ANALYSIS OF THE CUSTOMS SIMPLIFICATION ACT OF 1951

The purpose of this bill is to amend the Tariff Act of 1930, as amended, in order to simplify its operation, to reduce expense and delay incident to its administration, and to eliminate inequities which add to the difficulty of enforcement.

The principal source of recommendations contained in this bill has been the survey of the customs service conducted 3 years ago by a private firm of management consultants. Such undertaking was made from funds specifically authorized by the Congress in the Customs appropriation for the fiscal year 1948. The management firm was given two main objectives:

1. Determine how the cost of customs operations can be reduced, compatible with required service.

2. Ascertain whether the service rendered by customs can be improved. Some recommendations for provisions in the bill came from the Customs Bureau, other Government departments, and from representations of importers and other groups interested in expediting the flow of commerce between nations. The law of customs administration and procedure, as distinguished from the rate structure, enacted in the Smoot-Hawley Tariff Act of 1930 (act of June 17, 1930, 46 Stat. 590) has been generally revised only once, by the Customs Administrative Act of 1938 (act of June 25, 1938, 52 Stat. 1077). Since that time many changes have occurred in industry and commerce, and the Customs Simplification Act of 1951 will modernize the administrative and procedural laws in accordance with the objective of giving improved service to the importing public at the least possible cost to the taxpayer.

The measures which are most necessary to achieve the foregoing objects are the following (the sections referred to are of the Tariff of 1930): to simplify and make more equitable the formulas for appraising merchandise for assessment of ad valorem duties (sec. 402); to eliminate "special marking" requirements and to require only such marking as will indicate to the ultimate consumer the country of origin of imported merchandise; to provide for uniformity of treatment in cases involving countervailing duties by requiring a finding of injury to American industry similar to provision regarding antidumping cases (sec. 303); to increase to a realistic level the "small value" exemptions (secs. 321; 498 (a) (1)); to eliminate the incurring by importers of undervaluation penalties without fault on their part (sec. 489); to provide a more modern method for converting amounts in foreign currencies to amounts in United States currency (sec. 522); to permit correction by customs officers of admitted errors without appeal to the courts (sec. 520 (c) (1)); and a number of others of lesser individual importance, but cumulatively of major importance. Details as to the changes proposed are set forth below. The bill proposes no change in any rate of duty and any incidental change in amounts of duty payable, such as those which may result from changes in appraisal methods, will not be large.

It is the opinion of the Treasury Department that these amendments, if adopted, will go far to remove the most serious obstacles in our Tariff Act to the increase of international trade, other than those represented by the tariff rates and the complexities of classification in the tariff structure.

Some of the provisions contained in this bill parallel certain of the customs administrative provisions of the General Agreement on Tariffs and Trade, which is now being applied in the United States on a provisional basis (that is, where not inconsistent with existing legislation). The representatives of this Government, in negotiating such agreement, were aware of the administrative difficulties tha had arisen under our customs laws, and, in this respect, had the advice of customs officials in relation to customs procedures. An endeavor is made in this analysis, where appropriate, to point out the particular customs provisions as they relate to provisions of the general agreement.

Regardless of the customs administrative provisions of this international agreement, referred to above, the Customs Simplification Act of 1951 is needed to improve the administrative and procedural aspects of the customs service, and thereby expedite the movement of merchandise in regular channels of trade. There follows a section-by-section explanation of the bill.

SECTION 1. SHORT TITLE AND EFFECTIVE DATE

This section contains a short title, a general provision for an effective date, and a table of contents.

SECTION 2. REQUIREMENT OF INJURY IN DUMPING AND COUNTERVAILING DUTY CASES

Subsection (a) of section 2 would amend section 201 (a) of the Antidumping Act, 1921 (U. S. Code, 1946 edition, title 19, sec. 160 (a)) to change "injured" to "materially injured" and "prevented" to "prevented or materially retarded" in the specifications of situations in which antidumping duties are to be levied. These are mere clarifications and will result in no change in the law as it has been administered since its enactment.

Subsection (b) would amend section 202 (a) of the Antidumping Act to make it clear that there will be no imposition of both countervailing and antidumping duties on particular merchandise to compensate for the same situation of dumping or export subsidization. Such action has never been taken, but it is not specifically forbidden by the terms of the antidumping and countervailing duty laws. Subsection (c) would amend section 303 of the Tariff Act of 1930 (U. S. Code, 1946 edition, title 19, sec. 1303) by adding a provision corresponding to that to be added to the Antidumping Act by subsection (b). It would also add to section 303 a provision that countervailing duties will be assessable only if an industry of the United States is being caused or threatened with material injury, or if establishment of an industry is being prevented or materially retarded. If an injury to an actual or potential United States industry is not established, the need for a countervailing duty is not established. Subsection (c) would also add a provision that countervailing duty shall not be levied because of the ordinary remission or refund of taxes and duties allowed on exportation by most nations, including the United States. Under the existing administrative interpretation of section 303 of the Tariff Act, countervailing duty is not imposed in such situations, but some judicial comments on the statutes do not make it clear that the courts would consider such duty or tax exemptions as outside the scope of the countervailing duty provision. The proposed amendment eliminates the possibility of rulings in conflict with the administrative practice which has been followed for over 50 years.

No similar provision is needed for the Antidumping Act, 1921, because the point is specifically covered by the terms of sections 203 and 204 of that act (U. S. Code, 1946 edition, title 19, secs. 162, 163). The proposed amendments, if adopted, will eliminate some relatively small discrepancies between our law and article VI of the general agreement (antidumping and countervailing duties), which in general recognizes our practices in the matter as a standard for all countries.

SECTION 3. REPEAL OF SPECIAL MARKING REQUIREMENTS

The provisions of law involved are paragraphs 28, 354, 355, 357, 358, 359, 360, 361, and 1553 of the Tariff Act of 1930 (U. S. Code, 1946 edition, title 19, sec. 1001, pars. 28, 354, 355, 357, 358, 359, 360, 361, and 1553). These paragraphs refer to specific items to be imported and (except for par. 28) specify in detail that the articles enumerated shall have, when imported, the name of the maker or purchaser as well as the name of the country of origin conspicuously and indelibly marked on the outside of the articles. Paragraph 28 requires marking the containers of certain coal-tar products with detailed information as to the contents. The amendments proposed by this section would repeal entirely the marking provisions mentioned. The amendment to paragraph 28 would leave unaltered a requirement for information on invoices, a more practical method of conveying information to the industrial users of these products.

This proposal is restricted to special marking requirements and the articles covered would still be subject to the general marking provisions of section 304 of the Tariff Act of 1930 (U. S. Code, 1946 edition, title 19, sec. 1304). The special marking is not needed for consumer information, in view of section 304, and its requirement often interferes with the efforts of United States medical men and scientists to get needed instruments for medical purposes and for research, and with trade and commerce generally.

Subsection (b) of section 3 would repeal section 2934 of the Revised Statutes (U. S. Code, 1946 edition, title 19, sec. 134) which relates to the marking of medicinal preparations imported into the United States. This provision of law is obsolete and should be repealed. At the present time, the Food and Drug Administration permits relabeling upon importation, under other statutory authority.

SECTION 4. REPEAL OF CERTAIN OBSOLETE RECIPROCAL PROVISIONS

Subsection (a) of section 4 would repeal the proviso to paragraph 812 of the Tariff Act of 1930 (U. S. Code, 1946 edition, title 19, sec. 1001, par. 812), which

provides for the forfeiture to the United States of any sized casks or other packages of spirituous or distilled liquors imported from any country under whose laws such sized casks and other similar packages of liquors put up or filled in the United States are denied entry into such country. Subsection (b) would repeal section 320 of the Tariff Act of 1930 (U. S. Code, 1946 edition, title 19, sec. 1320), which provides that the Secretary of the Treasury and the Postmaster General, with the advice and consent of the President, may enter into a reciprocal agreement with any foreign country to provide for the entry free of duty of certain advertising matter. Although this provision has been in the law almost 20 years, no action has ever been taken under it.

Both are contrary to the most-favored-nation principle, and both clearly provide for discriminatory treatment. The proposed revision will be consistent with article I of the general agreement.

SECTION 5. AMERICAN GOODS RETURNED

Paragraph 1615 (f) of the Tariff Act of 1930, as amended (U. S. Code, 1946 edition, title 19, sec. 1201, par. 1615 (f)), provides for the levy of duty on imported goods which have been previously exported with benefit of draw-back of customs duties or with refund or remission of internal-revenue tax. The duty imposed is an amount equal to the sum of any customs draw-back allowed upon the exportation of such article from the United States plus the amount of any internalrevenue tax imposed, but in no case in excess of the total duty and internalrevenue tax imposed on the importation of like articles. The proposed amendment would add new language to paragraph 1615 (f) to provide a means of determining the amount of duty on such reimported merchandise in cases when it is impracticable to determine the amount of draw-back or whether draw-back has been allowed, because of the destruction of customs records or for any other

cause.

Under the proposed section 5, the collector would assess an amount of duty equal to the amount of draw-back which he estimates would be allowable if the imported merchandise used in the manufacture or production of the reimported article were dutiable at the rate applicable to such merchandise on the date of importation. The amendment further provides that the Secretary of the Treasury may determine the amounts of duty equal to draw-back or internal-revenue tax which shall be applied to articles or classes or kinds of articles, and may exempt from duty certain articles or classes or kinds of articles where the expense and inconvenience to the Government would be disproportionate to the amount of duty.

This amendment is proposed in response to a recommendation made by McKinsey & Co. as follows: "We recommend the elimination of affidavits and evidence of exportation on entries of 'American goods returned' when, upon examination of the merchandise, it can definitely be determined that such merchandise is of American manufacture, growth, or produce. * * * Regarding the amount of duty paid on 'American goods returned' to offset any draw-back that had been claimed upon their exportation, it is recommended that a list containing the items or articles upon which draw-back is regularly claimed be supplied to all collectors." (Management Survey of the Bureau of Customs, vol. III, p. 28.)

SECTION 6. FREE ENTRY PROVISIONS FOR TRAVELERS

Section 6 is proposed to clarify paragraph 1798, Tariff Act of 1930, as amended (U. S. Code, 1946 edition, title 19, sec. 1201, par. 1798), by realining and restating its provisions. This paragraph, as amended by section 36 of the Customs Administrative Act of 1938 (act of June 25, 1938, 52 Stat. 1093), by Public Law 540, Eightieth Congress (62 Stat. 242), and by section 9 of Public Law 378, Eighty-first Congress, contains 10 provisos. This results in difficulties of interpretation and administration which can be removed by the suggested realinment and restatement of the provisions.

Certain suggestions for substantive changes are incorporated in this section. These will be commented on in the order in which they appear:

Section 308 (5), Tariff Act of 1930, as amended by section 4 of the Customs Administrative Act of 1938 (U. S. Code, 1946 edition, title 19, sec. 1308 (5)), provides that automobiles, motorcycles, bicycles, aircraft, boats, horses, and similar articles, and the usual equipment of the foregoing, may be brought in free of duty under bond by nonresidents for the temporary use in the transportation of such nonresidents, their families and guests, and for such incidental

carriage of articles as may be necessary and appropriate to the purposes of the journey.

Section 308 (5) contains a provision for the deferment of a bond for a period of "not to exceed 90 days (or 6 months in the case of such horses, vehicles, and craft from a country which accords a similar privilege to horses, vehicles, and craft from the United States)." Unless the horse, vehicle, or craft is exported or entered under bond before the expiration of the period of deferment, it becomes subject to forfeiture.

The administration of these provisions of section 308 (5) has presented so many administrative difficulties that the Treasury Department is impelled to recommend that automobiles, trailers, aircraft, motorcycles, bicycles, baby carriages, boats, horse-drawn conveyances, horses, and similar instruments of transportation, and the usual equipment accompanying the foregoing, imported in connection with the arrival of a nonresident and to be used in the United States only for the transportation of such person, his family and guests, and such incidental carriage of articles as may be appropriate to his personal use of the conveyance, be admitted free of duty and cleared through customs under the informal procedures applicable to wearing apparel, articles of personal adornment, toilet articles, and similar personal effects accorded free entry under the first clause of paragraph 1798 (subdivision (1) of subparagraph (b) of paragraph 1798 as amended in section 6 of this bill). Such a transfer from section 308 (5) to the free list would be effected by subdivision (2) of subparagraph (b) of paragraph 1798.

Subparagraph (f) provides that if any article exempted from duty under the said subdivision (2) of subparagraph (b) is sold within 1 year after the date of importation, without prior payment of the duty in effect at the time of its entry, such article, or its value (to be recovered from the importer), shall be subject to forfeiture, unless the sale is pursuant to a judicial order or in liquidation of the estate of a decedent.

Subdivision (3) of subparagraph (b) would provide that a nonresident may take with him through the United States without the payment of duty articles. not exceeding $200 in value. It has proved very inconvenient for travelers in transit through this country, especially those traveling by air, to arrange for the bonded transportation, pursuant to section 553, Tariff Act of 1930, as amended (U. S. C., 1946 ed., title 19, sec. 1553), of articles such as gifts which they are carrying to friends and relatives in foreign countries.

Subparagraphs (c), (d), (e), (f), and (g) of paragraph 1798, as proposed to be amended in section 6, would continue the exemptions now accorded returning residents under the terms of the second, third, fourth, fifth, sixth, seventh, eighth, ninth, and tenth provisos to existing paragraph 1798, with certain exceptions which are listed below.

Whereas the eighth proviso to existing paragraph 1798 provides for the payment of double duty if any article accorded the $300 exemption is sold within 3 years after the date of arrival of the returning resident, subparagraph (f) of paragraph 1798, as proposed to be amended by this section, would provide that if any such article is sold (otherwise than pursuant to a judicial order or in liquidation of the estate of a decedent) within 3 years after the date of importation of the article, without prior payment of the duty applicable thereto at the time of its entry, the articles, or its value (to be recovered from the importer), shall be subject to forfeiture.

A corresponding change would be effected in the second proviso to the existing paragraph 1798 by subparagraph (f) in the case of jewelry or similar articles of personal adornment having a value of $300 or more accorded free entry in behalf of a nonresident under the first clause of existing paragraph 1798 (subdivision (1) of subparagraph (b)).

The transfer from section 308 (5), Tariff Act of 1930, as amended, to a free entry provision of automobiles, aircraft, etc., brought in by nonresidents for transportation purposes, is recommended for the reasons stated above. This would be accomplished by subdivision (2) of subparagraph (b), section 6, in conjunction with section 8 (b) of this bill.

The enactment of the suggested provision will make possible improvements in customs administration which will facilitate the flow of international traffic and further good international relations.

SECTION 7. FREE ENTRY FOR NONCOMMERCIAL EXHIBITIONS

Paragraph 1809 (U. S. C., 1946 ed., title 19, sec. 1201, par. 1809) allows free entry of articles under bond for permanent noncommercial exhibitions, such as in

museums. The duration of the bond is now unlimited, necessitating the retention of many old records and keeping open many old entries. The amendment in section 7 will limit duration of the bond to 5 years. After that the customs officers will no longer be required to check on the status of the articles.

SECTION 8. TEMPORARY FREE ENTRY FOR SAMPLES AND OTHER ARTICLES UNDER BOND

Section 308 of the Tariff Act of 1930, as amended by the Customs Administrative Act of 1938 (U. S. C., 1946 ed., title 19, sec. 1308), permits the temporary free entry of certain articles under bond for reexportation within 6 months, which the Secretary of the Treasury may, upon application, extend for another 6 months. Among these articles are samples (sec. 308 (3)). Since this period of a year is insufficient, it is proposed to authorize further extension to a total of 3 years. present, it is found that many samples must be exported before their intended use is over, particularly in the case of samples used in commercial exhibitions and trade fairs.

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The amendment to section 308 (5) would delete from it certain articles provided for in paragraph 1798 as amended by section 6 of this bill.

SECTION 9. SUPPLIES AND EQUIPMENT for VESSELS AND AIRCRAFT

The present law allows certain exemptions from duties and taxes for supplies which may be withdrawn from warehouse or continuous customs custody after importation, for the use of vessels and aircraft. In the case of foreign aircraft, equipment and repair parts receive the same treatment. These privileges are granted reciprocally to aircraft of countries granting our aircraft like privileges, and shipment or use on such foreign aircraft is deemed exportation.

These provisions are distributed among sections 309 and 317 of the Tariff Act of 1930, as amended (U. S. C., 1946 ed., title 19, secs. 1309, 1317), and section 3451 of the Internal Revenue Code (U. S. C., 1946 ed., title 26, sec. 3451).

The proposed section 9 extends to foreign ships the exemption for equipment and repair parts previously granted to aircraft only. Removal of this discrimination against the shipping industry will eliminate anomalous situations in which duties are assessed on articles brought in for vessels in distress, which articles never go into the commerce of the United States. In view of annex 9 to the ICAO Convention, exemption is proposed for ground equipment for foreign-flag aircraft from duties only, but not taxes, except taxes imposed on or by reason of importation.

SECTION 10. DRAW-BACK ON EXPORT OF IMPORTS NOT ORDERED

Section 313 (c) of the Tariff Act of 1930 (U. S. C., 1946 ed., title 19, sec. 1313 (c)) provides that upon the exportation of merchandise not conforming to samples or specifications upon which duties have been paid and which, within 30 days after release from customs custody, is returned to customs custody for exportation, the full amount of the duties paid upon such merchandise shall be refunded as drawback, less one per cent. The proposed amendment would insert new language in section 313 (c) to provide for the refunding of duties in such cases where the merchandise upon which the duties have been paid was sent to the consignee without his consent and would extend the period during which the merchandise can be exported from 30 to 90 days. The purpose of the amendment is to prevent hardship in cases when the American consignee has paid duty on goods he did not order and wishes to return; and to extend the time for return to customs custody to a period reasonably adequate for discovery of latent defects or those which can only be ascertained by test or use. The present 30 days is not sufficient for these purposes, and cases of hardship to American purchasers occur frequently,

SECTION 11. ADMINISTRATIVE EXEMPTIONS

The present law permits customs officers to disregard differences of $1 or less between the estimated duties and taxes deposited on entry, and the final amount as ultimately liquidated. It allows collectors, in their discretion, to let persons entering the United States bring with them goods up to $5 in value duty free and to give free entry to other importations aggregating not over $1 in value. The purpose of these provisions is to avoid waste of customs manpower in determining and collecting trival amounts of money. The proposed amendments would increase the first provision mentioned from $1 to $5, would allow persons to bring