Applications under Sec. 336 dismissed by a split vote of the U. S. Tariff Commission

Name of applicant

Item

Action

Escape clause applications before U. S. Tariff Commission

Mr. LERCH. Of course, this provision which simply raises the free entry from $1 to $10 seems quite practical when you do not look at it too closely.

The Government-Mr. Johnson, I think it was, of the Treasury Department, in answer to a question of Congressman Reed about this provision, said the only reason why he wanted it in here was that the cost of administering it was far greater than the amount of revenue. Well, that seems a rather inane reason to me, because revenue from customs has long since ceased to be any material part of the budget.

Senator KERR. Is it not the fact that the cost of enforcing laws against petty larceny often exceeds the amount of the stolen article? Mr. LERCH. And I think this is in the same category.

Senator KERR. But it would hardly be an argument to favor repeal of the laws against petty larceny, would it?

Mr. LERCH. No.

Senator KERR. You may proceed.

Mr. LERCH. But this is a promotion of petty larceny, might I say, if you adopt this section raising it to $10. It is an invitation to larceny, as I say here.

For instance, if you might bring in place settings of china or earthenware, that lets say it would result in a hundred or a hundred and ten-piece dinner setting, you could bring them in-a place setting of rather good china or earthenware could be bought for less than $10. All you would have to do would be to bring 12 of them in. Senator KERR. One at a time.

Mr. LERCH. One at a time; and you would have no duty.

Senator KERR. I must say that I share your feeling of concern with reference to the wisdom of such a provision. I doubt the ability, however, of anybody to successfully demonstrate that it would constitute petty larceny. I would think that there are more effective arguments against it than that, and which could be more easily substantiated. However, it is your privilege to make it on any basis that you like.

Mr. LERCH. Of course, I would not term larceny a thing which could be done under the law. Therefore, I suggest that you do not increase the ante of from $1 to $10.

Also, section 6 of this bill raises the tourist exemption to $500.

Now, I am told that under that exemption you could bring from Canada four bone china dinner services. They sell there for $125, about that, and there is no inhibition to a tourist's bringing in four of those sets, one of which would cost $500 in this country.

Mr. Chairman, I have printed here a brief, you might call it, a memorandum in which I have review the legislative history of our present provisions on value, section 402 of the present act. Those provisions have been brought down over a period of 160 years through trial and error and judicial interpretation, even by the Supreme Court of the United States, and to those of us who have dealt so closely with them, they represent just about as perfect a system of valuation as one can devise. Those are all repealed by section 13.

Not only are they repealed, but we have, as Mr. Colburn and other witnesses have said, a very lose and arbitrary system of appraisal whereby an appraiser appraising on comparable merchandise can pull

out of thin air the adjustments that he makes, and certainly he could not have

Senator KERR. He does not even have to reach into thin air, does he. Mr. Lerch?

Mr. LERCH. Not if he has a fertile brain.

Senator KERR. All right.

Mr. LERCH. But that is exactly what I meant when in my opening statement I said to turn over to a Government official, no matter how honest he may be, that much arbitrary or discretionary power seems to me to be very dangerous and a very flimsy basis on which to base the value of our customs duties.

There is also this connected with that change over to a discretionary finding: It has been held for over a hundred years by our Supreme Court of the United States that a court will not review a discretionary power placed in the hands of a Government agency or official by Congress.

Therefore, even though ou leave in this present bill section 501 providing for an appeal to reappraisement, there is very grave doubt as to whether an appeal lies from an action under section 13 of this proposed bill for, in my judgment, and as I said in my opening statement, I have been connected very closely with this litigation, 80 percent of the appraisements would be made on comparable value as defined in section 13 of this bill because even though section 13 attempts to redefine the phrases that now appear in the statute, such as "freely offered for sale," "the usual wholesale quantities," ordinary course of trade," even with those definitions, there is a certain discretion, and when once exercised the court could not review it.

True, under section 501 you could put on a form an appeal to reappraisement, the importer's name and the proper number of the invoice or entry, and a description of the merchandise, but the minute you got into court to question the action of the appraiser, and the Government objected under the Barr decision of the Supreme Court of the United States, you would be estopped from going further. You could not review his action, so that it would be, as I intimate, an arbitrary action.

One of the things I would like to comment a little further on, that is Mr. Coburn's testimony as the conversation of the currency.

Mr. Chairman, you said it was a rather unreal set-up as proposed by section 20.

Senator KERR. I asked if it were not.

Mr. LERCH. Well, I would like to testify that it is.

Senator KERR. Very well.

Mr. LERCH. In other words, what the anomalous situation in which you find yourself as an importer is that you pay by draft the shipper by draft under on conversion of currency, and then when you come tʊ pay duty you pay your duty on an entirely different basis.

Senator KERR. Or you might.

Mr. LERCH. You might; at least, as I read section-

Senator KERR. Under the law it could be administered to bring about that result.

Mr. LERCH. Yes, that is the point I am making.

Senator KERR. Does not make such a result mandatory, as I understand it. It permits such a result.

Mr. LERCH. Well, in the absence of the provision, the alternative provision, there for going back to the Federal Reserve bank quotations, it would be a different basis.

Senator KERR. Their valuation might be the same.

Mr. LERCH. Well, it could be, of course.

Senator KERR. Yes.

Mr. LERCH. Well, may I ask that this brief be printed as part of my remarks?

(See brief on p. 153.)

Senator KERR. Yes, sir.

Mr. LERCH. And I think that is all I have to say.
Senator KERR. All right, Mr. Lerch, we thank you.

Are there any further questions?

Mr. LERCH. Thank you, sir.

Senator KERR. Mr. Dailey?

STATEMENT OF H. WARNER DAILEY, SECRETARY, PIN CLIP AND FASTENER ASSOCIATION

Mr. DAILEY. Mr. Chairman, I wanted to state that I am the secretary of the Pin Clip and Fastener Association, and I expected that Mr. John Breckinridge would be here this morning. He is our tariff attorney, but he has been held up in a hearing before the Tariff Commission so I want to testify very briefly on this bill.

Senator KERR. Would you like permission to insert his statement in

this record?

Mr. DAILEY. I would like to state that we have no written statement. This is just oral, and it is very brief on certain aspects of the legislation.

Senator KERR. Yes.

Mr. DAILEY. First, I would like to outline why we are interested in this bill. Our industry is a small industry. We are manufacturers of safety pins, straight pins, paper fasteners, and paper clips. During the postwar period the imports of safety pins and straight pins have been mounting to alarming proportions, and we are naturally interested in protecting whatever a reduced tariff rate is in effect, so that it cannot be so loosely interpreted by H. R. 5505. In other words, there are so many loopholes that we see in this bill that it doesn't matter very much what a particular tariff rate is if one can get around it by multiple exchange rate manipulation, valuation, and some of the other

sections that are in the bill.

Senator KERR. In other words, your concern is that the effect of this bill would be to pratically eliminate any import duties on articles to which you refer?

Mr. DAILEY. That is it, exactly.

Senator KERR. All right.

Mr. DAILEY. In other words, you can have a fairly good protective tariff or tariff rate, and through the Customs Simplification Act you could lose its effectiveness entirely.

We have no objections to the simplification procedure of this bill. We think that probably simplification of certain customs procedure is good, but we do object strenuously to sections 2, 13, and 20. Senator KERR. Two, thirteen, and twenty?

Mr. DAILEY. Two, thirteen and twenty, which have already been objected to by other people testifying today.

We feel that these sections don't represent a simplication, as much as they represent a policy change, that is, to lower present rates, and if you cannot lower them, then, accomplish it through these sections of the bill.

Just briefly on section 2, we object to the Dumping Act procedure in which there is the injury requirement. Our past experience has been that we had a case in one of our industries where there was dumping, unquestionably. The prices at which the foreign goods were being brought into this country were considerably below the foreign market value, but we also had to prove that there was actual injury to the industry, and we never could get anywhere.

Senator KERR. In other words, you are aware of its reality but unable to make such proof of it as to secure relief from it?

Mr. DAILEY. That is true; and we would have to submit a lot of confidential data, and it would probably extend over several months, and I think that proving of injury to the industry is like saying, well, the horse has been stolen--I mean, by the time you prove it.

Senator KERR. In other words, having to prove that the patient was ill of a malady which if not checked would be fatal before you could get medical relief.

Mr. DAILEY. Exactly.

Senator KERR. And during which time it would have had it full effect.

Mr. DAILEY. That is right.

In connection with section 13, the valuation, from our experience, the export value is of a lower value than the foreign value appears to be in practice, and if the valuation is based upon the export value it means that you just have that much lower base on which your ad valorem tariffs will operate. I believe Mr. John Breckinridge has filed an almond brief with this committee, and as a case in point I know that in the almond case, almonds were offered for 37 cents a pound whereon the foreign value were 97 cents, so you can see how you can get around tariff protection from this angle.

Senator KERR. What you are saying is that this is not a simplification bill

Mr. DAILEY. Yes, sir.

Senator KERR. But a bill that emasculates import duties.

Mr. DAILEY. Absolutely. It is just a smoke screen for a different policy on our foreign trade.

The Comparative-value basis was discussed and, of course, we are heartily in accord with previous testimony against it. I believe it leaves far too much power to the customs appraiser who is going to follow through on that.

The conversion of currency in section 20, a great deal has already been said on that, and I will not add very much more except to say that through multiple exchange rates I think you can accomplish anything you want to if you are a foreign country wanting to exploit our domestic markets.

For example, I was informed that the present official rate of one of the countries exporting almonds to us, Spain, was 10.95 pesetas per dollar, but so far as the almond exports went, the rate for that, if we