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there a large group of citizens who should be entitled to maintain an action of some sort in the Customs Court who cannot claim a direct connection with the import? We feel that it is a good concept and it would improve the judicial machinery if, for instance, under certain carefully defined and limited circumstances, consumer groups could come in and sue against customs decisions and labor unions could come in and sue against customs decisions.
Senator DECONCINI. Mr. Altier?
Mr. ALTIER. In your prepared statement, you indicated that you opposed the substitution of the complaint for the summons which is the current procedure.
We received testimony earlier today from Mr. Vance which indicated or suggested the use of the summons or the complaint with the ultimate decision being left with the rules of Customs Court.
I believe you addressed that in your summary. Could you provide us with some further background or commentary as to your recommendation ?
Mr. SCHWARTZ. Mr. Vance has taken the position on behalf of the Association of Customs Bar that it should be up to the Customs Court to determine a particular action as to whether a summons or complaint should be filed.
Our present position is that we would prefer that the present procedure, which provides for summons across the board, should be retained. We think that has worked well.
I would not prefer to see any tinkering with that at the momment.
Mr. PALEY. I agree with that statement. The summons has served to initiate the action. There are many cases in the Customs Court which never come to trial for which I feel a complaint is not warranted or justified because the cases will be disposed of in line with a test case which will be tried.
I agree that it is necessary to have a complaint for the test case, but I do not feel it is necessary to indulge in all of that additional work and detail where the case itself and where the individual importation would not be the subject.
Mr. ALTIER. I see.
Also in your prepared statement, you indicated that you were concerned about the Government's broad right to counterclaim the Customs Court litigation.
Mr. PALEY. Yes.
Mr. ALTIER. Do you think it would chill the citizen's right to try his or her case before the Customs Court? Last Friday we had testimony from the ABA and they suggested that perhaps after a series of questions between us and them, they felt that there could ho certain limitations placed on this right.
Do you have any comments on that? Or are you still opposed to the use of counter-claim?
Mr. PALEY. In our more detailed discussion, we have stated that it should at most be limited to the particular transaction involved. I would like, however, for Mr. Schwartz to comment on that if he would.
Mr. SCHWARTZ. We feel that if you allow the Government to counterclaim on a particular import transaction which may be totally remote from the importation before the court, then, in effect, the Government may be able to frighten the potential claimant right out of court. For instance, you may have an importer who may owe the Government, according to the Government, $20,000 in demurrage charges on some importations that occurred years and years ago and nothing to do with the suit before the court. Under the bisl as it is now written, if the man chooses to file a complaint against the Government in the Customs Court his attorney will have to remind him that he might be hit with that $20,000 claim. So, we feel that it should be related. If the government is allowed to counter-claim—and there is probably a basic right in the government to be able to counter-claim if you look at it generally-we feel it should be limited to those transactions which are before the court and the debts and obligations that arise out of those transactions and none other.
Mr. ALTIER, According to Mr. Gerhart's study—I do not know whether you have been able to review it or not-there are only those who understand the customs administration beyond those who are regularly involved, other than those who are importers, lawyers or brokers who are involved in customs matters.
It seems that this small group is somewhat insulated and ingrown and relatively unaffected by the developments in other fields.
Under the proposed bill, Customs Court would be granted power similar to other Article III courts. The subject matter of the Customs court would also be expanded. The subject matter of jurisdiction would also be expanded.
Have you sensed amongst your peers a feeling that efforts to infuse the types of procedures that are provided for under the bill which would make the Customs Court more in line with the district court practice—that is, do you think there is an opposition caused by fear of expanding members of the Customs bar?
Mr. PALEY. I do not think that is really the problem. I can only speak for myself. From my standpoint, my only objection to making the Customs Court “the same” as any other court is that having spent the number of years that I have in going through the changes in the Customs Court, I still have the feeling that the Customs Court is different and it should be different in some respects from any other court, because the Customs Court has evolved from a body which is really a businessman's court. It is a special court created to sue the Government on claimed overcharges for assessment of duty. I think that the addition of more requirements from the procedural standpoint has increased the inhibition of claims against the Government, the purpose for which the court was set up in the first place.
Mr. ALTIER. Do you have any comments on the preliminary injunctive relief provision under the bill which states that financial loss shall not constitute the irreparable injury within the meaning of the subsection?
Mr. SCHWARTZ. We are against it. We feel that in 98 percent of the cases an importer's complaint is financial loss. He has a business to run. If the Government action is continued, then he will be bankrupt and out of business.
Mr. ALTIER. Would that be your sole basis?
Mr. SCHWARTZ. There may be some instances where he may have some other kind of problem than financial loss. But in most of the cases, the irreparable injury is one to his bank account. So, we support the concept that there is a public interest in the collection of duties.
There is a public interest in the collection of taxes. I believe that there is a general set against people being able to arbitrarily delay the collection of duties and taxes. But set that to one side,
Now, consider the question of what constitutes irreparable injury. If
you arbitrarily exclude financial injury, then in effect, you have thrown the whole concept of irreparable injury right out of the window.
So, the answer is perhaps a compromise along the lines we have suggested which I think we borrowed from Mr. Hertzstein and that is that provided all increased duties shall be paid except where in such circumstances payment of increased duties would represent irreparable injury.
Mr. PALEY. I would like to add a comment, if I may.
In line with what I answered to the last question, it seems to me that I must look at the question in the context of the Customs Court and the fact that it is a businessman's court. It seems to me that if you are talking about irreparable injury when a company's financial life is at stake, that can be real irreparable injury without anything else being involved.
Mr. ALTIER. I have one final question. If permanent and temporary injunctive relief were provided in the bill, do you feel that the Customs Court would be able to handle these emergency-type situations with their main location being in New York City?
Mr. SCHWARTZ. I would guess their increased caseload generated by this legislation may decrease the possibility of their ability to respond quickly to emergency situations.
Mr. Paley. The consensus of opinion is that only time will tell. But, as of now, I feel that the Customs Court is equipped at the present time to handle emergencies and is ready, willing and able to go to the scene of the problem and is not that backlogged with work so that it is a time problem.
Mr. ALTIER. Gentlemen, we want to thank you very much. Senator DeConcini had to go to the floor of the Senate. He apologizes for having to leave early. He also thanks you for your cooperation and your assistance.
This hearing is now adjourned.
DOHERTY AND MELAHN,
ATTORNEY AT LAW,
Boston, Mass., June 27, 1978. Re Customs Courts Act of 1978—S. 2857. Hon. DENNIS DECONCINI, Chairman, Subcommittee on Improvements in Judicial Machinery, Committee
on the Judiciary, U.S. Senate, Washington, D.C. DEAR SIR: Enclosed find a comprehensive statement on the Customs Courts Act of 1978 by Mr. Doherty of this office. This firm is the only law firm in New England which regularly practices before the Customs Court. Mr. Doherty, who is now semiretired, has practiced before the Customs Court for more than 35 years. It is hoped that this statement will be of assistance to your Committee in considering the Bill, S. 2857, which is currently pending before the Subcommittee.
It is hoped that some consideration will be given to the views of members of the private Bar including those who do not practice in the New York City or Washington areas. Mr. Doherty's Statement will give your Committee the viewpoint of an "outport” practitioner. I will not detail my own impressions of the Bill because I believe Mr. Doherty has more than amply touched upon the salient points; however I would like to make a few pertinent observations.
In my opinion the Bill has been drafted primarily by persons who are mainly concerned with the effects of the Bill on the Government's management of matters which may be contested in the Customs Court. The Bill is replete with roadblocks and retributions for unsuspecting importers who have the audacity to challenge bureaucratic decisions which may affect the livelihood of the importer and/or its employees. There is a substantial Washington bias in the Bill and little consideration has been given to due process to the individual importer importing his merchandise throughout the various Ports in the United States. Most importations take place in the various Ports and not in Washington,
While it may be true that the individual claim of a modest importer to obtain refunds of duties may not be very important in terms of the overall trade policy of the United States, it seems to me that fundamental due process requires that each and every citizen ought to have hassle-free access to a judicial forum anywhere in the United States, and not be compelled to pursue his remedies solely in Customs Service Headquarters in Washington, D.C. Almost all of the procedural changes proposed will have the effect of diminishing the jurisdiction of the Customs Court, which is already inadequate, and at the same time throw more impediments in the path of an importer trying to correct what he believes to be an improper assessment of duties, or whatever relief he is seeking.
I note, for example, special emphasis is given to the convenience of Federal Agencies in processing papers by initiating civil actions by means of Complaints. No consideration has been given to importers pursuing their rights at Ports throughout the United States when they may not even have sufficient papers in front of them to draft a Complaint, as the files might be in distant Customs offices.
I also note that the Bill does not provide any mechanism to compel the Gov. ernment to liquidate entries even in those instances where the District Director requires the payment of additional duties as a condition precedent to entry. See 19 C.F.R. 141.103. If you think that this is an academic exercise, I refer you to a case handled by this office. Russell Stanfield Dexter v. United States, 78 Cust. Ct. C.R.D. 77–1 (1977), copy enclosed for your ready reference, where the Court said that it did not have any authority to compel liquidations.
The language of Judge Watson is very pertinent to your Committee's responsibilities to see that importers receive due process:
It would appear that if the relevant jurisdictional statute satisfies the rudimentary constitutional requirements plaintiff's real argument is with the terms of the legislation and the final resolution of such a problem is a matter within the special competence of Congress. Congress is the proper body to consider whether the existing limitations on the jurisdiction of the Court are possibly permitting the existence of inequities, which although they may not be unconstitutional, are nevertheless incompatible with our sense of fairness and the spirit of an impartial and equitable government of laws.”
This bill does not change the Dexter situation one particle. It is very unfair of the Government to require an importer to pay duties which the importer believes to be excessive unless the Government is prepared to defend its decision in a judicial forum. Your Committee should correct this injustice.
Also conspicuously absent from the Bill is a provision for interest on Judgments obtained against the Government. I do not see any reason why the Customs Service should be any different from the Internal Revenue Service which pays interest on its Judgments when the monies have been deposited in advance. In many cases, Judgments in Customs cases do not enter for many years after entry of the merchandise. The importer loses the use of its money during the period and must also pay attorneys' fees. When he obtains a favorable Judgment he receives refunds in deflated dollars.
Finally, I wish to leave your Committee with the thought that as an active practitioner before the Customs Court I firmly believe that the Customs Court should have increased jurisdiction. There are simply too many decisions made by Customs officials that are not subject to judicial review in any forum. One of the themes which permeates S. 2857, is an overall a version to judicial review of bureaucratic decisions. This should not be permitted by the Congress. It is a fundamental precept of our Government that all Governmental actions are subject to judicial review, and I see no reason why the U.S. Customs Service and related agencies should be immune from such review. To the contrary, my experience as a practitioner leads me to believe that there is a great need for such review. I have counselled too many clients who have expressed dissatisfaction with the type of minimal judicial review which is now permitted under the current jurisdiction of the Court. In an age of a "liberal judiciary", it is shocking to realize how little meaningful review there is of thousands of decisions made by the Customs Service in its daily work. This is not to say that the Customs Service is any better or worse than any other Government agency. However, like all bureaucracies it will only respond to meaningful judicial review of its decisions.
I have had the benefit of reading Chief Judge Re's presentation to the Committee, and endorse his suggestion to immediately correct the present defects of the Court's jurisdiction, while examining new jurisdiction, in other areas in the future.
If you or anyone on your Staff is desirous of communicating with us on this Bill, we would be pleased to assist you in any way that we can. Very truly yours,
WILLIAM E. MELAHN.
DECISIONS OF THE UNITED STATES CUSTOMS COURT
U.S. CUSTOMS COURT
Nils A. Boe, Chief Judge Paul P. Rao, Morgan Ford, Scovel Richardson, Frederick Landis, James L.
Watson, Herbert N. Maletz, Bernard Newman, and Edward D. Re, Judges
Mary D. Alger, and Samuel M. Rosenstein, Senior Judges
Joseph E. Lombardi, Clerk
CUSTOMS RULES DECISIONS