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countries and discourage exports to the United States by decreasing the rate on that class of commodities. We feel it gives them an absolute control over their foreign trade and our foreign trade, and would nullify or tend to nullify our existing tariffs, the countervailing duty statute, the antidumping statute and other statutes we have dealing with foreign trade where a question of converting currency is involved.
As I say, we are very much opposed to the approach taken by this bill in section 22.
There is another approach which this committee has considered before, and which we think is the much better, more logical approach to this question, a very complicated question, of foreign currencies and exchange rates. That approach was offered in a bill by Mr. Kean of the committee, H. R. 3810, in the first session of the 80th Congress. This committee favorably reported that bill in report No. 689 and it passed the House.
The intent of that bill was to require the use of one single exchange rate for customs purposes. It set up a formula in the case of countries using multiple rates, whereby the Secretary of the Treasury would determine a single rate most representative of the actual commercial value of the foreign currency involved in all commercial transactions with the United States. It would require the use of that single rate for all customs purposes.
On page 2 of that report, it is stated:
It is contemplated that the rate used will be a commercially realistic rate so far as can be determined from rates used in connection with the preponderance of imports to the United States from a foreign country during the period for which a rate is required.
That report also contains a very excellent discussion of the problem in a letter from the Treasury Department to the Speaker of the House, in which they review the history of the development of this problem, the Barr case, and its effect on the many complications it caused, and the great amount of litigation caused by it.
Incidentally, the Treasury Department recommended and urged the passage of the Kean bill. We feel that was the correct answer. We feel that section 22 in this bill would perpetuate a very bad situation and would continue to promote and encourage the adoption of the multiple rates by foreign countries which gets ever further away from the idea of convertability of foreign currencies, which we all feel is so important. In addition to the problem of assessment of duties, I think, if section 22 were adopted into law, that it would cast very serious legal doubts on the use of section 303 in countervailing duties and dumping duties under the Antidumping Act
I noticed that Mr. Rose testified on behalf of the Treasury Department that in their opinion no effect was intended on the administration of either countervailing duties or the dumping duties. However, I think it would raise very serious doubts and would cause considerable litigation. I fear very much that a court would hold that a rate of exchange, a multiple rate of exchange, used by a foreign country, which is recognized in our law and required to be made applicable to that importation, would not constitute a bounty or subsidy within the meaning of section 303. I also think this factor
emphasizes the need for clarification of section 303 as is done in section 11 of the Simpson bill, H. R. 4294.
Mr. KEAN. Mr. Chairman?
I think that completes what I want to say on section 22. I would like to briefly comment that we are opposed
Mr. JENKINS. Mr. Kean.
Mr. KEAN. Could we have a unanimous consent to print here, or to request him to include that section (d) of my bill that is in the report, so we can get the wording?
Mr. BRECKENRIDGE. I intended to do that. I am glad you mentioned it.
Mr. JENKINS. Without objection it is so ordered.
Mr. BRECKENRIDGE. Could we print in the record the whole report?
Mr. JENKINS. Mr. Kean asked for one section.
Mr. KEAN. All I want is the wording of the amendment.
Mr. JENKINS. Will you please have that in your amendment so that the clerk may have that? This is a very lengthy document, as you know.
Mr. KEAN. The section is the thing you want.
Mr. BRECKENRIDGE. That is correct. This is a very short report. I think it might be convenient to have this in the record.
Mr. KEAN. It amounts to about five closely written pages. I think we ought to put the wording of the section in and refer in the report, in the hearing, to the letter which appears in this report, so anybody could find out, could go back and look the letter up in the actual report that is available.
Mr. KEAN. All right.
Mr. JENKINS. Without objection. Mr. Kean, I would like for you to supply that.
(The letter referred to, dated May 21, 1947, addressed to the Speaker of the House of Representatives, signed by Joseph J. O'Connell, Jr., Acting Secretary of the Treasury, is contained in H. Rept. No. 689, 80th Cong., 1st sess., accompanying H. R. 3810.)
(The proposed amendment to sec. 522 (d) of the Tariff Act of 1930, as amended, is as follows:)
(d) DUAL OR MULTIPLE EXCHANGE RATES.-When there are on any day dual or multiple exchange rates, either in the New York market for exchange payable in the currency of a particular foreign country, or in that foreign country for exchange payable in the currency of the United States, or otherwise between the United States and that foreign country, the Federal Reserve Bank of New York may in its discretion ascertain or calculate, and certify to the Secretary of the Treasury, all or any of such rates for noon of such day and shall so ascertain or calculate and certify any other of such rates which the Secretary of the Treasury shall request. For the purpose set forth in subdivision (b), if more than one of such rates are so certified, the Secretary of the Treasury shall select from the rates certified, or shall otherwise determine, a single rate of conversion of each such currency for that day. The rate so selected or determined for the currency of a particular foreign country shall be as nearly representative as is practicable of the rate of exchange, or the combination of such rates, used most generally in effecting the transfer of payment for commodities exported from that foreign country to the United States or in converting into the currency of such foreign country such payment made in United States dollars or in the currency of any other country. The rate so selected or determined shall not be lower than the lowest, nor higher than the highest, rate certified for the currency of such foreign country for such date, and may differ from any rate certified or actually used in any transaction. If the date of exportation falls upon a Sunday or holiday, then the rate so selected or determined for the last preceding business day shall be used.
If the proclaimed value referred to in subdivision (b) varies by 5 per centum or more from any one of the dual or multiple rates certified for the same currency, the proclaimed value shall be disregarded, unless such proclaimed value varies by less than 5 per centum from the rate selected or determined. In the latter case, conversion shall be made at the proclaimed value.
Mr. BRECKENRIDGE. I want to comment briefly on the Treasury's proposal to add a new section to this bill to insert the injury requirement in the countervailing duty statute comparable to the injury requirement that is now in the antidumping statute. We are very much opposed to that because the injury requirement in the dumping statute now, as for the past several years, in effect constituted a nullification of that statute. I think I should call attention to the fact that section 12 in the Simpson bill removes the injury requirement from the Antidumping Act. We feel that is the right approach. The two laws should be made consistent by adopting section 12 in the Simpson bill, rather than inserting the injury requirement, in this bill, with respect to the countervailing duty statute.
The only other matter which I want to mention is that we feel that any bill that is adopted by the committee should include a provision comparable to section 24, I believe it was, in H. R. 5505 of the last Congress, making it clear that the adoption of the bill is not a congressional ratification or approval of the General Agreement on Tariffs and Trade.
That, Mr. Chairman, completes my statement.
Mr. JENKINS. Any questions?
If not, we thank you very much, Mr. Breckenridge. You may leave your insertions with the reporter.
Mr. BRECKENRIDGE. Thank you.
Mr. JENKINS. The next witness I have here is Mr. Ray. You may proceed.
STATEMENT OF JOHN C. RAY, CHAIRMAN, IMPORT AND CUSTOMS COMMITTEE OF THE DETROIT BOARD OF COMMERCE, DETROIT, MICH.
Mr. RAY. Mr. Chairman and members of the committee, my name is John C. Ray. I am the chairman of the Import and Customs Committee of the Detroit Board of Commerce. I am appearing in behalf of the Detroit Board of Commerce to speak in behalf of the customs simplification act.
The port of Detroit is a major port of entry and exportation of merchandise, ranging third in the total amount of dollar volume of imports and exports. We, therefore, are slightly interested in simplifying procedures as far as customs are concerned. It has been the sad experience of importers at Detroit that there have been under the present customs laws delays and other annoyances of various sorts in the entry of merchandise. These could not be attributed to the inefficiency and inapplication of the customs service which at Detroit still has the same number of employees that it had in 1937 even though the dollar volume of business handled by the customs office has increased substantially in the interim, but are chargeable to the antiquated complexities of the present provisions of the Tariff Act of 1930 amended.
The most provoking delays and annoyances are those involving valuation of imported merchandise. Under the present law, it is not at all infrequent to be advised by the customs long after the imported merchandise has been sold at what was considered a reasonable profit, that the entered value was advanced by the appraiser and additional duties were to be paid, which in some instances wiped out the profit. Such experience with the customs laws has prompted some importers in our area to give up importing which is to the detriment of the wellbeing of the world economy which we, as a nation, are endeavoring to foster.
It has been my experience as a customs attorney to have demands made upon my clients from amounts of $50,000 and upwards on what is called withheld appraisements, where the customs have made investigations. After entry was made and after they had completed these investigations they would make substantial demands on importers which were in many cases ruinous.
Although the proposed customs simplification act contains numerous desirable amendments of the present Tariff Act, we shall limit our remarks to those sections of the proposed act which we feel are particularly important and constructive improvements over corresponding provisions of the present Tariff Act of 1930.
Although section 15 of the Customs Simplification Act of 1953 will not completely simplify valuation of importations, it should, however, remove one of the most serious obstacles to increase of world trade. Under the present law, on ad valorem duty importations, the United States customs appraiser must determine and apply the higher of the foreign or export values according to the specified statutory formula. Which, I may say, is very complicated indeed, and if such values are not available or determinable, then the appraiser would apply the United States value of like or similar merchandise, and failing in this, then to apply a cost of production value.
In some cases, notably chemicals, the American selling price is mandatorily applied in the first instance. To determine the higher of the foreign export values under the existing laws, makes for most of the delays in determining the valuations of importations. It is not at all uncommon, under the present law, for the customs to take a year and much more to complete their investigations and determinations on value. This is caused by the cumbersome investigations which must be made in the exporting country by our Treasury attachés or customs agents.
During this period of investigation, the appraisement or valuation is withheld on all importations of like merchandise whose value is being investigated. The importer, during this period, in selling his merchandise at the entered valuation, does so at his peril as he may find to his financial sorrow that his entered value is not accepted as the correct valuation but a different and higher valuation is applied by the appraiser. Oftentimes, where there have been considerable importations of an item, and where appraisement has been withheld pending the foreign investigation, such advanced or increased valuation may result in substantial sums of money being demanded of the importer upon liquidation or finalizing of the entry. Obviously this is an unrealistic and unbusinesslike way of treating importations. There are cases where several years were required to complete value
determinations under existing laws and the final demands in increased duties were ruinous to the importer.
I may say there have been cases where valuations were not completed for 10 or 15 years because of the intervention of war and the difficulty of making these investigations. So valuations are being completed now on entries which were made in 1938 and 1939.
There are also instances where the importer was no longer in business at the time the valuation was completed.
The Customs Simplification Act of 1953 eliminates consideration of foreign value and makes export value the preferred basis of valuation, if it can be determined. If export value cannot be ascertained, then the appraiser would endeavor to apply the defined "United States value" which is the value of comparable merchandise from the same exporting country. Should the appraiser, however, be unable to determine either the "export value," the "United States value," or the "comparative value," then he would apply the "constructed value" which is the equivalent of the present "cost of production value." Elimination of foreign value and substitution of export value as the preferred initial method of basis of valuation, will make valuations more realistic and more readily ascertainable to importers and customs officials, and should speed up valuations.
The "United States value," "comparative value," and "constructed value" as defined in the proposed act, are substantial improvements over the present equivalent tariff provisions, which I may say were very arbitrary and provided for certain rigid formulas which were very unbusinesslike and very unrealistic. The proposed valuations eliminate existing arbitrary or fictitious valuations and produce a method of valuation which is fair and equitable, based upon true values as near as they can be determined.
Section 19 of the proposed act, dealing with amendment of entries and duties on undervaluation, is a particularly good and constructive step toward improving international trade, and we wholeheartedly recommend its adoption. Under sections 489 and 503 of the present law, the importer must give the entered value at his peril, subjecting himself to an undervaluation duty if he fixes too low a figure, and if, to be on the safe side, he fixes it too high, he receives no benefit from the final appraisement if it happens to be less than the entered value. The present law also provides an additional undervaluation duty of 1 percent of the final appraised value of the merchandise for each 1 percent that such final value exceeds the value as "entered" by the importer, and if the appraised value exceeds the entered value by more than 100 percent, the entry will be considered presumptively fraudulent and the merchandise is subject to seizure and forfeiture.
I might say section 489 is particularly a bugaboo to international trade. It is a pitfall that not only novice importers would fall into, but even experienced importing firms would fall peril to.
The present section 489 with its complexities and the heavy penalties and costs which can be incurred under it, has been a particular deterrent to international trade. Under section 19 of the proposed act, this will be eliminated and importers need no longer fear incurring additional penal duties because of honest undervaluation. Section 19 of the proposed act also repeals the present unfair provision that where the importer's entered or declared value is higher than the final appraised value, the importer's entered value, nevertheless, becomes the