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Senator DECONCINI. Does it cause a great deal of delay, that is, the ability to constantly delay the final determination of the matter?

Mr. KAPLAN. It could. But, on the other hand, a liquidation of an entry involves all aspects of the merchandise covered by the entry. In a single case there should be questions of normal value for duty, amount of dumping duty under the Antidumping Act, classification, and a myriad of other questions, whereas the only issue that is before the court of determination is the amount and the applicability of the antidumping duties. I think it would be inappropriate to ask the court to go into all those other things.

Senator DECONCINI. It would be the same position as to any counterclaims by the Government. You don't think they should be able to go into other matters?

Mr. KAPLAN. I really think the bill, as drafted, presents a very serious question in that it creates special subject matter jurisdiction for the benefit of the Government exclusively. The bill does not permit persons challenging a governmental decision to do so in the Customs Court. For example, the government has refused to grant an export license despite the fact that schedule B is based upon the TSUS which is a subject matter which might very well lie within the expertise of the Customs Court, but a private party cannot ask the Customs Court, under S. 2857, to rule on the denial of an export license. However, the Government would grant itself the right to have determinations regarding exports ruled upon by the Customs Court if it is convenient because it would have to set up a counterclaim.

There is a significant disparity there between the rights of the Government and the rights of private parties.

Mr. HERZSTEIN. I think part of our problem with that provision is simply that it does allow the Government to bring in issues that have no relationship to either the case before the Customs Court or the special expertise of the Customs Court.

Senator DECONCINI. But it still may have some direct relationship to the party before the court.

Mr. HERZSTEIN. That is right.

Senator DECONCINI. Let's assume a legitimate claim is made. That would be a legitimate claim by the United States.

Mr. HERZSTEIN. Our feeling is that the United States has plenty of forums in which it could bring that claim.

Senator DECONCINI. They do. But you know how it is in litigation. Once you are before the court, you certainly like to avail yourself of all remedies available and bring up other matters, even if those matters involve a counterclaim. As it is in civil litigation, you don't have to drop out of the court and file another action in the civil litigation. It doesn't seem right to me, just offhand, to prevent the Government from counterclaiming, assuming it is not frivolous, or just to cause harassment, which I know the Government sometimes partakes in, but

Mr. HERZSTEIN. We are dealing with courts that are set up for special expertise.

Senator DECONCINI. Yes; it is a specialized court and maybe that is a justification.

Mr. HERZSTEIN. You might have, for instance, an antidumping case where you are seeking the court's review of a highly technical thing,


and the government comes in with an Internal Revenue issue related to the question of whether your company properly valued its exports to a subsidiary abroad and thereby unfairly or improperly reduced its income taxes.

Senator DECONCINI. Yes. But what about being restrictive on the counterclaims which they could file! I do not have the language to suggest to you, but what if they could not go out of the scope or the

, jurisdiction of the Customs Court?

Mr. HERZSTEIN. If you could somehow keep it in the same ballpark of subject matter, then all right. But the present bills say that any kind of claim relating to export or import-related

Senator DECONCINI. Mr. Altier questions what would happen if you limit it to the entry.

Mr. KAPLAN. So it would arise from the same transaction?
Senator DECONCINI. Yes.

Mr. KAPLAN. Then, at least, it is a reasonable concept. You can deal with it because there is parity and there is some kind of balance. It is not something that comes from left field.

Senator DECONCINI. That would be satisfactory in your judgment ? Mr. KAPLAN. You would still have to deal with the question of whether it is appropriate for the Customs Court to grant money judgments. We are not satisfied that that question has been satisfactorily answered.

Senator DECONCINI. I can understand if the Government got way off in some income tax case in which the statute was about to run, or something like that, and decided to file a counterclaim. It would be unfair to tie up the whole process in that instance. But if there was a legitimate counterclaim related to the entry or to the particular case before the Customs Court, I would hate to bar anyone from exercising that counterclaim. When you have an opportunity to solve the whole thing, then it would be better. The Government then would not have to file a separate action.

Mr. HERZSTEIN. I think if it is related to the expertise and the subject matter that is before the court, I think there is a lot more to be said for that.

Senator DECONCINI. We have no further questions.

Mr. HERZSTEIN. As a matter of perspective, I would like to make one comment in terms of the timing. The bill contains many different kinds of issues. I am sure you appreciate that.

There are the questions of the powers of the Customs Court. For instance, there is its power to grant preliminary relief, and to fashion equitable remedies, and the question of the status of the Customs Court judges. These are questions that are fundamental to the structure and the functioning of the court. They have been around for quite a long time. I think most of the controversy has been gotten out of those. I believe one of the first bills you introduced when you came into office, in fact, was addressed to those issues. That had been brought to the committee's attention in the previous session of Congress.

Senator DECONCINI. Yes.

Mr. HERZSTEIN. I did want to say this. We would hate to see those get lost in the maelstrom over many of these highly technical and much more controversial issues. If the bill as a whole appears to be failing to make progress because of these other questions, then we

would favor separating these out and going forward. Of course, there is much good in other parts of the bill, also, but there is much that troubles us such as the question of subject matter jurisdiction and, particularly, the apparently vastly excessive scope of the exclusive jurisdiction being vested in the Customs Court.

Maybe those can be worked out shortly.

Senator DECONCINI. We will make an effort to work them out. We will keep in the back of our minds the possibility of separating the two areas. However, it seems foolish to try to come back in the next Congress and pick up pieces. We will appreciate your assistance.

Our next witness is Mr. Simon Katz, chairman of the American Importers Association's Importers Rights Committee. He is accompanied by Barry Nemmers, staff attorney of the American Importers Association.

We have some time constraints, Mr. Katz, pressing upon us due to Senate rules which allow us to meet for only 2 hours after the Senate goes into session. We would, therefore, ask that your statement be printed in the record at this time in its entirety. If you could keep your presentation to 5 or 7 minutes so that we can get to the rest of the witnesses here before I have to close the hearings, we will be grateful.


Mr. Katz. Thank you, Mr. Chairman. That will be fine.

Senator DECONCINI. Without objection, Mr. Katz' statement will be inserted into the record at this time.


BARRY NEMMERS, STAFF ATTORNEY, AMERICAN IMPORTERS ASSOCIATION Mr. Chairman and Members of the Committee: My name is Simon Katz. I ani Executive Vice President of New York Merchandise Company which was establislied in 1906 and is one of the largest importers of general merchandise. I have served for the past several years on the Presidential Advisory Committee for Trade Negotiations under Ambassadar Robert Strauss. I appear here in my capacity as chairman of the American Importers Association (AIA) Committee which is studying the legislation under consideration today. I am also a Past President and Director of the AIA. I am accompanied by Barry Nemmers, staff attorney for AIA.

The American Importers Association is a non-profit organization formed in 1921 to represent the common interests of the United States importing community. AIA is the only association of national scope not limited to specific commodities or product lines. As such it is the recognized spokesman for American companies engaged in the import trade.

At present, AIA is composed of nearly 1300 American firms directly or indirectly involved with the importation and distribution of goods produced outside the United States. Its membership includes importers, exporters, import agents, brokers, retailers, domestic manufacturers, customs brokers, attorneys, banks, steamship lines, insurance companies, and others connected with foreign trade,

We welcome this opportunity to present our views on the Customs Court Act of 1978.

This bill presents a basic, yet complex and multifaceted question: What is the most effective allocation of jurisdiction over the judicial review of administrative actions affecting imports? The question can neither be quickly nor easily answered in theory much less in the practicalities of enacting legislation. We commend this Subcommittee for taking on such a task.

As we examine the issues raised by this bill, we must remember where the ultimate effects of these proposed changes will fall. While most of the presons who will testify on this bill are attorneys, the real parties in interest to changes made in the Customs Court and CCPA jurisdiction and procedure are American companies engaged in international trade.

While the lawyers will be the ones who must operate day to day under the changes you make, they will do so only insofar as they are protecting the rights and interests of their clients. As we become immersed in the legal concepts and terminology embodied in this bill, it will be natural to lose sight of these parties. The purpose of any reform of the Custom Court and CCPA is not just to write a law which embodies principles of jutsice and procedural efficiency, but to ensure that the rights of Americans engaged in international trade are protected by adequate judicial oversight of government action. And of course, to hold all parties to their responsibilities under the law.

One technical point we wish to make concerning legislation to reform the Court's jurisdiction is that some reforms are more appropriately left to the Court itself to address through changes in its rules. An example of one such area is the bill's proposal to legislate standards concerning the admissibility of certain evidence in valuation cases (proposed section 2639). AIA questions the necessity of legislation which repeats provisions verbatim from the Court rules. See, e.g., Customs Court Rule 9.6. Matters relating to the probative value of evidence should be left to the Court to decide. Further, AIA questions the rationale behind requiring verification of affidavits offered by the importer without requiring similar verification of such statements when offered by the government.

AIA feels that rather than examine the bill section by section at this stage, it would be more appropriate to discuss some of the concepts embodied in the bill. Many of them are proper and should be enacted. Others need to be given a great deal of thought and discussion. Too many have been assumed to be generally accepted ideas when in fact they have not yet been given very much thought by the trade community. The idea of a comprehensive court of international trade, for example, is new, and there has been little discussion of it within the international trade community or between the government and the trade. Major reforms need to go through the annealing process of thought and debate prior to enactment. Such discussion and negotiation preceded the legislation which resulted in the previous Customs Court Act in 1970. There has been alınost no such consultation on this bill.

AIA's testimony therefore is largely conceptual in its approach to the bill and should not be considered as an exhaustive analysis. We will supplement this statement with an additional submission prior to the closing of the record.

AIA finds much in this bill which it supports, including the declared purposes. However, even those purposes raise conceptual questions which are not satisfactorily answered by the specific provisions of this bill. The first declared purpose—"to provide for a comprehensive system of judicial review of matters directly affecting imports, utilizing, wherever possible, the specialized expertise, of the United States Customs Court and Court of Customs and Patent Appeals, and the opportunity for ensuring uniformity afforded by the national jurisdiction of these courts”-raises questions. The answers to these questions are assumed, but not answered, in the bill. For example, we should ask what role we want specialized courts to play in this country. The bill assumes expansion in the Customs Court with the retraction of the more general jurisdiction of the district courts. Historically, however, the Customs Court and its predecessors were confined to questions of classification and value. These questions were felt to be too technical and time consuming for the district courts. Perhaps we should return to that concept and leave more general questions of international trade to the district courts with their less specialized perspective. We must ask which perspective would result in decisions best for the overall national interest. On the other hand, perhaps the Customs Court should become a true “International Trade Court” and also decide questions relating to exports. Legislation presently before another committee of this house (S. 1990) proposes to consolidate the administrative agencies whose missions involve international trade. Should judicial review also be so consolidated ? In an action challenging a denial of an export license based on conflicting readings of Schedule B. the classification schedule for exports—which now is very similar to the Tariff Schedules for imports—who is better qualified to answer the question than the Customs Court?

(1) Eren making further use of the uniformity afforded by the Court's national jurisdiction is not without problems. Because the Court sits primarily in only one city, access to the Court is made more difficult for importers in other regions of the country. While the bill does include provisions ameliorating the problem (e.g.. proposed section 2632(b) to provide that the date of postmark is deemed the date of filing), it does not cure it. The Court's permanent location in New York City presents various handicaps to importers and lawyers in other areas. This problem has been addressed a number of times but never completely solved. Perhaps some of the judges should sit permanently in the major ports of entry or rotate between an assigned list of ports in a region.

(2) The second declared purpose-to prevent jurisdictional conflicts between the Customs Court and the district courts—addresses a serious problem. However, at least one of the causes of recent jurisdictional conflict is not addressed in the bill. Present law (28 U.S.C. $ 1582) vests exclusive jurisdiction in the Customs Court over actions involving the exclusion of imports from entry on delivery under any provision of the "customs law.” Nowhere is this term defined. The bill retains this language which has long created confusion. I'or example, in two nearly identical cases where jurisdiction rested on this statute, the decisions of the Second and District of Columbia Circuits of the United States Court of Appeals are in conflict. The Second Circuit ruled that the Customs Court did not have jurisdiction over a challenge to restrictive footwear agreements negotiated persuant to the Trade Act of 1974 and that jurisdiction rested in the district court. Sneaker Circus, Inc. v. Carter, 556 F. 2d 396 (2d Cir. 1977). The District of Columbia Circuit reversed a District Court decision assuming jurisdiction and ruled that a challenge to the U.S. program regulating by quota the importation of textiles and textile products into the United States clearly was a "customs law” and that the case belonged in the Customs Court. Consumers Union V. Committee for the Implementation of Textile Agreements, 561 F. 2d 872 (D.C. Cir. 1977).

While proposed section 1593 allows an action commenced in the wrong court to be transferred without prejudice to the appropriate court which may or may not agree that it has jurisdiction), the proposed residual grant of jurisdiction in proposed section 1581 does not clearly settle the matter. Only statute by statute, and perhaps even circuit by circuit, could this matter be settled without some attempt to define the term "customs law.”

The third declared purpose—to provide expanded opportunities for judicial review of actions directly affecting imports-should also be useful. Yet the bill in a number of its provisions grants expanded jurisdiction in one section and then confuses the grant in another. For example, proposed section 1583 grants exclusive jurisdiction to review final agency action of any agency which directly affects imports. Yet in that same section and again in subsection (g) the bill states that the section does not create a new cause of action. This overly cautious drafting does not belong. It is confusing and creates more questions than the section answers. The analysis accompanying the hill does not adequately explain its purpose. Again, in proposed section 1582, the Court is granted equity powers. Yet in proposed section 2636, the Court is prohibited from issuing an injunction on grounds of financial loss. AIA contends that due to the strictly commercial nature of cases in Customs Court, very little remains of the grant of injunctive powers.

The bill contains other anomalies. AIA supports the provision allowing a defendant in a penalty case under section 592 (19 U.S.C. $ 1592)—which must ve brought in district court-to transfer the case to the Customs Court if he wishes to avail himself of that Court's expertise in customs law (proposed section 1591). However, in doing so he may also have to forego more than a right to a jury trial. Legislation which is now before a conference committee (H.R. 8149) would provide the defendant with de novo review in district court. Proposed section 1591, however, would limit the scope of review in Customs Court to the much more restrictive standard of the Administrative Procedure Act- arbitrary, capricious, or an abuse of discretion. It is unlikely that many transfers would be made. Review in Customs Court should also be de novo. AIA questions whether this bill would allow the Customs Court in review a case where the importer chose to review only the amount of the penalty.

This transfer provision is deficient in other ways, as well. Transfer should be available to the defendant by right, not subject to the objection of the government and discretion of the district court. Further, an importer should have the

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