HQ 224253: Cartman; C.S.D. 82-26; 19 U.S.C. 1565; 19 CFR 112; 19 CFR112.1(b); 19 CFR 112.2(b); 19 CFR 112.21; 19 CFR 112.22; 19 CFR112.27; 19 CFR 112.29; 19 CFR 112.41; HQ 222402; independentcontractor; H. Reuschlein & W. Gregory, Agency and Partnership.

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 224253

                        February 1, 1993

CAR-2 CO:R:C:E 224253  AJS

CATEGORY: Cartage

District Director
U.S. Customs Service
300 South Ferry Street
Terminal Island
San Pedro, CA 90731

RE: Cartman; C.S.D. 82-26; 19 U.S.C. 1565; 19 CFR 112; 19 CFR
112.1(b); 19 CFR 112.2(b); 19 CFR 112.21; 19 CFR 112.22; 19 CFR
112.27; 19 CFR 112.29; 19 CFR 112.41; HQ 222402; independent
contractor; H. Reuschlein & W. Gregory, Agency and Partnership.

Dear District Director:

     This is in reply to a memorandum of October 16, 1992, which
forwarded your concerns regarding Customs Legal Determination 81-
0198 of December 24, 1981, also published as C.S.D. 82-26 in 16
Cust Bull. 721 (1982).  This decision held that a bonded cartman
may not use vehicles belonging to another person nor persons who
are employees of another firm to conduct its own cartage
operations.

FACTS:

     Certain companies are leasing vehicles or employing vehicle
owner operators as independent contractors to perform cartage
operations.

ISSUE: 

     Whether a cartman may lease vehicles or employ vehicle owner
operators as independent contractors to perform cartage
operations.

     Whether a cartman may perform cartage operations using
vehicles in which they do not possess legal title because of a
chattel mortgage held by a bank or a lease agreement from a truck
dealership. 

                               -2-

LAW AND ANALYSIS:

     The law governing Customs cartage, section 565 of the Tariff
Act of 1930, as amended (19 U.S.C. 1565) provides that:

     The cartage of merchandise entered for warehouse shall
     be done by cartmen to be appointed and licensed by the
     appropriate customs officer and who shall give a bond,
     in a penal sum to be fixed by such customs officer, for
     the protection of the Government against any loss of,
     or damage to, such merchandise while being so carted. 
     The cartage of merchandise designated for examination
     at the appraiser's stores and of merchandise taken into
     custody by the customs officer as unclaimed shall be
     performed by such persons as may be designated, under
     contract or otherwise, by the Secretary of the
     Treasury, and under such regulations for the protection
     of the owners thereof and of the revenue as the
     Secretary of the Treasury shall prescribe.

     The Customs Regulations on the licensing of cartmen
issued under the authority of this law are found in Part 112 of
the Customs Regulations (19 CFR Part 112).  A "cartman" is
defined in 19 CFR 112.1(b) as "one who undertakes to trans- port
goods or merchandise within the limits of the port."  Under 19
CFR 112.2(b), "[a] bond and license provided for in this part
[i.e., Part 112] are required to transact business as a cartman .
. . for the cartage . . . of merchandise entered for warehouse,
designated for examination, taken to container stations, or taken
into custody as unclaimed."

     Subpart C of part 112 of the Customs Regulations provides
for the licensing of cartmen.  Under section 112.21, a
customhouse cartage license is required to perform Customs
cartage, with certain exceptions inapplicable in this case. 
Section 112.22 contains the requirements for applying for a
cartage license.  An applicant for such a license is required to
file with the appropriate district director: (1) a bond on
Customs Form 301 containing the conditions provided for in 19 CFR
113.63 in an amount specified by the District Director; (2) a fee
of $100; and (3) if required by the District Director, a list of
the names and addresses of the managing officers and members of
the organization or of the persons who will receive or transport
imported merchandise which has not been released from Customs
custody, or a list of all such persons and their addresses.  In
addition, a cartman licensed by city or State authorities is
required to present to the district director their city and State
license.  Vehicles licensed by Customs for cartage must be marked
with the Customs license number (19 CFR 112.27).  
                               -3-

Customs may require licensed cartmen to make, keep, and submit to
Customs records of cartage and a current list of the
organization's managing directors and persons who will receive or
transport imported merchandise which has not been released from
Customs custody (19 CFR 112.29).  Customs may require licensed
cartmen and each employee thereof who handles imported
merchandise which has not been released from Customs custody to
carry, and display upon request, an identification card (19 CFR
112.41).  

     In HQ 222402 (July 26, 1990) (copy attached), Customs ruled
that a corporation may not be licensed as a Customs cartman when
a second corporation provides the vehicles and drivers under a
lease arrangement with the first corporation.  We stated that
there is no provision permitting two entities to be a cartman,
and the binding of one corporation or legal person to the
conditions of a cartman's license cannot bind another corporation
(i.e., a separate and distinct legal being) to those conditions. 
To rule otherwise would allow a corporation which is not bound to
the conditions of the cartman's license to be the responsible
entity with regard to many, if not most, of the requirements for
cartmen under 
the Customs Regulations (i.e., provision of the names and 
addresses of the managing officers and persons who will handle
imported merchandise which has not been released from Customs
custody, marking of the vehicles with the Customs 
license number, keeping of records of cartage, and carrying and
displaying of identification cards by the cartman and employees
who will handle imported merchandise which has not been released
from Customs custody).  We also cited C.S.D. 82-26 as support for
this decision. 

     In this instance, your memorandum states that companies are
leasing vehicles or employing owner operators as independent
contractors to perform their cartage operations.  In the original
letter addressed to our office raising this issue, the company in
question was a California corporation.  Therefore, we assume that
these companies are corporations.  As stated previously, a
corporation may not lease vehicles and use drivers from another
corporation to perform cartage operations.  We also find no
reason to not apply this principle to a situation in which a
corporation is using trucks owned by independent contractors.  An
independent contractor is "[a] person who contracts with another
to do something for them but who is not controlled by the other
nor subject to the other's right to control with respect to their
physical conduct in the performance of the undertaking."  H.
Reuschlein & W. Gregory, Agency and Partnership, 4 (1978). 
Consequently, an independent contractor would not be controlled
by the corporation nor subject to its right to control concerning
the physical conduct of the cartage operations.  This type of
relationship would lead to a 
                               -4-

situation in which an independent contractor, which is not bound
to the conditions of the cartman's license issued to the
corporation, is the responsible entity with regard to many, if
not most, of the requirements for cartmen under the Customs
Regulations.  As in HQ 222402, we are of the view that this form
of operation is not permissible.  It would permit two legal
entities (i.e., a corporation and independent contractor) to be a
cartman, and attempt to bind one legal person to the conditions
of a cartman's license issued to another legal person.  

     The issue has also been raised concerning situations in
which a cartman does not possess legal title to the trucks
because of a chattel mortgage held by a bank or a lease agreement
from a truck dealership.  In both instances, we assume that the
trucks are under the physical control of the cartman and operated
by one of their employees.  In our view these types of cartage
operations are permissible because of the important factual
differences regarding control of the cartage operations which
exists between these operations and the previously discussed
situations.  As opposed to a situation involving owner operators
as independent contrac- tors, the cartman without legal title
would be responsible 
for the physical conduct of the cartage operations through their
employees and physical control of the trucks.  As opposed to a
situation involving trucks and drivers used from another
corporation, the cartman without legal title would be the only
legal entity operating as a cartman as well as the responsible
legal entity for compliance with the requirements of the Customs
Regulations. 

     We are not aware of any other legal determinations which
address this issue.  If you have any additional questions, please
contact Allan Stevenson of my office at (202) 482-7040.

HOLDING:

     A cartman may not employ vehicle owner operators as
independent contractors to perform cartage operations.  A cartman
may use vehicles to perform cartage operations in which they do
not possess legal title because of a chattel mortgage held by a
bank or a lease agreement from a truck dealership.
      

                                 Sincerely,


                                 John Durant, Director