HQ 225414: Ruling request concerning broker status of jointly-ownedsubsidiary of a parent brokerage group; 19 U.S.C. 1641; 19 CFR111.2.

Native CBP ruling rendition. Applicability is fact-specific; modification/revocation relationships and original publisher date are retained. Publisher sentinel year0001 means unknown date, not a historical legal adoption.

                            HQ 225414

                         November 9, 1994


BRO-3-05 CO:R:C:E 225414  TLS

CATEGORY: Entry

Mr. Joseph S. Kaplan
Ross & Hardies
65 East 55th Street
New York, New York  10022-3219


RE: Ruling request concerning broker status of jointly-owned
subsidiary of a parent brokerage group; 19 U.S.C. 1641; 19 CFR
111.2.


Dear Mr. Kaplan:

     The above-referenced ruling request has been received by
this office for consideration.  We have considered the points
raised in your March 20, 1992, letter.  Our decision follows.

FACTS:

     H. A. & J. L. Wood, Inc. (Wood), W. Y.  Moberly, Inc.
(Moberly) and Border Brokerage (Border) are shareholders of
Associated Customs Brokers, Inc. (A.C.B.).  The individuals who
will be the officers of A.C.B. are licensed customs brokers.  In
accordance with 19 U.S.C. 1641(c), a licensed individual will be
employed by A.C.B. to supervise the Customs business of A.C.B.
within each customs district for which A.C.B. has a permit to
act.  Each such licensed individual will not qualify the permit
of any other broker.  With the exception of the licensed
individual who qualifies a permit for A.C.B., there would be no
other person employed on a salary by A.C.B.  Instead, A.C.B.
would use the employees of the individual licensed broker who is
also an officer and an employee of Wood, Moberly, or Border.

     A.C.B. at each location would share an office with Wood,
Moberly, or Border.  Records that are required to be maintained
by a broker (19 CFR 111.21-111.27) would be kept separate from
the other brokers' records, although both brokers' records would
be kept at the same office location.  The portion of the space at
each jointly-used office location that is to be used by A.C.B.
would contain the materials required to be available to each
broker under 19 CFR 111.11(d).  Also, all of the brokers would
execute a waiver of liability so that any act of any employee on
a customs transaction would be considered to be the act of all
four brokers.  All four brokers would agree in writing not to
disclaim liability for any employee's act on the ground that the
employee transaction would be considered to be the act of all
four brokers.  All four brokers would agree in writing not to
disclaim liability for any employee's act on the ground that the
employee was not acting for a specific broker.  To the same
extent, a client of A.C.B. would not be limited to the assets of
A.C.B. in the event that the client was harmed by a negligent or
unlawful act on a customs transaction.  On the other hand, A.C.B.
will neither pay or collect withholding tax with respect to any
employee of Wood, Moberly, or Border.

ISSUE:

     Whether two licensed brokers may share the same office
location.

     Whether an unlicensed employee of one broker may be the
employee of another broker without being subject to the
requirement of nonconcurrent hours of work.

LAW AND ANALYSIS:

     This ruling is limited to the application of the Customs
laws.  The question concerning the propriety of the proposed
withholding tax procedures is a matter for the State tax
authorities and the Internal Revenue Service and is expressly
outside the scope of this ruling.  Nor does this ruling address
various liability issues.

     Section 641 of the Tariff Act of 1930 (19 U.S.C. 1641)
covers licensing for customhouse brokers.  A Customs broker's
license for corporations is granted under section 641(b)(3).  At
least one officer of the corporation must hold a valid individual
customs broker's license which is granted under 641(b)(2). 
Section 641(b)(4) requires that the customs broker must exercise
responsible supervision and control over the customs business
that it conducts.

     The regulations governing these activities are found in Part
111 of the Customs regulations.  Under 19 CFR 111.2, the
following is provided for:

     A person shall obtain the license provided for in this
     part in order to transact the business of a broker.  A
     separate permit is required for each Customs district
     in which a licensee conducts customs business.

Under 19 CFR 111.11(b) and (c), a partnership, association, or
corporation must have at least one member or officer, as the case
may be, who is a licensed broker and maintains an office in the
Customs district where it has applied for a permit.  The office
must be the place where customs transactions are performed by a
licensed member of the organization or an employee under the
supervision of the licensed member.  Additionally, a license
holder is required under 19 CFR 111.19(d) to have a permit for
the district in which the broker operates, unless a waiver is
obtained under the same provision.

     Customs ruling 221724 (June 4, 1991) addresses this issue of
a subsidiary transacting customs business for the parent
company's clients.  That ruling held that a subsidiary may
transact customs business for its parent company's clients under
certain conditions.  First, the parent and subsidiary each must
have powers of attorney from the client and exchange powers of
attorney between themselves.  Second, the parent company must
provide a written statement to Customs stating that it will
assume all responsibility for any violative acts committed by the
subsidiary while acting on the parent's behalf.  Third, the
parent must maintain responsible supervision and control over the
subsidiary's actions as required under 19 CFR 111.19(d).

     In this situation, in any Customs transaction performed by
A.C.B. for a client, that client will have given a power of
attorney to A.C.B.  Any billing procedure must conform to 19 CFR
111.29 and 111.39, as well as C.S.D. 79-111 and T.D. 78-308.

                     Shared Office Locations
     In the proposed situation, A.C.B. would share an office with
one of the other three brokers.  Each broker's permit would be
qualified by a different licensed individual who would be
required to exercise responsible supervision and control over
each respective broker's business.  It is clear that without the
creation of A.C.B., Moberly, for example, could exercise
authority under a power of attorney from an importer to issue a
power of attorney from the importer to Border and that Border
could make an entry in accordance with C.S.D. 79-111 and T.D. 78-308.  The creation of A.C.B. as a separate licensed corporate
broker does not change the legal concept.

     The relevant regulations with respect to permit locations
are 19 CFR 111.19, 111.21 through 111.27, and 111.43.  Under the
facts presented, each corporate broker will have a different
licensed individual who will qualify each respective permit.  The
qualifying individual for A.C.B. will be an officer-shareholder
of A.C.B. and that individual will not qualify any other permit. 
That same individual will be an officer-employee of one of the
other three brokers.

     Section 111.23(a), Customs Regulations, generally requires
that the records required to be kept by a broker be retained
within the customs district to which they relate, with certain
exceptions not relevant here.  Counsel for A.C.B. has stated that
at each shared office, A.C.B. and the other broker will each keep
separate records for their respective Customs transactions in
order to comply with 19 CFR 111.23(a).

     Under Section 111.19(d), Customs Regulations, within each
district for which a permit is granted a Customs broker must have
a licensed individual who must exercise responsible supervision
and control over the broker's business in that district.  The
elements of responsible supervision and control are set forth in
19 CFR 111.11(d).  Counsel for A.C.B. has stated that at each
shared office, A.C.B. will take steps to meet the requirements of
19 CFR 111.11(d).

     Under these circumstances, there would be no violation of
the Customs laws and regulations relating to brokers if A.C.B.
shared an office with another licensed broker.  We assume that
compliance with 19 CFR 111.43 poses no problem.

                        Sharing Employees

     The relevant regulations concerning employees are in 19 CFR
111.3(b) and 111.28(b).  The only employees of A.C.B. will be the
individuals who qualify the permits.  Wood, Moberly, and Border
will provide a written waiver of their right to disclaim
liability for any violation on a Customs transaction on the
ground that the person who did the act was not their employee. 
The stipulation will contain an agreement that the Customs
Service will not be required to attribute responsibility on a
transaction said to be performed by A.C.B. to Wood, Moberly, or
Border in order to assess liability or take disciplinary action
against Wood, Moberly, or Border.  In addition, each licensed
individual who will qualify the permits issued to A.C.B. will
provide a written stipulation to each district director who
issues a permit that any violative act or omission on an A.C.B.
customs transaction shall be considered the personal act or
omission of the individual licenseholder.  Each licenseholder
will agree to waive any right to assert that the act or omission
as that of an employee Wood, Moberly, and Border.  Wood, Moberly,
Border, and each individual who qualifies a permit for A.C.B.
will agree in writing that with respect to any violation on an
A.C.B. transaction will be a violation by both A.C.B. and the
broker operating in the shared permit location.

     The procedure for designating an unlicensed employee for
acting for a broker is set in 19 CFR 111.3(b)(2).  Upon
compliance with that provision, the filing of the waivers of
defenses described above would protect Customs interest in having
work done under the supervision of a licensed individual and
would eliminate any requirement for Customs to determine which
broker was at fault for an employee's act or omission.  Here,
both brokers involved, A.C.B. and one of the other three brokers,
and both licensed individuals who quality the respective permits
would be subject to disciplinary action if the violation occurred
on an A.C.B. transaction.

     Under 19 CFR 111.28, brokers are required to submit employee
lists to any district director who issued the permit to operate. 
Both brokers at each shared location would be required to provide
such lists.  The fact that A.C.B. will not pay the salary of any
unlicensed employee will not prevent A.C.B. from using the
services of that employee, provided that the waiver of defenses
is given to Customs and that powers of attorney are issued by
A.C.B. to each person who performs work for A.C.B.

HOLDING:

        Two brokers may share the same office space if there is
complete compliance with 19 CFR 111.19(d), 111.21-111.27, and
111.43.

        An unlicensed person shall be considered the employee of two
brokers despite being paid by only one broker if both brokers
list that person as an employee, both brokers issue a power of
attorney to that person, and both brokers and each permit
qualifying licensee provide written waivers of defenses so that
Customs will not be required to determine if the act or omission
was done by a specific broker in order to take disciplinary
action.






        Billing practices that conform to 111.29, 111.39, C.S.D. 79-111, and T.D. 78-308 are permissible.

                                           Sincerely,



                                           John Durant, Director
                                           Commercial Rulings Division