should be corrected before that practice spreads to the detriment of those who now produce photoengraving plates in the United States. Mr. MASON. Perhaps then it is our job to clarify these court decisions so they do not go further than the intent was and perhaps that ought to be done in this bill, if it is a clarifying bill.

Mr. MILLS. That was my thought, that we could do it in the bill. Mr. NICHOLS. I would like to say, if the committee feels-and I can understand how they might feel there is a loophole here we certainly would be glad to give whatever assistance we can in drafting a suitable provision.

I think your bill, Mr. Mills, of course applies to only one of the cases in which that rule has been applied.

Mr. MILLS. That is the weakness of the bill. It should be applied generally to exclude every situation where it is not-and I am expressing a personal opinion-a reproduction in kind.

Mr. NICHOLS. Just expressing a personal opinion, I would think the committee would probably prefer, if they were going to handle this, not to single out a specific commodity, but deal with the matter across the board, and if this legislation has been misinterpreted by the court, then certainly this is the time to correct it.

Mr. COOPER. Let me ask a question for information. Is the effect of this provision now being discussed in the pending bill to reestablish the interpretation that was followed before the court decisions to which Mr. Johnson has referred?

Mr. NICHOLS. No, sir. The bill that we have before you would not affect that at all because all it does is to extend the bond period to 3 years, and if you are going to take care of the situation that Mr. Mills is talking about you are going to have to have some other amendment that is not now in this bill.

Mr. MILLS. Perhaps Mr. Cooper has in mind that the suggestion I was making with respect to this problem would restore the original interpretation of the Bureau of Customs prior to the court decision.

Mr. NICHOLS. You evidently would have to use different language than they used before because the court has interpreted the language previously used.

Mr. MILLS. Language that would clarify the intent a little more. Mr. NICHOLS. Are there any other questions on this section, Mr. Chairman? If not, I would like to go on.

The CHAIRMAN. You may proceed.

Mr. NICHOLS. I should have mentioned that the part of this section which refers to the automobiles, motorcycles, bicycles, airplanes, airships, and so forth, which is in the middle of page 11 of the bill, is to take care of what is left after we have taken the nonresidents' automobiles for their own personal transportation, that is to say, an automobile that was imported for use to participate in a race would be brought in under this temporary bonding procedure. It is only automobiles for personal transportation that would come in as personal effects.

SECTION 9. SUPPLIES AND EQUIPMENT FOR VESSELS AND AIRCRAFT

I would like to go on to section 9 of the bill, which is on page 11 of the bill and on page 14 of the analysis.

This section has to do with the provisions of sections 309 and 317 of the Tariff Act which provide tax- and duty-free supplies and

equipment to warships and merchant ships and fishing vessels and aircraft.

The procedure that has been established for a great many years has been that one of our own war vessels, or foreign-flag war vessels, or a merchant ship of our own or a foreign country, can obtain by withdrawal from warehouse, or from continuous customs custody, as it is called, the supplies and equipment that the vessel requires in order to operate.

The purpose of this is primarily, so far as our own vessels were concerned, to put them on a footing of equality with foreign vessels that, for the most part, would get their supplies and equipment abroad.

I should have said that the supplies for vessels and aircraft under our own flag do not include equipment-it is simply supplies.

We have a provision relating to aircraft which is in our law which provides for equipment as well as supplies and the effect of that provision is that a foreign flag aircraft, if it comes from a foreign country that grants reciprocal privileges to our aircraft, can obtain tax- and duty-free supplies, repair parts, and equipment.

Now we are proposing to change the law in this bill in two major respects: In the first place, we propose that a foreign-flag merchant ship that has to undergo repairs in this country can obtain the importation of the repair parts or equipment that needs to be installed—a new boiler, for instance, or propellor without the payment of duty under our law.

The present law has the unfortunate effect of causing the foreignflag ship that needs repair in our ports to pass up those repairs if it possibly can, because you cannot bring in a propeller to put on a foreign-flag ship without paying duty on it. Even though the ship is going to leave our port with the propeller installed and perhaps never return, our present law requires duty on that propeller and there is no provision for draw-back or refund.

Mr. MILLS. If I may interrupt you at that point, actually what you are endeavoring to do in this section is to extend the same treatment to foreign ships that is now extended to foreign aircraft?

Mr. NICHOLS. That is correct, yes. We are proposing to do a little bit more for foreign aircraft, and so there still will be some distinction. The foreign aircraft stand in need of ground equipment, and we propose in this bill to let them bring in ground equipment on a reciprocal basis. That is, if they come from a country that grants reciprocal privileges to our aircraft.

And I think from the balance of advantages and disadvantages, that with regard to the ships we have these two advantages: in the first place, you will advance the cause of safety at sea by assuring that foreign-flag ships will be properly repaired if they need repair in our ports, and secondly, you will get a little bit more ship-repair business for our ship-repair yards.

Mr. COOPER. Let me ask you a question for information there. Take a ship that comes into port in this country and finds it needs a new boiler. Well, that ship did not bring an extra boiler along with it, did it?

Mr. NICHOLS. No. If they ship there would be no duty. another ship, there is a duty.

correct.

brought a spare part on board the But if the spare part is brought in on That is the situation we are seeking to

If the boiler was brought in, let us say, from Norway, to be installed on a Norwegian ship which was tied up in our ports needing boiler repair, they would have to pay duty on that boiler. We do not think that is fair, and we do not think that it is a desirable situation in the effect it has on the policies and practices of these foreign-flag ships.

This particular provision was discussed with the Maritime Administration and we were informed that they had taken it up with some of the domestic shipping people and encountered no objection. So we feel that this is not a controversial provision.

The provision with respect to the aircraft is one that would be highly beneficial to our aircraft industry because it would assist them in obtaining reciprocal privileges abroad. And we call your attention in the analysis to the so-called annex 9 of the International Civil Aviation Convention in which the countries agreed, so far as was consistent with their legislation, to make reciprocal privileges of this kind available.

The provision with respect to ground equipment will be different under this bill in one respect, and that is that the ground equipment has to be imported. We are not recommending any tax exemption with regard to ground equipment which a foreign-flag airline might want to buy in this country.

Mr. MILLS. Let me see if I understand what you propose. So far as foreign ships are concerned, you are proposing to treat them in the future as you now treat aircraft?

Mr. NICHOLS. That is right.

Mr. MILLS. And so far as aircraft is concerned, you propose to enlarge the exemption on importations to include ground equipment? Mr. NICHOLS. That is right.

Mr. MILLS. Now, the ground-equipment part, as I understand it, will not be applicable to all nations, but only to those nations that extend to us a comparable treatment?

Mr. NICHOLS. That is right.

Mr. MILLS. That is under ICAO?

Mr. NICHOLS. That is right.

Mr. MILLS. Do you have any limitation upon your treatment of foreign ships? Will that be world-wide, or will that treatment apply to only such countries as accord us comparable treatment?

Mr. NICHOLS. No, the reciprocal provision in this bill is only with respect to aircraft. As to the ships, we do not think the situation is quite the same with regard to ships because, of course, it is much more costly to have repairs made in this country than abroad, and we have to assess duty on our ships when they have repairs made abroad. Mr. Mills. We do assess duty?

Mr. NICHOLS. We assess a duty of 50 percent on any repair that is made

Mr. MILLS. Do you mean if an American liner is incapacitated at Le Havre, France, and parts can be obtained in France that may amount to $10,000, when that ship returns to the United States, the duty is paid on those parts?

Mr. NICHOLS. That is correct, with one exception. That duty can be remitted if the repair was unavoidable, that is, if the casualty could not have been foreseen and provided against, and the ship had to have the repair made to return to the United States.

Mr. MILLS. In that event there would be no duty?

Mr. NICHOLS. Then there would be no duty.

The CHAIRMAN. Does that provision apply to all ships or just warships? For example, is there a difference between merchant ships and warships?

Mr. NICHOLS. It applies to foreign warships and foreign merchant ships and foreign fishing vessels.

The CHAIRMAN. What about American ships? Does it not apply to them at all in any way?

Mr. NICHOLS. No.

The CHAIRMAN. Suppose American shipowners secure equipment for their ships that is foreign made. Then where do they come in under the tariff?

Mr. NICHOLS. They have to pay duty. If the equipment was installed in this country, the duty would be according to the schedules of the tariff act, whatever it was. If the equipment was installed abroad, it would be the special 50-percent duty on ship repairs. The CHAIRMAN. Very well, proceed.

Mr. NICHOLS. We are not proposing any change with regard to ships of our own flag.

Mr. JOHNSON. To the best of my knowledge, the United States is the only country in the world that treats these articles as imported merchandise when they are brought in solely for installation on the foreign vessel. I know positively that Canada does not treat it as importation.

Our treatment is required by court decisions and opinions of the Attorney General holding that the merchandise is imported when it is transferred from one vessel to the other although it is never landed on the soil of the United States.

Mr. NICHOLS. I have finished my remarks on this section, and if there are any questions I should be glad to answer them.

If not, I will proceed.

Mr. COMBS. I have just one question to clear up my own mind. As to this tax or differential or tariff that is levied on repair of American flag vessels in foreign countries, if I understand you, that applies only to voluntary repairs made abroad, and not necessitated by unforeseeable accidents or something of that sort?

Mr. NICHOLS. That is right.

Mr. COMBS. Then I assume the purpose of that 50-percent tax, or whatever it is, is to see to it, as far as tariffs will do so, that American flag ships are repaired by American workmen in the United States; is that right?

Mr. NICHOLS. That is the way I understand it, yes.

Mr. REED. What countries extend these reciprocal privileges? Do we have written reciprocal relations with Norway? You mentioned Norway.

Mr. NICHOLS. I was talking about aircraft in connection with reciprocal privileges. That does not happen to prevail with respect to ships.

Mr. REED. It does not?

Mr. NICHOLS. No. We can provide for you a list of countries that do afford reciprocal privileges insofar as we have that information That is on aircraft only. We can provide that if the committee would like to have it.

Mr. REED. I think it might be just as well to have it for the record. Mr. NICHOLS. Very well.

(The information referred to is as follows):

RECIPROCAL PRIVILEGES FOR AIRCRAFT

Countries which the Secretary of Commerce has stated allow to aircraft of United States registry privileges substantially reciprocal to those referred to in section 309 (a), Tariff Act of 1930, as amended (19 U. S. C. 1309 (a)), and section 3451 of the Internal Revenue Code:

The CHAIRMAN. Very well, you may proceed.

SECTION 10. DRAW-BACK OF IMPORTS NOT ORDERED

Mr. NICHOLS. I come now to section 10 of the bill which is on page 15 of the analysis and page 14 of the printed bill.

This section is intended to provide against two types of hardship cases that cannot be dealt with under the existing law. The existing law permits an importer to reject his importation as not conforming to samples or specifications and to receive a refund or draw-back of his duties if he returns it to customs custody for export within 30 days.

We have found that the 30 days are not in practice sufficient for the importers to ascertain if the merchandise is defective or not, and they need a little more time, so we are recommending that the statute be amended to show 90 days instead of 30.

The other change we are proposing here is with respect to merchandise not ordered. This is a very unusual situation, but once in a great while a man accepts the delivery and makes an entry of merchandise