[Congressional Record Volume 142, Number 115 (Wednesday, July 31, 1996)]
[Extensions of Remarks]
[Page E1418]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




    TECHNICAL CORRECTIONS AND MISCELLANEOUS AMENDMENTS TO TRADE LAWS

                                 ______
                                 

                               speech of

                         HON. NANCY L. JOHNSON

                             of connecticut

                    in the house of representatives

                         Tuesday, July 30, 1996

  Mrs. JOHNSON of Connecticut. Mr. Speaker, I rise in support of H.R. 
3815, a bill to make technical and miscellaneous changes to our trade 
laws. In particular, I want to call attention to a very important 
section of the bill which is necessary to provide clear direction to 
the Customs Service, preventing it from improperly administering 
country of origin rules. Section 30 of the bill is intended to prevent 
the Customs Service from proceeding with any action that would change 
the status quo for the rules of origin governing the American hand tool 
industry.
  Section 30 of the bill represents the Ways and Means Committee's 
concern that Customs is attempting to significantly change longstanding 
rules of origin on which American manufacturers have relied, without 
authorization from Congress. First, the contention by Customs that a 
1992 decision by the U.S. Court of International Trade in the National 
Hand Tool case, which upheld a determination by Customs that specific 
articles were not ``substantially transforme,'' directed Customs to 
abrogate prior determinations for different products involving 
different domestic processing is not supported by the decision of the 
presiding judge. Given the record in the National Hand Tool case, the 
Government's contemporaneous arguments, and the court's silence as to 
any intent to overturn precedent, no weight or credibility can be given 
to the present contention by Customs that National Hand Tool changed 
the law and now mandates the revocation of the long-standing ruling 
letters for hand tools manufactured in the United States from imported 
metal forgings. Second, Customs' proposal to apply a tariff-shift 
standard to supplant the traditional case-by-case substantial 
transformation test which follows the time-tested judicial 
interpretation of the marking statute and its criteria of changes in 
name, character, or use has not been authorized by Congress. On July 8, 
1996, the U.S. Court of International Trade ruled that in attempting to 
overrule or abrogate the substantial transformation test Customs 
``contravenes Congressional intent, exceeds Customs' authority to 
promulgate regulations . . . and therefore is arbitrary and . . . not 
in accordance with law.''
  Section 30 of H.R. 3815 is a bipartisan approach adopted unanimously 
by the committee after extensive debate. It would impose a 1-year 
moratorium on any actions by the administration to revoke 
administrative ruling letters in effect on July 17, 1996. Additionally, 
it would require the Secretary of the Treasury, prior to issuing any 
significant policy change to the rules of origin, to consult with 
interested parties, and report to the congressional committees of 
jurisdiction the rationale for the proposed policy change. Under 
section 30, a proposal to revoke longstanding ruling letters relied on 
by hand tool manufacturers at least since the early 1980's, would 
constitute a significant policy change.
  The moratorium will provide a period for the committees of 
jurisdiction to review, study and determine the appropriate rules of 
origin for hand tools manufactured in the United States from imported 
forgings. The required consultation with the Congress upon the 
expiration of the moratorium is an added precaution to ensure that no 
policy changes are implemented by administrative action that amount to 
abrogation of longstanding court rulings and Congressional intent. 
Finally, the moratorium will provide time for the WTO working group on 
the harmonization of rules of origin to continue their work without 
interim changes by the Customs Service that may be disruptive to and 
have potentially profound adverse impact on American hand tool 
manufacturers and other manufacturing sectors of our economy.
  At this point, I would also like to submit the following letter from 
the Joint Industry Group [JIG], a coalition of over 100 companies and 
associations of importers who have also expressed concerns regarding 
origin rules.


                                     The Joint Industry Group,

                                     Washington, DC, May 15, 1996.
     Hon. Robert E. Rubin,
     Secretary of the Treasury, Department of the Treasury, 
         Washington, DC.
       Dear Mr. Secretary: Earlier this year, Deputy Secretary 
     Summers advised Congressman Crane that the Customs Service 
     had been instructed to withhold publication of a final rule 
     that would have extended Part 102 of the Customs Regulations 
     (NAFTA Annex 311 Rules of Origin) to trade with all 
     countries. The Joint Industry Group (JIG) is a coalition of 
     over 100 companies, associations and firms that represent 
     billions of dollars annually in trade. Therefore, as 
     importers and associations of importers that would have been 
     badly damaged had those rules gone into effect, we were 
     pleased by and fully supported that decision.
       There now appears to be a concerted effort underway, 
     sponsored by a small group of manufacturers calling itself 
     the American Hand Tool Coalition, to gain a competitive 
     advantage by having the Treasury Department reverse its 
     position. The implications of applying Part 102 to all trade 
     are very broad and potentially unsettling.
       The proponents of such action suggest that the Treasury 
     Department could limit it to a specific product, but adoption 
     of rules under Part 102 on a piecemeal basis would be bad 
     policy and set a disastrous precedent. To do so would 
     inevitably lead to an endless succession of changes and or 
     exceptions and a proliferation of different origin rules for 
     different industries. Similar problems previously occurred 
     when Customs first implemented regulations in 1985 which 
     nominally applied to textile products, but the principles of 
     which have been extended on a piecemeal basis to all other 
     commodities. From a practical standpoint, it would be 
     virtually impossible to adopt any segment of Part 102 without 
     also adopting the Part's general interpretative rules, many 
     of which are unsatisfactory and result in an unwarranted 
     departure from existing law.
       We respectfully ask the Department to abide by its 
     commitment not to publish the rule that would extend Part 102 
     to trade from all countries other than our NAFTA partners, 
     Canada and Mexico.
           Sincerely,

                                                Evelyn Suarez,

                                                      Chairperson,
     Rules of Origin Committee.

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