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dutiable value. This is tantamount to overpaying one's income tax and not being able to recover such overpayment.
Section 21 of the proposed act, dealing with correction of errors and mistakes will permit customs officials to correct any mistake adverse to the importer if discovered within 1 year after entry, appraisement, or transaction, or within 60 days after liquidation or exaction when the liquidation or exaction is made more than 10 months after the date of the entry, appraisement, or transaction. Under the present law, such correction can only be made when the situation is the result of a "clerical error." Present interpretations of the Customs Court of "clerical error" are too narrow. The inability of the customs service to correct patent mistakes or inadvertances with respect to entries, appraisements, liquidations, or other customs transactions, has on occasion caused importers in our area to complain bitterly over the unfair and harsh decisions that necessarily followed. The proposed change is replete with common sense and by all means should be adopted.
In conclusion we strongly urge the enactment of the Customs Simplification Act of 1953 at the present session of Congress. Overhauling and revision of our tariff laws has been long overdue. It is extremely important for business to have a fairly exact knowledge of the costs of the products bought and sold by it, or of the materials entering into the products manufactured by it. The proposed act will permit importers to calculate their landed costs with some degree of certainty and should expedite valuation at the customshouse. The proposed act will also eliminate the injustice of having additional penal duties assessed for undervaluation and inability to recover overpayments on entry. It will also remove a number of other annoyances and anachronisms inherent in the present tariff laws.
Mr. Chairman, although it is not a part of my statement, I would also like to comment on paragraph 7 of the Customs Simplification Act dealing with American goods returned, which is the subject matter of another bill which was filed_by_Representative Victor Knox, a member of this committee. It is H. R. 4034.
Mr. JENKINS. It deals with tariffs, does it not?
Mr. RAY. Yes, it does.
Mr. JENKINS. I do not believe it would be proper, do you think so, gentlemen, to bring in testimony with reference to another bill, except that if you want to insert this in the hearings as a part of your testimony it will be all right.
Mr. RAY. You mean submit the statement?
Mr. JENKINS. Without objection we will insert that with your statement in the record. That will be exhibited to the members if you will make it available to us what you have to say. You do want to insert as a part of your statement the resolution which is attached to your statement?
Mr. RAY. Yes, sir.
Mr. JENKINS. That is all right.
(The documents referred to follow:)
RESOLUTION OF THE DETROIT BOARD OF COMMERCE
The Detroit Board of Commerce representing the many 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. We believe they have created a needless hardship for United States importers and, thereby, had an adverse effect upon United States exporters, consumers, and the employment of labor.
The board of directors of the Detroit Board of Commerce therefore respectfully urges the adoption of H. R. 5106.
By order of the Board of Directors May 28, 1953.
DETROIT BOARD OF COMMERCE,
Executive Vice President.
STATEMENT OF JOHN C. RAY, CHAIRMAN, IMPORT AND CUSTOMS COMMITTEE, OF THE DETROIT BOARD OF COMMERCE, ON H. R. 4034, AN ACT TO AMEND PARAGRAPH 1615 (G) OF THE TARIFF ACT OF 1930, AS AMENDED
The Detroit Board of Commerce, by appropriate resolution, favors the enactment of H. R. 4034 for the following reasons:
This amendment is to aid industry along the Canadian border. During the past 10 years, because of lack of American plant facilities or reluctance of American plants to take on certain operations, it was necessary for American manufacturers along the Canadian border to export their partly manufactured products to Canadian plants for some simple manufacturing process or operation which did not complete the product into a finished article, and then reimported the item for completion in their own plants.
Typical cases were exportations of ingots to be made into slabs preparatory to then being rolled into sheet steel in American steel mills; exportation of lever arms for adding machines for having angles bent in them; automobile truck and tank wheels and parts for flanging, stamping, drilling, etc.; piston rings for grinding, In each instance, the article returning to the United States after such Canadian processing, was material that still required additional work or processing in American plants before being regarded as a finished product.
Under existing provisions of the Tariff Act of 1930, as amended, such articles, upon return to the United States, are subject to a classification duty applicable to the article in the form in which it is returned to the United States. This duty would include not only the value of the cost of the Canadian processing or operation, but also would include the cost of value of the article in its original exported form.
Paragraph 1615 (a) of the duty-free schedules of the Tariff Act of 1930 reads as follows:
'Articles, the growth, produce, or manufacture of the United States, when returned after having been exported, without having been advanced in value or improved, in condition by any process of manufacture or other means.' [Emphasis supplied.]
It can be seen that the foregoing provision does not give any relief to the situation as obviously any article after foreign processing has been advanced in value or improved in condition, and therefore would not qualify under the foregoing paragraph for free entry.
Subparagraph 1615 (g) of the duty free schedules reads as follows:
"Any article exported from the United States for repairs or alterations may be returned (duty free) upon the payment of a duty upon the value of the repairs or alterations at the rate or rates which would apply to the article itself in its repaired or altered condition, if not within the purview of this subparagraph.”
It does not give any relief as through Customs Court and Bureau of Customs interpretations, application of this subparagraph has been limited chiefly to repairs or alterations of a mechanical nature on equipment such as locomotives, buses, etc.
The Tariff Act of 1930 is not written with a consistent, unswerving policy of providing for the free advanced entry of only such American goods as are not advanced in value or improved in condition. For instance, paragraph 1410 of the act provides:
"That exported books of domestic manufacture, when returned to the United States after having been advanced in value or improved in condition by any process
of manufacture or other means shall be dutiable only on the cost of materials added and labor performed in the foreign country.'
Paragraph 1726 of the Act provides for free entry of:
"Sound recordings transcribed or recorded abroad for radio or television news broadcasts in the United States, or suitable for use in reproducing sound in connection with moving-picture news reels undeveloped negative moving-picture film of American manufacture exposed abroad for silent or sound news reel."
The above provisions ovbiously are discriminatory in favor of the industries benefited by them. It is difficult to comprehend why a book of domestic manufacture which has been exported for further processing, should be dutiable upon return to the United States, on the basis of the cost of materials added and labor performed in the foreign country; whereas, an ingot of domestic steel, which was exported to Canada to be made into a slab, upon return in the latter form, should be dutiable not only on the value of the foreign slabbing operation but also upon the value of the ingot originally exported. Such tariff treatment is not only inconsistent, but is unfair and discriminatory. There is no logical or economic justification for it.
As a general rule when it is necessary to export materials for the purpose of having an operation performed, the cost of that operation is many times greater than the cost would be if the operation were performed domestically. When manufacturers employ this expedient they do so for one purpose only, to continue their industry and keep their labor in employment. When a manufacturer encumbers himself with this additional expense, and then is confronted with the prospect of paying full duty on reimportation of his material and not a duty based solely on the work done in the foreign country, he becomes justly incensed with the operation of the law. When a manufacturer avoids importation of materials processed to a point where he can handle them and instead originates the material and only relies on foreign aid for those processes which he cannot perform or have done in the United States, he is most certainly entitled to protection under the Tariff and relief from paying duty on American material and American labor.
During the last war certain Detroit war plants were unable to have certain operations done in American plants and therefore availed themselves of Canadian facilities for the necessary operation. The returned articles were assessed duty on their full value and not on the cost of the Canadian operation only. As the manufacturers were engaged in defense work on a cost-plus basis, it can be readily seen that the American taxpayer was additionally burdened by this unrealistic tariff treatment. Unless the present law is changed, this will be repeated again in the present emergency when plants are again busy along the Canadian border working on defense work.
The proposed amendment also benefits United States industry because it broadens the field in which the industry may operate. For instance, jobbing out or subcontracting is a common practice in industry today. Manufacturers are reluctant or find it inexpedient and unprofitable to manufacture every item required for their finished product or to perform all of the operations on the parts going into such finished product. Certain Canadian plants have capacities that are useful to American manufacturers. Recourse to them is made at the present by American manufacturers chiefly because of inability to obtain the same facilities on this side of the border. American labor is benefited because stoppages that occur because of emergencies, can be overcome by having the necessary operation performed in nearby Canadian plants.
The proposed amendment is extremely narrow in its scope and has been drafted in such a way that it cannot be misinterpreted. It does not inject new wordage into the Tariff Act. It is not the intention of the amendment to reduce or abolish tariff protection now had by certain domestic industries, such as textiles, gem cutting, fur garment manufacturing, automobile assembling, etc. As the amendment confines its benefits to articles which would be classified in the same paragraph as the exported article, it can readily be seen that it would have very limited application.
Any fears that the proposed amendment will prompt American manufacturers to ship most of their products to Canadian plants for intermediate processing can be quickly dispelled by the knowledge that the cost of transportation to Canadian plants and back to the United States, plus the comparable wage scales of Canadian plants and duty on the Canadian operation confines recourse to this expedient only to cases of dire necessity.
The purpose of the proposed amendment to paragraph 1615 (g) is to correct an unfair, unrealistic, and discriminatory tariff treatment of American products, which, because of necessity, are exported for some simple intermediate processing.
Its enactment will result in savings to taxpayers and consumers, and create good will with our good Canadian neighbor. The Detroit Board of Commerce respectfully urges the early enactment of the proposed amendment.
Mr. JENKINS. Are there questions? If not, we thank you very much.
Mr. RAY. Thank you, sir.
Mr. JENKINS. The next witness is Dr. Robert F. Martin. Dr. Martin, you have a prepared statement, have you not?
Mr. MARTIN. Yes, sir.
Mr. JENKINS. Very well, you may proceed.
STATEMENT OF ROBERT F. MARTIN, EXECUTIVE SECRETARY OF THE VITRIFIED CHINA ASSOCIATION, INC., WASHINGTON, D. C.
Mr. MARTIN. Mr. Chairman, I am Dr. Robert F. Martin, executive secretary of the Vitrified China Association, Inc., 517 Wyatt Building, Washington 5, D. C.
The increases in the American tourist tariff exemptions in 1948 and 1949 gave great impetus to a semiblackmarket trade in the import of English chinaware by American tourists and travelers returning from Canada.
A similar situation once existed in the case of cigars from Cuba. The unfair nature of this tariff-avoiding traffic was recognized by the Congress and a reasonable limit placed thereon. It is included in section 8 of the bill we are considering, H. R. 5106.
The undue concentration of returning travelers from Canada on sets of English china, presumed in the present law to be a tourist souvenir of a fishing trip or visit to the Canadian Rockies, has led to a genuine situation of wholesale tariff avoidance and left American importers and retailers with only half of the English china sales to American consumers, as well as leaving American producers without even the protection left to them under the trade agreements rates.
Shipments of chinaware by returning American travelers by common carrier alone, excluding the volume brought back in cars, have run at about $2 million per year, which with the amount brought back in cars is close to the volume shipped directly by the English manufacturers to American importers. Canada fosters this traffic by allowing duty-free entry into Canada of English china but prevents American producers from competing for this tourist market by maintaining a 30 percent duty on American china.
We propose to leave an ample exemption for the duty-free entry of china tableware items that might be considered a genuine souvenir of a tourist trip abroad, but curtail the commercialized bypassing of American importers and retailers and the tariff, by inclusion in this bill of a reasonable limitation similar to that on liquors and cigars.
We propose: After the word "cigars" in line 6 page 12, of H. R. 5106, section 8, paragraph 1798 (c) (2) line 3, insert the following: and including not over 6 pieces of $25 in value of china or earthenware tableware. Mr. JENKINS. Doctor, I take it then, as your statement indicates, you would like to have an amendment as set forth in your last paragraph.
Mr. MARTIN. Yes, sir. We have some reservations on this valuation matter, but they have been covered by other witnesses.
In addition to my statement I should like to read for the record the following news item from Retailing, published at Montreal under date of September 29, 1952.
NEW MONTREAL STORE ATTRACTS UNITED STATES TOURISTS
Substantial sales of 56-piece tableware sets of over $200 value have been made to United States tourists the past few weeks by Maurice Pollack, Ltd., Quebec City department store, by the simple expedient of asking the customer to make a small deposit of $5 or so, the balance to be paid only after the visitors have returned home.
This newly built store only added chinaware in July but quickly found out that American tourists would buy much more if they were not asked to part with a large chunk of available cash when visiting in Canada.
So the store posted notices inviting American tourists to take their choice of the store's selection of English chinaware and make a small deposit. Invoices showing the deposit paid against the total cash amount due are made out for customers to present to United States customs at the border in the regular way. Payments have to be completed within 6 months, to comply with United States customs regulations on this point. Goods are shippped direct to customers when the full amount has been received.
Mr. JENKINS. Are there any questions?
If not, we thank you very much.
Mr. EBERHARTER. Mr. Chairman, before we recess, may I ask permission to include in the record a statement by Mr. John J. Hosey, president, Energetic Worsted Corp. Bridgeport, Pa.
Mr. JENKINS. Without objection the statement may be included in the record at this point.
(Mr. Hosey's prepared statement is as follows:)
STATEMENT SUBMITTED ON BEHALF OF ENERGETIC WORSTED Corp., Bridgeport,
We are a Delaware corporation, owned by native-born citizens, and are engaged in the business of spinning knitting yarns from wool top.
We desire to suggest to the committee the advisability of adding to the Custom's Simplification Act of 1953, H. R. 5106, a provision amending section 303 of the Tariff Act of 1930, by adding at the end of it a proviso reading as follows: "Provided, however, That in the case of bounties or grants indirectly paid or bestowed, such countervailing duties shall be levied only after the President, after having sought information and advice from the United States Tariff Commission, the Departments of State, Agriculture and Commerce, and from such other sources as he may deem appropriate, has determined that an industry or group of agriculturists in the United States is being substantially injured by reason of the importation into the United States of articles or merchandise upon the manufacture, production or export of which such a bounty or grant is paid or bestowed."
Section 303 of the Tariff Act requires the imposition on imports of countervailing duties equivalent in amount to the amount of any bounty or grant, directly or indirectly paid or bestowed in the country of origin, by the government of that country or any of its political subdivisions or by any private persons or agencies, upon the manufacture or export of the article or merchandise imported here. The amount of the countervailing duty is determined by the Secretary of the Treasury. The imposition of such countervailing duties is mandatory, irrespective of whether or not the payment or bestowal of the bounty or grant has any adverse effect on our economy or any of our nationals, and whether or not the action will have any adverse diplomatic implications. We believe that this mandatory feature is inimical both to our economy and to our foreign relations, and hence propose amendment of the provision so that the countervailing duties shall be imposed only if, after consideration of all relevant factors, by all interested departments of our Government, it appears that the imposition thereof would be warranted by its significant beneficial effect upon our economy.
No occasion for such an amendment existed until recently, since section 303 had been applied only in cases where a direct bounty or grant was paid or bestowed abroad, or where it was plainly apparent that a subterfuge had been deliberately