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In view of these holdings and their salutary effect upon the actions of the Chief Executive, who must legally obey the specific terms of the Congressional delegation of power “to lay and collect duties,” the Committee recommends that the language in question be amended as follows:
“The Customs Court shall not possess jurisdiction to review a discretionary decision of the President or his delegate pursuant to the authority granted to him by any law relating to international trade; provided, that if such discretionary decision involves or entails the imposition of duties within the meaning of Article 1, 88, Clause 1 of the Constitution of the United States pursuant to power delegated by the Congress, nothing contained herein shall preclude the Customs Court from taking jurisdiction of the matter solely for the purpose of determining whether the action of the President or his delegate was in excess of statutory jurisdiction, authority, or limitations, or without observance of procedure required by law.”
This language is drawn from subsections (C) and (D) of 5 USC 706 (2) and is believed to state existing law.
Subparagraph (ii) of proposed new 1583 (f) (page 7, line 22) provides generally that neither the Customs Court nor any other court shall possess jurisdiction to review any customs-related ruling or "internal advice” (the latter term being another type of ruling) issued by the Secretary of the Treasury. However, subparagraph (ii) does provide for direct review of rulings issued by the Secretary of the Treasury under § 315(d) of the Tariff Act (19 USC § 1315(d)) pertaining to a “change of practice”.
Under this provision of present law, before the Customs Service can assess a higher rate of duty than that previously found (by the Secretary of the Treasury) to have existed under "an established and uniform practice,” appropriate notice must be published in the Federal Register and importers are given a 30-day grace period (expanded to 90 days by regulation) within which to close out existing contracts, etc. Because of the extreme potential for surprise and damage to the importing community when the Customs Service upsets an established and uniform practice and imposes a higher duty, such “change of practice" rulings should be directly reviewable. The Committee therefore supports the concept of a direct review of such rulings, but is unable to approve the section as a whole because the language used attempts to insulate all rulings from any judicial review whatsoever-clearly an unacceptable, and probably unconstitutional, result.
Subsection (g) of proposed new § 1583 (page 8, line 5) repeats, word for word, the third paragraph of g 1583(a) (pertaining to not creating a new cause of action) and should be deleted in accordance with the Committee's previous recommendation.
Proposed new § 1584, “Appraisal and classification" (page 8, line 9) combines two present branches of the traditional review jurisdiction of the Customs Court to review the appraisement (valuation) of imported merchandise for duty purposes, and the classification thereof under the provisions of the Tariff Schedules of the United States. No dispute can exist that this jurisdiction should be retained, but the Committee would redraft the section for clarity to read as follows:
“The Customs Court shall possess exclusive jurisdiction of civil actions which involve the appraised value or the classification of imported merchandise, and the rate and amount of duties chargeable upon imports.”
Proposed new § 1585 covers “Exclusion of goods from entry or delivery" (page 8, line 21) and reads as follows:
"Except as otherwise provided by law, the Customs Court shall possess exclusive jurisdiction of civil actions which involve the exclusion of imports from entry or delivery under any provision of the customs laws or the exclusion or required delivery of imports purusant to the terms of an entry bond.”'
Cases involving exclusions of merchandise by Customs officers have been particularly troublesome, first in regard to the initial choice of forum, and second, to speed of review. One problem area is generated by the fact that Customs, in addition to imposing its "own" laws pertaining to exclusion from entry, also enforces numerous laws of other agencies (cod'fied elsewhere than in Title 19 of U.S. Code) to the extent such laws affect merchandise crossing the Customs
1 See address by the late George Bronz before the First Judicial Conference of the Court of Customs and Patent Appeals, Washington, D.C. on May 29, 1975 (on file with the Administrative Conference of the United States) ; see also a report dated August 17, 1977 of the Administrative Conference of the United States entitled “Judicial Review of Customs Service Actions” prepared by Professor Peter M. Gerhart of the Ohio State University College of Law (hereinafter Gerhart report), at pages 53-55, 86, 100, 160-163.
barrier. Under 19 USC § 1499, Customs officers are directed, in connection with their inspection of imported merchandise, to deterimne that it is “found to comply with the requirements of the laws of the United States.” This means all the laws. The Customs Service, during the course of Congressional hearings in 1976, inserted a document into the record entitled “Laws and Regulations Enforced or Administrated by the U.S. Customs Service" which runs to 60 pages in the printed record and covers hundreds upon hundreds of laws, including such esoterica as the Bald Eagle Protection Act, The Import of Adulterated Butter Act, The Private Carriage of Letters Act, and The National Mobile Home Construction and Safety Standards Act.
The Committee submits that importers and others should not have to guess as to the meaning of the term “Customs laws” in proposed new § 1585. Merely to choose the wrong forum results in lengthy delay and confusion which, in the case of exclusion of goods (an act very much akin to seizure) can result in irreparable injury and the bankruptcy of the importer. Therefore, the Committee suggests inserting into $ 1585 the following provision: “For purposes of this section, the term customs laws shall include any law codified in Title 19 of the United States Code; or any law which pertains to imported merchandise and not to domestically-produced merchandise; or, any law which discriminates against imported merchandise as op sed to domestically-produced merchandise.”
Another necessary change in proposed new § 1585 concerns the use of the language "the exclusion or required delivery of imports pursuant to the terms of an entry bond" (page 8, line 17). Entry bonds as such do not "exclude" merchandise; only U.S. laws can do that. Moreover, entry bonds come into play in the context of proposed new § 1585 only when a demand for re-delivery is made under threat of collection of liquidated damages under the bond, or a lawsuit for the full face value of the entry bond. Therefore, the phrase should be revised to read : “the required re-delivery of imports pursuant to the terms of an entry bond". As thus redrafted, the clause would include situations where the importer, under threat of action against his entry bond, chose to re-deliver to Customs custody, under duress, merchandise that had been previously released to him.
Proposed § 1586 "Charges or exactions” (page 8, line 21) would include within the Customs Court's review jurisdiction various charges, taxes, fees or other exactions, which are either imposed "upon importation” (subsection (a), page 8, line 24), or are assessed under a decision of the Secretary of the Treasury, upon “any vessel, aircraft or other instrumentality of international commerce which enters into the Customs territory of the United States" (subsection (b), page 9, line 5). This latter provision for navigation fees, etc., excludes assessment of “Customs duties”. Subsection (b) is apparently intended to overrule cases such as Puget Sound Freight Lines, et al v. United States, 36 CCPA 70, C.A.D. 400 (1949) which held that navigation fees and charges assessed under 19 U.S.C. $ 58 were not reviewable in the Customs Court.
The Committee supports $ 1586 with a recommendation that it be expanded to include liquidated damages or penal sums assessed against Customs bonds. Rather than invite a suit by the government to collect the full face value of the bond, most importers, brokers, common carriers, and other parties required to take out Customs bonds, prefer to settle with the Customs Service on the basis of liquidated damages as a mitigated penalty. The jurisdiction of the Customs Court in this area is fuzzy at best (see Gerhart report, pages 87-88) and should be clarified. It is submitted that a Customs bond is closely enough connected with the acts of importation and delivery of imported goods to fall within the general scope of the proposed legislation, and should therefore be reviewable in the Customs Court, under APA $ 706 standards.
Additionally, § 1586 should be clarified to avoid inadvertently overruling the important decision in Suwannee Steamship Company v. United States, CD 4708, 11 Cust. Bull. 33 (decided July 18, 1977), in which it was held that a penal duty imposed on vessel repairs under 19 USC § 257 (now 19 USC § 1466) was reviewable in the Customs Court. As proposed § 1586 now stands, there is some doubt that the special penal duties fall within the language of $ 1584 pertaining to "duties chargeable upon imports”, or proposed § 1586(a), or $ 1586(b). We therefore recommend that the language in $ 1586 be amended to include specific provision for the types of special penal duties imposed under 19 USC § 1466 and elsewhere in Title 19.
2 Hearings before the Subcommittee on Trade, House Committee on Ways & Means, on H.R. 9220, 94th Cong., 20 Sess., August 3-6, 1976, at p. 110.
New 1587, pertaining to refusal to pay claim for drawback (page 9, line 9), new § 1588, pertaining to liquidation or reliquidation of an entry or modification thereof (page 9, line 14), and new § 1589, pertaining to refusal to reliquidate an entry (page 9, line 18), all restate existing review powers in the Customs Court, and the Committee has no objection to the phrasing of these sections of the bill.
New $ 1590 (page 9, line 22), vests exclusive jurisdiction in the Customs Court to review civil actions instituted pursuant to g 516 of the Tariff Act of 1930 (19 USC § 1516). 8 516 itself is extensively revised by 8 601 of the bill (disapproved by the Committee). However, the Committee has no objection to the language of proposed new $ 1590, insofar as it merely restates present law.
Proposed new § 1591 covering “Civil penalties, forfeitures, suits to recover on a bond, and recovery of Customs duties" (page 10, line 3) represents a grant of new jurisdiction to the Customs Court to review, upon transfer from a district court, civil actions involving imports which are instituted by the U.S. to (1) recover civil fines or penalties or enforce forfeitures “imposed under any revenue statute administered by the Customs Service”, or (2) to recover upon a bond relating to the importation of merchandise, or (3) to recover Customs duties. Such suits are presently instituted in district court pursuant to various provisions of Title 28. As is discussed more fully below, under the bill as presently drafted, such transfer would be accomplished only if the district court determines that the case involved a "substantial question” (page 11, line 3) regarding the proper classification or value of imports or the rate of duty imposed (therefore making it appropriate to invoke the special expertise of the Customs Court). The Committee supports the transfer jurisdiction vested in the Customs Court by the bill, but would liberalize the right of transfer, as discussed below. As a matter of draftsmanship, the Committee recommends that the words "in international trade” appearing after the word "imports” in proposed § 1591 (a) (page 10, line 5) be deleted as superfluous (since all imports involve "international trade") and that clause (1) of proposed § 1591 (a) (page 10, line 6) be redrafted to read “recover a civil fine or penalty or enforce a forfeiture imposed under any revenue statute administered by the Customs Service". We further recommend that parenthetical language be inserted in clause (2) of proposed § 1591 (a) (page 10, line 8) to exclude matters involving suits to recover liquidated damages or penal sums assessed under bonds, to clarify that such actions would be covered by proposed § 1586 with the amendments suggested by the Committee.
The transfer procedures as set forth in proposed § 1591 (b) (page 10, line 11), which are based upon 28 USC § 1446, are acceptable to the Committee with the following recommendations: It is believed that the transfer procedures are too restrictive, limited as they are in proposed § 1591 (d) (2) (page 11, line 2) to situations where the district court determines "that the case involves a substantial question * * * as to the proper classification or valuation of imported merchandise or the rate of duty imposed.” To begin with, many of the matters which are the subject of initial proceedings by the U.S. before a district court of the type specified in proposed g 1591 (a) might involve substantial Customs questions other than classification or valuation or rate of duty: i.e., Customs entry procedures; clerical error, mistake of fact or other inadvertance of the nature contemplated in 19 USC 1520; whether an importer had properly revealed to Customs officials all facts necessary to properly treat the entry; and like matters. Moreover, it is believed that district court calendars (at least in the large ports such as New York and Los Angeles) are much more congested by comparison with the Customs Court, where the work load has dropped sharply since adoption of the 1970 Customs Court procedural amendments. It is therefore believed appropriate to revise § 1591 (a) (2) to provide that transfer may be had to the Customs Court upon a simple application by either party, with the proviso that the district court may refuse the transfer if it determines that there is a non-Customs question involved of such importance as to warrant retaining jurisdiction or that the interests of justice otherwise require that jurisdiction be retained (e.g., a jury trial is Constitutionally required).
Finally, appropriate language should be inserted in proposed § 1591, in connection with a suit to recover Customs duties which has been transferred to the Customs Court, to preclude a party from litigating or re-litigating those issues of law and fact pertaining to the classification, appraised value and rate of duty imposed upon the entries in question, which (a) he could have litigated initially in the Customs Court by way of protest and civil action against the denial of such protest, or (b) he did litigate, but which were passed upon in the Customs Court in the previous civil action against the denial of the protest (that is, collateral estoppel).
New § 1591 (g) (page 11, line 18), applies the present provisions of chapter 163 of USC Title 28 (pertaining to fines, penalties & forfeitures) to transfer proceedings in the Customs Court. The Committee has no objection.
New $ 1592 (page 11, line 23) would grant to the Customs Court jurisdiction to render judgment in favor of the U.S. "upon any set-off, demand, or counterclaim, which arises out of an import or export related transaction”. The rationale given in the Justice Department's explanation of this provision is that the Customs Court should be allowed to affirmatively determine and render judgment in support of a classification different than that originally returned by the District Director or claimed by the plaintiff, if the government should press for this result during trial. The Committee submits that the threat of a Customs Court judgment affirmatively returning a higher rate of duty than as assessed by Customs would have an obvious and severe chilling effect upon an importer's right to judicial review. Under present procedures of the Customs Court, a test case involving one or several entries is usually selected for trial, with all other civil actions involving other entries (under the multiple-filing system peculiar to the Customs Court) being "suspended” to abide the test-case outcome.
If the government receives in the test case an affirmative judgment for a classification different than that returned by Customs officials (at a higher rate of duty) it could then move to have the same classification applied to all other entries involved in all other civil actions "suspended” under the test case. The unfairness of such a result is clear, especially when it is contrasted with the present practice followed in such a situation, namely, a published announcement by the Customs Service that it will, or will not, apply the “alternative” classification reached in the test case to unliquidated entries. Thus, the importer may choose to abandon all the “suspended” civil actions, and avoid having to pay substantial duty increases on such entries. The Committee favors retention of the present practice.
In any event, even if it is concluded that it is desirable to allow the Court to return judgment supporting an “alternative" classification, the section goes far beyond this purpose and the Committee's opinion is much too broadly drafted. As it presently stands, proposed 1592 might permit the Government to threaten a plaintiff in the Customs Court with counterclaims involving import or export related transactions totally remote from the merchandise and issues before the Court. So written, the section would have an obvious chilling effect upon parties seeking judicial review. If the government is entitled to an affirmative classification different than that returned by the District Director, with regard to the merchandise before the Court, the government should have the right to assert a set-off, demand or counterclaim only with regard to the transactions before the Court. The Committee (while maintaining its objections noted above) therefore suggests the following language as an alternative to proposed § 1592:
“The Customs Court shall have jurisdiction to render judgment upon any setoff, demand or counterclaim, asserted by the United States against the plaintiff, which arises out of the same import transactions before the court."
Proposed § 1593, entitled "Cure of Defects” (page 12, line 5) would allow the District Court to transfer cases to the Customs Court, and vice-versa, where the plaintiff had chosen the wrong forum to commence action. There is obvious equitable merit to this section, and the Committee approves the same. Title IV: Customs Court procedures
$ 401 (page 12, line 19), as a prelude to § 402, repeals and renumbers various provisions of the various sections of chapter 169 of Title 28 USC, presently governing Customs Court procedure.
§ 402 (page 13, line 4) would amend the present procedural provisions governing Customs Court actions as follows: Proposed new § 2631, entitled “Persons entitled to Commence a Civil Action” (page 13, line 6), states as follows in subsection (a):
“(a) Except in those civil actions specified in sections 1584, 1585, 1587, 1588, 1589, 1590, and section 516 of the Tariff Act of 1930, as amended, a civil action may be instituted in the Customs Court by any person adversely affected or aggrieved (within the meaning of section 702 of title 5, United States Code) by the agency action (as defined in section 551 (13) of title 5, United States Code), which is the subject of the suit. Nothing in this subsection shall be construed
to create a cause of action, or to permit the maintenance of a suit not otherwise authorized by law."
The provision is the functional implementing language governing the residual grant of jurisdiction appearing in proposed new $ 1581 and g 1583 of Title 28 ($ 302 of the bill). For the same reasons that the Committee set forth regarding the “nothing in this section” sentence contained in proposed new $ 1581 and $ 1583, the Committee believes that this sentence should be deleted. That is, the “nothing in this subsection” sentence tends to immediately negate the operation of the section, which does create a new “residual” cause of action not presently existing in the law.
The Committee agrees with the incorporation by reference of the "adversely affected or aggrieved" definition of 5 USC § 702 and also the "agency action" definition of 5 USC § 551 (13). On this latter point, 5 USC $ 551 (13) includes "failure to act” in its definition of "agency action". Under present law, the Court of Customs and Patent Appeals held in United States v. Nils A. Boe, Chief Judge, et al, C.A.D. 1177, 10 Cust. Bull. 47, decided November 4, 1976, that the Customs Court had no authority to compel the District Director to liquidate an entry (however meritorious was the importer's case to compel liquidation unreasonably withheld). It is believe that under the $ 515 (13) "failure to act” phrase, coupled with other provisions of the bill expanding its jurisdiction, the Customs Court could under proposed § 2631, grant relief to a party the liquidation of whose entries had been unreasonably or unjustifiably delayed. The Committee supports this concept.
The initial language of proposed § 2631 (a) excepting "those civil actions specified in § 1584, § 1585, § 1587, § 1588, § 1589, 8 1590, and $ 516 of the Tariff Act of 1930, as amended" (page 7, line 7) is intended to preserve the present procedure whereby litigants with a cause of action falling under the referenced headings are required to file a protest with the Customs Service and thereafter to ground their subsequent civil actions upon denials of such protects. We believe these procedures should be continued, for the obvious reason that the op portunity to file a protest (which may be supported with more or less elaborate briefs, and may be reviewed by Headquarters under certain circumstances) provides a desirable level of comprehensive administrative review of initial Customs decisions. Additionally, under an existing procedure, whereby pursuant to agreement between the Customs Service and the protesting party action may be “suspended" on certain protests while a test case is being litigated in the Customs Court, a large number of cases are effectively prevented from unnecessarily reaching the Customs Court and clogging the Court's calendars. Such procedures should be continued and may be continued under the bill.
One puzzling aspect of the exclusionary language contained at the beginning of proposed § 2631 (a) (page 13, line 8) is the omission of reference to 8 1586, which covers exclusion from entry. Decisions excluding merchandise from entry have been traditionally among those protestable (19 USC 1514(a) (4)); and apparently, omission of § 1586 exclusion decisions in proposed § 2631 (a) is inadvertent.
Proposed § 2631(b) (page 14, line 1) pertains to intervention in a civil action and provides as follows:
By leave of the court, any person who would be adversely affected or aggrieved by a decision in a civil action pending in the Customs Court may intervene in that action.
The Justice Department's analysis states that the purpose of this is to allow parties such as consumer groups to intervene, and (presumably to present evidence and otherwise participate in the trial as plaintiffs-intervenors. The Committee, while supporting generally the public policy behind the proposed intervention provision, is concerned that a too-liberal granting of the right to intervene might severely hamper the original plaintiff's presentation of his or her case. Besides consumer groups, parties who would be likely to intervene, in a case of importance, would include competing importers, importers' trade associations, competing domestic manufacutrers' trade associations, foreign exporters of the same merchandise, foreign governments—the list grows quite substantial. Obviously, the more intervenors, the more complex and disorderly become the trial procedures. The Committee notes that Federal Rule 24 (b), governing permissive intervention, contains the following sentence at the end thereof : "In exercising its discretion, the court shall consider whether the intervention will unduly delay or prejudice the adjudication of the rights or the original parties". The Committee urges that this language be inserted verbatim in proposed § 2631 (b).