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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
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,
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
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 circumstances 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
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 of 1921.
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.
I think that completes what I want to say on section 22. I would like to briefly comment that we are opposed
Mr. KEAN. Mr. Chairman?
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. JENKINS. Without objection. Mr. Kean, I would like for you to supply that.
Mr. KEAN. All right.
(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.