H. Rept. 111-683 - 111th Congress (2009-2010)
December 16, 2010, As Reported by the Energy and Commerce Committee

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House Report 111-683 - FOREIGN MANUFACTURERS LEGAL ACCOUNTABILITY ACT OF 2010




[House Report 111-683]
[From the U.S. Government Printing 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).
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    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).
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------

                          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:
<GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT>

            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)'').
---------------------------------------------------------------------------

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.