time we have endeavored to develop an export trade for our material in a more advanced stage of manufacture. After receiving a great deal of encouragement from one branch of our Government that is organized to develop and enlarge our foreign trade, it was quite a shock to learn that our tariff laws did not exempt from duty samples of foreign manufacture, when intended to be used solely for comparison and reproduction, and not for sale, especially when the articles produced in an American plant were to be exported, thereby adding to our foreign trade." The question was presented to the House legislative counsel as to an amendment to the tariff laws and it was thought best to add to paragraph 4 "also samples intended to be used solely for comparison and reproduction and not for sale." It would seem that it would be only fair to a manufacturing concern, which is a large exporter of such things, to permit him to import samples duty-free for the purpose of comparison and reproduction. I hope the committee will write this amendment into section 308 and add it to paragraph 4. Very truly yours, HUBERT F. FISHER, (Tariff adjustment, 1929, hearings, Committee on Ways and Means, vol. XVI, p. 9784) DEPARTMENT OF COMMERCE, March 15, 1929. HON. W. C. HAWLEY, Chairman, Committee on Ways and Means, House of Representatives, Washington, D. C. MY DEAR MR. HAWLEY: In reply to your invitation of February 14 for any suggestion relative to the administrative paragraphs of the Tariff Act *** I indicated that we would present shortly a number of suggestions with regard to certain of these administrative features which have an interest for us in making the Tariff Act help in the promotion of American export trade. ***This communication will confine itself to matters not involving the import-tariff controversies, but rather those primarily affecting our export trade.. We offer suggestions on three subjects: 1. *** 2. *** 3. Temporary duty-free importation of samples for examination and possible reproduction. The detailed suggestions of the Department on these subjects and the reasons for our recommendations are presented in the attached brief. Very truly yours, E. F. MORGAN, Acting Secretary of Commerce.. (Part of the brief relating to sec. 308 (p. 9786)) Section 308. Temporary free admission of samples for examination and reproduction The Department of Commerce has from time to time been approached by American manufacturing concerns with requests for assistance in securing the admission into this country of samples of foreign articles which they found were offering severe competition to their own products in common-export markets. These samples the American producers desired to bring to their plants in the United States for careful examination with a view to possible reproduction of similar articles in the United States. Because of the bearing of these requests upon the promotion of American export trade, officials of this Department have taken the matter up with the customs service of the Treasury Department, as have also a number of American importers themselves, asking whether, in view of the purpose for which such importations were desired, they could not be granted the privilege of temporary free admission under bond for reexportation within 6 months under section 308 of the Tariff Act of 1922. It was urged that such importations constitute a close analogy to models of women's wearing apparel imported by manufacturers for use solely as models, and to samples imported solely for use in taking orders, which are among the cases now afforded such duty-free importations under section 308. In reply to such requests, the Treasury Department has stated that under the present law, it finds itself without authority to allow such temporary free entry of articles imported for the purpose of examination precedent to possible manufacture. In view of the fact that the privilege sought is not essentially different from those already granted to similar classes of samples under section 308 of the tariff law, the Department of Commerce suggests for the consideration of Congress the addition to that section of a specific provision authorizing the temporary dutyfree entry under bond of samples intended to be used solely for comparison and possible reproduction, but not for sale. It is believed that this provision can be granted without injury to domestic producers, since the number of articles involved would be very small and would not enter the markets of the United States, and with possibly considerable benefit in the strengthening of the ability of American producers to compete in foreign markets by supplying the type of article which apparently best meets the local demand. (Tariff Act, 1930, House and Senate reports to accompany H. R. 2667 (SmootHawley bill), pp. 160, 161) Section 308 *** Molders patterns for use in the manufacture of castings are included in the list of articles which may be imported under this section of the 1922 act. The attention of your committee has been called to the fact that from their very nature such patterns can quickly and easily be duplicated, so that temporary free importation is equivalent to relieving patterns from the payment of duty entirely. They are, therefore, omitted from the list in this bill. Samples may be imported under the section only for use in taking orders. The amendment extends the privilege to samples imported for examination with a view to reproduction. This should materially assist American manufacturing concerns which are meeting severe competition from foreign articles in common export markets, and it is recommended by the Department of Commerce on account of its bearing upon the promotion of American export trade. The number of articles involved would be small and the samples cannot, under the law, enter the markets of the United States without payment of duty. Mr. JENKINS. Are you through, Mr. Strackbein? Mr. EBERHARTER. Mr. Chairman, the record shows that Mr. Strackbein is on a committee representing industry, agriculture, and labor. Would you please tell us specifically what segment of agriculture you represent? Mr. STRACKBEIN. I have here a list of the organizations. I read that into the record at the hearing on the trade agreements bill. Do you desire me to put that into the record at this point again? Mr. EBERHARTER. That was a committee with a different name than this, Mr. Strackbein. Perhaps you are the chairman of a great number of committees. Can you answer my question or can you not? Mr. STRACKBEIN. Well, I can, but I will have to go through this list. That is the only thing. I will be glad to. Mr. JENKINS. You may supply that answer, Mr. Strackbein. (The information is as follows:) THE NATION-WIDE COMMITTEE OF INDUSTRY, Hon. DANIEL A. REED, Washington, 25, D. C., June 5, 1953. Chairman, House Ways and Means Committee, Washington, 25, D. C. DEAR MR. REED: When I appeared before the Ways and Means Committee during its hearing on H. R. 5106, the Customs Simplification Act of 1953, I was asked by Committee member Eberharter, of Pennsylvania, what agricultural groups I spoke for. At the time, I was not in a position to name the list offhand and promised to supply a list for the record. Accordingly, I now list the following groups that are assoclated in the NationWide Committee of Industry, Agriculture and Labor on Import-Export Policy, largely representative of agriculture. I request that the list be placed in the record at the appropriate point. American National Cattlemen's Association National Wool Growers Association Pacific Wool Growers California Almond Growers Exchange National Cheese Institute American Butter Institute National Creameries Association Milk Industry Foundation California Fig Institute Florida Fruit and Vegetable Association National Association of Hot House Vegetable Growers The Mushroom Institute Sunkist Growers California Walnut Growers Association Cherry Growers and Industries Foundation New York Cherry Growers Association, Inc. O. R. STRACKBEIN, Chairman. Mr. JENKINS. Do you have anything further? Mr. JENKINS. Any questions? If there are no questions, we thank you for your statement, Mr. Strackbein. Mr. STRACKBEIN. Thank you. Mr. JENKINS. The next witness is Mr. Jonh Breckenridge, appearing on behalf of the Pin, Clip and Fastener Association. STATEMENT OF JOHN BRECKENRIDGE, MUNSEY BUILDING, WASHINGTON, D. C., ON BEHALF OF THE PIN, CLIP AND FASTENER ASSOCIATION Mr. JENKINS. I understand you do not have a printed statement. Mr. BRECKENRIDGE. No, sir; I do not. Mr. JENKINS. Very well. Mr. BRECKENRIDGE. Mr. Chairman, my name is John Breckenridge, an attorney with the law firm of Pope, Ballard & Loos, I appear here today on behalf of the Pin, Clip and Fastener Association, which is a trade association, of about 10 producers of pins, clips, and fasteners, and other small metal products, located in New York, Pennsylvania, Connecticut, and Illinois. First we would like to be on record as in favor of the very laudable purpose of simplifying the purely procedural aspects of our customs laws. However, we feel that any approach to simplifying those procedures, as is attempted in this bill, H. R. 5106 should be viewed in the light of what the basic purpose of our customs laws is. That is, is the basic purpose to protect domestic industries, or is it to raise revenue. We feel that of all the disagreement on foreign trade policies, there is pretty nearly unanimous agreement that we no longer look upon our customs laws as revenue measures, primarily, but that the justification for those laws and the purpose of them is primarily to protect domestic industries when that is needed and justified to prevent injury from low-cost, unfair competition from abroad. One fault I find, both in the previous and current analysis of the customs simplification bill by the Treasury Department, is that they constantly state their explanations or justifications for changes in terms of efficiency in protecting the revenue. We feel that that is not the fundamental or basic purpose of our customs laws. Rather in the analysis of procedure, or a simplification of that procedure, should be looked at in terms of the protection and intended protection to be granted to American producers. Mr. JENKINS. Of course you would not object if the Congress can perfect it? You would not object if they can do this work more economically? Mr. BRECKENRIDGE. No, sir: We favor purely procedural simplifications providing the intent, sometimes hidden in verbage, is not to lower the incident or effect of our existing protective measures such as tariff. I do not want to discuss this very complicated bill in detail. Several other witnesses have appeared and discussed most of the section in detail. I would particularly like to endorse the statements that have been made by Mr. Lerch and Mr. Strackbein. I want to discuss only section 15, on value, and section 22 on conversion of currency, and the suggestion Mr. Rose, from the Treasury Department, made last Wednesday that there be included in the bill a section insert the injury requirement in the countervailing duty statute. Now, with respect to section 15 on value, we feel that the elimination of foreign value and the substitution of export values as the primary basis of assessing ad valorem duties is not a question of simplification. It is a substantive change in our law, and would result in a reduction in the effectiveness of our ad valorem duties in at least 75 percent of the cases. The Bureau of Customs states that historically, in at least 75 percent of the cases, the foreign value has been higher than the export value. If there is need for simplification, in that you do not have to consider both values, then we feel that foreign values should be the primary basis of assessing ad valorem duties rather than export value which is subject to control and manipulation by foreign governments or exporters and, at times, even by individual exporters. Now to turn to section 22, on conversion of currency, which we feel is the most dangerous provision in this bill. I will have to go into a little background on that very complicated subject. I might say that I do not know of any question that is more complicated today than getting into the various foreign exchange rates and practices and manipulations utilized by various foreign countries for various of their own purposes. Under section 522 of the Tariff Act of 1930, which currently is the section of the law dealing with the conversion of currency, the Treasury Department had always used only one rate of exchange until the Barr case in 1945. That did not produce much of a problem prior to World War II, because the use of multiple rates of exchange by foreign countries did not become significant until the late 1930's and the beginning of the war in Europe and later when we got into the war. After foreign countries began adopting multiple rates of exchange, the Treasury Department consistently held, for customs purposes, that the rate producing the highest value would be used. Incidentally, that also was the rate, in applying ad valorem duties, that produced the highest duty. That continued up to at least 1945, at which time we had a Supreme Court decision in the historic Barr case, referred to by the Treasury Department and others on this problem (324 U. S. 83). In that case, an importer brought some woolen goods in from England. There were two rates in existence: An official rate, pegged by the British Government, and a free rate in which certain commodities could be traded, including woolen goods. The circum stances in that case were very narrow. In that case, the importer was invoiced and had to pay in pounds. So he bought his pounds in New York at the free rate. That free rate was a higher rate in terms of dollars than the official rate, and would result in a lower value in terms of pounds, and a lower duty. However, the Customs Bureau, following their historical practice, applied the rate which produced the highest value and the highest duty in terms of dollars. The Customs Court originally held for the importer. The Court of Customs and Patent Appeals reversed them, holding that the Treasury's interpretation of section 522 was right. Then the Supreme Court reversed them, holding for the importer, which in effect required the Treasury to recognize this special exchange rate on exports of woolen goods. After that decision there was considerable confusion as to what procedure the Treasury Department would follow in other cases. Finally they adopted a broad policy, based on the Barr case, of recognizing all multiple rates utilized by foreign countries. That, I think, has been largely responsible for the tremendous increase in the utilization of multiple rates by foreign countries. They recognized that as a means of selectively devaluating their currency by specific commodities or by groups of commodities. They may do that for various reasons of their own, but frequently, in the case of exports to the United States, it is used for the specific purpose of increasing exports of certain commodities to the United States. A good example is the wool tops coming from Uruguay and Argentina. That presents a problem which I think the Congress must recognize and correct in one way or another. Section 22 of this bill, H. R. 5106, seems to recognize the principle, does recognize the principle, of multiple rates on a much broader basis, in fact an entirely unlimited basis, as compared with the Barr case which is applicable to a very limited set of facts. Section 22 requires that the Federal Reserve Bank of New York certify all rates of exchange if they vary more than 5 percent from the par rate. It also requires that the customs officials in assessing duties, and for all customs purposes, use the multiple rate which is applicable to that specific importation. There, again, the rate that is applicable to that specific importation is entirely in the control of the foreign country involved. We feel that this legislative recognition of multiple rates, and in fact a sanction for the use of those rates by foreign countries, opens up and establishes the procedure whereby foreign countries, if they so desire, can completely and absolutely control their trade with the United States. By upping the exchange rate on specific commodities or groups of commodities they can encourage the export to the United States and nullify any tariff protection that we have or might have in the future. They can control, also, our exports to their |