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Summary

If that part of section 11 of H. R. 5505 which proposes to amend section 321 (b) (2) of the Tariff Act of 1930 is enacted

1. The duties which would be lost would in most instances exceed the cost of clearance by the Customs, with a direct loss of revenue to the Federal Government.

2. There would be an appreciable reduction in the collections of Federal retailers and manufacturers excise taxes, since the imported items would not be subject to these excise taxes.

3. These duty-free excise-tax-free shipments would cause a loss of business to American manufacturers and retailers, with a loss to the Treasury in income taxes.

4. In many lines an added result would be unemployment and a further potential reduction in income-tax collections.

For these reasons the retail industry requests that this section be stricken from H. R. 5505.

MEMBER ASSOCIATIONS OF THE AMERICAN RETAIL FEDERATION

National Associations:

American National Retail Jewelers Association
Association of Credit Apparel Stores, Inc.

Institute of Distribution, Inc.

Limited Price Variety Stores Association, Inc.
Mail Order Association of America

National Association of Chain Drug Stores

National Association of Credit Jewelers

National Association of Music Merchants, Inc.

National Association of Retail Clothiers and Furnishers

National Association of Shoe Chain Stores

National Retail Dry Goods Association

National Retail Farm Equipment Association

National Retail Furniture Association

National Retail Hardware Association

National Shoe Retailers Association

National Stationery and Office Equipment Association
National Foundation for Consumer Credit

National Luggage Dealers Association

American Retail Coal Association

Retail Paint and Wallpaper Distributors of America, Inc.
National Retail Tea and Coffee Merchants Association

State associations:

California Retailers Association

Colorado Retailers Association

Delaware Retailers Council

Florida State Retailers Association

Georgia Mercantile Association

Idaho Council of Retailers

Illinois Federation of Retail Associations

Associated Retailers of Indiana

Associated Retailers of Iowa, Inc.

Kentucky Merchants Association, Inc.

Louisiana Retailers Association

Maine Merchants Association, Inc.

Maryland Council of Retail Merchants, Inc.
Massachusetts Council of Retail Merchants

Michigan Retailers Association

Missouri Retailers' Association

Nevada Retail Merchants Association

Retail Merchants Association of New Jersey

New York State Council of Retail Merchants, Inc.
North Carolina Merchants Association, Inc.

Ohio State Council of Retail Merchants
Oklahoma Retail Merchants Association

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State associations-Continued

Oregon State Retailers' Council

Pennsylvania Retailers' Association
Rhode Island Retail Association

Retail Merchants Association of South Dakota
Retail Merchants Association of Tennessee
Council of Texas Retailers' Association

Utah Council of Retailers

Virginia Retail Merchants Association, Inc.
Associated Retailers of Washington

West Virginia Retailers Association, Inc.

Senator HOEY. Mr. R. E. Canfield. Mr. Canfield, have a seat.

STATEMENT OF ROBERT E. CANFIELD, AMERICAN PAPER AND PULP ASSOCIATION

Mr. CANFIELD. My name is Robert E. Canfield, American Paper and Pulp Association, 122 East Forty-second Street, New York.

I have been before you privously, Senator.

Senator HOEY. Yes, I remember.

Mr. CANFIELD. Almost invariably before opposing some kind of legislation that was intended to implement administration policy. This time I am in the cheerful position of being with administration policy.

The only reason I am here is to talk about section 13, the valuation provision. It is the amendment of section 402 of the Tariff Act, and it appears on page 18 of the bill.

What I want to do is to point out that apparently in the zeal to simplify customs procedures, which certainly need simplifying, the drafters of the bill have inadvertently included provisions which are in direct conflict with one of the administration's pet policies, one with which most American industry, if not all, are in favor, namely, to try to rid foreign trade of the evils of cartel control, and to foster true competitive business abroad as we know it here at home.

Section 13, in its present form, would supply an economic incentive which would virtually guarantee cartel control of all exports to the United States, and I doubt very much if that is really intended by the administration or by the Congress.

Under the present law the courts have reluctantly held that foreign cartels can create a situation where the export price must be taken by the United States for tariff-evaluation purposes even though cartelcontrolled, and even though it is placed far below home-market value, in order to reduce duty payments.

All they have to do to achieve that result is to create a controlled price in the home market which automatically removes it as a yardstick for evaluation purposes.

Under section 13 of this bill the cartels do not have to create the situation. The law does it for them. What was reluctant becomes accepted basic United States policy. The only deterrent to cartel control of the United States valuation base is eliminated.

The cartel can control the United States valuation base without having to rig the market at home.

The way section 13 accomplishes this result is simple: The present law says that the higher of the freely offered home market price and the export value is to be used as a base for valuation. Section 13.

drops out the home-market test and says that the export value is the base. It defines "export value" as the price at which the merchandise is freely sold or offered for sale for exportation to the United States. That would not be so bad except that further on "freely sold or offered for sale" is defined.

I suppose it is true the Congress can pass a law that says, "for the purposes of this act black means white." It is a little starling to find it, however, and that, as near as I can figure out, is exactly what the definition does.

I think without the definition that anyone, any court, would agree that "freely sold or offered for sale" means sold in an uncontrolled, unrigged market at a price determined by free negotiation between buyer and seller. That is what the courts have held under the present act, with the reluctant result that they eliminate home-market value when it has been rigged.

But section 13 in its definition leaves out any such concept, and states that all that "freely sold" means is that the same price, whether rigged or not rigged, is offered to all buyers and that use of the product by the buyer is not restricted except in certain ways, the certain ways being the only important ones.

So, for all practical purposes what it says is that "freely offered" merely means that the same price, even though it is a rigged price, is offered to all buyers.

With that definition the exporter controls absolutely the valuation for United States tariff purposes.

Let us take a specific example of how that works: Take French cigarette paper. It happens to be controlled completely by Regie, the French Government tobacco monopoly. The price at home in the French market currently is $4.40 per bobbin. The export price generally to other countries than the United States ranges from $4 to $4.50 per bobbin. The export price to the United States is $2.35 per bobbin. Under the present act the duty would be charged on the $4.40 foreign home market value price, except that it is a rigged price.

Under the new act that would not be taken into account, rigged or not rigged, and the rigged price of $2.35, the export price to the United States, would be the base on which we had to compute duties.

In February, which is the last month I have figures for here, the imports-they are quite small on this, but it just typifies the whole situation-totaled a value of $15,000 and some-odd, on this $2.35 base. On the home-market value, it would have been $28,500. The duty actually collected on the February shipment was $3,423, which it would be under this new act.

On a correct valuation the duty would have been $6,200, almost a hundred percent higher.

Now, it seems to me axiomatic that when Congress fixed ad valorem duties, and almost all of our duties are ad valorem in whole or in part, that they meant that the value was a real value, not a rigged-up value for the purpose of limiting the amount of duty that people would have pay, and it seems to me axiomatic also that if we are trying, as the administration states as a basic policy, to get rid of cartels throughout the world in order to free up trade, that we should not pass a law that invites cartel control of things, and almost, as a matter of economics, forces it.

to

If somebody is in a position to cut his duty by 50 percent merely by doing what he can do under his own laws, but what would end him up in jail here, he is certainly going to do it.

Senator HOEY. Have you any suggestion to make about any changes you think are proper?

Mr. CANFIELD. Yes; I think it would be quite simple to do, sir. Senator HOEY. You might put in the record any suggestions you might have by way of amendment.

Mr. CANFIELD. I shall do that.

I would think that what we ought to do if we are trying to make a real value is to say to foreigners in effect, "Do you value this stuff for import purposes on the basis of a free market price, not the way it is defined in this act, but the way people mean it when they say 'free.' If you have not got a free market price, then take our American free market price as a criterion. If you don't want to value your imports on that basis, establish a free market of your own."

Now, to do that, all that would be required in the way of amendment of this bill would be this: On page 18, after line 10, insert a new clause which says:

If neither the export value, the United States value, nor the comparative value can be ascertained satisfactorily, then the American selling price of comparable merchandise

Then there would be some changes of numbering.

The next addition would be in line 12 on that same page. To strike out the word "nor" and to insert after the word "value," the words "nor the American selling price of comparable goods." Then there will again be some numbering changes.

On page 22 there should be a new definition inserted of what we mean by comparable merchandise, because I have used that phrase, and that will be,

merchandise manufactured or produced in the United States of like materials used for the same purpose and of approximately equal commercial value as the merchandise undergoing appraisement.

That language is taken right out of the bill, from another clause.

There will be some more numeral changes, and then in line 18 on page 22, the basic change: In the definition of "freely sold or offered for sale" there should be inserted, after the word "wholesale" in the second line of the definition, and that is on line 18, the words:

at prices determined without agreement with or compulsion by any other seller, group of sellers, or Government agency—

and so forth.

Senator HOEY. That would be merely inserted in line 18?

Mr. CANFIELD. Line 18.

Those simple changes would assure that duty valuations were made on the basis of real value and not rigged value.

Senator HOEY. Yes. Thank you very much, Mr. Canfield.

Mr. CANFIELD. Thank you, sir.

Senator HOEY. Mr. John Ray.

STATEMENT OF JOHN RAY, CHAIRMAN, IMPORT AND CUSTOMS COMMITTEE, DETROIT BOARD OF COMMERCE

Mr. RAY. My name is John C. Ray, of Detroit, Mich. I am chairman of the import and customs committee of the Detroit Board of Commerce, and I am appearing here this morning on behalf of the Detroit Board of Commerce.

The Detroit Board of Commerce, representing the many varied, vast and diversified industries and businesses operating within the Detroit area whose connections and investments are extended throughout the world, has for the past several years been concerned with the cumbersome, complicated, and unnecessary United States customs regulations and restrictions, and we believe that they have created a needless hardship for the United States importers and thereby had an adverse effect upon the United States exporters, consumers, and the employment of labor.

The board of commerce, by appropriate resolution, favors the adoption of the Customs Simplification Act.

There may be avenues of dissent with certain particulars of the act with which we, however, are not concerned. We are only concerned with the broad aspects of the act and urge its adoption.

Our port ranks fourth as far as dollar volume of imports are concerned, and we have been subjected to considerable annoyances and delays in making our entries at the port of Detroit. These annoyances and delays have not been occasioned by any means by any inefficiency on the part of the customs, but are largely attributed to the complexities of the present act.

Even though our volume of business, customs business, at the port of Detroit has increased over 300 percent since 1937, the personnel of the collector has not been increased at this particular port proportionately.

We feel that the delays have been occasioned to a large extent by the complexities of the valuation of importations, which section 13 of the proposed act is designed to correct.

We feel that doing away with the determination of foreign value will remove the necessity for making foreign investigations which take so much time, and oftentimes it may be a year or two years and three, and sometimes longer, before an importer will find what the appraiser values his merchadise at, and oftentimes that valuation is different from the entered value, and the profit is turned into a loss.

It certainly is a very unrealistic and unbusinesslike way of handling importations, and we feel that section 13 of the proposed act will go a long way toward correcting this evil.

Senator HOEY. I may say in this connection, Mr. Ray, if you would like to have your full statement appear in the record and refer to such parts as you want to now, you may do so.

Mr. RAY. Yes, I would; I am just trying to save time here. Senator HOEY. Just refer to such parts as you wish, and your full statement will go in the record. Mr. RAY. Yes.

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