job at the pier or at the airport, and it does not have the same safeguards as a formal entry.

We think it is manifestly unfair that importers of larger shipments should go through the formal entry, and importers who bring in many shipments of less than $250 do it in an informal way.

I have a letter here from one of our members on one of the borders in which he writes:

A large client of ours frequently ships small samples of one of his products. The material has been given three different classifications on Forms 5119. That is the informal entry.

Though customs laboratory analysis of large importations entered formerly has established as proper a fourth and different classification, the inspectors making these informals continue to use the several others despite our protest. The shipper cannot understand how the same product can carry duty at 6 percent up to 25 percent, and that his own truck driver seems to be able to get lower rates makes him wonder if we are treating him carelessly.

That is the Canadian border or Mexican border situation, where a truckman brings along at the present time a shipment under $100 in value and enters it informally and he gets a different rate of duty and a different value than someone who makes a formal entry. Now we say increasing that to $250 will only multiply the mischief.

There are just a couple of more things which I wish to speak about, and one of those is we understand the Customs Bar Association has proposed in its statement that a provision be written into this law compelling the deposit of duties where there is an appeal to the appraisement made by the appraiser.

be

Now, we feel, as a brokers association, that it is very salutary to have all duties deposited as soon as it is determined that they are or may due. We think this is consonant with the pay-as-you-go-along plan in income taxes, and we think that it is always helpful for an importer to have paid his duties before he sells his merchandise so that he knows in pricing his merchandise pretty well what it is going to cost him and, therefore, we favor the deposit of duties with the Government as soon as the Government has estimated or calculated that there are any more duties due.

One other matter which I would wish to mention, and that is in connection with section 10 of the proposed bill, amending some of the draw-back provisions. There are limitations of 1 year and 3 years, respectively, in those provisions, and we ask that those limitations be increased to 3 years and 5 years, respectively, giving the importer a longer time wtihin which to process his goods and export them. Thank you very much, gentlemen.

Senator JOHNSON (presiding). We thank you, sir.

Any questions?

(The prepared statement of Benjamin M. Altschuler is as follows:)

STATEMENT OF BENJAMIN M. ALTSCHULER AS COUNSEL FOR THE CUSTOMS BROKERS AND FORWARDERS ASSOCIATION OF AMERICA, INC., ON THE CUSTOMS SIMPLIFICATION ACT OF 1951 (H. R. 5505)

My name is Benjamin M. Altschuler. I am a member of the firm of Altschuler & Morrison, attorneys, 39 Broadway, New York 6, N. Y., and I am counsel to the Customs Brokers and Forwarders Association of America, Inc., of 8-10 Bridge Street, New York 4, N. Y. I am making this statement as their representative.

This association, on whose behalf I am making this statement, was organized over half a century ago and now consists of more than 400 members, all of whom

are either licensed customhouse brokers or experienced foreign freight forwarders. Its members are located in most of the principal ports of the Nation. This association is deeply concerned with legislation affecting the foreign trade of this country. The members of this assocation are agents of importers and exporters of commodities to and from all parts of the world. As customs brokers, they are the first ones to act on behalf of the importers in connection with the merchandise arriving from abroad. Foreign trade is the lifeblood of the members of this association, and anything affecting foreign trade is of prime interest to them?

The Supreme Court of the United States has stated that "the business of a customhouse broker is related to the process of foreign commerce," and "the customhouse broker, in clearing shipments, aids in the collection of customs duties and facilitates the free flow of commerce betwee na foreign country and the United States."

The purpose of the bill, as stated by the Treasury Department in its analysis, is to amend the Tariff Act of 1930, as amended, in order to simplify its operation, to reduce expenses and delay incidental to its administration, and to eliminate inequities which add to the difficulties of enforcement. With all of these good principles and purposes, we are in accord. It is the customhouse broker who, day after day, has to carry the load of finding his way through burdensome tariff laws and regulations. Anything which lightens that burden will be helpful. While we are in favor of many of the proposed provisions of this bill and urge their enactment into law, we must definitely suggest that some of the proposals will invite great difficulties and problems and will result in more headaches for the customhouse broker and the importers. We also believe that in some of the provisions, further simplification and reform is needed.

Section 10 of the proposed bill deals with certain amendments to section 313 of the Tariff Act of 1930 as amended. With these proposals we are wholly in accord.

We propose, in addition thereto, that section 313 (b) be amended by substituting the phrase "within a period not to exceed 3 years" for the phrase "within a period not to exceed 1 year."

We also propose that section 313 (h) be amended by substituting the phrase "within 5 years" for the phrase "within 3 years."

Section 13 of the proposed bill: We feel that the proposal to eliminate "foreign value" as a basis for determining value is entirely a matter for congressional policy, but we do believe that in two following respects the proposal is defective: (1) The appraiser should definitely state in his final appraisement what was his basis of value, i. e., "export value," "United States value," etc.

(2) There should be a definite time limitation within which the appraiser should complete his appraisement. The failure to have such a time limitation makes it virtually impossible for an importer to calculate his costs in many cases until long after the merchandise has been sold and consumed.

Section 15 of the proposed bill: We are vigorously opposed to the proposed changes in this section because they will permit certain importers of certain commodities to carry on their business with customs in an informal manner, while their competitors go through formal procedure. We have no objection to lessening the formality on noncommercial shipments, but we definitely oppose lessening the formality on commercial shipments regardless of value. With modern means and speed of transportation an importer could do quite a large import business with individual shipments in value not greater than $250. If no consular invoice is required, and no formal examination and appraisal by the appraiser, that importer's duty payments would depend upon a single inspector and his individual shipments might well be different in appraised value and even in classification from those entered formally by his competitors. Likewise, at the borders of the United States, where truckmen who are not common carriers are permitted to make entry of goods belonging to other persons, under existing customs regulations, there is an opportunity for considerable abuse of the customs process which will only be amplified by increasing the ceiling on informal entries from $100 to $250.

Section 17 of the proposed bill: This proposed section eliminates amendment of entries and deals with duties on undervaluation. The proposal which would abolish the right of amendment of an entry under any circumstances once an entry has been made is too harsh and is entirely unnecessary. There are situations where, from the point of view of the Government, of the customhouse brokers, and of the importer it would be salutary to permit amendment of entries. Without the right to amend the entry, the additional duties provided

for in this section may well be imposed on an innocent person who, if permitted to amend his entry, could have avoided these additional duties and yet paid to the Government what was lawfully due.

We believe that the concept of additional duties is wrong and it should be discarded entirely. If there is an honest dispute between an importer and the Government, the dispute should be resolved in the proper forum without any penalty. If an importer is fraudulent or deceptive, there are other provisions in the law which amply punish him, either through criminal prosecution or civil penalties against him personally or against the goods imported.

We believe the above-mentioned observations are of great interest to the entire importing community and it is for this reason that we respectfully present them to the attention of this committee.

Senator JOHNSON. Mr. Max Berkowitz, National Authority for the Ladies' Handbag Industry. You may proceed in your own way.

STATEMENT OF MAX BERKOWITZ, CODIRECTOR, NATIONAL AUTHORITY FOR THE LADIES' HANDBAG INDUSTRY

Mr. BERKOWITZ. Mr. Chairman and gentlemen, my name is Max Berkowitz. I am a director for the National Authority for the Ladies'. Handbag Industry, a national trade association of handbag manufacturers. There are 250 handbag manufacturers in our orgnization and they produce approximately 70 percent of the total production of handbags in the United States.

We have appeared before this committee on several occasions in the past, and have always received the most considerate and courteous attention for which I wish to sincerely thank you.

The two major problems confronting the handbag industry today, and for the past few years, are the 20-percent excise tax on handbags and the importation of handbags from foreign countries. These twoproblems have been the subject of many industry-wide meetings, formation of committees, and considerable other activity to combat and eliminate the havoc, unemployment, and insolvency that has been wrought by these two problems.

We have appeared before congressional committees before, on each of these subjects, separately, and have shown by conclusive facts and figures that each in its own way has contributed to creating a depression in the handbag industry. Together, the excise tax and the imports, combine to make an insurmountable obstacle to operating a profitable business. The handbag industry has shrunk from 800 firms doing a wholesale volume of $200,000,000 in 1946 to 500 firms doing $135,000,000 in 1951.

The firm that shows a profit in the handbag industry is a rarity. This deplorable condition, which is a sad commentary on the American business scene, is directly attributable to the inequitable, unsound, and discriminatory features of the 20-percent excise tax and the reduction of the rate of duty.

This committee is fully familiar with both of these matters, and I feel certain, were it not for the far more important considerations of international events, and national safety and stability, each of these problems would have received favorable consideration from this committee before.

The excise tax and the importation of handbags each have been an enigma to the industry, as I have said. Now, along comes the customs simplification bill, section 321, and in one, neat little package, all tied up with a pink ribbon-we have all the most undesirable features of

the excise tax and the importation problems, coming into being, with greater force and impact, than we thought possible. Section 321 compounds the felony of the tax and the imports.

Raising the exemption level from $1 to 10 on duty-free shipments, as provided for in section 321, falls particularly hard on the handbag industry.

Handbags have always been bought as gift items. Statistics on the sale of handbags by retailers show the largest percentage of handbags are sold for Christmas, Easter, and Mother's Day. The excise tax has greatly reduced the sale of handbags for gift purposes. Women prefer to put the amount equal to the excise tax they would have to pay on a handbag into some other apparel accessory that is not taxed. Incidentally, the handbag is the only item of women's apparel, with the exception of fur coats, that is subject to the 20-percent excise. tax. Raising the exemption to $10 will place the domestically produced handbag at a decided disadvantage as compared with the foreign-made handbag sold through mail order, at gift seasons. foreign handbag, not being subject to excise tax and duty, would be so much cheaper than a comparable American handbag that the little business we do around Christmas, Easter, and Mother's Day would also be lost. If it weren't for these three selling periods there wouldn't be a handbag industry at all. There are enough obstacles and hardships facing the industry now, please let's not add another one-a disastrous one.

The

We don't know what the quantities and what the dollar value is of the handbags that are imported free of duty as passengers' baggage. We believe that it is very considerable and represents a very serious inroad to the American handbag industry. Although our product is at a disadvantage, as compared to other commodities, because of the excise-tax burden, we have felt there is little that could be done in this regard. Travelers abroad, and to South America, will always buy souvenirs and other commodities competitively priced and bring them into the country duty-free within the limitations provided.

However, raising the exemption from $1 to $10 on articles imported otherwise than on the person or in the accompanying baggage of an individual arriving in the United States will be an open invitation to circumvent the present $500 limitation on articles brought in on the person. When the limitation is $1, a woman could not consider the purchase of a handbag and mail it into the country. Raising it to $10 makes it practical, feasible, and worth while, particularly as to handbags, since a recent analysis of the average value of imported leather handbags shows that the average value of handbags from Guatemala for the year 1951 was $3.33; from the United Kingdom, $5.59; from France, $7.09; from Italy, 6.19. If it is raised to $10, a woman could buy a handbag for $10 each in France, Italy, Spain, and England, have each purchase shipped separately into the United States and not be required to pay any duty on these handbag purchases.

I would like to quote from subheading (2) of section 321 which would make this possible:

When the articles are imported otherwise than on the person or in the accompanying baggage of an individual arriving in the United States and the aggregate value of all articles in the shipment is not over $10, if the articles are

intended for the personal or household use of the consignee and not for sale, or $5 in any other case. The privilege of this subdivision shall not be granted to any c. o. d. shipment or in any case in which merchandise covered by a single order or contract is forwarded in separate lots to secure the benefit of this subdivision.

Multiply this situation by the great number of other commodities that are sold for more than $1 and less than $10 and you have a condition, that to a great extent will nullify the Government's intention of limiting articles brought in on the person up to $500 duty free.

Under subheading (C) of section 321 the Secretary of Treasury is authorized to diminish the $10 to a lesser amount whenever there is an abuse of this privilege. This is what I would call a "little escape clause." All of you are familiar with the extreme features of the escape clause under the general agreement on tariffs and trade and know that it is most difficult, to put it mildly, to have the escape clause invoked under the general agreement. The escape clause in this bill will be just as difficult and impractical after the damage has been done.

In the past few years a great deal of reptile, alligator, and other leather-handbag business has been lost to Argentina, Guatemala, and Cuba. The duty on reptile handbags is 1712 percent and on leather 20 percent. However, by virtue of a trade agreement with Cuba, Cuban products are entitled to a 20-percent preferential rate and so the rate on reptile handbags from Cuba is 14 percent.

It is interesting to note what this preferential treatment on duty has meant to the handbag industry. In 1939 here were less than 500 pieces imported into the United States from Cuba. In 1950, there were 84,239 reptile handbags valued at $534,156 imported from Cuba. This would make the average value about $6. Raise the $1 limitation to $10, under section 321, and a mail-order business will spring up that will make it impossible to compete with Cuba. The preferential duty is bad enough, add to this-not subject to the 20-percent excise tax, and the domestic product hasn't a chance.

It is our understanding that the reason for the change from $1 to $10 is because a saving of $1 per package is involved as this is the approximate cost-of-customs clearance. As concerns handbags, there would be no savings, but rather a loss since as I said before, the average value of leather handbags imported from Italy in 1951 was $6.19, which would make for a duty of $1.23; from France $7.09, which would make for a duty of $1.41; from the United Kingdom $5.59, which would make for a duty of $1.11. These are the principal European exporting countries. At the 20-percent rate of duty which applies in this case, and 20-percent excise tax instead of a saving, there would be a loss to the United States. This is a case of penny-wise and pound-foolish.

The handbag industry is a small-business industry. There are no defense contracts in the industry. Congress has declared it to be in the national interest that small business be preserved as a vital force and basic element of the national economy. The excise tax, imports, and bad business generally, in the soft-goods industries, have been whittling the handbag industry and gnawing at its vitals. While raising the limitation from $1 to $10 is not a momentous thing in itself, it is an important factor to a distressed industry. It portends greater instability and chaos.

98600-52-15