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                                                       Calendar No. 898
106th Congress                                                   Report
                                 SENATE
 2d Session                                                     106-452

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



 
TO IMPROVE THE CAUSE OF ACTION FOR MISREPRESENTATION OF INDIAN ARTS AND 
                                 CRAFTS

                                _______
                                

October 2 (legislative day, September 22), 2000.--Ordered to be printed

                                _______
                                

   Mr. Campbell, from the Committee on Indian Affairs, submitted the 
                               following

                              R E P O R T

                         [To accompany S. 2872]

    The Committee on Indian Affairs, to which was referred the 
bill (S. 2872) to provide for amendments to the Indian Arts and 
Crafts Act of 1990 (IACA, or ``the Act''), P.L. 101-644 (25 
U.S.C. 305e), having considered the same, reports favorably 
thereon with a bill and recommends that the bill do pass.

                                Purpose

    The purpose of S. 2872 is to provide technical amendments 
to improve the enforcement of the IACA for the protection of 
the economic and cultural integrity of authentic Indian arts 
and crafts, and for other purposes.

                               Background

    Today's market for Indian-made goods currently exceeds $1 
billion in revenue, but it is estimated that $400 to $500 
million of that demand is being satisfied from non-Indian, and 
largely, non-U.S. sources.\1\ This growing influx of 
inauthentic Indian arts and crafts has dramatically affected 
the Indian arts and crafts market by driving down prices, and 
tainting consumer confidence in and the cultural integrity of 
the market. With Native communities plagued by unemployment and 
stagnant economies, the flood of fake Indian arts and crafts is 
decimating one of the few forms of entrepreneurship and 
economic development on Indian reservations.\2\
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    \1\ John Shiffman, $1 billion Industry Reeling as Faux Crafts Flood 
Market, USA Today, April 8, 1998 at 2A; James Brooke, American Indian 
Crafts Lose Native Edge As Foreign Fakes Flourish, International Herald 
Tribune, August 4, 1997 at 11.
    \2\ At the Zuni Pueblo, approximately eighty-five percent of the 
population relies on Indian arts and crafts sales as either a primary 
or secondary source of income. Due to the importation of inauthentic 
Indian arts and crafts, these artisans have noticed that it is more 
difficult to sell their work and that their work sells at a reduced 
price from that of ten years ago. Implementation of the Indian Arts and 
Crafts Act of 1990: Oversight Hearing Before the Senate Committee on 
Indian Affairs, 106th Congress (2000) (statement of Tony Eriacho, Jr., 
Board Member, Indian Arts and Crafts Association).
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    Imitation Indian arts and crafts are generally mass-
produced, and thus, manufactured at a substantially reduced 
cost, generally around ten percent the cost of the original, 
authentic good. To compete, traditional Indian artisans are 
required to reduce their prices and reduce their profit margin. 
As a result, many traditional Indian artisans have retired from 
their professions because of this weakening of the market.\3\
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    \3\ The Isleta Pueblo's full-time artisan population has reduced 
from 150 to 30 individuals over the past ten years. Implementation of 
the Indian Arts and Crafts Act of 1990: Oversight Hearing Before the 
Senate Committee on Indian Affairs, 106th Congress (2000) (statement of 
Andy Abeita, President, Council for Indigenous Art and Culture).
---------------------------------------------------------------------------
    Another result of the rapid rise in imitation Indian arts 
and crafts is that consumer confidence in this market is 
declining. Lack of consumer confidence will reduce the demand 
for Indian arts and crafts as consumers shift their preference 
to goods with greater consumer protections.
    The flood of inauthentic Indian arts and crafts also 
damages traditional Indian heritage and culture. Indian arts 
and crafts are created through time-honored cultural practices 
and traditions. Intergenerated continuity of these cultural 
practices is threatened when young people are deterred from 
becoming artisans because of the changing market that results 
from the surge of cheaply made, imitation Indian arts and 
crafts. The following statement illustrates the spiritual 
nature of traditional Indian artistry.

          The intangible thing that separates Native Art from 
        the generic terminology ``arts and crafts'' is the fact 
        that the art produced by Indian nations is an extension 
        of their heart and soul. A Native artist cannot, for 
        the most part, go out to the local store and purchase 
        raw materials to make their art or craft. The process 
        for obtaining the raw materials is an invested effort 
        of harvesting either animals, plants, or other natural 
        materials that first need to be processed to a usable 
        form. Even this is premised by a prayer ceremony to the 
        Creator, before taking from the land * * * It remains a 
        very spiritual act in creating an art or craft; and 
        many still practice the `old Ho Chunk teaching' in that 
        a flaw is inconspicuously made in the art price in 
        respect to the Creator, knowing that He is the only 
        Perfect Creator.\4\
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    \4\ Id.
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            The 1935 Act and the 1990 Amendments to the Act

    The Indian Arts and Crafts Act of 1935 (``the organic 
Act'') P.L. 74-355, 25 U.S.C. 305e was enacted to promote 
American Indian and Alaskan Native economic development through 
the expansion of the Indian arts and crafts market. The organic 
Act established the Indian Arts and Crafts Board (IACB) to 
promote the development of Indian arts and crafts. As a result, 
the IACB focused on establishing and expanding an Indian arts 
and crafts market. In addition, the organic Act had two 
enforcement mechanisms: (1) the IACB was authorized to 
establish a government trademark of genuineness; and (2) the 
Act established criminal penalties for the counterfeiting of 
the IACB trademark and the misrepresentation of the authentic 
Indian arts and crafts. Although the organic Act contained 
these enforcement provisions, the promotion of Indian arts and 
crafts was the primary focus of the IACB throughout the 1935-
1990 period.
    In 1990, the Act was amended to provide stronger 
enforcement through enhanced civil and criminal sanctions.\5\ 
Even with these strengthened enforcement provisions, to date 
there has yet to be a civil or criminal conviction under this 
Act. In addition, the Department of Interior has yet to issue 
trademark regulations regarding the trademark provisions 
pursuant to the organic Act and the 1990 amendments to the 
organic Act.
---------------------------------------------------------------------------
    \5\ P.L. 101-644 Sec. 104-105.
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    Under the 1990 amendments, the criminal penalties for 
individuals who violate the statute range from a fine of 
$250,000 to $1,000,000 and/or a prison sentence ranging from 
five to fifteen years, depending on whether the defendant is a 
repeat offender. In addition, a corporation is liable for a sum 
of $1,000,000 on its first offense and up to $5,000,000 on 
subsequent offenses. Civil sanctions include injunctive and 
other equitable relief, monetary damages, punitive damages and 
attorneys fees.
    In criminal cases, only the Attorney General of the United 
States (``Attorney General'') has standing to prosecute 
possible violations of the Act. The IACB's role in a criminal 
case is to receive a complaint, recommend that the Federal 
Bureau of Investigation (FBI) investigate the merit of the 
complaint, and then the IACB may recommend that the Attorney 
General proceed with a criminal action. The 1990 amendments 
designate only the Attorney General and an Indian tribe \6\ as 
having standing to bring civil suit under the Act. The IACB's 
role in a civil case is to receive a complaint, recommend that 
the FBI investigate the merit of the complaint, and then 
recommend that the Secretary of the Interior refer the matter 
to the Attorney General for civil prosecution.
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    \6\ An Indian tribe may bring a civil cause of action for either 
itself, an individual Indian, or an Indian arts and crafts association.
---------------------------------------------------------------------------

                      Section-by-Section Analysis


Sec. 1. Short Title.

    The title of this act is the Indian Arts and Crafts 
Enforcement Act of 2000.

Sec. 2.

    Amendments to Civil Action Provisions. All amendments will 
be made to Section 6 of the IACA.
    Section 6(a). To enhance the ability of the plaintiff to 
assess and calculate damages, the phrase ``directly or 
indirectly'' will be added after the phrase ``against a person 
who.'' This provision clarifies that suit may be brought 
against a manufacturer and/or supplier when the plaintiff is 
not in direct competition with the manufacturer or supplier. 
For example, this language would authorize an Indian tribe to 
bring civil suit against wholesalers and others involved in the 
chain of distribution, although these defendants may not be the 
final retailer who sells the violative product.
    Section 6(a)(2)(B). This section is amended to clarify how 
treble damages can be assessed. Plaintiffs who bring suit under 
the IACA, like other consumer protection cases, have difficulty 
in proving and quantifying damages. For example, lost or 
diminished sales attributable to the complained behavior, are 
difficult or impossible to prove. With this amendment, 
plaintiffs may use the defendant's profits from selling the 
violative product as a basis for assessing damages. This 
approach is similar to how the Lanham Act assesses damages.\7\
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    \7\ 15 U.S.C. at Sec. 1117 (1946).
---------------------------------------------------------------------------
    Section 6(c)(1)(B). Under Section 305e(c), only the 
Attorney General or an Indian tribe may bring civil suit for 
alleged violations of the IACA. This amendment authorizes both 
Indian arts and crafts organizations and individual Indians to 
bring suit for alleged violations of the Act.
    To date, there has not been a successful prosecution under 
the IACA. One of obstacles in enforcing the IACA has been the 
lack of suits initiated by either the Attorney General and 
individual Indian tribes. Often these entities are not 
aggressive in bringing suits on behalf of individual artisans 
and/or artisan organizations because the Attorney General or an 
Indian tribe suffer no direct injury. Individual Indian 
artisans and artisan organizations suffer both financial and 
cultural injury from inauthentic Indian arts and crafts 
entering the market. By broadening standing under the statute, 
the Committee's intent is to encourage greater enforcement of 
the Act.
    Section 6(c). This section is amended to authorize the 
Attorney General to allocate a portion of the damages collected 
in a successful prosecution to reimburse the IACB for its costs 
in investigating and bringing about the successful prosecution 
of the suit.
    Section 6(d)(2). This section is amended to make the 
definition of Indian products more precise throughout the 
regulatory process. This amendment requires the IACB to 
promulgate regulations which include specific examples of 
Indian products to provide guidance to the artisans, as well as 
purveyors and consumers, of Indian arts and crafts.

                          Legislative History

    A hearing on the implementation of the Act was held on May 
17, 2000 and the Indian Arts and Crafts Enforcement Act of 2000 
(S. 2872) was introduced on July 14, 2000, by Senator Campbell, 
for himself, and for Senators Bingaman, Kyl, Domenici, and 
Johnson. S. 2872 was referred to the Committee on Indian 
Affairs on July 14, 2000. On July 26, 2000, the Committee on 
Indian Affairs convened a business meeting to consider S. 2872 
and other measures that had been referred to it, and on that 
date, the Committee ordered S. 2872 reported favorably without 
an amendment.

            Committee Recommendation and Tabulation of Vote

    On July 26, 2000, the Committee on Indian Affairs, in an 
open business session adopted S. 2872 by voice vote and ordered 
the bill reported favorably to the full Senate.

                    Cost and Budgetary Consideration

    The cost estimate for S. 2872 as calculated by the 
Congressional Budget Office, is set forth below:

                                     U.S. Congress,
                               Congressional Budget Office,
                                    Washington, DC, August 7, 2000.
Hon. Ben Nighthorse Campbell,
Chairman, Committee on Indian Affairs,
U.S. Senate, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for S. 2872, the Indian 
Arts and Crafts Enforcement Act of 2000.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Lanette J. 
Keith.
            Sincerely,
                                          Barry B. Anderson
                                    (For Dan L. Crippen, Director).
    Enclosure.

S. 2872--Indian Arts and Crafts Enforcement Act of 2000

    CBO estimates that implementing S. 2872 would have no 
significant impact on the federal budget. Because enactment of 
S. 2872 would not affect direct spending or receipts, pay-as-
you-go procedures would not apply to the bill. S. 2872 contains 
no intergovernmental or private-sector mandates as defined in 
the Unfunded Mandates Reform Act and would impose no costs on 
state, local, or tribal governments.
    S. 2872 would allow Indian arts and crafts organizations to 
seek damages in the federal courts from persons misrepresenting 
arts and crafts as having been produced by Indians. Based on 
information from the Administrative Office of the United States 
Courts, CBO expects that any increase in federal costs for 
court proceedings would not be significant because of the small 
number of cases likely to be involved. Any additional costs to 
implement the bill would be subject to the availability of 
appropriated funds.
    The CBO staff contact for this estimate is Lanette J. 
Keith. The estimate was approved by Robert A. Sunshine, 
Assistant Director for Budget Analysis.

                      Regulatory Impact Statement

    Paragraph 11(b) of rule XXVI of the Standing Rules of the 
Senate requires that each report accompanying a bill to 
evaluate the regulatory paperwork impact that would be incurred 
in implementing the legislation. The committee has concluded 
that enactment of S. 2872 will create only de minimis 
regulatory or paperwork burdens.

                        Executive Communications

    The Committee has received no official communication from 
the Administration on the provisions of the bill.

                        Changes in Existing Law

    In compliance with subsection 12 of rule XXVI of the 
Standing Rules of the Senate, changes in existing law made by 
the bill are required to be set out in the accompanying 
Committee report. The Committee finds that enactment of S. 2872 
will result in the following changes to 25 U.S.C. Sec. 305(e), 
with existing language which is to be deleted in bold brackets 
and new language to be added in italic:

                           25 U.S.C. 205e(a)

    (a) Injunctive or Equitable Relief; Damages.--
    A person specified in subsection (c) of this section may, 
in a civil action in a court of competent jurisdiction, bring 
an action against a person who, directly or indirectly, offers 
or displays for sale or sells, a good, with or without a 
Government trademark, in a manner that falsely suggests it is 
Indian produced, an Indian product, or the product of a 
particular Indian or Indian tribe or Indian arts and crafts 
organization, resident within the United States, to--
          (1) obtain injunctive or other equitable relief; and
          (2) recover the greater of--
                  (A) treble damages; or
                  (B) in the case of each aggrieved individual 
                Indian, Indian tribe, or Indian arts and crafts 
                organization, not less than $1,000 for each day 
                on which the offer or display for sale or sale 
                continues.
    For purposes of paragraph (2)(A), damages shall include any 
and all gross profits accrued by the defendant as a result of 
the activities found to violate this subsection.

                           25 U.S.C. 305e(c)

    (c) Persons Who May Initiate Civil Actions.--
          (1) A civil action under subsection (a) of this 
        section may be commenced--
                  (A) by the Attorney General of the United 
                States upon request of the Secretary of the 
                Interior on behalf of an Indian who is a member 
                of an Indian tribe or on behalf of an Indian 
                tribe or Indian arts and crafts organization; 
                [or]
                  (B) by an Indian tribe on behalf of itself, 
                an Indian who is a member of the tribe, or on 
                behalf of an Indian arts and crafts 
                organization[.]. or
                  (C) by an Indian arts and crafts organization 
                on behalf of itself, or by an Indian on behalf 
                of himself or herself.
          (2) Any amount recovered pursuant to this section 
        shall be paid to the individual Indian, Indian tribe, 
        or Indian arts and crafts organization, except that--
                  (A) in the case of paragraph (1)(A), the 
                Attorney General may direct from [the amount 
                recovered the amount] the amount recovered--
                          (I) the amount for the costs of suit 
                        and reasonable attorney's fees awarded 
                        pursuant to subsection (b) of this 
                        section and deposit the amount of such 
                        costs and fees as a reimbursement 
                        credited to appropriations currently 
                        available to the Attorney General at 
                        the time of receipt of the amount 
                        recovered; and
                          (ii) the amount for the costs of 
                        investigation awarded pursuant to 
                        subsection (b) and reimburse the Board 
                        the amount of such costs incurred as a 
                        direct result of Board activities in 
                        the suit; and
                  (B) in the case of paragraph (1)(B), the 
                amount recovered for the costs of suit and 
                reasonable attorney's fees pursuant to 
                subsection (b) of this section may be deducted 
                from the total amount awarded under subsection 
                (a)(2) of this section

                          25 U.S.C. 305e(d)(2)

          (2) subject to subsection (f), the terms ``Indian 
        product'' and ``product of a particular Indian tribe or 
        Indian arts and crafts organization'' has the meaning 
        given such term in regulations which may be promulgated 
        by the Secretary of the Interior;

                           25 U.S.C. 305e(f)

    (f) Not later than 180 days after the date of enactment of 
the Indian Arts and Crafts Enforcement Act of 2000, the Board 
shall promulgate regulations to include in the definition of 
the term `Indian product' specific examples of such product to 
provide guidance to Indian artisans as well as to purveyors and 
consumers of Indian arts and crafts, as defined under this Act.