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Mr. MEEKER. Thank you, Mr. Chairman.

What I would like to do in the few moments we have is to emphasize a small number of points.

First of all, in the opinion of Consumers Union judicial review should be available of all final administrative decisions affecting imports. I think one of the difficulties about S. 2857 is that it tends to be limiting in this respect, and there are a number of instances in which judicial review of administrative decisions would not be available.

So, we would strongly urge revision of the bill to assure that judicial review would be available for all final administrative decisions on import matters.

Second, with regard to the scope of review, here again, the bill is not clear as to what some of its effects would be. In fact, with respect to different kinds of cases, the scope of review would be different.

In our judgment, the scope of review in all instances should have the standards of the Administrative Procedure Act as the minimum standards to be adhered to.

Third, as to jurisdiction, it seems entirely appropriate that the Customs Court should have jurisdiction in cases involving imports. We do not think, however, that the Customs Court should have exclusive jurisdiction in all cases involving imports.

We think that exclusive jurisdiction should be conferred in matters where the Customs Court has special expertise. Those would include matters relating to classification and valuation of imports.

We do not think that the Customs Court should have exclusive jurisdiction where a case has only a coincidental relationship to importation.

For example, in the litigation which Consumers Union brought against the Committee for Implementation of Textile Agreements, a case referred to already by Assistant Attorney General Babcock this morning, the issue was whether the executive branch had acted within the scope of its authority under an act of Congress, and whether it had functioned in conformity with the procedural requirements of the APA.

Those are questions that are not peculiar to customs matters. They don't lie particularly within the expertise of the Customs Court. We think issues of that sort should not lie within the exclusive jurisdiction of the Customs Court but should be adjudicated in the courts of general jurisdiction, namely, the Federal district courts.

The last point that I would like to make is that certainly inter-court transfer of cases is apppropriate where the wrong forum has been chosen. For example, a case brought in the district court should be transferrable to the Customs Court when the Customs Court has exclusive jurisdiction.

Similarly, if a case was brought to the Customs Court, and it has no jurisdiction, that case should be transferrable to a Federal district court.

In conclusion, Mr. Chairman, I would just like to urge that some further consideration be given to S. 2857 with a view toward making chances along the lines of the four points that I have just now emphasized in my testimony.

From the point of view of Consumers Union, we would be happy to contribute in any way that we might to such a process of further drafting of the bill.

Thank you.

Senator DECONCINI. Thank you, Mr. Meeker. We will give careful consideration to your four points. We may very well ask for your review of some changes that we anticipate.

Our last witness is Mr. James Trombetta, President, John F. Kennedy Airport Customs Brokers Association, Inc. He is accompanied by David Serko.

Gentlemen, we are pleased to have you. I am regretful, again, that in 3 or 4 minutes I will have to leave to go vote. The committee will have to be adjourned at that time.

However, without objection, your entire statement will be inserted into the record at this time. [Material follows:]


New York, N.Y.


ASSOCIATION, INC. Mr. Chairman, Members of the Committee, and Ladies and Gentlemen : We wish to thank you for the opportunity to appear before you today on behalf of the J.F.K. Airport Customs Brokers Association, Inc. The Association is composed of 133 member firms licensed as professional Customhouse brokers by the United States Customs Service. In our capacity as brokers responsible for the clearance of imported merchandise, we find ourselves in many instances, plaintiffs in actions pending before the United States Customs Court.

In addition, we are relied upon by our importer clients for advice relating to the classification and value of merchandise. These importer clients make up the bulk of the plaintiffs before the Customs Court. It is for these reasons, as well as the brokers' general interest in matters affecting the application and enforcement of the Customs laws, that we appear before you to comment on S. 2857, the Customs Court Act of 1978.

We fully endorse the purposes of the Bill as stated in Title I. We believe that the specialized expertise of the United States Customs Court and Court of Customs and Patent Appeals have up to the present time, been underutilized and that an expansion of this jurisdiction is in the best interests of all members of the importing community.

However, while we support these basic tenets, we believe that the body of the Bill specifying the manner in which these purposes are to be carried out fails to implement the goals presented in Section 101. Unfortunately, rather than expand the jurisdiction of the Court in any meaningful way, we believe that the working provisions of the Bill will tend to sharply curtail the use of the Customs Court by potential litigants.

In the time available it is impossible to fully detail the inadequacies of this Bill. Therefore we limit our comments to a problem which is of particular concern to our members. Section 302 of the Bill contains amendments to 28 U.S.C. Section 1592. This would confer upon the Customs Court jurisdiction to entertain setoffs, demands, and counterclaims filed by the defendant United States Government. The only limitation placed upon the filing of such a counterclaim, etc., is that the cause of action arise "out of an import or export related transaction.” Thus, a broker or other plaintiff contesting the classification or appraisement of merchandise by the Customs Service may find himself served with a counterclaim based on a wholly unrelated matter, its only relation being that it somehow involves imports or exports. While the plaintiff's action demands relief in the form of a change in the classification or the basis of appraisement, the action of the government may be related to specific money damages. The effect of the above is twofold. The first is to place a chilling effect on potential litigants. The second is to prolong litigation by introducing matters outside the recognized expertise of the Court.

Since one of the purposes in expanding the jurisdiction of the Customs Court is to take better advantage of its specialized expertise in the areas relating to the Customs laws, this provision runs counter to that espoused purpose.

The above proposal could present an anomalous and potentially economically devastating situation. A broker, the importer of record, although only the nominal consignee, appears in Customs Court as the plaintiff to protect the rights of his importer client. The government, in searching its records, ascertains that it has a claim against that same broker relating to a totally unrelated situation involving the importation or exportation of totally different merchandise. If only the nominal consignee, although the importer of record, by bringing an action to protect his first client's interests, the broker opens himself up to potential liability which, practically speaking, is not his own. By creating such a situation the broker is placed in a quandary since he feels it is obligatory to protect one client's interests but does not want to open himself up to potential liability if the government has a claim against another of his clients, technically presentable against him by the government. Further, if the claim by the government is one in contract or tort, for example, by the government bringing this claim in the Customs Court, the broker is precluded from his right to have the facts decided in those situations by a jury. This provision of the Bill must be changed to eliminate these potential problems.

The net result of the "counterclaim” provision, as it now stands, is to decrease the effectiveness of the Customs Court by forcing it to decide issues wholly unrelated to the “Declaration of Purpose” : “To provide for a comprehensive system of judicial review of matters directly affecting imports, utilizing, wherever possible, the specialized expertise of the United States Customs Court and Court of Customs and Patent Appeals." (emphasis added.)

We believe that expansion of the jurisdiction of the Customs Court and Court of Customs and Patent Appeals is both necessary and desirable. However, we do not believe that the Bill in its present form achieves that end.

A natural reaction may be to attempt to salvage the bill by revising sections or changing some of the language. However, the language of the bill is so frought with interpretive difficulties that we do not believe such an approach is either possible or advisable. Accordingly, we suggest that this Committee fully reconsider the bill, and that, through a joint effort by all interested parties, it be redrafted in its entirety.

Thank you.



Mr. TROMBETTA. Thank you, Mr. Chairman.

Mr. Serko was unable to be here with us this morning, however, Carl Soller, who is a member of the firm of Serko and Simon, is with me.

I would like to refer to our position as customs brokers, which, so far, has not been expressed here today.

I have found in the preponderance of testimony given by interested members that we agree on one aspect of the bill. That is, the setoff claims which we find would definitely have a chilling effect on our industry.

Significantly, it would appear that industry members who have testified agree to that, while Government witnesses do not.

In the case of the broker, per se, frequently we find ourselves representing an importer in a matter before the Customs Court where we are not the actual importer but may be the importer of record or nominal consignee. If we were additionally to be confronted by the possibility of a counterclaim or a setoff claim, having no relation whatever to the instant case, I could tell you that I, for one, would be very reticent about acting in the interest of my client.


Additionally, I can see no benefit toward expediting matters before the Customs Court because a setoff claim as a result of our presence in the Customs Court, could only create further delays in settling the original issue.

Basically, our opposition is aimed toward that end specifically.

There are other items which we find in the bill that we object to, but we will let our written testimony stand.

Mr. SOLLER. Senator, I would like to say one thing with regard to counterclaims, specifically, with regard to the question that Mr. Altier asked, I believe, Mr. Schwartz. That is, if the counterclaim were confined to that particular entry, that could raise a question wherein, in a classification issue, let's say, the Government counterclaims on that same entry for a classification which would be a higher duty rate.

This would be a situation which has never existed, and I don't think it would be a good thing, especially in light of the anomalous situation where you might have the presumption of correctness still attaching to the original claim and the Government itself counterclaiming on a separate issue, a separate claim for classification.

Senator DECONCINI. Excuse me, I am going to have to leave before the end of the time so that I can vote. I am going to leave the hearings open for a few minutes. I have a couple of questions that Mr. Altier of my staff will pursue.

So, we would like for you to stay. I am sorry, but I will have to go and vote.

Mr. SOLLER. The other area that I would like to briefly touch on now is this. I am talking about the presumption of correctness.

I think that in order to have a presumption of correctness, especially when we are talking in terms of classificaton and value areas, that there should be some obligation on the part of the Government to explain a decision at the administrative level as to why it reaches a particular decision as to the value of a particular item or the classification of a particular item. In that way the presumption of correctness would have a basis that we, the importer, and we, the broker, would know was a rationale basis. We could contest that rather than contest every possible governmental interpretation which could have led to their decision.

I think the presumption of correctness can only be viable in our system today in the way other administrative agencies work if the Department of the Treasury is required at the administrative level to explain their decisions.

I would like to also comment on another area that brokers get involved in, although we do not feel they should be involved in in any case and that is in penalty situations. The statute as proposed today in section 1591 gives the defendant a choice of going into Customs Court or U.S. district court with the possibility of the Government objecting.

I think this is a good thing. I think this gives the defendant the opportunity to use the specific expertise of the Customs Court in deciding the classification or value issue related to a penalty case.

However, what this statute does is foreclose the defendant's right to a jury trial which he has in the U.S. district court, to go into Customs Court for a decision on the classification or value. In many instances, the defendant would want a jury to make a fact determina


tion as to his intent in terms of doing a particular act and in terms of the ultimate penalty.

A solution to this could be that the Customs Court would make a decision as to the classification or value issue, and then we would have à second trial to determine any other factual areas that had to be determined wherein a jury could be used.

Thank you very much.

Mr. TROMBETTA. There was one other point we found troublesome. It is in section 602 on page 39 of the bill. It does not make it quite clear in our mind, specifically—in the first place it seems too broad as to who may file a protest. Some of the description is “any person seeking entry or delivery.” That could be construed as a truckman, a messenger, an airline clerk, or any one of that nature. Beyond that, when a protest is filed, as in the case of a surety company, it is not clear to whom the refund will be made. The presumption is that as it stands at present, the check would go to the importer of record. I don't know how that would protect, in this case the surety company, or anyone else filing a protest who was deemed to have been eligible to recover moneys under the circumstances as set forth. If the check is to be sent to the party who did not pay it to begin with, then I wonder what purpose has been served.

I believe that might need some clarification also.

Mr. ALTIER. We are aware of some of those problems with section 602 of the bill. We will look closely at that. We understand that this is one of the most controversial parts of the bill.

Before I get into questions, I wonder if you could explain for the record a connection, if there is any, between your organization and your association and the group that is testifying here next week, the National Customs Brokers Group. Is there any connection at all?

Mr. TROMBETTA. Yes, we are an affiliated member of the national association. We are, however, the largest local independent customs broker organization, in the country, and, as such, we are an affiliate member of the national association. Many of our members, incidentally, are both members of the national association and of our association. The preponderance of our members are airport brokers, but we do have many members who have dual memberships, and we are affiliated with the national, while we do take our own position on many issues, I think we are in agreement with them here.

Mr. ALTIER. Senator DeConciui asked me to pursue your line of thought on the inclusion of the counterclaim in the bill. What would you like to see done with that? Would you like to see some kinds of limitations, or would you like to see counterclaims excluded totally?

Mr. TROMBETTA. Our preference would be for the counterclaims to be excluded totally.

Mr. SOLLER. May I make one comment?

I cannot recall who said it, but I think they said that in terms of actions involving the classification or value of merchandise, this is an action on the merchandise and not on the individual. Therefore, you find situations such as when a broker is representing an importer, where he is representing someone else's interest regarding that property. It would be an anomalous situation, I think, to allow the Government to counterclaim against the broker for any reason whatsoever.

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