However, and most importantly, we strongly urge this committee and the Congress which it represents not to relinquish at this time its authority to determine where entry documentations should be filed.

Section 103 would delegate to the Secretary of the Treasury the authority to make that decision. This is the key point to the implementation of the system of duty assessment by account-DABAwhich was a fundamental part of the proposed H.R. 9220 in the preceding Congress.

We testified to that Congress that this system would in effect transfer from the private sector-namely, us-to the Customs much of the work that we now perform both for importers and for Customs.

Of course, we admit that this would hurt our industry greatly, as would the fact that the system would encourage many importers, especially our larger clients, to take advantage of the additional services to be provided them by the Government and to deal directly with Customs themselves, thus ceasing to use our services. We pointed out to the Congress at the hearings on H.R. 9220 the many weaknesses of the DABA system. It was also testified to this committee by the then Commissioner of Customs Acree that DABA would not be necessary if the automated merchandise processing system then being implemented by Customs worked.

We understand that on Tuesday, Deputy Commissioner of Customs Dickerson testified that as far as Customs is concerned, it was not the intent of this legislation to institute DABA.

The AMPS system which is presently being further extended by Customs has been fully supported by us in every stage of its development, because we believe that is the best way for Customs to improve its operations.

We recommended to the Congresses that it reserve its right to determine whether DABA should be established. This could be accomplished by inserting in the proposed section 103 (a) that the place of filing an entry document is to be "in the customs district where the articles are released from Customs custody, or, if under bond, in the customs district where the goods are designated for release from Customs custody."

Section 104 (a) should provide for the place where duty should be paid as "in the customs district where the entry is filed."

When and if needed, Congress could easily enact a bill just to remove these words to permit Customs to proceed with DABA, if Congress decided that DABA should be used. But, frankly, AMPS is an enormous investment and should be given a reasonable trial. Furthermore, rather than rely upon procedural changes of questionable value such as DABA, we think this committee has developed so much expertise in this field that it would be well advised to consider other substantive improvements in our customs laws such as valuation of imports for tariff purposes.

Thank you very much.

Mr. JENKINS. Mr. Hummel?

Mr. HUMMEL. Mr. Chairman, our second comment concerns section 592 in the bill which will be discussed by Mr. William R. Casey.

STATEMENT OF WILLIAM R. CASEY

Mr. CASEY. My name is William R. Casey. I am a director of the National Customs Brokers & Forwarders Association of America, and I am also chairman of the Myers Group, Inc., at Rouses Point, N.Y., which has 39 offices in various ports of entry in the United States.

The parties who framed H.R. 8149 have done a remarkably good job. We commend them for the long hours spent in listening to suggestions by interested persons in most of the larger ports and then in producing the bill in its present form, particularly in connection with section 592.

The members of the Joint Committee for the Revision of section 592 of the Tariff Act of 1930 have also done excellent work in efforts to correct section 592.

The proposed bill goes far toward correcting most of the faults now found in section 592. There are still a few problem areas which we should like to see corrected, and we, who are most intimately familiar with the working problems of section 592, have a number of suggestions which are set forth in our written report with pertinent notes.

First of all, we believe that customs brokers should be named in section 592 cases only if there is evidence that they are culpable either for fraud or for gross negligence, but we do not believe the customs brokers should be guarantors to the Government under 592 even when they are importers of record, nor should 592 be used by Customs to punish brokers for simple negligence; nor should customhouse brokers be held to higher standards than accountants under the Internal Revenue Act, nor attorneys under this act.

Customs has recognized this over the years, and in their current guidelines they have gone a long way toward recognizing this view. Also we commend the Joint Committee for recognizing this problem of ours in their testimony.

However, we still ask that the word "agent" be eliminated from the act, as agent means customhouse broker to Customs and tends to cause Customs to name the broker as well as his principal in 592

cases.

If the broker is culpable, he can be brought into the case by the term "other persons" equally as easily as by the term "agent.

Penalties are proposed in all cases where a single instance of unwillful common negligence occurs. We feel strongly that such a single instance of common negligence is in the same class of error as a clerical error, or an inadvertence, and should be exempt. It is only when an importer has a history of carelessness that he should be subject to a penalty.

The use of the expression "domestic value" as a basis for penalties is fraught with danger. This expression should either be defined specifically in the statute or not used. The very high price that a retailer charges his customers is just as much a domestic value as other different domestic prices related to sales to domestic distributors, wholesalers, etc., and there usually are different prices to different people in each class. A "dutiable value" is defined by statute and is well known to the import community.

The bill as now worded does not state when entry occurs, but there is an implication that entry occurs when the entry papers are filed just prior to the release of the imported merchandise.

If this is to constitute the entry, then note must be taken of the fact that official invoices are frequently not then available, and pro forma documents must be used. There should be a reasonable opportunity to correct the entry papers before a party becomes liable to section 592 penalties.

An importer should not be penalized for making a voluntary disclosure of a nonfraudulent act or omission, particularly for a single instance of nonwillful negligence. He should be encouraged to disclose his error and clear his record.

If the full domestic value of the goods is the possible penalty for fraud or gross negligence, and if the court is permitted by law to assess that heavy penalty in a de novo proceeding in an instance where Customs has found a much lower loss of duty, then the same practical restrictions that now exist on judicial review will not be corrected. We feel that if meaningful judicial review is to be obtained, then the court should not be allowed to find a monetary penalty higher than that found by Customs in its final mitigation. There should be a new provision which will permit an importer to bring an action in the district courts for immediate relief from a seizure penalty.

In passing, Mr. Chairman, Customs in their testimony mentioned their bill, H.R. 8367, and asked for a section 593. We object to this as it would merely reinstate old section 592 under a new number 593 and negate the 592 provisions of this bill.

Also, in this act, it would eliminate section 111, the change to section 584, and it would lead to holding customs brokers and forwarders and others liable to manifest discrepancies over which they have no control.

Thank you, Mr. Chairman.

Mr. JENKINS. Thank you, Mr. Casey.

Mr. HUMMEL. Thank you, Bill. I will address the subject of licensing, Mr. Jenkins, if you will.

Mr. JENKINS. On what page in your written testimony?
Mr. HUMMEL. Page 6, sir.

H.R. 8149 provides for the issuance of licenses to customhouse brokers which are to be valid for only 3 years after date of issuance and must thereafter be renewed. We believe that the renewal provisions should be deleted.

A customhouse broker is a skilled professional, and to limit his license to 3 years demeans the profession. A limited license would also diminish the value of the business, affect the ability to obtain credit and raise capital. As in related fields of transportation (ocean, air, and surface forwarders) the license of a customhouse broker should be permanent, subject only to suspension or revocation when serious misdeeds have taken place.

We understand that the purpose of a renewal provision is to permit Customs to ascertain whether a licensee is still in business. Such purpose can better be served and harmful effects avoided by requiring a licensee to file with Customs an annual report and allowing

Customs to impose a reasonable penalty for the failure to file or late filing.

It has come to our attention that it was not the committee's intention to cancel all licenses after 3 years. We certainly hope this is the case, since such a drastic change could adversely affect brokers in several important areas such as: (1) His continuing relationship with his clientele, (2) the ability to sell one's business, or (3) even preventing a broker from going public and so forth.

Under section 641 it is necessary for a corporate licensee to be qualified by officers holding individual licenses. Some customhouse brokers have made it a practice to "sell" their licenses by allowing them to be used for a fee to qualify more than one corporate licensee. This practice should be prohibited except in those cases where the individual licensee is used to qualify corporations under common ownership or control.

Under section 641 the Secretary of the Treasury may institute a disciplinary proceeding only for the suspension or revocation of a customhouse broker license. In many instances such punishment would be too severe, for example, where the offense is only a violation of a regulation issued by the Secretary of the Treasury.

We have, therefore, suggested that on lesser offenses the Secretary of the Treasury be authorized to impose a monetary penalty, rather than suspend or revoke a license. In order to assure that the proceeding will be independent and impartial, we have adopted the idea in H.R. 8149 that, at the option of the broker, the advisory hearing board should make the decision with respect to whether a violation has taken place.

Presently, customhouse brokers are authorized by Customs to have "Immediate Delivery" (ID) privileges, that is, the right to obtain delivery of an importation before a formal entry is filed. This privilege is essential to the customhouse broker. Nevertheless, Customs suspends or revokes the ID privilege in its sole discretion without affording the broker either notice or the right to be heard. We strongly recommend, therefore, an amendment to section 641 which assures the customhouse broker the constitutional right of adequate notice and an opportunity to defend himself.

Mr. Jenkins asked Deputy Commissioner of Customs Dickerson the following question on Tuesday, and we quote:

We have been advised that customs brokers around the country are now, after 40 years, being ordered by the Customs Service to show on their invoices to importers their costs and profits on accessorial services such as arranging for insurance, cartage, warehousing and other services which the broker provides in competition with nonbrokers.

Do you believe that Customs should regulate the business activities of a customs broker that have nothing to do whatsoever with his entry, clearance or duty collection functions?

In our opinion, Customs is authorized to audit and regulate the customhouse broker with respect to customs business, that is, the usual services performed by a broker in the entry and clearance of merchandise and the collection of duties thereon. U.S. Customs is extending its auditing and regulating powers to the so-called accessorial services rendered by the broker, such as arranging for insurance, cartage, warehousing, etc.

When a customs broker renders such service, he may charge an overall fee consisting of his cost of obtaining the service and his gross profit for the work done in arranging the service. For 40 years, Customs has sanctioned this practice. But recently, Customs has insisted that the broker must now separately disclose his cost and gross profit on the invoice to the importer.

This position by Customs is an unwarranted intrusion upon the noncustoms activities of a broker. When an accessorial service is rendered, the broker is acting as an agent only of the importer on noncustoms business which should not be subject to regulation.

Accordingly, we recommend strongly that Congress confine the rulemaking authority of the Secretary of the Treasury to "a customs transaction," which Customs has defined as "an act or activity to which the Customs and related laws apply."

Finally, the law does not presently provide for a penalty for the unauthorized carrying on of the business of a customhouse broker. 'To deter unlicensed persons from engaging in such business and punishing those that do, we recommend that one who engages in business as a customhouse broker without a license should be subject to a civil penalty.

Thank you, sir.

Mr. JENKINS. Thank you, Mr. Hummel.

Do you have any further statement?

Mr. HUMMEL. Yes; I do. Our fourth comment is on the subject of the increase in the monetary value on informal entries, and that will be delivered by Mr. Shapiro.

Mr. JENKINS. Mr. Shapiro, you may summarize your written statement for the record.

STATEMENT OF SIGMUND SHAPIRO

Mr. SHAPIRO. Thank you, Mr. Chairman.

My name is Sigmund Shapiro. I am vice-president of the National Customs Brokers & Forwarders Association, and I am president of Samuel Shapiro & Co., customs brokers, with offices in Baltimore and at Dulles Airport.

Section 211 of H.R. 8149 would amend the present law to increase from $250 to $600, the maximum value of a shipment which may be entered informally pursuant to customs regulations.

In our opinion, raising the limits on commercial shipments would be detrimental to the best interests of the United States. Insofar as personal shipments are concerned, we go far beyond the present law. We feel that all personal shipments should be admitted under the informal procedures without regard to value.

In fact, this is done today under existing customs regulations at most ports, although there is a lack of uniformity throughout the ports of the United States as there are in many other areas of customs administration.

Commercial shipments are a different matter entirely, however. We feel that raising the limit would not only fail to achieve the expected economies in Government handling costs, but on the contrary, would result in additional costs to the economy possibly in the millions of dollars.