an amendment is presented before you, we respectfully submit, gentlemen, that this will not take care of all of the members of our industry, and, therefore, it is our desire to operate under the value basis that we have now successfully been working on for many years and have this rejected altogether. We are exclusive importers of specific lines of earthenware and chinaware. Our factories and suppliers in the United Kingdom do not, in point of fact, actually freely offer these to all customers in this country. There are certain agents' owned companies, and so forth, who handle the entire supply of these goods, that is, the entire importation. For this reason there is grave doubt as to whether export value as it is presently set up would be applicable. The second basis is United States value. Here again the traditional practices in this trade are to offer our wares for sale countrywide, but in certain stores throughout the country. It does not necessarily mean in every possible outlet throughout the country. It would not be possible to do so. Strict interpretation of United States value would, therefore, rule us out under this yardstick. We then come to the third value basis, namely, comparative value, and we submit that in this yardstick there is a broad discretionary power placed in the hands of customs appraisers which would leave actual results in considerable doubt. For example, it has been stated under the new proposal that appraising officers would calculate the value of an 8-inch plate from, say, une value of a 10-inch plate, or it might be used by appraising officers to calculate or estimate the value of a chinaware item from an exactly similar earthenware item or some combination. Whether comparative value would be resorted to, of course, we are not sure. Nevertheless, it seems to us that this provision could be very detrimental in that a businessman is uncertain as to just what his costs are actually going to finally be. It will be at the discretion and caprice of the customs appraisers. Furthermore, it may be subject to the same difficulty of export value and United States value, namely, this "freely offered" provision. It is therefore feared that such a broad provision might constitute an open invitation to appraising officers to arbitrarily fix values on imported products, with the extent of possible court review and corrective action being in some doubt. We come down next to the final value yardstick which is offered, namely, constructed value or cost of production. This has been stated, and in the recent past, as having difficulties. It involves by section 402 of the Tariff Act of 1930 investigations being made abroad. It, of necessity, brings up cost-accounting systems which are less clearly defined abroad than they are even in this country. With a wide variety of items there could readily be considerable burdensome expense to the Government, delays in gathering factual data, and, consequently, difficulties in carrying on import business in this type of merchandise. For these reasons, we believe constructed value should only be resorted to in the final analysis, in other words, when no other value is possible. Actually, we come back to our previous point that under the present statute insofar as our industry is concerned, foreign value is a feasible method. It works easily, it is quite simple. The price for which these products are offered for sale in the United Kingdom is the same: price at which they are billed to us, and upon that price duty is. assessed. Our imports have been going on for quite a number of years. Prices change occasionally, but not from day to day. There is no spot change in the market; it is a stable, fixed item. Insofar as our industry is concerned, therefore, we submit that the repeal of foreign value would result in leaving the appraisement of our products up in the air without fitting us into any one of the suggested bases of value, other than comparative value. We have already stated our objection to this as hypothetical, as unrealistic in practice, and a yardstick which would be very difficult for a business man to use. We therefore urge this committee to amend H. R. 5505 and restore foreign value as a basis for appraising imported merchandise. Unless. this bill is so amended for products of our industry or whoever else may be similarly situated, then, although we are in broad agreement with the principles involved and the objectives of the legislation, we believe the bill should be defeated and the existing law left in its. present form. (The prepared statement of Mr. Hinckley is as follows:) STATEMENT OF HUGH F. HINCKLEY ON BEHALF OF THE ASSOCIATED The association consists of importers of fine earthenware and chinaware from the United Kingdom, and is composed of 14 members. This committee will probably recognize the names of several of the products imported by our members, such as Wedgwood, Spode, Royal Doulton, Minton, Royal Worcester, and Crown Derby. We urge the committee to submit an adverse report to the Senate on H. R. 5505 unless the bill be amended to prevent discrimination against the interests of American importers handling fine earthenware and chinaware products. Our objections are limited solely to section 13 of the bill. The proposed Customs Simplification Act by section 13 thereof would eliminate the use of foreign value as the basis for appraising merchandise and require customs appraisers to (1) apply export value, (2) United States value, (3) comparative value, or (4) constructed value in determining the price at which imported merchandise would be appraised for the purpose of assessing ad valorem rates of duty. At the pesent time we are generally operating very satisfactorily under the foreign-value provision, and we have never been informed by any customs official that the application of foreign value to our products results in delays, inconvenience, or additional expense to the Government. Customs officials understand the manner in which this merchandise is offered. for home consumption in the United Kingdom, and we, on the other hand, understand customs' requirements upon the importation of such merchandise into the United States. It is therefore our contention that foreign value should continue to be the basis for determining duitable value for our industry. Suggestions have been made that section 13 of the bill be amended in a manner which could possibly permit the products of some of our members to be appraised upon the basis of export value. The proposal, we understand, is to eliminate the requirement that merchandise be freely offered to all purchasers, and the demands of the statutes are met if merchandise is offered to importers who are financially independent of the seller. In the case of some of our members, this amendment, if adopted, would ont solve the problem which the repeal of foreign value would create. Accordingly, if this committee be requested to amend the bill along the lines indicated, we trust it will bear in mind that the change in language in connection with the definition of "freely offered" will not benefit all of the members in this association. We are exclusive importers of specific lines of fine earthenware and chinaware. The factories or suppliers in the United Kingdom will not freely offer these. articles to other buyers in the United States, and this restriction would prevent the application of export value to this type of merchandise. Our methods of distribution in the United States, which are traditional in this trade, would operate as restrictions preventing the application of United States value to our products. The next possible basis of value under the new proposal is comparative value. It would be difficult to find language vesting broader discretionary power in administrative officers. For example, it has been stated that this new proposal is intended to permit appraising officers to calculate the value of an 8-inch plate from the value of a 10-inch plate, or it might be used by appraising officers to calculate or estimate the value of a chinaware item from a corresponding earthenware item, or the reverse. Whether comparative value would be resorted to as the basis of appraisement for chinaware and earthenware cannot, of course, be foretold at this time. The provision would seem to be still subject to the limitations of export value and United States value, i. e., that the merchandise must be freely sold in usual wholesale quantities, etc. It is feared that this broad provisoin might constitute an open invitation to appraising officers to arbitrarily fix values on imported products with the extent of possible court review and correction of such administrative action, considerably in doubt. The use of constructed value or cost of production as it is presently denominated in the statute is open to the same complaint of customs officers that has been voiced in connection with the ascertainment of foreign value. In proposing the Customs Simplification Act, customs officials have stated the provision for foreign value should be repealed, since it has caused considerable delays to importers, has increased the burdens of the Government, and also resulted in additional expense to both importer and the United States in gathering necessary factual data. Even if this were so, the same complaint might well be made in ascertaining the so-called constructed value or, as it is now known, cost of production. Since it is necessary at the present time in ascertaining cost of production under section 402 of the Tariff Act of 1930 for investigations to be made abroad, delays necessarily occur in the ascertainment of value pending the completion of such investigations, and additional expense is borne both by importers and the Government in collecting data. For these reasons we believe that recourse to constructed value should be had only in rare instances when no other basis for determining value can be ascertained. Under the present statute, insofar as our industry is concerned, there is a feasible method, expeditiously operated, to determine the value of the products imported by our members. The measure of value is simple and direct, namely, the price at which these fine earthenware and chinaware products are offered for home consumption in the United Kingdom, i. e., foreign value. Insofar as our industry is concerned, we submit that the repeal of foreign value would result in leaving the appraisement of our products up in the air without fitting us into any of the suggested bases of value other than comparative value. We have already stated our basic objections to the use of this hypothetical value which is unrealistic in practice and does not furnish any yardsticks by which a businessman can measure his costs. We therefore urge that this committee amend H. R. 5505 and restore foreign value as a base for appraising imported merchandise. Unless section 13 of the bill be amended to provide for the use of foreign value for products of our industry or others similarly situated, then, although we are sympathetic with the broad purposes and objectives of the legislation, we believe the bill should be defeated and existing law left in its present form. Senator HOEY. Any questions? If there are no questions, thank you very much, Mr. Hinckley. This concludes the hearing today. The hearing will now be recessed until tomorrow at 10 o'clock. (Whereupon, at 11:55 a. m., a recess was taken until 10 a. m. Thursday, April 24, 1952.) 98600-52 CUSTOMS SIMPLIFICATION ACT THURSDAY, APRIL 24, 1952 UNITED STATES SENATE, The committee met, pursuant to adjournment, at 10 a. m., in room 312, Senate Office Building, Senator Robert S. Kerr presiding. Present: Senators Kerr, Frear, Butler of Nebraska, and Martin. Also present: Elizabeth B. Springer, chief clerk; and Serge N. Benson, professional staff member. Senator KERR. The committee will come to order. To begin with, we will insert in the record a statement of the American Farm Bureau Federation, a statement of George Hansen, president of the National Retail Dry Goods Association, a statement by the drug, chemical, and allied trades section of the New York Board of Trade, a statement of Mr. Oren O. Gallup, executive vice president of the Export Managers Club of New York, and a statement of Senator Karl E. Mundt. (The documents referred to are as follows:) AMERICAN FARM BUREAU FEDERATION, Re Customs Simplification Act of 1951 (H. R. 5505). Chairman, Senate Committee on Finance, United States Senate, Washington, D. C. DEAR SENATOR GEORGE: The American Farm Bureau Federation recommends the enactment of legislation which will simplify and expedite existing customs procedures to the maximum feasible extent, including any provisions which will result in more uniform and rapid classification of products and commodities for customs purposes. We believe that H. R. 5505, now under consideration by your committee, will accomplish the primary objectives toward this end. This subject has been considered by the voting delegates of the American Farm Bureau Federation on several occasions. We quote the following applicable portions of our resolution dealing with this subject: "The reduction of customs barriers and a freeing of world trade from the shackles of currency and quantitative trade restrictions should be the most important objectives of the United States trade policy. These objectives must be considered not only in our own economic self-interest, but rather in a firm belief that the creation of healthy economic conditions and the development of strong self-supporting economies in the nations of the free world are vitally important to our security. If America is to be effective in helping accomplish these objectives, we must look realistically at our own trade policies and make the necessary changes in order to contribute our part in this endeavor. "We again recommend that our customs regulations be modified under existing tariff schedules in order to encourage expansion of international trade. Even though provisions are made in the ITO Charter to accomplish this purpose, we recommend that the proper agencies of Government take the necessary steps to modernize the United States customs regulations. We recommend passage of legislation to accomplish this." |