[House Report 104-859]
[From the U.S. Government Publishing Office]



104th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES

 2d Session                                                     104-859
_______________________________________________________________________


 
                      REGULATORY FAIR WARNING ACT

                                _______
                                

 September 28, 1996.--Committed to the Committee of the Whole House on 
            the State of the Union and ordered to be printed

_______________________________________________________________________


 Mr. Hyde, from the Committee on the Judiciary, submitted the following

                              R E P O R T

                             together with

                            DISSENTING VIEWS

                        [To accompany H.R. 3307]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on the Judiciary, to whom was referred the 
bill (H.R. 3307) to amend title 5, United States Code, to 
provide for a limitation on sanctions imposed by agencies and 
for other purposes, having considered the same, report 
favorably thereon with amendments and recommend that the bill 
as amended do pass.
    The amendments are as follows:
    Strike out all after the enacting clause and insert in lieu 
thereof the following:

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Regulatory Fair Warning Act''.

SEC. 2. AFFIRMATIVE DEFENSE AGAINST IMPOSITION OF FINES OR OTHER 
                    PENALTIES BY AGENCIES.

    Section 558 of title 5, United States Code, is amended by adding at 
the end the following new subsection:
    ``(d)(1) No fine or other penalty shall be imposed on a person by 
an agency for a violation of a rule if the agency finds that--
          ``(A) the rule, other general statements of policy, and 
        related guidances, policies, and other public statements--
                  ``(i) published in the Federal Register by the 
                agency, or
                  ``(ii) as to which such person had actual notice,
        failed to give such person fair warning of the conduct that the 
        rule prohibits or requires; or
          ``(B) such person committed the violation in reasonable 
        reliance upon a written statement by a Federal or State 
        official, with real or apparent authority to interpret such 
        rule, made after disclosure by such person of all material 
        facts that such person was in compliance with, exempt from, or 
        otherwise not subject to, the requirements of the rule.
    ``(2) In an action brought to impose a fine or other penalty on a 
person for an alleged violation of a rule, an agency shall not give 
deference to any interpretation of such rule relied on by the agency 
that was not published in the Federal Register or was not otherwise 
available to such person prior to the alleged violation.
    ``(3) For purposes of this subsection, a person shall be considered 
to have received fair warning of the conduct that a rule of an agency 
prohibits or requires--
          ``(A) if a person, acting reasonably and in good faith, would 
        be able to identify, with ascertainable certainty, the 
        standards with which such agency expects such person's conduct 
        to conform, or
          ``(B) when a person first received notice of the initiation 
        of a proceeding against such person for violation of such rule 
        by the agency which issued such rule.
    ``(4) The defenses authorized by this subsection shall not apply 
with respect to a violation of a rule which is a health or safety 
related rule which has been issued on an emergency basis.''.

SEC. 3. AFFIRMATIVE DEFENSE AGAINST IMPOSITION OF FINES OR OTHER 
                    PENALTIES BY COURTS.

    (a) In General.--Chapter 111 of title 28, United States Code, is 
amended by adding at the end the following new section:

``Sec. 1660. Affirmative defense against fines or other penalties for 
                    violations of agency rules

    ``(a) No civil or criminal fine or other penalty shall be imposed 
on a person by a court for a violation of a rule and no fine or other 
penalty imposed by an agency for a violation of a rule shall be 
approved by a court if the court finds that--
          ``(1) the rule, other general statements of policy, and 
        related guidances, policies, and other public statements--
                  ``(A) published in the Federal Register by the agency 
                which promulgated such rule, or
                  ``(B) as to which such person had actual notice,
        failed to give such person fair warning of the conduct that the 
        rule prohibits or requires; or
          ``(2) such person committed the violation in reasonable 
        reliance upon a written statement by a Federal or State 
        official, with real or apparent authority to interpret such 
        rule, made after disclosure by such person of all material 
        facts, that such person was in compliance with, exempt from, or 
        otherwise not subject to, the requirements of the rule.
    ``(b) In an action brought to impose a civil or criminal fine or 
other penalty on a person for an alleged violation of a rule, the court 
shall not give deference to any interpretation of such rule relied on 
by the agency that promulgated the rule that was not published in the 
Federal Register or was not otherwise available to such person prior to 
the alleged violation.
    ``(c) For purposes of this section, a person shall be considered to 
have received fair warning of the conduct that a rule of an agency 
prohibits or requires--
          ``(1) if a person, acting reasonably and in good faith, would 
        be able to identify, with ascertainable certainty, the 
        standards with which such agency expects such person's conduct 
        to conform, or
          ``(2) when a person first received notice of the initiation 
        of a proceeding against such person for violation of such rule 
        by the agency which issued such rule.
    ``(d) The defenses authorized by this section shall not apply with 
respect to a violation of a rule which is a health or safety related 
rule which has been issued on an emergency basis.''.
    (b) Clerical Amendment.--The table of sections at the beginning of 
chapter 111 of title 28, United States Code, is amended by adding after 
the item relating to section 1659 the following new item:

``1660. Affirmative defense against fines or other penalties for 
violations of agency rules.''.
    Amend the title so as to read:

    A bill to amend title 5, United States Code, to provide an 
affirmative defense against fines or other penalties imposed by 
agencies and for other purposes.

                          Purpose and Summary

    ``The Regulatory Fair Warning Act''--H.R. 3307--is designed 
to ensure that federal agencies respect the due process rights 
of persons subject to their jurisdiction. H.R. 3307 provides a 
statutory basis for affirmative defenses against fines or 
penalties imposed by agencies for the violation of rules where: 
(1) a rule or other policy document published in the Federal 
Register (or of which a person had actual notice) failed to 
give a regulated party fair warning of the conduct prohibited 
or required; or (2) a person reasonably relied upon a written 
statement by a Federal or State official that his or her 
conduct was in compliance with the rule. The bill codifies the 
decisions of several recent U.S. circuit courts of appeals that 
have addressed the principles involved in the adequate notice 
or fair warning defense,1 and is intended to eliminate an 
agency's authority to impose penalties where those principles 
are not respected.
---------------------------------------------------------------------------
    \1\ See, e.g., S. G. Lowendick and Sons, Inc. v. Reich, 70 F.3d 
1291 (D.C. Cir. 1995); General Electric Co. v. EPA, 53 F.3d 1324 (D.C. 
Cir. 1995); McElroy Electronics Corp. v. FCC, 990 F.2d 1351 (D.C. Cir. 
1993); Rollins Environmental Services, Inc. v. EPA, 937 F.2d 649 (D.C. 
Cir. 1991); Satellite Broadcasting Co., Inc. v. FCC, 824 F.2d 1 (D.C. 
Cir. 1987); and Gates & Fox, Co. v. OSHRC, 790 F.2d 154 (D.C. Cir. 
1986).
---------------------------------------------------------------------------
    The bill would preclude an agency or court from imposing a 
fine or other penalty upon a person under two specific 
circumstances. The first is where the agency or court 
determines that a rule, general policy statement, or related 
guidance, either published in the Federal Register by the 
agency or communicated to that person through actual notice, 
failed to give that person fair warning of the conduct that a 
rule prohibits or requires. The bill defines ``fair warning'' 
as set forth by the United States Court of Appeals for the D.C. 
Circuit in the recent case of General Electric Co. v. 
Environmental Protection Agency,2 and specifically, it 
provides that a person shall have received fair warning of the 
conduct prohibited or required if a person, acting in good 
faith, would be able to identify with ascertainable certainty 
the standards with which the agency expects a person's conduct 
to conform.3 The second is where the agency or court 
determines that a person acted in reasonable reliance upon a 
written statement from an appropriate Federal or State official 
(i.e. one with real or apparent authority to interpret the 
rule) that that person's conduct was in compliance with the 
rule, after all material facts were disclosed.
---------------------------------------------------------------------------
    \2\ General Electric v. EPA, 53 F.3d 1324 (D.C. Cir. 1995).
    \3\ Id. at 1329.
---------------------------------------------------------------------------
    H.R. 3307 is intended to protect regulated individuals or 
entities which are subject to agency penalties, who in good 
faith are able to prove either of these two defenses. It is 
intended to encourage agencies to promulgate clear and 
unambiguous regulations and policy statements. The Committee 
intends the legislation to require agencies to acknowledge the 
``fair warning'' and ``reasonable reliance'' defenses which 
exist in current law, and make factual and legal findings 
regarding the evidence supporting such defenses before 
determining the merit of such arguments.

                  Background and Need for Legislation

                               Background

    On July 14, 1995, during consideration of S.343, the 
``Comprehensive Regulatory Reform Act of 1995,'' the U.S. 
Senate adopted an amendment designed to protect against the 
unfair imposition of penalties for the violation of federal 
rules.4 The amendment, offered by Senator Hutchison, would 
have precluded an agency from imposing a civil or criminal 
penalty on a regulated entity if such entity did not have fair 
warning of the conduct prohibited by the rule.5 The 
amendment passed the Senate by a vote of 80 to 0.6
---------------------------------------------------------------------------
    \4\ 141 Cong. Rec. S9984 (daily ed. July 14, 1995) .
    \5\ 141 Cong. Rec. S9899 (Daily ed. July 13, 1995) (statement of 
Sen. Hutchison).
    \6\ 141 Cong. Rec. S9984 (Rollcall Vote No. 308 Leg.).
---------------------------------------------------------------------------
    On April 24, 1996, Congressman George Gekas introduced H.R. 
3307, the ``Regulatory Fair Warning Act.'' The bill, which 
amends titles 5 and 28 of the U.S. Code, was referred to the 
Committee on the Judiciary and, within the Committee, to the 
Subcommittee on Commercial and Administrative Law. Upon 
introducing the bill, Congressman Gekas, the chairman of the 
Subcommittee on Commercial and Administrative Law, 
characterized H.R. 3307 as follows: ``(T)his legislation 
codifies the principles of due process, fair warning and common 
sense that were always intended to be required by the 
Administrative Procedure Act. The bill requires that an agency 
give the regulated community adequate notice of its 
interpretation of a rule.'' 7
---------------------------------------------------------------------------
    \7\ 142 Cong. Rec. E635 (daily ed. April 25, 1996) (statement of 
Rep. Gekas).
---------------------------------------------------------------------------
    On May 2, 1996, the Subcommittee on Commercial and 
Administrative Law held a hearing on H.R. 3307. Testimony was 
heard from, among others, a current and former deputy assistant 
attorney general of the Department of Justice, a senior 
attorney with the National Resources Defense Council, and 
several members of the regulated public who testified of their 
experiences with the Occupational Health & Safety 
Administration, the Army Corps of Engineers, the Department of 
Agriculture, and the U.S. Environmental Protection Agency. H.R. 
3307 was reported favorably by the Subcommittee on June 20, 
1996, after the adoption of several amendments. The full 
Judiciary Committee favorably reported a substitute amendment 
to H.R. 3307 on August 1, 1996.
    Differences between the Senate amendment and H.R. 3307, as 
reported, are significant. First, H.R. 3307 was drafted after 
considering the substantial criticisms made by the Department 
of Justice regarding the scope and wording of the Hutchison 
amendment.8 For example, the Regulatory Fair Warning Act 
requires disclosure of all material facts by a person who 
utilizes the defense provided in subsection (d)(1)(B) of 
section 2 and subsection (a)(2) of section 3, and is effective 
upon the date of enactment rather than retroactive as is the 
Senate amendment. In addition, the bill was amended at 
Subcommittee markup to accommodate concerns raised by the 
Administration and others in testimony before the Subcommittee 
on Commercial and Administrative Law.9
---------------------------------------------------------------------------
    \8\ Letter from John R. Schmidt, Associate Attorney General, U.S. 
Department of Justice to Senators Robert J. Dole and Thomas A. Daschle. 
(July 13, 1995).
    \9\ ``The Regulatory Fair Warning Act'': Hearings on H.R. 3307 
Before the Subcomm. on Commercial and Administrative Law, 104th Cong., 
2d Sess. 104-67 (May 2, 1996).
---------------------------------------------------------------------------
    The bill was again amended in full Committee, in response 
to further concerns raised by various federal agencies, as well 
as the Office of Management and Budget. Those changes were 
incorporated in a substitute amendment offered by Congressman 
Gekas and adopted by the full Committee. The Gekas substitute 
made substantial changes to the Subcommittee reported bill. It 
eliminated the defense contained in the bill which would have 
allowed a person to argue that penalties should not be imposed 
upon them because they reasonably and in good faith determined, 
based on the rule and other statements, that they were in 
compliance with or exempt from the rule. The Department of 
Justice testified against that provision and the Administration 
argued that the provision allowed a subjective decision by an 
individual to immunize conduct which was contrary to the intent 
of a rule. Secondly, the Gekas substitute included a definition 
of the term ``fair warning.'' The Administration testified in 
support of the fair warning defense as described in General 
Electric v. EPA, but expressed concern that the legislation did 
not specify that the term ``fair warning'' in the bill would 
parallel that in case law. In response, the Committee added a 
definition of the term ``fair warning'' which is largely based 
upon the GE case.

             Safeguards of the Administrative Procedure Act

    The Administrative Procedure Act,10 enacted in 1946, 
was designed to provide uniformity and predictability to the 
various administrative processes employed by the many agencies 
of the Federal government. One of the fundamental precepts of 
the APA is the uniform requirement of notice to parties 
affected by agency actions. Section 552(a)(1)(D) requires all 
federal agencies to publish in the Federal Register 
``substantive rules of general applicability, as authorized by 
law, statements of general policy, or interpretations of 
general applicability formulated or adopted by the agency.'' 
The importance of this requirement is emphasized by the fact 
that no exceptions are provided to this provision. That is, due 
process rights of the regulated public are paramount in the 
notice requirements of the APA.
---------------------------------------------------------------------------
    \10\ 5 U.S.C. Sec. Sec. 551-559, 701-706 (1994).
---------------------------------------------------------------------------
    The original drafters of the APA intended to discourage 
agencies from adversely affecting the rights of the regulated 
public, where notice of a rule's requirements has not been 
adequately communicated. The Senate Judiciary Committee's 
report on the APA stated that: ``[T]he bill is designed to 
afford parties affected by administrative powers a means of 
knowing what their rights are and how they may be protected.'' 
11 The high standard to which Congress intends to hold 
agencies with regard to the issue of notice was made clear in 
later additions to the statute's language which provide: 
``[E]xcept to the extent that a person has actual and timely 
notice of the terms thereof, a person may not in any manner 
(emphasis added) be required to resort to or be adversely 
affected by, a matter required to be published in the Federal 
Register and not so published.'' 12 Clearly, fair notice 
of a regulation's actual requirements is a procedural right 
bestowed upon the regulated public by the APA.
---------------------------------------------------------------------------
    \11\ S. Rep. No. 193, 79th Cong., 2d Sess. (1946).
    \12\ 5 U.S.C. Sec. 552(a).
---------------------------------------------------------------------------
    Federal courts, in interpreting this language, have 
balanced the agency's ability to carry out its responsibilities 
against the regulated public's right to know. Take, for 
example, the case of Appalachian Power Co. v. Train,13 
which involved a dispute between several power companies and 
the Environmental Protection Agency (EPA) over regulations 
issued by EPA pursuant to the Federal Water Pollution Control 
Act Amendments of 1972. The Act required cooling water intake 
structures to reflect the best technology available for 
minimizing any adverse environmental impact. The EPA regulation 
at issue required the regulated public, in determining the best 
available technology, to consider information contained in the 
agency's ``Development Document.'' The ``Development Document'' 
was not published in the Federal Register nor were the parties 
given actual notice of the information contained therein. In 
ruling against the EPA and holding its regulation to be 
ineffective against the regulated parties, the court held that:
---------------------------------------------------------------------------
    \13\ Appalachian Power Co. v. Train, 556 F.2d 451 (4th Cir. 1977).

          Any agency regulation that so directly affects 
        preexisting legal rights or obligations, indeed that is 
        of such a nature that knowledge of it is needed to keep 
        the outside interests informed of the agency's 
        requirements in respect to any subject within its 
        competence, is within the publication 
        requirement.14 (citations omitted).
---------------------------------------------------------------------------
    \14\ Id., at 455.

    The APA and relevant court interpretations leave no 
question but that notice to the regulated public--either 
through publication in the Federal Register or via actual 
notice--is fundamental to an agency's ability to ultimately 
enforce its own regulations. However, courts have struggled to 
determine where an agency's obligation to give notice ends. One 
test was established in Lewis v. Weinberger,15 which 
involved a challenge to the Indian Health Service's failure to 
give notice of certain policy coverage limitations through 
publication in the Federal Register. In ruling against the 
agency, the court held that the APA requires notice by 
publication whenever agencies adopt new rules or substantially 
modify existing rules, and thereby cause direct and significant 
impact upon the substantive rights of the general 
public.16
---------------------------------------------------------------------------
    \15\ Lewis v. Weinberger, 415 F.Supp. 652 (D. N.M. 1976).
    \16\ Id. at 659.
---------------------------------------------------------------------------
    Another instructive case is a decision by the Ninth Circuit 
Court of Appeals in Anderson v. Butz,17 where the 
Department of Agriculture amended a handbook which contained 
instructions on calculating food stamp benefits. The court, in 
holding against the Department, ruled that the APA permits an 
agency to refrain from publishing a document only when: ``(1) a 
clarification or explanation of existing laws or regulations is 
expressed; and (2) no significant impact upon any segment of 
the public results.'' 18 Whatever the formulation arrived 
at in these cases, it is clear that the courts have found that 
notions of due process inherent in the APA were intended to 
render an agency's enforcement authority less than plenary 
where fair notice to the regulated public has not been 
accomplished.
---------------------------------------------------------------------------
    \17\ Anderson v. Butz, 550 F.2d 459 (9th Cir. 1977).
    \18\ Id. at 463.
---------------------------------------------------------------------------

                    Agency Authority and Due Process

    The Fifth Amendment to the U.S. Constitution provides that 
``[n]o person * * * shall be deprived of life, liberty, or 
property, without due process of law.'' The purpose and 
fundamental guarantee of the due process clause is to ensure 
fairness and substantial justice.19 Where the Government 
has adversely affected a person's rights in life, liberty or 
property, that person shall be afforded due process.20
---------------------------------------------------------------------------
    \19\ See, John E. Nowak and Ronald D. Rotunda, Constitutional Law, 
West Publishing Co. at 511 (5th ed. 1995).
    \20\ Id. at 510.
---------------------------------------------------------------------------
    It is a basic principle of due process that a statute may 
be deemed to be void for vagueness if its prohibitions are not 
clearly defined.21 This fundamental proscription against 
vague laws is set forth in the early case of U.S. v. L. Cohen 
Grocery Co.22 In Cohen, a dealer in sugar was charged with 
violating the Lever Act, which made it unlawful for any person 
to willfully charge any unjust rate in dealing in any 
necessaries.23 The Supreme Court, in quashing the 
indictment, concluded that the law was too vague, indefinite, 
and uncertain since it fixed no immutable standard and was 
unconstitutional since it did not inform the defendant of the 
nature and cause of the accusation against him.24 The 
Supreme Court more recently reiterated this principle in 
striking down a local picketing regulation. It stated:
---------------------------------------------------------------------------
    \21\ Grayned v. City of Rockford, 408 U.S. 104, 108-109 (1972).
    \22\ U.S. v. L. Cohen Grocery Co., 255 U.S. 81 (1921).
    \23\ Id. at 86.
    \24\ Id. at 87-88.

          It is a basic principle of due process that an 
        enactment is void for vagueness if its prohibitions are 
        not clearly defined. Vague laws offend several 
        important values. First, because we assume that man is 
        free to steer between lawful and unlawful conduct, we 
        insist that laws give the person of ordinary 
        intelligence a reasonable opportunity to know what is 
        prohibited, so that he may act accordingly. Vague laws 
        may trap the innocent by not providing fair warning. 
        Second, if arbitrary and discriminatory enforcement is 
        to be prevented, laws must provide explicit standards 
        for those who apply them.25
---------------------------------------------------------------------------
    \25\ Grayned, 408 U.S. at 108.

    The essential guarantee of the due process clause is that 
of fairness--to ensure there is always a neutral decision-
maker, be it a judge, hearing officer or agency.26 The 
Supreme Court has long held that a fair process in a fair 
tribunal are basic requirements of due process, and that this 
requirement applies to administrative agencies as well as to 
courts.27 Federal courts have recognized this principle 
and have applied it to guide the rulemaking process used by 
federal agencies. As the D.C. Circuit recently ruled: 
``[T]raditional concepts of due process incorporated into 
administrative law preclude an agency from penalizing a party 
for violating a rule without first providing adequate notice of 
the substance of the rule.'' 28 This basic due process 
concept has repeatedly been adopted by federal courts in 
determining whether agencies have overstepped their bounds in 
enforcing their regulations.29
---------------------------------------------------------------------------
     26 Nowak, supra, note 24, at 510.
     27 Withrow v. Larkin, 421 U.S. 35 (1975); Gibson v. 
Berryhill, 411 U.S. 564 (1973).
     28 Satellite Broadcasting, supra, at 3.
     29 Lowendick, supra; General Electric, supra; McElroy 
Electronics , supra; Rollins, supra; and Gates and Fox, supra.
---------------------------------------------------------------------------

                        The Fair Warning Defense

    Despite Congress' attempt to instill procedural due process 
protections and a right to notice for the regulated public 
through APA provisions, some agencies have strayed from the 
law's intent. Over the past two decades federal courts have 
been forced to overturn the imposition of sanctions where 
agencies have penalized regulated entities for violations of 
rules determined to be too vague, incomprehensible or 
implemented pursuant to a non-public agency interpretation. 
This trend, which some have characterized as agency 
overzealousness, has resulted in a recent line of federal court 
decisions that have insulated the regulated public from 
penalties where an agency has failed to give fair warning of 
what a rule requires.
    For example, in General Electric Co. v. EPA,30 the 
General Electric Company (GE) was fined by EPA for violating a 
regulation governing the disposal of polychlorinated biphenyl 
(PCB). Although the court gave traditional deference to the 
agency's interpretation of its own rule, since penalties were 
sought by EPA, the court's determination became contingent upon 
the issue of whether the rule provided GE with fair warning of 
the conduct it required. The court held that due process 
requires parties to receive fair notice before being deprived 
of property, and concluded that EPA's interpretation of its own 
regulation did not give the company fair warning of what the 
rule required. In reversing the agency's imposition of a fine, 
the court stated:
---------------------------------------------------------------------------
     30 General Electric, supra, at 1327.

          Although the agency must always provide ``fair 
        notice'' of its regulatory interpretations to the 
        regulated public, in many cases the agency's pre-
        enforcement efforts to bring about compliance will 
        provide adequate notice. * * * In some cases, however, 
        the agency will provide no pre-enforcement warning, 
        effectively deciding to use a citation--as the initial 
        means for announcing a particular interpretation--or 
        for making its interpretation clear. * * * In such 
        cases, we must ask whether the regulated party 
        received, or should have received, notice of the 
        agency's interpretation in the most obvious way of all: 
        by reading the regulations, if, by reviewing the 
        regulations and other public statements issued by the 
        agency, a regulated party acting in good faith would be 
        able to identify with ``ascertainable certainty,'' the 
        standards with which the agency expects parties to 
        conform, then the agency has fairly notified a 
        petitioner of the agency's interpretation.31
---------------------------------------------------------------------------
     31 Id. at 1329.

    The GE Court's ``fair warning'' ruling exhibits a dual 
respect for both constitutional due process protections and the 
fundamental notice requirements of the APA.
    Nine years before its holding in GE, the U.S. Court of 
Appeals for the D.C. Circuit enunciated a similar ``fair 
warning'' test for agencies attempting to penalize the public 
for violations of federal rules. In Gates & Fox v. 
OSHRC,32 an employer was cited for violating Occupational 
Safety and Health Administration (OSHA) regulations that 
required employers engaged in tunneling to provide emergency 
breathing equipment for each employee near an advancing face of 
a tunnel. Although the court acknowledged the traditional 
deference to the agency's interpretation, it ruled that since 
penalties were sought by the agency, due process concerns 
diluted that traditional deference. The court stated:
---------------------------------------------------------------------------
     32 Gates & Fox, supra, at 155.

          Courts must give deference to an agency's 
        interpretation of its own regulations. Where the 
        imposition of penal sanctions is at issue, however, the 
        due process clause prevents that deference from 
        validating the application of a regulation that fails 
        to give fair warning of the conduct it prohibits or 
        requires.33
---------------------------------------------------------------------------
     33 Id. at 156.

    The court went on to cite the Fifth Circuit decision in 
Diamond Roofing Co. v. OSHRC,34 as follows:
---------------------------------------------------------------------------
     34  528 F.2d 645, 649 (5th Cir., 1976).

          An employer, however, is entitled to fair notice in 
        dealing with his government. Like other statutes and 
        regulations which allow monetary penalties against 
        those who violate them, an occupational safety and 
        health standard must give an employer fair warning of 
        the conduct it prohibits or requires. * * * If a 
        violation of a regulation subjects private parties to 
        criminal or civil sanctions, a regulation cannot be 
        construed to mean what an agency intended but did not 
---------------------------------------------------------------------------
        adequately express.

    The court, in granting the petition for review of the 
Commission's decision to impose sanctions, held that the Gates 
& Fox Company did not receive adequate notice of the prohibited 
conduct.
    A year later, the U.S. Court of Appeals for the D.C. 
Circuit relied on its ruling in Gates & Fox to again prohibit 
an agency from penalizing the regulated public where adequate 
notice was not provided. In Satellite Broadcasting Co., Inc. v. 
FCC,35 the Federal Communications Commission (FCC) 
dismissed the Satellite Broadcasting Company's (SBC) 
applications to operate certain microwave radio stations 
because they were filed at the wrong location.36 The FCC 
rule, pursuant to which the SBC filed its applications, did not 
at the time of SBC's filing specify the location at which 
applications were to be filed. In ruling against the 
agency,37 the court held that while the agency's 
interpretation of its rules is entitled to deference, if it 
wishes to use an interpretation to cut off a party's rights, it 
must give full notice of its interpretation. In reiterating its 
previous holding, the court stated: ``Traditional concepts of 
due process incorporated into administrative law preclude an 
agency from penalizing a private party for violating a rule 
without first providing adequate notice of the substance of the 
rule.'' 38 The court acknowledged that the agency's 
interpretation was a reasonable one, but determined that the 
private party's interpretation was equally reasonable and 
concluded that an agency, through its regulatory power, cannot 
punish a member of a regulated class for reasonably 
interpreting agency rules.
---------------------------------------------------------------------------
     35 Satellite Broadcasting, supra.
     36 The SBC filed its application in Washington, D.C. The 
subsequently amended rule required such applications to be filed in 
Gettysburg, Pennsylvania.
     37 The court held that the FCC's order dismissing the SBC's 
application was arbitrary and capricious and remanded the case for 
reinstatement.
     38 Id. at 3.
---------------------------------------------------------------------------
    While the U.S. Court of Appeals for the D.C. Circuit has 
been called upon more frequently to rule on the ``fair 
warning'' defense, other circuits have also recently had to 
face the issue. In Georgia Pacific Corporation v. The 
Occupational Safety and Health Review Commission,39 the 
Eleventh Circuit Court of Appeals ruled against the 
Occupational Safety and Health Review Commission (OSHRC) 
regarding its imposition of a penalty for violation of a 
forklift regulation. In vacating the penalty, the court held:
---------------------------------------------------------------------------
    \39\ Georgia Pacific Corporation v. The Occupational Safety and 
Health Review Commission, 25 F.3d 999 (11th Cir. 1994).

          Like other statutes and regulations which allow 
        monetary penalties against those who violate them, an 
        occupational safety and health standard must give an 
        employer fair warning of the conduct it prohibits or 
        requires. A statute or regulation is considered 
        unconstitutionally vague under the due process clause 
        of the Fifth or Fourteenth Amendments if it forbids or 
        requires the doing of an act in terms so vague that men 
        of common intelligence must necessarily guess at its 
        meaning and differ as to its application.40
---------------------------------------------------------------------------
    \40\ Id. at 1005.

    The Seventh Circuit Court of Appeals in Kropp Forge Company 
v. The Secretary of Labor,41 ruled against the OSHRC's 
imposition of a penalty against a regulated party for violation 
of a noise level regulation. The court determined the 
regulation to be vague and stated: ``[T]he pertinent parts of 
the regulation do impose `penal sanctions' and the regulation 
in issue does not give reasonable notice of the conduct said to 
be prohibited. * * *'' 42 The Fifth Circuit Court of 
Appeals also addressed the fair warning issue the 
aforementioned case of Diamond Roofing Company v. The 
Occupational Safety and Health Review Commission.43
---------------------------------------------------------------------------
    \41\ Kropp Forge Company v. The Secretary of Labor, 657 F.2d 119 
(7th Cir. 1981).
    \42\ Id. at 123.
    \43\ Diamond Roofing Company v. The Occupational Safety and Health 
Review Commission, supra at 649.
---------------------------------------------------------------------------
    The Third Circuit Court of Appeals in Dravo Corporation v. 
The Occupational Safety and Health Review Commission,44 
ruled against the Commission regarding its interpretation of an 
OSHA ship building regulation and stated:
---------------------------------------------------------------------------
    \44\ Dravo Corporation v. The Occupational Safety and Health Review 
Commission, 613 F.2d 2127 (3rd Cir. 1980).

          Because we deal here with a penal sanction, we begin 
        with a recognition that the coverage of an agency 
        regulation should be no broader than what is 
        encompassed in its terms * * *. [T]he Secretary as 
        enforcer of the [regulations] has the responsibility to 
        state with ascertainable certainty what is meant by the 
        standards he has promulgated.45
---------------------------------------------------------------------------
    \45\ Id. at 2132.

    Virtually every U.S. circuit court of appeals that has had 
the opportunity to rule on an appeal involving the ``fair 
warning'' defense has been consistent in ruling against 
agencies that have sought to impose penalties where adequate 
notice was not given.

                    The Reasonable Reliance Defense

    Some federal statutes, which require numerous regulations 
to implement, provide agencies the power to delegate 
enforcement authority to state governments.46 Such 
delegations of authority have led to dual enforcement schemes 
shared between federal and state officials. Where conflicts 
have arisen between state and federal authorities regarding 
interpretations of federal rules, federal agencies have been 
reluctant to grant regulated parties the benefit of the doubt, 
and instead have sought to penalize the private party for 
reliance on a state authority's interpretation. Recent disputes 
where a federal agency has been reluctant to recognize a 
regulated party's good faith reliance defense under this dual 
enforcement circumstance have been resolved pursuant to 
voluntary consent decrees.47 It is the Committee's intent 
that the agencies and courts acknowledge the ``reasonable 
reliance'' defense fully consistent with the terms of the new 
subsection 558(d)(1)(B). If a person relies on a written 
statement of a federal or state official who has real or 
apparent authority to interpret a rule, that reliance is 
reasonable.
---------------------------------------------------------------------------
    \46\ See, e.g., The Clean Air Act (codified as amended at 42 U.S.C. 
Sec. 7401 et. seq.), and the Clean Water Act (codified as amended at 33 
U.S.C. Sec. 1251 et. seq.).
    \47\ See, Consent Decree in U.S. versus Louisiana Pacific 
Corporation, Civ. No. 6:93-0869 (W.D. LA.) 58 Fed. Reg. 34591 (June 28, 
1993) Notice of Amended Consent Decree 60 Fed. Reg. 62258 (December 5, 
1995); and Consent Decree in U.S. versus Georgia Pacific Corporation, 
Civ. No. 1: 96-CV-1318-FMH (N.D. GA.) 61 Fed. Reg. 42266 (August 14, 
1996).
---------------------------------------------------------------------------

                        The Need for Legislation

    The goal of the APA--to provide an administrative process 
that is uniform and predictable to the regulated public--is 
undermined when penalties are imposed where the procedural 
requirements of due process notice and fair warning are in 
doubt. Agencies that issue unclear rules or reinterpret rules 
within their own walls, without regard to the understanding of 
the regulated public, are not acting consistent with the goals 
of the APA. In such circumstances, regulated parties may find 
it difficult, if not impossible, to plan their affairs with 
confidence until the regulation is challenged and publicly 
interpreted by an agency or court.
    Where agencies choose to ignore the notice requirements of 
the APA, and seek instead to impose penalties on regulated 
entities in the face of the ``fair warning'' or ``reasonable 
reliance'' defenses, the financial cost and the burden of 
uncertainty fall upon the regulated public. For example, in 
Rollins Environmental Services, 48 the EPA took years to 
settle on an interpretation of a confusing regulation governing 
the incineration of solvents used to decontaminate PCB 
containers.49 EPA took six years just to file a complaint 
against Rollins,50 and a full year after filing the 
complaint, prepared an internal report that acknowledged 
significant disagreement among various headquarters and 
regional offices concerning the regulation's actual 
meaning.51 Even though the D.C. Circuit refused to enforce 
the civil fine, that does not erase the years of uncertainty to 
which the agency subjected an entire industry.52
---------------------------------------------------------------------------
    \48\ 937 F.2d 649 (D.C. Cir. 1991).
    \49\ Id. at 652.
    \50\ Id. at 651.
    \51\ Id. at 653.
    \52\ Manning, supra, note 31, at 612.
---------------------------------------------------------------------------
    The fact that numerous agency penalties have been 
overturned at the appellate level indicates that some agencies 
are ignoring or simply dismissing these defenses in many cases. 
53 Although appellate court rulings regarding the 
imposition of penalties in fair warning circumstances have been 
consistent, this has not discouraged agencies from pursuing 
penalties in such cases. Litigation which begins at the agency 
level and is ultimately resolved in a U.S. circuit court of 
appeals is expensive and time consuming. When agencies, to the 
detriment of the public, ignore the principles of due process 
and prior appellate court decisions on point, then Congress has 
a responsibility to act.
---------------------------------------------------------------------------
    \53\ For example, in GE v. EPA, supra, the Environmental Appeal 
Board of the EPA summarily dismissed GE's ``fair warning'' defense 
without making any legal or factual findings regarding the defense or 
evidence supporting the defense. The Appeals Board in dismissing GE's 
defense simply stated:
    GE did not comply with [the regulation] and was therefore properly 
charged with, and found guilty of violating the disposal regulation. 
This conclusion is based on the plain language of [the regulation]; 
GE's arguments that it did not have fair notice of what the law 
requires are rejected. * * * GE's proffered defenses are purely legal 
in nature and, for the most part, are not even relevant to these 
charges; they in no way prove or offset any of the elements that make 
up a violation of this regulatory requirement. In re General Electric 
Co., Board of Appeals, U.S. Environmental Protection Agency, Docket No. 
TSCA IV-89-0016, TSCA Appeal No. 92-2a (November 1, 1993).
---------------------------------------------------------------------------
    H.R. 3307 is born of the regulated public's appeal to 
Congress to respond to the actions of a stubborn and litigious 
administrative bureaucracy. The legislation does not impinge 
upon any agency's authority to enforce its regulations--it 
merely requires agencies to respect and acknowledge the ``fair 
warning'' and ``reasonable reliance'' defenses with regard to 
the issuance of penalties. H.R. 3307 codifies the decisions of 
several U.S. circuit courts of appeal which have ruled on the 
issue of fair warning 54 where the imposition of penalties 
is at stake. The bill provides that no civil or criminal fine 
or penalty shall be imposed by an agency or court if the agency 
or court finds that: (1) the rule alleged to be violated, and 
other policy statements or guidances, whether published in the 
Federal Register, or brought to the regulated party's actual 
notice, failed to give a person fair warning of the conduct 
that the rule prohibits or requires; or (2) the regulated 
person acted in reasonable reliance upon a written statement of 
a federal or state official that the person's conduct was in 
compliance with the rule, as long as all material facts 
regarding the conduct were disclosed.
---------------------------------------------------------------------------
    \54\ The legislation explicitly codifies the case of GE, supra, in 
that the language of subsections (d)(3)(A) of section 2 and (c)(1) of 
section 3 of the bill is identical to the language of the GE decision.
---------------------------------------------------------------------------

                                Hearings

    The Committee's Subcommittee on Commercial and 
Administrative Law held a hearing on H.R. 3307 on May 2, 1996. 
Testimony was received from: James F. Simon, Deputy Assistant 
Attorney General, Environment and Natural Resources Division of 
the Department of Justice, accompanied by Edward L. Dowd, Jr., 
United States Attorney, Eastern District of Missouri; Roger J. 
Marzulla, Esq., former Assistant Attorney General, Environment 
and Natural Resources Division of the Department of Justice; 
David Hawkins, Senior Attorney, Natural Resources Defense 
Council; Laurent R. Hourcle, Assistant Professor of 
Environmental Law, The National Law Center, The George 
Washington University; Susan Eckerly, Director of Regulatory 
Policy, Citizens for a Sound Economy; Robert J. Brace, Robert 
Brace Farm, Inc.; Vitas M. Plioplys, Manager of Safety 
Services, R.R. Donnelley & Sons, Co.; and Robert McMackin, with 
additional material submitted by Andrew S. Liscow, Vice 
President, Cincinnati Preserving Co.

                         Committee Consideration

     On June 20, 1996, the Subcommittee on Commercial and 
Administrative Law met in open session and ordered favorably 
reported the bill H.R. 3307, amended, by a voice vote, a quorum 
being present. On July 30, 31, and August 1, 1996, the full 
Judiciary Committee met in open session and ordered reported 
favorably the bill H.R. 3307, amended, by a recorded vote of 16 
to 9, a quorum being present.

                         Vote of the Committee

     There were ten amendments offered during full Committee 
consideration. However, only one amendment, an amendment in the 
nature of a substitute offered by Mr. Gekas, was adopted. That 
amendment was adopted by voice vote. The bill, as amended by 
the Gekas substitute, was favorably reported to the House by a 
roll call vote of 16 to 9.
     Mr. Scott offered an amendment to require that the 
defenses provided for in the bill not apply with regard to 
circumstances where multiple and conflicting statements are 
issued from the same agency. The Scott amendment was defeated 
by voice vote. In addition, there were recorded votes on nine 
amendments and one motion to table during the Committee's 
consideration of H.R. 3307, as follows:
    1. A substitute amendment offered by Mr. Reed to strike the 
specific affirmative defenses provided for in the bill and 
instead provide a general prohibition on agencies from imposing 
civil fines where ``fair warning'' was not provided to a 
regulated party. Defeated 9-13.
        YEAS                           NAYS
Mr. Conyers                         Mr. Hyde
Mr. Frank                           Mr. Moorhead
Mr. Reed                            Mr. Sensenbrenner
Mr. Nadler                          Mr. Gekas
Mr. Scott                           Mr. Smith (TX)
Mr. Watt                            Mr. Gallegly
Ms. Lofgren                         Mr. Canady
Ms. Jackson Lee                     Mr. Buyer
Ms. Waters                          Mr. Bono
                                    Mr. Heineman
                                    Mr. Chabot
                                    Mr. Flanagan
                                    Mr. Barr

    2. An amendment offered by Mr. Scott to provide that the 
defenses in the bill would not apply where a conflict exists 
between an agency's interpretation of a rule and a regulated 
person's interpretation of a rule where fair warning has been 
given. Defeated 8-15.
        YEAS                          NAYS
Mr. Frank                           Mr. Hyde
Mr. Berman                          Mr. Moorhead
Mr. Reed                            Mr. Sensenbrenner
Mr. Scott                           Mr. Gekas
Mr. Watt                            Mr. Schiff
Ms. Lofgren                         Mr. Gallegly
Ms. Jackson Lee                     Mr. Canady
Ms. Waters                          Mr. Goodlatte
                                    Mr. Buyer
                                    Mr. Bono
                                    Mr. Heineman
                                    Mr. Bryant (TN)
                                    Mr. Chabot
                                    Mr. Flanagan
                                    Mr. Barr
    3. An amendment offered by Ms. Waters to require that the 
defenses provided for in the bill not apply to any federal rule 
which is issued for the protection of the health and safety of 
workers in the United States. Defeated 9-16.
        YEAS                          NAYS
Mr. Conyers                         Mr. Hyde
Mr. Frank                           Mr. Moorhead
Mr. Schumer                         Mr. Sensenbrenner
Mr. Berman                          Mr. McCollum
Mr. Reed                            Mr. Gekas
Mr. Scott                           Mr. Schiff
Mr. Watt                            Mr. Gallegly
Ms. Lofgren                         Mr. Canady
Ms. Waters                          Mr. Goodlatte
                                    Mr. Buyer
                                    Mr. Bono
                                    Mr. Heineman
                                    Mr. Bryant (TN)
                                    Mr. Chabot
                                    Mr. Flanagan
                                    Mr. Barr

    4. A motion offered by Mr. Gekas to table the motion by Ms. 
Lofgren to suspend consideration of H.R. 3307 until September 
17. Passed 15-10.

        YEAS                          NAYS
Mr. Hyde                            Mr. Frank
Mr. Moorhead                        Mr. Schumer
Mr. Sensenbrenner                   Mr. Berman
Mr. McCollum                        Mr. Reed
Mr. Gekas                           Mr. Nadler
Mr. Schiff                          Mr. Scott
Mr. Gallegly                        Mr. Watt
Mr. Canady                          Ms. Lofgren
Mr. Goodlatte                       Ms. Jackson Lee
Mr. Bono                            Ms. Waters
Mr. Heineman
Mr. Bryant (TN)
Mr. Chabot
Mr. Flanagan
Mr. Barr

    5. An amendment offered by Ms. Lofgren to provide that the 
defenses in the bill will not apply to safety rules issued by 
the Secretary of Transportation or to interpretations of any of 
its underlying agencies. Defeated 9-12.
        YEAS                          NAYS
Mr. Conyers                         Mr. Hyde
Mr. Frank                           Mr. Moorhead
Mr. Reed                            Mr. McCollum
Mr. Nadler                          Mr. Gekas
Mr. Scott                           Mr. Coble
Mr. Watt                            Mr. Canady
Ms. Lofgren                         Mr. Goodlatte
Ms. Jackson Lee                     Mr. Bono
Ms. Waters                          Mr. Heineman
                                    Mr. Bryant (TN)
                                    Mr. Chabot
                                    Mr. Barr
    6. An amendment offered by Ms. Lofgren to provide that the 
defenses in the bill will not apply to any rule issued by the 
Consumer Product Safety Commission for the protection of 
children from hazardous products. Defeated 4-12.
        YEAS                          NAYS
Mr. Nadler                          Mr. Hyde
Mr. Watt                            Mr. Moorhead
Ms. Lofgren                         Mr. Gekas
Ms. Jackson Lee                     Mr. Coble
                                    Mr. Smith (TX)
                                    Mr. Gallegly
                                    Mr. Canady
                                    Mr. Bono
                                    Mr. Heineman
                                    Mr. Bryant (TN)
                                    Mr. Chabot
                                    Mr. Flanagan

    7. An amendment offered by Ms. Jackson Lee to provide that 
the defenses in the bill will not apply to any law which 
protect human health and the environment. Defeated 8-13.
        YEAS                          NAYS
Mrs. Schroeder                      Mr. Moorhead
Mr. Berman                          Mr. Coble
Mr. Bryant (TX)                     Mr. Smith (TX)
Mr. Reed                            Mr. Canady
Mr. Watt                            Mr. Inglis
Ms. Lofgren                         Mr. Goodlatte
Ms. Jackson Lee                     Mr. Buyer
Ms. Waters                          Mr. Bono
                                    Mr. Heineman
                                    Mr. Bryant (TN)
                                    Mr. Chabot
                                    Mr. Flanagan
                                    Mr. Barr

    8. An amendment offered by Mr. Reed to provide that the 
defenses in the bill will not apply to any rule issued by the 
Securities and Exchange Commission. Defeated 9-15.
        YEAS                          NAYS
Mrs. Schroeder                      Mr. Hyde
Mr. Berman                          Mr. Moorhead
Mr. Reed                            Mr. Coble
Mr. Nadler                          Mr. Smith (TX)
Mr. Scott                           Mr. Schiff
Mr. Watt                            Mr. Canady
Ms. Lofgren                         Mr. Inglis
Ms. Jackson Lee                     Mr. Goodlatte
Ms. Waters                          Mr. Buyer
                                    Mr. Bono
                                    Mr. Heineman
                                    Mr. Bryant (TN)
                                    Mr. Chabot
                                    Mr. Flanagan
                                    Mr. Barr
    9. An amendment offered by Mrs. Schroeder to provide that 
the defenses in the bill will not apply to any actions taken by 
the Attorney General or the Equal Employment Opportunities 
Commission under title VII of the Civil Rights Act of 1964. 
Defeated 9-16.
        YEAS                          NAYS
Mrs. Schroeder                      Mr. Hyde
Mr. Berman                          Mr. Moorhead
Mr. Reed                            Mr. Gekas
Mr. Nadler                          Mr. Coble
Mr. Scott                           Mr. Smith (TX)
Mr. Watt                            Mr. Schiff
Ms. Lofgren                         Mr. Canady
Ms. Jackson Lee                     Mr. Inglis
Ms. Waters                          Mr. Goodlatte
                                    Mr. Buyer
                                    Mr. Bono
                                    Mr. Heineman
                                    Mr. Bryant (TN)
                                    Mr. Chabot
                                    Mr. Flanagan
                                    Mr. Barr

    10. Vote on final passage of H.R. 3307. Adopted 16-9.
        YEAS                          NAYS
Mr. Hyde                            Mrs. Schroeder
Mr. Moorhead                        Mr. Berman
Mr. Gekas                           Mr. Reed
Mr. Coble                           Mr. Nadler
Mr. Smith (TX)                      Mr. Scott
Mr. Schiff                          Mr. Watt
Mr. Canady                          Ms. Lofgren
Mr. Inglis                          Ms. Jackson Lee
Mr. Goodlatte                       Ms. Waters
Mr. Buyer
Mr. Bono
Mr. Heineman
Mr. Bryant (TN)
Mr. Chabot
Mr. Flanagan
Mr. Barr

                      Committee Oversight Findings

    In compliance with clause 2(l)(3)(A) of rule XI of the 
Rules of the House of Representatives, the Committee reports 
that the findings and recommendations of the Committee, based 
on oversight activities under clause 2(b)(1) of rule X of the 
Rules of the House of Representatives, are incorporated in the 
descriptive portions of this report.

         Committee on Government Reform and Oversight Findings

    No findings or recommendations of the Committee on 
Government Reform and Oversight were received as referred to in 
clause 2(l)(3)(D) of rule XI of the Rules of the House of 
Representatives.

               New Budget Authority and Tax Expenditures

    Clause 2(l)(3)(B) of House Rule XI is inapplicable because 
this legislation does not provide new budgetary authority or 
increased tax expenditures.

               Congressional Budget Office Cost Estimate

    In compliance with clause 2(l)(C)(3) of rule XI of the 
Rules of the House of Representatives, the Committee sets 
forth, with respect to the bill, H.R. 3307, the following 
estimate and comparison prepared by the Director of the 
Congressional Budget Office under section 403 of the 
Congressional Budget Act of 1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                   Washington, DC, August 28, 1996.
Hon. Henry J. Hyde,
Chairman, Committee on the Judiciary,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
reviewed H.R. 3307, ``The Regulatory Fair Warning Act,'' as 
ordered reported by the House Committee on the Judiciary on 
August 1, 1996. CBO estimates that H.R. 3307 would not 
significantly affect governmental receipts or the direct 
spending that results from these receipts. Because enacting 
H.R. 3307 could affect receipts and direct spending, pay-as-
you-go procedures would apply to the bill.
    H.R. 3307 would prevent federal agencies and courts from 
imposing civil and criminal penalties on individuals for 
violating federal regulations if the regulating body failed to 
give fair warning through publication in the Federal Register 
or direct notice of the conduct prohibited or required. 
Furthermore, the bill would bar the imposition of penalties on 
individuals who violated regulations with reasonable reliance 
upon written documentation from an appropriate regulatory 
authority that they were in compliance or exempt from the 
regulation. According to the Department of Justice, the bill 
would establish affirmative defenses against the imposition of 
penalties which would likely increase the frequency and 
complexity of litigation in cases where individuals are accused 
of violating agency regulations. While the bill could prevent 
the imposition of penalties in some marginal cases, CBO 
estimates that these cases would result in only a modest 
reduction in penalties collected by the federal government. In 
most cases, the bill would not affect penalty collections 
because agencies and courts currently take such factors into 
consideration in determining the appropriateness of imposing a 
penalty. Several recent federal court cases have precluded 
agencies from imposing sanctions on regulated individuals based 
on evidence that the regulating agencies failed to provide fair 
warning. The bill would require agencies and courts to comply 
with the findings of these decisions. Because the bill largely 
codifies existing practice, CBO estimates that it would not 
measurably reduce penalty collection.
    Section 252 of the Balanced Budget and Emergency Deficit 
Control Act of 1985 sets up pay-as-you-go procedures for 
legislation affecting receipts or direct spending through 1998. 
Because H.R. 3307 could affect receipts by reducing civil and 
criminal penalty collections, pay-as-you-go procedures would 
apply to the bill. Criminal fines are deposited in the Crime 
Victims Fund and then spent out the following year. Thus, any 
change in receipts to the Crime Victims Fund would be matched 
by a change in direct spending from the fund, with a one year 
lag. These effects are summarized in the pay-as-you-go table 
below.

                      PAY-AS-YOU-GO CONSIDERATIONS                      
                [By fiscal year, in millions of dollars]                
------------------------------------------------------------------------
                                                 1996     1997     1998 
------------------------------------------------------------------------
Changes in receipts..........................        0        0        0
Changes in outlays...........................        0        0        0
------------------------------------------------------------------------

    H.R. 3307 contains no private sector or intergovernmental 
mandates as defined in Public Law 101-4, and would have no 
significant impact on the budgets of state, local, or tribal 
government.
    If you wish further details on this estimate we will be 
pleased to provide them. The CBO staff contact is Stephanie 
Weiner, who can be reached at 226-2720.
            Sincerely,
                                         June E. O'Neill, Director.

                              Agency Views

    The Committee has received the following communications 
from the Departments of Justice, Treasury, and Labor.

                        U.S. Department of Justice,
                             Office of Legislative Affairs,
                                     Washington, DC, July 12, 1996.
Hon. Henry Hyde,
Chairman, Committee on the Judiciary,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: We understand that the House Judiciary 
Committee plans to mark up H.R. 3307, the ``Regulatory Fair 
Warning Act,'' next week. I am writing to provide additional 
comments of the Department of Justice on H.R. 3307 as amended 
by the Commercial and Administrative Law Subcommittee at its 
June 20, 1996 markup. The Department originally testified in 
opposition to the bill on May 2, 1996 and remains strongly 
opposed to H.R. 3307, notwithstanding the amendments adopted by 
the Subcommittee.
    On its face, the bill appeals to concepts that appear to be 
fair and unobjectionable. The Department of Justice fully 
supports the well-established principles that citizens should 
be given fair warning of what laws and regulations require and 
that citizens should be permitted reasonable reliance on 
government statements. Indeed, existing doctrines of due 
process and estoppel protect these principles under current 
law. However, we believe H.R. 3307 goes beyond these principles 
and thus would have many harmful consequences that Congress 
does not intend. H.R. 3307's broad new legal defenses to civil 
or criminal enforcement of any federal rule would undermine 
public health, safety, environmental protection, and effective 
law enforcement.
    First, the bill would make enforcement depend on the 
defendant's belief about the law, thereby creating a good-faith 
``mistake of the law'' defense and seriously reducing 
protections for all Americans against law-breakers. In 
addition, the bill would allow businesses and individuals to 
rely on any statement by state officials that a given law or 
rule does not apply to particular conduct. This would 
effectively permit states to grant businesses or individuals an 
exception to federal rules, thereby undermining national 
uniformity in the application of federal law and lowering 
standards for compliance with federal regulations of all types, 
including those protecting public health, safety and the 
environment.
    Finally, the bill's provision permitting only statements 
published in the Federal Register to constitute fair warning of 
regulatory requirements is unwise and unwarranted. For many 
regulated entities, publication in the Federal Register is not 
the best way to provide actual notice of regulatory 
requirements to an industry. This provision also does not 
recognize the various alternative ways in which regulated 
entities may receive actual notice of what the law requires.
    We cannot predict with certainty how the courts will apply 
the broad and overlapping new defenses to civil and criminal 
enforcement that H.R. 3307 would create, but we continue to be 
concerned that the bill would seriously undermine the Justice 
Department's ability to carry out critical law enforcement 
responsibilities. For example:
    The Americans with Disabilities Act--The Americans with 
Disabilities Act (ADA) provides anti-discrimination protections 
to 43 million persons with disabilities. Because the ADA 
created new and unfamiliar requirements, the government is 
required to provide Technical Assistance Manuals. See 42 U.S.C. 
12206(c)(3). The Manuals are widely disseminated, but are not 
published in the Federal Register. Numerous court decisions 
have held that the interpretations of the ADA found in the 
Manuals are entitled to substantial deference. Because H.R. 
3307 appears to require Federal Register publication of all 
rules, these Manuals could be rendered unenforceable. In 
addition, the bill would invite litigation over defendants' 
claims that they ``reasonably and in good faith'' determined 
that they were in compliance with, or exempt from, ADA 
requirements.
    Child Pornography--To prevent the exploitation of children 
in films or photographs that depict sexually explicit conduct, 
the Justice Department has issued rules that require producers 
of these materials to keep and disclose records documenting the 
names and ages of the persons portrayed. Violators are subject 
to criminal penalties. Suppose a purveyor of child pornography 
elicits an erroneous opinion from an attorney that these rules 
are inapplicable to its operations. The pornographer could 
argue under H.R. 3307 that he ``reasonably and in good faith 
determined'' that he needs not comply with the rules, and 
thereby avoid penalties for violations of the rules.
    Prisoner Conduct--In discharging its statutory 
responsibility for the care, custody, and control of federal 
inmates, the Bureau of Prisons (``BOP'') has issued 
comprehensive rules addressing a broad range of activities, 
including disciplinary regulations. H.R. 3307 implicates every 
possible interpretation of these regulations and could disrupt 
BOP's effective management and operation of federal prisons. 
For example, an inmate might contend that he had reasonably 
believed that BOP's rule against ``interfering with a staff 
member in the performance of duties,'' codified at 28 CFR 
541.13, did not provide fair notice that certain disruptive 
conduct was prohibited. It is difficult to predict the outcome 
of these types of cases under the bill, but at a minimum the 
bill could generate more, and we believe inappropriate, 
litigation to determine whether the prisoner's belief was 
reasonable. Inmates would have the time and incentive to raise 
every possible defense under the bill and exploit every 
arguable ambiguity in disciplinary sanctions proceedings.
    Tax evasion--Taxpayers have attempted to argue in our 
criminal cases that they did not act willfully because the IRS 
had not published anything specifically saying that a 
particular tax evasion scheme was illegal. The courts have held 
that one can willfully evade taxes even though the IRS has not 
said that a particular scheme is illegal. The IRS does not 
typically identify specific schemes as illegal in the Federal 
Register. Under H.R. 3307, a tax evader could claim immunity 
from penalties for a scheme violating a regulation if the IRS 
had not specifically labelled it illegal.
    H.R. 3307 could create similar barriers to law enforcement 
in many other regulatory programs administered or enforced by 
the Justice Department, including immigration, antitrust, and 
narcotics (e.g., the Drug Enforcement Administration's schedule 
of controlled substances).
    In sum, H.R. 3307 provides many opportunities for abuse. To 
the extent that the goal of H.R. 3307 is to make regulations 
clearer and easier to understand, a better legislative approach 
is to support agency efforts to simplify and clarify 
regulations and improve coordination with state regulators, and 
to expand and facilitate agency efforts to inform the regulated 
community about what the law requires. The Department would 
welcome the opportunity to work with you, the Committee, and 
any other interested Members, to find productive ways to 
achieve these goals.
    The Office of Management and Budget advises that there is 
no objection to the presentation of this report from the 
standpoint of the Administration's program.
            Sincerely,
                                             Ann M. Harkins
                     (For Andrew Fois, Assistant Attorney General).
                                ------                                

                        Department of the Treasury,
                                           General Counsel,
                                     Washington, DC, July 15, 1996.
Hon. Henry J. Hyde,
Chairman, Committee on the Judiciary,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: This letter presents the views of the 
Department of the Treasury on H.R. 3307, the ``Regulatory Fair 
Warning Act.'' While we agree that agencies should provide fair 
warning and assistance to persons attempting to comply with the 
law, the Department of the Treasury Strongly opposes H.R. 3307 
because it would seriously impair the ability of the Department 
to enforce the law and administer its regulatory programs. In 
addition to the comments expressed below, the Department 
endorses the views expressed by the Department of Justice in 
its May 2, 1996, testimony before the Subcommittee on 
Commercial and Administrative law.
    The bill provides that an agency or court cannot impose a 
civil or criminal fine or other penalty for a violation of a 
rule (or other guidance) published in the Federal Register if 
the rule failed to give ``fair warning'' of the prohibited or 
required conduct. The bill, however, does not define what 
constitutes ``fair warning.'' In criminal law, the due process 
defense of ``void for vagueness'' protects persons from 
prosecutions for noncompliance with a rule if the rule is not 
sufficiently clear about the prohibited conduct. In civil law, 
statutes generally direct agencies and courts to take into 
account the objective reasonableness of a defendant's actions 
when assessing civil fines and penalties. It is unclear whether 
the proposed ``fair warning'' standard is merely intended to 
mirror the current standards, or whether it constitutes a super 
mandate that imposes a different standard. If the former, the 
provision is unnecessary and confusing; if the latter, it will 
result in years of litigation before a body of reliable case 
law is developed to enable agencies to satisfy the new 
standard.
    The bill also provides that an agency or court cannot 
impose a civil or criminal fine or other penalty for violation 
of a rule, if the person charged with the violation 
``reasonably and in good faith determined'' on the basis of 
material a published by the agency in the Federal Register, 
that he or she was in compliance with, exempt from, or 
otherwise not subject to, the requirements of the rule. This 
provision is highly objectionable for a number of reasons.
    This provision would undermine the entire range of 
Treasury's law enforcement and regulatory programs. The 
longstanding principle that mistake or ignorance of the law is 
not a valid defense would be replaced by a subjective standard 
that provides that no penalty can be imposed on a person who 
believed that he or she was in compliance with the law, even if 
he or she clearly and objectively was in violation of the law. 
Such a standard encourages ignorance of the law and removes all 
incentives for persons to know and undertake their obligations 
to society under the law. In a business context, the bill 
rewards precisely the wrong behavior; it places conscientious 
law-abiding businesses at a competitive disadvantage relative 
to those that cut costs by violating the law without the threat 
of civil or criminal penalties.
    Furthermore, it is inappropriate to determine whether a 
person acted reasonably and in good faith based solely on that 
person's understanding of materials published in the Federal 
Register. Both the Internal Revenue Service and the United 
States Customs Service have extensive private letter ruling 
programs designed to provide highly technical guidance to 
persons on tax and customs matters, respectively. A similar 
program administered by the Office of Foreign Assets Control 
(OFAC) provides guidance to persons and businesses concerning 
compliance with OFAC regulations implementing foreign sanctions 
programs with respect to hostile foreign governments. The 
Office of the Comptroller of the Currency (OCC) and the Office 
of Thrift Supervision (OTS), which are the Federal agencies 
with primary supervisory authority over national banks and 
savings associations, provide advisory and interpretative 
letters to financial institutions regarding compliance with 
Federal laws and regulations designed to ensure the safety and 
soundness of insured depository institutions and to protect 
depositors. Publication of such documents in the Federal 
Register, which are issued by the thousands each year, would be 
extremely costly and could, in certain instances, result in the 
inappropriate public disclosure of confidential business or 
other information.
    Many agencies utilize a variety of other means to 
disseminate guidance information to the public. For example, 
the Internal Revenue Service publishes revenue rulings and 
revenue procedures in the Internal Revenue Bulletin; the Bureau 
of the Public Debt issues interpretations under the Government 
Securities Act and the rules governing auctions of marketable 
Treasury securities that are available through various private 
publication services (e.g., CCH and BNA); the OCC and OTS 
provide extensive guidance on all aspects of Federal banking 
law to financial institutions through the Banking Circular and 
Thrift Bulletin, respectively, which are made available through 
regular mailings, private publication services, computer 
research services (e.g., LEXIS and Westlaw) and the Internet. 
Section 625 of the Tariff Act of 1930 (19 U.S.C. 1625), as 
amended in 1993 by the North American Free Trade Agreement 
Implementation Act, requires the Secretary of the Treasury to 
publish certain interpretative rulings in the Customs Bulletin 
and strongly encourages the use of the Customs Bulletin and the 
Customs electronic bulletin board as the principal means for 
Customs to communicate information to the trade community. Many 
agencies, particularly the Internal Revenue Service, also 
provide the public with detailed publications providing 
guidance on how to comply with statutes and regulations.
    Each of these highly successful and beneficial programs 
would be rendered meaningless by the bill because they would be 
irrelevant to a determination of whether a person acted 
reasonably and in good faith. Indeed, it is likely that the 
bill would result in decreased public use of these programs 
because it removes any incentive for persons to look beyond 
what appears in the Federal Register in order to determine 
whether they are in compliance with a particular law or 
regulation.
    This provision also is inconsistent with the Small Business 
Regulatory Enforcement Fairness Act of 1996 (SBREFA), which 
received broad bipartisan support and was signed into law by 
the President on March 29, 1996. One of the stated purposes of 
SBREFA is to develop more accessible sources of information on 
regulatory and reporting requirements for small businesses. For 
example, SBREFA section 212(a) requires agencies to publish 
compliance guides with respect to rules that impose a 
significant economic impact on small businesses. Section 214 
specifically contemplates that such guides would be distributed 
by Small Business Development Centers. SBREFA directs agencies 
to provide non-Federal Register guidance to small businesses on 
how to comply with the law and regulations; H.R. 3307 tells the 
small business community it can ignore those compliance guides 
and rely solely on what the agency published in the Federal 
Register.
    We also note that SBREFA section 212(c) specifically 
provides that in a regulatory enforcement action ``the content 
of the small entity compliance guide may be considered as 
evidence of the reasonableness or appropriateness of any 
proposed fines, penalties or damages.'' We fail to understand 
why it is appropriate to consider a small business compliance 
guide for purposes of determining the reasonableness of a fine 
or penalty, but not for determining whether the defendant acted 
reasonably and in good faith with respect to complying with the 
rule explained by the compliance guide.
    If this bill is enacted, it will in all likelihood 
dramatically increase the number of regulations published in 
the Federal Register as well as the detail and complexity of 
those regulations. The number will increase as agencies publish 
the entire range of compliance materials not now published in 
the Federal Register. Instead of writing clear and concise 
regulations that allow for necessary flexibility, detail and 
complexity will increase as agencies attempt to list or 
enumerate each and every situation in which a rule would or 
would not apply. Such a result is clearly contrary to widely 
supported Administration efforts to streamline and simplify 
regulations. It also is inconsistent with SBREFA section 
203(4), which declares that a purpose of the act is ``to 
simplify the language of Federal regulations affecting small 
businesses.''
    The bill also provides that a court or agency can give 
deference to an agency interpretation of a rule only if that 
interpretation was published in the Federal Register or 
``otherwise available'' to the defendant. This provision 
appears to be in conflict with the provision in the bill that 
prohibits an agency or court from considering an interpretation 
of a rule that was not published in the Federal Register when 
determining if a person reasonably believed that he or she was 
in compliance with a rule. We fail to understand why an agency 
interpretation that was ``otherwise available'' to a defendant 
cannot be considered when determining whether the defendant 
reasonably believed he or she was in compliance with a rule, 
but can be considered if it subsequently is determined that the 
defendant unreasonably believed he or she was in compliance.
    The bill would have serious consequences for the entire 
spectrum of Treasury's law enforcement and regulatory programs, 
some of which are discussed below. With respect to the Internal 
Revenue Service (IRS), the system of penalties contained in the 
Internal Revenue Code (Code) has been carefully developed over 
the years to balance the interests of both the taxpayer and the 
government. It appears, however, that the bill would completely 
override the penalty structure of the Code. For example, Code 
section 6662(d)(2)(B) provides for a reduction in the penalty 
for making a ``substantial understatement'' of tax only if (1) 
there is ``substantial authority'' for the taxpayer's position 
or (2) there is a reasonable basis for the taxpayer's position 
and the taxpayer adequately discloses the relevant facts on the 
tax return. Code sections 6651 and 6656 provide that a penalty 
is not applicable if the defendant's failure to comply ``is due 
to reasonable cause and not due to willful neglect.'' These are 
objective standards that can be administered by examining the 
facts and circumstances of each case.
    Under the bill, however, no penalty could be imposed if the 
taxpayer reasonably and in good faith determined that his or 
her position was correct. Since the likelihood of a penalty is 
significantly reduced by the bill's subjective standards, the 
bill will encourage taxpayers to take more aggressive positions 
when filing their tax returns. We believe that the bill will 
encourage taxpayers to ``shop around'' for tax advice until 
they find a practitioner who will provide the sought after 
opinion. Indeed, under the bill it appears that a taxpayer 
could ``reasonably and good faith'' rely on such an opinion, 
even if the practitioner's advice was unreasonable or not made 
in good faith. The potential revenue loss to the government 
could be substantial.
    We are seriously concerned that the scope of the bill may 
extend beyond the imposition of traditional tax penalties to 
the actual enforcement of Federal taxes. Because the term 
``other penalty'' could be construed to include a ``taking'' or 
``seizure'' of property (see 5 U.S.C. 551(10)(D)), it is 
possible that the bill could apply to the levy or seizure of 
property pursuant to a tax lien for unpaid taxes. If so, the 
bill would permit a taxpayer to assert the ``reasonable and 
good faith'' defense for unpaid Federal taxes because the 
ultimate actions available to the government to obtain 
payment--levy and seizure of property for a tax sale--would be 
``penalties'' subject to the defense. Thus, even if a taxpayer 
was wrong on the law, but reasonably thought otherwise, the 
Internal Revenue Service could be precluded from collecting the 
taxes lawfully due the government. Again, the potential revenue 
loss to the government could be substantial.
    The bill would make it much more difficult for the OCC and 
OTS to successfully bring proceedings against officers and 
directors whose actions jeopardize the safety and soundness of 
our financial institutions. Ultimately, this could increase the 
liability of the Federal deposit insurance funds, with those 
costs being ultimately borne by the American taxpayer. We are 
seriously concerned that the bill's ``reasonable and in good 
faith'' standard could immunize officers and directors who 
clearly have violated safety and soundness requirements, as 
well as their fiduciary duties, by permitting them to claim 
ignorance of the law, or to interpret the law in a way that 
justifies their actions.
    OFAC is charged with implementing Presidential 
determinations to impose economic, trade and other sanctions on 
hostile governments such as Iran, Iraq and Libya. Although OFAC 
publishes regulations in the Federal Register implementing its 
sanctions programs, administration of the sanctions programs 
relies heavily on individual OFAC licensing determinations and 
advisory opinions issued in response to specific requests, 
which are not published or otherwise made available because 
they reflect confidential business information. The bill would 
allow a person to make an individual determination as to the 
meaning of an OFAC regulation without applying for a specific 
license or advisory interpretation, and then seek to avoid 
civil or criminal penalties by arguing that he or she 
reasonably and in good faith relied on the published 
regulations. Such a result would seriously undermine the 
ability of the United States to administer foreign sanctions 
programs. The Federal government must have greater certainty 
that it will be able to direct policy and control the conduct 
of U.S. persons in dealing with hostile nations.
    Many of the same concerns would also apply to penalties for 
violations of the counter-money laundering provisions of the 
Bank Secrecy Act. This statute, administered by Treasury's 
Financial Crimes Enforcement Network (FinCEN), is a key 
component of Federal efforts to detect trafficking in illicit 
drugs and other organized crime.
    In conclusion, we do not believe that the proposed 
legislation is necessary in order to protect law-abiding 
citizens from the arbitrary imposition of civil or criminal 
fines or other penalties. Indeed, the Administration's program 
providing for the waiver of fines and penalties intended to 
benefit those first-time violators who in good faith have 
attempted to comply with the law. The bill would, however, give 
criminal and civil defendants, rogue members of regulated 
industries and tax protestors who intentionally violate laws or 
regulations the ability to protect themselves from the 
imposition of fines and penalities on mere technicalities. The 
bill would make it easier for defense counsel to construct post 
hoc defenses based on spurious interpretations of agency 
regulations. The vagueness of the bill would invite frivolous 
challenges to agency interpretations of both its regulations 
and its implementing statutes.
    The Office of Management and Budget has advised that there 
is no objection to the submission of this report.
            Sincerely,
                                 Edward S. Knight, General Counsel.
                                ------                                

                          U.S. Department of Labor,
                                        Secretary of Labor,
                                     Washington, DC, July 15, 1996.
Hon. Henry J. Hyde,
Chairman, Committee on the Judiciary,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: It is my understanding that H.R. 3307, 
the ``Regulatory Fair Warning Act,'' is to be considered by 
your Committee in the near future. I am writing to express the 
Department of Labor's strong opposition to this legislation.
    Section 2 of the bill provides that an agency may not 
impose a civil or criminal fine or other penalty against a 
person for violation of a rule, if, inter alia, the agency 
finds--(1) that the rule and other agency guidance and policies 
published in the Federal Register failed to give the person 
fair warning of the conduct prohibited or required; or (2) that 
prior to the violation, the person reasonably and in good faith 
determined, based upon the rule and other agency guidance and 
policies, that it was in compliance with, exempt from, or 
otherwise not subject to the rule's requirements; or, (3) that 
the violation was committed in reasonable reliance upon a 
written statement by an appropriate Federal or State official 
(made after disclosure by the person of all material facts) 
that the person was in compliance with, exempt from, or 
otherwise not subject to the rule's requirements. (Section 3 of 
the bill imposes the same restrictions on courts.)
    While we agree that certain aspects of the regulatory 
process could be improved and recognize and appreciate your 
efforts to improve protections for America's working men and 
women, we are also convinced that H.R. 3307 would not advance 
this goal. We are especially concerned that, if this 
legislation were enacted, it would have a drastic and 
detrimental effect on the Department's ability to protect the 
Nation's working men and women.
    We believe H.R. 3307 could promote extensive and costly 
litigation concerning whether individuals ``reasonably and in 
good faith'' determined that they were in compliance with, or 
exempt from, a rule. Such litigation could force Federal 
agencies to move away from flexible performance-oriented 
rulemaking that allows for the exercise of judgment and common 
sense to overly-prescriptive specification rulemaking that 
requires agencies to define the application of every rule to 
every conceivable situation. Clearly, this result is 
unnecessary, unreasonable and would be extremely burdensome and 
costly to the Federal Government. It would also prove costly to 
business, which has strongly supported the use of performance-
oriented standards. While the current legislative desire is to 
reduce the amount of litigation, this bill would actually 
increase the amount of litigation.
    In this regard, we are extremely concerned about the bill's 
``fair warning'' requirement. At the outset, we believe that 
the requirement is unreasonably vague, because the term ``fair 
warning'' is not defined, and that the requirement would 
encourage massive litigation by individuals seeking to obtain 
protection from civil and criminal fines or other penalties for 
violating agency rules. We also believe that the Federal 
Register publication requirement is not reasonable, since for 
many of our agencies, and for many members of the regulated 
community, publication in the Federal Register is not 
necessarily the exclusive means for providing actual notice and 
understanding to the regulated community.
    Furthermore, we believe that this overly prescriptive 
requirement could seriously undermine our efforts to protect 
our Nation's workers. For example, in a Mine Safety and Health 
Administration (MSHA) enforcement case, 10 miners were killed 
in a methane gas explosion at an underground coal mine in 
Kentucky in 1989. The cause of the explosion was a buildup of 
methane gas while the mine operator was moving equipment. While 
an investigation of this accident later led to 14 guilty pleas 
or convictions of company officials, some of which involved 
substantial prison sentences for willful violations of basic 
safety laws, the result might have been an acquittal under H.R. 
3307. The operator could have argued that ``fair warning'' was 
not provided by the agency's rule, because it did not 
specifically state that the mine operator's activity, which 
clearly put miners in grave danger, constituted a violation.
    We also have serious concerns with the provision of the 
bill which bars civil and criminal fines or other penalties 
against a person where the person ``reasonably and in good 
faith'' determined that it was in compliance with or exempt 
from the rule. By placing the emphasis on the subjective 
understanding of the person, the bill: (1) overturns a long-
standing principle that ignorance of the law is no excuse, and 
(2) entices individuals to construct ``good faith'' compliance 
arguments to escape legal requirements that Congress has deemed 
necessary to protect the public. If a person can construct a 
``reasonable'' argument that the conduct is not proscribed by 
rule, the person is immune from any fine or penalty for 
violation, regardless of how much harm to the public health or 
safety may result. The following example may serve to 
illustrate this point.
    In an enforcement action under the Occupational Safety and 
Health Act, 29 U.S.C. 658 et seq., an employer at a 
construction site used a crane to swing a 2,600 pound load over 
two employees working on an aircraft carrier deck. A rope in 
the load broke, causing the load to fall 40 feet onto the 
workers, killing one and injuring the other. At the hearing 
before the Occupational Safety and Health Review Commission 
(``Commission''), the Commission ruled that the employer 
violated a standard prohibiting the use of swinging loads by a 
crane over employees, and rejected the employer's argument that 
the term ``swing'' did not apply because the cited crane was 
carrying the load in only one direction. However, the defendant 
may have been acquitted under H.R. 3307, by arguing that, under 
his subjective understanding of the law, he reasonably and in 
good faith determined that the term ``swing'' applied only to a 
two-directional movement.
    We also have strong objections to the provision allowing 
individuals to escape civil and criminal fines or other 
penalties through a reasonable reliance on a written statement 
by a Federal or State official ``authorized to implement or 
ensure compliance with the rule.'' Among other things, this 
provision would encourage forum shopping by members of the 
regulated public who seek written statements that narrow the 
scope of a regulation's coverage to exclude particular 
activity. This will also have an inevitable chilling effect on 
agency officials trying to provide helpful, informal guidance 
to members of the public; they will fear that such advice could 
have negative enforcement consequences. In this regard, we note 
that the recently enacted ``Small Business Regulatory 
Enforcement Fairness Act'' encourages agency officials to 
provide compliance assistance information to members of the 
small business community, while H.R. 3307 would promote the 
opposite results.
    The Department of Labor is committed to eliminating 
regulations that are outdated, unclear and ineffective, and to 
streamlining and simplifying regulations that need to be 
retained. While the President has made elimination of 
unreasonable and burdensome regulations a priority of this 
Administration, equally important is the ability of each agency 
to carry out its responsibilities to promote the common welfare 
of working men and women. We believe that this goal would be 
thwarted by the enactment of H.R. 3307, which would impede our 
ability to carry out our mission in these times of declining 
resources.
    The Office of Management and Budget has advised that there 
is no objection to the submission of this report to the 
Congress from the standpoint of the President's program.
            Sincerely,
                                                   Robert B. Reich.

                     Inflationary Impact Statement

    Pursuant to clause 2(l)(4) of rule XI of the Rules of the 
House of Representatives, the Committee estimates that H.R. 
3307 will have no significant inflationary impact on prices and 
costs in the national economy.

                      Section-by-Section Analysis

Section 1--Short title

    Section 1 of the bill sets forth its short title as the 
``Regulatory Fair Warning Act.''

Section 2--Affirmative defenses against imposition of fines or 
        penalties by agencies

    Section 2 of the bill amends title 5 of the United States 
Code by adding a new subsection (d) to section 558 of that 
title. This subsection establishes certain affirmative defenses 
against penalties in agency enforcement actions.

Subsection (d)(1)

    New subsection 558(d)(1) creates two affirmative defenses 
against the imposition of a fine or other penalty by agencies 
for the violation of federal rules. This subsection is intended 
to provide guidance to an agency in determining whether or not 
it should impose penalties upon a person.55
---------------------------------------------------------------------------
    \55\ The term ``person'' as used in the bill is intended as it is 
defined in section 551 of title 5 to include: an individual, 
partnership, corporation, association, or public or private 
organization other than an agency. 5 U.S.C. Sec. 551 (1994).
---------------------------------------------------------------------------

Subsection (d)(1)(A)

    Subsection (d)(1)(A) sets forth the first of two 
affirmative defenses provided for in the bill. It provides that 
no fine or penalty shall be imposed on a person by an agency 
for a violation of a rule if the agency finds that the rule, 
other general statements of policy, and related guidances, 
policies, and other public statements, published in the Federal 
Register by the agency, or where there was actual notice, 
failed to give such person ``fair warning'' of the conduct that 
the rule prohibits or requires. This provision, referred to as 
the ``fair warning defense,'' provides a statutory basis from 
which a person may argue against the imposition of penalties by 
an agency in an enforcement action.

Subsection (d)(1)(B)

    Subsection (d)(1)(B) sets forth the second of the two 
defenses provided for in the bill. It provides that no fine or 
penalty shall be imposed on a person by an agency for the 
violation of a rule if the agency finds that a person committed 
the violation in reasonable reliance upon a written statement 
by a Federal or State official, with real or apparent authority 
to interpret such rule, after disclosure by the person of all 
the material facts. This provision, referred to as the 
``reasonable reliance defense,'' is intended to provide a 
statutory basis from which a person may argue against the 
imposition of penalties by an agency in an enforcement action.

Subsection (d)(3)

    Subsection (d)(3) defines when a person shall be considered 
to have received fair warning. It provides that a person shall 
be considered to have received fair warning of the conduct that 
a rule prohibits or requires under two circumstances. The first 
circumstance, set forth in subsection (d)(3)(A), states that a 
person is considered to have received fair warning, if that 
person, acting reasonably and in good faith, would be able to 
identify with ascertainable certainty, the standards with which 
the agency expects the person's conduct to conform. The second 
circumstance under which a person shall be considered to have 
received fair warning is set forth in subsection (d)(3)(B). It 
provides that fair warning has been received when a person 
first received notice of the initiation of an agency 
enforcement proceeding against them for a violation of a rule.

Subsection (d)(4)

    New subsection (d)(4) clarifies that no health or safety 
related rule issued on an emergency basis will be subject to 
the defenses provided in this legislation.

Section 3--Affirmative defenses against imposition of fines or other 
        penalties by courts

    Section 3 of the bill amends title 28 of the U.S. Code by 
adding at the end of chapter 111 a new section 1660. The new 
section 1660, in general, provides that no court shall impose a 
civil or criminal fine or penalty or approve a final penalty 
imposed by an agency under certain circumstances.

Subsection (a) of section 3

    Subsection (a) of section 3 of the bill provides that 
chapter 111 of title 28 of the U.S. Code is amended by adding 
at the end a new section. The description of that new section, 
section 1660, is detailed below.

Subsection 1660(a)

    The circumstances set forth in new subsection 1660(a) of 
title 28 under which penalties shall not be imposed by a court 
are identical to the circumstances provided in section 2 of 
this bill regarding restrictions on an agency's authority to 
impose penalties. As under section 2 of this bill regarding 
agencies, any decision by a court to impose penalties, or 
approve of an agency's imposition of penalties, shall be 
contingent upon the findings of the court regarding the 
defenses proffered. Subsection (a) of the new section 1660 to 
title 28 provides a statutory basis for two affirmative 
defenses against the imposition of penalties by courts.

Subsection 1660(a)(1)

    New subsection 1660(a)(1) sets forth the circumstances upon 
which the ``fair warning'' affirmative defense may be based to 
preclude the imposition of penalties by a court. These 
circumstances and the policy arguments supporting this defense 
are identical to the circumstances and arguments supporting 
such defense when proffered to an agency to preclude penalties 
as provided in section 2 of the bill, establishing a new 5 
U.S.C. 558(d)(1)(A).

Subsection 1660(a)(2)

    New subsection 1660(a)(2) of title 28 sets forth the second 
of two affirmative defenses provided for in the bill against 
the imposition of penalties by courts. This subsection 
describes the basis for the ``reasonable reliance'' defense 
wherein a person demonstrates that they relied upon a written 
statement of an authorized official that their conduct would be 
in compliance with a rule. This subsection, which provides a 
defense against penalties imposed by a court, is identical to 
new subsection 5 U.S.C. 558(d)(1)(B) established under section 
2 of this bill.

Subsection 1660(b)

    New subsection 1660(b) of title 28 would preclude a court 
from granting deference to an agency's interpretation of a rule 
which is the subject of an enforcement proceeding when that 
interpretation was not available to the regulated public prior 
to the violation. This provision regarding a court's discretion 
is identical to new subsection (d)(2) of 5 U.S.C. 558, which 
would be created by section 2 of this bill.

Subsection 1660(c)

    Subsection (c) of new section 1660 of title 28 defines when 
a person for purposes of section 3 of the bill will be 
considered to have received ``fair warning.'' This provision is 
intended to guide a court in determining whether or not a fair 
warning defense has merit. This subsection is identical to 
subsection 558(d)(3) of title 5 which would be created by 
section 2 of this bill.

Subsection 1660(d)

    Subsection (d) of new subsection 1660 of title 28 provides 
that the defenses authorized by section 3 of this bill 
regarding a court's authority to impose penalties shall not 
apply to a violation of a health or safety related rule issued 
on an emergency basis. This provision is identical to 
subsection 558(d)(4) of title 5 which would be established by 
section 2 of this bill.

Subsection (b)

    Subsection (b) of section 3 of the bill provides a clerical 
amendment to chapter 111 of title 28 of the U.S. Code to 
provide a new section and title. The section and title are as 
follows: ``1660. Affirmative defense against fines or other 
penalties for violations of agency rules.''

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3 of rule XIII of the Rules of the 
House of Representatives, changes in existing law made by the 
bill, as reported, are shown as follows (existing law proposed 
to be omitted is enclosed in black brackets, new matter is 
printed in italics, existing law in which no change is proposed 
is shown in roman):

               SECTION 558 OF TITLE 5, UNITED STATES CODE

Sec. 558. Imposition of sanctions; determination of applications for 
                    licenses; suspension, revocation, and expiration of 
                    licenses

  (a) * * *
          * * * * * * *
  (d)(1) No fine or other penalty shall be imposed on a person 
by an agency for a violation of a rule if the agency finds 
that--
          (A) the rule, other general statements of policy, and 
        related guidances, policies, and other public 
        statements--
                  (i) published in the Federal Register by the 
                agency, or
                  (ii) as to which such person had actual 
                notice,
        failed to give such person fair warning of the conduct 
        that the rule prohibits or requires; or
          (B) such person committed the violation in reasonable 
        reliance upon a written statement by a Federal or State 
        official, with real or apparent authority to interpret 
        such rule, made after disclosure by such person of all 
        material facts that such person was in compliance with, 
        exempt from, or otherwise not subject to, the 
        requirements of the rule.
  (2) In an action brought to impose a fine or other penalty on 
a person for an alleged violation of a rule, an agency shall 
not give deference to any interpretation of such rule relied on 
by the agency that was not published in the Federal Register or 
was not otherwise available to such person prior to the alleged 
violation.
  (3) For purposes of this subsection, a person shall be 
considered to have received fair warning of the conduct that a 
rule of an agency prohibits or requires--
          (A) if a person, acting reasonably and in good faith, 
        would be able to identify, with ascertainable 
        certainty, the standards with which such agency expects 
        such person's conduct to conform, or
          (B) when a person first received notice of the 
        initiation of a proceeding against such person for 
        violation of such rule by the agency which issued such 
        rule.
  (4) The defenses authorized by this subsection shall not 
apply with respect to a violation of a rule which is a health 
or safety related rule which has been issued on an emergency 
basis.
                              ----------                              


              CHAPTER 111 OF TITLE 28, UNITED STATES CODE

                    CHAPTER 111--GENERAL PROVISIONS

Sec.
1651. Writs.
     * * * * * * *
1660. Affirmative defense against fines or other penalties for 
          violations of agency rules.
          * * * * * * *

Sec. 1660. Affirmative defense against fines or other penalties for 
                    violations of agency rules

  (a) No civil or criminal fine or other penalty shall be 
imposed on a person by a court for a violation of a rule and no 
fine or other penalty imposed by an agency for a violation of a 
rule shall be approved by a court if the court finds that--
          (1) the rule, other general statements of policy, and 
        related guidances, policies, and other public 
        statements--
                  (A) published in the Federal Register by the 
                agency which promulgated such rule, or
                  (B) as to which such person had actual 
                notice,
        failed to give such person fair warning of the conduct 
        that the rule prohibits or requires; or
          (2) such person committed the violation in reasonable 
        reliance upon a written statement by a Federal or State 
        official, with real or apparent authority to interpret 
        such rule, made after disclosure by such person of all 
        material facts, that such person was in compliance 
        with, exempt from, or otherwise not subject to, the 
        requirements of the rule.
  (b) In an action brought to impose a civil or criminal fine 
or other penalty on a person for an alleged violation of a 
rule, the court shall not give deference to any interpretation 
of such rule relied on by the agency that promulgated the rule 
that was not published in the Federal Register or was not 
otherwise available to such person prior to the alleged 
violation.
  (c) For purposes of this section, a person shall be 
considered to have received fair warning of the conduct that a 
rule of an agency prohibits or requires--
          (1) if a person, acting reasonably and in good faith, 
        would be able to identify, with ascertainable 
        certainty, the standards with which such agency expects 
        such person's conduct to conform, or
          (2) when a person first received notice of the 
        initiation of a proceeding against such person for 
        violation of such rule by the agency which issued such 
        rule.
  (d) The defenses authorized by this section shall not apply 
with respect to a violation of a rule which is a health or 
safety related rule which has been issued on an emergency 
basis.
                            DISSENTING VIEWS

    We fully support the concept of regulatory fair warning--
the government should provide its citizens with fair warning of 
what its laws and regulations require and citizens should be 
able to rely on information received from their government. 
Indeed, that principle is embodied in the Due Process Clause of 
the United States Constitution. However, the Republican 
``Regulatory Fair Warning Act'' is anything but fair and goes 
well beyond these bedrock principles. The bill would create 
unprecedented and unjustified new legal defenses to both civil 
and criminal enforcement of any federal regulation that will 
undermine public health, safety, environmental protection and 
effective law enforcement. That is why environmental groups, 
consumer groups and prosecutors join us in opposition to this 
legislation.

             1. fair warning is already required under law

    Due process and general principles of administrative law 
require that a person must have fair notice before penalties 
can be assessed. 1 In criminal cases, the rule of lenity 
already requires that ambiguity in a statute be resolved in the 
defendant's favor. 2 The law also provides an estoppel 
defense if an individual relies on statements made by the 
government. 3 If this legislation were designed to codify 
and clarify these principles, we would support it. But that is 
not what H.R. 3307 does.
---------------------------------------------------------------------------
    \1\ See General Electric Co. v. EPA, 53 F.3d 1324 (D.C.Cir. 1995) 
(Government cannot obtain a penalty for the violation of a new 
regulatory interpretation about which the company did not have fair 
notice. Where different divisions of the agency disagree on the rule's 
interpretation there is no fair notice.)
    \2\ Crandon v. United States, 494 U.S. 152, 168 (1990).
    \3\ United States v. Brebner, 951 F.2d 1017 (9th Cir. 1991).
---------------------------------------------------------------------------
    At the Subcommittee hearing on the issue of fair warning, 
we heard very compelling testimony from a retired couple, the 
McMackins, who became entangled in a wetlands dispute with the 
Army Corps of Engineers. Many of us have tried to aid 
constituents in similar predicaments. But H.R. 3307 does not 
provide any assistance to the McMackins. Neither of the 
defenses provided by the bill apply to the facts of their case. 
Fortunately, President Clinton has already solved the problem 
of homeowners like Mr. McMackin: in July, 1995, the President 
issued a nationwide Clean Water Act exemption that allows small 
landowners in non-tidal areas to build a single family home 
without applying for a permit. 4
---------------------------------------------------------------------------
    \4\ Home-Related Construction in Wetlands Approved by New 
Nationwide Permit No. 29--Issued 7/19/95.
---------------------------------------------------------------------------
    Although the McMackins would not benefit from H.R. 3307, 
the California District Attorneys Association, an organization 
composed of the elected attorneys of California's 58 counties 
and 3,000 deputy district attorneys and city prosecutors had 
this to say about those who would benefit:

          This affirmative defense would be prone to misuse by 
        dishonest defendants * * * could have the unintended 
        consequence of allowing unscrupulous defendants to 
        claim ignorance, even if they are aware of existing 
        regulations, especially where there is no penalty for 
        improperly raising the affirmative defense. The 
        difficulty in proving actual knowledge of a rule would 
        make application of sanctions against violators 
        virtually impossible * * * 5
---------------------------------------------------------------------------
    \5\ Letter from Lawrence G. Brown, Executive Director, and Edwin F. 
Lowry, Director, Environmental Project, California District Attorneys 
Association, to the Rep. George Gekas (July 19, 1996).
---------------------------------------------------------------------------

    2. The legislation was initially written by corporate lobbyists

    According to reports in the New York Times and the Atlanta 
Journal and Constitution, the Senate amendment that H.R. 3307 
is based on was actually written by lobbyists from Georgia-
Pacific, an international wood products company being 
investigated by the EPA for Clean Air Act violations. 6 
The New York Times outlined the different approaches adopted by 
three different wood products companies in response to an EPA 
investigation of industry practices. Weyerhaeuser began to 
comply with the laws and installed millions of dollars worth of 
pollution control equipment. It received no fine from the EPA. 
Louisiana-Pacific was fined $11 million by the EPA and agreed 
to install $70 million worth of pollution control equipment. 
Georgia Pacific decided to send in lobbyists to draft and help 
pass legislation. 7
---------------------------------------------------------------------------
    \6\ Stephen Engelberg, ``Wood Products Company Helps Write a Law to 
Derail an E.P.A. Inquiry,'' New York Times, April 25, 1995; Stephen 
Engelberg, ``Tall Timber and the EPA,'' New York Times, May 21, 1995; 
Don Melvin, ``Georgia-Pacific Helps Draft a Bill to Rein in EPA,'' 
Atlanta Journal and Constitution, April 26, 1995; Rob Tucker, 
``Weyerhaeuser Actions Avert Air Pollution Prosecution,'' News Tribune, 
July 11, 1995.
    \7\ During consideration of H.R. 3307, the Subcommittee on 
Commercial and Administrative Law adopted--on a party line vote--an 
amendment offered by Rep. Barr to make the bill's provisions 
retroactive, and which could have benefitted Georgia Pacific. Since 
that time, Georgia Pacific has settled its lawsuit with the EPA, 
agreeing to pay a fine, install pollution control equipment at 11 
plants in eight southeastern states, and to obtain permits and conduct 
audits and 26 facilities.
---------------------------------------------------------------------------
    Edward Dowd, the United States Attorney from the Eastern 
District of Missouri testified against H.R. 3307 on behalf of 
the Justice Department. He noted that ``when we took a close 
look at the bill's language, compared it with current law, and 
talked to other prosecutors and civil attorneys, we came to 
realize that H.R. 3307 would have many harmful and dangerous 
consequences that you would not intend.'' 8 In a letter, 
the Justice Department wrote, ``we strongly object to * * * 
broad and absolute statutory defenses. Among other things the 
codification of such defenses creates enormous opportunities 
for abuse, and could immunize egregious violations that cost 
taxpayers millions of dollars and result in serious harm to the 
public.'' 9
---------------------------------------------------------------------------
    \8\ Regulatory Fair Warning Act, Hearing before the Subcomm. on 
Commercial and Admin. Law of the House Comm. on the Judiciary, 104th 
Cong., 2d Sess. 16 (1996) (statement of Edward Dowd, U.S. Attorney, 
Eastern District of Missouri).
    \9\ Letter from Kent Marcus, Acting Assistant Attorney General, to 
Senator Orrin Hatch 4 (April 5, 1995). The concepts underlying the 
legislation ``are already in effect... under many statutes and the 
Principles of Federal Prosecution, a defendant's good faith efforts at 
compliance are an important factor that is considered when the 
government decides whether to bring a civil or criminal enforcement 
action and the amount of penalties to seek, if any. Similarly, a 
defendant's reasonable, good faith reliance on statements by 
responsible federal or state officials may also be considered. Courts 
and juries also weigh these factors in appropriate cases. Nevertheless, 
we strongly object to any effort to transform these considerations into 
broad and absolute statutory defenses. Among other things, the 
codification of such defenses creates enormous opportunities for abuse, 
and could immunize egregious violations that cost taxpayers millions of 
dollars and result in serious harm to the public.''
---------------------------------------------------------------------------

   3. The fact that an interpretation has not been published in the 
Federal Register does not mean that the regulated entities do not have 
                                 notice

    In the original bill, even actual notice would not have 
qualified as fair notice. For example, an agency may respond to 
inquiries with a letter setting forth its interpretation, such 
as IRS and U.S. Customs Service private letter rulings,\10\ or 
issue ``Airworthiness Directives'' directly to affected 
airlines after a problem is discovered.\11\ These types of 
actual notice would not have been sufficient notice under the 
bill as introduced and as approved by the Subcommittee. 
Although this provision has been rewritten, problems still 
remain with this section of the bill.
---------------------------------------------------------------------------
    \10\ Letter from Edward S. Knight, General Counsel, U.S. Dept. of 
the Treasury, to Rep. Henry J. Hyde (July 15, 1996).
    \11\ Letter from Nancy E. McFadden, General Counsel, U.S. 
Department of Transportation, to Rep. George W. Gekas (June 19, 1996).
---------------------------------------------------------------------------
    For example, under the Americans with Disabilities Act, the 
Justice Department is required to provide Technical Assistance 
Manuals to facilitate compliance.\12\ These manuals are not 
published in the Federal Register, and under the bill would not 
serve as fair notice although they are widely disseminated and 
courts have held that the interpretations of the ADA found in 
the Manuals are entitled to deference.\13\
---------------------------------------------------------------------------
    \12\ See 42 U.S.C. 12206(c)(3).
    \13\ Letter from Andrew Fois, Assistant Attorney General, Office of 
Legislative Affairs, U.S. Dept. of Justice, to Rep. Henry Hyde 2 (July 
12, 1995).
---------------------------------------------------------------------------
    Court rulings are also excluded from the definition of fair 
notice under the Committee approved bill, so even a Supreme 
Court ruling interpreting the regulation at issue could be 
ignored by defendants.
    Tax evaders have attempted to argue that they did not act 
willfully because the IRS had not published anything 
specifically saying that a particular tax evasion scheme was 
illegal. Under H.R. 3307, according to the Department of 
Justice, the tax evader would be able to claim they did not 
have fair notice.\14\ Arthur Levitt, Chairman of the Securities 
Exchange Commission, raised similar concerns:
---------------------------------------------------------------------------
    \14\ Id. at 3.

          The statute narrowly defines notice to be agency 
        rules and interpretations published in the Federal 
        Register. Unfortunately such a defense can appear in 
        some cases to be reasonable, but in reality can result 
        in disastrous consequences. * * * For example, because 
        insider trading is not specifically described in Rule 
        10b-5, Ivan Boesky (and a host of equally prominent 
        securities law violators) could have escaped liability 
        under this bill for one of the biggest securities 
        frauds of the 1980s. The bill might have precluded the 
        Commission's emergency action in Foundation for New Era 
        Philanthropy, because SEC rules do not specifically 
        address inducing churches and universities to invest 
        over $100 million in a phony charitable foundation. * * 
        * \15\
---------------------------------------------------------------------------
    \15\ Letter from Arthur Levitt, Chairman, U.S. Securities and 
Exchange Commission, to Rep. Thomas J. Bliley, Jr., and Rep. John D. 
Dingell (July 25, 1996).
---------------------------------------------------------------------------

 4. The bill would allow defendants to search out a written statement 
from a wide range of employees in a relevant federal or state agency to 
approve conduct that would otherwise violate federal regulations, even 
                       where there is fair notice

    This provision could undermine national uniform standards, 
particularly environmental standards. The statement does not 
have to be made public or even shared with the appropriate 
federal agency. In the worst case, in-state businesses, or 
businesses that threaten to relocate, could be exempted from 
certain federal laws. The EPA recently settled a case where a 
company located in a carbon monoxide non-attainment area was 
able to obtain a sham permit from the local air pollution 
control district to allow it to evade the Clean Air Act.\16\ 
The company, California Almond Growers Exchange, agreed to 
lower its emissions by 96% and pay a fine. Under H.R. 3307, 
this company would have been effectively immunized.
---------------------------------------------------------------------------
    \16\ Regulatory Fair Warning Act, Hearing before the Subcomm. on 
Commercial and Admin. Law of the House Comm. on the Judiciary, 104th 
Cong., 2d Sess. 9 (1996) (Statement of the Environmental Protection 
Agency).
---------------------------------------------------------------------------
    According to the Environmental Defense Fund, ``H.R. 3307 
would punch two large and uncontrolled loopholes in 
environmental protection laws (among others) * * * authorize 
any one of hundreds or thousands of bureaucrats to write out 
special exemptions, even if contradictory to the law. * * *'' 
\17\ As was pointed out at the hearing on the bill, ``America's 
environmental quality is among the best in the world * * * due 
in very large part to landmark environmental laws passed by 
Congress since 1970. But the laws themselves are only pieces of 
paper, it is respect for the rule of law and effective 
compliance with these laws that is needed to protect public 
health and environmental quality. * * * Many federal health, 
safety, and environmental provisions were enacted in the first 
instance to establish a solid foundation of minimal protections 
that would be in place in each State. * * *'' \18\
---------------------------------------------------------------------------
    \17\ Letter from David Roe, Senior Attorney, Environmental Defense 
Fund, to Rep. Henry J. Hyde (July 15, 1996).
    \18\ Regulatory Fair Warning Act, Hearing before the Subcomm. on 
Commercial and Admin. Law of the House Comm. on the Judiciary, 104th 
Cong., 2d Sess. 16 (1996) (statement of David Hawkins, Senior Attorney, 
Natural Resources Defense Council).
---------------------------------------------------------------------------

  5. By creating a ``mistake of law'' defense, the bill as originally 
           introduced rewrote every strict liability statute

    In criminal law, the general rule is that mistake of law is 
no excuse. As the Justice Department noted in its letter, the 
bill would ``turn on its head the legal principle that those 
who engage in dangerous or highly regulated activities are 
responsible for knowing the rules that govern their behavior.'' 
\19\ The Department of Agriculture noted in its letter of 
opposition to the bill that:
---------------------------------------------------------------------------
    \19\ Letter from Kent Marcus, supra note 9, at 6.

          The bill has the effect of inappropriately adding a 
        state of mind defense to the application of all Federal 
        regulations. In many of the statutes implemented and 
        enforced by USDA agencies, Congress has directed that 
        penalties should be imposed regardless of a party's 
        intent. For example, Congress has made the distribution 
        of adulterated meat food products or the movement of 
        prohibited animal or plant products strict liability 
        offenses.\20\
---------------------------------------------------------------------------
    \20\ Letter from Bonnie Luken, Acting General Counsel, U.S. Dept. 
of Agriculture, to Rep. Jack Reed 2 (June 21, 1996).

    The Department of Commerce noted in its letter of 
---------------------------------------------------------------------------
opposition to the bill:

          Many of the violations established in the Export 
        Administration Regulations are ``strict liability'' 
        violations. In other words, if a person exports without 
        a required license, that person has committed a 
        violation, whether or not he knew that a license was 
        required. Strict liability violations were included in 
        the EAR to ensure that a party could not ship items, 
        such as weapons technology, to a ``rogue'' country and 
        avoid liability by remaining ignorant of the regulatory 
        prohibition. H.R. 3307 would effectively eviscerate all 
        such strict liability violations.\21\
---------------------------------------------------------------------------
    \21\ Letter from Susan G. Esserman, Acting General Counsel, U.S. 
Department of Commerce, to Rep. Jack Reed 1 (June 19, 1996).

    The Commerce Department also noted, ``simply put it is 
difficult to imagine that someone who fails to comply with the 
Fastener Quality Act and who, therefore, bears much of the 
responsibility for having a plane fall from the sky or a bridge 
collapse should be able to escape civil and criminal liability 
because he in `good faith' thought he was in compliance with 
the requirements.'' \22\
---------------------------------------------------------------------------
    \22\ Id. at 2.
---------------------------------------------------------------------------

      6. Amendments approved by the Committee fail to remedy the 
                       legislation's infirmities

    The Majority recognized the problems inherent in the 
legislation approved by the Subcommittee and the bill was 
substantially rewritten the day before the full committee 
markup. For example, the retroactivity provision was dropped 
and other productive changes made. However, serious problems 
remain, and are illustrated by the amendments that were 
offered, but rejected at the markup, all on party line votes.
     For example, the bill as reported, still allows a state 
official to nullify the federal government's interpretation of 
a federal law, even where the United States government provided 
actual notice, as well as notice in the Federal Register. 
Congressman Scott offered an amendment to eliminate this 
possibility, but it was rejected. Congressman Scott also 
offered an anti-forum shopping amendment that would have 
prevented defendants from collecting multiple opinions from 
state and federal officials until they found one that they 
liked. This amendment, too, was rejected.
    Congressman Reed offered an amendment to limit the bill's 
provisions to fair warning, codify General Electric Co. v. EPA, 
53 F.3d 1324 (D.C. Cir. 1995), and avoid the other problems 
raised by the bill. Congresswoman Jackson-Lee offered an 
amendment to exempt regulations protecting human health and the 
environment to augment a provision already in the committee 
substitute that creates a largely illusory exemption for 
emergency rules. Both amendments were rejected by the 
Republicans.
    Amendments were also offered related to worker safety 
protections, SEC enforcement, Consumer Products Safety 
Commission regulations that protect children from harmful 
products, and EEOC enforcement of sexual harassment and 
discrimination statutes. All were rejected along party line 
votes.
    Even more disturbingly, the Majority refused to even 
consider a number of proposed amendments which would have 
protected American consumers and workers, by exempting 
enforcement of, among other things, airplane safety and 
security, export controls, telemarketing fraud, health laws, 
antitrust laws, Small Business Administration oversight of 
lenders, Department of Justice regulations dealing with 
sexually explicit conduct, and trade sanctions. Despite the 
fact that these amendments were pending, Republicans took the 
almost unprecedented step of closing consideration on H.R. 3307 
after a mere six hours of debate and amendment.\23\
---------------------------------------------------------------------------
    \23\ Transcript of Judiciary Committee Markup of H.R. 3307 at 44, 
45 (Aug. 1, 1996).
---------------------------------------------------------------------------

                               Conclusion

    H.R. 3307 applies to all regulatory enforcement from 
antitrust and airline safety to safe drinking water and clean 
air. Particular care should be taken in drafting this type of 
legislation. No one would disagree with the basic concepts at 
the root of this legislation, fair warning and reliance on 
government statements. However, we believe more work needs to 
be done on this legislation before it can fairly be said to 
meet these goals. It is not worth placing the American public 
at risk with hastily crafted legislation that has such broad 
and dangerous impact.
                                   John Conyers, Jr.
                                   Barney Frank.
                                   Pat Schroeder.
                                   Xavier Becerra.
                                   Sheila Jackson Lee.
                                   Jack Reed.
                                   Howard L. Berman.
                                   Melvin L. Watt.
                                   Bobby Scott.
                                   Maxine Waters.
                                   Zoe Lofgren.
                                   Charles E. Schumer.
                                   Jerrold Nadler.