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Section 601.—This section, with a few very minor improvements, basically reiterates the amendments proposed in the original bill to section 516 of the Tariff Act of 1930, as amended. As noted in the Association's Oral Statement, there is some need and desire for amendments to section 516. This is a section that could well have benefited from dialogue among the Administration, American manufacturers, producers, and wholesalers interests and the attorneys who normally represent them, importers and counsel who normally represent them, and others. The version contained in the revision being basically the same as that included in the original bill, we must renew our recommendation that section 601 of the bill be deleted at this time for many of the considerations set forth at pages 48 through 54 of the Analysis.
Section 602.—We are in agreement with the changes made in section 602(a). The new language in the section includes a significant change by the Administration giving sureties the right to file protests equally with importers or consignees. As drafted, the statute would now permit sureties to file protests within 90 days of liquidation or within 90 days from the date of mailing of notice of demand for payment against their bond. However with regard to the latter filing, the surety would have to certify that it was not filing its protest “to collusively extend another authorized person's time to protest." This latter provision is in the new paragraph (b) of section 602 which replaces paragraph (b) which we had recommended be deleted. We are in agreement with the new paragraph (b) of section 602.
Section 714.–The present section 714 in the revised bill was not included in the original bill. It would delete the following sentence from section 514(a) of the Tariff Act of 1930, as amended, 19 U.S.C.A. 1514(a): “When a judgment or order of the United States Customs Court has become final, the papers transmitted shall be returned, together with a copy of the judgment or order to the appropriate Customs officer, who shall take action accordingly." I am unable to fathom the reason for this proposed provision, and would recommend its excision from the bill. If it is intended that the court should retain in its files certain of the documents in contested cases, appropriate statutory language should be drafted. However even in those instances it would be necessary for the Customs officials to have the consumption entries to effectuate liquidation.
Section 715.—This is the prior section 714 in the original version of the bill. In accordance with our suggestion that § 2631 in section 402 of the bill be deleted, we renew our recommendation for the deletion of this section from the bill and the deletion of “(b)” before the remaining paragraph.
If you have any further questions after viewing these comments, I would certainly be glad to answer them. I appreciate the opportunity to have been able to comment on the revised bill, in spite of the limitations. Sincerely yours.,
ANDREW P. VANCE.
AMERICAN BAR ASSOCIATION,
Chicago, Ill., July 17, 1978. Hon. DENNIS DECONCINI Chairman, Subcommittee on Improvements in Judicial Machinery, Committee on
the Judiciary U.S. Senate, Washington, D.C. DEAR MR. CHAIRMAN: On behalf of the American Bar Association, I would like: again to express our appreciation to you and members of your Subcommittee for the opportunity you recently provided us to testify at the hearings on S. 2857, the proposed Customs Courts Act of 1978.
You have sent us a revised version of the bill and requested coments by July 17. Regrettably, it is simply not feasible for use to review this revised draft and respond in such a short time. As you know, the bill contains a great number of complex provisions, and many of the changes made are quite fundamental and will importantly alter the scope and availability of judicial review for some years to come. Thus, we feel it is important to examine the revisions with care and to consult among the various members of the Bar who are expert in this field and have been participating in the formulation of our views.
We would hope that your Subcommittee will find it possible to withhold action on this bill until we have had an opportunity to review it carefully and submit our comments. My quick reading of the revised draft indicates that there are still substantial problems with some of the provisions, especially those which describe the subject matter jurisdiction of the Customs Court. A little time spent delineating that jurisdiction carefully at this time can save years of uncertainty and
expensive litigation that would likely follow from enactment of the present version.
Please be assured that the ABA strongly supports the objectives of this legislation. As indicated at the hearing, we will have no objection to enactment of the provisions addressed to improving the status of the judges of the Customs Court and giving the Court equity powers and the power to act, in appropriate cases, prior to the exhaustion of all administrative remedies. However, the provisions relating to the scope of the Court's exclusive jurisdiction do require, in our view, additional attention. We will attempt to have our views submitted to you by approximately the end of August. Sincerely yours,
ROBERT E. HERZSTEIN,
American Bar Association.
SERKO & SIMON.
New York, N.Y., July 17, 1978. Re. S. 2857–Customs Court Act of 1978 Comments on Revised Bill. SUBCOMMITTEE ON IMPROVEMENTS IN JUDICIAL MACHINERY, 6.306 Dirksen Senate Office Building, Washington, D.C. Att. : Mr. Michael J. Altier, Deputy Counsel.
DEAR MR. ALTIER : Enclosed is the statement prepared on behalf of the J.F.K. Airport Customs Brokers Associations, Inc., containing our comments on the revisions to S. 2857. We truly appreciate the opportunity afforded us by Senator De Concini to comment on these revisions and hope that you will feel free to contact us for any further analysis or suggestions which we can provide. With kind regards. Sincerely,
DAVID SERKO. Enclosure.
STATEMENT OF THE J.F.K. AIRPORT CUSTOMS BROKERS ASSOCIATION, INC., ON
S. 2857—CUSTOMS COURT ACT OF 1978, AS REVISED We have reviewed the revised bill which, as stated by Senator DeConcini, incorporates many of the constructive suggestions which arose out of the hearings held June 23rd and 27th, 1978. While we believe this revision goes a long way in resolving many of the difficulties which we had regarding this bill, there still remain certain areas in need of further revision, areas of particular concern to our members as Customhouse brokers. Rather than attempt to address ourselves to the entire bill, we will concentrate our attention on those particular sections which we believe are of the greatest importance to our members and which we believe require additional review.
Section 302 (Section 1591).-Although revised for clarity, and expanded to include additional grounds for invoking the jurisdiction of the Customs Court, this section, relating to civil penalties and forfeitures, still requires the defendant to choose between its right to a jury trial and the benefit of the expertise found in the Customs Court. No such choice should be necessary.
There are two possible solutions to this problem. The first would entail a change in the language of 1591 (f) to permit a trial by jury in the Customs Court in actions brought pursuant to this section. The jury trial could be specifically limited to this section only and would have no application to actions brought under the other provisions of this Bill.
The second alternative would be the introduction of the bifurcated trial to the penalty area. The first trial would deal with the questions discussed in 1591 (d) (2), while the second trial, heard in the presence of a jury in the District Court, would determine liability and amount of penalty.
Either of these proposals would preserve for the defendant its basic right to a trial by jury. It would eliminate the necessity to sacrifice one benefit in order to obtain another.
An additional question remains with regard to this section. At the present time, cases commenced in the District Court are prosecuted by the U.S. Attorneys Office. However, all cases tried in the Customs Court fall under the jurisdiction of the Custom Section of the Civil Division of the Department of Justice. Left unclear by the bill is the question of who would prosecute the case should a transfer be effected to the Customs Court. Will the case remain under the jurisdiction of the U.S. Attorney? Will the Office of the Assistant Attorney General take over the litigation once it is transferred? Will both agencies work together in the prosecution of the action ? None of these questions are answered by the legislation as presently worded.
Although we do not express a preference with regard to which agency shall ultimately be responsible for the litigation, we do wish to point out that as presently constituted, it is the Office of the U.S. Attorney which initially is re:sponsible for the preparation of the action. This includes the investigatory work necessary prior to the filing of suit. Accordingly, should the case be transferred from one office to the other, it will be necessary for the Assistant Attorney General's office to invest additional time familiarizing itself with the findings of the U.S. Attorney.
Section 302 (Section 1592)—Although revised to limit any counterclaim, setoff, or demand to the same import transaction before the Court, we still believe that this counterclaim provision should be excluded from the bill. If, however, it is retained, we believe that it requires considerable revision.
This section would enable the Government to counterclaim for a higher rate of duty than that imposed at the time of liquidation. At the same time, pursuant to Section 402 (Section 2639) of this bill, the Government could still rely on the presumption of correctness with regard to its original classification and/or appraisal. On the one hand, the Government will be alleging that the original classification is wrong, while on the other it would be relying on the presumption which states that the original classification was right. If the provision for counterclaims is to remain in the bill, it should be amended to provide that where a counterclaim is in the form of a claim for change in classification and/or appraisal to one higher than that found at the time of liquidation, the presumption of correctness attaching to the original classification or appraised value will no longer be applied, and the burden of proof as to the correct classification or appraised value would be on the Government. This would substantially negate the chilling effect of this provision on claimants in the Court.
Equally important, is that the introduction of the counterclaim into the Customs Court will result in a change in the longstanding practice of denying affirmative relief in the form of a rate of duty or appraised value higher than that assessed by the Government where suit has been commenced by the importer. See for example Mego Corp. v. United States, 73 Cust. Ct. 190, C.D. 4574 (1974).
The Government is permitted 90 days from the date of liquidation to voluntarily reliquidate an entry to adjust either the classification or value. While the Government may argue alternative classifications and/or values, it has never been permitted to affirmatively assert such a claim. The counterclaim provision permitting such a result may lead to a tremendous upsurge in the number of alternative claims pleaded by the Government merely because they result in a higher rate of duty. See for example J. E. Bernard & Co., Inc. v. United States, 64 Cust. Ct. 525 at 527, C.D. 4029 (1970). The potential for the Government to obtain an affirmative result through the use of alternative claims may prove too tempting an invitation to flood the Court with claims which would not otherwise be made but for this provision. The result will be to prolong the litigation, and direct attention away from the main issues.
In addition, this provision will permit the Government to raise, in the form of a setoff or counterclaim, causes of action for which original jurisdiction is found in the District Court. For example, the penalty cases referred to in Section 1591 above, which commences in the District Court, could be commenced by the Government in the form of a counterclaim or setoff in the Customs Court. The effect will be to deny the plaintiff its opportunity for a trial by jury which it would have had as the defendant in the District Court action.
In addition, this provision would allow the counterclaim to be applied as setoff, even if the penalty claim were barred by the Statute of Limitations. The only requisite would be the finding by the Court that the counterclaim or setoff arose out of the same import transaction.
A most significant defect in the counterclaim provision lies in the fact that it will complicate the proceedings and dilute the effect of the expertise of the judges of the Customs Court in classification and value matters. Claims arising out of the same import transaction, but not related to classification or value, or to any of the other historically recognized causes of action before the Customs Court will result in prolonged litigation raising issues better suited for other forums.
Finally, the counterclaim provision contains numerous pitfalls and problems without any apparent overriding, or even equal, policy considerations in its favor. Accordingly, we reiterate our position that this section should be deleted.
Section 402 (Section 2634)—Subsection A of this section refers to those items which are to be forwarded to the Customs Court at the time of the service of the complaint on the Secretary of the Treasury. Where certain of these items donot exist, an affirmative statement to that effect is to be transmitted to the Court in lieu of the actual items.
However, this section does not take into account instances in which the itemsmentioned did exist and were in the custody of the Customs Service, but through inadvertance neglect or otherwise, have been lost prior to the filing of the complaint. Under such circumstances, certain sanctions should be enacted to prevent the Government from benefiting from its own behavior.
For example, where a sample from the actual entry is necessary in order to prove the plaintiff's classification claim, and this sample had previously been provided to the Customs Service, the defendant should not be able to profit from the fact that it has misplaced the sample and is unable to produce it in Court. This is particularly apt to occur where an extended period of time elapses between the entry of the merchandise and the commencement of the Court action. In many instances, the plaintiff will not have a sample from the shipment and, in fact, relying on the previous submission of a sample to the Government, may not have any samples of the merchandise after the normally long period of time between entry and the commencement of the action.
Under such circumstances, the importer should be permitted to produce a facsimile or other substitute, with the defendant estopped from raising objection. The bill could use as a model the sanctions provided for under Rule 37(b) of the Federal Rules of Civil Procedure or as adopted by the United States Customs Court under Rule 6.5(b) relating to sanctions for failure to comply with discovery.
In addition, we believe that the types of items required under Subsection (a) should be expanded to include any and all reports prepared by the Customs Service relating not only to laboratory tests, but to all other aspects of the entry as well. Many times, the Customs Service will circulate documents and reports, through the Customs Information Exchange or between two ports, containing information with regard to particular merchandise. These should be included as part of the information to be forwarded to the Court.
One other item which should also be included are copies of all correspondence between the Customs Service and the importer. Many times, the Customs Service will request information from the importer and in turn, the importer will respond in writing to the Customs Service. This should be part of the official record sent to the Court. Again, failure to produce these reports should subject the defendant to the type of sanctions outlined above.
Section 402 (Section 2639)-paragraph 1 of this section retains the presumption of correctness which attaches to the decisions of the Secretary of the Treas. ury. We believe that there is no rationale for retaining this archaic presumption, and that it should be deleted from the bill. If, however, the Committee chooses to retain the presumption of correctness, it should be modified to place stringent requirements on the Customs Service.
Presently, actions commenced in the Customs Court based on the denial of a protest normally contain nothing in the record to indicate the reasons for the denial of the protest or the reasons for the classification or value assigned by the import specialist. The actions of the import specialist are deemed presumptively correct, despite the failure to provide a rationale for the decisions reached. Accordingly, we suggest that this section be revised, if retained, to require that the presumption of correctness shall only attach in those instances where administratively, the Department of the Treasury has provided the reasons for a particular decision, in writing, thereby establishing that the decision was made with due deliberation. Without this explanation, there is nothing in the rerord to suggest that the actions of the Customs Service were made after due deliberation and a correct assessment of the facts.
We believe that this change would be helpful not only from the standpoint of clarifying the issues, but also from the standpoint of helping the parties to the action and the Court understand the manner in which the administrative decision was reached.
Section 503 (Section 1546)_Of particular concern to our membership is Subsection (c) of this section placing with the C.C.P.A. exclusive jurisdiction to review decisions of the Secretary of the Treasury to either deny, revoke, or suspend a Customhouse broker's license. The authority to review these decisions is stated to be based on Section 641 (b), of the Tariff Act of 1930, as amended.
Initially, it appears that the drafters have made a technical error in citing the denial of license provisions as being contained in Section 641 (b). We believe that the Committee intended to make reference to Section 641 (a), when referring to the denial or revocation of the license under paragraph 1 of Subsection (c).
If this interpretation is correct, we are quite concerned with the lack of appellate procedures comparable to those found in 641(b) paragraph 2. The provisions of 641 (b) include an automatic stay of the actions of the Secretary of the Treasury in suspending or revoking a Customhouse broker's license. No comparable provisions are found in 641 (a). In addition, because of the language of proposed Section 1546(e) of Title 28, the C.C.P.A. would be unable to issue either an injunction, or writ of mandamus, for the purpose of either enjoining revocation of the license, based on the existence of less than two corporate officers who are licensed brokers, or compelling the Secretary of the Treasury to issue a license previously denied.
Customs brokerage is a service business. Accordingly, the loss of a broker's license, if not immediately remedied, will as a practical matter, result in the destruction of the broker's business. Without the necessary tools to take immediate action based on the denial or revocation of a lencense under 641 (a), a decision favorable to the broker by the C.C.P.A. will result in only a pyrrhic victory because of the practical effect of the broker having lost all of his customers.
It should be noted, that prior to 1935, the revocation of a Customhouse broker's license under 641(a) was subject to judicial review, and the commencenment of a proceeding did act as a stay of the revocation. In effect, what we are asking is that this bill continue in this tradition and permit a licensed broker to continue to operate pending judicial review of the Secretary's actions.
In addition, we are suggesting that Subsection (e) be revised, at least with regard to its reference to Subsection (c), to permit the Court to enjoin or compel the Secretary of the Treasury, as necessary, to preserve the status quo during the litigation.
Section 602.--The provisions of Section 602 relate to the parties entitled to file a protest with respect to merchandise entered for consumption. While expanding the number of permissable parties able to file protests under this section, the bill does not address itself as to whom refunds are to be sent.
At the present time, it is the practice of the Customs Service to forward all refunds based upon a protest to the importer of record. However, this does not take into account the numerous instances in which the importer of record is not the person paying the charge or exaction. We suggest that this section be revised to include a provision providing for the forwarding of any refunds to the unreimbursed party paying the charge or exaction. The protest itself should require disclosure by the protesting party as to the identify of this unreimbursed party.
An example of the significance of such a change can be found in the experience of our members. At the present time, it is the practice of many Customhouse brokers to deposit duties on behalf of their importer clients. This is done both as a service to the client and to prevent the late filing of the entry. In some instances, however, the broker does not receive reimbursement for the deposit of the duties. In many instances this is as a result of the bankruptcy of the importer prior to the payment. At the present time, there is no provision for the broker to obtain a preference in bankruptcy in order to collect the funds deposited as duty on behalf of the importer.
By requiring that any refunds on protested entries be paid to the unreimbursed party paying the charge or exaction, the bill will insure that the party entiled to receive the refund, in fact, does.
We are greatly appreciative of the opportunity you have afforded us to comment on the revised bill. We look forward to hearing from you and stand ready to provide any additional information or clarification which you may find necessary.
The concerns expressed above, are of great importance to our members, and we hope that you will give them your every consideration. Respectfully submitted.