either through administrative or judicial review. We believe this is necessary so that all persons whose interests are directly and substantially affected by action of the Customs Service have the ability to challenge such actions. We believe this can be done without increasing the risks that such suits would be used for harassment or to obtain confidential information from competitors.

This is especially true in light of the new section 2641 (b) of the legislation, which would empower the Customs Court to protect the confidentiality of information.

The legislation, however, adopts a curious blend of provisions relating to standing to sue. The bill adopts the "adversely affected person" test with respect to the new sources of jurisdiction of the Customs Court. But, it retains the rather narrow classes of standing with respect to those persons who may file a protest or a petition. In addition, the bill would somewhat expand, through section 1516, the classes of persons who could file a petition to challenge certain customs actions, but would not expand it as far as our recommendation goes, which is to include all persons adversely affected by actions of the Customs Service.

We believe that because the actions of the Customs Service do have significant impact upon many classes of persons, not only those who are now presently authorized to file a petition or protest, standing to challenge customs actions should be expanded so that all such persons have an opportunity to have incorrect administrative action reversed. The next recommendation of the Administrative Conference relates to the burden of proof in the Customs Court: the fact that a plaintiff seeking to challenge action of the Customs Service must not only overcome the presumption of correctness on the part of the Customs Service, but must also prove what the correct action should have been. We are gratified to note that section 2643 of the legislation would change that anomaly.

Another recommendation of the Administrative Conference that relates to this bill concerns the exclusion of merchandise. The bill would enact the recommendations that exclusion cases be given precedence in the Customs Court, and would thus insure that those injured by exclusion will have means of quick relief.

The final recommendation of the Conference relates to the reform of section 592. The Administrative Conference's recommendations contained a number of principles to guide the reform section 592. Our recommendations differ from the bill in that we recommended that all penalty cases under section 592 be adjudicated or reviewed in the Customs Court. The bill is different. It would provide for joint jurisdiction between the district court and the Customs Court, depending upon the transfer from one to the other. We believe that although the legislation differs from our recommendations, the legislation is reasonable and that it would certainly be a workable solution to the issue.

In conclusion, I have two general comments about the drafting of the legislation. I think much of it can be improved; most notably, section 601, which attempts to reform section 1516. That section has always been unintelligible. It is now completely impenetrable. Work could be fruitfully done to rewrite that portion.

Another drafting problem concerns the jurisdiction which would be given to the Customs Court. The bill, through section 1581, purports to enact a rather broad jurisdictional grant to the Customs Court but then, apparently, attempts to limit that broad jurisdiction in two ways.

One is through the laundry list of exceptions to Customs Court jurisdictions contained in 1583 (e), and the second is through an implied limitation under jurisdiction of the Customs Court which is supposed to come out of section 1584 through 1589. The problem with that scheme is that the specific grants of jurisdiction in sections 1584 through 1589 do not on their face either expressly or impliedly limit the jurisdiction of the Customs Court under 1581. So, if the attempt of the legislation is to make section 1581 merely a residual grant of jurisdiction for cases not precluded by other sections, then it could not have that affect because the other sections do not by themselves preclude jurisdiction; they merely grant jurisdiction.

That concludes my formal statement.

Senator DECONCINI. Thank you very much. We appreciate your testimony. We thank you for the indepth nature of your submitted testimony as well.

Without objection, this material will be inserted into the record at this point. [Material follows:]

ADMINISTRATIVE CONFERENCE OF THE UNITED STATES, Washington, D.C., June 21, 1978. STATEMENT OF THE ADMINISTRATIVE CONFERENCE OF THE UNITED STATES ON S. 2857: THE CUSTOMS COURT ACT OF 1978 BY PETER M. GERHART, CONSULTANT TO THE ADMINISTRATIVE CONFERENCE AND ASSISTANT PROFESSOR OF LAW, OHIO STATE UNIVERSITY COLLEGE OF LAW, AND JEFFREY S. LUBBERS, ESQ.. STAFF ATTORNEY, OFFICE OF THE CHAIRMAN, ADMINISTRATIVE CONFERENCE OF THE UNITED STATES, CONCERNING S. 2857: THE CUSTOMS COURTS ACT OF 1978

STATEMENT OF THE ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

A. Introduction

This statement is submitted by Peter M. Gerhart, Consultant to the Administrative Conference of the United States and Assistant Professor at the Ohio State University College of Law, and Jeffrey S. Lubbers, Staff Attorney in the office of the Chairman of the Administrative Conference. The purpose of this statement is to acquaint this Committee with Administrative Conference Recommendation 77-2, entitled "Judical Review of Customs Service Actions," much of which would be implemented by S. 2857.

The Administrative Conference of the United States was established as a permanent independent Federal agency by the Administrative Conference Act of 1964 (5 U.S.C. §§ 571-576). Its purpose is to identify the causes of inefficiency, delay, and unfairness in administrative proceedings affecting private rights, and to recommend improvements to the President, the agencies, the Congress, and the courts.

The Conference is a deliberative body of 91 members. Its Chairman is appointed by the President with the consent of the Senate for five years. Ten members are appointed for three-year terms by the President, to serve as a Council. In addition there are 44 members who are high-level persons in the departments and agencies, and finally there are 36 members who are distinguished people from private life.

The Conference acts in a formal way only through a plenary session of its full membership, which occurs twice a year. At its plenary session in September, 1977 the Conference adopted Recommendation 77-2, based on the study undertaken by Professor Gerhart as consultant to the Conference.

The study arose in June, 1975 when several lawyers specializing in customs practice brought to the attention of the Administrative Conference examples of what they considered to be deficiencies in the jurisdiction and powers of the Customs Court-deficiencies that assertedly make it difficult for the court to correct erroneous actions of the Customs Service. The Chairman's Office, after preliminary study, concluded that these concerns were sufficient to warrant a fullscale study of the adequacy of judicial review of Customs actions, and Professor Gerhart was chosen as consultant.

Professor Gerhart's draft report and recommendations were reviewed by the Conference's Committee on Judicial Review and were also circulated for comment to interested agencies and persons prior to their eventual adoption by the Conference in September, 1977. We have attached a copy of that Recommendation 77-2 as Appendix A to this statement. Copies of Professor Gerhart's final report as published have been made available to the Committee. (See Gerhart, “Judicial Review of Customs Service Actions," 9 Law & Pol'y Int'l Bus 1101 (1978)). Most of the comments made here concerning S. 2857 are based upon the principles endorsed in the Conference's Recommendation 77-2. However, that Recommendation is narrower in scope than S. 2857. The Conference's Recommendation addressed only the adequacy of judicial review of Customs Service actions, while S. 2857 addresses judicial review of all actions "directly affecting imports," including actions of several other agencies. Thus, there are many matters covered by S. 2857 that have not been studied by the Administrative Conference and as to which the Conference can present no position. Consequently, the comments we make that go beyond the scope of Recommendation 77-2 represent only our views and not necessarily those of the Conference.

B. Overview of comments and statement of general support for S. 2857

Generally the thrust of S. 2857 is consistent with Recommendation 77-2. Moreover, the bill either entirely or partially implements most of the Conference's proposals in Recommendation 77-2. The following summarizes the principal areas of agreement and disagreement between S. 2857 and Recommendation 77-2.

Title II of the bill would remove both the political affiliation limitation on appointees to the Customs Court and the provision permitting the President to designate the Chief Judge "from time to time." Except for a small difference noted below, this section would implement paragraph A(3) of Recommendation 77-2.

Title III of the bill would broaden the jurisdiction of the Customs Court and give it all the remedial powers possessed by other Article III courts. These provisions are generally consistent with paragraphs A(1) (jurisdiction) and (2) (remedial powers) of Recommendation 77-2, except as noted below, but are broader because they cover review of actions of agencies other than the Customs Service.

Title IV would (along with Title VI) expand somewhat the categories of persons eligible to seek administrative and judicial review of actions of the Customs Service. This is consistent with, but does not go as far as, paragraph B of Recommendation 77-2, which would generally extend review to all persons adversely affected by Customs action.

Title IV would also enact a requirement that persons seeking judicial review first exhaust administrative remedies, and would authorize the Customs Court to provide equitable relief, including preliminary injunctive relief and orders protective of trade secrets. These provisions are consistent with paragraphs A(1) and (2) of Recommendation 77-2 and with the reasoning underlying the recommendation that standing to challenge Customs action to broadened (paragraph B).

Title IV would eliminate the double burden that requires plaintiffs challenging Customs Service actions to prove both the incorrectness of the administrative decision and what the correct decision should have been. This would implement paragraph C of Recommendation 77-2.

Finally, Title IV would require the Customs Court to give precedence to all cases challenging the exclusion of merchandise, a provision that would implement paragraph D(1) of Recommendation 77-2.

Because in these specific ways S. 2857 fully or partially implements the important parts of Recommendation 77-2, the Conference can strongly support the substance of much of the bill. However, in several instances the bill falls short of full implementation of our Recommendation. This is true primarily in the

sections designed to broaden standing to sue in the Customs Court. In addition several other portions of the bill seem to be awkwardly structured, probably as a result of the bill's attempt to engraft new grants of subject matter jurisdiction onto an already unwieldly statutory base. We refer here primarily to Titles III and VI. Finally, there is much in the bill that is beyond the scope of the Administrative Conference's Recommendation or its underlying study conducted by Professor Gerhart.

C. Section-by-section comments

Section 101.-We support the declaration of purpose as stated.

Section 201.-We support this proposed removal of the political affiliation limitation on appointees to the Customs Court and the deletion of the provision permitting the President to designate the Chief Judge of the Customs Court "from time to time." These proposals implement paragraph A(3) of Recommendation 77-2. The Recommendation is slightly different than Section 201, however, because the Recommendation (but not Section 201) provides that the designation of the Chief Judge be subject to the advice and consent of the Senate, as is true with respect to the Chief Judge of the Court of Claims and the Court of Customs and Patent Appeals.

Section 302.-(New Sections 1581-1595 of Title 28, United States Code). (Sections 1581-1590).-Section 1581 is designed to expand the jurisdiction of the Customs Court to give it exclusive jurisdiction "over all civil actions against the United States. . . directly affecting imports . . ." Section 1583 is designed to expand the jurisdiction of the Customs Court to include review of final agency action that directly affects imports; it gives the Customs Court exclusive jurisdiction over certain decisions of the International Trade Commission and Office of the Special Trade Representative; and it specifically precludes Customs Court jurisdiction over certain enumerated actions. Sections 1884-1589 restate with only minor changes existing Custom Court jurisdiction over matters that are first subject to administrative protest within the Customs Service. Section 1590 gives the Customs Court exclusive jurisdiction of petitions filed under Section 516 of the Tariff Act of 1930 (as amended by Title VI of this bill).

These provisions would largely implement the Conference's Recommendation 77–2(A) (1), a recommendation to expand the jurisdiction of the Customs Court to encompass all final agency action of the Customs Service except two types of cases actions specifically made subject by statute to review in another court (e.g., cases involving personnel matters or the Freedom of Information Act) and cases in which a court or another federal agency orders the exclusion of merchandise under a law that is not a custom law. The only respect in which S. 2857 might be inconsistent with that recommendation relates to the exclusion of merchandise: An inconsistency would arise if Section 1581 were construed to permit the Customs Court to take jurisdiction over an order to exclude merchandise issued by an agency other than the Customs Service, for example the Food and Drug Administration (an action "directly affecting imports"). Review of such action should not be in the Customs Court (and would not be under Recommendation 77-2) because that court has no expertise concerning the subject matter of the suit, which is a type generally dealt with by district courts. The proposal we make below to modify Section 1581 would insure that the Customs Court would not have jurisdiction over such cases. Also, Section 1585, which restates existing Customs Court jurisdiction over actions excluding merchandise under a customs law, appears to be deficient because those few cases in which the Customs Service excludes merchandise under a law that is not a custom law (e.g., switchable knives, 15 U.S.C. § 1241) would not be subject to review in the Customs Court, even though the decision to exclude is made by the Customs Service and not another agency. Under Recommendation 77-2, the Customs Court would have jurisdiction over such actions, thus enabling the Customs Court to provide a full system of justice when actions of the Customs Service are questioned. We believe Section 1585 should be amended to reflect that principle.

Because the Conference did not consider the question of the proper forum for review of trade-related actions of agencies other than the Customs Service, the part of Section 302 of S. 2857 that would give the Customs Court jurisdiction to review actions of the President, ITC, Secretary of the Treasury or the Office of the Special Trade Representative is beyond the scope of the Conference's study. We do, however, have certain misgiving about the proposed jurisdictional framework.

Section 1581, which provides for Customs Court jurisdiction over actions "directly affecting imports" is extremely broad. So is Section 1583,which gives the Customs Court jurisdiction over final agency action which directly affects imports. According to the section-by-section analysis accompanying the bill, Section 1581 is meant to be a "residual" provision only, its broad provisions limited and superseded by the more specific provisions of new Sections 1583-1589. The second paragraph of Section 1581 presumably is designed to state this principle. But we doubt if this framework is workable.

First, the preclusionary list in Section 1583 (e), which is meant as one form of limitation on the boad language in Sections 1581 and 1583, may be incomplete. Although we have no problem with any of the items on the list, we are concerned that no list can adequately take into account the types of suits that might be, but should not be, brought in the Customs Court. For example, would a civil damage suit challenging an allegedly unconstitutional search and seizure of imported goods be precluded? Because issues like that are likely to arise, the bill would rely heavily on the Customs Court to develop an adequate jurisprudental test for "directly affecting imports" in order to exclude matters that should not be in the Customs Court but are not on the list of precluded matters. But development of such case law would take time, and in the meantime plaintiffs would be forced to guess at the appropriate forum, with the penalty for a wrong guess dismissal of the suit, even at the appellate level (except as relief might be available under Section 1593).

Second, Sections 1584 through 1589, which restate the present jurisdiction of the Customs Court with only minor changes, are also apparently intended to be limitations on the jurisdiction granted by Sections 1581 and 1583. It could be argued, for example, that since Section 1585, the specific provision that addresses the exclusion of merchandice, does not provide for Customs Court jurisdiction over a decision of the Food and Drug Administration to exclude merchandise, such jurisdiction would also be precluded under Section 1581. On the other hand, Section 1584 through 1589 are, on the face, grants of jurisdiction, not limitations on jurisdiction. The only way those sections can be read as limitations on the jurisdiction otherwise granted under Sections 1581 and 1583 is to read into them something that is not there: the implication that they preclude jurisdiction. At the least, the present language is ambiguous, on a subject where clarity is essential and attainable.

For these reasons, although we generally support the proposed expansion of jurisdiction, we suggest that Title III be restructured. We suggest that Section 1581 be made the primary jurisdictional statute; that it first recite that the Customs Court possesses exclusive jurisdiction over matters a, b, c, d, e ... (the matters now in Sections 1583 (b) (c) (d), 1584–1590); and that it then grant the Customs Court residual jurisdiction over other final agency actions of the Customs Service. Those actions of other agencies that are properly made exclusively reviewable in the Customs Court should then be specified in the statute. (New sub-sections 1583 (b), (c), and (d) specify such actions.) Alternatively, if it were felt that such a list might inevitably omit appropriate actions, a test akin to the "directly affecting imports" could be used to cover actions of all agencies other than the Customs Service.

Finally, we support Section 1582, which would give the Customs Court all the power in law and equity of district courts. A similar principle is contained in paragraph A (2) of Recommendation 77-2.

(Section 1591).-In its Recommendation 77-2(D) the Conference has proposed a complete reform of Section 592 of the Tariff Act of 1930 and has testified in support of H.R. 8149, the Customs Procedural Reform Act. (That bill has passed both the House and the Senate and is awaiting conference committee action.) As noted in the section-by-section analysis to S. 2857, the Conference, as part of its Recommendation, urged that exclusive jurisdiction of penalty actions be in the Customs Court. This was done on the theory that the court's ability to hold hearings outside New York could be improved and that a jury-trial provision could be added if necessary. Although the bill did not adopt this approach, the bill's proposal to allow the transfer of some, but not all, cases to the Customs Court seems to be reasonable. We undestand that the transfer will take place automatically unless the United States objects and the district court upholds the objection. To make this clearer, we suggest adding the words, "if the United States objects," to paragraph (d) (2) after the word "and," in the first sentence. Finally, we question the advisability of making tranfer decisions appealable only on appeal from a final judgment on the merits.