PANEL ON BEHALF OF INDEPENDENT FREIGHT FORWARDERS & CUSTOMS BROKERS ASSOCIATION OF SAVANNAH, INC., MIAMI CUSTOMS BROKERS & FREIGHT FORWARDERS ASSOCIATION, INC., JACKSONVILLE CUSTOMS BROKERS & FREIGHT FORWARDERS ASSOCIATION, AND CUSTOMS BROKERS & FREIGHT FORWARDERS ASSOCIATION OF CHARLESTON, S.C., INC., REPRESENTED BY THOMAS C. JAMES OF JOHN S. JAMES & CO., SAVANNAH, GA.; GILBERT LEE SANDLER, COUNSEL; AND THOMAS G. TRAVIS, COUNSEL

Mr. JENKINS. We are happy to have each of you appear before the subcommittee. Your prepared written statement may be made a part of the record. I shall ask each of you, if you will, to summarize the written statement.

Mr. JAMES. Congressman Jenkins, my name is _Thomas James, and I am with John F. James & Co. in Savannah, Ga.

I am the president of the Independent Freight Forwarders and Customs Brokers Association of Savannah.

Today I speak on behalf of the Brokers Association of Savannah, the Brokers Associations of Charleston, S.C., Jacksonville, Fla., and Miami, Florida.

Mr. Tony Toro, who was also to be with me today, was unable to make the trip, but he assures me the weather is nice in Miami. With me today is Mr. Gilbert Lee Sandler and Mr. Thomas Travis, who have assisted our association in the preparation of this statement.

For the benefit of the committee, we have submitted the written statement earlier today, and we will just summarize or highlight some of the points we feel should be stressed. We would just like to say at the outset that our statement is in essence a "me, too," with some slight revisions.

We fully support the statement and actions of the National Customs Brokers Association of which most all of our members are also included in their membership list.

We did, however, feel that the committee should certainly hear from the grass roots area, wherein small businesses, and that is exactly what we are, could and would be affected to a greater or lesser degree by whatever legislative activity comes from these hearings.

So we are most concerned that our story be heard and properly recorded.

The four associations, on behalf of which the statement is filed, are nonprofit corporations organized under the laws of the States of Georgia, Florida, and South Carolina. We consist of approximately 70 customhouse brokers and more than 100 ocean freight forwarders.

As licensed customs brokers, as has already been stated today, we are responsible for the proper filing of all documents and forms required for entrance and clearance of all imported merchandise,

and it is to say almost 90 percent of all imported merchandise is formally cleared by licensed customhouse brokers.

Members of our association are vitally interested in the provisions of any legislation affecting the procedures under the customs laws. However, because we are brokers, we would first like to highlight the proposals in the Customs Procedural Reform Act of 1977, H.R. 8149, which does directly affect our brokerage community—that is, licensing and disciplinary procedures.

Thereafter, our formal paper and this brief statement will discuss the administrative issues which are pending before this subcommittee, to include, one, the new entry procedures; two, the new recordkeeping requirements under this proposal; three, revisions of the customs penalty statutes, that is, section 592; four, provision of the vessels penalty statutes and repair statutes, that is, under section 584, and also 466, as outlined in our written statement.

Under five, new statutes of limitation on liquidation, new requirements for public notice of action affecting all importers; seven, customs appropriations and authorizations; and eight, revision of dollar limitations on entries.

The customhouse brokers strongly oppose the new licensing provisions pending before the subcommittee. The provisions under section 116 would change the system for licensing customhouse brokers dramatically, but would, we feel, fail to improve the system in any meaningful way.

Moreover, the sections of section 116 may violate the due safeguards provisions of the U.S. Constitution and contain technical defects that would result in chaotic administrative processes.

The specific ideas and recommendations outlined by our national panel earlier today essentially, and we believe sufficiently cover this subject, as does our written presentation.

Briefly, H.R. 8149 provides that all existing customs brokers' licenses would expire in 3 years after the date of the enactment of the legislation. Expired licenses may be renewed by filing applications under regulations promulgated by the Secretary of the Treasury.

We would like to outline what we feel should be the appropriate language for the legislative purpose underlying section 116, and I quote from page 4 of our written statement:

The Secretary of the Treasury may prescribe such rules and regulations as he deems appropriate to require the periodic registration or reregistration of licensed customs brokers or statistical purposes only.

If we are mistaken in our understanding of the purpose of section 116, we nonetheless strongly oppose its enactment as currently drafted.

Again, our written statement outlines that.

The second item of considerable interest to us personally is the disciplinary procedures on customhouse brokers. The second change in section 116 would amend section 641 of the Tariff Act to provide that all hearings concerning revocation or suspension of a broker's license would be conducted in the presence of an advisory hearing board. This board would then make recommendations to the Secretary of the Treasury concerning revocation or suspension of licensing at issue.

Currently such proceedings are entirely conducted by and before representatives of the Customs Service only, and in the word of my Miami colleagues, this is like learning how to swim in a pool full of sharks. There is no way you are going to learn how to swim. While the principle of the proposed advisory hearing board is sound and acceptable, there are certain fundamental technical errors, we feel.

First, the authority of the board is too inflexible. The only sanctions available to the board are the revocation and the suspension of licenses. These are dramatic remedies which more often than not would have the effect of penalizing innocent importers, brokerage house employees, and so forth.

Flexibility should be brought to the law by providing monetary penalties in appropriate cases. The Customs Modernization Act of 1975 contained such provisions. The bill would have provided maximum penalties of $500 for each violation and not to exceed $20,000 in total.

We would certainly trust that the committees would consider this very strongly.

Another topic under customhouse brokerage, as reflected in our written statement, is on page 9. We feel this bill fails to address the actual problem concerning the regulations and licensing of brokers. Neither H.R. 8149 nor the present law include any provision to penalize a person for conducting customhouse brokerage without a license. It certainly seems strange to be regulated, audited and guided by the Federal Government and your neighbor down the street is doing the same job you are and yet has to answer to no one, it seems, other than his client.

Again, our written statement goes into more detail.

Mr. JENKINS. Mr. James, I think we are going to have to vote. Mr. Jones?

Mr. JONES. Yes, that was two bells for a vote for an amendment to the farm bill. Mr. Chairman, I would suggest we recess for 10 minutes to cast this vote, and I would also suggest that the remaining witness adhere to the 3-minute rule in summarizing your testi

mony.

In looking over the witness list, I had the privilege of visiting in some cases in public hearings and in other cases in informal meetings with almost all of the remaining witnesses. If you could summarize in three minutes your testimony and specifically try to zero in on the provisions of H.R. 8149 that you agree or disagree with, with whatever your suggestions are, that you have not already related to the subcommittee, it will be helpful.

If we can't stick to this and do not have the time to digest the written testimony, I am afraid we can't mark it up this week, and if we can't do that, we can't get a bill this year.

So if you would cooperate with us, we would appreciate it. Mr. JENKINS. The committee will stand in recess for 10 minutes. [A brief recess was taken.]

Mr. JONES [presiding]. We will resume the hearing. Who is the next person on the panel to summarize their testimony?

Mr. JAMES. May I finish?

94-545-77-29

Mr. JONES. I used to work for President Johnson and he said that anything that couldn't be said on a 1-page memo probably shouldn't be said anyway, and a brief statement could be very persuasive at this time.

Mr. JAMES. I will conclude, sir.

We have in our region, in the Southern States, an experimental program called "centralized appraisement." This program is inefficient and damaging to small importers because it often removes all decisionmaking authority from the ports of entry. DABA would encourage Treasury and others to continue the centralized appraisement program and to put forth other programs equally as ridiculous and expensive. H.R. 8149 should be amended to prevent this, as outlined in our statement.

Finally, the customhouse broker is a small businessman.

We are in the commercial market. We are also licensed and regulated to protect the revenues of the Government. Most of us try to do our best to do that, and whatever recommendations come up, and whatever the committee decides, we hope legislation would be enacted this year which will enable us all to get back to work. Thank you very much.

[The prepared statement follows:]

STATEMENT OF THE INDEPENDENT FREIGHT FORWARDERS AND CUSTOMS BROKERS ASSOCIATION OF SAVANNAH, INC.; THE MIAMI CUSTOMS BROKERS AND FREIGHT FORWARDERS ASSOCIATION, INC.; THE JACKSONVILLE CUSTOMS BROKERS AND FREIGHT FORWARDERS ASSOCIATION; AND THE CUSTOMS AND FREIGHT FORWARDERS ASSOCIATION OF CHARLESTON, SOUTH CAROLINA, INC.

Mr. Chairman, and members of the Subcommittee, this statement is filed on behalf of four independent customhouse Brokerage Associations located in the south Atlantic ports of Savannah, Georgia; Miami, Florida; Jacksonville, Florida; and Charleston, South Carolina.

The Associations are represented today by Thomas C. James, a licensed customhouse broker and President of John S. James & Co. of Savannah, Georgia; A. A. Toro, a licensed customhouse broker and Vice President of Frontier Freight Brokers, Inc. of Miami, Florida, and counsel for the Associations, Gilbert Lee Sandler and Thomas G. Travis of the law firm of Sandler & Travis in Miami, Florida.

The four Associations on behalf of which this statement is filed are nonprofit corporations organized under the laws of the states of Florida, Georgia and South Carolina, and consist of approximately 70 licensed customhouse brokerage houses and more than 100 ocean and air freight forwarding companies located in four of the major southeast Atlantic ports of entry.

Our Associations, and their individual members, take very seriously the obligation of licensed brokers to provide quality services to the import community. The activities of our Associations are devoted to improving the services offered by our memberships. The purpose of our participation in the hearings today is to make a positive contribution to the improvement of the administration of the Customs laws. Our interests, as well as the interests of our clients, this Subcommittee and the nation as a whole, lie with the facilitation of international trade and the easing of the administrative burden in administering the laws related to the trade.

As licensed customhouse brokers, we are responsible for the proper filing of all documents and forms required in the entrance and clearance of imported merchandise. Almost 90% of all imported merchandise is formally cleared by licensed brokers. In a real sense, we act as intermediaries between the Customs Service which must administer a variety of laws affecting imports, and the import community which must fully comply with those laws. This requires a high degree of expertise and involves a serious obligation to our clients. Large multi-national corporations often rely heavily upon the expertise

of their Customs brokers; smaller companies without vast financial resources, of course, very often must rely entirley upon our expertise and training.

The members of our Associations are vitally interested in the provisions of any legislation affecting the procedures under the Customs laws. However, because we are brokers, we will first discuss the proposals in the Customs Procedural Reform Act of 1977 (H.R. 8149) which directly affect the brokerage community: licensing and disciplinary proceedings. Thereafter, we will discuss the broader administrative issues which are pending before this Subcommittee, including (1) new entry processing procedures, (2) new record-keeping requirements, (3) revision of the Customs penalty statute (Section 592), (4) revision of the vessel penalty statutes, (5) new statute of limitations on liquidations, (6) new requirements for public notice of actions affecting importers, (7) Customs Service appropriation authorization and (8) revision of the dollar limitation on informal entries.

CUSTOM HOUSE BROKERS: LICENSING

We strongly oppose enactment of the new brokerage licensing provisions pending before this Subcommittee. The provisions of Section 116 of H.R. 8149 would dramatically change the existing system for licensing customhouse brokers, but would fail to improve the system in any meaningful way. Moreover, the provisions of Section 116 may violate the due process safeguards of the United States Constitution and include technical defects that would result in a chaotic administrative process.

H.R. 8149 provides that all existing customhouse brokerage licenses will expire three years after the date of enactment of the legislation. Expired licenses may be renewed upon filing an application in accordance with regulations to be promulgated by the Secretary of the Treasury. Licenses issued by the Secretary of the Treasury would be valid for periods of no more than three years.

The purpose of this legislation, as we understand it, is to permit the Customs Service to accumulate and process accurate data on the number, location and use of customhouse brokers licenses and businesses. Clearly, this legislation would authorize much more than this limited purpose by granting the Secretary of the Treasury unlimited authority over the relicensing of customhouse brokers. This unbridled grant of discretion is simply inappropriate. We believe that the limited purpose of this legislation could be achieved by deleting subsection (a) of Section 116 and inserting in its place the following: Section 116 (a) is amended by deleting subsections (1) and (2), redesignating subsections (3) and (4) as (2) and (3) respectively and inserting the following new subsection (1) after the third sentence of subsection (a) of Section 641:

"The Secretary of the Treasury may prescribe such rules and regulations as he deems appropriate to require the periodic registration or re-registration of licensed customhouse brokers for statistical purposes only."

If we are mistaken in our understanding of the purpose of Section 116, we nonetheless strongly oppose its enactment, as currently drafted for the following additional reasons.

First, Section 116 includes no criteria for decisions whether or not to grant applications for license renewal. Is the legislation designed to establish an automatic license renewal process such as proposed by the Treasury Department in 1975? If so, why does the amended statute include vague language which arguably might authorize the Customs Service to issue regulations requiring all customhouse brokers to be reexamined every three years?

Second, Section 116 requires all existing licenses to expire in three years, but includes no obligation for the Secretary of the Treasury to act on renewal applications prior to the date of expiration. The standards for due process of law require that no license expire while a timely application for renewal is pending.

Third, Section 116 includes none of the procedural requirements necessary to satisfy the due process of law requirements which must be satisfied in license renewal systems: there are no provisions for reasonable notice, for an opportunity to be heard or for an opportunity to challenge an adverse decision.