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1 entries liquidated on and after the date of enactment. 2 (b) All other provisions of this Act shall become effec3, tive upon the date of enactment: Provided, That, this Act 4 shall not cause the dismissal of any action instituted prior 5 to the date of enactment under the then existing jurisdictional 6 statutes concerning the Customs Court or the Court of Cus7 toms and Patent Appeals.

Senator DECONCINI. Ms. Babcock, we are pleased to have you here today. Will you please proceed.

STATEMENT OF BARBARA BABCOCK, ASSISTANT ATTORNEY GENERAL, CIVIL DIVISION, DEPARTMENT OF JUSTICE, ACCOMPANIED BY DAVID COHEN, CHIEF, CUSTOMS SECTION

Ms. BABCOCK. Good morning. I am pleased to be here in support of this bill which, as you have noted, is the culmination of 10 years of work and consideration. This has become much more intense over the past year as we have tried to arrive at a reasonable bill taking into account many varying interests.

If I may, I would like to submit my prepared statement for the record, and at this time, I would like to merely highlight some of the portions which I think might be the most helpful.

Senator DECONCINI. Without objection, your entire statement will be inserted into the record.

[Material follows:]

STATEMENT of Barbara BABCOCK, ASSISTANT ATTORNEY GENERAL, CIVIL DIVISION, BEFORE THE COMMITTEE ON THE JUDICIARY, SUBCOMMITTEE ON IMPROVEMENTS IN JUDICIAL MACHINERY, U.S. SENATE, CONCERNING S. 2857-CUSTOMS COURT ACT, ON JUNE 23, 1978

Mr. Chairman, members of the committee, the bill which we are discussing today, S. 2857, represents the culmination of an effort which began over eight years ago.

In the late 1960's, it was recognized that both the procedures and the jurisdiction of the United States Customs Court were in need of revision. However, because it soon became apparent that the procedures of the court were in the most need of revision and because revision of these procedures would be a massive undertaking in itself, the decision was made to concentrate upon reform of the court's procedures and to leave revision of the court's jurisdiction for the future. As you know, the effort to revise the court's procedures was successful and the enactment of the statute which embodied that effort, the Customs Courts Act of 1970,1 is truly a major event in the long history of the court.

The proposed Customs Courts Act of 1978 represents the second aspect of the effort begun nearly 10 years ago. While the bill contains a few provisions designed to correct some defects in the 1970 act and to remedy some procedural problems which that act did not address, the principal effect of the bill would be to substantially increase the jurisdiction of the customs courts by taking advantage of their underutilized resources to transfer to them some of the cases which are now instituted in the other, overburdened Federal courts.

The Department of Justice has come to the conclusion that this action is of some importance, and believes that legislation is required at the earliest possible time. We have recently experienced a large increase in the number of suits challenging governmental decisions which directly affect the importation of merchandise into this country. Due to the historical origins of the customs courts' jurisdictional statutes, the limitations upon the relief which those courts may award, and the rather vague terminology contained in the statutes granting residual jurisdiction to the district courts over imported-related matters, these suits have resulted in a series of decisions relating to the division of jurisdiction between the customs courts and the other Federal courts which are virtually impossible to reconcile. We simply can no longer tolerate this jurisdictional confusion which often results in the effective denial of judicial review. The availability of the underutilized resources of two national courts with expertise in the area provides a perfect opportunity to eliminate these difficult jurisdictional questions quickly in an efficient and effective manner and we must not allow the opportunity to slip away through inaction.

1 Public Law 91-271, 62 Stat. 942.

S. 2857 AND THE PRESENT JURISDICTION OF THE CUSTOMS COURTS

As is the case with other Federal courts-most notably, the Court of Claims— the present jurisdiction and status of the Customs Court differs somewhat from the jurisdiction and status of the court in its early days.

The court began as an administrative tribunal which was principally designed to resolve disputes between merchants and the Customs Service relating to the correct classification and valuation of imported merchandise under the tariff laws. While the decisions of this tribunal were important in terms of revenue, the decisions were of primary interest to merchants whose businesses could be and were substantially affected by the amount of duty they or their competitors were required to remit to the Government.

Today, the Customs Court and its appellate court, the Court of Customs and Patent Appeals, have been declared by Congress to be Article III courts and their procedures are nearly identical to the procedures utilized in the other Federal courts of equal stature. However, the courts' jurisdiction is still bound by the courts' history and the purposes for which they were originally established.

It is true that some of the courts' decisions have had an immense impact upon the Nation's trade relations and I do not wish to minimize these decisions in any way. The decisions of the courts in the Yoshida case 2-involving the validity of the surcharge upon imports imposed by the President during the balance-ofpayments crisis of the early 1970's-and the recent Zenith decisions relating to the imposition of so-called countervailing duties—are but two recent examples of decisions of the customs courts which have affected our international economic relations in an important and substantial manner.

However, it must be recognized that these cases arose in the context of the customs courts' historical jurisdiction. For the most part, they are cases which resulted from disputes between a limited class of merchants and the Customs Service involving the correct valuation or classification of imported merchandise and, hence, the correct duty to be paid by an importer.

It requires little knowledge of international trade matters to recognize that times have changed substantially since the framework of the courts' jurisdiction was first established.

With the successive reduction in tariffs which has resulted from the implementation of the trade agreements program, the amount of the duty assessed upon imported merchandise has declined significantly. This decrease in tariff rates, coupled with the cost of litigation, has made it far less likely that an importer will challenge the Customs Service's allegedly erroneous classification or valuation of his imported merchandise in the customs courts. The amount of the duties which the importer stands to recover if the Customs Service is required to classify or value the goods as the importer claims they should be classified or valued, is simply too small to justify the expense of litigation. This fact is clearly reflected in the very substantial decline in the number of cases on the courts' calendars and in the substantial underutilization of the courts' resources.

To be sure, the allegedly erroneous valuation and classification of merchandise under the Tariff Schedules of the United States can be and is still of great importance to an importer or an American manufacturer of competing merchandise, and it is imperative that we retain a means which these affected parties may utilize to obtain judicial relief. Thus, S. 2857 would not substantially alter the courts' present substantive jurisdiction. Indeed, the only major changes the bill would make in the courts' present jurisdiction would be to increase the availability of judicial review by enlarging the class of persons who would be entitled to challenge an allegedly erroneous classification or valuation and by aligning the courts' procedure more closely to the procedure followed in the district courts and the courts of appeals so as to remove some of the "mystique" which surrounds practice in the customs court and thereby decrease the need of plaintiffs to rely upon attorneys who are specialists in the field. Both these types of provisions should improve the availability of judicial review and result in the more efficient use of the courts' resources.

2 Yoshida International, Inc. v. United States, 378 F. Supp. 1155, rev'd, 526 F. 2d 560 (1975).

3 Zenith Radio Corp. v. United States, 430 F. Supp. 242, rev'd, 562 F. 2d 1209, pet. for certiorari granted, (1978).

U.S.

S. 2857 AND THE EXPANSION OF THE JURISDICTION OF THE CUSTOMS COURTS

Although the changes in the courts' present jurisdiction and procedure will increase the availability of judicial review, and make an important contribution to an effort to utilize the courts' resources more efficiently, these provisions, standing alone, will not clarify the substantial jurisdictional confusion which exists in the field of international trade and will not, standing alone, result in the maximum utilization of the resources available to the customs courts. Accordingly, S. 2857 contains provisions which extend far beyond a mere “fine tuning" of the present jurisdiction and procedures of the customs courts. These additional provisions take advantage of the flexibility afforded by the underutilized resources of the customs courts to resolve some important jurisdictional conflicts, to ease the crushing burden under which our district courts now operate, and to increase the availability of judicial review in a field where the important impact of governmental decisions has been recognized only in comparatively recent times.

In the past few years, we have come to recognize the fact that governmental decisions in the field of international trade, in addition those relating to the classification and valuation of imported merchandise, have an important and substantial effect upon the interests of large classes of individuals other than importers and American manufacturers. The Congress has specifically recognized this fact in recent years by enacting numerous procedural safeguards designed to protect the interests of these other individuals by ensuring that certain types of decisions in this field are rendered only after their interests have been taken into account.

The importance of international trade decisions has also been recognized by the individuals affected. Recently, we have seen an increase in the number of lawsuits instituted by those who believe that their interests have been adversely affected by allegedly erroneous or procedurally defective governmental decisions in the field of international trade.

In our view, these suits logically belong in the Customs Court and the Court of Customs and Patent Appeals. These courts are national courts and their decisions can ensure nationwide uniformity on issues which truly require a uniform rule. Moreover, many of the suits involve issues-the question of whether an industry or a community is being injured by imports, for example, or statutessuch as the Antidumping Act of 1921-with which these courts are already familiar.

However, under present law it is not, by any means, an easy matter to determine with confidence whether a suit properly belongs in the Customs Court or in a district court. This is due in large measure to the fact that the jurisdictional statutes concerning the Customs Court grant that court exclusive jurisdiction to entertain the suits defined by those statutes while section 1340 of title 28 grants residual jurisdiction to the district courts to entertain any action not within the exclusive jurisdiction of the Customs Court. Thus, in order to determine, for example, whether a suit challenging a particular governmental decision in this area is properly instituted in a district court, it is first necessary to determine whether or not, in any conceivable way, the decision could be challenged by means of a suit instituted in the customs court. If the answer is in the affirmative, the suit properly belongs in the customs court, not in a district court. The reverse is true if the answer is in the negative.

The determination of whether the governmental decision could in some conceivable way be challenged in the customs court is itself a difficult task. As I have noted, the framework of the courts' jurisdiction was primarily designed to enable importers, and, in some cases, their domestic competitors, to challenge the classification or valuation of goods under the customs laws. It often takes considerable imagination and great familiarity with the decisions of the customs courts to determine how, if at all, these new suits involving related, but different, issues and similarly interested, but different, parties might fit into the courts' jurisdictional framework.

The result is a confusing jurisdictional morass which does not always permit a party who wishes to challenge a decision in this field to determine with certainty in advance whether the suit properly belongs in a district court or in the Customs Court. All too frequently, the net result is the institution of a suit by a party who, after the long delay to which litigants in our overcrowded Federal courts are often subject and, perhaps, after an appeal, is finally informed that the suit has been instituted in the wrong court.

For example, in Consumers Union v. Committee for the Implementation of Textile Agreements, a consumer organization instituted suit challenging a decision of an executive agency to enter into negotiations with foreign governments with a view towards limiting the amount of textile products which those countries would export to the United States. The plaintiff organization contended that it was affected by the decision to enter into the agreements because the price for textile products would increase in the United States as a result and that the challenged agency's decision was not within the statutory authority of the agency or, at the very least, had been reached in a procedurally irregular fashion. The district court held that it possessed jurisdiction but rejected the plaintiff's claims on the merits. The court of appeals reversed, on the grounds that the district court lacked jurisdiction. According to the court, if the plaintiff possessed standing to institute suit, exclusive jurisdiction resided in the Customs Court. The court of appeals, therefore, remanded the case to the district court with directions to dismiss the complaint. An attempt by the plaintiffs to obtain Supreme Court review failed.

Similarly, in SCM Corp. v. United States,5 a domestic American manufacturer of portable electric and manual typewriters instituted suit to challenge a finding of the International Trade Commission, under the Antidumipng Act, that the American portable typewriter industry was not being injured or was not likely to be injured by the importation of typewriters into the United States at prices which the Secretary of the Treasury had found to be lower than the fair value of the merchandise."

The district court dismissed the suit for lack of jurisdiction and this decision was affirmed after an appeal by the plaintiff."

The fact that these two suits resulted from a genuine confusion as to the existence of jurisdiction and not, for example, from some rather transparent attempt to circumvent the existing jurisdictional scheme in order to institute suit in a more favorable forum is illustrated by a comparison of the Consumers Union case with Sneaker Circus, Inc. v. Carter. In Sneaker Circus, American retailers, wholesalers and importers sought injunctive relief to invalidate international agreements between the United States and the Republic of Korea and the Republic of China pursuant to which the latter countries agreed to limit their exports of footwear to the United States. In principle, although the basis for the challenge to the agreements differed, the agreements at issue in Sneaker Circus were no different than the agreements at issue in Consumers Union.

The district court in Sneaker Circus, unlike the district court in Consumers Union, dismissed the suit for lack of jurisdiction. The court of appeals, however, unlike the court of appeals in Consumers Union, reversed the district court decision, holding that exclusive jurisdiction did not reside in the Customs Court, and remanded with directions to proceed with the case on the merits.

As these cases illustrate there is a genuine confusion concerning jurisdiction in this area-a confusion which is not often resolved with respect to a particular case until the case reaches an appellate court. All too frequently, the result at the appellate level is a dismissal for lack of jurisdiction and, given the costs of litigation today, the dismissal of a suit on these grounds often means the effective denial of all judicial relief. The plaintiff simply cannot afford the time or expense to begin over again in another court.

The Customs Courts Act of 1978 is designed in large part to remedy this problem by bringing within the jurisdiction of the customs courts those suits which we believe properly belong in those courts but which are often instituted in the other, already crowded, Federal courts. Thus, pursuant to the bill, the Customs Court and, on appeal, the Court of Customs and Patent Appeals, would possess exclusive jurisdiction to entertain all civil actions against the United States which directly affect imports and arise under the Constitution, laws, or treaties of the United States or under an Executive Agreement or Order. This

4561 F. 2d 872 (CADC 1977), cert denied, Sup. Ct. No. 77-785 (Mar. 20, 1978). 5549 F. 2d 812 (CADC 1977).

The administration of the Antidumping Act, 19 USC § 160, et seq. is bifurcated. Before a dumping finding may be issued and dumping duties assessed, the Secretary of the Treasury must find sales at less than fair value and the International Trade Commission must find that these less than fair value sales are injuring an American industry.

7 The court of appeals in SCM remanded the case to the district court with directions to retain jurisdiction unless the plaintiff insitiuted suit in the Customs Court and the Custom Court decided it possessed jurisdiction. After plaintiff instituted suit in the Custom Court, the latter held that it possessed jurisdiction, SCM Corp. v. United States, CRD. 78-2 (May 11, 1978), and the district court then dismissed the action.

8 266 F. 2d 396 (CA 2, 1977).