July 3, 2012
BRO 3-05 OT:RR:CTF:ER H135698 PTM
Ms. B.J. Shannon Alston & Bird LLP 950 F Street, NW Washington DC 20004-1404
Dear Ms. Shannon,
We are writing in response to your request for a prospective ruling on behalf of your client, Dollar Tree Inc., under 19 C.F.R. Part 177. Your request concerns the ability of an employee of one company to conduct customs business and compliance activities on behalf of the three related corporate entities.
According to your letter, Dollar Tree, Inc. is the parent company of Dollar Tree Stores Inc. (“DT Stores”), Dollar Tree Distribution, Inc. (“DT Distribution”), Dollar Tree Sourcing Co., LLC (“DT Sourcing”), and Greenbriar International, Inc. (“Greenbriar”). DT Sourcing and Greenbriar serve as the importers of record for merchandise imported on behalf of and consigned to DT Stores. Merchandise is imported through multiple CBP ports. Imported goods are consigned to Dollar Tree Stores, Inc. DT Distribution manages the logistics for the importation and delivery of merchandise sourced from abroad. DT Distribution does not currently serve as an importer of record, but may do so in the future.
The Customs Compliance Manager for all of the Dollar Tree companies is a full-time employee of DT Distribution and is a licensed customs broker. DT Distribution itself, however, is not licensed to conduct customs business. You state that the Customs Compliance Manager also serves as a corporate officer, with the title of Assistant Secretary, of DT Sourcing and Greenbrier. The Customs Compliance Manager works with an outside customs broker who has powers of attorney from DT Sourcing and Greenbrier. You state that the Customs Compliance Manager provides the outside customs broker with information and advice concerning the classification and valuation of imported merchandise, information necessary for filing entry with CBP, and other information. You request a ruling as to whether the Customs Compliance Manager may, on behalf of DT Sourcing and Greenbriar, conduct customs business. Specifically, the customs business to be performed includes filing entries, paying duties, responding to CBP requests for information and CBP notices of action, filing post entry amendments, and otherwise engaging in oral or written communication directly with CBP.
Whether the Customs Compliance Manager may conduct corporate compliance activity on behalf of DT Stores and its sister companies.
Whether the Customs Compliance Manager may conduct customs business for DT Sourcing and Greenbriar as an officer of those entities.
LAW AND ANALYSIS:
It is your position that the Customs Compliance Manager may conduct corporate compliance activity on behalf of DT Stores and its sister companies. You also posit that the Customs Compliance Manager, as an officer of DT Sourcing and Greenbriar, may conduct customs business on behalf of each. We conclude that the Customs Compliance Manager may conduct corporate compliance activity on behalf of DT Stores and its sister companies, as CBP has ruled that similar arrangements are permissible. Additionally, the statute and corresponding regulations for brokers do not prohibit a person from serving as an officer of more than one entity and conducting customs business on behalf of each. Therefore, the Customs Compliance Manager may conduct customs business on behalf of DT Sourcing and Greenbriar provided she is a duly elected or appointed as an officer, and during hours that are not concurrent with her employment at DT Distribution.
In recognition of the need for parent companies to exercise “reasonable care” over the import activities of related companies, CBP created a category of activity known as “corporate compliance,” which is not considered customs business and may be performed without a customs broker’s license. See Final Rule, Performance of Customs Business by Parent and Subsidiary Corporations, 63 Fed. Reg 47,455, 47,456 (August 11, 2003). The regulatory definition of "corporate compliance activity" is provided in 19 C.F.R. §111.1:
"Corporate compliance activity" means activity performed by a business entity to ensure that documents for a related business entity or entities are prepared and filed with CBP using "reasonable care", but such activity does not extend to the actual preparation or filing of the documents or their electronic equivalents. For purposes of this definition, a "business entity" is an entity that is registered or otherwise on record with an appropriate governmental authority for business licensing, taxation, or other legal purposes, and the term "related business entity or entities" encompasses a business entity that has more than a 50 percent ownership interest in another business entity, a business entity in which another business entity has more than a 50 percent ownership interest, and two or more business entities in which the same business entity has more than a 50 percent ownership interest.
The distinction between “customs business” and “corporate compliance activity” is significant because both 19 U.S.C. § 1641(b) and the corresponding CBP regulation, 19 C.F.R. §111.2(a), state that a broker’s license is required to conduct customs business. It is permissible, however, for a person to conduct customs business solely on one’s own account without a license under 19 U.S.C. § 1641(b).
Therefore, it is permissible for an unlicensed Customs Compliance Manager to conduct corporate compliance activities on behalf of the Dollar Tree family of businesses, as no customs broker’s license is required to conduct such activities. CBP has previously ruled that similar arrangements are permissible. For example, CBP ruling letter HQ 116220 (June 21, 2004), found that employees of a subsidiary could provide corporate compliance activities on behalf of its parent and related companies. The ruling cautioned, however, that a subsidiary could perform only those activities falling within the definition of “corporate compliance activity” on behalf of another related entity.
You also assert that the Customs Compliance Manager should also be able to perform those activities considered to be customs business on behalf of the related businesses and without a customs broker’s license. Further, you state that the Customs Compliance Manager will be able to conduct customs business on behalf of DT Distribution as a full-time employee of that entity, and for DT Sourcing and Greenbriar as an officer of those entities. The term “Officer” is defined in 19 C.F.R. § 111.1 as,
…a person who has been elected, appointed, or designated as an officer of an association or corporation in accordance with statute and the articles of incorporation, articles of agreement, charter, or bylaws of the association or corporation.
Further, Black’s Law Dictionary defines “officer” as,
[a] person who holds an office of trust, authority, or command…in corporate law, the term refers esp. to a person elected or appointed by the board of directors to manage the daily operations of a corporation, such as a CEO, president, secretary, or treasurer.
Black’s Law Dictionary 889 (7th ed. 2000). Per the regulatory definition, the Customs Compliance Manager must be duly elected or appointed as an officer of each Dollar Store entity in accordance with the articles of incorporation (in the case of Dollar Tree Distribution Inc. and Greenbriar International Inc.) or articles of organization (in the case of Dollar Tree Sourcing Co. LLC). As an officer, the Customs Compliance Manager must also be involved in the management or operations of each entity in which she serves as an officer. See also, HQ H114313 (December 8, 2010) (in which CBP noted that officers must be appointed and “be involved in the management of the daily operations of the corporation.”)
Pursuant to 19 U.S.C. § 1641(b), “[n]o person may conduct customs business (other than solely on behalf of that person) unless that person holds a valid customs broker's license.” The regulation promulgated thereunder, 19 C.F.R. § 111.2(a)(2) states: “[a]n importer or exporter transacting customs business solely on his own account and in no sense on behalf of another is not required to be licensed, nor are his authorized regular employees or officers who act only for him in the transaction of such business.” 19 C.F.R. § 111.2(a)(2)(i). The CBP regulations, at 19 C.F.R. § 111.1, define the activities that are considered customs business. The definition of “customs business” mirrors the language set forth in 19 U.S.C. §1641(b). The regulatory definition of customs business is provided in 19 C.F.R. §111.1:
"Customs business" means those activities involving transactions with CBP concerning the entry and admissibility of merchandise, its classification and valuation, the payment of duties, taxes, or other charges assessed or collected by CBP on merchandise by reason of its importation, and the refund, rebate, or drawback of those duties, taxes, or other charges. "Customs business" also includes the preparation, and activities relating to the preparation, of documents in any format and the electronic transmission of documents and parts of documents intended to be filed with CBP in furtherance of any other customs business activity, whether or not signed or filed by the preparer. However, "customs business" does not include the mere electronic transmission of data received for transmission to CBP and does not include a corporate compliance activity.
Many of the activities that the Customs Compliance Manager will perform constitute “customs business” within the definition set forth above. You acknowledge that some of the proposed activities to be performed by the Customs Compliance Manager including: making entry, paying duties, responding to CBP inquiries and notices of action, and filing post entry amendments with CBP constitute customs business.
Customs Service Decision (C.S.D.) 81-40 (July 15, 1980), states that “an officer of both corporations could file an entry on behalf of corporation B, provided he was doing so in his capacity as an officer of corporation B.” CBP later cited C.S.D. 81-40 for the proposition that an officer of both a parent corporation and a subsidiary could file an entry on behalf of the subsidiary, provided the officer was doing so in his capacity as an officer of the subsidiary. See HQ 223804 (June 29, 1992).
Both the CBP broker statute and corresponding regulation permit a person to conduct customs business solely on their own behalf, and previous CBP rulings have endorsed the ability of an individual to conduct customs business on behalf of more than one company as an officer of each entity. Acting in the capacity of an officer for each entity, the Customs Compliance Manager may conduct customs business solely on behalf of each entity. Further, per 19 C.F.R. §111.2(a)(2), no customs broker’s license is required provided that the person is conducting customs business on their own behalf and in no sense on behalf of another. Therefore, it is permissible for an officer of each Dollar Store entity to conduct customs business solely on behalf of that entity, and in no sense on behalf of another.
Furthermore, in Headquarter’s Ruling HQ 115278 (November 13, 2001), CBP addressed the question of whether a full-time employee of Porsche Cars North America (“PCNA”) could provide customs advice to other related Porsche companies. In that ruling, CBP noted that “asserting that a full-time employee ceases his employment whenever called upon to give customs advice to others, conflicts with the policy and spirit of the broker licensing law, which requires corporations to be licensed if they transact customs business on behalf of other persons.” Consequently, the Customs Compliance Manager may only operate as an officer of DT Sourcing and Greenbriar and conduct customs business on behalf of each during hours that are non-concurrent with those served as a full-time employee of DT Distribution. This requirement ensures that the Customs Compliance Manager will not be conducting customs business on behalf of the other entities without a broker’s license, in contravention of 19 C.F.R. §111.2(a)(2).
The Customs Compliance Manager may conduct corporate compliance activities on behalf of the Dollar Tree family of stores.
The Customs Compliance Manager may conduct customs business on behalf of DT Sourcing and Greenbriar as an officer of each entity, during non-concurrent hours of her employment at DT Distribution.
Please note that 19 C.F.R. §177.9(b)(1) provides that “[e]ach ruling letter is issued on the assumption that all of the information furnished in connection with the ruling request and incorporated in the ruing letter, either directly, by reference, or by implication, is accurate and complete in every material respect. The application of a ruling letter by a Customs Service field office to the transaction to which it is purported to relate is subject to the verification of the facts incorporated in the ruling letter, a comparison of the transaction described therein to the actual transaction, and the satisfaction of any conditions on which the ruling was based.”
Myles B. Harmon, Director Commercial and Trade Facilitation Division