H.R. 4825 Effect on Revenue The enactment of this legislation would result in a loss of customs revenues. Based on the dutiable value of imports under TSUS item 137.71 in 1983 (which does not include GSP imports), the estimated annual revenue loss would amount to $359,000. If dutyfree treatment under the GSP had not been available, the estimated loss as to all imports under item 137.71 would have been about $472,000. (As indicated earlier, imports of Brussels sprouts under TSUS item 138.46 are believed negligible or nil.) Subcommittee Action Agency Reports The Department of Agriculture opposes enactment of H.R. 4825. report. Markup On June 27, 1984, the Subcommittee on Trade ordered H.R. 4825 favorably reported to the full Committee on Ways and Means by voice vote, with an amendment deleting frozen Brussels sprouts from the coverage of the proposed new provisions and conforming the effective date to 15 days after the date of enactment. SUMMARY OF TESTIMONY ON H.R. 4825 Administration Department of Agriculture: Opposes enactment of H.R. 4825. The Department of Agriculture see no reason to extend reduced duty treatment on a GSP eligible item to countries that either exceed the GSP competitive need limitation or are ineligible for the GSP program. The Department would prefer to grant such treatment only in return for negotiated concessions on the part of other countries. H.R. 3159 Introduced by: Mr. Gibbons (FL) Date: May 26, 1983 To require that customs duties determined to be due upon liquidation or reliquidation are due upon that date, and for other purposes. Summary of the Provision H.R. 3159, if enacted, would provide that additional duties determined by Customs to be owed to the Government are due 15 days after date of liquidation or reliquidation. It also provides for the assessment of interest on duties which are not paid within 30 days after that date, and further provides interest to be paid by the Government for duties collected which are required to be subsequently reduced. Section-by-Section Analysis Section 1 of H.R. 3159, if enacted, would amend section 505 of the Tariff Act of 1930 (19 U.S.C. 1505) by adding a new paragraph which would prescribe the due date of liquidation or reliquidation of duties to be 15 days after the date of liquidation or reliquidation and, if not paid within 30 days after that date, interest would be assessed from the 15th day after the date of liquidation or reliquidation at a rate determined by the Secretary of the Treasury. Further, this section would be effective thirty days after enactment and any pending duties would be due thirty days following enactment. Section 2 would amend section 520 of the Tariff Act of 1930 (19 U.S.C. 1520) by adding a new paragraph which would provide for interest to be paid by the government if a determination is made to reliquidate an entry as a result of a protest filed under section 514 of the Act or if an application for relief is made under subsection (C) (1) of Section 520 of the Tariff Act of 1930 or if reliquidation is ordered by an appropriate court. Interest would be paid on the amount of overcharge at a rate to be determined by the Secretary of the Treasury and determined as of the 15th day after the date of liquidation or reliquidation. Interest would be calculated from the date of payment to the date of refund or the filing of a summons under 2632 of title 28, United States Code, whichever occurs first. The amendment would be effective on or after the 15th day after the date of enactment of the Act. H.R. 3159 Background and Justification Currently, a deposit of the estimated duties owed must be made at the time of entry of merchandise, other than entry into warehouse, for transportation, or under bond. If it is determined that additional or increased duties are due, the appropriate customs officer must collect them. If any excess duties are being refunded, no interest is payable thereon. No time limits are fixed for the payment of additional or increased duties, and no interest on such amounts owed can be assessed. The increased duties need not be paid on liquidation and need not be deposited in order to protest their assessment before the Customs Service; they must be paid prior to filing a civil action in the Court of International Trade, or the expiration of the time for filing such an action (180 days). The procedures for collecting duties beyond the deposited amount and for refunding excess duties paid are as follows: A notice of any additional or increased duties being assessed must be sent to the importer of record or to the actual owner of the imported merchandise. Regulations of the U.S. Customs Service provide procedures for the refunds of excess duties collected. 19 CFR Sec. 24.36. Separate application to the assistant regional commissioner of the pertinent internal revenue region must be made for refunds of excess internal revenue taxes paid. Finally, regulations require that notice of liquidation of formal entries be given by bulletin notice and provide for notice of liquidation of other entries including entries liquidated by operation of law. 19 CFR Sections 159.9-159.10. While courtesy notices of the liquidation of certain entries may be sent to importers or their agents, the actual bulletin notices are posted in the various customhouses, each notice covering entries filed at that customs port of entry or station. Thus, an importer or other person must check the bulletin notices regularly to ascertain whether entries have been liquidated and the dates of such liquidation if a refund is due, but a bill for any additional or increased duties owed will be sent. This legislation is strongly supported by U.S. Customs and the U.S. Treasury. Until February 18, 1982, the United States Customs Service had based its debt collection responsibilities upon the proposition that "[a] bill for duties, taxes, or other charges is due and payable upon receipt thereof by the debtor" (19 CFR 24.3 (e)). However, on February 18, 1982, the United States Court of Customs and Patent Appeals upheld a decision of the Court of International H.R. 3159 Page Three Trade in the case of United States v. Heraeus-Amersil, Inc., 671 F.2d 1356. The decision provides that increased or additional duties determined to be due on liquidation or reliquidation are not due and payable by the importer until either the protest period has expired without a protest being filed (90 days after liquidation or reliquidation), or where a protest has been filed and denied, the time to appeal to the Court of International Trade under 28 U.S.C. 1581(a) has expired (180 days after denial). Thus, in the latter situation, collection efforts cannot be initiated for a minimum of 270 days. The effect of the proposed legislation would be to allow Customs to take immediate steps to collect monies determined to be due and payable to the United States. If the duties were not paid within the time allotted by this bill, then the importers would be assessed interest in accordance with section 306 of Public Law 96-304 and regulations to be promulgated by the Customs Service. Without legislation to overturn the Heraeus decision and with the current high interest rates prevailing throughout the country, we would anticipate that any normal business entity, legally able to delay payment of large sums of money without interest, would take advantage of that opportunity. It The second part of this legislation recognizes the inherent fairness of a reciprocity of payment of interest when the importer has been able to sustain his position in an appropriate forum. is similar to but, as regards increased or additional duties, goes beyond 28 U.S.C. 2644 which allows interest to be paid to a successful plaintiff in the Court of International Trade but only from the date of filing of the summons, regardless of the date of payment. The rate of interest to be paid will be that applicable to a late payment of the particular entry. For purposes of this legislation, liquidation shall be defined as the final computation or ascertainment of the duties or drawback occurring on an entry (19 CFR 159.1). Comparison with Present Law As discussed above, the U.S. Customs Service has continually based its debt collection responsibilities upon the proposition that "[a] bill for duties, taxes, or other charges is due and payable upon receipt thereof by the debtor." (19 CRF 24.3 (e)). The decision by the U.S. Court of Customs and Patent Appeals has determined that increased or additional duties determined to be due on liquidation or reliquidation are not due and payable by H.R. 3159 Page Four the importer until either the protest period has expired without a protest being filed or where a protest has been filed and denied, the time to appeal to the Court of International Trade under 28 U.S.C. 1581(a) has expired. Effect on Revenue The precise impact of this legislation cannot be determined due to the difficulty in determining the amount of increased duties to be expected in any given year, the rate of payment and the level of protest that may be experienced under the present law. However, from the discussion above and the trend which Customs is now seeing in protest levels and payment rates, the revenue gain and savings in administrative costs would be significant. An order of magnitude savings of $25-$50 million in otherwise lost imputed interest and administrative costs could be realized. Subcommittee Action Agency Reports The U.S. Department of the Treasury (Customs Service) supports enactment of H.R. 3159. The International Trade Commission submitted an informative report. Markup On June 27, 1984, the Subcommittee on Trade ordered H.R. 3159 favorably reported to the full Committee on Ways and Means by voice vote, with several amendments to address the concerns raised by groups opposing the legislation. As amended, additional duties would be due 15 days after liquidation or reliquidation and be considered delinquent and subject to interest 30 days thereafter. The rate of interest to be assessed should be determined in the same manner as the Secretary of the Treasury currently determines the rates of interest applicable to underpayments and overpayments of income taxes pursuant to 26 U.S.C. 6622 with the rate based on the prime interest rate charged by banks and with provision for adjustment of the rate on March 31 or September 30 of each year. The provision providing for retroactive application of the bill has been deleted and the Subcommittee has directed that the following language be included in the report accompanying this bill: |