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DEAR MR. SADLAK: As a member of the House Ways and Means Committee may I urge you to support the above-captioned bill, H. R. 5106. We certainly need a tremendous amount of improvement in our customs procedures. We are so bound now by red tape, barnacles, hangers-on and "camp followers" that it is a frustrating, nerve racking and sad thing to try to get a simple package out of customs. If every "i" has not been dotted and every "t" not crossed, and if you fall into the hands of some "constipated". inspector who is much more concerned in rewriting the book than in trying to facilitate trade or making concessions to common sense the Lord help you. Please.
If you comment on that, all right, Mr. Rose. I say you do not have to. But after all, we receive these letters in the mail, and they expect a reply. You would facilitate my reply or give me a basis for it by any comments you would make.
Mr. ROSE. What I would say in answer to that is that we do think we will get a substantial measure of help out of the passage of this bill. We recognize, I think, that the tremendous volume of increased business since the war has developed a backlog which has resulted in undesirable delays in a number of cases. That is a thing we have to find ways and means of getting hold of. We do not think this bill is the sole answer. We are going to be working at administration also from the standpoint of trying to speed up and generally better our procedures. But I do think that this bill would be a substantial help in that direction.
Mr. SADLAK. And would substantially overcome the contentions that I read in this letter?
Mr. ROSE. As I said earlier, I do not think that the enactment of this bill will produce a customs millennium.
Mr. SADLAK. It would not be a panacea for all of the ills, but it would go a long way toward eliminating much of it?
Mr. ROSE. Yes.
Mr. SADLAK. Thank you.
Mr. KEAN. I have one question on section 22. Several years ago I introduced a bill on the subject of section 22, which passed the House but did not pass the Senate, and at that time I provided for a single rate which would be named by the Treasury in case of multiple rates. I provided that this rate shall be as nearly representative as practical of the rate of exchange or the combination of such rates used most generally in effecting the transfer and payment of commodities exported from that foreign country to the United States.
As I understand this bill, you are in general recognizing the permanency of multiple exchange rates. It would provide that you might have a different exchange rate for every single import, practically. Of course, that is exaggerated.
The section provides where multiple exchange rates exist, that the application of the rate among those certified which reflects the commercial value of the foreign currency as related to the import in question. That means a specific import. Who determines that?
Mr. ROSE. The customs.
Mr. KEAN. The customs people look at the import, and they not only have to determine the cash value of it, but they also have to determine the exchange applicable to this individual item. Can you give me an example of what you might mean? What sort of decision would they make of a rate which might reflect the commercial value as related to the import in question?
Mr. ROSE. Without referring to a specific one, if you had a country that maintained multiple rates, as is sometimes the case now, one rate of exchange allowed to the exporter for sale of commodity X, and a different rate allowed to him for sales of commodity Y.
What you determine first is the export value, then, if it is in a foreign currency and that is when this question arises, when you have a price in the foreign currency that must be translated into United States currency-you determine what that price is in the foreign currency, and then you translate it into United States dollars at the rate applicable to that particular commodity.
Mr. KEAN. That would require the Customs Bureau to take into account the fact that when this specific amount of goods was arranged for export into the country that they were given currency at a certain
Mr. ROSE. Yes, that is exactly right. I would like to comment on something you said in stating your question, that this recognized the permanency of multiple exchange rates. I think our philosophy with respect to it is not that. We feel generally that multiple exchange rates are not a good thing. However, they are with us and they have to be recognized and dealt with in some way and to some extent by customs. As we conceive the effect of this provision, this simply permits the Secretary of the Treasury to announce in lieu of the present obsolete gold coin values, which have nothing to do with any real transactions now, commercial rates which will avoid the necessity of the day to day variations in extremely small amounts by use of these daily certifications from the Federal Reserve bank.
Mr. KEAN. That was provided in my bill.
Mr. ROSE. So, as I see it, we do not affect the multiple rate question one way or another. We leave it just as it is now. We simply simplify the procedure in cases where you can use a rate published and kept up to date by the Secretary of the Treasury as an actual commercial rate maintained by the foreign country.
Mr. KEAN. But then you go to a specific rate and a specific importation.
Mr. Rose. In the case of multiple currency situations, that is correct, but you do that now. In effect, we do not change the present practice with respect to multiple rate situations. We simply provide a means of simplifying when that factor is not present.
Mr. JENKINS. Before you leave, Mr. Rose, a while ago we received. unanimous consent to insert in the record a statement made by the Secretary of State.
Now, a statement has come in from the Secretary of Commerce. Without objection, I will have it inserted in the record.
Mr. FORAND. Mr. Chairman, if I am in order, I ask unanimous consent that the statements from any of the Government departments that do come into the committee be made a part of the record at this point.
Mr. JENKINS. Without objection, it will be so ordered.
We appreciate your coming here, Mr. Rose, and want to congratulate you on the fine statement, especially the ability you have shown to grapple with this problem, although you have been in the Treasury Department a short time.
Mr. ROSE. Thank you.
(The statement of the Department of Commerce is as follows:)
STATEMENT BY ASSISTANT SECRETARY OF COMMERCE SAMUEL W. ANDERSON TO THE WAYS AND MEANS COMMITTEE IN SUPPORT OF THE CUSTOMS SIMPLIFICATION BILL
Mr. Chairman and members of the committee, there is probably no subject in the field of our foreign trade on which there is more general agreement than on the desirability of simplifying our customs requirements and administration. President Eisenhower recognized this in his state of the Union message when he listed first among the desirable measures in this field: "Revising our customs regulations to remove procedural obstacles to profitable trade."
This subject is by no means new to your committee, which I understand went into it at some length 2 years ago. The major features of the bill approved by this committee during the last session of Congress have been retained in the present version, although certain provisions have been dropped or modified and a few others added. Since the committee has issued a factual summary of what each section of this bill provides, I need not repeat that explanation. I do want to stress, however, that in view of the long time that this subject has been under study within the Government and on the part of the trade, it is important that final action be taken during this session of Congress. We therefore hope this revised bill-H. R. 5106—will in substance meet with your early approval.
The Department of Commerce attaches great importance to this customs simplification bill because it finds in it an effective tool which can advance the interest of all parties concerned. The majority of its provisions are designed to simplify the operations of the customs service, so that it may perform its essential task with greater dispatch and economy. At the same time, however, the bill embodies a number of important changes that have been urgently recommended by business men. These aim at eliminating formalities that are not absolutely necessary, and at reducing the complexities, uncertainties and inequities that are now too often involved in the practical business of bringing foreign goods into the American market. Many of the provisions serve both purposes.
As the governmental agency particularly charged with the promotion of foreign trade, we have over the years received many complaints from business men about our customs requirements and procedure, and it is from the commercial viewpoint that I would like to discuss this bill with you. The Import Advisory Committee to the Department of Commerce, which has met with us from time to time to discuss current trade problems, has repeatedly and vigorously expressed its concern on this subject. A special group set up by that committee several years ago issued a report, after several months' study, strongly recommending a comprehensive series of customs reforms, administrative and legislative. Most of those requiring legislation action are embodied in the bill now before you.
No bill can completely satisfy all parties concerned, and the witnesses who will come before you may suggest changes in this or that respect for your consideration. On the whole, however, we believe that foreign traders share our opinion that enactment of the legislation along the lines of this bill would go far toward removing most of the legitimate complaints arising out of our present law regarding the administration of the United States customs.
The joint ECA-Commerce Department Mission, which visited Europe in the summer of 1948, found that one of the principal deterrents to getting American firms to take on new lines of European products for sale in this market is their fear of running into difficulties because of our highly elaborate and exacting customs requirements and procedures. In fact, some businessmen have declared that the uncertainties and the complexities of our present customs system are often greater discouragements to efforts to introduce foreign goods here than the height of our impost duties.
In this connection, I believe that the Bureau of Customs of our Treasury Department should be commended for the efforts it has made during the last few years to give the commercial community a clearer understanding of its requirements, and for the steps it has already taken, within the limits of its present statutory authority, to revise regulations and to simplify various aspects of customs procedures.
Certain of the provisions embodied in the bill now before you are designed to authorize the Treasury Department to make other improvements by administrative order, as experience demonstrates their desirability. However, the painstaking reexamination of the whole customs operation that has been made over the past several years has found that there is need for many changes in the basic law under which the customs administration operates. Out of that careful reexamination have come the recommendations for desirable legislative changes which make up the present bill.
Before going into details of this bill, I should emphasize one general characteristic. It does not propose any changes in the duty rates, and it does not weaken the purposes of the tariff portion of the act of 1930, either in the way of the revenue to be afforded to the Government or the protection accorded to American producers. I am sure you will agree that, as an expression of clear purpose in our governmental operations, the direct tariff treatment should represent the full measure of the burden to be imposed upon admission of foreign products into the United States, and that imports should not be additionally handicapped by costly or discouraging customs procedures or requirements that are not absolutely necessary.
The Department of Commerce has participated in the consideration of the various provisions of this bill and has brought them to the attention of representative members of the trade for their reaction. However, I do not propose to go into the technical aspects of the various changes. The customs experts and the traders who will be coming before you are better able than I to do that. I will confine myself to a brief analysis of certain outstanding provisions of this bill that are of special interest to the businessman-provisions that are designed to simplify the process of importation as well as to increase the efficiency of the customs service.
I would refer first to section 15, which deals with the methods of determining the value of imported merchandise for duty purposes. The present law calls upon appraisers to ascertain both the "foreign value" and the "export value,' and to assess the duty upon the higher of the two. At the risk of repeating what you already know, I might define these two terms. By "foreign value" is meant the price at which the imported product is freely offered for home consumption in the exporting country. By "export value" is meant the price at which the merchandise is freely offered to purchasers for exportation to the United States. It is now proposed to end this confusing and unnecessarily laborious process of ascertaining both these sets of values, and to standardize the basis of duty assessment as the export value of the goods. Experts in the field have been urging this change for years, and it is probably the most important single improvement in the customs administrative provisions that could be made.
Let me point out a few of the advantages that would flow from this change. First of all, the consistent use of "export value" as the standard basis for assessment of ad valorem duties would expedite the administration of the customs and reduce its costs. It would greatly reduce the need for American officials to make investigations abroad to ascertain the prevailing prices of the imported products in the domestic markets of the countries of their origin.
From the trader's viewpoint, authority to customs appraisers to calculate the duties upon the export value of the goods would result in their being based upon more realistic commercial values, and should allow a more prompt and definitive determination of the amount of duties payable. There would thus be reduced the uncertainties and discouragements to traders arising from the present unpredictable_system of valuations and the frequent long delays in customs iiquidations. Importers now have to allow for the possibility of their being later called upon to pay increased duties, after they have sold the goods. They must therefore either take a calculated risk that they will later be called upon to pay increased duties, with possible attendant loss, or set an unreasonably high price markup as a hedge against such a risk.
There is a series of other changes which will also relieve the trade from avoidable uncertainties and burdens complained of under the present law. This group of changes appear in sections 19 and 17 of the bill, and they have to do mainly with sections 503 and 489 of the present law.
Section 503 now provides that the amount of the duties to be paid on imported merchandise subject to ad valorem rates of duty shall be determined by the entered value—that is, the value declared by the importer on his customs entry form-or the final appraised value, whichever is higher. This needs to be read along with section 489, which provides in substance that, if the value of the goods as determined by the appraiser exceeds the entered value, the importer shall pay double the duty on the difference between them. If, at any time before the final appraisement the importer has reason to believe that the proper dutiable value for the goods is different from the value that he had declared, and in accordance with which he had deposited the amount of the duty he provisionally understood was due, the present law provides that he may correct it by filing an amended entry.
While the threat of having to pay double duties upon the extent to which the merchandise should be found to have been undervalued makes it to the interest
of the importer to report to the customs any information he may obtain bearing on the market value, the present law allows for adjustments only one way. If the appraiser should finally decide that a value lower than that declared on the entry is proper, the importer is still bound to pay duty upon the higher value which he declared. This situation has come to be recognized as distinctly inequitable. The unfairness to the trader is aggravated by the fact that, in cases of innocent undervaluation, any additional duties that may be imposed because the value declared on the entry proves to be lower than that judged proper by the appraiser can be remitted only after litigation in the Customs Court, and the burden is upon the importer to establish that there was no intention to defraud the revenue of the United States or to misrepresent the facts in the situation.
Under the provisions embodied in this bill, the situation would be changed radically. Section 503 is amended so that the duty is always to be assessed upon the final appraised value. If the value declared by the importer in his entry is found to have been too high, he would not be held to it. On the other hand, section 489 is so modified that, if the appraiser's valuation is higher than the entered value, there would no longer be any presumption of intentional undervaluation and no assessment of double duties on the difference between the two values, as under the present law. In those cases where fraudulent statements or practices on the part of the importer can be proven, the Government can have recourse to other provisions of the law. including section 592 of the present Tariff Act, to secure the imposition of suitable penalties. These changes should go far toward fostering a better relation of confidence and respect between Government and business in the field of import trade.
The documentary requirements in connection with import transactions are proposed to be further eased in two additional respects. The law now requires that an import entry be filed with the collector of customs within 48 hours after the arrival of the merchandise, unless further extension is specifically obtained. It is proposed to increase that period to 5 days. Allowing this more reasonable period of time will not only be welcomed by the importers but should also reduce the instances of inaccurate or imcomplete information being furnished to the customs under the pressure of having to file an entry immediately after the arrival of the goods.
At present, certified consular invoices are required for all shipments of merchandise on which the duty is in any way dependent upon the value. If the invoice is lacking, the customs now allows 6 months for its presentation. It has been urged from many directions that the United States should either abolish the requirement for a certified consular invoice altogether or considerably simplify the procedure in connection with it. It is not yet clear how far it would be wise to go in that direction. However, since the principal use of the consular invoice is in connection with the administration of the customs, the present bill proposes to insure that the Secretary of Treasury shall have the discretion to set the conditions under which merchandise may be permitted entry without a certified invoice. That would allow the elimination of the consular-invoice requirement for additional commodities or the simplification of the manner of its legalization or handling, as experience may find advisable.
A related easement is that proposed with regard to marking of origin (sec. 4 of the bill). No change is contemplated in the general requirement that imported articles shall be so marked as to indicate to the ultimate purchaser in the United States the English name of the country of origin of the article. In some cases, however, there have been quite justifiable complaints of hardships for which the customs service has not been able to grant relief because of the rigidity of the present law. Particularly on certain classes of cutlery and instruments, the additional requirement that the name of the maker or purchaser, and beneath that of the country of origin, shall be diesunk or indelibly indicated on the outside of the article has been a cause of frequent complaint. Since it cannot always be known at the time of manufacture what portion would be bought for the American market, and since the law does not permit the marking after arrival in the United States, even if it could be done at that stage, the only recourse has been to send the goods back. This type of special marking it is now proposed to eliminate. Moreover, in order to avoid hardship in unusual cases, such as shipments where the failure to mark before importation was due to ignorance of the marking requirement and marking thereafter would involve a prohibitive expense, it is proposed to authorize the Secretary of the Treasury to allow suitable relief.
Taken together, this group of proposed changes would ease the life of the American importer by minimizing uncertainties and inequities, while reducing the cost to the Federal Government of the administration of the customs. At the