It will permit the importation by mail, free of duty, of articles valued to $3. If you cannot bring your desired importation within this provision, you may have an acquaintance abroad mail it to you as a gift if its export value is not over $10. But if you want to make a real saving under this section, provided you live within a reasonable distance from our border, you may drive across the border, stay at a cheap lodging house, enjoy 12 days vacation and bring in $500 worth of merchandise at the wholesale export value. I can assure you that this provision will annually make simple the free importation of millions of dollars worth of merchandise to the displacement of many times that value of American made merchandise. Section 14 of the Jenkins bill relates to administrative policy as to which my clients have no opinion. Section 15, value: Section 15, which abolishes the forms of value which have been the basis of all ad valorem rates of duty for over half a century, replacing them with entirely new forms of value which will foster another 50 years of litigation, assuming litigation is permitted, before their terms will be as well understood as the present forms of value. The present provisions of section 402 of the Tariff Act of 1930 are factual (describing a set of facts in each instance), while the new provisions of section 15 of the Jenkins bill attempt to define new bases of value, each of which vest the appraiser with discretionary power. The Jenkins bill still exacts of an importer the obligation of declaring the correct dutiable value of his merchandise on entry, although it removes the additional duty exact under existing law for failure to do so. This presents a non sequitur. Why not abolish any obligation on the part of the importer to declare the value of his merchandise. The provision of the value section of this bill ascribes to the importer the powers of a clairvoyant since the final arbiter of value, the appraiser, is directed by this bill to "ascertain and estimate" the value of his merchandise. As I stated in my previous appearance on the companion bill in the last Congress, the Supreme Court of the United States in its early existence decided that no Federal court had power to review a discretionary act vested by Congress in a Federal officer or agency. It follows, therefor, that while this bill does not repeal section 501 of the Tariff Act of 1930, giving a right of appeal to the United States Customs Court in questions of value, this is but an empty gesture since, while an appeal is permitted by statute, a review is precluded by law. This was called to the attention of this committee when this section was before it at the last session of Congress, and undoubtedly led to the insertion in section 15(d) of the proposed bill defining "comparative value," that is shall be the equivalent of the export value as nearly as such equivalent may be ascertained or estimated by the appraiser or proper court. It is significant that the court is not mentioned in any of the other subdivisions of section 15, although they all involve discretionary powers. This fact alone would tend to confirm the statement I made on my previous appearance that the "comparative value" definition would form the basis of the bulk of ad valorem duty importations, and the authors of this bill attempted to guarantee review by the "proper court". There is only one "proper court" and that is the United States Customs Court. Many years ago, when this court was known as "The Board of United States General Appraisers", it had such inquisitorial jurisdiction in value cases, and anyone that has been in this practice as long as I have, and has experienced the confusion of that day, will join me in petitioning Congress to avert the retrogression or reversion to practices that many of us have worked hard to eliminate on the ground that they were arbitrary, uncertain, inquisitorial, and unjudicial. From the point of logic or reason, how can it be said, with appraisers all over the country selecting "comparable merchandise" upon which to appraise the same imported product "with appropriate adjustment for differences in size, material, construction, texture, or other differences," and a court making the final arbitrary guess, that an importer would ever know upon what value he would pay duty on his imported product. Yet, the only explanation given for this radical departure from established practice by the proponents of the Jenkins bill is the simplification of customs practice. To one familiar with customs practice, simplification of customs is not the motive for the introduction of a section as radical and retrogressive as section 15 of this bill. Some other motive must be ascribed to it. The authors of this bill have not said, and I am sure I cannot find it. In the copy that I received of Mr. Jenkins' explanation of section 15, he simply enumerates what is done by the section without giving reasons therefor. In my judgment it would take powers far beyond the scope of the average human mind to furnish a logical reason for this change. Maybe that is why no reason was given. I think I have shown the committee why section 15 should be deleted from the bill; but, if the committee desires, I could analyze in detail each subsection and definition to show its vicious potentiality. Mr. JENKINS. From that text, Mr. Lerch, I want to take it upon myself to invite you to do that. I know how you feel about section 15, and I am sure that the members of the committee would be glad to have your explanation in detail with reference to that. Without objection, you may have permission to extend your remarks to that extent. Mr. LERCH. I will be glad to. In other words, may I file an additional explanation later? Mr. JENKINS. Yes. Mr. LERCH. I do have some more remarks that I want to make about it here. Mr. JENKINS. Yes. You do not have to do that today, but I would appreciate your doing that. I know your position on it, and I would like to know just what you suggest in place of it. Mr. LERCH. I can tell you now my suggestion in place of it-to leave section 402 as is. Mr. JENKINS. You can go in more detail on your objections to these changes. (The information is as follows:) Re H. R. 5106, Customs Simplification Act. House of Representatives, Washington, D. C. LAMB & LERCH, New York, N. Y., June 3, 1953. GENTLEMEN: When I appeared before your committee on May 27, 1953, I offered to analyze, more fully than I had done, the provisions of section 15 of H. R. 5106. The chairman requested me to file a brief extending my remarks on this bill for the record. It is in response to this request that I file this brief asking it to be printed as part of my testimony of May 27, 1953. VALUE-SECTION 15 Let us place in juxtaposition the opening of section 402 of the Tariff Act of 1930 and that of the section as it appears in the proposed bill: 1930 Basis. For the purposes of this Act the value of imported merchandise shall be H. R. 5106 Basis. Except as otherwise specifically provided for, the value of imported merchandise for the purposes of this Act shall be It is a well-settled principle of law that where Congress makes a change in existing language of a statute a reviewing court will give to that change a different meaning than had the previous statute, or it would impute to Congress an idle gesture. Under the new provision, where and how has Congress "otherwise *** provided"? As far as I know, no explanation has been offered by the proponents of this bill. In order to remove any doubt of the meaning of this change, the bill should read "Except as provided in ***,” followed by numbered sections. Since the provision is ambiguous, it will require legal construction and involve uncertainty and delay. FOREIGN VALUE I concur in the elimination of "foreign value" as a basis of assessing ad valorem duties. When this value was established a century ago, "foreign value," or the price at which an exporter would sell his merchandise in his own market, was a true index to its real value. As the United States progressed industrially and our standard of living outstripped other countries, more and more it became profitable to have merchandise made abroad for the exclusive use of the United States importer, thus avoiding the application of "export value" in order to secure appraisement on "foreign value," the value the exporter freely sold in his market. Since the volume consumed in the country of exportation of merchandise made for the United States markets is not often a large percentage of total foreign production, every incentive is offered to sell in the foreign market freely at a low value and to erect restrictions on export sale to insure the rejection of 'export value" as a basis of appraisement of ad valorem merchandise. In ascertaining "foreign value" under existing law, affidavits are admissible. Many of these were self-serving declarations. In order for the appraiser or the reviewing court to be accurately informed, an investigation has to be made by a Treasury attaché or some other Government officer, which many times proved impossible because of the foreign producer's refusal to permit an inspection of his books. Experience has shown that "foreign value" as the basis for ad valorem duties, when manipulated by a skilled importer, could result in greatly reducing the amount of duty paid upon merchandise bearing an ad valorem rate. I endorse the elimination of "foreign value" as a basis of appraisement. REVIEW OF APPRAISER'S DECISION, SECTION 402 (B), TARIFF ACT OF 1930 Section 402 (b) of the Tariff Act of 1930 guaranteed a judicial review of all elements entering the appraiser's decision as to the value of imported merchandise. This section has been omitted from section 15 of the proposed bill. By the same analogy to that I have previously expressed an omission of a provision of existing law imputes an intent on the part of Congress to effect a change in existing practice it follows, the omission of this section, when considered in the light of the new wide discretionary powers conferred upon the appraiser, will effectively abridge, if not remove, the jurisdiction of the United States Customs Court over appraisements. If this is not intended by the Jenkins bill, section 402 (b) of the Tariff Act of 1930 should be incorporated in this bill verbatim, except for the deletion of the words "foreign value." The inclusion of the provision for the admission of affidavits of foreign affiants, only if corroboration by a Treasury attache is permitted, would greatly safeguard the revenue and deter corruption. EXPORT VALUE-SECTION 15 (B) What I have to say as to this and all other subsections of section 15 is influenced largely by the new subsection (h) "Definitions." While the definitions of "export value," "United States value," "constructed value,” and “American selling price" in H. R. 5106, without a careful comparison, would seem to be the same as existing law, by omissions and additions together with new definitions, they present a very new and alarming basis of appraisement. Let us look at subsection (b) "export value." Whereas in existing law export value is based on the value of "such" merchandise, the word "such" is changed to "the" and there is added the phrase "merchandise undergoing appraisement.' Thus, the value for duty purposes by this simple change is removed from "such" or competitive merchandise to the value of the merchandise undergoing appraisement. Never, under existing law, to my knowledge, has the value or the price paid for the imported merchandise figured in its appraisal for duty purposes. It has always been upon the "value" or the price at which such or similar merchandise was "freely offered for sale," not the price which an American could go "over there" and purchase and have his merchandise offered for sale. This bill changes, so far as export value is concerned, the basis and directs that the appraiser shall consider only the price at which such or similar merchandise undergoing appraisement is sold, possibly in a rigged market. Another significant change is that this bill writes into the definition of “export value" "sold or in the absence of sales," the price at which the exported merchandise is offered for sale. Under existing practice, the price at which merchandise is sold is considered the best evidence of the price at which it is freely offered for sale. In the proposed provision, the qualifying provision of existing law, "to all purchasers," is eliminated and in the accompanying definitions sales or offers may be made to individual purchasers and under certain restrictions. Our courts have construed the existing statute so as to eliminate restricted offers or sales to a single or limited number of persons. The present law prescribes, in addition, for all containers and coverings and all other expenses incidental to packing the merchandise for shipment to the United States. This would seem to be a material change in the present provision which includes "costs, charges, and expenses." I feel that the present provision for "export value" which has been adequately construed by our courts, is far preferable and less ambiguous than the proposed legislation. UNITED STATES VALUE In this provision, as in the previous one, "to all purchasers" is left out of the proposed provision, "sold or in the absence of sales, offered for sale in the principal markets.' The proposed provision also limits the sales or offers in the principal market for those "for domestic consumption.' The existing definition of "United States value" provides a minimum deduction for commission of 6 percent and overhead and profit to 8 percent and 8 percent. However, the unlimited deduction in the proposed law is also defined as that "usually made by sellers in such market on imported merchandise of the same class or kind as the merchandise undergoing appraisement." Subsection 3 under "United States value" is a new provision which vests with the appraiser the power to ascertain or estimate, which, as I pointed out in my original appearance, places in the hands of the appraiser arbitrary power and will probably preclude its review in any United States court. This section also removes the present basis of ascertaining United States value on the basis of prototype merchandise and provides for a delayed appraisement up to 90 days, which will permit the importer to sell his original importation to the best possible advantage for duty purposes. There can be no question but that the proposed section on "United States value" will throw into utter confusion the existing practice and result in years of litigation before an importer would have sufficient knowledge of its meaning to chance the application of this provision of law to this merchandise for duty purposes. COMPARATIVE VALUE As I have said repeatedly, this new form of value is ethereal, arbitrary, indefinite, and final in its application, and I feel that under existing law no Federal court would be permitted to review it. It would also result in multiple values for duty purposes being found by various appraisers over the country for identical merchandise. It will, because of this and because of arbitrary exercise of discretion, in time become an open invitation to fraud. Is it fair to tempt officials with arbitrary discretionary powers not reviewable and expect all of them to remain honest? They are but human. I have commented at length in my last appearance and in previous appearances on this provision of the law. I repeat that it is the most vicious proposal that I have encountered in forty years of customs association. I feel that it will completely disrupt the orderly appraisement of imported merchandise upon which there is placed an ad valorem duty. DEFINITIONS This subsection attempts to define expressions such as "freely sold or offered for sale," "ordinary course of trade," "purchasers at wholesale," "such or similar merchandise," and "usual wholesale quantities." I have quoted the expressions as they are quoted at the head of each of the paragraphs which attempts to define them (subsections (1) through (5)). I have examined the definitions under "value" and I fail to find an expression "freely sold or offered for sale." Nor do I find any expression "purchasers at wholesale," except in the definition "freely sold or offered for sale." It would seem to be an attempt to define an expression used in a definition which in turn is definitive. Prescribing the scope of bases of value by using terms that are not used in the bases would seem to be rather incongruous-or may be that is what is meant by customs simplification. It is important to note also that if by any chance, and this is most remote, the bases themselves do not vest with the appraiser discretionary powers, the definitions under subsection (h) leave no question of what is intended, for they carefully provide that the elements prescribed may be "ascertained or estimated." CONCLUSION It is important to consider in connection with my comments on section 15 of the proposed bill section 19 (b) where existing penalties for undervaluation or for failing to declare the proper value are repealed. This makes the picture complete. Under existing law, which is factual and definite after half a century of litigation, an importer is penalized if he does not declare the proper value under the appropriate provision of section 402. I assume that it is only fair and just that the penalty should be removed if the new bases of value are to become so nebulous that it would require an importer to read the mind of the examiner who is to appraise his shipment after it is received. My conclusion, based upon my experience, is that while the present bases of appraisement of ad valorem merchandise may not be perfect, they are settled and everyone knows what they are. A wise sage once said, "It is better to have the law settled than to have it just." Until a complete study is made that may evolve a better and more equitable basis of appraisement, I earnestly request that section 15 of the proposed law be deleted. Respectfully submitted, JOHN G. LERCH, Attorney. Mr. LERCH. Maybe in its year of study of tariff procedure the administration may devise a sounder basis for the appraisement of ad valorem merchandise no past study has done it—and certainly section 15 of the Jenkins bill is not it. Section 21, clerical error: Section 21 of this bill on clerical error really simplifies customs procedure for the importer. Under existing law, if a "manifest clerical error" occurs, the importer may resort to his legal remedy in the Customs Court to have it corrected. This bill would permit the correction of an error or mistake on entry by the |