[House Report 111-683]
[From the U.S. Government Publishing Office]
111th Congress Rept. 111-683
HOUSE OF REPRESENTATIVES
2d Session Part 1
======================================================================
FOREIGN MANUFACTURERS LEGAL ACCOUNTABILITY ACT OF 2010
_______
December 16, 2010.--Ordered to be printed
_______
Mr. Waxman, from the Committee on Energy and Commerce, submitted the
following
R E P O R T
together with
DISSENTING VIEWS
[To accompany H.R. 4678]
[Including cost estimate of the Congressional Budget Office]
The Committee on Energy and Commerce, to whom was referred
the bill (H.R. 4678) to require foreign manufacturers of
products imported into the United States to establish
registered agents in the United States who are authorized to
accept service of process against such manufacturers, and for
other purposes, having considered the same, report favorably
thereon with an amendment and recommend that the bill as
amended do pass.
CONTENTS
Page
Amendment........................................................ 2
Purpose and Summary.............................................. 5
Background and Need for Legislation.............................. 6
Legislative History.............................................. 7
Committee Consideration.......................................... 7
Committee Votes.................................................. 8
Committee Oversight Findings and Recommendations................. 10
New Budget Authority, Entitlement Authority, and Tax Expenditures 10
Statement of General Performance Goals and Objectives............ 10
Constitutional Authority Statement............................... 10
Earmarks and Tax and Tariff Benefits............................. 10
Federal Advisory Committee Statement............................. 10
Applicability of Law to Legislative Branch....................... 10
Federal Mandates Statement....................................... 11
Committee Cost Estimate.......................................... 11
Congressional Budget Office Cost Estimate........................ 11
Section-by-Section Analysis of the Legislation................... 13
Explanation of Amendments........................................ 17
Changes in Existing Law Made by the Bill, as Reported............ 17
Dissenting Views................................................. 18
AMENDMENT
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Foreign Manufacturers Legal
Accountability Act of 2010''.
SEC. 2. DEFINITIONS.
In this Act:
(1) Applicable agency.--The term ``applicable agency'' means,
with respect to covered products--
(A) described in subparagraphs (A) and (B) of
paragraph (3), the Food and Drug Administration;
(B) described in paragraph (3)(C), the Consumer
Product Safety Commission;
(C) described in subparagraphs (D) and (E) of
paragraph (3), the Environmental Protection Agency;
(D) described in paragraph (3)(F), the National
Highway Traffic Safety Administration; and
(E) described in paragraph (3)(G)--
(i) the Food and Drug Administration, if the
item is intended to be a component part of a
product described in subparagraphs (A) or (B)
of paragraph (3);
(ii) the Consumer Product Safety Commission,
if the item is intended to be a component part
of a product described in paragraph (3)(C);
(iii) the Environmental Protection Agency, if
the item is intended to be a component part of
a product described in subparagraphs (D) or (E)
of paragraph (3); and
(iv) the National Highway Traffic Safety
Administration, if the item is intended to be a
component part of a product described in
paragraph (3)(F).
(2) Commerce.--The term ``commerce'' means trade, traffic,
commerce, or transportation--
(A) between a place in a State and any place outside
thereof; or
(B) which affects trade, traffic, commerce, or
transportation described in subparagraph (A).
(3) Covered product.--The term ``covered product'' means any
of the following:
(A) Drugs, devices, and cosmetics, as such terms are
defined in section 201 of the Federal Food, Drug, and
Cosmetic Act (21 U.S.C. 321).
(B) A biological product, as such term is defined in
section 351(i) of the Public Health Service Act (42
U.S.C. 262(i)).
(C) A consumer product, as such term is used in
section 3(a) of the Consumer Product Safety Act (15
U.S.C. 2052).
(D) A chemical substance or new chemical substance,
as such terms are defined in section 3 of the Toxic
Substances Control Act (15 U.S.C. 2602).
(E) A pesticide, as such term is defined in section 2
of the Federal Insecticide, Fungicide, and Rodenticide
Act (7 U.S.C. 136).
(F) A motor vehicle or motor vehicle equipment, as
such terms are defined in section 30102 of title 49,
United States Code.
(G) An item intended to be a component part of a
product described in subparagraph (A), (B), (C), (D),
(E), or (F) but is not yet a component part of such
product.
(4) Distribute in commerce.--The term ``distribute in
commerce'' means to sell in commerce, to introduce or deliver
for introduction into commerce, or to hold for sale or
distribution after introduction into commerce.
(5) Foreign manufacturer or producer.--The term ``foreign
manufacturer or producer'' does not include--
(A) a foreign manufacturer or producer of covered
products that is owned or controlled, directly or
indirectly, by one or more United States natural or
legal persons, if--
(i) the United States natural or legal person
has assets in excess of the foreign
manufacturer or producer; or
(ii) the United States natural or legal
person owns or controls more than one foreign
manufacturer or producer of covered products
and such person has assets in excess of the
average assets held by each foreign
manufacturer or producer; or
(B) a foreign manufacturer or producer of covered
products that owns or controls, or through common
ownership or control is affiliated with, directly or
indirectly, one or more United States operating legal
persons if the principal executive officer residing in
the United States of each United States operating legal
person certifies in writing to the applicable agency
that such person--
(i) is responsible for any liability from a
covered product of the foreign manufacturer or
producer, including liability from the design,
testing, assembly, manufacturing, warnings,
labeling, inspection, packaging, or any other
cause of action related to the covered product;
and
(ii) will serve as the initial point of
contact for the applicable agency in case of a
voluntary or mandatory recall or other issue
involving the safety of a covered product.
SEC. 3. REGISTRATION OF AGENTS OF FOREIGN MANUFACTURERS AUTHORIZED TO
ACCEPT SERVICE OF PROCESS IN THE UNITED STATES.
(a) Registration.--
(1) In general.--Beginning on the date that is 180 days after
the date on which the regulations are prescribed pursuant to
section 3(d) and except as provided in this subsection, the
head of each applicable agency shall require foreign
manufacturers and producers of covered products distributed in
commerce to register an agent in the United States who is
authorized to accept service of process on behalf of such
manufacturer or producer for the purpose of any State or
Federal regulatory proceeding or any civil action in State or
Federal court related to such covered product, if such service
is made in accordance with the State or Federal rules for
service of process in the State in which the case or regulatory
action is brought.
(2) Location.--The head of each applicable agency shall
require that an agent of a foreign manufacturer or producer
registered under paragraph (1) be--
(A) located in a State chosen by the foreign
manufacturer or producer with a substantial connection
to the importation, distribution, or sale of the
products of the foreign manufacturer or producer; and
(B) an individual, domestic firm, or domestic
corporation that is a permanent resident of the United
States.
(3) Designation by manufacturer or producer and acceptance by
agent.--The head of each applicable agency shall, at a minimum,
require a--
(A) written designation by a foreign manufacturer or
producer with respect to which paragraph (1) applies--
(i) signed by an official or employee of the
foreign manufacturer or producer with authority
to appoint an agent;
(ii) containing the full legal name,
principal place of business, and mailing
address of the manufacturer or producer; and
(iii) containing a statement that the
designation is valid and binding on the foreign
manufacturer or producer for the purposes of
this Act.
(B) written acceptance by the agent registered by a
foreign manufacturer or producer with respect to which
paragraph (1) applies--
(i) signed by the agent or, in the case in
which a domestic firm or domestic corporation
is designated as an agent, an official or
employee of the firm or corporation with
authority to sign for the firm or corporation;
(ii) containing the agent's full legal name,
physical address, mailing address, and phone
number; and
(iii) containing a statement that the agent
accepts the designation and acknowledges that
the duties of the agent may not be assigned to
another person or entity and the duties remain
in effect until withdrawn or replaced by the
foreign manufacturer or producer.
(4) Applicability.--
(A) In general.--Paragraph (1) applies only with
respect to a foreign manufacturer or producer that
exceeds minimum requirements established by the head of
the applicable agency under this section.
(B) Factors.--In determining the minimum requirements
for application of paragraph (1) to a foreign
manufacturer or producer, the head of the applicable
agency shall, at a minimum, consider the following:
(i) The value of all covered products
imported from the manufacturer or producer in a
calendar year.
(ii) The quantity of all covered products
imported from the manufacturer or producer in a
calendar year.
(iii) The frequency of importation from the
manufacturer or producer in a calendar year.
(b) Registry of Agents of Foreign Manufacturers and Certifications.--
(1) In general.--The Secretary of Commerce shall, in
cooperation with each head of an applicable agency, establish
and keep up to date a registry of agents registered under
subsection (a), certifications submitted under section 2(5)(B),
and certifications removed pursuant to subsection (e).
(2) Availability.--The Secretary of Commerce shall make the
registry established under paragraph (1) available--
(A) to the public in a searchable format through the
Internet website of the Department of Commerce; and
(B) to the Commissioner responsible for U.S. Customs
and Border Protection in a format prescribed by the
Commissioner.
(c) Consent to Jurisdiction.--
(1) In general.--A foreign manufacturer or producer of a
covered product that registers an agent under this section
thereby consents to the personal jurisdiction of the State and
Federal courts of the State in which the registered agent is
located for the purpose of any judicial proceeding related to
such covered product.
(2) Rule of construction.--Paragraph (1) shall not apply to
actions brought by foreign plaintiffs where the alleged injury
or damage occurred outside the United States.
(d) Regulations.--
(1) In general.--Not later than one year after the date of
the enactment of this Act, the Secretary of Commerce, the
Commissioner responsible for U.S. Customs and Border
Protection, and each head of an applicable agency shall
prescribe regulations to carry out this section.
(2) Interagency cooperation.--The Secretary of Commerce, the
Commissioner responsible for U.S. Customs and Border
Protection, and each head of an applicable agency shall
cooperate and consult with one another for the purpose of--
(A) prescribing consistent regulations to the extent
necessary for the effective and efficient sharing of
information and establishment of systems and procedures
necessary to carry out this section; and
(B) establishing minimum requirements described in
subsection (a)(4), and to the extent advisable and
practicable for the purpose of establishing consistent
minimum requirements.
(e) Certification Requirements.--Upon actual knowledge or verified
information that any person to whom the requirements of section 2(5)(B)
applies has failed to fulfill such requirements the applicable agency
shall--
(1) notify the Secretary of Commerce that the certification
of such person must be removed from the registry under section
3(b); and
(2) notify such person that the related foreign manufacturer
or producer must comply with section 3.
SEC. 4. PROHIBITION OF IMPORTATION OF PRODUCTS OF MANUFACTURERS WITHOUT
REGISTERED AGENTS IN UNITED STATES.
(a) In General.--Beginning on the date that is 180 days after the
date the regulations required under section 3(d) are prescribed, a
person may not import into the United States a covered product (or
component part that will be used in the United States to manufacture a
covered product) if such product (or component part) or any part of
such product (or component part) was manufactured or produced outside
the United States by a manufacturer or producer who does not have a
registered agent described in section 3(a) whose authority is in effect
on the date of the importation.
(b) Enforcement.--The Secretary of Homeland Security shall prescribe
regulations to enforce the prohibition in subsection (a).
SEC. 5. REPORTING OF DEFECTS IN COVERED PRODUCTS IN FOREIGN COUNTRIES.
(a) Determination by Manufacturer or Producer.--Not later than 5
working days after determining to conduct a safety recall or other
safety campaign in a foreign country of a covered product that is
identical or substantially similar to a covered product offered for
sale in the United States, the manufacturer or producer of the covered
product shall report the determination to the head of the applicable
agency.
(b) Determination by Foreign Government.--Not later than 5 working
days after receiving notification that the government of a foreign
country has determined that a safety recall or other safety campaign
must be conducted in the foreign country of a covered product that is
identical or substantially similar to a covered product offered for
sale in the United States, the manufacturer or producer of the covered
product shall report the determination to the head of the applicable
agency.
(c) Reporting Requirements.--Not later than the date described in
subsection (d), the head of each applicable agency shall prescribe the
contents of the notification required by this section.
(d) Effective Date.--Except as provided in subsection (c), this
section shall take effect on the date that is one year after the date
of the enactment of this Act.
SEC. 6. STUDY ON REGISTRATION OF AGENTS OF FOREIGN FOOD PRODUCERS
AUTHORIZED TO ACCEPT SERVICE OF PROCESS IN THE
UNITED STATES.
Not later than 1 year after the date of the enactment of this Act,
the Secretary of Agriculture and the Commissioner of Food and Drugs
shall jointly--
(1) complete a study on the feasibility and advisability of
requiring foreign producers of food distributed in commerce to
register an agent in the United States who is authorized to
accept service of process on behalf of such producers for the
purpose of any State or Federal regulatory proceeding or any
civil action in State or Federal court related to such food
products; and
(2) submit to Congress a report on the findings of the
Secretary with respect to such study.
SEC. 7. STUDY ON REGISTRATION OF AGENTS OF FOREIGN MANUFACTURERS AND
PRODUCERS OF COMPONENT PARTS WITHIN COVERED
PRODUCTS.
Not later than 1 year after the date of the enactment of this Act,
the head of each applicable agency shall--
(1) complete a study on determining feasible and advisable
methods of requiring manufacturers or producers of component
parts within covered products manufactured or produced outside
the United States and distributed in commerce to register
agents in the United States who are authorized to accept
service of process on behalf of such manufacturers or producers
for the purpose of any State or Federal regulatory proceeding
or any civil action in State or Federal court related to such
component parts; and
(2) submit to Congress a report on the findings of the head
of the applicable agency with respect to the study.
SEC. 8. STUDY ON ENFORCEMENT OF UNITED STATES JUDGMENTS RELATING TO
DEFECTIVE DRYWALL IMPORTED FROM CHINA.
Not later than 1 year after the date of the enactment of this Act,
the Comptroller General of the United States shall--
(1) complete a study on methods to enforce judgments of any
State or Federal regulatory proceeding or any civil action in
State or Federal court relating to defective drywall imported
from the People's Republic of China and distributed in commerce
during the period 2004 through 2007 and used in residential
dwellings in the United States; and
(2) submit to Congress a report on the findings of the
Comptroller General with respect to the study.
SEC. 9. RELATIONSHIP WITH OTHER LAWS.
Nothing in this Act shall affect the authority of any State to
establish or continue in effect a provision of State law relating to
service of process or personal jurisdiction, except to the extent that
such provision of law is inconsistent with the provisions of this Act,
and then only to the extent of such inconsistency.
PURPOSE AND SUMMARY
H.R. 4678, the ``Foreign Manufacturers Legal Accountability
Act of 2010'', introduced by Rep. Betty Sutton (D-OH), requires
foreign manufacturers and producers that distribute in commerce
certain products regulated by the Consumer Product Safety
Commission (CPSC), the Environmental Protection Agency (EPA),
and the Food and Drug Administration (FDA) to register an agent
in the United States who is authorized to accept service of
process on behalf of the foreign manufacturer or producer.
Registering an agent consistent with the Act constitutes
acceptance by the foreign manufacturer or producer of personal
jurisdiction of the state and federal courts of the state in
which the agent is located.
Under H.R. 4678, agents would have to be registered in a
state with a substantial connection to the importation,
distribution, or sale of products of the foreign manufacturer
or producer. The CPSC, FDA, and EPA would each be required to
determine, based on the value or quantity of goods manufactured
or produced, which foreign manufacturers and producers under
their respective authority would be required to designate a
registered agent. The Act prohibits the importation into the
United States of products from foreign manufacturers that fail
to designate a registered agent.
BACKGROUND AND NEED FOR LEGISLATION
In the decade between 1998 and 2007, the import of consumer
products into the United States more than doubled.\1\ This
sharp rise in imported consumer products has been accompanied
by an overall increase in product recalls and a
disproportionate increase in the share of product recalls
involving imported products--particularly products from China.
---------------------------------------------------------------------------
\1\U.S. Consumer Product Safety Commission, Import Safety Strategy
(July 2008) (online at www.cpsc.gov/BUSINFO/importsafety.pdf).
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In 2007, the CPSC announced 473 recalls.\2\ This was the
highest level of recalls in 10 years.\3\ Of those 473 recalls,
82% involved imported products.\4\ Of the 389 recalls involving
imported products, 74% involved products from China.\5\
---------------------------------------------------------------------------
\2\ Id.
\3\U.S. Consumer Product Safety Commission, 2011 Performance Budget
Request (Feb. 2010) (online at www.cpsc.gov/CPSCPUB/PUBS/REPORTS/
2011plan.pdf).
\4\U.S. Consumer Product Safety Commission, Import Safety Strategy
(July 2008) (online at www.cpsc.gov/BUSINFO/importsafety.pdf).
\5\Id.
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Incidents involving defective imported products that
attracted national attention in the past several years
included: a children's craft kit containing beads coated with a
chemical similar to a date rape drug;\6\ toy trains coated with
lead paint;\7\ a contaminated blood thinning drug;\8\ and
drywall emitting sulfurous gases.\9\
---------------------------------------------------------------------------
\6\Recalled Toys Contain Chemical Linked to Date-Rape Drug, USA
Today (Nov. 7, 2007) (online at www.usatoday.com/money/industries/
retail/2007-11-07-toy-recall-chemicals_N.htm).
\7\U.S. Consumer Product Safety Commission, RC2 Corp. Recalls
Various Thomas & FriendsTM Wooden Railway Toys Due to Lead Poisoning
Hazard (June 13, 2007) (online at www.cpsc.gov/cpscpub/prerel/prhtml07/
07212.html).
\8\Deadly Heparin Contaminant Identified, CBS (Mar. 19, 2008)
(online at www.cbsnews.com/stories/2008/03/19/health/
main3950732.shtml?tag=dsGoogleModule).
\9\CPSC Ties Drywall, Corrosion, The Wall Street Journal (Nov. 24,
2009) (online at
online.wsj.com/article/SB125899409382460761.html).
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Holding foreign manufacturers accountable for injuries
caused by defective products that make it into the hands of
American consumers has proven difficult. Victims trying to sue
foreign manufacturers for injuries caused by defective products
face significant obstacles with respect to providing service of
process (notice about the litigation required to be given to
the defendant) and establishing jurisdiction over foreign
manufacturers in U.S. courts.
The Hague Convention on Service Abroad of Judicial and
Extrajudicial Documents in Civil or Commercial Matters--of
which the United States and many of its major trading partners,
including China, are parties--provides a means of serving
process on foreign manufacturers in their home countries.\10\
This method, however, can be time consuming and costly because
all the legal documents must be translated into the foreign
manufacturer's native language and then provided to a
governmental central authority, which in turn attempts to serve
the documents on the manufacturer.\11\ It can take three or
more months for the central authority to serve the documents on
the manufacturer.\12\
---------------------------------------------------------------------------
\10\Senate Committee on the Judiciary, Subcommittee on
Administrative Oversight and the Courts, Testimony of Louise Ellen
Teitz, Leveling the Playing Field and Protecting Americans, 111th Cong.
(May 19, 2009).
\11\Id.
\12\Id.
---------------------------------------------------------------------------
In addition, even if a victim successfully serves process
on a foreign manufacturer, the manufacturer will likely
challenge the exercise of personal jurisdiction over it by a
U.S. court. Under well-established constitutional due process
principles, before a U.S. court can exercise personal
jurisdiction over a defendant it must consider: (1) the
defendant's purposeful minimum contacts with the state in which
the court sits, and (2) fairness to the defendant of being
subjected to jurisdiction in that state's courts.\13\ Foreign
manufacturers have increasingly turned to litigating this issue
to avoid being brought before U.S. courts.\14\ This litigation
can be costly and time consuming due to the fact specific
nature of these issues.\15\ The result is an increased time and
expense burden for both victims injured by defective products
and the judicial system.\16\
---------------------------------------------------------------------------
\13\Id.
\14\Id.
\15\Id.
\16\Id.
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LEGISLATIVE HISTORY
On February 24, 2010, H.R. 4678, the ``Foreign
Manufacturers Legal Accountability Act of 2010'', was
introduced by Reps. Betty Sutton, Michael Turner, Linda T.
Sanchez, John Conyers, Zoe Lofgren, Candice Miller, Bruce
Braley, John Sarbanes, Ginny Brown-Waite, Michael Michaud,
Lloyd Doggett, Walter Jones, John Duncan, Phil Hare, Dale
Kildee, Bart Stupak, Joe Donnelly, Gene Green, Lee Terry, Donna
Edwards, Carol Shea-Porter, James Oberstar, Tim Ryan, Paul
Kanjorski, Marcy Kaptur, Steve Kagen, and John Yarmuth. The
bill was referred to the Committee on Energy and Commerce, and
in addition to the Committee on Ways and Means and the
Committee on Agriculture. Subsequently, on February 25, 2010,
the legislation was referred to the Subcommittee on Commerce,
Trade, and Consumer Protection. The Subcommittee held a hearing
on the legislation on June 16, 2010. At the hearing, the
Subcommittee heard support for the bill from the CPSC,
consumers groups, a homeowner affected by defective Chinese
drywall, and a law professor with expertise on the subject of
tort law. A witness representing U.S. importers and exporters
expressed reservations about the bill.
COMMITTEE CONSIDERATION
On June 30, 2010, the Subcommittee on Commerce, Trade, and
Consumer Protection met in open markup session to consider H.R.
4678. The Subcommittee subsequently favorably forwarded H.R.
4678 to the full Committee, amended, by a voice vote.
During Subcommittee consideration and markup, Chairman Rush
offered an amendment in the nature of a substitute to H.R.
4678, which was agreed to by a voice vote. The amendment did
the following: (1) limited the breadth of the consent to
personal jurisdiction by making clear that it does not include
wholly foreign law suits; (2) provided additional guidance to
applicable agencies on setting the minimum size that foreign
manufacturers or producers must exceed in order to trigger the
Act's requirements; (3) set certain minimum requirements to be
eligible to serve as the registered agent for a foreign
manufacturer or producer and also set certain minimum
requirements for documenting the designation of a registered
agent; (4) clarified the Act's applicability to component part
manufacturers; (5) added the National Highway Traffic Safety
Administration (NHTSA) as an agency that must require foreign
manufacturers to meet the requirements of the Act; (6) called
on all the agencies with responsibilities under the Act to
cooperate with each other to establish consistent regulations
to carry out the Act in an effective and efficient manner and
extended the timeframe for implementation of the Act to one
year; and (7) required foreign manufacturers and producers to
report to the applicable agency any safety campaigns or recalls
in other countries for products also sold in the United States.
On July 21, 2010, the Committee on Energy and Commerce met
in open markup session and considered H.R. 4678 as approved by
the Subcommittee. A manager's amendment offered by Chairman
Waxman was agreed to by a voice vote. The Committee also
adopted an amendment offered by Mr. Melancon of Louisiana by a
voice vote. Subsequently, the Committee ordered H.R. 4678
favorably reported to the House, amended, by a rollcall vote of
31 yeas--22 nays.
COMMITTEE VOTES
Clause 3(b) of rule XIII of the Rules of the House of
Representatives requires the Committee to list each record vote
on the motion to report legislation and amendments thereto. A
motion by Mr. Waxman ordering H.R. 4678 reported to the House,
amended, was approved by a record vote of 31 yeas and 22 nays.
The following is the recorded vote taken during Committee
consideration, including the names of those members voting for
and against:
COMMITTEE OVERSIGHT FINDINGS AND RECOMMENDATIONS
In compliance with clause 3(c)(1) of rule XIII of the Rules
of the House of Representatives, the oversight findings and
recommendations of the Committee are reflected in the
descriptive portions of this report, including the
recommendation that foreign manufacturers and producers that
distribute products in commerce in the United States be
required to have an agent in the United States who is
authorized to accept service of process.
STATEMENT OF GENERAL PERFORMANCE GOALS AND OBJECTIVES
In accordance with clause 3(c)(4) of rule XIII of the Rules
of the House of Representatives, the Committee's performance
goals and objectives are reflected in the descriptive portions
of this report, including that foreign manufacturers and
producers that distribute products in commerce in the United
States be required to have an agent in the United States who is
authorized to accept service of process.
CONSTITUTIONAL AUTHORITY STATEMENT
Clause 3(d)(1) of rule XIII of the Rules of the House of
Representatives requires the Committee to include a statement
citing the specific powers granted to Congress to enact the law
proposed by H.R. 4678. The Committee finds that the
constitutional authority for H.R. 4678 is provided in article
I, section 8, clauses 3 and 18 of the Constitution of the
United States.
NEW BUDGET AUTHORITY, ENTITLEMENT AUTHORITY, AND TAX EXPENDITURES
Pursuant to clause 3(c)(2) of rule XIII of the Rules of the
House of Representatives, the Committee finds that H.R. 4678
would result in no new budget authority, entitlement authority,
or tax expenditures or revenues.
EARMARKS AND TAX AND TARIFF BENEFITS
H.R. 4678 does not contain any congressional earmarks,
limited tax benefits, or limited tariff benefits as defined in
clause 9(d), 9(e), or 9(f) of rule XXI of the Rules of the
House of Representatives.
FEDERAL ADVISORY COMMITTEE STATEMENT
No advisory committees were created by H.R. 4678 within the
meaning of 5 U.S.C. App., section 5(b).
APPLICABILITY OF LAW TO THE LEGISLATIVE BRANCH
Section 102(b)(3) of the Congressional Accountability Act
of 1985 requires a description of the application of this bill
to the legislative branch where the bill relates to terms and
conditions of employment or access to public services or
accommodations. H.R. 4678 does not relate to the terms and
conditions of employment or access to public services or
accommodations within the meaning of section 102(b)(3).
FEDERAL MANDATES STATEMENT
Section 423 of the Congressional Budget and Impoundment
Control Act of 1974 (as amended by section 101(a)(2) of the
Unfunded Mandates Reform Act, P.L. 104-4) requires a statement
on whether the provisions of the report include unfunded
mandates. In compliance with this requirement the Committee
adopts as its own the estimates of federal mandates prepared by
the Director of the Congressional Budget Office included
herein.
COMMITTEE COST ESTIMATE
Clause 3(d)(2) of rule XIII of the Rules of the House of
Representatives requires an estimate and a comparison by the
Committee of the costs that would be incurred in carrying out
H.R. 4678. Clause 3(d)(3)(B) of that rule, however, provides
that this requirement does not apply when the Committee has
included in its report a timely submitted cost estimate of the
bill prepared by the Director of the Congressional Budget
Office under section 402 of the Congressional Budget Act. The
Committee adopts as its own the cost estimate on H.R. 4678
prepared by the Director of the Congressional Budget Office
included herein.
CONGRESSIONAL BUDGET OFFICE COST ESTIMATE
In accordance with clause 3(c)(3) of rule XIII of the Rules
of the House of Representatives, the following is the cost
estimate on H.R. 4678 provided by the Congressional Budget
Office pursuant to section 402 of the Congressional Budget Act
of 1974:
December 9, 2010.
Hon. Henry A. Waxman,
Chairman, Committee on Energy and Commerce,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 4678, the Foreign
Manufacturers Legal Accountability Act of 2010.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Susan Willie.
Sincerely,
Douglas W. Elmendorf.
Enclosure.
H.R. 4678--Foreign Manufacturers Legal Accountability Act of 2010
H.R. 4678 would require certain foreign manufacturers to
register an agent in the United States that would be authorized
to accept notice of a regulatory proceeding or civil action.
The bill also would require those foreign manufacturers and
producers to report any voluntary or mandatory recalls or other
safety campaigns involving affected products to the appropriate
regulatory agency.
Several agencies, including the Food and Drug
Administration (FDA), the Consumer Product Safety Commission,
the Environmental Protection Agency, and the National Highway
Traffic Safety Administration, would be required to develop
regulations to carry out the new requirements. For example, the
FDA would be responsible for implementing the registration and
reporting requirements relating to imported drugs.
Further, the bill would prohibit foreign goods from being
imported if the affected manufacturer fails to designate such
an agent. We assume that the Customs and Border Patrol (CBP),
in coordination with the other affected agencies, would be
primarily responsible for enforcing those new prohibitions.
The bill also would require the International Trade
Administration to develop a registry of agents that would be
made available to the public and would require agencies to
prepare various reports for the Congress related to the
registration of agents for foreign manufacturers and other
topics related to imported goods.
Impact on the Federal Budget
Based on information from the affected agencies, CBO
estimates that implementing H.R. 4678 would cost about $170
million over the 2011-2015 period, assuming appropriation of
the necessary amounts, to develop and enforce the new
regulations, to create the registry of agents, and to prepare
reports. CBO expects that most of those costs would be incurred
by CBP and FDA for administration and enforcement activities.
Enacting H.R. 4678 would not affect direct spending or
revenues; therefore, pay-as-you-go procedures do not apply.
Intergovernmental and private-sector impact
H.R. 4678 contains no intergovernmental mandates as defined
in the Unfunded Mandates Reform Act (UMRA) and would not affect
the budgets of state, local, or tribal governments.
H.R. 4678 would impose private-sector mandates as defined
in UMRA by requiring manufacturers in the United States with
foreign locations or subsidiaries to register agents in the
United States and to report on any safety campaigns resulting
from the recall of products covered by the legislation. Based
on information from industry sources about the cost of hiring
or appointing registered agents and on the small incremental
difference between current safety standards for consumer
products and the legislation's requirement, CBO estimates that
the cost to comply with those mandates would not be
significant.
The bill also would impose a private-sector mandate on
importers and manufacturers by prohibiting them from importing
certain products or components if those imports come from a
foreign manufacturer that does not have a registered agent in
the United States. Currently, industry standards do not require
manufacturers to know the origin of imported components or
parts used to manufacture most goods. The cost of the mandate
would include the cost of tracking the origin of imports and
their components and any net loss in income resulting from
purchasing imports from foreign manufacturers that comply with
the bill. Based on information from industry experts on the
cost of obtaining that additional information and on the number
of manufacturers that would be affected, CBO estimates that the
cost of this mandate would probably be substantial.
In total, CBO estimates that the cost of complying with the
mandates in the bill would probably exceed the annual threshold
for private-sector mandates established in UMRA ($141 million
in 2010, adjusted annually for inflation).
CBO staff contacts
The staff contacts for this estimate are Susan Willie (for
federal costs), and Marin Randall, Jimmy Jim, and Samuel Wice
(for the private-sector impact). This estimate was approved by
Theresa Gullo, Deputy Assistant Director for Budget Analysis.
SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION
Section 1. Short title
This section designates that the short title of the Act as
the ``Foreign Manufacturer Legal Accountability Act of 2010''.
Section 2. Definitions
This section defines the terms ``applicable agency'',
``commerce'', ``covered product'', and ``distribute in
commerce''. It also defines by exclusion the term ``foreign
manufacturer or producer''.
The definition of ``foreign manufacturer or producer'' is
intended to address concerns by industry stakeholders about
including within the scope of the Act foreign manufacturers and
producers related to an entity located in the United States.
These stakeholders contended that the presence of a related
entity over which a U.S. court already has jurisdiction means
there is a responsible party located here who can be held
accountable in place of the foreign manufacturer or producer in
the event of damage or injury from a covered product, such that
it was unnecessary to require the foreign manufacturer to
register an agent and consent to jurisdiction. The definition,
in general terms, removes from the scope of the Act two types
of U.S. entities that distribute in commerce covered products
from a foreign manufacturer to which they are related: (1) a
foreign manufacturer that distributes a covered product through
its U.S. parent; and (2) a foreign manufacturer that
distributes a covered product through its U.S. subsidiary.
The exemption, however, is not unqualified. It is the view
of the Committee that it would be unwise to exempt these
categories of manufacturers entirely from the provisions of the
Act without securing specific, credible assurance that
consumers injured by dangerous or defective products made by
such manufacturers can hold someone in the United States
responsible. The exemption is only available to a foreign
manufacturer with a U.S. parent that is a going concern, and
not merely a shell. The exclusion attempts to capture only
operating companies by requiring that the level of assets held
by the parent exceed those of the foreign manufacturer, or
exceed an average of the assets held by each foreign
manufacturer related to the parent. The Committee believes that
if the parent possesses more in assets than a subsidiary then
it is in well-enough condition to settle a judgment. The
exemption also is only available to a foreign manufacturer with
a U.S. subsidiary that will certify to the applicable agency
that it is responsible for any liability related to a covered
product of the foreign manufacturer and will be responsive in
the event of a recall.
While the Committee was sympathetic to the concerns of
these industry stakeholders, it also is aware that U.S.
subsidiaries of foreign manufacturers that distribute covered
products have argued against responding to consumers in U.S.
courts on the grounds that only the foreign entity is the
appropriate entity to respond.\17\ The definition in the bill
ensures that if a U.S. subsidiary is unwilling to provide a
certification of responsibility for actions of the related
foreign manufacturer, then the related foreign manufacturer
will have to comply with the registration and consent
requirements of the Act and be treated like any other foreign
or domestic manufacturer doing business in the United States.
---------------------------------------------------------------------------
\17\See, e.g., Defendant Toyota Motor Sales USA, Inc.'s, Response
to Plaintiffs' Special Interrogatory Set No. One, Ezal v. Martin
Resorts, Inc. and Toyota Motor Sales USA, Inc., (Aug. 6, 2009)
(stating: ``PREFATORY STATEMENT: Toyota Motor Sales, U.S.A., Inc. is
the authorized importer and distributor of Toyota motor vehicles in
certain geographic areas of the continental United States. Toyota Motor
Sales, U.S.A., Inc. does not design, test, manufacture or assemble
Toyota vehicles in the ordinary course of its business, and Toyota
Motor Sales, U.S.A., Inc. was not responsible for the design,
manufacture, assembly or developmental testing of the 2005 Toyota Camry
in this case. Therefore, Toyota Motor Sales, U.S.A., Inc. does not have
sufficient information or documents to respond completely and
accurately to many of these interrogatories. Such interrogatories
should be addressed to Toyota Motor Corporation. Toyota Motor
Corporation, located in Japan, was responsible for the overall design
and developmental testing of the 2005 Camry'').
---------------------------------------------------------------------------
The definition of ``applicable agency'' was expanded during
Subcommittee consideration to include the National Highway
Traffic Safety Administration (NHTSA). While foreign
manufacturers of motor vehicles and motor vehicle equipment are
required to designate an agent for service of process and
notices pursuant to 49 U.S.C. 30164, designation of an agent
under that statute does not constitute acceptance of
jurisdiction of U.S. courts by the manufacturer. Additionally,
some courts have held that the designation of an agent under
that statute is for the limited purpose of federal regulatory
proceedings.\18\ The Committee has included NHTSA here to
eliminate barriers for injured consumers to accessing and fully
utilizing agents designated by these manufacturers, and so
there is no inconsistency with respect to the role of
registered agents across the agencies with responsibilities for
consumer protection.
---------------------------------------------------------------------------
\18\See Richardson v. Volkswagenwerk, A.G., No. 77-0702-CV-W-1-S-4
(W.D. Mo., Apr. 14, 1982) (stating: ``Contrary to plaintiffs' argument,
three reasons lead to the conclusion that VWAG's designation of VWOA as
an agent under 15 U.S.C. Sec. 1399(e) [now 49 U.S.C. 30164] is limited
to service of documents by, of and from the United States Secretary of
Transportation. . . . Finally, this Court's decision that 15 U.S.C.
Sec. 1399(e) is not a proper method for service of process in common
law actions is supported by the wisdom of other courts which have
addressed the same issue. Utsey v. VWAG, No. 80-1620-9 (D.S.C.Sept. 18,
1981); Hamilton v. VWAG, Nos. 81-01-L, 80-594-D (D.N.H.June 10, 1981);
Pasquale v. Genovese, 428 A.2d 1126 (Vt.1981); Sipes v. American Honda
Motor Co., 608 S.W.2d 125 (Mo.App.1980); Fields v. Peyer, 75 Wis.2d
644, 250 N.W.2d 311 (1977); VWAG v. McCurdy, 340 So.2d 544 (Fla.App.
1976); Rubino v. Celeste Motors, Inc., No. 72-CV-350 (N.D.N.Y. Oct. 11,
1974)'').
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Section 3. Registration of agents of foreign manufacturers authorized
to accept service of process in the United States
Section 3(a) requires foreign manufacturers and producers
that send covered products to the United States for
distribution in commerce to designate a registered agent who is
authorized to accept service of process on behalf of the
manufacturer or producer here in the United States for state or
federal regulatory proceedings or civil actions in state or
federal court related to a covered product. This subsection
also sets out the requirements for the designation of an agent,
including selection of the location, who may serve as an agent,
and the minimum documentation that an applicable agency must
require for a valid designation. Finally, this subsection
provides guidance to applicable agencies on setting the minimum
level of import activity that foreign manufacturers or
producers under their respective authority must exceed in order
to be required to register an agent under the Act. The
Committee heard concerns that requiring an agent for service of
process in the United States would violate U.S. international
obligations as a party to the Hague Convention on the Service
Abroad of Judicial and Extrajudicial Documents in Civil or
Commercial Matters. These concerns, however, are misplaced. The
Hague Convention on Service, as the title makes clear, relates
to service abroad. This Act relates to service within the
territorial boundaries of the United States. The Hague
Conference's own explanatory documents make clear that the
Convention only applies when ``a document is to be transmitted
from one State party to the Convention to another State party
for service in the latter (the law of the forum State
determines whether or not a document has to be transmitted
abroad for service in the other State--the Convention is non-
mandatory).''\19\ The Committee has determined that service of
process does not need to be transmitted abroad under the
circumstances provided for under this Act.
---------------------------------------------------------------------------
\19\Hague Conference on Private International Law, Outline: Hague
Service Convention (Nov. 2009) (online at www.hcch.net/upload/
outline14e.pdf).
---------------------------------------------------------------------------
Section 3(b) requires the Secretary of Commerce in
cooperation with the applicable agencies to establish a
searchable Internet database containing information about the
agent registered by a foreign manufacturer or producer, U.S.
entities that have submitted certifications of responsibility
and liability for their foreign related entities, and U.S.
entities that have had their certifications of responsibility
and liability removed for failure to fulfill their
responsibility or liability obligations. The Secretary of
Commerce is also required to provide this information to the
Commissioner of Customs and Border Protection.
Section 3(c) provides that a foreign manufacturer or
producer that registers an agent consistent with the Act
consents to the jurisdiction of the state and federal courts of
the state in which the agent for service of process is located
for the purpose of any judicial proceeding related to a covered
product. This consent ensures that injured consumers have
access to a court in the United States to bring claims related
to a covered product. For example, a foreign manufacturer that
exports bicycle helmets subject to regulation by the CPSC must
register an agent with the CPSC. If a person in the United
States is injured in a bicycle accident and claims that the
helmet was defective, then that company would have consented to
the jurisdiction of the courts in the state where the agent is
located. The scope of consent extends only to the covered
product that allegedly caused the plaintiff's injury. A foreign
manufacturer that exports bicycle helmets into the United
States does not, by virtue of registering an agent with the
CPSC, generally consent to jurisdiction related to claims
involving products that are not covered by the Act.
That a foreign manufacturer has consented to the
jurisdiction of the courts in one state, however, does not mean
that injured consumers can only bring suit in that state. It is
the Committee's intent that injured consumers can continue to
pursue their claims in any state they wish. The difference is
that the foreign manufacturer can contest the exercise of
jurisdiction by courts in states other than the one where the
registered agent is located. It is the Committee's view that
establishing the floor of at least one state where consumers
can seek judicial relief brings United States and foreign
manufacturers closer to competing on a level field because
there is no doubt that a U.S.-based manufacturer will always be
subject to the jurisdiction of courts of at least one state.
This subsection also provides that the consent does not extend
to civil actions brought by foreign plaintiffs where the injury
or damage from a covered product occurred outside the United
States.
The Committee heard concerns that requiring foreign
manufacturers to submit to the jurisdiction of U.S. courts
would lead to retaliation by other countries against U.S.
manufacturers that do business abroad. These concerns are also
misplaced. The problem of establishing jurisdiction over
foreign manufacturers is one of American law. Our
constitutional principles require measuring minimum contacts
with a given state to establish jurisdiction. Most other
countries follow the general rule of tort law that the forum is
governed by lex loci delecti--the law of the place of the
wrong.\20\
---------------------------------------------------------------------------
\20\House Committee on Energy and Commerce, Subcommittee on
Commerce, Trade, and Consumer Protection, Testimony of Prof. Andrew
Popper, Hearing on H.R. 4678, the ``Foreign Manufacturers Legal
Accountability Act'' and H.R. 5156, the ``Clean Energy Technology
Manufacturing and Export Assistance Act,'' 111th Cong. (June 16, 2010).
---------------------------------------------------------------------------
Section 3(d) requires the departments and agencies with
responsibilities under the Act to prescribe regulations no
later than one year after enactment and that the departments
and agencies work together so that the Act is implemented as
effectively and consistently as possible.
Section 3(e) requires applicable agencies to remove the
certifications of U.S. entities that fail to fulfill the
responsibility or liability obligations that served as the
assurance for exempting their related foreign manufacture from
having to register an agent and consent to the jurisdiction of
U.S. courts.
Section 4. Prohibition of importation of products of manufacturers
without registered agents in United States
This section bans the importation of covered products from
foreign manufacturers and producers that fail to register an
agent consistent with the Act.
Section 5. Reporting of defects in covered products in foreign
countries
This section requires a foreign manufacturer or producer of
a covered product to report within five business days to the
applicable agency any voluntary or mandatory recalls or other
safety campaigns concerning a product that is identical or
substantially similar to a covered product sold in the United
States.
Section 6. Study on registration of agents of foreign food producers
authorized to accept service of process in the United States
This section calls on the U.S. Department of Agriculture
and the FDA to complete a study to determine the feasibility of
requiring foreign producers of food exported to the United
States to register an agent in the United States for service
process.
Section 7. Study on registration of agents of foreign manufacturers and
producers of component parts within covered products
This section calls on the head of each applicable agency to
complete a study to determine the feasibility of requiring
foreign manufacturers and producers of component parts included
in fully assembled products exported to the United States to
register an agent in the United States for service of process.
Section 8. Study on enforcement of United States judgments relating to
defective drywall imported from China
This section calls on the U.S. Government Accountability
Office, GAO, to study potential methods for enforcing judgments
by U.S. courts against Chinese drywall manufacturers that
exported defective drywall to the United States between 2004
and 2007.
Section 9. Relationship with other laws
This section leaves intact state laws concerning service of
process and personal jurisdiction, and the authority of states
to enact such laws, to the extent that they are not
inconsistent with the Act and then only to the extent of the
inconsistency.
EXPLANATION OF AMENDMENTS
During Committee consideration of H.R. 4678, Chairman
Waxman offered an amendment that excluded from the requirements
of the bill: (1) foreign manufacturers and producers owned or
controlled by a U.S. person or business that maintains a
certain level of assets; and (2) foreign manufacturers and
producers with related entities located in the United States so
long as the related U.S. entity certifies that it is
responsible for liabilities related to the covered product and
will act as a point of contact in the event of a recall or
other issue concerning the safety of a covered product. The
Waxman amendment also eliminated the requirement that the
written agent designation submitted by the foreign manufacturer
or producer include the trade or brand names or other
identifying information under which the covered product would
be sold in the United States. The amendment also clarified that
the effective date for the requirement to register an agent was
to follow the publication of regulations implementing the Act.
The Committee agreed to the Waxman amendment by a voice vote.
The Committee considered an amendment by Mr. Braley of Iowa
calling on GAO to study potential methods for enforcing
judgments by U.S. courts against Chinese drywall manufacturers.
The Committee agreed to the Braley amendment by a voice vote.
CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED
H.R. 4678, as reported by the Committee, makes no change to
existing law.
DISSENTING VIEWS
We, the undersigned Members of the Committee on Energy and
Commerce, oppose the passage of H.R. 4678 and submit the
following comments to express our concerns with this
legislation.
The Foreign Manufacturers Legal Accountability Act, H.R.
4678, while born of good intentions, will result in nothing but
harm to American businesses and the American consumer. Not only
will it severely disrupt supply chains, potentially violate our
international trade agreements, and open our domestic
industries to retaliatory actions, but it does nothing to
achieve the Majority's stated goal: aiding consumers in
obtaining damages from foreign manufacturers for product
liability. Even if a consumer obtains a judgment under this
purportedly easier procedure, there is less incentive for a
foreign court to enforce a U.S. judgment when the treaty
procedures (to which we are a party) have been circumvented.
That alone may render this bill anti-consumer: a consumer will
still spend considerable resources obtaining a judgment only to
find parties are less likely to enforce the judgment and must
spend additional funds to comply with treaty procedures.
The bill's proponents deem this legislation as necessary
because it has proven difficult for U.S. plaintiffs to hold
foreign manufacturers accountable. While recognizing the
existence of the Hague Service Convention (to which 59 nations,
including China, are signatories)\1\, they cite testimony of a
law professor from a 2009 Senate Judiciary Committee hearing to
support their conclusion that it can take ``three or more
months'' to serve process documents on a foreign manufacturer.
However, a Special Commission convened by The Hague in 2009 to
review the Convention's operation concluded that ``the
Convention is both efficient and effective--statistical data
shows that 66% of requests are executed within 2 months.''\2\
The Special Commission further ``confirmed `wide use and
effectiveness, as well as the absence of major practical
difficulties.'''\3\
---------------------------------------------------------------------------
\1\See Hague Convention of the Service Abroad of Judicial and
Extra-Judicial Documents in Civil or Commercial Matters, Feb. 10, 1969,
658 U.N.T.S. 163 [hereinafter Hague Service Convention].
\2\Hague Conference on Private International Law, Outline Hague
Service Convention, 1 (Nov. 2009) http://www.hcch.net/upload/
outline14e.pdf.
\3\Id. at 2.
---------------------------------------------------------------------------
The oft-cited example for the policy need for this
legislation is the defective drywall imported from China during
the building boom when U.S. manufactured drywall was in short
supply. However, in this case, existing process was successful:
at least one Chinese drywall manufacturer was served and a
default judgment was achieved in Federal court.
The bill's proponents also note that even if a victim is
successful in serving process on a foreign manufacturer, the
manufacturer will challenge personal jurisdiction of the U.S.
court. An objection to personal jurisdiction is founded in the
Fifth Amendment of the U.S. Constitution and courts have found
that foreign nationals are afforded the same equal protection
of the laws as U.S. citizens. Due process extends to the
definition of in personam jurisdiction and to whether minimum
contacts exist for a court to claim jurisdiction over a foreign
defendant. This bill, however, would strip foreign nationals of
their due process right to object to personal jurisdiction by
mandating consent to the personal jurisdiction of U.S. courts.
In addition to violating Constitutional protections, H.R.
4678 may also violate our World Trade Organization (WTO)
obligations. As a party to numerous WTO agreements, the U.S.
has pledged to not treat foreign trading partners differently
than domestic producers. This bill creates a potential national
treatment violation by imposing legal obligations on foreign
trading partners that do not apply to domestic producers. U.S.
manufacturers are not required to incorporate and, as a result,
there are no legal obligations on domestic manufacturers to
identify an agent for service of process. Further, a U.S.
manufacturer may argue that it does not have sufficient minimum
contacts to be subject to the jurisdiction of another State's
courts. Conversely, H.R. 4678 places a legal obligation on
foreign manufacturers to designate an agent and, by the act of
designating an agent, denies foreign manufacturers the right to
argue they do not have minimum contacts with a State to be
subject to its jurisdiction.
Below we detail a number of specific objections.
SECTION-BY-SECTION
Section 2. Definitions
Section 2, paragraph (2) defines ``commerce'' in a circular
manner. Under H.R. 4678, ``The term `commerce' means trade,
traffic, commerce, or transportation . . . which affects trade,
traffic, commerce, or transportation.'' While there is
precedent for this definition in the Magnusson-Moss Warranty
Act, there are certainly more recent and more logical
definitions at Congress's disposal.
Section 2, paragraph (3)(G) defines a ``covered product''
to include not just a finished product, but a component part to
be assembled into a finished product. This extends to not only
pre-made components but also to raw materials imported from a
foreign mine or ingredients used for pharmaceutical products or
drug testing, notwithstanding existing requirements for foreign
drug manufacturers to register with the Food and Drug
Administration.
This extension of a covered product to include component
parts in combination with a definition of ``commerce'' so broad
it captures research and development could have a significant
chilling effect on emerging industries reliant on the global
economy, such as clean energy technology. On the same day the
Committee acted on H.R. 4678, the Committee also considered and
reported H.R. 5156, a new $75 million program within the
International Trade Administration dedicated to growing the
clean energy technology industry and the export of such
technology. H.R. 4678 would severely undercut the effectiveness
of such programs and viability of such industries for several
reasons. Forcing foreign manufacturers or importers of
components, including raw materials (i.e., a component intended
to be assembled in the U.S.), to individually register and
submit to U.S. jurisdiction will likely restrict the supply of
necessary materials. This could also have serious consequences
in the research and development of new drugs as many
ingredients are imported. If such imports are restricted, it
will necessarily impact the research into and development of
new drugs, raising the costs to U.S. consumers. It remains
unclear whether the requirement in this legislation for the
relevant agency to promulgate minimum size guidelines
determining which manufacturers will be required to register
will in fact exempt the very manufacturers cited as the impetus
for this legislation.
In either example, neither the final product nor its
components ever reach a U.S. citizen and there is thus no need
for a U.S. citizen to be able to sue such suppliers. If a need
should arise, U.S. citizens may find recourse through our
judicial system utilizing the procedures of The Hague Treaty to
which we have been a party for nearly 50 years.
Finally, if we make it burdensome for foreign manufacturers
to export their products to the U.S. by requiring the
designation of an agent and registration with the applicable
Federal agency, and by opening the door to vicarious liability,
some manufacturers may withdraw from the U.S. market. Decreased
supply means decreased competition, which in turn means higher
prices for U.S. consumers.
Section 3. Registration of agents of foreign manufacturers authorized
to accept service of process in the United States
The new requirements and restrictions of H.R. 4678 may
violate our obligations under various international treaties.
The Majority, however, notes that ``. . . [the Hague Service
Convention] relates to service abroad.'' If a defendant neither
resides in the forum nor has sufficient contacts in the forum,
the only reasonably certain way of serving process is by
serving the defendant where he or she resides--in these
instances, abroad. Rule 4 of the Federal Rules of Civil
Procedure in fact references the established treaty procedures
by permitting service of a foreign defendant ``by any
internationally agreed means of service that is reasonably
calculated to give notice, such as those authorized by the
Hague Convention on the Service Abroad of Judicial and
Extrajudicial Documents.'' Also, while the Majority concludes
that the Committee ``determined that service of process does
not need to be transmitted abroad,'' this Committee does not
have the authority to change civil suit procedures.
Section 3(b) requires the Department of Commerce to
maintain a public, searchable database of every manufacturer or
component part manufacturer and their designated agent for
every single import that enters the U.S. Such a database would
be vast in its size and scope and was not vetted in the
Committee. Second, this program is not compatible with the
Department's mission statement:
The Department of Commerce promotes job creation, economic
growth, sustainable development, and improved living standards
for all Americans, by working in partnership with business,
universities, communities, and workers to:
1. Build for the future and promote U.S.
competitiveness in the global marketplace, by
strengthening and safeguarding the nation's economic
infrastructure;
2. Keep America competitive with cutting-edge science
and technology and an unrivaled information base; and,
3. Provide effective management and stewardship of
our nation's resources and assets to ensure sustainable
economic opportunities.\4\
---------------------------------------------------------------------------
\4\Department of Commerce, Strategic Plan for 1997-2002, 1 (visited
Jun. 3, 2010) http://www.osec.doc.gov/bmi/budget/strtgc/Aintro.pdf.
Section 3(c) requires foreign manufacturers, by the act of
designating an agent, to consent to the personal jurisdiction
of courts. In so doing, this eliminates a foreign
manufacturer's ability to argue it does not have sufficient
contacts with a State. Further, it disregards whether any party
can reasonably anticipate being hauled into U.S. State court.
For reasons noted above, this is a violation of the Due Process
Clause.
Additionally, Section 3(c) states that such consent shall
be ``for the purpose of any judicial proceeding related to such
covered product.'' Without any limitation, a manufacturer could
be pulled into a lawsuit for any reason--regardless of whether
the suit relates to a product defect.
Both of these troubling aspects pose a risk to domestic
manufacturers should foreign countries choose to adopt mirror
legislation as a retaliatory measure. The Majority dismisses
this concern as ``without merit;'' however, trade press reports
indicate both the European Union and Canada are already
examining H.R. 4678 for inconsistencies with the General
Agreement on Tariffs and Trade and for its impact on supply
chains.\5\
---------------------------------------------------------------------------
\5\Ways and Means Examining Foreign Manufacturers Bill for WTO
Issues, Inside U.S. Trade (June 25, 2010).
---------------------------------------------------------------------------
Section 4. Prohibition of importation of products of manufacturers
without registered agents in United States
The Committee did not address Section 4 at markup due to
lack of jurisdiction. However, the section remains in the
legislation. Section 4 bans the import of covered products,
component parts intended for assembly into a covered product if
the ``product (or component part) or part of such product (or
component part)'' was produced by a foreign manufacturer who
fails to designate or maintain an agent for service of process.
The inclusion of the term ``any part'' extends the import ban
to products that are not defined in Section 2 as a ``covered
product.'' In effect, this means that while manufacturers of
parts are not required to designate an agent under Section 2,
they may not export to the U.S. unless they do so under Section
4. For example, if a computer manufacturer imports motherboards
for assembly into a computer here in the U.S., the motherboard
manufacturer must designate an agent because it is a ``covered
product'' under Section 2. Under Section 4, the import of those
motherboards would be banned if the manufacturer of the
transistors already installed on the motherboards has not also
designated an agent. Further, it is unclear how far down the
line this definition applies; the term ``any part'' could be
interpreted to mean even the lead soldering (or even the lead
itself) and thus if the manufacturers of the soldering and lead
do not register agents, the motherboard may be banned from
importation. At markup, Committee counsel was unable to clarify
the definition of ``any part'' within this section.
Beyond the technical problems with section 4, this section
may violate Article XI of the General Agreement on Tariffs and
Trade as an illegal prohibition on trade.\6\
---------------------------------------------------------------------------
\6\General Agreement on Tariffs and Trade, Jan. 1, 1948, 55
U.N.T.S. 224 http://www.wto.org/english/docs_e/legal_e/gatt47_e.pdf.
No prohibitions or restrictions other than duties, taxes or other
charges, whether made effective through quotas, import or export
licences [sic] or other measures, shall be instituted or maintained by
any contracting party on the importation of any product of the
territory of any other contracting party or on the exportation or sale
for export of any product destined for the territory of any other
contracting party.
---------------------------------------------------------------------------
Conclusion
This legislation is a disincentive for foreign
manufacturers of all products, but particularly component
parts, to export to the U.S. market. This could result in a
grave disruption in supply chains across the board. H.R. 4678
potentially violates our international agreement obligations by
treating foreign companies differently from U.S. companies and
institutes an importation ban based on something other than
duties or taxes.
For those foreign companies that choose to continue
exporting to the U.S., this bill creates a potentially
overwhelming administrative burden for U.S. companies. Many
companies have thousands, if not tens of thousands of
suppliers. Our retailers and manufacturers will incur the cost
of checking on each vendor to ensure the products are legally
entered into the U.S. with no net benefit to consumers.
Further, creating regulatory burdens for domestic companies
who source products from foreign manufacturers is a job killer,
not a jobs program. This legislation creates far more problems
for U.S. businesses than it will ever resolve regarding foreign
manufacturers. For these and the reasons enumerated above, we,
the undersigned, cannot support H.R. 4678.
Joe Barton.
Marsha Blackburn.
John Shimkus.
Cliff Stearns.
Joseph R. Pitts.
Ed Whitfield.
Phil Gingrey.
Robert E. Latta.
Lee Terry.