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(The statement is as follows:)
STATEMENT OF ROWLAND JONES, JR., REGARDING H. R. 5106, THE CUSTOMS SIMPLIFICATION ACT OF 1951
My name is Rowland Jones, Jr. I am the president of the American Retail Federation with offices at 1625 Eye Street NW., Washington, D. C.
The American Retail Federation is a federation of 25 national retail trade associations and 33 Statewide retail associations. The names of the members of the federation are attached to this statement.
The members of the federation are opposed to that part of section 13 of H. R. 5106 which proposes to amend section 321 (b) (3) of the Tariff Act of 1930 as amended.
This section would permit the importation of articles without payment of duty in cases where the aggregate value of all articles in a shipment did not exceed $3.
The purpose of this provision is to avoid expense and inconvenience to the Government disproportionate to the amount of revenue that would otherwise be collected.
The retail industry feels strongly that the enactment of this provision would not accomplish the purpose set forth in the bill, and, on the contrary, that substantial amounts of revenue would be lost to the Federal Government if this provision becomes law.
The American Retail Federation opposed a similar provision in the Customs Simplification Bill of 1952 which failed of passage. In this case, the cut off
figure was $10.
It should be pointed out that the 1952 bill carried three limitations which are not contained in the pending bill. One, limiting the exemption from duty to articles for personal and household use and not for resale; another making alcoholic beverages and tobacco products ineligible for the exemption; and a third prohibiting the C. O. D. privilege on exempted shipments.
These omissions in the present bill greatly broaden the exemption privileges in comparison with the 1952 bill and are highly objectionable for reasons outlined in this brief.
Large volume of imports seen
This exemption provision, if enacted, would be a cordial invitation to foreign manufacturers and others to advertise extensively in our newspapers, magazines, radio, and by direct mail that their products can now be obtained duty-free, excise tax free and sales tax free.
A certain glamour, undeserved in many cases, I think, attaches to imported articles at all times. In addition, the American public is always quite conscious of any chance to buy an article at a reduced price, particularly if the reduction is caused by the elimination of a tax.
The retail industry believes that, if this provision becomes law, a huge import business in articles of less than $3 foreign value will result. It is important to emphasize here that the $3 value, as defined in this bill, refers to foreign value, not domestic value, which would be as much as 2 to 3 times higher than the foreign value.
This new import business, I repeat, would mushroom to important proportions almost overnight, with a substantial loss to the Treasury, not only in customs duties, but in Internal Revenue and State and municipal sales taxes.
Customs loss would be material
Retailers believe that the loss of customs duties from increasing the exemption to $3 value will be substantially greater than the Treasury anticipates.
It is easy to understand the desire to eliminate the detail and delay in inspecting small parcels particularly, when the cost of such inspection and collecting the amount of duty may equal or exceed the amount of duty involved.
The Treasury may be correct in estimating that the amount of duty involved on the present volume of small parcels valued between $1 and $3 does not warrant such delay and cost of inspection.
But more is involved than the present volume of small parcels.
It is our contention that raising the exemption to $3 value will divert to individual parcel shipments huge quantities of merchandise items valued under $3 which currently are being imported in bulk shipments-and the present substantial import duties on these bulk shipments will be lost if this exemption provision is approved.
Loss in excise taxes
Aside from the loss in customs revenue, there is the certain loss to the Treasury from diminished excise tax collections. Many of the items which would appeal to American purchasers are those which are subject to Federal excise taxes of 20 percent of the retail selling price, such as jewelry, luggage, and toilet preparations. Thousands of items in these categories would come within the $3 exemption based on foreign value. As imports, they would not be subject to the 20-percent excise tax and the saving of a 20-percent tax would be a forceful appeal to the bargainminded American customer.
In addition, there are many items which might be imported under this provision which are subject to 10 to 20 percent manufacturer's excise tax if produced domestically.
Included in these are small electric appliances, sporting goods, cigarette lighters, pens and pencils, and many other items.
The loss to the Treasury from the importation of these articles which would come in duty-free and excise tax free, would be anything but inconsequential. Loss in State and municipal sales tax collection
Except for foods, the great majority of products which could qualify under the $3 exemption are now subject to State and city sales taxes. Thirty-two States now levy sales taxes ranging as high as 3 percent. Several hundred municipalities have already invaded the sales tax revenue field.
Every product imported under this exemption would be free of these sales taxes. Loss in income tax collections
The growth of a large duty-free mail order import business direct to individual consumers from foreign manufacturers and dealers direct to the American consumer could not help but have a noticeable effect on income taxes as well.
Retailers who suffered from a loss in sales due to this type of foreign competition would have their profits reduced and pay less income taxes to the Federal Government. American manufacturers producing items in competition with the im-. ported items would also suffer a loss in sales which would shortly be reflected in lower tax payments.
Safeguards anything but adequate
The danger that this provision would open the doors to a mail-order business of vast proportions was clearly recognized in the hearings before this committee, and admitted by Treasury representatives who testified on the bill last year. They felt, however, that they had provided ample safeguards in the provision in subsection (c) of the proposed new Section 321, by giving the Secretary of the Treasury power to prescribe exceptions to this exemption whenever necessary to protect the revenue or prevent unlawful importations.
Your committee's report in 1952 also stated that it was the desire of the committee that the Secretary should use these powers to prevent abuses by mail-order business engaging in direct shipment of dutiable articles to purchasers in the United States.
The retail industry does not consider these safeguards as adequate
It would take some time to detect the extent to which the provision was being used to build up a mail-order business in this country, and it would take more time to determine the extent to which the Secretary should exercise his powers to make exceptions, to restrict certain articles from the privilege, or to reduce the maximum to some lesser figure.
By that time, the damage would have been done and the safeguards would be meaningless.
The retail industry opposes the pending bill solely because of the section which would increase the import-duty exemption from $1 to $3, and for these reasons: 1. The increase in the exemption would result in tremendous growth of foreign mail-order business offering substantial savings to consumers on a myriad of imported products that are duty-free, excise-tax-free, and sales-tax-free.
2. The certain loss of substantial revenue for the Federal Government, the States, and the municipalities as a result of avoidance of excise and sales taxes and reductions in corporate and personal taxable income.
3. The safeguards of administrative discretion contained in the bill will not prevent the evils they are intended to prevent.
4. Three basic limitations to the exemption contained in the 1952 bill do not appear in the pending bill; namely, exception for alcoholic beverages and tobacco, denial of the c. o. d. privilege, and elimination of the qualifications that such shipments be limited to articles for personal and household use and not for resale. 5. The loss of customs revenue would be substantially in excess of the present cost of inspection of small-value packages for the reason that current bulk shipments of small-value items which produce substantial amounts of tariff revenue would be diverted to mail-order-type single-unit duty-free imports.
6. The increase in the duty-free exemption involves the question of tariff revision which should be reviewed carefully in terms of tariff policy and which should not be injected into an otherwise meritorious customs simplification bill.
Member associations of American Retail Federation
American National Retail Jewelers California Retailers Association
American Retail Coal Association
Institute of Distribution, Inc.
Mail Order Association of America
National Association of Chain Drug
National Association of Music Mer-
National Association of Retail Clothiers & Furnishers
Colorado Retailers Association
Massachusetts Council of Retail Mer-
Missouri Retailers Association
Michigan Retailers Association
Foundation for Consumer Nevada Retail Merchants Association
National Luggage Dealers Association
National Retail Furniture Association
National Shoe Retailers Association
Retail Paint and Wallpaper Distributors
New York State Council of Retail
North Carolina Merchants Association,
Ohio State Council of Retail Merchants
Associated Retailers of Washington West Virginia Retailers Association, Inc. Mr. JENKINS. Mr. John Lerch. We are glad to have you here. We know of your wide interest and considerable knowledge on this subject. I think before you get very far in your reading of your brief that more of the members will be back from answering the quorum call. You may proceed, Mr. Lerch.
STATEMENT OF JOHN G. LERCH, NEW YORK CITY, N. Y.
Mr. LERCH. My name is John G. Lerch, and I am a member of the firm of Lamb & Lerch, attorneys, 25 Broadway, New York City. I am representing in this hearing the industries listed at the head of this brief, which are as follows:
The Candle Manufacturers Association, 19 West 44th Street, New York City.
Collapsible Tube Manufacturers Association, 19 West 44th Street, New York City.
The Industrial Wire Cloth Institute, 74 Trinity Place, New York City.
Manufacturers of hand-pressed and blown cable-art glassware and stemware of the American Glassware Association, 19 West 44th Street, New York City.
National Building Granite Quarries Association, Inc., 114 East 40th Street, New York City.
Rubber Footwear Division, the Rubber Manufacturers Association, Inc, 444 Madison Avenue, New York City.
Toy Manufacturers of the U. S. A., Inc., 200 Fifth Avenue, New York City.
Twisted Jute Packing and Oakum Institute, 19 West 44th Street, New York City.
United States Potters Association, East Liverpool, Ohio.
Velveteen Industry, Howard Richmond, chairman, Tariff Committee, 1071 Avenue of the Americas, New York City.
At the very outset of my appearing on H. R. 5106, the so-called simplification bill, I wish to call attention to the fact that this committee has just passed through almost a month of hearings on H. R. 4294, the extension of the Trade Agreements Act of 1951 (the Simpson bill). Many domestic interests appeared before you. I represented some of them. They favored the enactment of the Simpson bill largely on the ground that this bill would perfect the remedy given us by the previous administration in the escape clause.
The present administration opposed that bill asking for an extension of the Trade Agreements Act of 1951 "as is" for 1 year-this, I understand, on the premise that it wanted 1 year within which to study the trade-agreement policy, or the international policy, or the tariff policy it desired to recommend to Congress.
Again, I understand this is to be accomplished through studies to be made by a committee or commission. During the life of the Trade Agreements Act of 1934, there have been numerous studies made of its efficacy by governmental and quasi-governmental boards and we still have it. It is difficult for one who has followed the tariff machinations since the enactment of the Trade Agreements Act of 1934 to anticipate what facts can be elicited during another year of operation of this law that have not already been reported.
The Simpson bill, if enacted, would furnish a workable escape clause and before a year will elapse the administration would have facts, which we believe would allow it to arrive at an intelligent conclusion as to whether or not the trade agreements policy is desirable or should be discontinued.
I refer to this bill, Mr. Chairman, because of its limited application to our tariff policy, and the great furor it has aroused among
importers, domestic interests, and Government officials, and yet this bill is on the outer fringe of customs procedure when compared to H. R. 5106, the Jenkins bill, which has for its purpose a complete revision of our customs practice. The Jenkins bill repeals statutes which have been in effect for over half a century. It abolishes practices which have grown out of half a century of experience of customs officials and statutes which were enacted to protect the Government against practices of conniving and unscrupulous importers, which were only applied when necessity demanded.
The Jenkins bill also abolishes present forms of value on which ad valorem duties are based. These forms of value have been in effect and have been litigated for over half a century and every importer, Government official, or domestic interest knows, or with little diligence can find out, what they mean and their scope. While we have not been advised of the facts that motivated these changes in policy, we have a strong suspicion that they grow out of a promise made to GATT by the previous administration at Geneva, Switzerland.
If there is any merit in the request of the present administration for a year to study the effect of the Simpson bill provisions, under the same reasoning it should ask for at least 2 years to study the much more drastic provisions of the Jenkins bill now before you.
Repeal of obsolete accounting provisions: Section 2 of the Jenkins bill provides for the repeal of all statutes relating to the office of the Comptroller of the Customs and substitutes therefor a clerk to be designated by the Secretary of the Treasury to perform the duties assigned to him which were previously performed by the Comptroller of Customs. Comptrollers of Customs, then known as naval officers, were established with the original Treasury Organization Act of July 31, 1789. This office must have been found necessary in the orderly administration of the customs in the past, but no explanation for the abolishment of this office is offered in the "Summary Explanation of H. R. 5106, Customs Simplification Act of 1953," which accompanied this bill.
Surely, in the accounting for customs revenues the functions of the Comptrollers of Customs must have played its part or that office would not have weathered the many investigations and congressional revisions of the customs administrative procedure over the past 165 years. However, we are not told why this necessity no longer exists. Again I repeat, the administration asks for a year to investigate the effect of the Simpson bill, but in the much broader Jenkins bill it sponsors radical changes in procedure without furnishing facts to justify them and asks for immediate passage. Would it be unreasonable to ask this committee to refer H. R. 5106 back to the administration with a request that it make a part of its study of H. R. 4294? Section 3 of the Jenkins bill deals with requirements on entry as to which we have no opinion.
Repeal of special marking requirements: Section 4 repeals the special marking provisions of a number of paragraphs of the Tariff Act of 1930, which require indelible marking with the country of origin. Marking in the manner provided in these paragraphs, experience has shown, results in some instances in a decided advantage to the importer, while in other instances it furnishes the ultimate purchaser with the information as to the origin of the product so that he may discriminate against it if he so desires. For instance, let us