unnecessary administrative burdens in connection with nonresident automobiles, and we believe that we are tightening up the enforcement and providing added protection to the revenue by the forfeiture provision. That is all that I have to say on that section, if there are no more questions, Mr. Chairman. SECTION 7. FREE ENTRY FOR NONCOMMERCIAL EXHIBITIONS The CHAIRMAN. Proceed to the next section. Mr. NICHOLS. The next section, section 7, would amend paragraph 1809 of the Tariff Act-page 9 of the bill and page 13 of the analysis. That paragraph now provides for free entry for such exhibitions, that is, for museums and the like, that, maintain permanent exhibits under a bond that is of indefinite duration. There is no period to expire in this case. The exhibit can be maintained indefinitely and the bond remains in force indefinitely. McKinsey pointed out that was a situation that permitted the accumulation for an indefinite period of old records. This amendment simply provides for the expiration of the bond after 5 years so that after 5 years the records can be disposed of and the collector will be free of any responsibility with respect to the articles on exhibit. We believe that 5 years is long enough to prevent any abuse. Mr. NICHOLS. That is right. The effect of this will not be they will have to reexport after 5 years. I want to make that perfectly clear. The effect will simply be that after 5 years the bond will expire and the collector will no longer be responsible for what they do with the paintings, or whatever they are. SUPPLEMENTAL DATA CONCERNING PROPOSAL IN SECTION 6, H. R. 1535, THAT AUTOMOBILES BE ADMITTED AS PERSONAL EFFECTS IN CERTAIN CASES OWNERSHIP OF CANADIAN AUTOMOTIVE INDUSTRY The Canadian automotive industry is almost entirely composed of subsidiaries or affiliates. A recent bulletin of the Dominion bureau of statistics says that the Canadian motor vehicle industry is controlled in the United States "almost 100 percent." Canada's International Investment Position: "Ford, General Motors, Chrysler, Studebaker, Nash, Hudson, and White Motor Truck are known to be manufacturing here." Large quantities of parts are exported from the United States to Canada for assembling and only a small portion of these are free of duty. OWNERSHIP OF MEXICAN AUTOMOTIVE INDUSTRY Both Ford Motor Co., S. A. and General Motors de Mexico are known to be wholly owned American subsidiaries. There are also a few Mexican-owned corporations which operate as assembly plants under private contract arrangements with the United States manufacturers. These are the Fabricsa Automex which handles Chrysler products, Automotriz O'Farril S. A. which has Packards, and Armadora Automotriz S. A., which has Nash, Willis, Hudson, Kaiser, Frazer, and Studebaker. COMPARATIVE PRICES OF AUTOMOBILES AT RETAIL IN DETROIT, MICH., AND Windsor. ONTARIO Prices of automobiles on a comparable basis as to model, accessories, tax inclusion, etc., indicate that in the low-price field automobiles are $200 and up higher priced in Windsor, Ontario, than in Detroit, Mich. The price differential increases for the higher priced cars. Further, such a price differential, with the higher prices existing in Canada, is reported to have existed since the inception of the automotive industry. COMPARABLE PRICES OF AUTOMOBILES AT RETAIL IN MEXICO AND IN THE UNITED STATES Comparable prices of automobiles in Mexico and in the United States as to model, accessories, tax inclusion, etc., indicate a spread with Mexican prices being higher in the low-class field of from six to eight hundred dollars. In the higher price fields, the spread remains about the same for most models. As in the case of Canada, a spread with Mexican prices being higher, is reported to have existed since the beginning of the automotive industry. Mr. JENKINS. Suppose that they are ornamental rugs and salable and have a regular market. These paintings would sell only to certain connoisseurs, but tapestries and things like that, if you have a 5-year limit on them and forget all about them, will be sold in competition with our manufacturers. Mr. NICHOLS. We agree that that could happen in theory. We think in practice it would not pay anyone to tie up an inventory of rugs or tapestries or other artistic objects for 5 years before disposing of them. Mr. MASON. You would tie up your money for 5 years, and you would have to make a tremendous profit in order to make it pay? Mr. JOHNSON. Paragraph 1809 contains a specific provision in the law that the privilege of entry under that paragraph shall not be allowed to any organizations connected in any way with business, so it is only museums that are entitled to the privilege, in the first place. The feeling is if they demonstrate a legitimacy of the importation for 5 years, that is long enough. Mr. JENKINS. If they go into the selling business you would soon find it out? Mr. JOHNSON. Yes. Mr. JENKINS. You could protect yourself that way? Mr. JOHNSON. Yes. Mr. CURTIS. The most that the Government could lose after 5 years would be the tariff? Mr. NICHOLS. Right. Mr. CURTIS. Is there a substantial tariff on the type of material that is apt to be imported for an exhibit? Mr. NICHOLS. The tariff could be substantial in the case of rugs, tapestries, and so forth. Mr. CURTIS. Are those often brought in for exhibit purposes by organizations that qualify? Mr. NICHOLS. I do not know. Mr. JOHNSON. This provision applies to works of art, collections and illustrations of the progress of the arts, science, industry, and agriculture, and material for public monuments. Mr. CURTIS. In other words, all this bonding provision would amount to would be that they could not be sold within 5 years without paying a tariff? Mr. NICHOLS. The bond would be effective to prevent a sale for 5 years. Mr. CURTIS. Without paying duty? Mr. NICHOLS. That would be the practical effect because if the importer wanted to sell the articles he would have to apply to the collector, and the arrangement would probably be for a penalty under the bond that would exceed the duty that would have been applicable. Mr. CURTIS. But it would mean that after 5 years it could be sold without any penalty or payment of the duty. Mr. NICHOLS. In the case of articles admitted temporarily under bond, under other provisions of law, the ordinary practice is if they are sold, and if the collector is satisfied they were originally entered in good faith with the intention of reexporting, the bond is canceled on payment of a penalty equaling the duty plus 25 percent. Mr. CURTIS. What I want to know is, Does the obligation to pay the duty expire with the life of the bond? Mr. NICHOLS. Yes. Mr. CURTIS. Why? Mr. NICHOLS. I think that a more accurate way to say it would be if the article was entered under this provision on the free list-and this is one of the free-list items-then the obligation to pay the duty never arose, and if the privilege was claimed fraudulently in bad faith, the importation would be subject to forfeiture, but if the privilege is claimed in good faith, there is no obligation to pay duty and there is only the penal provisions of the bond which would remain effective for 5 years. Mr. JOHNSON. It might be of interest to say the principal operation of this provision, or one of the principal operations, is on picture frames. A picture brought into the United States in a frame may be free of duty, but the frame is subject to duty, so the museum will enter the whole thing, the free picture and the dutiable frame, under bond just to avoid paying duty on the frame. If they put that picture on display for 5 years it seems that they ought to have the frame along with the picture. Mr. NICHOLS. I might also add that there are several other sections of the free list that grant privileges to museums and public bodies to import art objects and that exempt original works of art, paintings and sculpture, so that is the reason why the practical application of this section is not as broad as it may seem. If there are no other questions, I will proceed. The CHAIRMAN. Proceed. SECTION 8. TEMPORARY FREE ENTRY FOR SAMPLES AND OTHER ARTICLES UNDER BOND Mr. NICHOLS. I am now turning to page 10 of the bill and 14 of the analysis. The present section 308 of the Tariff Act is the section which provides for a number of articles to be permitted temporary free entry under a bond which calls for reexport of the article within 6 months, and the Department has authority to extend that bond period to a year. The articles that come under that are machinery for repair, models of women's wearing apparel, samples to be used in taking orders for merchandise, articles intended for experimental purposes, locomotives brought into the United States to clear obstructions or fight fires, containers for compressed gases and a few other articles. At present this is the provision which applies to the free entry of nonresidents' automobiles, but as I have already explained in discussing the previous section, we are proposing to take that out of this section and handle the nonresidents' automobiles like other personal effects. What we are proposing to do with this section, if the Congress approves, is to provide for extensions of up to 3 years in time instead. of just 1 year. We think this amendment will have a commercial effect with respect to samples which are brought in to be exhibited in commercial shows and in trade fairs. The people who handle these samples very frequently have a schedule of exhibitions which run for more than a year, and they find it somewhat of a hardship to export the samples and bring them in again under a new bond. We believe that the authority to extend the bond period for reexport to 3 years will be a convenience and a help to the importers in marketing their products without involving any danger for the revenue, because a bond for 3 years is just as enforceable as a bond for 1 year. Mr. JENKINS. Recently I introduced a bill in Congress and abandoned it, and this is what the purport of it was-to admit commodities to various community fairs and municipal shows and so on and so forth. Well, I had a report from one of the departments indicating that there were some commodities that wore themselves out through use. For instance, if there was a motion-picture film brought into the country and shown around for 6 months, it would be shown in all the big cities and it would be worn out, and there would be no duty paid on it. What commodity would there be that you would permit the use of for 3 years? Suppose that you brought in a machine of some kind and put it to work for 3 years. It would be producing and thereby throw our people out of work. Mr. NICHOLS. If a machine were brought in for 3 years and actually used in production, it would be a violation of the conditions of the bond because the bond, if you have reference to the first item I mentioned in the list of machines brought in for repair, would limit the use of the machine to repair. If it were used for any other purpose, the penal sum of the bond would become due. There is no provision in this section 308 for temporary free importation of a machine for any period for actual use except if you call a locomotive a machine, for the purpose mentioned in connection with fire-fighting. I do not think the extension of 3 years would be of any importance in that connection. Mr. JENKINS. Perhaps I am too far away from the right section. However, the report came up from some of your departments indicating that the bill we had introduced would permit the illustration that I cited of the motion-picture films. It would be a popular film in Europe and it would come over here and be an exhibition. It would run all over the country and by the time the limit was reached its utility would be gone. It would pay no duty upon its entry, Mr. NICHOLS. That film would not come in under this section. Mr. JENKINS. I know it would not. I am just wondering if you extend this for such a length of time if there would not be other things that would come in. Machines would come in and take the place of our machines. They would use them for 3 years. Mr. NICHOLS. A motion picture can be brought in under 308 and it can be reproduced but it cannot be shown commercially. Mr. JENKINS. That is what your authority says. I had a bill prepared to permit some show articles for a show in Cleveland. The language was so broad that it would permit the motion-picture films to be sent in. The time limit was so long that they decided it would allow the exhibition of the film. The film would have passed its usefulness because the whole country would have seen it. Three years would be much longer than 6 months. Mr. NICHOLS. We have a provision in this bill for admitting race horses under bond, and the 3-year period might wear out a race horse. Mr. JENKINS. Very few race horses in our country last 3 years in the big money. Mr. NICHOLS. I think in the case of race horses your comment might conceivably have effect. A race horse may wear out in 3 years. The same section has a provision in it for racing automobiles and motorcycles. I am not expert enough on those items, but I think the possibility of what you mentioned occurring on any sufficient scale to involve any danger to the revenue is nil. Mr. JENKINS. The way the traffic is developing here we have plenty of racing now with automobiles. Mr. REED. I recall sometime ago there was a bill introduced by Mr. Cooley to permit the entry of some new machinery for weaving. We had to get clearance by law. It was a new device that they wanted to develop in this country, yet we had to get clearance through a special act. Is there any change in the law with regard to that so that those devices can come in? Mr. NICHOLS. Yes. I was familiar with Mr. Cooley's bill, if that is what you are referring to. Mr. REED. Is this law going to be broadened so that machinery of that kind can come in? Mr. NICHOLS. There is nothing in this bill that would accomplish what Mr. Cooley sought to accomplish in his bill. Mr. REED. I was just wondering whether or not you were changing the law to permit that sort of device to come in here. Mr. NICHOLS. We do not have any suggestions that new articles be brought in under this temporary procedure that I am discussing now. Mr. MILLS. Mr. Nichols, do you find that there is any possibility of abuse, or any actual abuse, of section 308, as now in effect? Do you ever find that there are articles brought in under this section free of duty which are reproduced or copied for commercial use or sale? Mr. NICHOLS. Let me answer that in this way: There is a considerable number of cases where importers import goods they mean to reexport within the period and then they want to sell the articles. That is particularly the case with respect to model gowns. Model gowns are among the articles that are subject to this bond procedure, and the practice of customs is, where there is no reason to doubt the good faith of the importer in intending to export when he first brings |