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(4) If neither the "export value" nor the "United States value" can be ascertained satisfactorily, then the use of "comparative value.”
(5) If neither the "export value," "United States value," nor the "comparative value" can be ascertained satisfactorily, then the use of "constructed value."
(6) In the case of certain articles with respect to which there is in effect a rate of duty based upon the American selling price of a domestic article, then the use of the American selling price of such domestic article, as at present. Generally, the definitions "export value" and "United States value" are the same as those in the present law. "Constructed value" is similar to the provisions for "cost of production" in the present law. "Comparative value" is roughly the equivalent of the "export value" in the country of origin of comparable merchandise exported to the United States, with appropriate adjustments for differences in size, material, construction, etc.
Section 15 of H. R. 5106 also defines such terms as "freely sold" or "offered for sale" as used in the proposed measure.
As has been indicated, there is no doubt that many of the delays in the final determination of the duty to be paid on the importation of certain articles have been due to the complex provisions for the determination of value under section 402. These delays have been due, in part at least, to the need for determining the "foreign value" of the article in each case which, in turn, often requires a foreign investigation. Further, it has been contended that the use of the "foreign value" criterion has caused many inequities, in that it requires the assessment of duty on the price for which articles are offered for sale in the home market of the country of origin even though such prices may be higher because of the smaller quantities dealt with in such country as compared with the quantities exported to the United States.
Since many United States duties are imposed on an ad valorem basis, the need for an equitable as well as expedient method of determining value for duty purposes cannot be overemphasized.
The reasonableness and efficiency of innovations such as are reflected in the valuation provisions of section 15 of H. R. 5106 will be finally determined only after such provisions have undergone the practical test of application over a period of time. As has been noted, the valuation provisions of the present law have often resulted in delay, uncertainty, prolonged litigation, and the final assessment of duty long after entry of the goods into commerce. Such conditions are thoroughly undesirable. The valuation provisions of the instant bill are the result of extensive and expert consideration of means to eliminate these conditions, and it is reasonable to believe that they will achieve this purpose.
Although the valuation provisions of H. R. 5106 are of major significance, there are other sections of the proposed measure which are of outstanding importance. Among these are the provisions relating to the amendment of customs entries. Section 19 of H. R. 5106 eliminates the privilege an importer has under the present law to amend his original customs entry to increase or decrease the entered value. The proposed measure would make the "final appraised value" the value for assessment of ad valorem duty, rather than "the entered value or the final appraised value, whichever is higher," as under the present law. The proposed measure would thus eliminate the provision of the present law for imposition of additional duties, and even for the seizure or forfeiture of the affected merchandise, if the entered value is below the final appraised value. The proposed measure would, of course, retain the provisions of the present law for application of severe penalties in case of false or fraudulent entries.
Also important are the provisions of H. R. 5106 for the extension of time limits for the performance of various acts by importers and exporters. These include
(1) The extension from 48 hours to 5 calendar days of the "general order" period in which formal customs entries must be filed after the arrival of imports.
(2) The extension from 30 days to 90 days of the period in which merchandise not conforming to sample or specifications may be returned to customs custody for exportation. This time extension provision would permit the Secretary of the Treasury to grant more than 90 days in special cases where the defects can be determined only by tests or use.
(3) The extension from 1 year to 3 years of the period during which substitution for drawback may be made, and the extension from 3 years to 5 years of the time limit for exportation of merchandise involving drawback allowances.
(4) The extension from 10 days to 30 days of the time allowed in which to segregate goods so packed or mingled that the quantity of goods subject to 34882-53- -15
different rates of duty in the package cannot be ascertained. The proposed measure provides that an even longer period may be authorized in special cases. The need for adequate time in which to make such segregation is important to the importer, since commingled goods are dutiable at the highest rate applicable to any part of the goods in a package.
(5) The extension from 6 months to 1 year of the period in which temporary imports are admitted duty free under section 308 of the present law. This
is the section under which foreign products may be imported under bond for certain purposes including repair or alteration, after which they must be exported. Under the proposed measure the 1-year period may be further extended for periods not exceeding a total of 3 years.
In view of the pressing need for simplified and streamlined customs administrative procedures in this country and of the above-indicated desirability of the general principles embodied in H. R. 5106, the National Foreign Trade Council respectfully urges the prompt enactment of a customs simplification measure based on these principles.
We request that this statement be made a part of the official record of the hearings of your committee.
STATEMENT SUBMITTED BY FRANK L. KING, EXECUTIVE SECRETARY OF THE FOUNTAIN PEN AND MECHANICAL PENCIL MANUFACTURERS' ASSOCIATION, INC.
It is imperative for the protection of a vast number of United States manufacturers and merchandisers that the Ways and Means Committee of the United States House of Representatives give serious consideration to the effects which would ultimately follow approval by the Congress of section No. 321 of H. R. 5106, popularly known as the "customs simplification bill." This section, in part, authorizes an increase in the limitation on duty-free mail imports from $1 to $3 per package. This increase has been favored by the United States Treasury as a money-saving device because, according to the Treasury, it costs approximately $1.59 on an average for the Bureau of Customs to clear individual incoming shipments.
The Fountain Pen and Mechanical Pencil Manufacturers' Association, Inc., is opposed to the passage of this provision of the bill authorizing this increase from $1 to $3 on the value of duty-free incoming mail shipments. Approval of this section not only would affect the fountain pen and mechanical pencil business in this country but other lines of business which also have foreign competitors shipping products into this country which would be covered by this increase on the limitation of duty-free mail. This increase is also opposed on the ground that approval thereof would be, in effect, a change in tariffs rather than a simplification of customs procedure.
One of the functions of customs tariffs is to protect the United States economy by prohibiting the importation of products which would undersell United States products. The application of duty not only increases the landed cost of the imported merchandise to a competitive price on the American market but also provides revenue for the United States Treasury. If the present limitation were raised beyond $1, a new loss of revenue might well ensue, for, besides the loss of duties, there would be a loss of excise taxes where applicable, as well as loss of business to American importers, manufacturers, and merchants which would result in potential lessening of their income taxes. In addition to such losses in revenues, unemployment in the industries affected might well take place.
The United States should not permit an increase in the duty-free importation of foreign-made merchandise which not only undersells American-made merchandise but is not subject to certain Federal taxes. There are numerous mail-order houses in the United States, both large and small, which deal in items generally under $3 in value. They would be directly affected by foreign competition as foreign-made goods can be produced in the same standards of quality at lower production costs.
At the present time there is in existence a foreign mail-order business primarily originating in Great Britain advertising foreign-made products. These advertisements not only show the cost price of the merchandise but the amount of duty which would have to be paid. In most instances, this cost-plus-duty price is below a fair price for the same articles manufactured in the United States. raising the limitation on duty-free mail the disadvantage to American manufacturers and mail-order houses would be even greater.
The raising of the limitation on duty-free mail to $3 is an invitation to foreign sellers and United States importers to import into the United States quantities of identical or similar articles in a series of mail shipments. The value of the merchandise shown in the documentation of the shipments will be fictitious and only part of the actual value. This is a practice being used throughout the world today to circumvent a variety of regulations governing the importation and exportation of merchandise.
An increase in the valuation of duty-free mail not only would increase the present disadvantage to some American manufacturers and mail-order firms but also would be an invitation to other foreign firms to enter into the business of selling by mail to United States consumers. Japan in particular would be ready to step into this business in the United States with regard to fountain pens and mechanical pencils. At the present time that country has not been too successful in selling Japanese pens and pencils in the United States in competition with United States manufacturers on a quality basis. The Japanese pen manufacturers, on reviewing their 1950 and 1951 figures on their domestic and foreign business, have requested the Japanese Ministry of Industry and Commerce to grant them the right to use gold in the manufacture of pen points so that they might better compete against the foreign pen manufacturers. Japanese productions costs are far below those in the United States. The wholesale price on a Japanese fountain pen with a gold nib can be estimated at approximately $10 a dozen. Even with our present import duties on fountain pens, such prices would be below the prices that a United States manufacturer of fountain pens would be forced to ask. Permitting Japanese fountain pens to be imported duty-free in small lots would make this unfair advantage even greater.
For these reasons, the 73 manufacturers of the Fountain Pen and Mechanical Pencil Manufacturers' Association, Inc., urge the members of the House Ways and Means Committee not to increase the value of duty-free incoming mail shipments above the present $1 limit.
AMERICAN FARM BUREAU FEDERATION,
Re H. R. 5106, Customs Simplification Act of 1953.
Hon. DANIEL A. REED,
Chairman, Ways and Means Committee,
United States House of Representatives, Washington 25, D. C.
DEAR CHAIRMAN REED: The American Farm Bureau Federation recommends enactment of legislation which will simplify and expedite customs procedures, particularly such provisions which will result in more uniform and rapid classification of products and commodities for customs purposes. We believe the enactment of H. R. 5106 will accomplish many of these objectives. The voting delegates representing 1,500,000 American Farm Bureau Federation members in 47 States have considered the need for customs simplification on several occasions. Their policies for 1953 state:
"We recommend early enactment of legislation to simplify customs procedures to facilitate imports. Customs procedures should neither add to nor detract from restrictions contained in the current schedule of duties."
The major objective of H. R. 5106 is the modernization and simplification of customs procedures. The subject is a highly technical one on which we are in no position to conclude that each and every provision of the bill is desirable; however, we do want to support the major objectives of this bill and recommend its approval with whatever revisions your committee deems desirable to accomplish the maximum customs simplification consistent with the principle stated in our policy quoted above. We urge early enactment of the bill.
We respectfully request that this letter be made a part of the record in lieu of personal testimony before your committee.
JOHN C. LYNN,
Cornell University Library,
Hon. DANIEL A. REED,
Chairman, Ways and Means Committee,
House Office Building, Washington, D. C.
Dear CONGRESSMAN REED: I am advised that your committee is now considering H. R. 5106 to amend administrative provisions of the Tariff Act of 1930. University libraries are especially interested in Section 17 (e) of this bill, as it would greatly simplify the process of importing books and periodicals published abroad. Since books are imported free of duty for use by libraries and educational institutions, under paragraph 1631 of the Tariff Act of 1930, no change is contemplated other than to eliminate the necessity for formal entry, consular invoices, customs declarations, etc.
I hope that you may see fit to support this provision of H. R. 5106, both in the committee and on the floor of the House.
With greetings from Cornell and many thanks for your interest.
DEAR MR. THORNBERRY: Recently there have been many articles pointing out the necissity for increased trade with our foreign friends. We note that the House Ways and Means Committee had hearings last week on H. R. 5106, designed to simplify customs procedure.
In our business we have tried for many years to import, direct, merchandise from various friendly countries in an effort to bring our customers certain types of merchandise which are not available in this country. You could scarcely believe the amount of paper work and the extra attention necessary to perform the simple task of importing, say, five dozen women's sweaters. The complications involved have been so great, we have been discouraged to the point that we import a minimum amount of such merchandise.
It so happens that just recently a case has arisen to point out our problem. Enclosed are copies of our correspondence from W. R. Zanes & Co. of Dallas, relative to shipments which we received in 1950, 1951, and 1952. The correspondence is self-explanatory. W. R. Zanes & Co. are recognized customhouse brokers, and the situation which has arisen is not due to their negligence or lack of knowledge of customs regulations.
Quite naturally, all of the merchandise referred to was sold at a retail price based on the duty paid at the time of entry. In reality, therefore, this supplemental duty assessed at this late date simply represents a direct expense to us. We know very little about customs (and have found few, if any, who do), but it seems that in this particular case it was determined that the Scottish manufacturers had purchased their wool a year before the garments were made up, that the price of wool advanced prior to the manufacture of the goods, and at the time of shipment, therefore, the selling price of the sweaters would have been greater for duty purposes.
As Mr. Hancock of the W. R. Zanes & Co. explains it to us, this is one of the provisions of the present customs law. It seems to us that this is entirely unreasonable because we have to order this merchandise 8 to 12 months in advance of delivery; it would be a physical impossibility for a retailer to order the merchandise and receive immediate delivery at the so-called value for duty purposes.
We are sending this specific example of difficulty in importing and we believe it is one of the typical reasons why direct trade with our foreign friends has not increased.
We earnestly solicit your best thought and effort in bringing about the simplification of our customs law so that the importer may be protected from these delayed assessments which are impossible to foresee.
Very truly yours,
E. M. SCARBROUGH & SONS,
J. W. SCARBROUGH, President.
W. R. ZANES & Co., Dallas 1, Tex., May 20, 1953.
E. M. SCARBROUGH & SONS, INC.
GENTLEMEN: We refer to the several shipments of wool knit outerwear shipped by Barrie & Kersel of Hawick, Scotland, which we have listed on the attached page. We have been furnished information that on each of these entries the value for duty purposes is greater than the invoice value, and in order to avoid customs penalties, it is suggested that you authorize us to amend these entries and pay supplemental duty per the attached invoices.
Should you not desire to have us amend the entries, the approximate penalties on each entry along with the supplemental duties are listed on the attachment. We wish to advise that if no amendments are filed, the appraisement can be appealed and taken into United States Customs Court where you will have an opportunity to present facts to overcome the appraised values.
Please advise us your desires.
W. R. ZANES & Co.
STATEMENT BY RICHARD LEVI, CHAIRMAN, LEGISLATIVE COMMITTEE, TEXTILE FIBERS INSTITUTE, OF THE NATIONAL ASSOCIATION OF WASTE MATERIAL DEALERS, INC., ON THE CUSTOMS SIMPLIFICATION BILL, H. R. 5106
We wish to bring to your attention the problem of commingled merchandise that has plagued this industry for many years. In view of the fact that you are at present attempting to enact a customs simplification bill, H. R. 5106, we are sure that it is your desire to correct an existing inequity.
The problems concerning textile waste are completely different than the problems concerning manufactured materials or original raw materials. Waste is a product that is involuntarily produced in manufacturing operations. Manufactures producing fabrics made from a number of different types of fibers find it impossible to segregate these fibers in the waste that they produce. Thus we have a situation of involuntary commingling. When this occurs with textile wastes, the resultant commingled mass has a lesser value than the components in an uncommingled state. However, the Treasury Department, in assessing duties on this type of merchandise, has been forced to follow the letter of the law and assess the duty based on the highest rate of any fiber present. The United States Customs realizes the inequities of the situation and would welcome a change, but have been unable to give any relief because of the existing statute.
Apparently your committee has some awareness of this problem, as is evidenced by section 508, "Commingling of goods.' We refer specifically to section C on page 39 of the bill. However, part 1 (A) of this bill limits such relief to "commercially negligible quantities." If it is your intention to interpret this phrase to cover only small percentages by volume, it will give no relief to this industry. If it is your intention to interpret this in terms of increased value, such interpretation would provide us with the necessary relief. However, in order that there should be no misinterpretation of this phrase in the future, it is our opinion that parts A and B should be combined and read as follows: