act. One was the c. o. d. proposition. This was designed to avoid the setting up of mail-order houses which were of considerable concern to some people. You have nothing in your bill on this at all. I am wondering why.

Mr. ROSE. I will ask Mr. Johnson to supplement what I say, but the reduction to $3 was partially to meet the controversy that you refer to. We also have in this bill a proposal for the reduction of that $3 in particular classes of cases or broadly by the Secretary of Treasury by regulation.

Mr. BYRNES. There are certain restrictions you admit you are going to put on right off the bat. There is one on tobacco and liquor. Mr. ROSE. That is right.

Mr. BYRNES. Why should that not be written into the bill just as we had it in the language of section 11 of the old bill that was passed by the House?

Mr. ROSE. Certainly the specific ones that are agreed on now could be written in. I think the theory of not doing so, but leaving it to regulation is that this, after all, is a de minimis provision or intended as such. This is not intended as a commercial provision to foster types of business growing up based on this $3 exemption.

Mr. BYRNES. It is not intended for that, Mr. Rose, but a lot of times what you intend and what the effect is are different.

Mr. ROSE. I understand that. It seemed a better way of accomplishing the purpose, and also preventing misuse because when you get into how to define what might be done you are in an area of considerable difficulty, I think, an area where considerable experimentation to come out at the de minimis result and at the same time to achieve the other result may be required. It was our thought, and again we are not rigid about it, that this was a preferable approach. Mr. BYRNES. Let me ask you something specific. In H. R. 5505 we provided in section 11 in connection with the importation of items, that the privilege of that section would not be granted to any c. o. d. shipper or in any case in which merchandise covered by a single order or contract is forwarded by separate lots. Is there any objection to inserting that in your new section 13.

Mr. ROSE. I would like to consider that a little further but I see none at this time.

Mr. BYRNES. I think what some people are concerned about is the setting up of mail-order businesses on small items operating out of Canada or Mexico, or even operating out of a foreign trade zonethey could operate right in this country out of a trade zone. We are all familiar with these mail-order people that carry on a business in novelties, more or less. Some people are concerned that businesses of that nature will be set up in Canada, in Mexico, or in the free zone. This section would set them up in business.

Mr. ROSE. Of course, that is not our intention. I am sure that full consideration ought to be given to the problem. As I see it now, I see no objection to expanding this to put in specific safeguards against things which are clearly defined as not within the intention of the $3 exemption as it now stands. I do think we need the flexibility of the additional ability to control by regulation, because I do not think you can foresee everything along that line that might develop.

Mr. BYRNES. I think that is correct. We provided in the old section 11 for further regulation by the Department if found advisable.

I was wondering why the restrictions that the committee saw fit to put in only 2 years ago in the drafting of this section were eliminated in the new drafting and whether you had some real reason.

Mr. Rose. It was primarily because of the fact that the amount being smaller-this is a question on which again we would be interested in all the information we could get the danger of what you describe was less.

Mr. BYRNES. On page 23, Mr. Rose, I am interested in the meaning of subparagraph (b) beginning on line 13. It states there—

that to admit articles free of duty and any tax imposed on or by reason of importation when the expense and inconvenience of collecting the duty accruing thereon would be disproportionate to the amount of such duty, but the aggregate value of the article imported by one person on one day and exempted from duty shall not exceed―

and then you go into the $10 cases. Do I understand that to mean that the Bureau can use its own judgment as to whether the $10 item which is sent as a bona fide gift or a $10 item accompanying a person shall have a duty assessed against it or not? It seems to me you left a loophole here when you say that that shall apply when the expense and inconvenience of collecting the duty accruing thereon would be disproportionate to the amount of such duty. Does that mean, then, that you can decide that the expense and inconvenience is not disproportionate and levy a duty on an article coming in as a bona fide gift of $10.

Mr. ROSE. Yes. As I read that provision, it sets out a principle, namely, that this is applicable in principle to situations where we are spending a dollar to collect 50 cents. Not in an individual situation, but in a class of transactions, perhaps. But the places where we can apply that principle, of the limits within which we can apply that principle, are fixed by the ceiling of $10 and $3.

Mr. BYRNES. This section, then, does not mean that a person can be certain that if he brings in an article not exceeding $10 in value that no duty will be levied?

Mr. ROSE. That is correct. That, I think, has been in the law since the 1938 amendment, discretion both in individual collectors and in the Secretary of the Treasury to limit the $5 and $1 provisions presently in the law.

Mr. BYRNES. And that also related to the $3.

Mr. ROSE. Exactly.

Mr. BYRNES. Does not that lead to uncertainty? Here I am going into Canada, and then I come back and I have this article of $10. I do not know whether I am going to be charged a duty on that or not. It all depends on whether the fellow at the customs house decides it is too convenient or too expensive for him to charge the duty.

Mr. ROSE. Of course, we would not expect to administer it on a capricious basis like that. The two ways in which this discretion would be exercised, and I think this is true now, would be first by broad regulations published by the Secretary of the Treasury in usual form, which would put people on notice as such regulations now do, and the other is local determinations to take into account the variety of local conditions that I understand exist in various border situations. That is true now. I do not believe that it is causing uncertainty or hardship. Collectors at different parts of the border by reason of different local commercial situations have adopted and are enforcing

different sets of rules regarding the $5 and $1 exemptions which now exist. So I do not think we are running into any new area of uncertainty or capriciousness here.

Mr. BYRNES. We did not have that in section 11 of H. R. 5505, did we?

Mr. ROSE. Have you got H. R. 5505 before you?

Mr. BYRNES. Yes, sir.

Mr. ROSE. I am not sure what draft this is. Are we looking at the same draft, September 27, 1951?

Mr. BYRNES. Yes, sir.

Mr. ROSE. On page 16 there is section (c) which I believe is identical with the corresponding provision in the present section.

Mr. BYRNES. But you established a general rule that you just let in all items under $10.

Mr. ROSE. Look at (b) on page 15:

subject to such exceptions and such regulations as the Secretary of the Treasury shall prescribe.

Mr. BYRNES. It is a reverse approach.

Mr. ROSE. It is differently stated.

Mr. BYRNES. In section 11 it seems to me we tried to state as a general flat rule what we expected, and then we say you could make exceptions. In your case you are starting out with the exceptions.

Mr. ROSE. I think the difference in the method of statement is accounted for by the circumstance that you referred to. There was concern about the commercial effect of the exemptions, and it was thought that concern might be somewhat allayed by a clear statement of the philosophy of this, which is, as I put it, not spending a dollar to collect 50 cents, and not a blanket 10-10-3 exemption, but simply a means given to the Treasury to avoid unduly expensive procedures which were not compensated for by the revenue collected.

Mr. BYRNES. The only point I was trying to make was that I think we would be better off in most cases if we were definite and certain of what we have in the law, both by way of the general principle involved and also by way of the specific exemptions.

Mr. ROSE. I agree with you thoroughly. Certainty, particularly in this field, is a highly desirable thing. I do not think that this section looks in the direction of any more uncertainty than we either have now or the substance of what was contemplated by the corresponding section of 5505.

Mr. BYRNES. I wonder why you did not take the sections of the old bill which the committee went over quite thoroughly in 1951. Mr. ROSE. Of course, this particular section, as you know, was a subject of considerable controversy not only here, but when testimony was taken before the Senate committee. Particularly in the light of that later development, it was thought that a restatement might clarify the actual objective.

Mr. BYRNES. Thank you.

Mr. JENKINS. Mr. Sadlak.

Mr. SADLAK. I have only one question, Mr. Rose, and I would like you to comment if you desire. You do not have to necessarily. I received a letter yesterday which is a very strong letter, and asks for immediate approval of H. R. 5106. Perhaps my colleagues received the same letter. It is from New York. It states:

We are

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. 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.

Very sincerely.

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

rate.

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:)