Hon. WALTER F. GEORGE, Chairman, Committee on Finance, United States Senate, Washington, D. C. THE SECRETARY OF COMMERCE, Washington 25, D. C., April 29, 1952. DEAR MR. CHAIRMAN: This is to advise you of my views with respect to H. R. 5505, a bill to amend certain administrative provisions of the Tariff Act of 1930 and related laws, and for other purposes. At the time early in 1951 when this legislation was introduced in the House of Representatives, this Department submitted a favorable report thereon, and subsequently, on August 10, 1951, I testified personally before the House Ways and Means Committee to the same effect. The bill now before you, as passed by the House, omits certain provisions that were in the original bill. Even without these provisions, however, H. R. 5505 is in my opinion highly desirable legislation and should be enacted, if at all possible, during this session of the Congress. We favor particularly those provisions which would directly simplify customs procedures and indirectly reduce the cost of customs operations. These include the general valuation provisions; the proposed increased use of informal entries; the proposed higher administrative exemptions for imports of small value; the free entry provisions for travelers and noncommercial exhibitions, temporary entry of samples and other similar articles; the provision on correction of errors; and the provisions dealing with supplies for vessels and aircraft, and with the signing and delivery of manifests. In addition, there are those provisions which would modify present unnecessarily arbitrary procedures in connection with special marking requirements; undervaluation penalties; and the treatment of commingled merchandise. It is important to note that all these provisions are concerned with the mechanics of importing, and would not change the present import duty structure. This Department is, of course, vitally interested in this legislation because of our concern and responsibility for the problems of business, and we are aware that the burden and costs of customs formalities fall first on American importers. H. R. 5505 is, however, a somewhat unusual piece of legislation, in that it commends itself to almost all segments of our economy. By improving and simplifying customs procedures, it would benefit our import trade. It would also in some degree serve the consumer, and from the viewpoint of Government, it would improve and possibly make less costly our customs administration and thereby be of benefit to the taxpayer. One final consideration favoring enactment of such legislation at this time may be found in its small but not insignificant contribution to the objectives of our foreign aid programs. To the extent that simplification of our customs practices encourages foreign firms to take advantage of commercial possibilities in the United States market, it should reduce the cost and shorten the period of assistance which the United States is giving to various friendly foreign countries to help them get on a self-supporting basis. We are advised by the Bureau of the Budget that there would be no objection to the submission of this report to your committee. If we can be of further assistance to you in this matter, please call upon us. Sincerely yours, CHARLES SAWYER, Secretary of Commerce. STATEMENT OF ROY A. CHENEY, PRESIDENT, UNDERWEAR INSTITUTE, NEW YORK, N. Y. I am Roy A. Cheney and am president of the Underwear Institute, a voluntary association representing approximately 80 percent of production of underwear and fabric gloves in the United States. I would like to call attention of this committee to the real objection we have to section 321 of H. R. 5505, now being considered. By its title, this bill is designed to simplify present customs procedure. There is no objection to this. But in section 321 of this bill there is a provision that would invite a mass of foreign competition for American manufacturers. It is inconceivable that the author of the legislation appreciated the danger that lies in this one section. Our manufacturers of underwear in this country know competition well.. When one enters this field he does so with the knowledge that to succeed he must be able to serve the consumer with goods they want and at a price they are willing to pay. If he fails to so serve, he cannot stay in business. This we know. However, American manufacturers cannot compete with foreign underwear manufacturers under the circumstances that would be set up by this bill. We must maintain manufacturing plants. In order to serve our customers we must go into the market and buy materials and supplies in quantities to satisfy demands, and make up and manufacture styles and colors that will appeal. Besides the above we must hire help to man our mills and factories, promotethe sale of goods, for, after all, the economy of this country prospers not because of the goods our underwear mills and glove factories produce alone, but rather upon what is sold across the counters of our wholesalers and retailers. Next comes the burden of taxes that are levied by the Federal, State, and local governments. Many States and many municipalities have sales taxes. Also, when we import foreign-made materials we must pay duty upon them before we can offer them for sale in the shape of finished garments. Contrast this situation with that of the alien operator, if this bill is passed. According to section 321 of H. R. 5505, a foreign operator, no doubt from a country that has been the recipient of billions in aid, partially paid by the taxes upon American manufacturers, wholesalers, and retailers, can advertise and sell in this country goods selling for $10 a shipment and mail them to our customers duty-free. The irony of this situation is that we would find some of the tax dollars we have paid being used to damage us. A foreign operator could place an advertisement in a newspaper or magazine in the United States and offer to sell underwear, gloves, lingerie, and a host of other items. These items could be priced upward of $10. Realize that the alien advertiser does not maintain quarters in this country. He does not pay any real-estate, income, or other taxes. He pays no duties. He does not maintain a selling force. His only expense would be the advertisement. The members of our association representing glove and underwear manufacturers feel that this type of competition should not be permitted and we pray that this committee will erase this harmful section. An amendment to the House bill was considered by some to remove the harmful features of section 321. This amendment would prevent c. o. d. shipments under this bill. But, gentlemen, I can assure you that any foreigner who could offer for $10 a sweater, that an American manufacturer could not produce for less than $12or $14, would not be discouraged by the ban against c. o. d. shipments. We honestly believe that this section is unfair and unjust and places upon several segments of our economy a double load. The retailer, wholesaler, and manufacturer would be forced to help pay the bill for foreign aid and then be placed in jeopardy by foreign competition created by this proposed legislation. Please let me urge you to a serious consideration of this request. The members of our association sincerely hope that the committee will delete section 321 of H. R. 5505. NATIONAL MILK PRODUCERS FEDERATION, Hon. WALTER F. GEORGE, Chairman, Senate Finance Committee, Senate Office Building, Washington, D. C. DEAR SENATOR GEORGE: We would like to have inserted in the hearing record this brief statement of the position of the National Milk Producers Federation on H. R. 5505 relating to customs simplification. The federation, as you know, represents some 450,000 dairy-farm families and the cooperatives which they own and operate and through which they act together to process and market their milk. Our members are not concerned directly with customs procedures and formal-ities. The general principle of customs simplification, if limited to that, appears to be sound and desirable. Protection of domestic industry should be accomplished by direct means and not through cumbersome customs procedure. H. R. 1535, as introduced, contained several objectionable features, mostly matters other than customs simplification, and the federation appeared at the hearings before the House Ways and Means Committee in opposition to some of thosefeatures. We opposed the reduction of the tariff on adulterated butter and filled cheese. In connection with the proposal to change the present 3-cent processing tax on coconut oil, palm oil, and palm-kernel oil to an import tax insofar as it applies to imported raw products, we asked that the status of the tax under the trade agreements be left unimpaired. To that end, we recommend that the processing tax continue to apply to domestic products and that the prohibition in the bill against modification of the import tax through trade agreements be retained in the final enactment. All of these matters were taken care of by the House committee. In addition, other provisions of H. R. 1535 not relating directly to customs simplification were deleted when the clean bill (H. R. 5505) was reported and passed, and a section was added to make it clear that the passage of the bill would not indicate approval or disapproval of the General Agreement on Tariffs and Trade. The federation would oppose any change in H. R. 5505 which would undo the above improvements made in the House. We are not sure of the effect of subsection (e) of section 22 of H. R. 5505 (p. 41), relating to taxes imposed under section 2491 of the Internal Revenue Code where the tax would be in contravention of a trade agreement. If this subsection is retained in the reported bill, we would like the committee to consider adding a statement in the report to the effect that this subsection would not affect the treatment of the import taxes set up in lieu of processin taxes by section 22 of the bill. The dairy farmers in this country are desperately in need of protection agains imports from countries where wages and standards of living are lower. Uncer tainty over the effectiveness of such controls after July 1 is already having a adverse effect in relation to prices, planning, and commercial storage. If sectio 104 of the Defense Production Act is not extended, our domestic source of suppl of a vital and essential food will be impaired at a time when we can least affor to rely on foreign sources. But, as indicated above, we believe that issue shou be met directly and not through opposition to customs simplification. Sincerely yours, Memorandum re customs simplification bill (H. R. 5505). COMMITTEE ON FINANCE, United States Senate, Washington, D. C. I. STATEMENT GENTLEMEN: This memorandum is submitted by the Carpet Institute, Inc., which represents over 90 percent of the domestic manufacturers of wool carpets, rugs, and floor coverings. We are in favor of any action which would simplify technical procedures in connection with the administration of the customs laws. However, we do not believe that any action should be aken which would directly or indirectly result in the equivalent of a reduction in present greatly reduced tariff rates of duties. Your committee is, of course, familiar with the fact that there have been many trade agreements negotiated with foreign countries under the Trade Agreements Act of June 12, 1934, as extended from time to time. The rates of duty prescribed in the said act of 1930 on wool carpets and rugs have been reduced in some cases as much as 75 percent and any action which might indirectly result in a further lowering of these duties would be harmful to our industry. We filed a memorandum with the Committee on Ways and Means dated September 7, 1951, with reference to the bill which was then pending before that committee and which was designated as H. R. 1535. The committee, however, when reporting said H. R. 5505 to the House on October 1, 1951, stated in part on page 2 of its report: "Your committee held extensive hearings on H. R. 1535 and deliberated at length on it in executive sessions. H. R. 5505 was introduced as a clean bill and reflects your committee's decisions on, and amendments to, H. R. 1535. The present bill, as a result of these hearings and deliberations, is truly a customs simplification bill. "The need for customs simplification was acknowledged by all witnesses who appeared before your committee. Their testimony on the provisions now contained in H. R. 5505 differed, in general, only in technical and drafting details." In our memorandum filed with the Ways and Means Committee with reference to said H. R. 1535 we strongly objected to a proposal to amend section 201 (a) of the antidumping act of 1921. It read in part: "Whenever the Secretary of the Treasury (hereinafter called the 'Secretary'), after such investigation as he deems necessary, finds that an industry in the United States is being or is likely to be materially injured, or is prevented or materially retarded from being established, he may make a public finding of dumping. We made an extensive argument in support of our suggestion that the word "materially" should be deleted. We are pleased to note that in H. R. 5505 "materially" was deleted. We are not repeating our argument in this memorandum in support of our proposition because it is our opinion that the elimination of the word "materially" is satisfactory to all parties. We urge, however, your committee: not to insert it in the pending bill. [Emphasis ours.] * * * II. COMMENTS ON PARTICULAR SECTIONS 1. Section 13. Value (p. 17): Said section 13 proposes to amend section 402 of the Tariff Act of 1930 by eliminating the basis of "foreign value.” We are particularly interested in this section because it eliminates "foreign. value" as one of the bases to be considered under section 402 of the said Tariff Act of 1930 by the United States appraisers when appraising the values of imported merchandise subject to ad valorem rates of duty. Your committee undoubtedly knows that under said section 402 the said appraisers first have to determine whether there is a "foreign value" and/or an "export value." If both values exist in accordance with the definition set forth in said section 402,. the appraisers must take whichever of the two values is the higher. If there isn't any foreign value, then they must determine if there is an export value.. It is our opinion that the elimination of "foreign value" as one of the basis of consideration would not only create greater uncertainty as to the real price of a product but might also be used indirectly by foreign manufacturers interested in building up export markets. The domestic manufacturers now have a certain degree of protection which would be denied to them if said section 13 of H. R. 5505 is enacted into law not only by the elimination of foreign value as one basis of consideration but also by the other definitions proposed by said section 13. The proposals in said section. 13 appear to be particularly important to our industry because it is reasonable to assume that foreign manufacturers of wool carpets, rugs, and floor coverings: might greatly increase their export trade and the values of such articles would. have to be determined according to their export values, in the absence of the foreign value provision. Foreign manufacturers, for example, might get export values considerably below the actual values of the merchandise in order to gain an increased United States market. When the greatly reduced rates were applied to such fictitious export values it might produce a situation distinctly unfair to American manufacturers. Said section 13 of the bill also proposes new definitions for the other bases of value as now defined in said section 402 of the Tariff Act of 1930, as amended. The primary value to be considered for the purposes of the Tariff Act would be "export value" as redefined. Without discussing each definition pertaining to value we wish to point out, however, that the term "Freely sold or offered for sale" (on p. 22, lines 17 to 25, inclusive, of H. R. 5505) has been defined by the proposed amendment so that any restrictions imposed by law on prices, such as. price controls, shall not be construed to prevent the finding that goods are "freely sold or offered for sale." Thus the existence of a governmental price control will not interfere with the establishment of any of the values to be used under the tariff act if so amended. Also there is a definition of "purchasers at wholesale" (p. 23, lines 7 to 14, inclusive, of H. R. 5505) which will clarify the finding. of values, eliminating the present requirement that goods be offered for sale "to all purchasers" which did not always mean "purchasers at wholesale." Refinements have also been made in the definition of "ordinary course of trade" (p. 23,. lines 1 to 6, inclusive, of H. R. 5505) and “usual wholesale quantities" (p. 24, lines 15 to 19, inclusive, of H. R. 5505) which are supposed to lead to a more accurate value, or a value which more nearly approximates the actual value of the merchandise. We think it is important to call to the attention of the committee that if section 13 is amended to provide for various definitions which differ from those in the act of 1930, as amended, many of the thousands of court decisions handed down over the past sixty-odd years might be of little or no value in interpreting said section 402 of the Tariff Act of 1930, as amended by the proposed section 13. Furthermore, it is reasonable to assume that if said section 13 becomes law, there would be many cases brought thereunder and new decisions rendered. Many years might elapse before such decisions could serve as precedents. 2. Section 17. Undervaluation (p. 27): Said section 17 is titled "Amendment of Entries and Duties on Undervaluation." Said section 489 is proposed to be amended so as to provide, among other things, that the special duty for undervaluation shall not be assessed unless the consignee "* shall have failed ** to furnish the appraiser, before that officer has signed his report of value to the collector, all information required by customs officers which is relevant to the value of the merchandise and available to him at the time of entry or within a reasonable time thereafter, and all such information that is so available to the person, if any, in whose behalf the entry was made. Thus, if the undervaluation is in good faith, and the importer has furnished the information so required, there would be no need for an amendment of the entry, and the special duty for undervaluation would not be assessed. * This is a radical departure from the present law. Said section 489 of the Tariff Act of 1930, as amended, provided, in substance, that an importer must enter his goods at his peril, so to speak, in the matter of the values of articles subject to ad valorem rates of duty. In other words, the additional duties are assessed ipso facto if the appraised values exceed the entered values. Such additional duties cannot be remitted "* * * nor payment thereof in any way avoided * * *"except in the case of a clerical error upon the finding of the Secretary of the Treasury "* or in any case upon the finding of the United States Customs Court, upon a petition filed * * * that the entry of the merchandise at a less value than that returned upon final appraisement was without any intention to defraud the revenue of the United States or to conceal or misrepresent the facts of the case or to deceive the appraiser as to the value of the merchandise. * * *"" * * The customs courts have decided many cases involving petitions for the abatement or refund of additional duties under the present section 489. In most of such cases importers have been able to prove that the entry of merchandise at values less than the appraised values was without intention to defraud the Government or to deceive the appraiser. Therefore, such additional duties were ultimately refunded. However, the increased duties were retained by the Government. To summarize, our view is that section 489 of the Tariff Act of 1930, as amended, acts as a deterrent to carelessness or indifference by an importer when deciding upon the values at which merchandise, subject to ad valorem rates of duty, is to be entered. Furthermore, under the proposal as set forth in H. R. 5505 a review of undervaluation cases, so-called, could still be made by the United States Customs Court and that such court could order the remission of such duties if it finds that undervaluation was made "* * * without any culpable negligence or intention to conceal or misrepresent the facts of the case or to deceive the appraisers as to the value of the merchandise." This language is found in subsection (b) on page 29 (lines 6 to 9, inclusive) of the bill. Our opinion is that if this language should be incorporated in any law which may be enacted it would seem to relax somewhat the obligation of an importer. In other words, it might make it possible for him to more easily prove good intentions than under the language of section 489 of the present Tariff Act, which reads in part, 66 * * * without any intention to defraud the revenue or to conceal or misrepresent the facts." 3. Section 13. Value (p. 17): We discussed under 2. Undervaluation, beginning on page 6 of this memorandum. However, we desire to call particular attention to subsection (d) which purports to amend section 503 of the present Tariff Act, which proposal is on page 30 of the bill (lines 12 to 16, inclusive). It restates in effect that duty shall be paid on the basis of the final appraised values, and therefore the entered values are not to be considered. Said section 503 of the present Tariff Act, if amended by a proposed subsection (d) would then read as follows insofar as subsections (a) and (b) of the present section 503 are concerned : "(a) Except as provided in section 562 of this Act (relating to withdrawal from manipulating warehouse) and in subdivision (b) of this section, the basis for the assessment of duties on imported merchandise subject to ad valorem rates of duty shall be the final appraised value." [Emphasis ours.] |