Section 15 of the bill is not too clear to me, and I listened closely to the Secretary for further elucidation and I still am not clear. May I refer to that very briefly. It has to do with the declaration of goods.

It is the language having to do with goods arriving, that they must be declared in 48 hours or by regulation in 5 days. Suppose there is a strike in the Port of Hawaii, Alaska, or Puerto Rico, which may run for 2 or 3 weeks. How is that situation to be handled under the language of this bill?

I submit that question to the committee so that they may further inquire, because we have territories where these strikes do occur from time to time, and where ships can not be unloaded, and it might have to do with that language. I am not sure the language here is sufficiently broad to let the Secretary do the thing that is necessary. I think that should be looked into.

I hold in my hand here the annual report of the Director of the Administrative Offices of the United States Courts, 1952 Annual Report. On page 45 we find this comment:

"The pending cases of the United States Customs Court went up substantially in 1952. Classification cases increased from 75,109 at the end of 1951 to 82,992 at the end of 1952, and appeals from 48,989 to 63,010."

On page 188 of the same report in tabulated form, table G-1, report of the United States Customs Court for the fiscal year ending June 30, 1951, and June 30, 1952, gives this information. Cases pending at the beginning of the year, 76,755. Cases received during the year, 10,722. Cases decided during the year, 12,368. Cases pending at the close of the year, 75,109. That is for 1951.

Now, for 1952, the figures run cases pending, 75,109. Cases received 14,205. Cases decided, 6,322. Cases pending at the close of the year, 82,992.

That record speaks for itself.

The Secretary in his comments a while ago made the statement—I did not get it too clear- something about one-third, as I understood it, of the 120,000 invoices received during the last 90 days are held up. How can anybody do business under such conditions. This congress should do something about it, and I congratulate the author of this bill for trying to do something about it by getting this bill before the Congress.

Here is the customs information for exporters of the United States, a tremendously valuable assistance to anybody who wants to import or anybody in another country who wants to export into this country. The Treasury has done its best to make it possible for a man to do business. But still the exporters and importers are up against it. If the Congress and the administration and the public generally want to facilitate the movement of goods across international boundary lines, and also somewhat assist in the settlement of trade balances, I suggest they support this bill.

Thank you very much, sir.

Mr. JENKINS. Thank you very much, Mr. Crawford.

Mr. CRAWFORD. Thank you.

Mr. JENKINS. The next witness to be called is Mr. Roland Jones. I know him very well, and he is a man of wide experience and great ability in this line.

STATEMENT OF ROWLAND JONES, JR., PRESIDENT, AMERICAN RETAIL FEDERATION, WASHINGTON, D. C.

Mr. JONES. Thank you, sir.

Mr. Chairman, in view of the lateness of the hour, I have two choices. I can either read this fairly short statement in its entirety or give it to you in summary, whichever would be most convenient to the committee.

Mr. JENKINS. You use your own judgment, Mr. Jones.

Mr. JONES. I would like to offer this entire statement for the record, and to simply give you at this time a summary of the position of the retail industry of this country on this bill. 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 the following

reasons.

First, the increase in the exemption would result in tremendous growth of foreign mail-order business, offering substantial savings to customers on a myriad of important products that would be duty free, excise tax free, and sales tax free.

Two, the certain loss of substantial revenue of the Federal Government, the States and the municipalities has resulted in the avoidance of the excise and sales taxes and the reduction in corporate and personal taxable income.

Third, the safeguards of administration discretion contained in the bill will not prevent the evils they are intended to prevent.

Four, three basic limitations to the exemption contained in the 1952 bill which failed of passage do not appear in the pending bill, namely, the exemption for alcoholic beverages and tobacco, the denial of the c. o. d. privilege, and the elimination of the qualification that such shipments are limited to articles for personal and household use and not for resale.

Why these limitations to this exemption have not been carried through in the present bill, I do not know.

Five, the loss of customs revenue would be presently in excess of the present revenue for the reason that current bulk shipments of small items which produce substantial amounts of revenue would be diverted to mail-order type single duty free imports.

Six, the increase in duty-free exception requires the question of tariff revision which should be reviewed carefully in terms of tariff policy in general, and not injected into an otherwise meritorious customs simplification bill.

Mr. Chairman, the retail industry generally is interested in customs simplification. The industry generally believes that we must have more foreign trade for reasons that are obvious. The retail industry also is interested in the importation of a tremendous volume of gift merchandise of a handicraft nature, which in reality do not compete with most of our mass-production industries in this country. We think that the $3 tax-free exemption, tax free all down the line, the bill is meritorious, but we do feel the advertising by direct mail, by radio, and newspaper and magazine in this country, the opportunity afforded to foreign shippers of a number of products which fall into the $3 exemption which I call your attention to is equivalent to $10 to $12 equivalent domestic value in this country for comparable items.

It is the hope of the American Retail Federation and its 58 constituent groups that if this bill is to be given consideration that the section involving the $3 duty-free exemption should be eliminated.

Mr. KEAN. Mr. Jones, what would be your comment to the statement made by the Treasury Department that this $1 limitation had been there for a long time, at a time when the general inflation was not there that is there now, and this $3 limitation is just about the same as the $1 limitation was some 20 years ago?

Mr. JONES. In the first place, we do not believe that the price level has tripled.

Mr. KEAN. It has doubled, has it not?

Mr. JONES. It probably has close to doubled, but certainly not tripled. The point is that today we have these very heavy Federal excise taxes of 20-percent rates at the retail level. We have a myriad of manufacture excise taxes, running from 10 to 20 percent, which cover many categories of goods which would fall within this $3 exemption.

In addition, our States and our municipalities are greatly dependent upon sales tax revenue for the operation of State and municipal government. These kinds of shipments would come in completely free from the taxes imposed at the State and city level.

Mr. KEAN. Of course, these taxes are included in the price at which goods are sold in the market, so the fact that if the level of the price of goods is doubled, definitely the manufacturers' tax is included in that, and therefore paid by the consumer.

Mr. JONES. That is right, but the point is that on these imported shipments, the tax does not accrue and is not paid either in the case of manufacture level taxes or the retail level Federal tax; it is completely exempt. That is the great danger. There is a great preoccupation of the American people today in the direction of tax avoidance. It is a common American practice today of studies and ways that they can legitimately reduce their taxes.

Mr. KEAN. That is always true when taxes are too high.

Mr. JONES. That is right. One of the reasons for that is the very high level of taxation. Here is a gimmick, to use a slang word, that opens a tax saving as high as 25 percent of the value on an American item which would sell in this country, either imported directly by retailers or importers, equivalent to $10 or $12 retail price. There are very substantial problems involved in this picture.

Mr. KEAN. Would your group be opposed to this section if the limit was $2 rather than $3?

Mr. JONES. We think the present $1 section should remain. Let me give you one example of what happens now under the $1 exemption. Here is a full page ad which appeared in last Sunday's Detroit Free Press advertising beautiful unusual gifts direct by mail from foreign lands every month for only $2 each postpaid, duty free._This ad cost $2,304 for a single insertion in the Sunday Detroit Free Press. It is evidence of the fact that there is a tremendous volume of merchandise moving into this country under the present dollar limit. What would happen if it was raised to three we can only surmise, but we are sure it would be substantial.

Mr. KEAN. Thank you, Mr. Jones.

Mr. JONES. Thank you, sir.

Mr. JENKINS. Mr. Jones, your statement may appear in the record at this point without objection.

(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 imported 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.

SUMMARY

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.

34882-53- -5