The currency provision would seem to recognize the present practice of certification of buying rates by the Federal Reserve bank, but would make the use of those buying rates which, after all, I suggest, fairly reflect the true value day to day of the moneys of the world that are used in foreign trade, would subject the use of them to the values established under the International Monetary Fund or this other unnamed organization, which was set forth and referred to in section. 20. I suggest again that is bad practice. We believe that the Federal Reserve certification of rates should be the primary basis, and if the International Monetary Fund rates are to be adopted despite our criticism, that then there should be provision for use alternatively of the Federal Reserve bank if such rates varied by 5 percent or more from the standard that may be established.

Senator KERR. Do you think that the Federal Reserve rates published daily or from time to time have to be closely related to reality? Mr. COLBURN. I do, sir.

Senator KERR. And that if there are other rates which differ, to the extent that they do differ, it would mean that they were unreal? Mr. COLBURN. I think so.

Senator KERR. If the Federal Reserve rates are based on reality, then the other conclusion would have to be correct, would it not? Mr. COLBURN. You achieve in one sense, I suppose, simplification when you adopt one rate instead of many, but you are doing that at the cost of adopting an unrealistic rate which, many times, is unrelated to the true value of the transaction.

Senator KERR. Do you make something simple only as you make it inaccurate?

Mr. COLBURN. I think so.

Senator MARTIN. Mr. Chairman, may I ask a question?

Senator KERR. Sure.

Senator MARTIN. Is there any way to make it realistic except through a stable currency based on gold or silver or some other commodity that has a real value?

Mr. COLBURN. Well, I am getting a little over my depth there, Senator.

Senator KERR. I wonder if I might rephrase that question? Let me see if I can rephrase that question.

Mr. COLBURN. I do not pose as an international monetary expert that is why I make that statement.

Senator KERR. Is there any way to make it accurate except on the basis of reality?

Mr. COLBURN. That, I can certainly endorse.

Senator MARTIN. That is what I am getting at. It is most difficult for legislators, the Congress of the United States, or in any of the countries of the world, to work out a currency so that you have real values unless it is based on something that has real value in the world. Mr. COLBURN. That would certainly seem to be quite clear.

Senator KERR. That is reality, Senator. You are talking about reality.

Senator MARTIN. That is what I am talking about, reality, and we are going to be in an awful lot of trouble in trading throughout the world until we do get back down again to realities.

Mr. COLBURN. I think so, Senator.

Senator MARTIN. I do not think any of those things are difficult. I mean, we have never been able to do it in all the history of the world. We get into trouble, we get devaluated currency, and it is awfully hard to get an established value unless it is on a reality basis.

Senator KERR. It occurs to me that the simplest formula in the world is that of reality.

Senator MARTIN. That is right.

Senator KERR. And when you either actually depart from or attempt to depart from reality, rather than becoming more simple you become less simple.

Mr. COLBURN. You are quite right.

I would like to interject, if I may here, that one of the criticisms which has been expressed here of the use of the Federal Reserve rates has been that it requires frequently quite involved calculations_because it has been the practice of that bank to certify rates extending out into many decimal places. That, I suggest, can be taken care of very readily by simply inserting in the revision of the law or in the present law the requirement that rates certified by the Federal Reserve shall be carried out only two decimal places, period.

Senator KERR. Well, you know that modern scientific development of mathematical formulas has fixed it so that problems may be solved pretty well by machines, even though they involve fractions or decimals out to more than two or three points.

Mr. COLBURN. Yes, Senator.

Senator KERR. I mean if they did not have them, I would be lost, but in view of the fact that such developments have taken place, Í find that even one with a limited knowledge of mathematics that I have, can have access to accuracy.

Mr. COLBURN. I think that that is entirely correct; and we have one of those machines in my office, which I do not understand, but apparently many people do not have them and, therefore, they have to do it the hard way and have difficulty.

Senator KERR. I do not understand the radio, but I have not permitted my lack of understanding to cause me to deny myself the pleasure of using it.

Mr. COLBURN. Exactly.

Senator MARTIN. Mr. Chairman, of course, all these things-you take the economy that we have in America: in 200 years, 95 percent of the work is done by mechanical effort rather than muscular effort.

Senator KERR. These mathematical machines have made mathematical experts out of those who otherwise would be mediocre—I do not mean to say that refers to me, but I take great comfort from that knowledge.

Senator MARTIN. It is a very great comfort, Mr. Chairman, but these different mechanical means are just to take care of the detail end of it, but the great basic principles remain the same, whether it is muscular energy or whether it is mechanical energy, and to get a proper value we have got to get it on realities, and the only reality, as far as monetary systems are concerned, that has worked out entirely satisfactorily has to be to base it on a commodity like gold or silver or something of that kind.

Senator KERR. Do you have anything further, Mr. Colburn?

Mr. COLBURN. I have only one other observation, Senator, and that is as to the possible effect of the Reorganization Plan No. 26 of 1950, under which Congress approved the transfer to the Secretary of the Treasury of all functions of all other officers of the Treasury, and agents and employees of that Department.

That was approved by the Congress, so that technically, I assume, that all functions of all officers of the Department including those of collectors and appraisers of customs were vested in the hands of the Secretary.

Subsequently, he redelegated those functions back to the respective officers, agents, and employees, but it would seem that under the basic reorganization plan and law he can cancel that redelegation at any time, and repossess the powers which, if it came about, might seem to raise very serious questions of the exercise of discretionary powers and the effect of a possible judicial review.

Senator KERR. What you are saying is that any additional discretionary powers granted to the collector are actually an additional grant to the Treasury?

Mr. COLBURN. That is right. Therefore, we have suggested a sort of a basket clause provision which we ask to be inserted at the end of this bill to make certain that no such event shall transpire from the adoption of this measure.

Thank you very much.

Senator KERR. All right, Mr. Colburn, we thank you.

Mr. COLBURN. Thank you, sir.

(The prepared statement of Mr. Colburn is as follows:)

STATEMENT OF J. BRADLEY COLBURN, ON BEHALF OF ASSOCIATION OF THE CUSTOMS BAR, NEW YORK, N. Y., ON THE PROPOSED CUSTOMS SIMPLIFICATION ACT OF 1951 (H. R. 5505)

The Association of the Customs Bar is composed of lawyers who specialize primarily in the practice of customs law before the United States Customs Court, the Court of Customs and Patent Appeals, the United States Treasury Department, and other departments of the Government concerned with customs and tariff matters.

The customs bar is directly and vitally interested in and concerned with the proposed legislation. Copies of the proposed bill have been made available to all members of the association and the statement now presented represents their composite views and specialized experience.

The stated purpose of the bill is to simplify operation of the Tariff Act of 1930, as amended, to reduce expence and delay incident to the administration of that law, and to eliminate inequities which add to the difficulty of enforcement. The proposed bill fails utterly to accomplish these objectives. Instead, it would do away with some of the safeguards which exist today for the protection of importers and traders; would vest broad discretionary and perhaps arbitrary powers in customs officials, and would, in some instances at least, abolish the historic right which Congress has provided for the customs field, that is, the right of aggrieved importers to seek and obtain judicial relief from arbitrary or erroneous administrative action in connection with every phase of importation into the United States.

The Association of the Customs Bar, for reasons which are hereinafter stated, is opposed to the bill in its present form. It recommends to the committee that the bill be rejected unless the necessary and clarifying amendments which we shall suggest be adopted. Such amendments relate to the following sections of the bill:

Section 5-Paragraph 1615 (f) Tariff Act of 1930-American Goods returned. Section 13-Value.

Section 17-Amendment of entries and undervaluation.

Section 20-Conversion of currency.

A new general amendment is suggested to insure maintenance of complete judicial review and to preclude any possibility of diminution of such review by operation of Reorganization Plan No. 26 of 1950 (15 Federal Register 4935) and order of the Secretary of the Treasury No. 120 of July 31, 1950.

SECTION 5-PROPOSED AMENDMENT OF PARAGRAPH 1615 (F) TARIFF ACT OF 1930AMERICAN GOODS RETURNED

The Treasury Department has stated that the proposed amendment to paragraph 1615 (f) is made in response to recommendations by McKinsey & Co. in a survey of the customs service by that firm of management consultants. The proposed amendment does not, however, go far enough and fails to carry out the following recommendations made by the McKinsey survey.

"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 product."

Paragraph 1615 (h) of the Tariff Act of 1930, as amended by the Administrative Act of 1938, provides:

"(h) The allowance of total or partial exemption from duty under any provision of this paragraph shall be subject to such regulations as to proof of identity and compliance with the conditions of this paragraph as the Secretary of the Treasury may prescribe."

The administrative authorities and the courts have uniformly held that compliance with regulations prescribed by the Secretary of the Treasury under this provision is a condition precedent to the free entry of any merchandise under paragraph 1615. Relief from the payment of duties has been denied on the ground of noncompliance with the regulations even where complete documentary proof was submitted after liquidation. (See United States v. Morris European and American Express Co., 3 Ct. Cust. Appls. 146.)

It has even been held that the fact that customs officials knew that the particular merchandise was of American origin and were familiar with all the facts connected with exportation and importation did not excuse the necessity for compliance with the regulations under the theory that the grant of free entry by the Congress in this paragraph was limited and the limitation must be strictly followed (Maple Leaf Petroleum Ltd. v. United States, 24 C. C. P. A. (Cust.) 5 T. D. 48976.

The determination of American origin of imported merchandise should in and of itself be sufficient to permit duty-free entry into the United States. The privilege of such free entry should not be qualified, limited, or made contingent upon the furnishing of affidavits and other documentary proof frequently difficult, if not impossible, for the importer to obtain in order to satisfy customs regulations. The importer should be free to establish the character of his merchandise and if dissatisfied with the findings of the collector as to its dutyfree or dutiable status, should be permitted to have his rights established by court review just as in the case of any other merchandise sought to be brought into the United States.

For the foregoing reasons it is suggested that paragraph 1615 (h) of the Tariff Act of 1930, as amended, be repealed.

SECTION 13-VALUE

This section would amend section 402 of the Tariff Act of 1930 by eliminating entirely the use of foreign value as a basis of dutiable value. It would make "export value" the primary basis for payment of all ad valorem duties under the tariff act, with resort, if export value did not exist, to a United States value, then to a newly defined "comparative value" and finally to cost of production or as the bill terms it "constructed value." The elimination of foreign value as a basis of dutiable value is regarded as a matter of congressional policy on which the bar expresses no opinion.

If the new bases of dutiable value are to be adopted, however, a number of changes are necessary to prevent arbitrary administrative action and to preserve judicial review.

The proposed bill omits entirely subdivision (b) of section 402 of the existing Tariff Act of 1930, which provides that a decision of the appraiser that any basis of value cannot be satisfactorily ascertained shall be subject to review under reappraisement proceedings under section 501 of the Tariff Act of 1930 (U. S. C., title 28, ch. 169).

The United States Customs Court and the Court of Customs and Patent Appeals have, for many years, assumed jurisdiction and decided thousands of cases involving findings of the appraiser that one or the other bases of stated values did or did not exist. It has been stated by the sponsors of the bill that omission of this section would not affect or diminish this historic court review.

If there

be any doubt whatever on this score, section (b) of the present law should be reinstated.

There are a number of detailed objections to the definition of various bases of alternative values in their present suggested form. For example, appraising officers would be authorized to ascertain or estimate United States value or comparative value. An estimate may involve use of discretion and to that extent, at least, limit possible judicial review. There is no need for this added power to appraisers and the suggested definitions of value are completely workable without it. Accordingly, the words "or estimated' should be deleted at page 20, line 8, and page 20, lines 16 and 17. Similar amendments should be made by deleting the words "or estimated" on page 22, line 10; page 23, line 34; page 24, line 12; and page 24, line 19.

Further objections to section 13 go to the suggested new comparative value as a basis of dutiable value, to the absence of any provision for making known to importers the basis of appraisement action oy customs officers and to the complete absence of any time limit on appraisements.

Comparative value.-Comparative value is defined to be the equivalent of export value as nearly as such equivalent may be ascertained or estimated on the basis of export or United States value of other merchandise from the same country, which is comparable in construction or use with the merchandise undergoing appraisement, with appropriate adjustments for differences in size, material, construction, texture, or other differences.

It would be difficult to find language vesting broader discretionary power in an administrative officer, and might well lead to wide abuses. Also, as long as no requirement exists for an appraising officer to set forth the official basis of his appraisement action, this wide open basket provision, or residual clause for comparative value, might constitute an open invitation to appraising officers to arbitrarily fix values on imported products with the extent of possible court review and correction considerably in doubt.

Requirement should be inserted to provide specifically that an appraiser shall disclose the basis of his appraisement in his return of value; that is, that he shall state on the face of the papers whether his findings of value is based upon export value, United States value, comparative value, or constructed value. Such a requirement would impose no hardship or additional work upon appraisers or other customs officers. It would simply mean that in putting down the figures of the value determined by the appraiser, he would add appropriate words to denote the basis thereof, as for example "export value." This is done by some appraising officers under existing practice and was formerly required by customs regulations,1 by adding initials to denote the basis of value as for example "F. V.," meaning foreign value, and "U. S. V.," meaning United States value. Such practice is not uniform or general today in the absence of any requirement thereof, however, and as a consequence, an importer, if he desires to challenge the correctness of an appraised value, is wholly in the dark as to the starting point therefor.

It is recommended that a new provision be added at the end of section 13, page 24, following line 19, to the following effect: "No appraisement made under the provisions of this section shall be complete unless there be included in the return of value by an appraiser a statement of the basis on which such appraisement is made."

A most serious objection to section 13 as now presented is the lack of any provision therein for a time limit on appraisement. Under present law, an importer is required to wait months and even years before he is informed of the dutiable value of the merchandise imported by him. In the case of merchandise subject to ad valorem duties, he cannot know the possible limits of his ultimate duty liability until the appraisement has been made. Importers, through no fault of their own, have been frequently subjected to heavy losses by appraisers' increasing dutiable values of merchanidse entered by them long after the merchandise had entered consumption and had been disposed of. Many of the delays which have occurred, have, as has been pointed out, been due to the

1 Customs Regulations of 1937, art. 776 (t); C. R. of 1931, art. 778 (t).