The CHAIRMAN. Well, thank you very much, Senator. (The letter previously referred to is as follows:) For release Wednesday, February 27, 1952. O'MAHONEY AND COLLEAGUES URGE TREASURY TO EXERCISE TARIFF POWER TO PREVENT ARGENTINE DUMPING OF WOOL TOPS Senator Joseph C. O'Mahoney (Democrat, Wyoming) today issued the following statement: "At a conference on February 9 of Senators and Members of the House of Representatives representing States interested in the wool industry, there was authorized the preparation of a letter to the Treasury Department urging the imposition of countervailing duties on wool tops exported into the United States by Argentina and Uruguay. These countervailing duties are authorized by section 303 of the Tariff Act of 1930 whenever any exporting company, directly or indirectly, provides a grant or bounty to stimulate increased exportation. In conformity with this agreement, the enclosed letter has been dispatched to Assistant Secretary Graham from whom I had previously received a letter dated February 15. Copies of the two letters are attached." Hon. JOHN S. GRAHAM, Assistant Secretary of the Treasury, Washington, D. C. FEBRUARY 21, 1952. DEAR MR. GRAHAM: I am most appreciative of your letter of February 15 in response to my telephone request of February 13 for information with respect to the enforcement of section 303 of the Tariff Act as the result of the exchange preference which is now being given by the Governments of Argentina and Uruguay to stimulate the manufacture of wool tops in those respective countries for export to the United States. I note with pleasure that the Department has already taken steps to obtain from the United States Embassy in Argentina "some of the information which is required for an adequate reexamination of this problem." On Friday last, February 15, a conference was held of Representatives and Senators from States in which the wool industry in one or more of its aspects, is of great importance to the maintenance of a sound economy, to consider this and other matters which are now adversely affecting the production and manufacture of domestic wool and wool products. I advised those present of the information I had received by telephone from your office and I have since distributed copies of your letter to all who participated. The members present were unanimously of the opinion that the present law imposes an obligation upon the Secretary of the Treasury to levy countervailing duties whenever a bounty or grant upon the export of dutiable commodities is made by any country exporting such commodities to the United States. In your letter of February 15 you say that it is one of the responsibilities of the Secretary to "determine whether a bounty or grant is in fact being conferred upon any product." May I not suggest that the language of section 303 of the Tariff Act seems to answer this question most explicitly. It would be difficult indeed to frame language less open to misconstruction of a misinterpretation than that which is used in this section. * The obligation of the Secretary of the Treasury to impose a countervailing duty clearly arises "Whenever any country * * shall pay or bestow, directly or indirectly, any bounty or grant, etc." The use of the words "pay or bestow" in the alternative and the words "directly or indirectly" to modify the words "any bounty or grant" could be designed only to show that Congress wanted to prevent any country from avoiding any tariff rate imposed by our law by an device or method. That it was not the intention of Congress to allow the Secretary discretionary power to determine whether or not a device which has the effect of granting a proferential position to any exporter from another country is a "bounty or grant," seems to be proven, not only by the fact that section 303 provides for a mandatory countervailing duty, but by the fact that in the clause imposing the additional duty, the section describes it as being “equal to the net amount of such bounty or grant, however the same may be paid or bestowed." This phrase "however the same be paid or bestowed" removes any possible ambiguity and imposes upon the Secretary an obligation which he may not avoid by construing preferential treatment through multiple export rates as a technique of deriving tax revenue, of avoiding political and other difficulties in the devaluation of their currencies or of producing other economic effects within the countries. The only question is whether the method used accords preferential treatment by which the American duty is avoided. No matter how the preference is paid or bestowed, and no matter what internal effect it may have, if the method used grants an advantage to an exported commodity, then the countervailing duty must be imposed. That Congress had no intention to give the Treasury Department any discretion in the matter is evidenced by the language used in section 303 of the Tariff Act of 1930 prescribing the action to be taken when such bounty or grant is paid or bestowed., This sentence reads: "The Secretary of the Treasury shall from time to time ascertain and determine, or estimate, the net amount of each such bounty or grant, and shall declare the net amount so determined or estimated. The Secretary of the Treasury shall make all regulations he may deem necessary for the identification of such articles and for the assessment of such additional duties. duties." It is difficult to see how language can be made more explicit. The countervailing duty comes into effect by the mandatory provision of the law whenever a bounty or grant is paid or bestowed, directly or indirectly, "however the same be paid or bestowed." The duty of the Secretary is also clearly prescribed. He shall ascertain and determine and he shall declare the net amount and he shall make all regulations he may deem necessary for the identification of such articles and for the assessment of such additional duties. If a multiple export rate has the effect prescribed in the law, even though it may have other economic effects, no discretion is given by the law to the Secretary to vary the effect Congress sought to produce. In the instant case the bounty is granted by the Argentine Government to exporters of wool tops at an export rate of exchange of 71⁄2 pesos per United States dollar. Wool receives an export rate of only 5 pesos per dollar. The result is that the favored Argentine manufacturers of wool tops are enable to export to this country the manufactured wool product at the same price as the Argentine wool from which the tops are made. The evidence before our conference was to the affect that South American tops are underselling tops made in the United States by 384 cents per pound. I trust that when the additional information is received which you have requested from the United States Embassy in Argentina you will arrange a conference with the undersigned, all of whom are of the opinion that the circumstances in the instant case require the imposition of a countervailing duty and that the only responsibility of the Secretary is to "determine, or estimate, the net amount of the bounty or grant, however the same be paid or bestowed" and levy a countervailing duty accordingly. Sincerely yours, LESTER C. HUNT. GUY CORDON. ERNEST W. MCFARLAND. CARL HAYDEN. O. C. FISHER. JOSEPH C. O'MAHONEY. WAYNE MORSE. WALLACE F. BENNETT. ARTHUR V. WATKINS. HENRY C. DWÓRSHAK. ED. C. JOHNSON. E. Y. BERRY. PAT MCCARRAN. TREASURY DEPARTMENT, Hon. JOSEPH C. O'MAHONEY, United States Senate, Washington 25, D. C. ASSISTANT SECRETARY, Washington, February 15, 1952. MY DEAR SENATOR: Reference is made to your telephone request of February 13, 1952, for information regarding the status of this Department's consideration of the applicability of countervailing duties to imports of wool tops because of exchange rates made applicable to them by Argentina and Uruguay. As you know, section 303 of the Tariff Act in substance places two responsibilities upon the Secretary of the Treasury. He must determine whether a bounty or grant is in fact being conferred upon any product and, if so, he must determine or estimate the net amount of each such bounty or grant and levy countervailing duties accordingly. These responsibilities often present a number of complex questions. The cases to which you refer are particularly difficult because they involve the problem of indirect bounties or grants which may result from the presence of multiple exchange practices. In some cases multiple export rates may have economic effects similar to those of bounties, but in other instances they may not. For example, some countries apply lower export rates on some commodities than on others as a technique of deriving tax revenue from the exportation of the commodities subject to the lower rates. In some countries multiple rates may be resorted to as a means of avoiding the political and other difficulties involved in a devaluation of their currencies. Therefore, the task of determining whether a particular rate is in fact as subsidy rate is obviously not an easy one nor is it a task which can usually be accomplished quickly. When the question of the exchange rates of Argentina and Uruguay was previously considered, the Department reached the conclusion in December 1950 that their application to the export of wool tops did not give rise to a bounty or grant within the meaning of section 303 of the Tariff Act of 1930. This Department is, however, again giving careful and active consideration to the specific cases to which you referred. Indeed, steps were taken some weeks ago to obtain directly from the United States Embassy in Argentina some of the information which is required for an adequate reexamination of this problem. very truly yours, JOHN S. GRAHAM, Assistant Secretary of the Treasury. The CHAIRMAN. Mr. Beiter. You may have a seat, Mr. Beiter, and identify yourself for the record. STATEMENT OF ALFRED F. BEITER, NATIONAL PRESIDENT, NATIONAL CUSTOMS SERVICE ASSOCIATION Mr. BEITER. My name is Alfred F. Beiter, and I am president of the National Customs Service Association. The CHAIRMAN. I beg your pardon for mispronouncing your name. Mr. BEITER. That is all right, Senator. Mr. Chairman, I represent the customs service employees. Our members consider themselves shareholders in the customs service. As career customs officers we have a strong interest in the improvement of customs administration. I use the word "career" advisedly since the personnel turn-over in our service is relatively small. A very large percentage of our members have had 20 years and more in the Government service. Customs is their life work, they are proud of it, and anxious to maintain its present high standard of perform ance and even improve on it. Our continuing interest in better administration of the tariff and related laws causes us to welcome and appreciate this opportunity to make this statement. Generally speaking, we believe the proposed legislation will make for improved customs administration and eliminate many of the uncertainties and hardships which plague those doing business with customs. Our comments on the present bill are more limited than on the original measure presented in the House-H. R. 1535-since H. R. 5505 is a considerably improved bill. We are in complete sympathy with the objectives of this legislation and our comment, therefore, is in the nature of friendly observations on selected portions of the bill which we feel will fall short of achieving the maximum improvement possible, or which will expedite handling or diminish the custom workload at the sacrifice of proper controls. Section 13. Value: Subsection (A) amending section 402 (c) (1) Tariff Act of 1930, as amended, provides that in computing United States value on nonpurchased goods allowance shall be made for any commission paid or to be paid. Allowing deduction of the full commission without limitation would make it possible for foreign suppliers through the medium of owned or controlled subsidiaries in the United States, to land their merchandise in this country at substantially lower prices than other importers of competitive merchandise.1 This could be added by a further proviso that the commission allowed shall in no case be greater than that which is usual in the market for merchandise of the same class or kind as that undergoing appraisement. The same subsection amending section 402 (e) (2) outlining constructed value stipulates that the addition for general expenses and profit shall equal that usually added by producers in the producing country who export to the United States on their sales in the usual wholesale quantities and in the ordinary course of trade, of merchandise of the same class or kind as that undergoing appraisement. Since one of the major objectives of the customs-simplification proposal has been to avoid as far as possible having customs valuation dependent on circumstances peculiar to foreign market sales, it is fair to assume that this addition for general expenses and profit is intended to be based on export sales to the United States. While it is quite probable that such would be the interpretation placed on the language, it might be advisable to specify that the addition for general expenses and profit is to be predicated on the export market to the United States. Heavier distribution costs, selling and advertising expenses, commonly require foreign sellers to make competitive consigned merchandise being appraised on United States value basis of some gross selling price, with importer A receiving a standard 10 percent 1 This would be accomplished by paring the profit margin which normally remains in the dutiable value of the merchandise and paying the difference as added commission. Since the agent would be wholly owned by the manufacturer no appreciable loss would thereby result to the seller. As an illustration, assume his selling price to the point of driving Ä out of competition, or at least securing the lion's share of the available trade. commission and importer B an inflated but actual commission of 40 percent, the computation would be approximately: IMPORTER A Per unit IMPORTER B Per unit United States selling price---- $10.00 United States selling price----- $10. 00 Less commission (10 percent). 1.00 Less commission (40 percent) __ - 4.00 As an initial consequence, B would pay less duty than A, though commercially and saleswise the merchandise is approximately the same. The probability is also that B, using the advantage given him by this lower duty liability, would reduce substantially larger additions for general expenses and profits for home-trade sales than for export transactions. Section 21. Customs supervision: It is our sober judgment that this provision in its present form should not be enacted. Its avowed purpose is to avoid the possibility that the courts may interpret tariff requirements for customs supervision as demanding direct and continuous supervision when the nature and purpose of the assignment would make that sort of supervision a wasteful employment of customs manpower. There can be no quarrel with such an objective, but section 21, in avoiding that danger, creates a far greater one. Proponents of this section will not deny the sweeping and all-embracing character of the language used. To protect importers who have acted in good faith requires no more than a provision that any action or thing done or maintained in good faith by an importer, or other person, under the supervision of customs officers, and in compliance with the principal customs officer concerned, may not thereafter be questioned administratively or otherwise. It most certainly does not require that we abandon a standard for customs supervision and substitute therefor in many cases the day-today makeshifts of hard-pressed local customs officers. Section 21 abandons principle and enthrones expediency. The true standard for customs supervision, implied but inflexible, is that it be of such a nature and extent as to effect the supervision intended within reasonable limits, dictated by the importance, revenuewise, or enforcementwise, of the task. The determination of what measure and kind of supervision, spot check, continuous observations, et cetera, is an administrative application of this general principle or standard to a specific control or enforcement problem. Under section 21, in the many instances where there is no regulation of the Secretary prescribing the nature and extent of the supervision to be exercised, this specific local determination of what form the supervision should take becomes not the application of the standard but the standard itself; and it is evident, when local officers all over the country are making such determinations almost daily, there no longer is any real standard of supervision. Such a situation is obviously fraught with disagreeable consequences. But, quite apart |