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tary of the Treasury to authorize the importation of limited quantities of trademarked merchandise accompanying persons arriving in the United States. All such merchandise must be intended for personal use and not for resale.
In establishing quantitative limits, it is contemplated that the Secretary, through the Customs Service, would conduct a survey to determine the quantities in which particular types of articles are usually purchased for personal use.
Although the Tariff Act of 1930 contains several sections which provide for forfeiture of conveyances and merchandise for specific violations, there is no general civil sanction of forfeiture. Section 215 of the bill would remedy this deficiency by providing, in a new section 593, for such a penalty for merchandise imported into the United States or Virgin Islands contrary to law.
Section 216 would amend section 599 of the Tariff Act to exclude yachts and other pleasure boats from the prohibition against Customs officers owning vessels.
Section 217 would amend section 644 of the Tariff Act to insert the title of the current law, the Federal Aviation Act of 1958, which replaced section 177 of title 49.
The laws establishing the penalty for the transportation of merchandise in violation of the coastwise laws, and the fees for vessel services have also been examined. Section 218 would amend section 27 of the Merchant Marine Act of 1920 (46 U.S.C. 883) to provide a monetary penalty rather than forfeiture of the merchandise involved, when the merchandise is transported in violation of the coastwise laws. Section 219 would repeal those statutes which have established vessel service fees now found to be inadequate in view of the administrative expense involved. Section 220 would enable the Secretary of the Treasury to fix fees to be collected for these services which more accurately reflect the cost to the Government for supplying these services.
Another major area to which this title addresses itself and which urgently requires amendment is the scope of the arrest authority of Customs officers. Section 221 would expand that authority to conform to that of Secret Service agents and IRS enforcement officers.
Under existing law, a Customs officer has authority to make arrests without a warrant for violations of the narcotic drug and marihuana laws and for violations of the Customs or navigation laws, where the violation is committed in his presence or where he has reason to believe that the person to be arrested has committed or is committing such violation.
However, Customs officers are now engaged in Federal enforcement programs not heretofore within the sphere of Customs activity. For example, Customs officers in the cargo security program frequently observe violations of nonCustoms laws, such as thefts from interstate commerce. Fugitive felons and persons in possession of stolen property have been detected entering the United States by Customs inspectors, who now have access to the National Crime Information Center. As a result, the limited arrest authority has proved to be clearly inadequate and potentially compromises and hinders Customs present role in the efficient enforcement of such Federal programs. The Department of Justice has recognized this problem and has requested the Treasury Department to seek such_expanded arrest. authority for Customs officers to be in accord with other Treasury enforcement personnel.
The final provision of Title II of the proposed legislation places a limit on the amount of time the Customs Service has to liquidate an entry. Current law provides no such limitation. Thus, under section 222, an entry not liquidated within 1 year from date of entry or date of withdrawal from warehouse, shall be deemed liquidated at the rate of duty, value, quantity and amount of duties entered by the importer, his consignee or agent. The period can be extended by the Secretary for specified reasons upon giving notice to the importer.
This provision is expected to be beneficial to both Customs and importers. It would eliminate unanticipated requests for additional duties coming years after the original entry. Cost savings should result to Customs following improved management of the liquidation process.
The Customs Service firmly believes that every proposal contained within this legislative package is necessary to update Customs laws to more adequately service the needs of the importing public while at the same time protecting the nation's revenues and enforcing the numerous laws for which Customs has responsibility.
TECHNICAL COMMENTS ON SECTION 112 OF H.R. 8149
Section 112 of H.R. 8149 would amend section 592 of the Tariff Act of 1930, as amended (19 U.S.C. 1592), the so-called penalty and fraud provision of the Tariff Act. The proposed amendment would include in the law many practices, procedures, and policies which are currently expressed in the Customs Regulations (19 CFR).
1. Subsection (a) (2)-page 19, line 10—The authority of the Customs Service to seize merchandise for violation of section 592 would be limited to certain specified situations one of which is “to protect the revenue.” We urge that after the words “United States” the following language be inserted, “or to prevent the introduction of prohibited and/or restricted merchandise into the United States.” Such language is necessary as violations involving misdescription of quota merchandise, prohibtited and/or restricted merchandise are often non-loss of revenue violations.
2. Subsection (b)-page 10, line 22—We recommend that a final sentence be added to read as follows: “No such notice shall be required if the violation is non-commercial in nature, or where the proposed penalty does not exceed $1,000.
The prepenalty procedure was designed to provide full consideration of arguments as to why a penalty should not be imposed in cases that fit the mold of "larger” penalties, e.g. those in which the huge initial penalties assessed under existing law (19 U.S.C. 1592), created contingent liabilities on balance sheets of major corporations which affected credit ratings, jeopardized stock values or otherwise inflicted economic punishment that was never intended or justified under 19 U.S.C. 1592, in addition to the penalty itself.
The extension of the prepenalty notice and hearing process to the total number of 19 U.S.C. 1592 cases regardless of dollar amount would create resource drains and burdens at the field level which cannot be absorbed and which cannot be generally justified by the same economic impacts that were involved in the large penalty cases. Additionally, in the smaller as well as larger cases the opportunity for mitigation of the initial penalty, and the opportunity to make specific oral or written presentations in connection with the petition for relief under 19 U.S.C. 1618 is available in all 19 U.S.C. 1592 cases, regardless of amount.
3. Subsection (c)-page 12, lines 1-6—The last two sentences of subsection (c) insures the right of the person concerned to petition for remission or mitigation of a penalty under section 618 of the Tariff Act and directs that he or she receive, in writing, notice of the final determination. Persons subject to a section 592 penalty already have these guarantees under existing law. Therefore, the two sentences are repetitive and should be deleted.
4. Subsection (d) (1), (2) and (3)—page 12-It is strongly urged that the second sentence in paragraph (1) be deleted. As Congressman Pike indicated in the hearings before the Trade Subcommittee last August, it is difficult to see why anyone would have a great interest in reducing, at least for the initial assessment, the penalties imposed in cases of actual fraud to a ceiling of less than the full value of the merchandise. We believe that any such reduction weakens the deterrent effect of these provisions against those who should be most subject to that deterrent, namely the intentional violator.
Also in paragraphs (1), (2) and (3) we recommend that the base used for all penalty purposes be the domestic value of the merchandise in lieu of "the value reported by the appropriate customs officer for statistical purposes." There appears to be no justification for non-loss of revenue violations to have a lower maximum penalty than revenue loss violations. In addition for the sake of consistency we recommend that “35 percent" in paragraph (2) be changed to "40" percent. This change would make the maximum penalty for non-loss of revenue violation involving gross negligence double the maximum provided for in paragraph (3) involving negligence. It is noted that in loss of revenue violations involving gross negligence, provision is made for a maximum penalty of four times the loss of revenue as compared to a maximum of two times the loss of revenue in violations involving negligence.
5. Subsection (d) (4)—page 13, line 5—It is not clear what subsection (d) (4) is intended to accomplish. We interpret the subsection as allowing the Government to collect all duties (not previously collected) arising out of the discovery of a section 592 violation (whether or not a monetary penalty is assessed), limited only by the five-year statute of limitations. This would be so even though liquidation of the entries involved would have become "final"
and not subject to challenge or reliquidation under any other provision of law. We also recommend that the word “may” on line 7 be changed to "shall."
6. Subsection (e)-page 13_We recommend that this entire section be deleted. Subsection (a), in effect, makes section 592 a monetary penalty provision with the merchandise as security for the payment of the penalty. Under these circumstances its would appear to be inconsistent to allow a violator the right to deliver the tainted merchandise, possibly at a very late date, to Customs in lieu of paying a monetary penalty. The depreciating value of that merchandise may be far less than the appropriate penalty, and the Government might be encumbered with the costs of its storage and sale.
7. Subsection (g)-page 13–Subsection (g) would establish the policy and procedure for the handling of voluntary disclosures of section 592 violations. To take advantage of the provision disclosure would have to be made prior to, or without knowledge of, the commencement of a formal investigation of such violation. We recommend that the words “or without knowledge of" be deleted. We are aware that this section places the burden of proof upon the person asserting such lack of knowledge. Nevertheless, this would introduce a subjective test into an objective set of presently established criteria, and, in our opinion, the retention of this subject test can only lead to endless controversy and protracted litigation.
8. Subsection (h) (1) (A) and (B)-page 14, line 8Subsection (h) (A) provides that in a suit to collect a monetary penalty all issues, including the amount of the penalty, shall be tried de novo. We strongly recommend that the words “amount of the penalty” be deleted and in lieu thereof the words “degree of culpability" be inserted. The present language could lead to a lack of uniformity in penalty collections for similar violations. In addition, allowing judicial review of the "amount of the penalty” would almost certainly encourage litigation as it would be highly unlikely that a court would ever increase the amount of an administratively determined penalty. In addition it must be noted that delay in payment can only benefit the violator as the law does not authorize the collection of interest on penalties which are not promptly paid.
In addition the words “clear and convincing evidence" appearing at the end of paragraph (B) should be deleted and replaced by "a preponderance of the evidence." We can find no valid reason for the Government to carry a higher burden of proof than is required in the usual civil action.
9. Subsection (h) (2)-page 15, line 7—This subsection would not permit the Government to commence an action to recover a monetary penalty until after the 90th day following the date of issuance of a written claim, or final determination in a proceeding under section 618, whichever is later. There appears to be no valid reason for inclusion of this paragraph in the proposed amendments to section 592. There are times, such as the running of the statute of limitations, when it is essential that the Government be permitted to file an action before conclusion of the administrative proceeding. Accordingly, we strongly recommend that subsection (h) (2) be deleted in its entirety.
TECHNICAL ANALYSIS OF SECTIONS 109, 111, 113, 115 AND 116 OF H.R. 8149 Section 109 would amend section 514 of the Tariff Act of 1930, as amended (19 U.S.C. 1514), by adding the following new subsection :
"(d) If a protest of a decision concerning entry of any merchandise is filed under subsection (b), if contest of a decision concerning entry of any merchandise is filed under section 516, or if a concerned Customs officer determines that liquidation as to any merchandise is suspended at a port of entry, the Secretary of the Treasury shall, by regulation, require that notice of the protest, contest, or suspension be published in the Federal Register."
Subsection (b) of section 514 provides that a protest of certain specified decisions of the Customs Service shall be filed in writing with the appropriate Customs officer setting forth distinctly and specifically each decision as to which protest is made; each category of merchandise affected by each such decision as to which protest is made; and the nature of each objection and reasons therefor.
The problems involved in publishing in the Federal Register notices of each protest filed under subsection (b) of section 514 must be considered in light of the fact that 25,513 protests were filed in the year 1976.
On the other hand, publication of notices of contests of decisions under section 516 is provided for under Subpart C of Part 175 of the Customs Regula
tions, in particular sections 175.21 (a) and 175.22(b). Decisions under section 516, to which exception is taken, are not very great in number, although the number is increasing as a result of the enactment of the Trade Act of 1974.
The meaning of the clause “or if a concerned Customs officer determines that liquidation as to any merchandise is suspended at a port of entry” (emphasis added) is not clear. We would assume this to mean that liquidation as to any merchandise shall be suspended, for the reasons provided in section 218(b) of the bill, page 31, lines 16–22, in those cases in which :
(1) Information needed for the proper appraisement or classification of the merchandise is not available to the appropriate Customs officer;
(2) Liquidation is suspended as required by statute; or (3) Liquidation is suspended pursuant to court order.
Of course, other circumstances may require suspension of liquidation ; e.g., the posture of certain penalty cases and the decision of the district director to suspend pending response to requests for internal advice. However, the great majority of suspensions occur in category (1), and a large number take place in category (2), particularly in antidumping cases, following the issuance of a withholding of appraisement notice.
There is no statistical data as to the precise number of suspensions of liquidation taking place; however, many thousands of entries are involved in the course of one year. The burden of publication would depend on the detail in which the notice of suspension must be published ; i.e., whether each individual entry must be enumerated, or whether it would be sufficient to state, as does a withholding of appraisement notice, that all entries of a particular class or kind of merchandise from a named country are suspended for a stated period. Of course, notices of withholding of appraisement in antidumping cases are published under present procedures.
Section 111 of H.R. 8149 would amend section 584 of the Tariff Act of 1930, as amended (19 U.S.C. 584), the provision of law which establishes penalties for the failure to manifest all merchandise carried by a vessel or vehicle. Under existing law the provision reaches only the master of a vessel or the person in charge of a vehicle. We endorse the amendment which would expand the provision to cover persons directly or indirectly responsible for the violations enumerated in section 584.
Section 113 of H.R. 8149 would increase the monetary ceiling for nonjudicial forfeitures from $2,500 to $10,000. Enactment of this amendment would considerably enhance our ability to dispose of forfeited merchandise without pursuing the more time consuming and costly judicial forfeiture process. We note, bowever, that only sections 607 and 610 of the Tariff Act of 1930 would be so amended ; section 612 would have to be similarly amended.
Section 115 would add a new section 625 entitled “Publication of Rulings" following section 624 of the Tariff Act of 1930, as amended. The new section 625 would provide :
“Within 120 days after issuing any ruling under this Act, the Customs Service shall have such ruling, without the names of concerned persons, published in the Customs Bulletin."
We recommend that the term "ruling" be defined, either in the bill or in the accompanying Committee reports, so that the parameters within which we are required to publish are established. In this connection, section 177.2(d), Customs Regulations distinguishes between a "ruling” and an "information letter" thus:
A "ruling" is a written statement issued by the Headquarters Office that interprets and applies the provisions of the Customs and related laws to a specific set of facts. . . . An “information letter" is a written statement issued by the Headquarters Office that does no more than call attention to a wellestablished interpretation or principle of Customs law, without applying it to a particular set of facts.
Assuming this distinction were to be preserved, it is est ed that 6,000 to 8,000 rulings would be required to be published each year. We note that section 115 relates to rulings under “this Act” (the Tariff Act of 1930, as amended) ; therefore, rulings made under the navigation laws or other laws administered by the Customs Service would not be within the mandatory publication requirement although it is now our intention to publish such of those ruling as appear of general interest.
We also note the requirement for mandatory publication of rulings. This requirement would appear to conflict with the provision of the Freedom of
Information Act, as amended (5 U.S.C. 552(b) (4)), which exempts from disclosure "trade secrets and commercial or financial information obtained from a person and privileged or confidential”. This section is now implemented, in the ruling process, in section 177.3(b) (7) of the Customs Regulations, which provides :
“If the request for a ruling contains information which is claimed to constitute trade secrets or privileged or confidential commercial or financial information regarding the business transactions of private parties the disclosure of which would cause substantial harm to the competitive position of the person making the request (or another interested party), the ruling request must clearly identify such information and set forth the reasons such information should not be disclosed, including, where applicable, the reasons the disclosure of the information would prejudice the competitive position of the person making the request (or of another interested party).”
Note also, sections 103.10(c) and 103.10(d) of the Customs Regulations, and section 1905, title 18, United States Code, which provides criminal penalties against an officer or employee of the United States who may improperly disclose confidential information coming to him in the course of his duties.
It is suggested, therefore, if section 115 is to be favorably considered, that the words “subject to the provisions of the Freedom of Information Act, as amended (5 U.S.C. 552(b)), and except as otherwise provided by law," be substituted for the words "without the names of concerned persons,” in lines 18 and 19, page 17.
Finally, in Title I section 116 would revise the present licensing and hearing procedures for customhouse brokers. It would limit the validity of licenses to 3 years and provide for an advisory hearing board, composed of Customs officials and courthouse brokers, to make determinations in disciplinary matters. While we concur that the hearing officer should not be the same as the official who initiated the particular charges against a broker, we see little benefit to be derived from going beyond the hearing procedures prescribed by the Administrative Procedure Act. If the provision is favorably considered, we recommend that an independent hearing officer or an administrative law juduge be designated to conduct disciplinary hearings. However, inasmuch as a study of Customs brokerage licensing and regulating is currently being conducted by the Treasury Department, it is recommended that any action in this area be deferred and dealt with separately at a more appropriate time.
Mr. JONES. Thank you very much. We are happy to welcome you aboard as Director of Customs and are glad to see you jump right into the other side of your administrative responsibilities.
We will ask the Department of Commerce witness, Shirley Kallek, to come forward and summarize your prepared testimony and then we will ask questions of the administration witnesses.
STATEMENT OF SHIRLEY KALLEK, ASSOCIATE DIRECTOR FOR
ECONOMIC FIELDS, BUREAU OF THE CENSUS, ACCOMPANIED BY EMANUEL A. LIPSCOMB, CHIEF, FOREIGN TRADE DIVISION
Ms. KALLEK. Mr. Chairman, I am pleased to have the opportunity to appear before this subcommittee on behalf of the Department of Commerce to discuss legislation currently under consideration relating to customs procedural reform.
After a careful review of the legislation and discussions with officials of the U.S. Customs Service, we believe that adequate safeguards have been established to assure the continued integrity of the statistical system and the Department's ability to monitor imports and to implement its various trade-related programs.
The Bureau of the Census has the responsibility to compile the official foreign trade statistics of the United States. The import statistics on kinds and quantities of merchandise are compiled from