of valuation then, and only then, as in similar situations now and in the past, the appraiser can fall back upon his general authority under csetion 500 of the Tariff Act of 1930, where he has the privilege of― ascertaining or estimating the value thereof by all reasonable ways and means in his power and so forth. Taxes: This provision appears as paragraph (g) on page 22, lines * 9 through 14. The language used is practically identical to that in article 35, paragraph 4 of the defunct Habana Charter for an International Trade Organization, and with article VII, paragraph 3, of the General Agreement on Tariffs and Trade. It provides that the value of imported merchandise shall not include the amount of any internal tax, applied within the country of origin or exportation, from which the imported merchandise has been exempted or has been or will be relieved by means of refund. What does "any internal tax" mean? All taxes in a foreign country are "internal taxes" in that country, and does not the word "any" imply "all" taxes? If this principle is carried out ad absurdum, would it not permit exported articles to land in our country exempt of all foreign taxes, while our domestic articles reach the consumer overloaded with taxes on profits, excise taxes, and others? Of course, this is a ridiculous construction, but the wording of this paragraph is so broad and imprecise that it appears to permit such a literal interpretation. Moreover, the text of paragraph (g) has no place in section 13. According to the Treasury Department's testimony before the House committee, this question of inclusion or exclusion of foreign internal taxes refers only to problems connected with the determination of "foreign value." Since "foreign value" is eliminated by the section 13 proposals, inclusion of paragraph (g), Taxes, makes no sense whatsoever. "Export value," which becomes the primary basis of Customs valuation, is the price for export to the United States, from which price may be exempted all sorts of foreign internal taxes without the United States having any recourse in the situation, except through strengthened countervailing duty procedures, as we have recommended in connection with section 2. We strongly urge that the committee eliminate paragraph (g) from section 13. SECTION 20. CONVERSION OF CURRENCY The question of converting foreign currencies into their equivalent value in United States dollars for Customs purposes arises from the fact that our tariff law requires that ad valorem duty rates be applied against the value of the imported merchandise, expressed in our national currency. The proposition in section 20 is to repeal article 25 of the act of 1894, as amended, and to amend section 522 of the Tariff Act of 1930. In article 25 of the act of 1894, Congress charged the Secretary of the Treasury with the administration of a part of one of the powers vested in Congress by the United States Constitution in article I, section 8, the power to regulate the value of our national monetary unit or coin and that of foreign coin. The United States dollar value of foreign currencies was obtained by calculating the ratio of the fine gold content of foreign coin to the gold content of the dollar. These relative values corresponded closely to values effective for commercial transactions, and they were used for customs purposes. Section 522 of the Tariff Act is the section entitled "Conversion of Currency," which ties the procedures under section 25 of the act of 1894 into the Customs administrative provisions of the Tariff Act. The League feels that the testimony of Treasury Department representatives before the House committee was somewhat misleading. The witnesses seemed to speak of a situation that may have been temporarily true at the time of the conferences related to the creation of GATT and with the proposed Habana Charter for ITO in 1947-48, but which certainly is not true today. The requirement that the members or contracting parties to GATT tie the conversion of their currency to the par values established by the International Monetary Fund, a specialized agency of the United Nations, is to be found in article 35, paragraph 5 of the Habana Charter for ITO, and in article VII, paragraph 4 of GATT. ITO was also to have become a specialized agency of the U. N. There may have been some logic in providing for the interplay of all the specialized agencies of the U. Ñ. when their roles crossed one another. The League has expressed its opposition to the forms of international economic planning proposed in the Habana Charter. That charter is now dead and, with it, the reasons for trying to bring the IMA into our domestic customs administrative procedures. Article 25 of the act of 1894, was amended by section 403 of the Emergency Tariff Act of 1921, in a way that recognized that, after World War I, some countries were not adhering to the gold-content conversion basis in their current international commercial transactions. The amendment provided that, where the Secretary has not proclaimed a conversion rate or where the proclaimed rate varies by 5 percent or more from the buying rate in New York on the day of exportation, the buying rate is to be used for assessment of customs duties. In 1934 the United States changed the gold content of the dollar so that it took $35 to purchase 1 troy ounce instead of $20.67 previously, and made it illegal for American citizens to hold gold in any monetary form. The Treasury and the Mint had no difficulty thereafter in adjusting the conversion rate of foreign currencies or coins to United States dollars and the Secretary continued to issue the proclaimed rates. While the citizen no longer could obtain gold for his currency or silver coin, there was still a definite, fixed gold content to the dollar, albeit a smaller amount than before. Reduction of the gold content of their monetary units is exactly what a large number of foreign countries have effected since World War II. We believe that the repeated statement of the Treasury representatives at the House hearings that the gold-coin standard has been abandoned by most countries, misleads the layman into believing that the gold content of foreign moneys has been largely abandoned. It certainly is not true in international balance of payment settlements. The International Monetary Fund has had nothing to do with these declarations of gold content of foreign monetary units, except to recognize them as a fait accompli. In fact, through no fault of its own, the IMF has never been able to perform its function, which is to stabilize currency values and keep them stable. Under these circumstances it seems at least premature to suggest changing our existing laws so as to base our currency-conversion procedures on IMF determinations. In the case of those countries which use multiple official rates of exchange, whether or not they are attached to gold, we agree with the expressed opinion of the Treasury Department that we can continue to operate under present law, as interpreted by the Supreme Court in the case of Barr v. United States (324 U. S. 83 (1945)). We see no justification for doing away with our present practices. The question of conversion of currencies is an important one in customs administrative procedures, and we consider it essential to strive to keep all elements entering into the determination of tariff duties within the control of the customs administration in the United States. Secion 20 should be eliminated. To document our belief that present laws permit realistic conversion of foreign currencies into United States dollars, we submit a supplementary statement entitled "Conversion of Foreign Currencies Under United States Laws," and respectfully request that it be made a part of the printed record at this point in my testimony. Senator KERR. It may be done. (The document referred to is as follows:) CONVERSION OF FOREIGN CURRENCIES UNDER UNITED STATES LAWS (Prepared by the American Tariff League) The Constitution provides in article I, section 8, that Congress shall have the power "to coin money, regulate the value thereof, and of foreign coin." Article 25 of the act of 1894 stipulates that the Director of the Mint estimate quarterly the values of the standard coins in circulation of the various nations of the world. That value is to be expressed in the money of account of the United States as the pure metal content of such coin of standard value. The Director of the Mint's findings are to be proclaimed by the Secretary of the Treasury quarterly on the first day of January, April, July, and October in each year. This provision is incorporated as section 403 (a) of the Emergency Tariff Act of 1921 and reiterated in section 522 (a) of the Tariff Act of 1930, as amended. In section 403 (b) of the Emergency Tariff Act of 1921, reiterated as section 522 (b) of the Tariff Act of 1930, as amended, it is ordered that for the purpose of assessment and collection of duties upon merchandise imported into the United States, wherever it is necessary to convert foreign currency into currency of the United States, such conversion shall be made at the values proclaimed by the Secretary, except as provided in subdivision (c). Section 403 (c) of the Emergency Tariff Act of 1921, reiterated in section 522 (c) of the Tariff Act of 1930, provides that when no value is proclaimed by the Secretary or that such proclaimed value varies by 5 percent or more from a value established by the cable buying rate for the foreign currency, as determined by the New York Federal Reserve Bank, at noon of the day of export and certified daily to the Secretary, who shall make it public at his discretion, then conversion will be made at the determined value. On page 32 of the published hearings on H. R. 1535 before the House Committee on Ways and Means (82d Cong., 1st sess.), the Treasury Department inserted, as an example, an exhibit A entitled "Par values of foreign currencies published and kept current by the Secretary of the Treasury pursuant to section 522 (a) and (d), Tariff Act of 1930, as amended," on the assumption that section 20 of the Customs Simplification Act was in effect. The conversion rates are given in United States cents per foreign currency unit. We find that the par values given are, in reality, obtained by dividing the official weight in grams of fine gold in the foreign currency by the weight in grams of fine gold in the United States dollar (0.888671 gram). An example is given in exhibit I, attached. We have check this list in exhibit A and find that every country listed has officially expressed the value of its national currency in terms of weight of fine gold content. We attach exhibit II, a tabulation of the official declarations of gold content for the currency units of each of the countries listed in the Treasury Department's exhibit A, to which we have added declarations made since the date of those hearings, by Ceylon and Sweden, and a change in the gold content by Yugoslavia. Exhibit B on page 33 of the published hearings before the House committee shows that the commercial rates for these countries, which have declared the gold content of their monetary units, very closely follow the official dollar cross rate. Under our present law, no other rate would be used for customs purposes unless the commercial rate determined by the Federal Reserve Bank of New York varied by 5 percent or more from the par value. It must not be forgotten that some countries which are not members of the International Monetary Fund have or might declare the gold content of their monetary unit and there is no reason why their declarations should be ignored. EXHIBIT I Gold content of United States dollar expressed in grams In 1934, the gold content of the United States dollar was reduced from 25.8 grains nine-tenths fine to 15.2381 grains nine-tenths fine. 15.2381 grains nine-tenths fine=13.71429 grains fine gold. 1 grain 0.0647989 gram. 13.71429 grains=0.888671 gram. Fine gold content of United States dollar=0.888671 gram. Examples of conversion rates: (a) How many United States dollars in one United Kingdom pound sterling? Fine gold content of United Kingdom pound sterling (see exhibit II): 2.48828 grams. Fine gold content of United States dollar: 0.888671 gram (2.48828÷0.888671= 2.8). Par value conversion rate: £1=$2.80. (b) How many Belgian francs in one United States dollar? Fine gold content of United States dollar: 0.888671 gram. Fine gold content of Belgian franc (see exhibit II): 0.0177734 gram (0.888671÷0.0177734=50). Par value conversion rate: Belgian francs 50-$1.00. EXHIBIT II Gold content and par values in United States cents of foreign currencies listed in exhibit A entered on p. 32 of published hearings on H. R. 1535 before the House Committee on Ways and Means, 1st sess., 82d Cong. [Official fine gold content of United States dollar in grams: 0.888671 (see exhibit I)] NOTE.-Italicized countries are new countries added since publication of exhibit A or countries which have changed gold content of their monetary unit since that time. |