extraordinary authority of the Customs Service to detain and seize imported merchandise that allegedly infringes a United States trademark or copyright in the absence of the same sort of court order that is required before action may be taken against allegedly infringing domestic merchandise.

1. Expedited review

Congress should amend the statutes giving preference to certain types of cases in the Customs Court, 28 U.S.C. § 2633, and the Court of Customs and Patent Appeals, 28 U.S.C. § 2602, to ensure a similar preference for cases properly before either court involving the exclusion of merchandise from entry or delivery. 2. The Customs Service's authority under the Trademark and Copyright Statutes

Congress should amend the statutes under which the Customs Service is authorized to detain and seize merchandise that allegedly infringes a United States trademarke, 19 U.S.C. § 1526, or copyright, 17 U.S.C. § 603, to provide that the Customs Service may take no such action until after the owner of the trademark or copyright has obtained an order in a United States district court enjoining the importation. Alternatively, Congress should amend the trademark statute, as it has the copyright statute, to authorize the Customs Service to establish by regulation such a condition precedent to its acting to detain and seize allegedly infringing merchandise, and the Customs Service should promulgate such a regulation. In either event, the Customs Service should then adopt express procedures that would enable the owner of a trademark or copyright to identfy imported merchandise that may infringe his mark or copyright.

E. IMPOSITION OF CIVIL PENALTIES

The penalty for violations of Section 592 of the Tariff Act of 1930, 19 U.S.C. § 1592, and some other import statutes is forfeiture of imported merchandise or its value. These penalty provisions are unsatisfactory. The statutory forfeiture penalty is likely to be disproportionate to the gravity of the alleged offense. Although the Customs Service is usually prepared to mitigate the penalty, the statures pose the following dilemma: If the alleged violator does not wish to accept the proferred mitigation because he believes he did not violate the statute or because he believes that he is entitled to a greater degree of mitigation, he is subject to suit in the district court for the full forfeiture value. Moreover, he will lose the benefit of any mitigation if the government can prove a violation, however insignificant, on his part. The recommendation would rationalize penalty procedures.

1. The rationalization of section 592

Section 592 of the Tariff Act of 1930, 19 U.S.C. § 1592, prohibiting fraudulent or false statements or practices respecting imports, should be revised to make it fairer and more rational in its operation.

(a) Section 592 should be amended to provide for civil money penalties against the person violating the statute rather than for forfeiture of the merchandise or the full value thereof. Congress should establish maximum penalties based upon the revenue deficiency, if any, resulting from the violation and upon the degree of culpability of the violator. In any case in which the violation does not result in a revenue deficiency, the maximum penalties should be based upon a percentage of the value of the imported merchandise and upon the degree of culpability of the violator. If the violator is an importer, he should be given the option of surrendering his merchandise in lieu of payment of any penalty assessed.

(b) The Customs Service should continue to have the authority to mitigate civil penalties. If an assessment is contested, an action by the government to enforce the penalty should be in the Customs Court. In such an action, the government should have the burden of proving the act or omission constituting a violation and, if so alleged, the intentional nature thereof. The Customs Court should be authorized to determine de novo the amount of the penalty.

(c) In order to ensure that those subject to possible penalties under Section 592 know what is expected of them under the laws administered and enforced by the Customs Service, the Service should, to the maximum extent feasible, adopt and publish standards that will guide its determinations under such laws.

(d) The authority of the Customs Service to seize and hold merchandise under Section 592, other than prohibited or restricted merchandise, should be limited to instances where such seizure and holding are necessary to protect its ability to collect any revenue deficiency or penalty, and the Customs Service should be required to release the merchandise to the owner upon his provision of security for payment of such revenue deficiency or penalty. Where no such release is effected by the owner, the Customs Service should be required to release the merchandise not later than 60 days after seizure unless the government has initiated an action in the Customs Court within that period and obtained an extension for good cause from the court. In instances where the Customs Court permits the Service to hold merchandise for sale by the Service to satisfy any revenue deficiency or penalty determined by the judgment of the court, the net proceeds of such sale, after allowance for the judgment and costs of the sale, should be paid to the owner.

2. Other statutes

Each of the other penalty provisions enforced by the Customs Service should be reviewed and, if appropriate, revised in a manner consistent with the foregoing recommendations for the revision of Section 592.

Senator DECONCINI. Mr. Altier has some questions for you.

Mr. ALTIER. The term "directly affecting imports" appears several times in the bill. Obviously, it determines many of the bill's parameters.

What does this term mean to you, and do you feel it should be defined in the bill?

Mr. GERHART. This was one of the problems in the drafting of the bill. I think the drafters of the bill had two choices. One is that they could try to list specifically each of the subject matters over which the Customs Court should have jurisdiction. In the alternative they could try to find a general grant of jurisdiction which would give the Customs Court the ability to take those cases which they should have and avoid taking those cases which they should not have taken.

Both approaches have dangers. The problem with the specific listing of subject matter is that the list may be under-inclusive. There may be matters that are not included on the list that should have been.

On the other hand, his draft of the bill takes the other approach and raises the other danger: That is, that the term "directly affecting imports" will be so broad that it will not meaningfully delineate or confine the jurisdiction to the Customs Court.

I think that if the term "directly affecting imports" were given a commonsense definition by the court, it might be a workable definition. In specific answer to your question, Mr. Altier, it seems to me that the term "directly affecting imports" should be taken to include those actions of agencies which particularly affect the importation of merchandise and are intended to implement the foreign trade policies of the United States, as opposed to other policies.

However, as our prepared statement suggests, I believe there is great danger in using a term that broad which is undefined and which is incapable of limitation. We would like first to see the drafters attempt a list of the subject matter jurisdiction of the Customs Court. Mr. ALTIER. Thank you.

The Administrative Conference has recommended that any person adversely affected by an action of the Customs Service concerning merchandise in an exclusion case should have the means of seeking administrative review of such action with subsequent review of the Customs Court.

Section 601 of the bill almost does that when it permits competing American manufacturers, producers, and wholesalers to petition for the exclusion of merchandise.

Your position seems to go beyond that. Do you have any comments with regard to utilizing the more expansive "adversely affected" standard?

Mr. GERHART. I believe that section 601 is good to the extent that it does increase the classes of persons who have standing to sue. To that extent, we support it. It does not go as far as the conference's recommendations. I think it should go further.

The best example of the class of persons who should be able to challenge exclusion decisions arises from the Consumers Union Case. Consumers Union wanted to challenge exclusion of textile merchandise, but was unable to. That was true even though there was a case or controversy and Consumers Union had a substantial interest in the litigation. So, I think there are benefits to having a broader "adversely affected" test for those who want to challenge exclusion decisions.

Mr. ALTIER. Also, in your prepared statement regarding section 2636, you recommended that the words "standing alone" be added following the words "financial loss" in the situation where the Customs Court grants preliminary injunctive relief.

Could you expand upon that and also discuss the possibility of allowing and providing the Customs Court with the capability of issuing both permanent and injunctive relief?

Mr. GERHART. As to the latter question, I believe the Customs Court should have the ability to award both permanent and temporary injunctive relief. That seems to me to be an important part of the arsenal of the remedies used by the judiciary to control administrative action. I would assume that the bill would provide for such relief because it gives the Customs Court all the power of a district court.

Mr. LUBBERS. With respect to the recommendation that "standing alone" be added, I believe I am responsible for adding that to our prepared testimony. My only thought there was that because the section-by-section analysis indicated that "financial loss standing alone" should not constitute irreparable injury, that might be added to the statute as well.

However, after reading some of the other statements on this point, I find it pretty persuasive that "financial loss" is generally a good indication of irreparable injury in these cases. This is something that the conference has not taken a position on, but I think we might want to reevaluate this whole sentence in our prepared statement.

Mr. ALTIER. I have one other question. Section 1583 of the bill denies any appeal for rulings or internal advice.

Do you agree or disagree with that approach?

Mr. GERHART. The Administrative Conference has not taken a position on that question. It is one which we have discussed informally. The danger of allowing an appeal from such a ruling on internal advice is that it could cause the Customs Service to stop giving internal advice or to give it less frequently for fear that too much of what they would do would be open to the public and be challengeable.

That is a danger. I think, on the other hand, that there should be some way for persons who are faced with a decision of whether or

how to import and who have an articulated and final ruling of the Customs Service to be able to get judicial review of that ruling so that they can transact their business with some degree of certainty.

I think the solution to that problem may be to enable the Customs Court to issue declaratory judgments in certain cases when they find that issues are final and are ripe and will materially aid international trade.

Senator DECONCINI. Thank you very much, Mr. Gerhart and Mr. Lubbers. We are very pleased to have had you this morning. We appreciate your fine testimony.

Our next witness is Andrew Vance, association of the Customs Bar, New York.

Mr. Vance, we have had an opportunity to review your testimony, particularly your in-depth study of this bill. We appreciate this effort that you have put forth and the time, abviously, that it took to do this.

You may proceed.

STATEMENT OF ANDREW P. VANCE, ATTORNEY REPRESENTING THE ASSOCIATION OF THE CUSTOMS BAR

Mr. VANCE. Thank you, Mr. Chairman.

My name is Andrew P. Vance. I am a practicing attorney in the field of Customs law in international trade and from 1962 to 1976 was Chief of the Customs Section, Civil Division, United States Department of Justice. I appear here this morning on behalf of the Association of the Customs Bar to present the views of the association with regard to S. 2857, the Customs Courts Act of 1978.

The Association of the Customs Bar is a national organization comprised of attorneys who specialize in the field of customs law and international trade. The association has been in existence in excess of 50 years and from time to time has had the honor to present its views to the Congress on legislation affecting trade. Its members continuously practice before the administrative agencies which regulate our foreign trade and administer and interpret the powers delegated to them by the Congress with regard to our foreign commerce, and the customs courts which review contested administrative action and interpret the statutory enactments on which it was based. We appreciate the honor and the responsibility in being asked to participate in the current legislative process which, hopefully, may evolve into the Customs Courts Act of 1978 or 1979.

The association agrees with the lofty and commendable declaration of purposes set out in section 101 of the proposed legislation. Those purposes were the guide used by the association and its Committee on Practice, Procedure and Legislation in studying the bill. On the basis of that study and of consideration of comments from other individual members of the bar, the association submitted to the committee on June 15, 1978, a detailed 58-page analysis of the proposed statutory provisions of S. 2857 which included not only the association's comments but its recommendations for changes in the legislation.

We believe those recommendations will make it possible to enact a bill which carries out the goals enunciated in section 101 which can be immediately realized, leaving for future study and consideration sub

stantive changes desired by importers, American manufacturers, producers or wholesalers, exporters, the executive branch, and others interested in international trade which might require the joint consideration of this committee and the Committee on Finance. Some of the areas left for further consideration will be touched on later in this statement.

I shall not try this morning to reiterate the analysis set forth in our submission of June 15, understanding that that analysis will be considered a part of our statement this morning and included in the record.

Senator DECONCINI. Without objection, that material will be inserted in the record at this time.

[Material follows:]

STATEMENT OF ANDREW P. VANCE ON BEHALF OF ASSOCIATION OF THE CUSTOMS BAR ON S. 2857

Section 201. Comment.-While the analysis makes no mention of it, the proposed revision of 28 U.S.C.A. 251 by Section 201 will eliminate the partisan requirements in the appointment of judges to the Customs Court. This is certainly a desirable change and in keeping with the Article III status of the Court. The bi-partisan requirement is a hangover from the 1890 Board of General Appraisers days. This deletion is a significant one, and it is surprising that the analysis speaks only of the change proposed with regard to the designation and service of the Chief Judge. Both proposals, the deletion of the partisan qualification for the appointment of judges, and the changes in the designation and service of the Chief Judge, are commendable and should be enacted.

Section 302. § 1581. Comment.-Unfortunately, the first paragraph of § 1581, which is said in the Department of Justice analysis to contain a "general, residual grant of jurisdiction to the Customs Court patterned after the similar general grant of jurisdiction which applies to the district courts, 28 U.S.Ç. 1331” does not stop after the words "treaties of the United States" (at line 8, p. 4) where the similar provision in 28 U.S.C.A. 1331 does, but adds the language "or an Executive agreement executed by the President of the United States or under an Executive order of the President." The additional reference to Executive agreements and orders seems unnecessary in view of the preceding language and raises a question as to whether the intent of the draftsmen is to deprive the Customs Court of jurisdiction over a civil action arising under a Presidential Proclamation.

The remaining three paragraphs of the proposed § 1581 also seem only to raise questions, and do not appear to have any basis in 28 U.S.C.A. 1331, the section after which the analysis says the residual grant in the proposed § 1581 is based. Certainly, the concern expressed in the second paragraph is already covered by the phrase "except as otherwise provided by law" in the second line of the first paragraph of § 1581. The remaining two paragraphs do nothing but state the obvious, but by doing so not only make what should be a rather simple statement of residual jurisdiction far more complex and confusing than necessary, but may raise questions and doubts. At any rate, there seems to be no reason for including the last three paragraphs in the proposed legislation: none is advanced in the analysis.

Recommendation.-§ 1581 as proposed should be stricken and replaced by the following language:

"§ 1581. Questions involving imports.

The Customs Court shall possess exclusive jurisdiction, except as otherwise provided by law, over all civil actions against the United States, or against any officer or agency thereof, challenging Government decisions directly affecting imports which arise under the Constitution, laws or treaties of the United States."

Section 302. § 1582. Comment.-It is certainly time for the Customs Court to be given equitable powers. It would appear that the first sentence of the proposed § 1582 does exactly that. That being so, there seems no relevance to or necessity for the second sentence therein, which is a restatement of the current 28 U.S.C.A.