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 NATIONAL ASSOCIATIONS STATE ASSOCIATIONS 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- Michigan Retailers Association inc. 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 unreason able 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 take paring or carving knives made of Sheffield steel from England or Henckel steel from Germany. These items are highly sought in this market and their names carry much weight with the purchaser. The same argument applies to French perfume and many other items. On the other hand, let us take the same article from Soviet Russia or Red China. The American purchaser should be furnished with the information that would permit him to avoid the purchase of these items if he desires. Changes made by recent laws, and the administration of the general marking provision of the present law (sec. 304, Tariff Act of 1930, as amended), have been so liberally construed as to permit, for example, china and earthenware to be marked with a paper label, whereas under the early years of the Tariff Act of 1930, marking by indentation in the mold or by lettering covered by the glaze of the article were required. It is customary for all American pottery manufacturers to mark their products with names or legends that will identify their American origin. A casual inspection of the shelves of any local 5- and 10-cent store will disclose china and pottery with no marking to identify its origin. We need not speculate on its origin for it is almost sure to be foreign made and entered this country marked with paper labels which "accidentally" came off after importation and in the unpacking and handling of the merchandise. Present laws impose a penalty for the removal of the country of origin, but in years I have not heard or read of a penalty being imposed. Does section 4 simplify customs procedure? The answer to this question depends almost entirely upon the angle from which you approach it. I am representing American producers and my answer is that it simplifies the introduction of foreign-made goods into the American market, as American-made goods. Again may I suggest that before all of this legislation is repealed. your committee refer this section to the White House for study along with H. R. 4294. Mr. JENKINS. Is the gentleman really serious about that? Mr. LERCH. I am, sir. Sections 5 and 6 of the Jenkins bill relate to matters in which my clients have no interest. American goods returned: Section 7 of this act extends the present provisions for reentry of American goods without duty. While this may benefit American manufacturers, we feel we must call attention to the fact that its administration will complicate, not simplify, the work of the collectors of customs. Free entry for individuals: Section 8 of the proposed bill provides for the free entry of merchandise being brought back by American tourists. Subparagraph (a) permits one who has remained abroad for a period of not less than 48 hours to bring back with him $200 worth of merchandise. Subsection (b) permits an American citizen who has been abroad for a period of not less than 12 days to bring back $500 worth of merchandise. While it may seem an altruistic attitude toward our citizens on the part of their government, this provision could very readily work great hardship on some domestic industries. For illustration, English bone china, because of arrangements between England and Canada, sells in Canada at a very reasonable price over that at which it is sold in this country and over comparable merchandise made in this country. If a traveler to Montreal, let us say, remained there for the 12-day period, he could bring back 4 or 5 bone china dinner sets free of duty under the exemption, and it could develop into a very prosperous industry running these valuable china sets into this country and disposing of them at the prevailing American price to the detriment of the American industry. While the proposed section provides a penalty for the sale of merchandise brought in by tourists, this provision in practice would be practically meaningless since it would be impossible to check every $500 worth of merchandise brought in by tourists to determine whether it had been sold. Sections 9, 10, 11, and 12 relate to matters of policy as to which we have no opinion. Section 13, administrative exemption: May I introduce my remarks on this section by quoting from the explanation which accompanied the Jenkins bill: It further authorizes him to admit articles free of duty when the expense and inconvenience of collecting the duty or tax would be disproprtionate to the amount of such duty but it limits the amount imported by one person and one day and exempted from the payment of duty under this section to not in excess of $5 in value in the case of articles accompanying and for the personal and household use of, persons arriving in the United States, or $1 in value in any other case. Section 13 would amend section 321 to (1) increase from $1 to $3 the difference between deposited or assessed duties and actual duties; (2) permit free entry of bona fide gifts from persons outside the United States to persons inside the United States up to $10; (3) allow free entry up to $3 in other cases. However, the Secretary would be enabled to reduce these amounts if he finds it necessary to protect the revenue. This section would permit a foreigner to send into the United States every day an article valued at $10 as a gift without the payment of duty. It would also permit the free entry by mail up to $3 in value. I might say that it is $3 in foreign value, which is so generally misunderstood by those who speak on this section. $3 in Canada or in England displaces about $10 here in most lines of merchandise. Is it the purpose of this bill to turn over to the foreign mail order houses much of the business of our small manufacturers? Can anyone visualize the hundreds of items that are sold in our retail stores at a value of $10 or less? Our neighbor, Canada, imports from England free of duty items of this character which were made at much less than the Canadian or American cost. Let us take for example an English doll which was advertised in the New York papers for $5 delivered by mail in the United States which would talk, walk and do everything that mechanical devices could effect. I am advised by doll manufacturers in New York that a comparable American made doll without all of the accomplishments of her English sister could not be made to sell for less than $15 at retail. Similar illustrations I could give you would be endless. While the $10 exemption is limited to gifts, this section also permits the importation by mail, duty free, any merchandise valued up to $3. With labor in England about one fourth of that paid in the United States or Canada and with the free entry of English made merchandise into Canada, this provision should give to the Canadaian mail order houses the greatest business they have ever known. But we need not limit its application to Canada since it applies to importations from Mexico and all foreign countries. To review the effects of this section: |