    [House Hearing, 111 Congress]
    [From the U.S. Government Publishing Office]

      H.R. 4678, FOREIGN MANUFACTURERS LEGAL ACCOUNTABILITY ACT, AND H.R.
     5156, CLEAN ENERGY TECHNOLOGY MANUFACTURING AND EXPORT ASSISTANCE ACT

    =======================================================================

                                    HEARING

                                   BEFORE THE

                        SUBCOMMITTEE ON COMMERCE, TRADE,
                            AND CONSUMER PROTECTION

                                     OF THE

                        COMMITTEE ON ENERGY AND COMMERCE
                            HOUSE OF REPRESENTATIVES

                         ONE HUNDRED ELEVENTH CONGRESS

                                 SECOND SESSION

                                   __________

                                 JUNE 16, 2010

                                   __________

                               Serial No. 111-136

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

          Printed for the use of the Committee on Energy and Commerce

                            energycommerce.house.gov
                                    _____

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                        COMMITTEE ON ENERGY AND COMMERCE

                     HENRY A. WAXMAN, California, Chairman
    JOHN D. DINGELL, Michigan            JOE BARTON, Texas
      Chairman Emeritus                    Ranking Member
    EDWARD J. MARKEY, Massachusetts      RALPH M. HALL, Texas
    RICK BOUCHER, Virginia               FRED UPTON, Michigan
    FRANK PALLONE, Jr., New Jersey       CLIFF STEARNS, Florida
    BART GORDON, Tennessee               NATHAN DEAL, Georgia
    BOBBY L. RUSH, Illinois              ED WHITFIELD, Kentucky
    ANNA G. ESHOO, California            JOHN SHIMKUS, Illinois
    BART STUPAK, Michigan                JOHN B. SHADEGG, Arizona
    ELIOT L. ENGEL, New York             ROY BLUNT, Missouri
    GENE GREEN, Texas                    STEVE BUYER, Indiana
    DIANA DeGETTE, Colorado              GEORGE RADANOVICH, California
      Vice Chairman                      JOSEPH R. PITTS, Pennsylvania
    LOIS CAPPS, California               MARY BONO MACK, California
    MICHAEL F. DOYLE, Pennsylvania       GREG WALDEN, Oregon
    JANE HARMAN, California              LEE TERRY, Nebraska
    TOM ALLEN, Maine                     MIKE ROGERS, Michigan
    JANICE D. SCHAKOWSKY, Illinois       SUE WILKINS MYRICK, North Carolina
    CHARLES A. GONZALEZ, Texas           JOHN SULLIVAN, Oklahoma
    JAY INSLEE, Washington               TIM MURPHY, Pennsylvania
    TAMMY BALDWIN, Wisconsin             MICHAEL C. BURGESS, Texas
    MIKE ROSS, Arkansas                  MARSHA BLACKBURN, Tennessee
    ANTHONY D. WEINER, New York          PHIL GINGREY, Georgia
    JIM MATHESON, Utah                   STEVE SCALISE, Louisiana
    G.K. BUTTERFIELD, North Carolina
    CHARLIE MELANCON, Louisiana
    JOHN BARROW, Georgia
    BARON P. HILL, Indiana
    DORIS O. MATSUI, California
    DONNA M. CHRISTENSEN, Virgin
        Islands
    KATHY CASTOR, Florida
    JOHN P. SARBANES, Maryland
    CHRISTOPHER S. MURPHY, Connecticut
    ZACHARY T. SPACE, Ohio
    JERRY McNERNEY, California
    BETTY SUTTON, Ohio
    BRUCE L. BRALEY, Iowa
    PETER WELCH, Vermont
            Subcommittee on Commerce, Trade, and Consumer Protection

                            BOBBY L. RUSH, Illinois
                                      Chairman
    JANICE D. SCHAKOWSKY, Illinois       CLIFF STEARNS, Florida
        Vice Chair                            Ranking Member
    JOHN SARBANES, Maryland              RALPH M. HALL, Texas
    BETTY SUTTON, Ohio                   ED WHITFIELD, Kentucky
    FRANK PALLONE, Jr., New Jersey       GEORGE RADANOVICH, California
    BART GORDON, Tennessee               JOSEPH R. PITTS, Pennsylvania
    BART STUPAK, Michigan                MARY BONO MACK, California
    GENE GREEN, Texas                    LEE TERRY, Nebraska
    CHARLES A. GONZALEZ, Texas           MIKE ROGERS, Michigan
    ANTHONY D. WEINER, New York          SUE WILKINS MYRICK, North Carolina
    JIM MATHESON, Utah                   MICHAEL C. BURGESS, Texas
    G.K. BUTTERFIELD, North Carolina
    JOHN BARROW, Georgia
    DORIS O. MATSUI, California
    KATHY CASTOR, Florida
    ZACHARY T. SPACE, Ohio
    BRUCE L. BRALEY, Iowa
    DIANA DeGETTE, Colorado
    JOHN D. DINGELL, Michigan (ex
        officio)

                                 C O N T E N T S

                                  ----------
                                                                       Page
    Hon. Bobby L. Rush, a Representative in Congress from the State
      of Illinois, opening statement.................................     1
    Hon. Ed Whitfield, a Representative in Congress from the
      Commonwealth of Kentucky, opening statement....................     2
        Prepared statement...........................................     5
    Hon. Betty Sutton, a Representative in Congress from the State of
      Ohio, opening statement........................................     8
    Hon. Robert E. Latta, a Representative in Congress from the State
      of Ohio, opening statement.....................................     8
    Hon. Doris O. Matsui, a Representative in Congress from the State
      of California, opening statement...............................     9
    Hon. Phil Gingrey, a Representative in Congress from the State of
      Georgia, opening statement.....................................    10
    Hon. John D. Dingell, a Representative in Congress from the State
      of Michigan, opening statement.................................    11
    Hon. Steve Scalise, a Representative in Congress from the State
      of Louisiana, opening statement................................    12
    Hon. Bruce L. Braley, a Representative in Congress from the State
      of Iowa, opening statement.....................................    13
    Hon. Cliff Stearns, a Representative in Congress from the State
      of Florida, opening statement..................................    14
    Hon. Linda T. Sanchez, a Representative in Congress from the
      State of California, opening statement.........................    15
    Hon. Lee Terry, a Representative in Congress from the State of
      Nebraska, opening statement....................................    15
    Hon. Tim Murphy, a Representative in Congress from the
      Commonwealth of Pennsylvania, opening statement................    16
    Hon. Michael R. Turner, a Representative in Congress from the
      State of Ohio, opening statement...............................    17
    Hon. Gene Green, a Representative in Congress from the State of
      Texas, prepared statement......................................   140
    Hon. Joe Barton, a Representative in Congress from the State of
      Texas, prepared statement......................................   142

                                   Witnesses

    Jeremy Baskin, Office of the General Counsel, United States
      Consumer Product Safety Commission.............................    18
        Prepared statement...........................................    21
        Answers to submitted questions...............................   145
    Ami Gadhia, Policy Counsel, Consumers Union......................    25
        Prepared statement...........................................    28
        Answers to submitted questions...............................   149
    William Morgan, victim of defective Chinese drywall..............    34
        Prepared statement...........................................    36
    Andrew Popper, Professor of Law, American University Washington
      College of Law.................................................    38
        Prepared statement...........................................    40
        Answers to submitted questions...............................   155
    Marianne Rowden, President and Chief Executive Officer, American
      Association of Exporters and Importers (AAEI)..................    58
        Prepared statement...........................................    60
        Answers to submitted questions...............................   171
    Mary Saunders, Deputy Assistant Secretary for Manufacturing and
      Services, United States Department of Commerce.................    81
        Prepared statement...........................................    84
        Answers to submitted questions...............................   180
    Deborah Wince-Smith, President and Chief Executive Officer,
      Council on Competitiveness.....................................    94
        Prepared statement...........................................    97
        Answers to submitted questions...............................   189
    Owen E. Herrnstadt, Director of Trade and Globalization,
      International Association of Machinists & Aerospace Workers....   111
        Prepared statement...........................................   113
        Answers to submitted questions...............................   193
    Jack Crawford, Jr., Chief Executive Officer, Jadoo Power.........   116
        Prepared statement...........................................   118
        Answers to submitted questions...............................   196
    Anthony Kim, Policy Analyst, Heritage Foundation.................   124
        Prepared statement...........................................   126
        Answers to submitted questions...............................   199

      H.R. 4678, FOREIGN MANUFACTURERS LEGAL ACCOUNTABILITY ACT, AND H.R.
     5156, CLEAN ENERGY TECHNOLOGY MANUFACTURING AND EXPORT ASSISTANCE ACT

                                  ----------

                            WEDNESDAY, JUNE 16, 2010

                  House of Representatives,
               Subcommittee on Commerce, Trade,
                               and Consumer Protection,
                              Committee on Energy and Commerce,
                                                        Washington, DC.
        The subcommittee met, pursuant to call, at 10:00 a.m., in
    Room 2322, Rayburn House Office Building, Hon. Bobby L. Rush
    [chairman of the subcommittee] presiding.
        Present: Representatives Rush, Sarbanes, Sutton, Stupak,
    Barrow, Matsui, Braley, Dingell, Stearns, Whitfield, Terry,
    Murphy, Gingrey, Scalise, and Latta.
        Also Present: Representatives Sanchez and Turner.
        Staff Present: Angelle Kwemo, Counsel; Felipe Mendoza,
    Counsel; Michelle Ash, Chief Counsel, Commerce, Trade, &
    Consumer Protection; Peter Ketcham-Colwill, Special Assistant;
    Althea Gregory, Intern; and Elizabeth Letter, Special
    Assistant.

     OPENING STATEMENT OF HON. BOBBY L. RUSH, A REPRESENTATIVE IN
                  CONGRESS FROM THE STATE OF ILLINOIS

        Mr. Rush. The subcommittee on Commerce, Trade and Consumer
    Protection will now come to order.
        The purpose of today's hearing is to hear testimony on two
    bills, H.R. 4876, the Foreign Manufacturers Legal
    Accountability Act, and H.R. 5156, the Clean Energy and
    Technology Manufacturing and Export Assistance Act.
        The chair recognizes himself for 5 minutes for an opening
    statement.
        I want to thank the members of the subcommittee for
    participating in this important legislative hearing. As I
    stated before, we will be considering two important bills.
        The first bill deals with products manufactured overseas
    that are flooding the U.S. market and aren't safe for American
    consumers. And the second bill deals with access to global
    markets by American manufacturing new products. Both bills aim
    at protecting American jobs and American consumers. And I would
    be remiss if I didn't commend Congresswoman Betty Sutton and
    Congresswoman Doris Matsui for attempting to lean on both of
    these very critical issues for the safety of the American
    people.
        Last year we were saddened by the tragedies caused by the
    toxic effects of Chinese drywall on consumers. The victims
    sometimes from areas still reeling from the aftermath of
    Hurricane Katrina, finding themselves suffering as a result of
    serious health problems.
        More saddening is the fact that it is very difficult, if
    not impossible, to hold accountable the foreign manufacturers
    of those products. H.R. 4876, the Foreign Manufacturers Legal
    Accountability Act, will fix that loophole and allow suppliers
    of foreign-made products to be sued for defects in those
    products used here on U.S. soil. And I must also say that while
    the U.S. market is open to global manufacturers, the contrary
    is not always the case.
        Our next bill illustrates the need for green technology and
    the need for necessary remedies. Last year, the subcommittee
    held a hearing on how to increase the export of green
    technology products. We heard about the challenges U.S.
    manufacturers are facing in overseas markets despite the fact
    that U.S. technology is unquestionably one of the best.
        We all agree that clean energy is a vast, untapped market.
    There is a large world demand for U.S. goods. But our market
    share in 2008 dropped in from 14 to 9 percent. Even emerging
    economies are rising and trying to replace the U.S. in its
    current position as global leader in manufactured goods. It
    will happen if we don't assert our long-recognized and long-
    held leadership on this particular matter.
        H.R. 5156, the Clean Technology Manufacturing and Export
    Assistance Act will help our industry do that and will
    strengthen the manufacturing industry's capacity and also
    provide them with the tools they need to boost their exports.
        We have, on several occasions, highlighted the importance
    of having a strong domestic policy to allow the manufacturing
    industries to be confident enough to penetrate the
    international markets. We are all aware that the events
    currently taking place in the Gulf of Mexico is another real
    concern. It reinforces the need for environmentally friendly
    technologies. This is where our future lies.
        As I said before, and I will repeat it again, we must seize
    every opportunity or fall drastically behind. And I want to
    thank all of the witnesses again for being here, and I look
    forward to your testimony on the bills we are considering
    today.
        And now I am going to recognize the ranking member for 5
    minutes for the purposes of an opening statement.

      OPENING STATEMENT OF HON. ED WHITFIELD, A REPRESENTATIVE IN
               CONGRESS FROM THE COMMONWEALTH OF KENTUCKY

        Mr. Whitfield. Chairman Rush, thank you very much and we
    certainly appreciate the witnesses being with us here this
    morning as we explore two pieces of legislation that I think
    all of us would agree have great intentions, and I think it's
    important because this legislation is so important that we
    listen to some experts today about some concerns that certainly
    I have about this legislation, although I agree with the intent
    of the legislation.
        For example, on 4678, which holds foreign manufacturers
    accountable in the U.S. for selling products that comply with
    our safety standards and require them to have an agent for
    service of process, I don't really have any problem with that.
    But I think we have to explore, for example, in 2002, the
    Congress passed the Public Health Security and Bioterrorism
    Act, and under that Act, under certain circumstances, certain
    companies had to have registered agents. The U.S. Customs law
    already requires agents for companies that do business in the
    U.S. in certain instances.
        We are signatory to the Foreign Sovereign Immunity Act, and
    we know that in many countries around the world like China, a
    lot of those companies are owned by the government and it
    raises the issue even if you have a service of process you
    obtain the judgment can you really collect on it, because of
    sovereign unity and so forth. And then we have the Hague
    Convention on the Service Abroad of Judicial and Extra Judicial
    Act and what will the impact of this have on that?
        So we have a lot of mechanisms already in place through the
    government to ensure the people of America that we are dealing
    and consuming and using safe products. Now, I am not saying
    that those are enough. But I also know that if we adopt this
    kind of legislation, we might also expect that other countries
    may also adopt it, which could have some negative impact on our
    small exporters that are trying to open up foreign markets, and
    I know that President Obama, one of his goals is to
    significantly increase our exports.
        So all of these are issues that I think we have an
    opportunity to work together here, but I think it is important
    that we explore the ramifications of this legislation. And so
    we look forward to the witnesses' testimony on that issue.
        On the clean energy technology manufacturing export
    assistance fund, I think all of us are certainly interested in
    exporting green technology or clean technology, and I know
    already the Department of Commerce has an extensive assistance
    program to encourage exports of U.S. products. And it appears
    that this legislation would simply be carving out clean energy
    technology, which is fine.
        But as I was reading this legislation, just to give you an
    example of one thing I was concerned about because I am from a
    coal State. Coal still provides 51 percent of all electricity
    produced in America, and I don't think anyone believes that
    renewable energies or wind power or anything else, I guess they
    are one in the same, over the immediate term will come close to
    providing our electricity needs.
        But if this bill became law, for example, I would like to
    see some assistance given to carbon capture sequestration
    technology because China is using more coal every day than the
    United States even thinks about. And right now, they are just
    burning coal, low-grade coal, and polluting the environment and
    if we can export clean coal technology to them, that would be
    great.
        But as I read this legislation, it says to be eligible for
    this program, the project or the entity has to do one of the
    following: Generate electricity. Well, carbon capture
    sequestration does not generate electricity but it removes
    carbon dioxide. Second thing, substantially increases the
    energy efficiency of buildings, industry, or agricultural
    processes. Well, I am not sure that carbon capture
    sequestration would meet that criteria, or it substantially
    increases the energy efficiency of the transportation system.
        So those are some questions that I think we need to explore
    because this is very important legislation, it has great goals,
    and I think we have an opportunity here to explore a lot of
    these issues and come up with a proposal that all of us can
    agree to. I yield back my 14 seconds.
        [The prepared statement of Mr. Whitfield follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Mr. Rush. The chair thanks the gentleman.
        The chair recognizes the gentlelady from Ohio, Ms. Sutton,
    for 2 minutes.

      OPENING STATEMENT OF HON. BETTY SUTTON, A REPRESENTATIVE IN
                    CONGRESS FROM THE STATE OF OHIO

        Ms. Sutton. I thank the chairman for holding this hearing,
    and I think both of these pieces of legislation are important.
    I am proud to be the sponsor of H.R. 4678 along with 61
    cosponsors from both sides of the aisle.
        I am going to keep my remarks limited to that at this
    point.
        Every year many Americans are injured, sometimes fatally,
    by dangerous products that have been manufactured abroad and
    imported into the United States. Recent examples include toxic
    drywall, faulty infant cribs, lead paint in children's toys and
    defective tires. These products not only hurt American
    consumers, they hurt American businesses.
        U.S. manufacturers are responsible for insuring that the
    products that they put on the market are safe, yet it is
    extremely difficult for injured parties to hold foreign
    manufacturers accountable because they are unable to serve
    process or establish jurisdiction. As a result, American
    consumers and businesses are forced to engage in cost-
    prohibitive and time-consuming international legal battles
    rarely receiving the redress they deserve.
        The Foreign Manufactures Legal Accountability Act would
    require foreign manufacturers doing business in the U.S. to
    identify a registered agent authorized to accept service of
    process on behalf of that manufacturer. Registering an agent
    would constitute an acceptance of jurisdiction of the State in
    which the agent is located. This bipartisan bill would help
    protect American consumers and businesses from defective
    products manufactured abroad, would level the playing field for
    American manufacturers, and provide U.S. consumers with the
    necessary tools to seek proper redress.
        And I want to thank my colleague and cosponsor
    Representative Mike Turner who is here this morning for his
    work and support on this legislation.
        I also want to thank Representative Linda Sanchez for her
    leadership and work on this issue, and she may be joining us as
    well.
        I look forward to hearing from the witnesses and to working
    through whatever concerns that the ranking member may have to a
    solution on this very, very important work.
        At the end of the day, this is about fairness and justice.
    American consumers and businesses deserve both, and this
    legislation will help us achieve that.
        Mr. Rush. The chair now recognizes the gentleman from Ohio,
    Mr. Latta, for 2 minutes.

    OPENING STATEMENT OF HON. ROBERT E. LATTA, A REPRESENTATIVE IN
                    CONGRESS FROM THE STATE OF OHIO

        Mr. Latta. Thank you, Mr. Chairman, Ranking Member
    Whitfield. Thank you for holding this hearing today on these
    two pieces of legislation both related to manufacturing. My
    congressional district is heavily based in manufacturing, and I
    am constantly advocating for ways to assist these manufacturers
    to remain in business and to continue producing goods.
        According to the National Association of Manufacturers, my
    district is the largest manufacturing district in the State of
    Ohio, the 20th largest in Congress. When I was first elected in
    December of 2007, I represented the ninth largest manufacturing
    district, and in two years it dropped to 20th. The current
    unemployment rate in Ohio is just under 11 percent, and there
    are many counties in my district that have over 12 percent
    unemployment.
        In looking at these two pieces of legislation, the
    subcommittee needs to ensure that it does nothing to hinder
    further economic growth to put further restrictions on U.S.
    manufacturers. It is important that Americans have safe
    products for use and that companies comply with U.S. safety
    standards. However, I have several concerns with H.R. 4678 and
    that will have unintended consequences on American
    manufacturers.
        They are concerns that under this bill the U.S. companies
    that have contracted with foreign manufacturers for parts will
    be the ones responsible for establishing a registered agent on
    behalf of the foreign supplier. In addition, I have concerns
    that other nations will reciprocate similar laws that would
    impose additional compliance regulations or liability exposure
    to U.S. exporters abroad.
        The manufacturers in my district can not withstand either
    of these scenarios. Many of these companies are still holding
    on by their fingernails in this troubled economy and will not
    be able to withstand further government mandates or increased
    exposure to liability. I have concerns that this legislation
    could inadvertently lead to an increase in lawsuits on our
    manufacturers.
        My district is also home to many facilities relating to
    alternative energy sources. Clean energy technology
    manufacturing is an important piece of the puzzle for America's
    energy independence. As with all of our manufacturing products,
    exporting is a key to the U.S. to remain a world leader.
    However, I do have concerns with H.R. 5156 and its creation of
    another new government program administered by the
    International Trade Administration within the Department of
    Commerce. At a time when our national debt is skyrocketing, I
    do not believe in expanding our government but should be trying
    to limit it.
        There are also concerns that this new grant program
    duplicates other programs that have already been created
    through the energy stimulus bills.
        I look forward to the hearing today.
        Mr. Rush. The chair now recognizes Mrs. Matsui for 2
    minutes.

    OPENING STATEMENT OF HON. DORIS O. MATSUI, A REPRESENTATIVE IN
                 CONGRESS FROM THE STATE OF CALIFORNIA

        Ms. Matsui. Thank you, Mr. Chairman, and thank you for
    calling today's hearing.
        I, first of all, want to applaud my good friend, Betty
    Sutton, for introducing H.R. 4678, and I support her
    legislation. I would also like to thank the witnesses for being
    with us here today. And I particularly want to welcome our
    witness from the Sacramento area, Jack Crawford, CEO of Jadoo
    Power.
        Under Jack's leadership, Jadoo Power is a leader in
    manufacturing clean energy technologies and providing hybrid
    fuel cell power for military, government, and commercial
    applications. Jack has a wealth of expertise in the clean
    energy sector, and I look forward to hearing from him today.
        As he can attest, the Sacramento region is well positioned
    to be a leader in producing clean energy technologies with more
    than 110 clean tech companies that focus on production of fuel
    cell technology, biofuels, solar, wind energy, and others.
        To continue growth, the U.S. clean energy sector,
    particularly small and medium-sized firms, need manufacturing
    expert assistance to boost their competitiveness in the
    international marketplace. In fact, our Nation's clean tech
    industry is lagging behind many of its competitors in exports,
    including Germany and China. This is simply unacceptable. The
    U.S. must be a leader in manufacturing and exporting clean
    technologies. That is why I, along with Chairmen Rush and
    Dingell and Representative Eshoo, introduced H.R. 5156, a bill
    to boost the competitiveness of American-made clean tech
    products both here in the United States and around the world.
        The bill will create a fund to develop and sustain a
    national clean energy technology export strategy to provide
    U.S. clean tech firms with expert assistance and finding and
    navigating foreign markets to sell their goods and services to
    new customers.
        The President has laid out a laudable goal to double U.S.
    exports over the next 5 years, and this legislation will ensure
    clean energy exports are at the forefront of the national
    export strategy. The bill will also strengthen America's
    domestic clean tech manufacturing industry.
        Ultimately, H.R. 5156 will enhance our standing in the race
    to be the global leader in clean energy. The BP oil spill only
    underscores the need for leadership in the clean energy market,
    and this spill has sent a strong message that America is
    serious about being the leader in producing and exporting these
    technologies.
        I look forward to working with my colleagues on the
    committee to achieve this goal, and I thank you, again Mr.
    Chairman, for holding today's hearing.
        Mr. Rush. Dr. Gingrey is recognized for 2 minutes.

      OPENING STATEMENT OF HON. PHIL GINGREY, A REPRESENTATIVE IN
                   CONGRESS FROM THE STATE OF GEORGIA

        Mr. Gingrey. I want to thank you for holding today's
    hearing on two pieces of legislation, H.R. 4678 and 5156, to
    allow us to hold a discussion on important issues facing
    consumers as we strive to create jobs. I believe that both of
    these bills are well intentioned as they attempt to assist
    consumers and improve the clean technology trade deficit that
    we currently face.
        Unfortunately, I believe that both bills will have
    unintended consequences that could prevent them from
    accomplishing their respective goals.
        Mr. Chairman, H.R. 4678 seeks to rectify the problems that
    have been associated with foreign product recalls. While I am
    saddened by what has occurred to the victims--one of whom is on
    our first panel of witnesses--I fear that H.R. 4678 will not
    fully address the underlying issue.
        The purpose of this legislation is to hold foreign
    manufacturers responsible for the products that come to the
    United States. However, unintended consequences many times
    domestic companies contracting with foreign manufacturers will
    likely be responsible for establishing registered agents,
    thereby putting American companies at risk as opposed to their
    foreign counterparts.
        I have similar concerns with H.R. 5156. During the budget
    window of this bill, we provide $75 million in funding instead
    of tackling two of the biggest problems with our clean
    technology trade deficit.
        Mr. Chairman, the first deals with the raw materials
    available domestically to support innovation in clean
    technology. The minerals needed to commercially manufacture
    these products are either not abundantly available in U.S. or
    current policies prevent them from being mined properly.
        The other problem is the issue of trade. Without access to
    markets, without burdensome tariffs, we will continue to trail
    our competitors when it comes to clean technology products.
    Unfortunately, I do not believe that H.R. 5156 will ultimately
    alleviate the trade deficit that we face in this area.
        Mr. Chairman, despite my concern about these bills though,
    I do look forward to hearing from both panels of witnesses so
    they can provide us with their expertise on these matters.
        Mr. Rush. The chair now recognizes the chairman emeritus
    for the full committee, the gentleman from Michigan, Mr.
    Dingell, for 5 minutes.

    OPENING STATEMENT OF HON. JOHN D. DINGELL, A REPRESENTATIVE IN
                  CONGRESS FROM THE STATE OF MICHIGAN

        Mr. Dingell. Mr. Chairman, I thank you. I commend you for
    holding today's hearings on H.R. 4678, the Foreign
    Manufacturers Legal Accountability Act, and H.R. 5156, the
    Clean Energy Technology Manufacturing and Export Assistance
    Act.
        The former will help ensure foreign manufacturers are held
    accountable for injuries their products may cause to American
    public health and safety. And the latter will bolster the
    Nation's exports in the growing sector of green technology.
    Both are important, and I support efforts such as these and
    will welcome the input of our witnesses.
        Before concluding my remarks, I wish to say a few words in
    support of H.R. 5156 which you, Mr. Chairman, Congresswoman
    Matsui, and I are original sponsors.
        There is broad agreement that the United States lags behind
    other nations in terms of exports. Whereas exports can now
    account for 49 percent of Germany's GDP, they account for only
    9 to 13 percent of our own. More alarmingly, while Germany
    exported $19.6 billion in clean technologies and services
    between 2004 and 2008, the United States exported only 7.7
    billion.
        In brief, the United States consumes far more than it
    produces and in so doing, is squandering not only our valuable
    resources, our moneys, but our opportunity to be a leader in
    green technology exports. H.R. 5156, by establishing a modest
    support mechanism for the export of such technologies by U.S.
    manufacturers will significantly help remedy this matter.
        Moreover, the tax revenue generated from these exports will
    pay more than the bill's cost over a 5-year period. The bill
    should enjoy bipartisan support and must be recognized as a
    critical component of our Nation's economic recovery.
        And to return to H.R. 4678, it should be noted that had
    such legislation been in effect, our troubles with the matter
    of Toyota vehicles and their safety consequences would have
    been handled much easier.
        Mr. Chairman, I thank you, and I yield back the balance of
    my time.
        Mr. Rush. The chair recognizes the gentleman from
    Louisiana, Mr. Scalise.

     OPENING STATEMENT OF HON. STEVE SCALISE, A REPRESENTATIVE IN
                  CONGRESS FROM THE STATE OF LOUISIANA

        Mr. Scalise. I would like to focus my comments on H.R.
    4678, the Foreign Manufacturers Legal Accountability Act, a
    bill that is relevant to my State and district because of the
    problems we are experiencing with toxic drywall.
        To date the Consumer Product Safety Commission has received
    over 3,300 incident reports related to toxic Chinese drywall
    from 37 States. Twenty percent of these reports are from
    Louisiana, which is second only to Florida. And my office
    continues to receive complaints from constituents affected by
    toxic drywall.
        Last week, a resident of New Orleans contacted my office at
    a loss for what steps to take or what to do for help. Like many
    others, her family was forced to move out of her home because
    of toxic Chinese drywall, and they can no longer afford to pay
    the mortgage on the home they aren't occupying while paying
    rent for temporary housing at the same time.
        The CPSC has been investigating toxic Chinese drywall for
    over a year and a half, and it has sufficient evidence that
    toxic Chinese drywall manufactured by Chinese companies is
    responsible for the severe damage we have seen in thousands of
    American homes. Last month, the Commission even identified 10
    drywall manufacturers whose products emitted high levels of
    hydrogen sulfite in laboratory testing. Unfortunately, no
    action has been taken against these companies.
        We must hold the manufacturers of toxic Chinese drywall
    accountable, and I have continued to push for this including
    requesting that the Department of Homeland Security pursue any
    and all options available to the department including the
    seizing of assets being shipped into the United States against
    those entities that manufacture toxic Chinese drywall and have
    been found liable for the damages associated with the
    contaminated products.
        These foreign manufacturers bear responsibility for serious
    damage for thousands of homes across the country and have
    caused homeowners significant financial hardship and in some
    cases, physical harm. Even more concerning is that they have
    done so without repercussion. We must take action to hold
    accountable those who are responsible for the damages caused by
    toxic Chinese drywall until they settle with the affected
    victims or comply with the rulings of U.S. courts.
        Given the challenges we are facing in doing this, I am
    pleased to see some of my colleagues recognizing this issue.
    The goals of H.R. 4678 are good, but I do have questions about
    whether its implementation will accomplish its intentions.
    While it can be argued that this bill would make it easier to
    prosecute foreign manufacturers in the U.S., foreign courts
    would still be under no obligation to enforce such judgements.
    We would still be dependent on the good will of foreign courts
    to enforce those judgments.
        My constituents and others around the country who have been
    affected by toxic Chinese drywalls deserve answers and
    solutions, and this subcommittee must work with the
    intergovernmental task force on problem drywall to help deliver
    that.
        Mr. Rush. The chair now recognizes the gentleman from
    Georgia, Mr. Barrow of Georgia for 2 minutes.
        Mr. Barrow. I thank the chairman, and I will waive opening.
        Mr. Rush. The chair now recognizes Mr. Braley for 2
    minutes.

    OPENING STATEMENT OF HON. BRUCE L. BRALEY, A REPRESENTATIVE IN
                    CONGRESS FROM THE STATE OF IOWA

        Mr. Braley. Thank you, Mr. Chairman, for this important
    hearing.
        And as chairman of the Populist Caucus, I am proud that the
    bill known as H.R. 4678, the Foreign Manufacturers Legal
    Accountability Act, is part of our America Jobs First platform.
    This bill requires foreign manufacturers doing business in the
    United States to identify a registered agent authorized to
    accept service of process on behalf of the manufacturer.
        And one of the reasons I support this legislation is
    because unlike a lot of people at this hearing, I have actually
    tried to hold foreign manufacturers accountable for their
    defective products in U.S. State courts. It is virtually
    impossible. There are companies marketing products in this
    country who put the word ``U.S.A.'' in their company logo and
    put out publications that say ``in an industry dominated by
    foreign competition, we are proud of the fact that our products
    are manufactured right here in the United States,'' and yet
    when those products gave rise to a defect and suit was pursued,
    they turned around and said these products, in fact, were not
    made in the United States. They were made in China. Which then
    dumps you into the bottomless pit of attempting to get suit on
    an entity that may be a part of the Chinese government who is
    manufacturing that defective product.
        So you can imagine how difficult it is when you have to
    translate that document into the native language of the country
    of where the suit is being served, then get help from a
    government entity that may be unwilling to subject its
    manufacturers to liability in U.S. courts. And after all of
    those delays, nothing happens.
        And I have heard some of my colleagues express concerns
    about U.S. companies being exposed to increased litigation.
    They are not well founded concerns because the reality is right
    now in many States if you cannot find the manufacturer of a
    defective product and hold them accountable, then some of the
    immunity that goes to the distributors of those products, if
    the manufacturer is available and can be pursued in that State
    court go out the window and then the U.S. distributors and
    manufacturers are the one on the hook.
        So this bill actually is a great thing for U.S.
    manufacturers. It levels the playing field and gives them the
    same opportunities to compete with foreign manufacturers that
    U.S. companies have.
        That is why I support it. And I yield back.
        Mr. Rush. The chair now recognizes the gentleman from
    Florida, Mr. Stearns, for 2 minutes.

     OPENING STATEMENT OF HON. CLIFF STEARNS, A REPRESENTATIVE IN
                   CONGRESS FROM THE STATE OF FLORIDA

        Mr. Stearns. Mr. Chairman, thank you very much.
        Having chaired this committee when the Republicans were in
    the majority, we tried to wrestle with this problem of
    reciprocity between countries where there is fraud, abuse, and
    incompetence and intentional mislabeling and things like that.
    Mr. Braley mentioned some of the problems. We were never able
    to get to the point where we were able to get together a bill
    that would deal with this very serious problem. It affects not
    only manufacturing, but also the Internet, how to go after
    people that are fraudulent on the Internet or basing their
    companies outside the United States. So I think the bill is
    well intended. I think the hearing will be worthwhile listening
    to.
        But I have to tell you that I don't think the problem that
    Mr. Braley talked about is going to be solved here because this
    agent is going to like a cardboard agent where he will deliver
    all of these documents that are in English, and he will just
    dead file them.
        I think this registered agent will be there, but I think we
    might even have to explore other ways to have reciprocities
    between countries because that is the larger issue because a
    lot of these countries are going to just stonewall us.
        Can we hold foreign manufacturers accountable for harmful
    products? Foreign courts are under no obligation to enforce
    U.S. judgements. So I welcome this hearing, Mr. Chairman. I
    look forward to what they have to say.
        I just conclude with H.R. 5156, the Manufacturing and
    Export Assistance Act, clean energy technology. This is going
    to cost us money. This is questionable. I would think all of
    this, Mr. Chairman, was in the cap-and-trade which passed out
    of the House. Perhaps it is also in the stimulus bill. So, you
    know, I think we have to realize that if we didn't get
    everything together in that cap-and-trade I would be very
    surprised. There were hundreds of amendments and we discussed
    it for weeks. So I think a lot of it was there.
        I just conclude where are you going to get all of this
    clean energy technologies bit parts from.
        So I think it is worthwhile to have these hearings on these
    two bills. I just think that perhaps when we mark this up, we
    might have to make it a little bit stronger.
        Mr. Rush. At this time I am going to entertain a unanimous
    consent request that two members who are not members of the
    subcommittee for the purposes of this hearing. And those
    individuals are Ms. Sanchez of California and Mr. Turner of
    Ohio.
        Hearing no objections. So ordered.
        I will recognize Ms. Sanchez recognized for 2 minutes for
    the purposes of an opening statement.

    OPENING STATEMENT OF HON. LINDA T. SANCHEZ, A REPRESENTATIVE IN
                 CONGRESS FROM THE STATE OF CALIFORNIA

        Ms. Sanchez. Thank you, Mr. Chairman, and distinguished
    members of the committee, and I appreciate you allowing me to
    participate with the subcommittee today. And I apologize. I am
    not going to be able to stay for the entire time, but the
    committee I serve on is currently holding a hearing as well.
        I want to share my support for the Foreign Manufacturers
    Legal Accountability Act that was introduced by my good friend,
    Congresswoman Sutton from Ohio. I am an original cosponsor of
    this piece of legislation, and I introduced similar legislation
    in the last session of Congress, and we held hearings on that
    in the Judiciary Committee as well.
        I have long been alarmed by the steady stream of toxic or
    defective foreign manufactured foods or products that harm U.S.
    families every year. Beyond the risks that these products pose
    to our health and welfare, I am also concerned that many
    foreign manufacturers have gained an unfair advantage over U.S.
    manufacturers by avoiding liability for the injuries and deaths
    that their products cause.
        Because of the difficulties associated with serving process
    on and establishing jurisdiction over foreign manufacturers,
    many Americans that are harmed by defective foreign-made
    products have no recourse. They literally never get their day
    in court.
        The Foreign Manufacturers Legal Accountability Act amends
    current law to facilitate service of process on foreign
    manufacturers. Quite simply, it just requires manufacturers who
    want to put their goods in our stream of commerce to establish
    a registered agent in the United States who then can be served
    process.
        That simple requirement just making sure that they are
    servable if injuries should arise will level the playing field
    for U.S. manufacturers by eliminating the unfair competitive
    advantage enjoyed by foreign manufacturers. This would
    essentially put them on equal footing making sure that all
    companies, whether foreign or domestic, are held accountable
    for the harm that they cause to American consumers.
        I want to thank the chairman for calling this hearing, and
    I am pleased that the subcommittee has taken the time to
    discuss H.R. 4678.
        And again, I appreciate the invitation to come. And I yield
    back my time.
        Mr. Rush. I now recognize Mr. Terry.

       OPENING STATEMENT OF HON. LEE TERRY, A REPRESENTATIVE IN
                  CONGRESS FROM THE STATE OF NEBRASKA

        Mr. Terry. I appreciate that.
        I am concerned. I am also going to discuss the Foreign
    Manufacturers Legal Accountability Act as one of the original
    sponsors and worked a little bit with Ms. Sutton on this.
        I think this is an important piece of legislation in
    protecting American consumers from defective goods manufactured
    outside the United States in the sense that if they don't have
    any presence within the United States, there may be very little
    ability for the victim to be compensated or justice to occur
    which then falls then mostly on the taxpayers instead of the
    foreign entity. And all this does, and Cliff is correct, the
    gentleman from Florida, that this doesn't really correct that
    problem but you can't get to the second hurdle and the third
    hurdle in this process without being able to effectively hand
    the petition to a representative of that country. And so this
    is just setting up the first step here.
        We do need to continue the dialogue on this. But this seems
    to be kind of the first step, the easy, noncontroversial, or
    for the most part, the least controversial part of the process.
        I want to thank the chairman for holding the hearing on
    this matter. I am anxious to hear from the witnesses and their
    input.
        And I yield back.
        Mr. Rush. Mr. Murphy.

       OPENING STATEMENT OF HON. TIM MURPHY, A REPRESENTATIVE IN
             CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA

        Mr. Murphy. Thank you, Mr. Chairman. We have now reached a
    point where China is the largest foreign holder of U.S. debt at
    $900 billion, and more than 2.3 million manufacturing jobs have
    been displaced to Chinese companies that sell products like
    drywall that causes terrible illness, lead in toys, and fungus
    in diapers and toxins in baby bottles.
        I am thankful we are having a hearing on how to hold better
    manufactures of a harmful product liable, but the larger issue
    is, how we are going to pursue policies that are going to
    invigorate American manufacturing in a fair playing field. And
    if we are going to tame an economic dragon like China, it is
    not going to be about lofty theories or more government
    spending, but how to make sure that it is a level playing
    field. I know that along with Congressman Tim Ryan of Ohio, he
    and I have introduced H.R. 2378, the Currency Reform Fair Trade
    Act, which stops some of the unfair trade practices of China,
    particularly some of their currency manipulation, which we
    consider vital.
        As we are looking at legislation that tries to find ways to
    help promote American businesses, I believe that often times we
    do not need American businesses to get more ideas on how to
    wade through complex trade laws, but make sure that we have
    trade laws that are fair and they are fairly enforced. Recently
    the Steel Caucus, which I am vice chair, has pushed for and
    been successful in getting some findings where China has dumped
    pipe and in the past steel, rolled steel in unfair trade
    practices. This is what manufacturers want to see. But we also
    want to make sure we have a system whereby we are not setting
    up laws here such as cap-and-trade and light bulb laws which
    basically turn our jobs over to China.
        I am looking forward to hearing some insight today from
    this panel today to make sure we do have fair trade laws and
    make sure what we are doing. Not just to tell American
    companies how to wade through this complexity but make sure
    they are able to use their ingenuity, their creativity and
    their manufacturing skills to bring back American jobs.
        And I yield back. Thank you.
        Mr. Rush. The chair now recognizes the gentleman from Ohio,
    Mr. Turner, for 2 minutes.

     OPENING STATEMENT OF HON. MICHAEL R. TURNER, A REPRESENTATIVE
                   IN CONGRESS FROM THE STATE OF OHIO

        Mr. Turner. Thank you, Chairman Rush and Ranking Member
    Whitfield. I thank you for allowing me to participate in
    today's hearing on H.R. 4678, the Foreign Manufacturers
    Accountability Act of 2010. I am an original cosponsor of H.R.
    4678, and I want to thank my Ohio colleague, Betty Sutton, for
    her hard work on this important piece of legislation.
    Representative Sutton has been a steadfast advocate for her
    community and for manufactures in Ohio.
        I also want to thank the U.S. Chamber of Commerce, who has
    been working with both my office and Representative Sutton's
    office on H.R. 4678, and I look forward to the continued
    collaboration as we move forward with this important
    legislation. The Chamber has expressed concern about a
    provision that may permit jurisdiction in U.S. courts for non-
    U.S. matters it is an unintended consequence and both Betty
    Sutton and I are looking at language that could adjust that.
        In this hearing I know there could be other unintended
    consequences, and I look forward to those being addressed. But
    mostly I appreciate the manner in which Representative Sutton
    has worked on this in a bipartisan manner and worked with the
    Chamber to ensure that the bill will protect consumers while at
    the same time avoid jurisdiction in U.S. courts concerning
    matters that have not caused injuries in the United States.
        The State of Ohio has faced many challenges as it
    transitions from being a manufacturing-based economy. Many of
    our local manufacturers have worked to remain competitive but
    find themselves in an uphill battle with foreign manufacturers
    because of unfair trade practices. One way in which foreign
    manufacturers are given an unfair advantage is by their ability
    to often times avoid the American judicial system. Because
    service of process in establishing jurisdiction is difficult
    with these products, maintaining a registered agent in the U.S.
    will assist American consumers in their ability to redress
    injuries. How does it do this? By establishing agents, it
    allows U.S. courts to have jurisdiction over the foreign entity
    and thereby allow them to render a judgment including the issue
    of seizing assets.
        And it will also help level the playing field for domestic
    manufacturers as they also have to avail themselves of the
    American judicial system. I want to thank you again for the
    opportunity to participate and for holding this important
    hearing. I look forward to reading the testimony from the
    witnesses today and hearing the comments and working with
    Congresswoman Sutton for drafting this important legislation.
        Mr. Rush. The chair thanks all of the members of the
    subcommittee for their opening statements.
        It is now time for us to hear from the policy experts, our
    witnesses who have been invited to testify before this hearing.
    And let me again welcome you and thank you so much for
    extending your valuable time to this subcommittee.
        And I want to introduce you all beginning on my left, Mr.
    Jeremy Baskin, who is with the Office of the General Counsel
    for the U.S. Consumer Product Safety Commission. Seated next to
    Mr. Baskin is Ms. Ami Gadhia. She is a policy counsel for the
    Consumers Union. Next to Ms. Gadhia is Mr. Bill Morgan. He is
    the victim of defective Chinese drywall. And seated next to Mr.
    Morgan is Professor Andrew Popper, and Professor Popper is a
    professor of law at the American University in Washington. And
    next to Professor Popper is Marianne Rowden. She is the
    President and CEO of the American Association of Exporters and
    Importers, or the AAEI.
        The chair again welcomes you. And it is the practice of
    this committee that all of the witnesses be sworn in.
        So will you please stand and raise your hands.
        Let the record reflect that all of the witnesses have
    responded in the affirmative.
        And now we will have 5 minutes of opening testimony from
    our witnesses beginning with you, Mr. Baskin.

      STATEMENT OF JEREMY BASKIN, OFFICE OF THE GENERAL COUNSEL,
     UNITED STATES CONSUMER PRODUCT SAFETY COMMISSION; AMI GADHIA,
        POLICY COUNSEL, CONSUMERS UNION; BILL MORGAN, VICTIM OF
      DEFECTIVE CHINESE DRYWALL; ANDREW POPPER, PROFESSOR OF LAW,
    AMERICAN UNIVERSITY WASHINGTON COLLEGE OF LAW; MARIANNE ROWDEN,
    PRESIDENT AND CHIEF EXECUTIVE OFFICER, AMERICAN ASSOCIATION OF
                     EXPORTERS AND IMPORTERS (AAEI)

                       STATEMENT OF JEREMY BASKIN

        Mr. Baskin. Good morning, Chairman Rush, Ranking Member
    Whitfield. My name is Jeremy Baskin. I am the general attorney
    who works with the import surveillance division of the Office
    of Compliance of the U.S. Consumer Product Safety Commission.
        I am pleased to be here today to discuss the U.S. Consumer
    Product Safety Commission's efforts in the area of import
    surveillance and H.R. 4678, the Foreign Manufacturers Legal
    Accountability Act. Before I begin, let me first note that the
    testimony that I give this morning is mine and has not been
    reviewed or approved by the Commission and may not necessarily
    represent the views of the Commission.
        From 1998 to 2007, the volume of consumer products imported
    into the United States increased over 100 percent. During that
    time period, imports from China nearly quadrupled and now
    constitute over 40 percent of all consumer goods. The shift in
    specific product areas has been more pronounced.
        In 2002, approximately 60 percent of toys purchased in the
    United States were imported from China and Hong Kong. By 2008,
    that number had risen to almost 80 percent of the U.S. market.
        In response to the rapid increase in consumer product
    imports, the CPSC has taken several steps to inspect products
    entering the country to ensure that they comply with applicable
    safety standards. In 2008, the Commission announced its import
    safety initiative and established a new import surveillance
    division within the Office of Compliance. The establishment of
    this new division allowed the CPSC to collocate permanent full-
    time compliance investigators at key ports of entry of the
    United States.
        In 2009, the division had 10 full-time employees, FTEs,
    dedicated to port surveillance. That number is scheduled to
    rise to 14 FTEs by the end of fiscal year 2010 and 19 by fiscal
    year 2011. In addition, the division can call on the resources
    of the entire Office of Compliance which has over 100 FTEs when
    necessary.
        The CPSC has also sought to enhance its relationship with
    larger agency partners such as the Department of Homeland
    Security. Through the operation guardian program, CPSC partners
    with U.S. Customs and Border Protection, CBP, staff in order to
    leverage joint resources. In addition, CPSC recently assigned
    two FTEs to CBP's new commercial targeting and analysis center,
    called to CTAC, and executed a memorandum of understanding with
    CBP that allows the agency direct access to pre-arrival cargo
    data. This allows CPSC inspectors to target suspect shipments
    before they arrive, and most importantly, before potentially
    dangerous goods can enter the U.S. stream of commerce.
        We have also conducted training programs with CBP to
    educate both government personnel and the importing community
    on CPSC and CBP product detention and seizure authorities. So
    far, the results of these initiatives are encouraging.
        In fiscal year 2007, CPSC collected approximately 750
    samples of suspect products entering our country. In fiscal
    year 2009, the number more than doubled to almost 1,600. At the
    same time, we started to see a commensurate decrease in the
    number of voluntary recalls from 5,063 in fiscal year 2008 to
    466 in fiscal year 2009.
        In most cases, CPSC has been able to work with domestic
    partners of foreign manufacturers such as importers or
    retailers on enforcement activities to obtain relief for
    consumers without resorting to adjudicative proceedings. In a
    few cases, however, the lack of a registered agent for service
    of process has hindered the Commission's ability to develop
    information that would help us provide relief to consumers.
        One example of this is the CPSC's effort to provide relief
    to U.S. homeowners impacted by problem drywall imported from
    China. In a number of cases, CPSC staff attempted to send
    requests for information to Chinese drywall manufacturers only
    to have these requests returned to the Commission refused and
    unopened.
        The lack of registered agent for service of process has
    also been recognized by Chinese industry groups and some local
    lawyers in China have provided legal advice seeking to exploit
    this situation. Thankfully this type of sentiment appears to be
    rare. However it is foreseeable that additional attempts to
    stymy or obstruct commission efforts to obtain information
    voluntarily from manufacturers outside of U.S. legal
    jurisdiction and that could occur in the future.
        Any such recalcitrance could impede commission efforts to
    assist consumers with potentially defective consumer products.
    Additional authority allowing CPSC to require that foreign
    manufacturers designate a U.S. registered agent for service of
    process could be helpful in some cases, particularly those
    involving administrative requests for documents or information.
        On January 15, 2010, CPSC chairman Inez M. Tenenbaum noted
    in a statement accompanying a report to Congress that helpful
    changes to existing statutes might include service of process
    requirements for foreign manufacturers so the agency can more
    easily pursue recalls.
        Currently, any action against an identifiable foreign
    manufacturer would require service of process using The Hague
    convention.
        As the subcommittee moves forward however some additional
    direction would be helpful with regard to the range in size of
    manufacturers that would be subject to the registration
    process. In addition, it might also be helpful to involve the
    import safety working group in this process to ensure that
    appropriate jurisdictional and operational details are
    addressed.
        Mr. Chairman, thank you again for the opportunity to
    testify. I would be happy to answer any questions at this time.
        [The prepared statement of Mr. Baskin follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Mr. Rush. Thank you, the chair now recognizes Ms. Gadhia
    for 5 minutes.

                        STATEMENT OF AMI GADHIA

        Ms. Gadhia. Thank you, good morning, Chairman Rush, Ranking
    Member Whitfield, and members of the subcommittee. My name is
    Ami Gadhia, and I'm policy counsel with Consumers Union, the
    nonprofit publisher of Consumer Reports Magazine. We appreciate
    the opportunity to testify the today in support of the Foreign
    Manufacturers Legal Accountability Act. I offer my testimony on
    behalf of both CU and the Consumer Federation of America. My
    full comments are contained in my written testimony, but I will
    summarize them briefly here.
        H.R. 4678 is necessary to ensure that consumers who are
    harmed by unsafe products can obtain redress no matter where
    the product is manufactured. It will also create a level
    playing field for all manufacturers, both domestic and foreign,
    by holding the responsible party accountable when consumers are
    injured. CUA and CFA have long fought for legislation and
    regulation that will result in safer products on our store
    shelves. But in the event that an unsafe product makes it into
    the marketplace, consumers should be able to pursue all
    remedies for the harm they suffer whether the manufacturer of
    the unsafe product is a foreign company or a domestic one.
        The products that Americans use every day are increasingly
    being manufactured overseas. According to the Toy Industry
    Association in 2007, toys made in China made up 70 to 80
    percent of the toys sold in the U.S.
        Of the products recalled by the CPSC since 2006, more than
    75 percent of products were manufactured outside of the U.S.
        We have too many frightening examples in recent years of
    dangerous or deadly foreign made products melamine, which is
    toxic to animals, was blended into pet food to give
    artificially high protein readings. Diethylene glycol,
    potentially lethal to humans, was substituted for its higher
    cost cousin glycerin, in the manufacture of toothpaste. Tires
    were manufactured with either a minimal or missing gum layer
    needed to prevent catastrophic tread separation. Toxic lead
    paint was substituted for the paint that was originally
    approved for popular children's toys presumably to save money.
        These are all cases were unscrupulous business practices
    have jeopardized the health and safety of the consumer.
        This legislation would assist our Federal agencies as well
    in their ability to recall consumer products manufactured by
    foreign entities.
        The following example is illustrative in May 2001, the CPSC
    recalled a home soda machine manufactured by Drinkmaker of
    Sweden. Components inside the soda machine broke apart and went
    flying, and there were reports of lacerations, fractures and
    contusions caused by the machine. However, the manufacturer,
    Drinkmaker of Sweden AB, either could not be contacted by the
    Commission or would not cooperate with the voluntary recall.
    Fortunately, a responsible company, the Soft Drink Company of
    Seattle, Washington, agreed to conduct the recall of these
    machines with the CPSC and to repair the Drinkmaker.
        It is untenable, however, to have a system of
    accountability that relies upon this kind of altruistic and
    rare behavior. By requiring that foreign manufacturers have
    registered agents in the U.S., H.R. 4678 will make considerable
    strides in assisting CPSC, FDA and EPA in holding the
    appropriate entities responsible for the products that they
    introduce and sell to U.S. consumers.
        If foreign entities have the benefit of selling products
    and making profits from sales in the U.S., they should be
    accountable if the product causes harm.
        While in some instances, U.S. retailers and other entities
    have shouldered the burden of the foreign manufacturers for the
    products they sell, this cannot be relied upon and is not
    always fair.
        Domestic manufacturers who make safe products should not be
    undercut by foreign manufacturers who are not prioritizing
    safety. If a foreign manufacturer knows that they cannot be
    held responsible in U.S. Courts for the dangerous products they
    sell, this knowledge has a likely significant impact upon the
    manufacturing decisions. Did they use the stronger more
    expensive component? Do they ensure that the product meets
    safety standards? Holding manufacturing entities accountable in
    our civil justice system acts as an important deterrent to
    unethical and potentially harmful business conduct.
        Deterring wrongful conduct is a significant attribute of
    our civil justice system and it does not make sense that
    foreign manufacturers who sell products in the U.S. Should be
    outside that system.
        We have a modest suggestion for an improvement to the bill.
    In section 3(a)(3) of H.R. 4678, the minimum size of the
    foreign manufacturer is left to the discretion of the
    applicable agency. At a minimum, the heads of each agency must
    coordinate the definition of which companies would fall under
    the bill's scope, and ideally there will be a consistent
    definition. It would be confusing and counterintuitive if a
    manufacturer were to produce some products that fall under the
    scope of this bill and some products that do not.
        Further, a consumer could be killed or seriously hurt by a
    product made by a manufacturer of any size. Our groups
    understand that it may be necessary to make a determination
    about which manufacturers fall under the bill but ensuring that
    consumers can obtain redress should be prioritized.
        We want to prevent companies from purposely using the size
    limits to evade responsibility to purchasers and users.
        Finally, we oppose efforts to weaken aspects of this
    legislation including efforts to shift cases from State to
    Federal courts. Efforts to limit access to State courts have
    negative consequences for consumers. Corporations that violate
    State laws are less likely to be held accountable for their
    wrongdoing when a Federal Court hears the case rather than's
    State court. Further corporations now seek to avoid
    responsibility under State law as States enact laws expanding
    consumer and environmental protections.
        When a case is based solely on a violation of State law as
    many product liability cases are, no compelling reason exists
    for stripping State courts of the ability of enforce that State
    law.
        Consumers Union and Consumer Federation of America support
    the Foreign Manufacturers Legal Accountability Act and we look
    forward to working with you to ensure that this bill becomes
    law. Thank you.
        [The prepared statement of Ms. Gadhia follows:]

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        Mr. Rush. The chair now recognizes Mr. Morgan for 5
    minutes.

                      STATEMENT OF WILLIAM MORGAN

        Mr. Morgan. Chairman Rush members of the subcommittee,
    thank you for allowing me to come here and testify. Thank you
    for allowing me the opportunity to come here and share my
    experiences with you here this morning. My name is Bill Morgan.
    I'm a retired police officer after having served the City of
    Newport News, Virginia for 24 years. My wife, Deborah, is a
    school teacher. She and I have been married 27 years. We have
    two daughters and our first grandchild was born a couple of
    weeks ago.
        My wife and I bought our dream home in July 2006. It was a
    beautiful home on a corner lot in Williamsburg, Virginia with a
    big yard. Both Debbie and I fell in love with the home. It was
    the perfect home for our family. We paid a little under
    $400,000 for the home.
        After my wife experienced multiple episodes of nose bleeds
    and headaches and after our house had a series of failures with
    the air conditioning and electrical systems, we discovered our
    had been built with defective drywall imported from China. We
    learned that this drywall contains high amounts of sulfur and
    that corrosive sulphur gases were circulating in our home
    corroding our electrical and mechanical equipment. My home was
    built with almost 200 sheets of 4 foot by 12 feet Chinese
    drywall.
        After a hearing in front of Judge Eldon Fallin in New
    Orleans earlier this year, he found that the electrical and
    mechanical systems in my home had been completely destroyed and
    needed to be replaced. The only solution to this extensive
    damage is to strip my house back down to the studs and
    completely rebuild it. I can't afford that.
        The corrosive gases have also damaged my computers,
    televisions and other electrical and electronic devices in my
    home. We were scared for our family's health and concerned
    about the risk of fire. We moved out of the house in June, 2009
    last year. Since having to abandon our dream home, I've been
    unable to pay the rent on the place where we are currently
    living and my mortgage. I have lost my home in foreclosure, and
    I have had to file for personal bankruptcy.
        The company that manufactured the drywall in my home was
    called Taishan. This company is located outside of Beijing in
    China. Although the Chinese company sent enough drywall into
    Norfolk, Virginia to build several hundred homes, it has
    refused to take any responsibility for its defective product.
    In the complaint that was filed on my behalf, it was necessary
    to have a lawsuit translated into Mandarin with special process
    service flying to China utilizing a time consuming and
    expensive process.
        The Foreign Manufacturers Legal Accountability Act would
    streamline this process and give victims of defective foreign
    products a more speedy and equitable procedure to have their
    claims addressed. My lawyers have advised me that they spent
    well in excess of $150,000 serving foreign drywall
    manufacturers for victims like myself.
        It's not unusual for these foreign authorities to sit on
    the lawsuits for 6 months before serving them on the defendant
    manufacturers. The average American, like myself, cannot afford
    this expensive time consuming and frustrating procedure.
        Foreign manufacturers should not be allowed to sell
    products which destroy homes and make people sick with
    impunity. Unless these companies require to make themselves
    amenable to being sued in U.S. Court, they should not be
    allowed to sell their products here.
        U.S. businesses are required to abide by our laws and
    foreign businesses that profit off of U.S. consumers should do
    so as well.
        I look forward to answering any questions you folks may
    have, and thank you for allowing me to come here and share this
    experience with you here today.
        [The prepared statement of Mr. Morgan follows:]

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        Mr. Rush. The Chair recognizes Mr. Popper for 5 minutes.

                       STATEMENT OF ANDREW POPPER

        Mr. Popper. I thank you, Mr. Chairman, and a special hello
    to Congresswoman Sutton from my alma mater Baldwin-Wallace in
    Berea, Ohio.
        H.R. 4678 is a straightforward appropriate essential step.
    It is, as far as I can tell, constitutionally sound, beneficial
    to consumers, beneficial to U.S. businesses and consistent with
    the laws and practices in many of our trading partners. It is
    as far as all of the witnesses seem to understand, a way to
    level the playing field. It strips foreign manufacturers of an
    unfair advantage. It closes an understandable loophole in our
    legal system. And that is not a loophole that is illegitimate.
    There is a constitutional basis for it. But there is also an
    answer for it. And the answer is this legislation.
        It begins at least in terms of how we think about these
    things with the obvious need, and I don't think any of us could
    say it better than Mr. Morgan just did. When you place into the
    stream of commerce millions of products, and we are talking
    about millions of products with toxic levels of lead, drywall
    that is destroying a home and a family, cribs that present a
    risk of strangulation, aqua dots that are coated with date rape
    drug as part of their paint, contaminated toothpaste and
    seafood and honey and pet food, you got a problem.
        And you might want to think that there are nice ways to get
    around this or our existing system of laws will account for it,
    but you really need to take the bull by the horns here.
        This is a very wise, very simple piece of legislation. The
    idea of designating an individual for service of process, and
    by that designation, establishing consent is, as I think we all
    said, it's a logical, simple, appropriate and constitutional
    approach.
        Imagine the scenario that was just presented by Mr. Morgan
    repeated over and over and over again. The majority of our most
    common pharmaceutical products are manufactured abroad, crash
    helmets, manufactured abroad, and the list, as you see from my
    testimony, goes on and on and on.
        Here is a bill that deals with the problem finally of the
    difficulty of haling into court--an interesting term--a foreign
    entity that otherwise has a minimum contact and reasonability
    basis for resisting service of process.
        Here is a bill that actually solves the problem.
        And we all recognize what the problem is. If you don't have
    an agent or officer in this country, if you don't own property
    or have a representative in the United States, it becomes
    difficult under our current system, under our current
    jurisprudence to establish in persona jurisdiction. Now with
    one simple bill that mimics legislation in other fields that
    seems fair that seems a legitimate quid pro quo, a condition
    for doing business in the United States that is mimicked in
    many other areas, you solve the problem.
        There were other solutions that people thought of, the
    aggregate of contacts suggestion that comes from the concurring
    opinion and the plurality opinion in Asahi is a legitimate
    answer. It's just complicated.
        This is simple. This is right. And this is the moment to do
    it.
        You have foreign producers who are creating a risk and are
    now being given a simple choice. I like to think of this
    legislation in terms of that word. This is choice. This is
    party autonomy. You don't have to do business here. If you
    choose to do business here, then you're subject to our laws. If
    we are lucky enough under the other legislation that is being
    considered or in any other area to have our wonderful
    manufacturing community able to market its goods abroad, do you
    think that they would get a free pass from other countries?
    China has just adopted a comprehensive tort law with strict
    liability, punitive damages, do you think that China is going
    to recognize a minimum contacts theory and not impose on our
    companies who do business there the same responsibility that we
    ought to be imposing on companies who do business in the United
    States?
        I don't think so. I don't think so.
        On the question of trade, and on the question of whether
    this creates an unfair advantage, there was a case involving
    artificial Christmas trees that catch on fire in the United
    States District Court about 2 years ago. And that product was
    manufactured in China. And the court held as follows, in this
    age of WTO and GATT, it is only reasonable that companies that
    distribute allegedly defective products to regional
    distributors in this country anticipate being haled into court.
        Well, of course it's reasonable. Of course it's normal, it
    is a condition of doing business here. And yet a loophole
    exists. Close the loophole. It's not that complicated. This is
    leveling the playing field. This is getting rid of a free pass
    that we are giving foreign manufacturers, a free pass that our
    manufacturers don't get.
        The law of the land in this country, the law of the land in
    virtually every common law country is lex loci delicti. You
    apply the law to the place of the wrong. The place of the wrong
    is here. This is where the manufacturer is harmed. Give the
    manufacturer the access to our courts, give the harmed
    individual access to our courts and let our system of justice
    work.
        This is good legislation. It's going to produce fair
    result. It isn't perfect. No legislation is. The Constitution
    isn't perfect. That's why we keep amending it.
        I ask that you give consideration to this bill. Thank you.
        [The prepared statement of Mr. Popper follows:]

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        Mr. Rush. Ms. Rowden, you are recognized for 5 minutes.

                      STATEMENT OF MARIANNE ROWDEN

        Ms. Rowden. Thank you, Chairman Rush, Ranking Member
    Whitfield, and members of the subcommittee, my name is Marianne
    Rowden, and I'm president and CEO of the American Association
    of Exporters and Importers. AAEI has been the voice of the
    International Trade Community since 1921, and we represent the
    entire spectrum of the trade community. AAEI greatly
    appreciates the opportunity to testify today. Our written
    testimony submitted for the record raises five points, but I
    would like to concentrate on two fundamental issues.
        Since enactment of the Consumer Product Safety Improvement
    Act, product safety has become an integral part of trade
    compliance. This new responsibility follows the trade community
    adopting new practices to enhance supply chain security since
    9/11.
        Our experience over the last decade has been that
    regulating goods produced outside of the United States requires
    two things: First a wholistic risk management system; and two,
    implementation of product safety legislation, which would
    eliminate the need for H.R. 4678.
        Let's turn to the chart entitled A Multi-Layered Approach
    to Wholistic Risk Management.
        This chart categorizes companies based on risk
    characteristics. This solution will allow the government to
    spend its limited resources efficiently and effectively to
    prevent defective products from entering the commerce of the
    United States, secure the homeland and increase trade
    compliance.
        We would like to highlight the companies who joined CPSC's
    voluntary partnership program with CBP, the importer self-
    assessment program for product safety would fall into the ultra
    low risk category as a result of their demonstrated commitment
    to ensuring the integrity of their imported products and the
    safety of U.S. consumers.
        This wholistic risk management approach is critical to the
    implementation of product safety laws enacted by Congress.
    First, without information about the integrity of imported
    products, we will continue to see defective products. AAEI is
    working with CBP, FDA, CPSC and other Federal agencies to
    leverage the data already collected by CBP to assess risk.
        Congress has chosen different methods for dealing with
    risks posed by different products. For consumer products,
    Congress has directed CPSC to require certifications
    demonstrating that the product meets applicable safety
    standards.
        For food drugs and devices, Congress chose to require
    foreign manufacturers to register with FDA because of the risks
    posed to the public health by potential bad actors seeking to
    compromise the integrity of these products.
        These laws need time for implementation and evaluation of
    their effectiveness before adding more legislative
    requirements.
        Finally, AAEI remains concerned that if Congress chooses to
    pass H.R. 4678, similar requirements will be placed on U.S.
    companies exporting to foreign markets. We believe it will be
    difficult for small U.S. companies to expand export
    opportunities and create jobs in the United States if they are
    required to appoint a registered agent in foreign countries to
    defend lawsuits.
        We thank you for the opportunity to testify today, and I'm
    happy to answer the subcommittee's questions.
        [The prepared statement of Ms. Rowden follows:]

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        Mr. Rush. The chair thanks all of the witnesses for their
    opening statements. And the chair now recognizes himself for 5
    minutes for the purposes of questioning the witnesses.
        Mr. Morgan, I must begin with you, your story of you and
    your family, the tragedy that you had to endure was heart
    wrenching. There is not one of us that wasn't moved by your
    story that you provided us. And I want to thank you for your
    willingness to share your story with us today. The story of
    defective Chinese drywall in what you thought was your dream
    home has, you said, made your life turned upside down, forced
    into bankruptcy and forced you to lose your home. And I can't
    think of anything that would be as horrible as having someone
    to lose their home under these kind of circumstances.
        Your story demonstrates quite clearly to all of us that the
    expense of foreign defective products on the American consumer
    can be enormous and can be life altering.
        We are not only moved emotionally, but we are also outraged
    by what happened to you and your family, and what is happening
    to not only you and your family but to thousands of other
    American consumers who are victims of this defective drywall,
    and other products, I might add, foreign manufactured and
    defective that come in from overseas.
        We are just very, very moved by the results that Americans
    have to suffer from the circumstances.
        I guess this might be kind of an interesting elementary
    question, but can you share how you feel about that and say why
    you support this legislation?
        Mr. Morgan. Yes, sir. I bear no ill will to China or the
    companies, 14 months ago, my life was perfect. We had no
    concerns, no issues, and in 14 months, I'm here today talking
    with you good ladies and gentlemen. Just hold them accountable
    like anybody else in this country. I don't think they should be
    placed on a higher standard. Just put them, hold them
    accountable like everybody that does business in this country
    is. As a police officer, my wife being a school teacher, we
    always had to obey the rules. It's just our nature. And I think
    that is probably the most frustrating thing is they are not
    being made to obey the rules of doing business in this country.
        Mr. Rush. Since your story has been made known to the
    public, have you been able to identify or share your stories
    with other American citizens who have had a similar story?
        Mr. Morgan. Yes, sir. And my story is very typical. The sad
    thing is it took almost 2 years for our home to start to
    display the problems. In other words, we built it brand new in
    2006 and it was around 2008 we started experiencing the
    problems with the electrical systems, the air conditioning, my
    wife had the nose bleeds the coughing, the headaches, all those
    types of things. And the homes that were built last year, there
    are a lot of people that have it in their homes and they don't
    know it yet. Anything I can do, and that's one reason I wanted
    to come here today, anything I can do to bring awareness to
    this, it's hurtful to sit and tell people that I've had to file
    bankruptcy. May 17th my home went into foreclosure.
        My wife and I were always the type of people, our mortgage
    check was there on the first because we were afraid if it was a
    day late they were going to come take the house. Here again, we
    have always done what we're supposed to do, and that's just
    what I hope anybody that does business with this country will
    be held to the same standards as those of us that live here and
    work here.
        Mr. Rush. Again, I want to thank you and members of this
    committee, our hearts go out to you and we are highly motivated
    to solve this problem.
        Mr. Morgan. Thank you, chairman.
        Mr. Rush. The chair is extending this time now, the chair
    now recognizes Mr. Whitfield for 5 minutes.
        Mr. Whitfield. Thank you very much, and thank you all for
    your testimony.
        When we talk about safety of products in the U.S., of
    course one part of it is we have a mechanism where we can
    recall certain items and then what this legislation really is
    about is giving an individual or a legal entity an opportunity
    to get a defending party into court. And let's take Mr.
    Morgan's example, and Mr. Morgan, I also would like to convey
    my very much concern about you and your family and what has
    happened to you and other people caught in the same
    circumstance.
        But if this law had been in effect, the one that we are
    talking about, and Mr. Popper, if we if we were able to serve,
    get the service of process on the Chinese company that provided
    this drywall and if we obtained a judgment in a court in the
    U.S., whether Federal or State, whatever, how difficult would
    it be to actually obtain the funds to collect to the judgment?
        Mr. Popper. I guess the best way to answer that would be to
    say that you would never get to that question unless this
    legislation is adopted. Because you would never get to having
    that manufacturer in court.
        Mr. Whitfield. I understand that. If we are going to try to
    really help people like Mr. Morgan, we can help get service of
    process very easily. But what can we do to collect on the
    judgment? In his case for example?
        Mr. Popper. The potential of liability changes behavior.
    The potential for civil liability is one of the most powerful
    forces in the American economy. Selling a product in the United
    States and knowing that you don't get a free pass or a dodge
    but that you can be haled into court and that you can haled,
    found liable, I think, creates an incentive that is worthwhile.
    That is the whole theory behind the tort system. That is the
    corrective justice effect. I don't mean to avoid your question.
    But you start with the fact, you asked me how this could happen
    or how this could be avoided? That is one way. The second way
    is we position----
        Mr. Whitfield. How do we collect the money?
        Mr. Popper. You go after the manufacturer and if the
    manufacturer doesn't cough up the money on the judgment, or if
    the manufacturer makes it difficult to secure that judgment
    under The Hague convention, then you have to go after the
    distributor. But you don't get to do any of that right now.
    None of those, none of those values are there.
        To be clear, this legislation doesn't solve every problem
    in the civil litigation system when you're dealing with a
    foreign manufacturer. It does give you a valid starting point.
    This bill wasn't designed, as I read it to facilitate the
    collection of foreign judgments. It allows for the entry of the
    judgment. Now potentially, you have got a judgment creditor,
    you have a company that is in trouble, you have an enforcement
    mechanism through the Department of Homeland Security----
        Mr. Whitfield. Mr. Popper, thank you, I appreciate that. I
    only have 1 minute and 50 seconds left. Thank you for that.
        But the importer of this product, Mr. Baskin, this tainted
    wallboard that was used in Mr. Morgan's house, would there be
    any mechanism through a treaty or otherwise that a lawsuit
    could have been filed against the importer or the distributor
    of the product in the U.S.?
        Mr. Baskin. The importer is responsible for obligations
    that the Tariff Act puts on him with regard to importation, but
    the importer would not necessarily be responsible for paying
    money damages.
        Mr. Whitfield. Mr. Morgan did your employers sue the
    importer of the product?
        Mr. Morgan. Not yet, no, sir.
        Mr. Whitfield. Have they had talked to you about doing
    that?
        Mr. Morgan. Yes, sir, I know all things are being looked
    at, and I would have to defer any additional questions like
    that to them.
        Mr. Whitfield. So they have not made a final decision yet.
    OK. But they are looking in it.
        One other question I would like to ask, and I'm not an
    expert in this certainly, but some experts have told us that
    this legislation may run afoul of WTO requirements for similar
    treatment of foreign and domestic products that if the bill
    passed foreign manufacturers would face the penalty of
    exclusion of their goods from commerce for failure to have a
    registered agent and thereby accepting the specific
    jurisdiction of the State court. However domestic manufacturers
    do not face this significant penalty of banishment from
    commerce for any similar violation.
        Is there any argument there that WTO would look at this as
    a discriminatory type action?
        Mr. Baskin. I would have to defer to Customs and
    International Trade Commission for an answer like that. CPSC
    wouldn't be in a position to answer that.
        Mr. Whitfield. But Mr. Popper, you had indicated that
    recently China had changed their tort law. Is that correct?
        Mr. Popper. My understanding, and it is in my testimony
    that China adopted a new, what they call a new tort law to take
    effect July 1, 2010.
        Mr. Whitfield. Have you had an opportunity to look at that
    yet? That law?
        Mr. Popper. It has been in the making for 8 years, and I
    have looked at the components parts of it that are available
    online. I haven't read it in its native tongue.
        Mr. Whitfield. May I ask one other question and I know we
    have other people.
        But Mr. Baskin, does the Consumer Product Safety Commission
    have a position on this bill?
        Mr. Baskin. Yes. We support the concepts of the bill. But
    as I noted in my testimony, there are some issues that we would
    have with regard to the range and size of manufacturers that
    would be subject to the process.
        Mr. Whitfield. You do support the concept?
        Mr. Baskin. Yes.
        Mr. Rush. Thank you. Ms. Sutton is recognized for 5
    minutes.
        Ms. Sutton. Thank you, Mr. Chairman.
        Mr. Baskin, in your testimony, you stated that earlier this
    year Chairman Tenenbaum sent a letter to Congress, and in the
    letter noted that helpful changes to the existing statutes
    might include a service of process requirements for foreign
    manufacturers so that the agency can more easily pursue
    recalls, is that correct?
        Mr. Baskin. Yes.
        Ms. Sutton. And so this legislation could be helpful to the
    Consumer Product Safety Commission as well as to providing
    redress for injured consumers, correct.
        Mr. Baskin. Yes.
        Ms. Sutton. Ms. Gadhia, thank you very much for your
    testimony as well.
        The CPSC has a number of tools as we have heard here today
    intended to prevent unsafe consumer products from entering the
    market. And you testified that this bill will make considerable
    strides in assisting CPSC and other agencies in holding
    appropriate entities responsible for products that they
    introduced and sell to our consumers.
        Could you elaborate about how this would work together and
    complement the CPSC's activities?
        Ms. Gadhia. Absolutely. As has been noted, there are
    mechanisms on the front end such as the CPSIA and other
    statutes in place that hold all manufacturers to certain safety
    standards that their products have to meet before they are sold
    in the U.S.
        And there are mechanisms once those parts come to our
    borders, through the good work of CBP and Department of
    Homeland Security to screen those products. But there are two
    issues with regards to that, one, not every company is going to
    follow the safety standards. You're going to have unscrupulous
    products, manufacturers and products, dangerous products coming
    through. And with the resources that CBP and others have, they
    are not able to screen every single one of the products at the
    border.
        So the end result for a variety of reasons is that there
    are going to be dangerous products on the market, despite
    everyone's efforts. And so this is yet another mechanism on the
    other side of things to address the harm when it does occur and
    allows consumers when they are injured and go through the
    devastating circumstances that Mr. Morgan and his family have
    gone through to try to begin to obtain some redress for that.
        Ms. Sutton. Thank you. And of course, Professor Popper, you
    were just explaining the benefits of also having this kind of
    legislation pass so that we can give an incentive to those who
    produce products to make them safe. Would you like to elaborate
    on that and how this is a useful tool up front as well as
    providing redress?
        Mr. Popper. I think that there is no question that the
    potential for liability changes behavior. It means both making
    sure in the production process that you have exercised
    reasonable care and that in the distribution and sale process
    you provide adequate information and warning. You know that
    liability is down the road. Whether as has been suggested, you
    may have difficulty selecting the judgment is a very separate
    question.
        The other piece of this is that once you interject the CPSC
    into the equation and the way the consumer product safety
    improvement legislations worked is, you end up with findings of
    regulatory violations where you don't have the collection of
    judgments a problem. Those findings become facts that
    constitute a violation, they constitute a breach of a duty of
    care and they are readily imported into our legal system. It's
    the way U.S. manufacturers function. They work both the front
    end and back end. It's what creates safer products. Why not do
    that with foreign manufacturers? It seems fair to me.
        Ms. Sutton. I appreciate that very much. Mr. Morgan, thank
    you so much for being here and for testifying for sharing your
    experience with the committee in an effort to try and improve
    the situation for others.
        I'm very sorry to hear about what has happened to your
    family. I'm sorry to hear about the toll that it has taken and
    the time that you have had to deal with in pursuing some kind
    of effort at recourse.
        To the questions that some of my colleagues have raised
    about enforcement, I have some ideas about enforcement too so I
    look forward to pursuing those.
        But I just, I'm struck and I think that it was professor
    Popper who indicated that your words frankly summarize it when
    you say foreign manufacturers should not be allowed to sell
    products which destroy homes and make people sick with impunity
    or the list of any of these other products that come into our
    stream of commerce, and frankly it will improve safety of
    products not just for American consumers, but for all
    consumers. And so I would advise and encourage folks to look at
    the list of items, Professor Popper, that is contained in your
    testimony I believe about things that are coming in to this
    country.
        And I don't have much time left, but I would just because
    I'm not very familiar, Ms. Rowden, with exactly with your
    entity that you are representing but I believe you said you
    represent the international trading community in the United
    States. And you support what I believe you described as fair
    and open trade policies, did you all support, did your
    organization support then things like NAFTA and CAFTA and NPTR?
        Ms. Rowden. Yes, traditionally, we have supported free
    trade agreements.
        Ms. Sutton. So you support all those things?
        Ms. Rowden. Yes.
        Mr. Rush. The chair now recognizes Commander Murphy.
        Mr. Murphy. Thank you, Mr. Chairman and thank you to the
    panel. Professor Popper, a question for you, I just want to
    make sure I have a proper summary of your testimony, so if we
    use these products, you can be poisoned, strangled, choked,
    fall, crash, burned, bruised, cut or die but you can't sue?
        Mr. Popper. That's correct.
        Mr. Murphy. Then given that, then I have a couple of
    follow-up questions there. And you pointed out that when one
    has to face the responsibility of litigation or the chance of
    litigation, it is a motivator for companies to make sure they
    keep an eye on their products because they are going to be held
    responsible for that.
        Does that add to the cost of products made in America such
    that products made in other countries that don't bear that
    responsibility use that as a mechanism to actually undercut the
    cost of products and sell them cheaper in the United States?
        Mr. Popper. I'm not sure I understand exactly your
    question, but I believe in my testimony what I stated in the
    written portion of it was that foreign manufacturers who are
    freed of this responsibility bear lower costs because they
    don't have to observe the due care responsibilities and they
    bear lower insurance costs and companies in the United States
    do have to observe due care responsibilities, do have to
    observe statutory obligations, do have to ensure against harm,
    and do spend more money. Consequently, the U.S. companies are
    definitely at a disadvantage.
        Mr. Murphy. That is what I wanted to know if you have any
    kind of dollar figure percent figure you have that it is one of
    those things that foreign companies may actually, we know they
    manipulate currency, they do a number of other things to
    subsidize or manipulate taxes, but I'm wondering along these
    lines too if we have any kind of dollar figure of what it is
    that they may by bypassing us actually undercut the cost of
    products.
        Mr. Popper. It's actually a very wonderful question, and
    it's very volatile because it is what is referred to in the
    United States from time to time as the tort tax. If you listen
    in the tort reform debate to people who don't necessarily agree
    with me on some of the issues, and they complain about the
    imposition of liability what they do is they place a percentage
    number on what it costs to produce good and safe products in
    this country and comply with our tort system. And I'm going to
    estimate that it is somewhere in the neighborhood of 15 to 20
    percent.
        Mr. Murphy. But that is a significant number----
        Mr. Popper. Massive.
        Mr. Murphy. And companies are saying we will just build in
    China and send it over here, and we don't have to pay that
    extra 15 to 20 percent and we manipulate currency which puts
    another 40 percent savings on, it's hard to compete with those
    countries.
        Mr. Popper. It's hard to compete with those countries and
    with those products so long as those products are not subject
    to the U.S. legal system.
        Mr. Murphy. Thank you. Mr. Baskin, I have a question, too,
    on your testimony. Does the Consumer Product Safety Commission
    have sufficient personnel to screen these products before they
    even get over here?
        Mr. Baskin. That would be a question that would be outside
    of my range of knowledge here.
        Mr. Murphy. I know you mentioned about the number of people
    who were involved in this and you have increased the number of
    screening, which is good news, but, even before they enter our
    ports, or I don't know where you feel that it's more important
    to check them before they leave the country of origin or when
    they come to our country, it's one of those areas that in order
    to protect consumer safety, if someone from your agency could
    get back to us because it's an important question to know what
    we would need to do with that.
        Mr. Baskin. Certainly, certainly.
        Mr. Murphy. Can someone also answer the question of what
    happens to U.S. Products in a foreign country? So if we sent
    something to a foreign country and it is deemed to be unsafe or
    some other problem, what happens to those products from foreign
    countries, anybody know?
        Mr. Popper. I will just give you a quick answer.
        Footnote 33 in my written testimony, I refer to a couple of
    pieces, one on the new Chinese tort law, and the other a piece
    pertaining to South and Central America and the imposition of
    liability on U.S. companies doing business in foreign
    countries. And the record varies. But for the most part, I have
    come to stand behind lex loci delicti. If you're in another
    country and you commit a wrong, the idea that the United States
    State Department is going to come in and bail you out when
    you're being subjected to civil liability, as far as I know,
    doesn't happen.
        Mr. Murphy. One final question then, do the importers of
    products in this country, do they mislabel products in terms of
    country of origin, content, anything else? Is that showing up
    anywhere, Mr. Baskin, in your findings?
        Mr. Baskin. That is always an issue. I have spent some time
    in Customs, and that is always a violation that customs would
    find. It would be no less applicable to CPSC.
        Mr. Murphy. Thank you very much.
        Mr. Rush. The chair now recognizes Mr. Braley for 5
    minutes.
        Mr. Braley. Mr. Morgan, I had the opportunity at the height
    of the Chinese drywall publicity to inspect some homes in
    Delray Beach, Florida, and I got to see first hand exactly what
    you were describing in your home, the corrosive effect on the
    wiring and the materials, the overwhelming smell of sulfur in
    there. And it was eye opening for me because the homeowners
    were devastated about what was happening to homes that they put
    a lot of money and were very proud of. And then I went back to
    Iowa where I live, and I was sick for about the next 6 weeks
    with respiratory problems.
        Have you or your family had any types of health-related
    problems because of being exposed to this Chinese drywall that
    we were talking about?
        Mr. Morgan. Yes, sir, my wife experienced nose bleeds for a
    long time, persistent coughing and headaches. After we moved
    out of the Chinese drywall house into our rental home she had
    nose bleeds for 2 days and she hasn't had one since.
        Mr. Braley. You're the perfect example of what foreign
    manufacturers who aren't subject to having a registered agent
    available in the United States do manipulate and that is they
    know that the long period and cost of trying to hold them
    accountable for what whatever they do, people will get
    frustrated and give up because at some point you have to move
    on with your life and you can't wait for that magic solution
    when you have got bills to pay and people are pushing you into
    bankruptcy. Has that been your experience?
        Mr. Morgan. Yes, sir, I mean just the cost just to do the
    translation, you know, $150,000, to myself or people like me it
    might as well be $1 million. It's just money that we don't
    have, we can't afford, and being a police officer, I hate to
    say in public, thank goodness for attorneys. They have been a
    real lifesaver for us in trying to get some of our life back.
    It's just been a maddening process. It really has.
        Mr. Braley. Mr. Popper I want to follow up with you. I have
    a very clear memory of a front line program talking about the
    trade imbalance between China and the United States, and they
    showed the Port of Long Beach with shipping container after
    shipping container come in with finished consumer products, a
    lot of them electronics, you name it, coming in and then they
    showed what was leaving the Port of Long Beach and it was
    recycled scrap metal and cardboard. That was the extent of what
    was going on in terms of the bulk of the shipping coming in and
    out of that port.
        And you talked about the practical aspects of enforcing a
    judgment against a foreign manufacturer.
        When you have got a judgment, all it is is a piece of
    paper. It means nothing whether you're suing a domestic
    manufacturer or foreign, but it gives you the right to enforce
    a judgment, and if you have got assets available in the United
    States, through a domestic manufacturer, you pursue that. If
    they refuse to pay, or if they are not insured, you can levy on
    those assets, you can attach them, you can have them sold, and
    then those proceeds can be used to satisfy a judgment, correct?
        Mr. Popper. That is correct.
        Mr. Braley. The same thing applies with foreign goods that
    would be in this country coming in through our ports that are
    owned by a foreign manufacturer, those are tangible assets that
    if need be, could be levied upon to satisfy a judgment if you
    can trace them back to the owner of the manufacturer, and they
    are doing business in the stream of commerce in the United
    States, right?
        Mr. Popper. That is correct.
        Mr. Braley. So it is not like we are developing a remedy
    without a payoff. It's just that it's very difficult, given the
    relationships with these foreign manufacturers and their
    ability sometimes to hide their assets overseas that makes it
    difficult for people who have been injured by these defective
    products to actually get a payout at the end.
        Mr. Popper. Yes.
        Mr. Braley. Would you agree with that?
        Mr. Popper. I would agree with that.
        Mr. Braley. Ms. Gadhia, one of the things I want to talk to
    you about is why this is so important? Because when you talk
    about something as massive as what we've seen with Chinese
    drywall, the average individual consumer, by themselves, are
    typically powerless against these large foreign manufacturers
    many of whom are hard to identify, because when you go into
    your Lowes or your Home Depot, they may have a product there
    that looks on the surface like it's a domestic product, and in
    reality, it was imported by a distributor, and being sold under
    their name rather than the original manufacturer. Why is it so
    important to consumers that we move forward on this
    legislation?
        Ms. Gadhia. It's incredibly important because, first of
    all, I think consumers have an expectation, and rightfully so,
    that the products that come into their homes regardless of
    where they come from are safe and it's only fair to domestic
    manufacturers that the rules that they play by should also
    apply to foreign manufacturers.
        You also need a mechanism that works on the other end of
    this entire supply chain in this system, where when you have
    got standards in place and you have got border protection in
    place, but you still have unsafe products coming through,
    sometimes you have a situation where you didn't know that this
    product was going to be problematic. I don't think anybody
    could have foreseen that you would have a children's toy with a
    chemical on it that turned to the date rape drug. I don't think
    you could have foreseen years ago that you would have sulfur
    coming out of drywall and causing these kinds of horrific
    problems. You have a lag time between these products coming in
    sometimes and the problems they cause, and you need that
    redress on the other side for consumers to be able to be made
    whole.
        Mr. Braley. Thank you. I yield back, Mr. Chairman.
        Mr. Rush. The chair recognizes Mr. Sarbanes now for 5
    minutes.
        Mr. Sarbanes. Thank you, Mr. Chairman. Thank you to the
    witnesses for their testimony.
        I always feel at these hearings, and in particular,
    committee, that I'm always sitting here saying you mean we
    don't already do that? Whatever the topic is, whether it's
    regulating chemicals, or in this case, whether consumers are
    going to have recourse when these foreign manufactured products
    come into the country, because I think the average American
    probably expects that this is already being done.
        And in that respect, I want to thank Congresswoman Sutton
    for this legislation because I think as four out of five of you
    testified, it makes absolute common sense to pursue it.
        I once argued in the Fourth Circuit a case on minimum
    contact. So I'm very familiar with the frustration, of a case
    called Eloquent Machine Corporation. And we were down to trying
    to make the case that faxes and other communications that were
    coming into the State of Maryland were sufficient to establish
    minimum contact for the purpose of exercising personal
    jurisdiction, I don't know if you're familiar with that case or
    not. But in any event, it makes absolute sense to try to fill
    this, or close this loophole as you have described it. And I
    wondered, though, if you could, Mr. Popper, respond to Ms.
    Rowden's arguments about whether we sort of don't need to go
    there yet, but it's really just a matter of improving the
    oversight through CPSC and other measures that we can take and
    that this is just kind of a extra layer that is unnecessary at
    this time. If you could respond to that, I would appreciate it.
        Mr. Popper. I think about 2-1/2 years ago when we started
    learning about the problems with pet food and the entire
    country seemed to mobilize around the issue, your question was
    answered. Were you dealing with isolated incidents, isolated
    problems and you had a solid regulatory structure in place, it
    might be worth waiting to allow that system to mature.
        I think that is not the case. I think you are looking at a
    remarkably broad problem when you're talking about 80 percent
    or more of the goods regulated by CPSC, the vast number of our
    pharmaceutical products, goods throughout the United States
    that we use in good faith. You started out your comment about
    why don't we already do this, I think as a country, one of the
    best things about us is that we operate in good faith, we
    operate in trust. We believe that when we buy a product sold by
    a reputable seller that we can rely on its safety and its
    efficacy. And we have learned with foreign manufactured
    products we can't do that. The regulatory system needs to be
    bolstered. The civil liability system needs to be bolstered.
        I certainly understand the desire to maximize our trade
    position. I think that is correct at every level. But requiring
    companies doing business in the United States, whether they are
    domestic or foreign, to follow the same set of laws strikes me
    as not inconsistent with that goal. It strikes me as perfectly
    consistent with it.
        And from my perspective as a law professor, I thank you for
    saying lawyers are, from time to time, heroes. They are. But
    you can be a good lawyer and representing a client who has a
    serious problem and run into exactly what you ran into in the
    Fourth Circuit, and there is nothing you can do about it. And
    when that happens, the concerns that we might have about some
    of our trading partners being miffed about the impositional
    liability strike me as not particularly the dominant concerns
    that one ought to have.
        Mr. Sarbanes. I appreciate it, and I think, Ms. Gadhia, you
    made the point that even a very rigorous regulatory oversight
    regime doesn't mean that you're going to completely be able to
    prevent harmful products from coming into the stream of
    commerce.
        Ms. Gadhia. Correct.
        Mr. Sarbanes. And you need other ways to create deterrence
    and/or create some remedy or recourse should that happen.
        Ms. Gadhia. That is absolutely correct. And in addition, as
    I mentioned in my testimony, this type of registered agent can
    also help agencies like the CPSC that are trying to conduct
    recalls within that regulatory scheme to do so in a proper
    fashion.
        Mr. Sarbanes. I have got 15 seconds. One last question for
    you Mr. Popper. And that is you spoke a little bit about what
    other countries have in place. Can you speak about what is
    happening with Chinese products going into certain other
    countries in terms of the way they are handling, because China
    has obviously been a focus of our discussion here.
        I mean, are we sort of in good or bad company, however, you
    might want to characterize it, in terms of the way we are
    equipped to handle these products coming in from China when we
    look at other countries or are others ahead of us on that?
        Mr. Popper. To the best of my knowledge, we provide a
    remarkably generous environment for foreign manufacturers by
    not imposing liability. I believe in the EU countries and in
    Latin America and in South America they are treated the same as
    their domestic companies. And so I think what we are doing is
    both domestically and internationally leveling the playing
    field.
        And if I might add just in terms of the regulatory
    obligations, keep in mind that as effective as regulatory
    systems are, they do not provide individual personal injury
    remedies. They provide a regulatory recourse, that affects the
    broad population, but the individual affected adversely by the
    violation of a safety regulation doesn't have recourse before
    the agency. The agency isn't an Article 3 court. It doesn't
    provide those remedies.
        Mr. Rush. The chair now recognizes Mr. Stupak for 5
    minutes.
        Mr. Stupak. Thank you, Mr. Chairman, thank you all for your
    testimony. Mr. Morgan, sorry, about your problems there and
    unfortunately your problems are duplicated many times
    throughout this country. Just a question though, you said you
    had your house built, right.
        Mr. Morgan. Yes, sir.
        Mr. Stupak. Did your builder charge you the going rate for
    drywall or did you get a lesser cost.
        Mr. Morgan. I don't know. I would like to know what the
    cost difference was.
        Mr. Stupak. I would like know that too. You might have a
    perfect claim right there against your builder.
        Let me ask Mr. Baskin or Ms. Gadhia, what happens when
    products come into the United States like this drywall, let's
    say, come came in right now from China high in sulfur, what
    would happen to it? You discover it at the border.
        Mr. Baskin. Luckily it's not. So that is a good thing in
    that----
        Mr. Stupak. But if it did, what would happen.
        Mr. Baskin. If it did, it could be detained at the border.
        Mr. Stupak. It sits there, right.
        Mr. Baskin. Yes.
        Mr. Stupak. Why don't we shove it back to the shipper?
        Mr. Morgan. The authorities allow that eventually.
        Mr. Stupak. They do?
        Mr. Baskin. Yes.
        Mr. Stupak. Well, then we had the inferior steel coming in
    from China, we had a couple of schools collapse in California
    because of inferior steel, they are telling us they have no
    authority to return it. In other words, it comes in, if they
    test the steel, it doesn't have the proper strength, they set
    it aside, tag it, set it aside, and it sits there, or whoever
    ordered it comes, picks it up, they are told they can't use it,
    say, for construction of a school, but it sits there or they
    take it use it for some other use in theory. So while you have
    authority to detain it, do you have specific authority to send
    it back to China.
        Mr. Baskin. I don't know about the steel situation.
        Mr. Stupak. How about drywall? Right now if bad drywall
    came in, you had the right to detain it at the border I agree
    with you, but do you have a right to send it back to China? And
    if so, who pays for it.
        Mr. Baskin. Good questions all. I would have to defer an
    answer to that, get that question in writing and we can get
    back to you on that.
        Mr. Stupak. Ms. Gadhia, you indicated, and Mr. Sarbanes,
    that the registered agent could help in a recall. How would a
    registered agent help in a recall underneath this legislation.
        Ms. Gadhia. The border would help is that you have got an
    entity here in the U.S. that should the agency need to get
    information from the agency about the scope of the product and
    when it was manufactured, the dates that they believe the
    defective product was manufactured, where the product went, how
    it was distributed, you have got an actual agent here that is,
    as the agent for service, of process, a contact domestically
    for the agency so they aren't trying to chase an entity
    overseas.
        Mr. Stupak. But sure but 4647 just requires you to have a
    registered agent here to accept process. You don't have to know
    anything about the product. You just have to be able to accept
    process so you don't have to send it to China and try to chase
    someone down where the central government holds it for 6 months
    before they give it to the manufacturer. How would a registered
    agent help? There would have to be more in the legislation
    wouldn't there to be able to really help in a recall.
        Ms. Gadhia. I think what it would do is it gives the agency
    one more option, one more entity to try to get that information
    from rather than sending it to China and having it sent back.
        Mr. Stupak. I agree if you're going to bring a lawsuit, you
    have a person or individual or entity you serve the process to
    and that manufacturer in this case is drywall would be
    considered served, but I don't know if I have a registered
    agent how that would help in a recall because they are not
    required to know manufacturing location, physical location,
    they just have to be a registered agent for a company, right?
        Ms. Gadhia. I might defer on the details of what the CPSC
    would be looking for as far as information the recall process
    to the agency. But I think it would depend on the case. It
    would depend on in some situations the agent for service of
    process might be an entity that has that information. In some
    cases you're right it could be simply and agent that accepts
    the paperwork.
        Mr. Stupak. So in this legislation shouldn't we expand the
    role of the registered agent more than just a person or entity
    that accepts service? Shouldn't they have greater knowledge of
    at least, if it's going to help in a recall.
        Ms. Gadhia. I think it could certainly help to do that, to
    expand it.
        Mr. Stupak. So do you suggest we put that in this
    legislation.
        Ms. Gadhia. I would respectfully take a minute to, I would
    respectfully respond that I would think about that a bit and
    get back to you on the record, if that's all right.
        Mr. Stupak. Please do. Mr. Chair, when we are in Oversight
    and Investigations, we see this all the time, whether it's
    melamine or whatever it might be, and a registered agent
    doesn't do anything to help you. In fact, all it is is a point
    of contact here in the United States.
        Ms. Rowden, why doesn't the American Association of
    Exporters and Importers just volunteer to be the registered
    agent for all these importers?
        Ms. Rowden. Oh, gosh.
        Mr. Stupak. Oh, gosh? I mean----
        Ms. Rowden. Our members are importers and exporters of
    goods. Often it is the U.S. importer who has the legal
    responsibility under U.S. customs law to deal with product
    safety and also will ensure----
        Mr. Stupak. Are you saying that the importers are
    certifying that the product is safe when they bring it in this
    country.
        Ms. Rowden. They have the obligation to make sure that that
    product meets all U.S. laws.
        Mr. Stupak. Really? Under what law is that.
        Ms. Rowden. All laws, not only U.S. Customs law, the FDA--
    --
        Mr. Stupak. So Mr. Morgan should just sue the importer.
        Ms. Rowden. He can. The question is I'm not a trial
    attorney, but whether that would, the causation would be there
    for the U.S. importer to be liable. I just don't know.
        Mr. Stupak. So the fact that they may have it, it's not
    real liability that Mr. Morgan could look to the importer of
    this drywall and say aha, you imported this, you had a
    responsibility and duty to make sure it met U.S. standards and
    if not, therefore, Mr. or Ms. Importer, you are subject to our
    courts and jurisdiction.
        Ms. Rowden. Certainly, the U.S. importer is subject to U.S.
    law as a U.S. entity. They are subject to all the regulatory
    requirements.
        Mr. Stupak. But doesn't the law require them to knowingly
    know that they imported a defective product, and the burden of
    proof is really on Mr. Morgan, not on that importer to show
    that.
        Ms. Rowden. That would be a normal trial law.
        Mr. Stupak. So it's really useless. But going back to my
    question. Why wouldn't you just be the registered agent? All
    you're doing accepting process, so therefore you could cut down
    on all the expenses, the fear of Congress putting forth
    regulations that you fear in your statement here, it could be
    resolved by your agency, just being the registered agent. All
    you're doing is accepting process and we could short circuit
    this, get right to the court and see who has liability here.
        Ms. Rowden. But our association has no commercial
    relationship with foreign manufacturers.
        Mr. Stupak. You don't have to have a commercial
    relationship. All you have to be is a person who is present in
    the United States over usually the age of 21 and be willing to
    accept the process. You don't have to be an attorney or
    anything. All you have to be is a person, you are a point of
    contact to begin that process so Mr. Morgan doesn't have to run
    all over China to find his manufacturer.
        Ms. Rowden. It is not our role as a trade association to
    serve as that function, because that is a legal function.
        Mr. Stupak. Well, if you're trying to promote trade, why
    wouldn't you do that? Because you're promoting trade, you're
    providing a service for people importing or exporting in. I
    would think that would be the service you would want to do.
        Ms. Rowden. I doubt that our membership would support that.
        Mr. Stupak. I doubt that too, but good argument. I yield
    back, thank you.
        Mr. Ross. The chair thanks the members, and also the chair
    thanks the witnesses for your outstanding and extraordinary
    contribution to this hearing. And with that in mind, again we
    thank you for the valuable time, you allowed us to utilize your
    valuable time.
        This first panel now is dismissed. Thank you very much for
    coming. And Godspeed to each and every one of you.
        Mr. Morgan, this committee does stand in support of you and
    your family. Thank you very much.
        Will the second panel please be seated.
        We certainly want to welcome members of the second panel to
    this subcommittee hearing. And again, I want you to reemphasize
    to you how extraordinarily grateful we are for your sacrifice
    of your time and energy to be here to help make a contribution
    to the hearings that the subcommittee has to deliberate on the
    important matters. And I want to recognize each and every one
    of you by name.
        And to the members of the subcommittee on my left, is Mary
    Saunders. She is the assistant Secretary for manufacturing and
    services for the international trade administration. Seated
    next to Ms. Saunders is Ms. Deborah Wince-Smith. She is
    president and CEO of the council on competitiveness.
        And next to Ms. Wince-Smith is Mr. Owen E. Herrnstadt. Mr.
    Herrnstadt is the director of trade and globalization for the
    international association of machinists and aerospace workers.
        And then next to Mr. Herrnstadt is Mr. Jack Crawford
    Junior. He is the chief executive officer of Jadoo Power.
        And Mr. Anthony Kim is seated next to Mr. Crawford. He is
    the policy analyst for Heritage Foundation.
        Again, welcome to each and every one of you. It is the
    customary tradition of this committee to swear in the
    witnesses. So would you please stand and raise your right hand.
        Mr. Rush. Let the record reflect that all of the witnesses
    answered in the affirmative.
        We will begin with you, Ms. Saunders. You have 5 minutes
    for an opening statement.

    STATEMENT OF HON. MARY SAUNDERS, DEPUTY ASSISTANT SECRETARY FOR
        MANUFACTURING AND SERVICES, UNITED STATES DEPARTMENT OF
     COMMERCE; DEBORAH WINCE-SMITH, PRESIDENT AND CHIEF EXECUTIVE
       OFFICER, COUNCIL ON COMPETITIVENESS; OWEN E. HERRNSTADT,
    DIRECTOR OF TRADE AND GLOBALIZATION, INTERNATIONAL ASSOCIATION
     OF MACHINISTS & AEROSPACE WORKERS; JACK CRAWFORD, JR., CHIEF
     EXECUTIVE OFFICER, JADOO POWER; ANTHONY KIM, POLICY ANALYST,
                          HERITAGE FOUNDATION

                       STATEMENT OF MARY SAUNDERS

        Ms. Saunders. Chairman Rush, Ranking Member Whitfield,
    thank you for the opportunity to speak to you today about the
    important topic of clean energy technology and export
    assistance.
        As you are well aware, clean energy is one of the greatest
    economic opportunities of the 21st century, and promoting the
    development, production and energy efficiency technologies and
    services is the highest priority for the Department of
    Commerce. These technologies are important to economic growth
    in the United States and locally.
        At the International Trade Administration or ITA, we have
    identified significant overseas market opportunities for U.S.
    firms in these technologies surfaces areas.
        For the record, I will not be commenting on H.R. 5156, but
    rather, my testimony will provide a prospective on the issues,
    challenges and opportunities within the clean energy technology
    and services sector today, as well as highlight some of the
    many programs that ITA has put in place to support U.S.
    industry competitiveness on this front.
        ITA is the lead export promotion agency in the Federal
    Government. Our mission is to create prosperity by
    strengthening the competitiveness of the U.S. industry,
    promoting trade and investment, and ensuring fair trade
    compliance with trade laws and agreements that enhance the
    ability of U.S. firms and workers to compete in the global
    marketplace on a level playing field.
        At his State of the Union Address this year, President
    Obama announced the National Export Initiative, or NEI, with
    the goal to double U.S. exports in years in support 2 million
    jobs. The President also emphasized that the Nation that leads
    the clean energy economy will be the Nation that leads the
    global economy.
        Clean energy technologies are a key way to meet global and
    economic development needs, mitigate climate change and capture
    the high value of innovation of jobs that this sector offers.
    Within ITA, we are responding to the NEI and to the President's
    emphasis on clean energy by hiring trade specialists in
    emerging growth markets, supporting small and medium size
    enterprises to broaden their exposure to international markets
    and developing outreach and trade mission programs to improve
    exports in high growth replacement clean energy.
        U.S. clean energy technologies and services companies face
    fierce competition in international markets. I want to
    highlight three factors that have a strong effect on
    international competitors: The strength of the domestic
    industry, the availability of international markets that offer
    U.S. companies a fair opportunity to compete, and the ability
    of U.S. companies to access the resources and master the skills
    required to export.
        The United States currently has a relatively small share of
    manufacturing capacity for clean energy-related industries.
    Nevertheless, there are clear opportunities for the U.S. To
    lead the world in high technology for clean energy
    manufacturing. We can leverage the R&D and innovation being
    pursued by companies, universities, and the Department of
    Energy national labs.
        Just turned on the microphone. Sorry.
        U.S. clean energy exports cannot increase if protection and
    rules and policies prevent open competition. Many countries
    have adopted policies that make it more difficult for foreign
    firms to compete in their markets. These include favoring their
    domestic industry through preferential tendering criteria and
    burdensome certification requirements.
        In addition, concerns regarding adequate protection of
    intellectual property rights hamper some firms from entering
    foreign markets.
        Intense foreign competition from State-owned enterprises
    poses another challenge for U.S. companies, particularly in the
    civil nuclear sector.
        And the final challenge to increasing clean energy
    technology exports that must be addressed is the willingness of
    U.S. firms to export. In the clean energy sector in particular,
    companies face challenges to exporting that are not market or
    policy based but are internal to that particular company's
    knowledge and comfort with the export process. Issues include a
    shortage of available capital or financing, complex domestic
    and foreign regulatory requirements, lack of knowledge, and
    comfort in local financial institutions to finance innovative
    clean energy products and difficulty in finding a local partner
    or distributor.
        ITA has multiple clean energy initiatives to support the
    President's NEI and works in close collaboration with other
    agency partners. We have initiatives focusing on sustainable
    manufacturing energy efficiency for U.S. companies as well as a
    civil nuclear trade initiative that identifies the sector's
    most pressing trade challenges and opportunities and
    coordinates public and private sector efforts to address them.
        We are leading a trade promotion coordinated committee
    effort to develop an export strategy for renewable energy and
    energy efficiency technologies and Secretary Locke recently
    established a renewable energy and energy efficiency advisory
    committee for industry to advise the Department directly on
    pressing trade promotion activities.
        ITA is actively promoting U.S. Clean energy solutions in
    overseas markets through trade events, foreign buyer programs
    at major renewable energy trade shows. We have brought
    delegations from all over the world to these events. We have
    organized numerous trade missions focused on clean energy.
        Most recently, the Secretary led a clean energy business
    development mission to Hong Kong, other cities in China and
    Indonesia. We have a number of reports and helpful resources,
    and I have brought copies of several of them. They provide a
    useful resource for small and medium-sized enterprises in the
    clean energy technology industry.
        And we recently released a small renewable energy
    assessment report on Indonesia and have continued to hold
    informational webinars on diverse topics.
        Lastly, I wanted to highlight the market development
    cooperative program which allows nonprofit groups or
    universities to propose projects to develop global markets for
    specific technologies. Last year, we awarded three awards in
    the clean energy sector. This year we have received numerous
    applications for MDCP rewards and are currently reviewing them.
        In closing, I would like to thank you, Chairman Rush,
    Ranking Member Whitfield, and members of the subcommittee for
    the opportunity to highlight what ITA is doing to help U.S.
    Companies compete in markets for clean emergency technologies
    and for all kinds of U.S. goods and services around the world.
        Expanding opportunities to export clean energy technologies
    will not only maintain the competitiveness of U.S. companies,
    but will create jobs and generate economic growth. In addition,
    it will increase the reliability of our energy supply.
        American businesses have the technology, the expertise and
    the experience to help countries around the world reach their
    climate and energy goals and this an extraordinary opportunity
    and a win-win for everyone.
        I welcome any questions you might have.
        [The prepared statement of Ms. Saunders follows:]

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        Mr. Rush. The chair recognizes Ms. Wince-Smith for 5
    minutes.

    STATEMENT OF DEBORAH WINCE-SMITH, PRESIDENT AND CHIEF EXECUTIVE
                  OFFICER, COUNCIL ON COMPETITIVENESS

        Ms. Wince-Smith. Chairman Rush, thank you for inviting me
    to testify today on the Clean Energy Technology Manufacturing
    and Export Assistance Act. This legislation acknowledges the
    pivotal role that the emerging clean energy industry will play
    in ensuring America's economic competitiveness and in our
    national security going forward.
        The growth and vitality of this industry depends upon the
    development of a robust domestic market coupled to access to a
    burgeoning global market for these essential technologies and
    services that will take us to a low carbon economy, energy
    security, and addressing climate change.
        Since 1986, the Council on Competitiveness has brought
    forth creative solutions to America's most pressing
    competitiveness challenges. Comprised of leaders from industry,
    academia and organized labor, the Council is unique in its
    abilities to build synergies and consensus across a wide span
    of organizations and interests.
        Next week on June 23rd, our chairman, Samuel Allen, the CEO
    and chairman of John Deere Corporation, will be launching with
    our members a new flagship initiative on U.S. manufacturing
    competitiveness in the 21st century. I submit for the record a
    summary of this initiative.
        The Council, with our partners in government and the
    private sector, will deliver a national manufacturing strategy
    to the administration and Congress at a national summit in
    2011. And energy and the clean energy revolution will be at the
    heart of this agenda.
        Our energy security innovation and sustainability
    initiative where we outlined a very robust plan last September,
    clearly supports an alliance with the objectives of the Clean
    Energy Technology Manufacturing and Export Assistance Act.
        As the 20th century drew to a close, rising global
    competition, the opening of global markets, challenged U.S.
    manufacturers raising concern about the export of U.S.-made
    goods, offshoring of our manufacturing production, the loss of
    skilled U.S. manufacturing jobs, and a rising account deficit,
    currency manipulation and distortion. With the growing strength
    and consumer demand of the emerging economies, competitors such
    as China, India, South Korea, and Brazil, now there are many
    that feel that U.S. manufacturing will spiral into further
    decline.
        The Council believes that no Nation can be a technology and
    economic leader without a robust multi-sector manufacturing
    capacity. And the stakes are extremely high. Our roadmap for
    energy security sustainability and competitiveness highlighted
    that revenue in just three clean energy sectors--wind, solar
    and biofuels--is projected to nearly triple over the next
    decade and markets for clean technologies and their attendant
    services will expand exponentially.
        These markets and the jobs and economic growth that will
    bring our country to the forefront require a set of enabling
    policies and programs in research and development, in
    manufacturing and commercial deployment here in America. So we
    believe that H.R. 5156 is an important policy step in
    addressing this challenge, and I am pleased to be here today to
    voice our support for this proposal and legislation.
        But there are many more policy steps required to ensure a
    vibrant ecosystem that supports America's capacity. For next
    generation R&D, and battery storage, carbon capture
    sequestration, and nuclear reactors, to increasing energy
    productivity and efficiency. We must engage in this intense
    global competition in Asia, Europe, the Middle East and the
    Americas.
        As an example of what is at stake, within the past decade,
    the United States has fallen from first to fifth among top
    solar manufacturing companies and now imports solar cells from
    the EU and Asia. China now is doing assembly work for solar
    cells in the United States.
        I cannot emphasize enough the importance of taking a
    systems approach to our energy sustainability and economic
    policies. We have to understand the linkage between policies
    and how we integrate them into a holistic strategy, everything
    from domestic tasks and fiscal policies to regulatory issues
    to, of course, global standards and trade policy.
        Let me highlight quickly four areas in our energy
    sustainability report that captures the essence of what you are
    trying to accomplish in this legislation with respect to
    expanding U.S. exports.
        The first is that we must remove tariffs and non-tariff
    barriers for sustainable energy products and services while not
    creating a dual track for preferential trade liberalization. We
    have to ensure that tariff reduction and removal of barriers
    are transparent, reciprocal, and provide access to all national
    markets where strong worker and consumer protections are
    provided.
        Two, we have to ensure intellectual property rights for all
    industrial products and services, copyrights and sustainable
    energy solutions are protected. This is a huge issue with
    China, India, and Brazil and other parts of the world.
        Three, we must ensure our continued U.S. technological
    leadership for the breakthroughs and commercializations. The
    Council has proposed that we need a long-term stable source of
    funding. And in the future, we argue that 30 percent of any
    revenue from carbon pricing should be allocated to R&D
    including the demonstration of clean energy technologies.
        And four, to insure that the technologies of tomorrow will
    be manufactured in the United States, we should allocate 40
    percent of revenues derived from any future carbon pricing
    program to manufacturing initiatives, Federal, State or local
    clean manufacturing zones, pilot projects as well as immediate
    expensing and depreciation of the costs of retooling for
    production and qualified products, and dedicating high-
    performance computing assets to the clean energy manufacturing
    revolution.
        In conclusion, Mr. Chairman, the Council believes that the
    transformation to a low-carbon economy will unleash American
    innovation, it will create new industries, revitalize and
    rebuild manufacturing jobs across our Nation and keep and grow
    high-skilled jobs for this generation and the next. But we have
    to come together around an integrated manufacturing policy and
    to accelerate this growth, stewardship, and security for all.
    Thank you, and I am welcome to answer any questions.
        [The prepared statement of Ms. Wince-Smith follows:]

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        Mr. Rush. Thank you very much.
        Mr. Herrnstadt.

        STATEMENT OF OWEN E. HERRNSTADT, DIRECTOR OF TRADE AND
       GLOBALIZATION, INTERNATIONAL ASSOCIATION OF MACHINISTS &
                           AEROSPACE WORKERS

        Mr. Herrnstadt. Thank you, Mr. Chairman.
        The International Association of Machinists & Aerospace
    Workers is one of the largest manufacturing unions in the
    United States representing thousands of workers who produce
    goods for exports every day. We strongly believe in the
    importance of the clean energy industry and we welcome the
    opportunity to appear before you today.
        Support for domestic manufacturing goods related to clean
    energy is a critical component for our economic recovery, and
    it is urgently needed. U.S. workers continue to be mired in the
    economic crisis while the official unemployment rate hovers at
    around 10 percent, the unofficial unemployment rate is
    approaching 20 percent. Some 8\1/2\ million workers have lost
    their jobs since December 2007 with a significant number
    directly working in manufacturing.
        Today, there are over 15 million workers who are
    unemployed. Almost half of all of those who are unemployed have
    been without work for over 6 months.
        The IEM continues to argue for the adoption of
    comprehensive policies that will address this jobs crisis. In
    order to be effective, we urge that these policies establish a
    framework for rebuilding our manufacturing base and ensuring
    its sustainability for the future.
        H.R. 5156, the Clean Energy Technology Manufacturing and
    Export Assistance Act of 2010 represents one element of an
    overall program that is so desperately needed. If enacted, the
    bill would assist U.S. companies in exporting clean energy
    products and services. The bill would also require the
    Secretary of Commerce to submit a report to Congress which
    would assess the extent to which the program has been
    successful in creating jobs in the United States.
        While H.R. 5156 represents an incredibly important step
    towards addressing the need to support manufacturing jobs in
    the clean energy sector, we urge an even more aggressive
    approach to ensure that Federal support for companies to export
    clean energy technology and services does, in fact, result in
    the creation or maintenance of jobs here at home.
        A direct verifiable requirement that Federal support for
    clean energy exports results in the creation of U.S. jobs is
    essential. It appears that some companies are only too willing
    to produce clean energy goods and equipment in other countries.
    For example, as reported in The Washington Post, BP announced
    this spring that it would be laying off 320 workers and closing
    its solar panel manufacturing plant in Frederick, Maryland, the
    final step in moving its solar business out of the United
    States to facilities in China, India and other countries. In
    making the announcement, BP's CEO stated that BP was ``moving
    to where we can manufacture cheaply.''
        We offer four specific suggestions for moving ahead and for
    building on H.R. 5156.
        One, detailed employment impact statements should be a
    required factor in any decisionmaking process for government
    assistance. The employment impact statements would contain
    information pertaining to employment that would be mandated,
    created, or lost if the program in question were approved. We
    also suggest that capital equipment related to production as
    well as goods to be exported must be domestically made and
    contain domestic materials.
        Strong domestic content requirements uniformly implemented
    and enforced could be specifically contained in current
    legislation.
        Export assistance should also be sought by the U.S. Export-
    Import Bank who has also developed expertise in these areas.
        And last but not least, domestic production for exports
    must be based on a fair and level field of global competition.
        Clean energy exporters must be able to prosper, and they
    can only do so if they are able and are able to compete fairly.
    That means trade barriers removed when dealing with countries
    like China. Those barriers must be challenged and removed.
    Demands for transfer of technology and production in return for
    market access must also be curtailed. Currency manipulation
    must be formally recognized and addressed, and relatedly
    subsidies to the industry by other countries like China should
    also be challenged in a number of forums, including trade
    complaints.
        As mentioned at the outset, U.S. manufacturing workers are
    in a crisis and not, coincidentally, so is our country's
    economy. Promoting U.S. clean energy companies to export
    domestically manufactured goods with U.S.-made materials and
    products represents one important solution to this crisis.
        Again, we very much appreciate the opportunity to appear
    before you today and we would obviously be happy to answer any
    further questions.
        [The prepared statement of Mr. Herrnstadt follows:]

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        Mr. Rush. Mr. Crawford, you are recognized for 5 minutes.

    STATEMENT OF JACK CRAWFORD, JR., CHIEF EXECUTIVE OFFICER, JADOO
                                 POWER

        Mr. Crawford. Thank you, Chairman Rush, Ranking Member
    Whitfield, members of the Committee on Energy and Commerce for
    inviting me to speak here today about ways to increase global
    competitiveness of small and medium-sized clean technology
    companies. I would also like to thank Representative Matsui for
    her kind welcome and applaud her efforts to boost
    competitiveness of clean technology companies in Sacramento, in
    the Sacramento area and the Nation.
        I am Jack Crawford, Jr., the CEO of Jadoo Power, a small
    alternative energy technology company based in Folsom,
    California. I have the experience of starting and investing in
    and growing several technology companies in my career. I would
    like to talk about the challenges facing a clean energy
    technology startup and its efforts to market its clean products
    internationally.
        Jadoo Power is an industry leader in advanced power and
    energy storage solutions. Jadoo has used its technology to
    develop and deliver demonstration products to the military,
    government and commercial sectors such as portable power for
    medical devices to support wounded soldier in war zones,
    emergency response communication solutions, and surveillance
    and security applications.
        Fuel cells such as those manufactured by Jadoo also advance
    this other advancement of other clean technologies such as
    solar, LED lighting and wind power solutions. Whatever the
    energy source, fuel cells save energy and reduce emissions.
        Jadoo's technology is being productized for military and
    commercial uses and additional support to scale or
    manufacturing will enable us to deliver a future large volume
    order of our products.
        It has been the case for many years that American science
    and engineering has been pre-eminent in the world. The U.S. is
    the unequivocal leader in energy innovation just as we have
    been in such sectors as semiconductors, biotechnology, and the
    Internet.
        As we strive to become a global leader in clean technology,
    one area of innovation where our advantage is most threatened
    is manufacturing. While breakthrough technology occurs here in
    the U.S., we are losing out to countries like China and Germany
    when it comes to energy manufacturing and exporting in part
    because these countries are providing hosts of tax incentives
    and export financial incentives and advantages for their clean
    technology companies.
        Selling our clean energy companies to foreign markets will
    be imperative to the future growth and sustainability of the
    clean technology industry in America.
        Like all other sectors of our economy, small businesses are
    the cornerstone of the clean technology industry. However, when
    it comes to exporting products and services, small businesses
    are at a disadvantage. Unlike large U.S. companies, small- and
    medium-sized clean technology companies do not have the
    financial resources, the expertise, or the relationships to
    navigate through and succeed in foreign markets.
        According to the trade promotion coordinating committee,
    about 30 percent of nonexporting small- and medium-sized
    companies would consider exporting if they had more access to
    international market information and assistance in pursuing
    export opportunities. Jadoo Power is one of those companies.
        This legislation being discussed today will help clean
    energy technology place clean energy technology at the
    forefront of our national export strategy and help small
    businesses find new customers and markets abroad.
        A greater level of support from the U.S. Federal Government
    would level the playing field, particularly for small- and
    medium-sized businesses and accelerate the ability of U.S.
    clean technology companies to meet global demand and better
    compete in the clean energy marketplace.
        I commend Representative Doris Matsui of Sacramento, along
    with Bobby Rush, John Dingell, and Anna Eshoo for introducing
    H.R. 5156, the Clean Energy Technology Manufacturing Export
    Assistance Act of 2010. This bill sets out a national strategy
    to assist U.S. clean energy technology companies with export
    assistance to find new markets for their products and services
    and to better compete in the international marketplace.
        This bill also provides domestic manufacturing assistance
    to find new ways to reduce production costs and increase
    productivity in the clean technology sector.
        For Jadoo, H.R. 5156 would provide tangible benefits as the
    company works to advance its manufacturing clean technology
    products and secure access and growth in the international
    marketplace.
        In addition to providing a robust business environment for
    Jadoo Power, the Sacramento region is well positioned to be a
    national leader in producing clean energy technology. Along
    with Jadoo Power, there are more than 100 other Sacramento-
    based small- and medium-sized clean technology companies that
    would benefit from H.R. 5156, as well as other clean technology
    companies in California and around the U.S.
        Representatives Matsui and Lungren, Governor Schwarzenegger
    and Sacramento's mayor, Kevin Johnson, have been actively
    supportive of clean technology companies both locally,
    Statewide and their continued support will be important to this
    emerging industry along with new support of government
    policies.
        The emerging global market for clean energy products is
    ever growing, and it is now time we look to market and sell our
    U.S. made clean energy products to foreign markets. With a
    clear opportunity of clean energy technology, the United States
    can catch up and be a leader of the world with technology in
    American-manufactured products.
        As we look at innovation and entrepreneurship in our
    country, it is time for us to go green and go global.
        Thank you for inviting me to today's legislative hearing
    and allowing me to present my perspective.
        [The prepared statement of Mr. Crawford follows:]

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        Mr. Rush. The chair now recognizes Mr. Kim for 5 minutes.

     STATEMENT OF ANTHONY KIM, POLICY ANALYST, HERITAGE FOUNDATION

        Mr. Kim. Chairman Rush, Ranking Member Whitfield and
    members of the committee. It is my privilege to testify today
    concerning the Clean Energy Technology Manufacturing Export
    Assistance Act of 2010. My name is Anthony Kim. I am a policy
    analyst at the Heritage Foundation. The views I express in this
    testimony are my own and should not be construed as
    representing any official position of the Heritage Foundation.
        In recent years, clean energy has become a shorthand sum
    for the bold policy today on how to achieve green growth and
    enhance our energy security. The proposed legislation offers a
    timely opportunity to discuss better ways to trigger innovation
    in our clean energy technology sector.
        Recognizing the urgency of developing a more competitive
    American clean energy technology sector, the proposed
    legislation intends to encourage innovation, investment and
    productivity, particularly via Federal subsidies. However, for
    the United States to regain economic leadership in the global
    clean energy industry, our strategy must be driven by real
    market conditions--not by government financial assistance that
    may serve as a temporary feel good action and delay more
    meaningful advancement of the clean energy sector.
        Government-mandated funding has often resulted in
    unbalanced development and lasting government interference in
    the private sector which dampen dynamic growth and innovation.
    It also invites the question as to whether government has the
    expertise to effectively help private companies navigate
    through rapidly evolving clean energy markets.
        The proposed bill also fails to acknowledge that there are
    existing government resources and market incentives to increase
    production of efficient or tentative clean energy.
        In advancing the competitiveness of our clean energy
    sector, there are more practical policy alternatives that can
    and should be implemented. At the top of the list should be
    further globalization of international trade. Free trade
    fosters economic efficiency, and economic efficiency is the
    basis for innovation, growth, and competitiveness.
        Over the past decades, the most practical improvements in
    energy efficiency and protecting environment have not come from
    government mandate funding. As chairman of the analysis of the
    Heritage Foundation's index of economic freedom, most progress
    has been driven by advances in freer trade and economic
    freedom. These unleash greater economic opportunity generating
    a purchase cycle of investment, innovation, and dynamic growth.
        Comprehensive globalization provides the most efficient
    export promotion strategy. Such trade globalization can be
    achieved by advancing freer trade through multilateral as well
    as bilateral trade pacts. Free trade agreements have spurred
    competition and economic growth. In recent years, the FTAs
    currently enforced accounted for more than one trillion in two-
    way merchandise trade. FTAs also include provisions that
    safeguard American businesses from discrimination and protect
    and enforce intellectual property rights for U.S. firms.
        The pending FTA with Colombia, Panama, and South Korea will
    result in significant new market access and lower types for
    American businesses, including our clean energy producers.
        There is no doubt that accelerating innovation and
    production of clean energy technology has become an economic
    necessity for our future. The best strategy to make this happen
    is not through special subsidies, but rather through dynamic
    leadership in opening markets and spurring innovation
    technology.
        In conclusion, I want to emphasize that we need a strategy
    that conforms to conditions in the international marketplace,
    not one that struggles against it by subsidizing technologies
    that cannot stand on their own. We know one sure way of doing
    this, and that is through open markets, not closing them with
    protectionist measures.
        Thank you again for the opportunity to testify before this
    committee today.
        [The prepared statement of Mr. Kim follows:]

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        Mr. Rush. The chair thanks all of the witnesses for your
    testimony, and the chair recognizes himself now for 5 minutes
    for the purposes of asking questions.
        And I am going to ask all of the witnesses to answer
    ``yes'' and ``no'' to the following questions. I only have 5
    minutes. If you could please restrict your answer to ``yes'' or
    ``no,'' that would be appreciated.
        Seizing clean energy export opportunities accelerate U.S.
    Recovery and become an engine of growth.
        You answer ``yes,'' or ``no.''
        Beginning with the first witness, Ms. Saunders.
        Ms. Saunders. Yes.
        Ms. Wince-Smith. Yes.
        Mr. Herrnstadt. Yes.
        Mr. Crawford. Yes.
        Mr. Kim. Yes.
        Mr. Rush. Dollar for dollar, clean energy investment will
    create more jobs than investments in conventional energy
    sector.
        Ms. Saunders. I can't answer that officially.
        Ms. Wince-Smith. It depends on how you define ``clean
    energy.'' I am on the edge.
        Mr. Herrnstadt. I don't know.
        Mr. Crawford. Can you ask the question one more time?
        Mr. Rush. Dollar for dollar, clean energy investment will
    create more jobs than investments in conventional energy
    sector.
        Mr. Crawford. I agree it is difficult to answer without
    specifically defining ``clean energy.''
        Mr. Kim. It depends. Potentially yes.
        Mr. Rush. With new jobs created in the clean energy sector
    will create new jobs and provide good wages. Yes or no.
        Ms. Saunders. Yes, in particular to export-related jobs
    which pay more than the average job.
        Ms. Wince-Smith. Yes, because they take new skills and new
    capabilities.
        Mr. Herrnstadt. I hope so.
        Mr. Crawford. Yes.
        Mr. Kim. Yes.
        Mr. Rush. Outside the U.S. borders, there is a promising
    market for U.S. green products.
        Ms. Saunders. Absolutely.
        Ms. Wince-Smith. Yes.
        Mr. Herrnstadt. Yes.
        Mr. Crawford. Yes.
        Mr. Kim. Yes, sir.
        Mr. Rush. Trade barriers are not the only obstacles to
    increasing exports of American products.
        Ms. Saunders. Yes, I agree.
        Ms. Wince-Smith. Yes.
        Mr. Herrnstadt. Yes.
        Mr. Crawford. Yes.
        Mr. Kim. Yes.
        Mr. Rush. Last question. Other countries, especially our
    main competitors like China and other European countries and
    Japan, have a more aggressive export policy platform.
        Ms. Saunders. Typically exports account for a larger
    percentage of those economies, and I would agree they strongly
    support the exports.
        Ms. Wince-Smith. Absolutely.
        Mr. Herrnstadt. It appears so.
        Mr. Crawford. Yes, and it's leading to a significant
    advantage for them.
        Mr. Kim. Yes. I think they are in favor of free trade.
        Mr. Rush. You also have policies that protect their
    domestic production.
        Ms. Saunders. In specific areas, that is correct.
        Ms. Wince-Smith. Yes. For instance, China's new policy on
    indigenous innovation is very worrisome.
        Mr. Herrnstadt. Yes.
        Mr. Crawford. Yes.
        Mr. Kim. Yes and no.
        Mr. Rush. The U.S. needs to have a more robust export
    assistance policy to its manufacturing industry.
        Ms. Saunders. We are operating within our current
    appropriated levels.
        Ms. Wince-Smith. Yes.
        Mr. Herrnstadt. Yes.
        Mr. Crawford. Yes, particularly for small- and medium-sized
    businesses.
        Mr. Kim. Yes, but to get there it is open to debate.
        Mr. Rush. Compared to other countries, the U.S. pays far
    less on export promotion. Yes or no.
        Ms. Saunders. It is hard to take an overall average
    compared to specific areas. The European Union, for example,
    that is correct.
        Ms. Wince-Smith. Yes.
        Mr. Herrnstadt. Yes. I think particularly with some
    countries. I am not an expert on the others.
        Mr. Crawford. Yes.
        Mr. Kim. Yes, but I think it depends.
        Mr. Rush. Thank you very much.
        The chair now recognizes the gentleman from Kentucky, Mr.
    Whitfield.
        Mr. Whitfield. Thank you, and I thank all of you for your
    testimony. We appreciate you being here today.
        Ms. Saunders, I was just curious, you have been so generous
    with your time today and you have testified that you didn't
    testify, you said you were not going to make any comments about
    this legislation. I was just curious why is that or why was
    that?
        Ms. Saunders. The administration has not taken a position
    on H.R. 5156.
        Mr. Whitfield. So you have no position.
        Ms. Saunders. No position.
        Mr. Whitfield. Mr. Crawford, I noticed in your testimony
    you were talking about, particularly in clean energy companies,
    particularly in manufacturing, it is very difficult to obtain
    financing; is that correct?
        Is that one of the reasons you support this legislation is
    because of the grant program that it would establish the $75
    million grant program?
        Mr. Crawford. Yes. I feel like as a country between the
    venture capital investments and the stimulus, we have seeded
    innovation in R&D around clean technology. We have gotten to
    demonstrable products. And now the next logical steps are to
    scale manufacturing and begin to sell those protects both here
    and abroad.
        Mr. Whitfield. This legislation on page 3 says specifically
    that the Secretary shall administer the funds to promote
    policies that will reduce production costs. Is that--it seems
    odd to me.
        Mr. Crawford. That is a significant issue for small and
    medium-sized companies, and here's why.
        Mr. Whitfield. I thought that you said that primarily you
    needed it for financing.
        Mr. Crawford. Part of investing and financing in the
    manufacturing process is to reduce the overall costs of
    producing those products. And so as you deliver demonstration
    units, they are oftentimes pretty expensive to manufacture and
    the logical next step is to invest and finance the
    manufacturing process to reduce the costs of those parts so you
    can compete in those commercial markets.
        Mr. Whitfield. Mr. Kim, I noticed in your testimony that
    you seem to be diametrically opposed to what Mr. Crawford is
    saying. Your general testimony seems to be you don't think the
    government should be involved in providing funds for private
    enterprise.
        Mr. Kim. That is correct, sir. I think government can play
    a much bigger role through free trade, through enhancing free
    trade agreements via multilateral or at a bilateral level. So
    there are things they can do, but not through Federal
    subsidies.
        Mr. Whitfield. So you think the free trade agreements will
    play a vital role?
        Mr. Kim. I think free trade is vital. For example, the
    current pending U.S.-South Korea FTA. South Korea has a huge
    market for green energy technology.
        Mr. Whitfield. You said the proposed legislation fails to
    identify specific policies to be pursued and risks becoming
    little more than a financial subsidy grab bag for politically
    connected special interests.
        Mr. Kim. There is no monitoring mechanism that we can
    follow. So I think we will have to see how this bill is
    actually implemented and then the entire process regarding this
    will be processed. But there is a political risk and then it
    can invite other problems, too.
        Mr. Whitfield. Mr. Herrnstadt, I notice that you all--
    certainly your union certainly favors the intent of this
    legislation, but I think you are specifically saying that it
    does not go far enough. And one of the things that you
    mentioned that needed to be done was to any grant that goes to
    any company that there be an EIS, as you call it, an employment
    impact statement, which actually I think is a pretty good idea.
        Have you all been successful in getting EIS requirements in
    other government programs?
        Mr. Herrnstadt. Not yet. But we're still trying. I think
    it's a really commonsense solution to what we're talking about.
    It really started off with an idea dealing with government
    procurement and the billions we spend on it. The government
    should know what it is getting for its money, and if a specific
    program is directed towards creating jobs, we need to calculate
    that with precision and that's something I am not sure the
    Commerce Department is doing yet.
        Mr. Whitfield. That sounds like that would certainly
    improve this bill from your perspective.
        Mr. Herrnstadt. It is one area that would, but I also want
    to point out that the bill itself is a real acknowledgment that
    there's a link between clean energy and U.S. jobs and I think
    that by itself is a real step forward.
        Mr. Whitfield. I know I only have 3 seconds.
        Mr. Crawford, the XM bank is very much involved in
    exporting technology, environmental technological products
    abroad. Has your company utilized the XM bank for----
        Mr. Crawford. We haven't. My perception is the difference
    here is we're talking about a focus on one particular industry
    sector that's of critical importance to our country and small-
    and medium-sized businesses so the combination of those two
    things with this policy would not only provide us with access
    to greater expertise focused on our company but also set up
    relationships that could be helpful in getting traction in the
    international marketplace.
        Mr. Rush. The chair now recognizes the author of the bill,
    Ms. Matsui, for 5 minutes.
        Mr. Matsui. Thank you all for being here today.
        As I mentioned in my opening statement, my home town is
    Sacramento, is home to 110 clean tech companies, many of them
    are small. And medium-sized companies are just now supporting
    ways to expand their businesses by exporting their products to
    foreign markets. But as you know, like large companies, they
    don't have the resources, time, and manpower to effectively
    promote their products abroad. And they do need assistance, and
    I do doubt that many of them have asked for help with
    Department of Commerce and small business and other entities
    that we can all think about.
        But I particularly have a question, several questions for
    Mr. Crawford with you being a small business person. Is Jadoo
    Power currently looking to expand by exploring ways to explore
    technology products abroad?
        Mr. Crawford. We're looking at new markets. In particular,
    international markets.
        Ms. Matsui. What are the current barriers you face in
    exporting?
        Mr. Crawford. Access to expertise in how best to export
    relationships and effectively resources, the time.
        Ms. Matsui. So how do you go about it now?
        Mr. Crawford. Right now it is independent market research.
    It is trying to identify people who have expertise in
    international market places. It's consultants. It's research on
    the Internet. Those types of efforts.
        Mr. Matsui. As you know, this legislation authorizes about
    $50 million a year for 5 years. Now as a small business person
    who is really concerned about expenses and resources, do you
    feel that this legislation, this amount of money is a
    responsible use and so that this country can actually establish
    a national clean tech export strategy to boost the
    competitiveness of small and medium-sized businesses?
        Mr. Crawford. As a small business owner and taxpayer, I
    think you can make the case that this is one of the best case
    uses of taxpayer money. What we're talking about with regard to
    our company and others across the country is something that can
    impact our energy security, our environmental security and have
    a positive impact on our economy. Those are driving issues in
    our country today, and this is the type of bill that could have
    a positive impact on taking small companies effectively that
    are the cornerstone of our economy and growing them.
        So my question actually is why aren't we, as a body,
    considering 10 or 20 times the amount because this is something
    that's addressing all of the relevant issues of today.
        Mr. Matsui. Thank you.
        Ms. Saunders, do our international competitors, like in the
    EU and Asia, help their small and medium-size businesses,
    particularly clean tech businesses, facilitate exports to the
    U.S.?
        Ms. Saunders. Yes, they do.
        Mr. Matsui. How do they do that?
        Ms. Saunders. They do that through export promotion
    programs very similar to the ones we operate out of the
    Department of Commerce and other trade agencies.
        Mr. Matsui. But they have more emphasis on it?
        Ms. Saunders. As I said earlier, specific countries in the
    European Union and other parts of the world have exports that
    are a larger part of their economy and they allocate a large
    portion of their government resources to promoting those
    exports.
        Mr. Matsui. If this legislation were enacted, what are your
    rough estimates on the amount of increased Euros clean tech
    exports in dollar amount or in other measurements?
        Ms. Saunders. We can always do more with more resources. We
    believe we're actively servicing this industry as a current
    priority of the Secretary and the administration. As far as
    dollar amounts, it is difficult to speculate as technology and
    services and actual products being exported have different
    values assigned to them. I would say generally from the
    International Trade Administration we have data that estimates
    that for every dollar invested in International Trade
    Administration programs, we generate $56 worth of exports.
        Mr. Matsui. Ms. Wince-Smith, now the President has
    repeatedly stated that he wants the U.S. to be the leader in
    exporting clean tech to other Nation's. However, international
    competitors like China and Germany are exporting substantially
    more clean tech energy products. I know I look at solar fuel
    cells and all of that.
        In your opinion, would this legislation provide the tools
    and resources to boost clean tech for its competitiveness in
    exporting their products and services?
        Ms. Wince-Smith. Like my colleagues, I believe it's a very
    important first step, and many of the provisions in the
    legislation in addition to the grant program that's been
    mentioned are really to accelerate the tools, the practices,
    the networks that small, medium-sized businesses need.
        I think one of the other issues that we really have to
    address still is how do we stimulate the production in the
    United States on a viable scale that it can go out globally.
    And you know that is a very, very serious part of this because
    in order for these new clean tech innovators to have a scale,
    they really have to have access to deep equity and debt capital
    and that gets into a whole broader set of issues.
        Ms. Matsui. Understood. And I think Mr. Crawford has been
    experiencing that himself.
        But as a small business person, you are excited about the
    fact that we are having a focus on clean tech exporting as I
    understand, because it does--it is part of the picture so to
    speak, it is not the complete picture obviously, but it is part
    of the picture.
        Anyway. Thank you very much and I yield back the balance of
    my time.
        Mr. Rush. The chair thanks the gentlelady.
        The chair thanks all of the witnesses who have participated
    in today's hearing, and the chair particularly thanks Ms.
    Saunders. You have been very patient with us and you have been
    very giving of your time and your contributions as it relates
    to your expertise. And some of your statements are very
    provocative and certainly we will take all of your statements
    to heart as we proceed with this legislative process.
        The chair thanks you and appreciates you very much. Thank
    you and God bless.
        [Whereupon, at 12:49 p.m., the subcommittee was adjourned.]
        [Material submitted for inclusion in the record follows:]

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