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collector instead of the court. In practice it would divest the Customs Court and the Court of Customs and Patent Appeals of jurisdiction over this class of cases. Since this is an equity jurisdiction lodged with the United States Customs Court, would it not be safer to redefine "clerical error" and leave with the Customs Court the remedy? Section 22, conversion of currency: This section further removes from the judicial review the conversion of currency. Under section 522 of existing law, discretion is placed with the Federal Reserve Bank of New York to declare the value of currency at noon of each day based upon the buying rate of cable transfers. The present law by its terms permitted no review by the Customs Court of the findings of the Federal Reserve bank. This bill grants more discretion to Government agencies in the conversion of currencies. If there are multiple rates of exchange in effect in a given country, the rate of conversion for duty purposes is as important as the rate of duty since it will as directly affect the amount of duty to be paid. We believe that the determination of the rate of conversion of foreign currency is as important as the appraiser's determination of value or the collector's decision on the classification of merchandise and should be subject to review by our courts.

Section 23, transfers of goods in bonded warehouse: In extending the discretionary powers of Government officials over goods in bonded warehouse, this section restricts the right of appeal to our Customs Court. We feel this should not be.

Conclusion: This bill is so far-reaching in its repeal of existing law and so drastic in its change of existing practices, that it will result in confusion rather than simplification of our customs laws. As the administration has proposed with respect to trade agreements, it may well submit this bill to a committee for study. From the explanation before you, there are no facts upon which an intelligent conclusion can be based. We suggest that no action be taken on this bill until the necessity for its enactment is shown.

Now, Mr. Chairman, I would like to go back and say a few words on that section 15 on value.

Mr. JENKINS. Yes, without objection you may do so.

Mr. LERCH. Congressman Crawford gave you a wired explanation of the number of cases pending in the United States Customs Court as shown by the court's report for the last 3 calendar years, and it resulted in his reading of statistics of something like 38,000 and 100,000 cases pending. That in no way reflects the work, as he suggests, being delayed and piled up, and that the Customs Court was not doing its job. That is not so. If you strike off the last three zeros in those tabulations you would more nearly approach the number of issues that are pending in the Customs Court, for it is the practice of importers in that litigation to bring a test case, and since every importation has to be covered by another appeal or another case, you might say, those literally thousands of cases that pile up behind the test case are all decided when the court of appeals renders its decision in the test case. So that those figures are grossly misleading if you look at them as each individual case being tried, because that is not so.

Mr. JENKINS. While you are talking about that, let me ask you this: We hear that the Tariff Commission does not render decisions. What are the facts with reference to what we are talking about in the

customs? Do the lawyers representing these importers and exporters get decisions rapidly, or is there any trouble about that?

Mr. LERCH. The average time elapsing between the bringing of an appeal and the final decision, some few years back when last we compiled those statistics, was 13 months. You can hardly have litigation going through two courts in less time than that.

Mr. JENKINS. Is the volume of litigation increasing? I presume it has with the volume of imports increasing. Do you find any fault with the court procedures?

Mr. LERCH. None whatever, and I am a member of the customs bar, and I think I can speak for them. Mr. Coburn will be here tomorrow, and I would like you to address that question to him, and I am sure he will answer the same way.

Mr. JENKINS. Being a lawyer myself, I am prompted to ask the question, because we do know that if courts become congested, justice is delayed, and naturally we have a lot of complaints. I am glad to hear you say that there is nothing like that prevailing in the administration of the customs laws.

Mr. LERCH. I say this, that compared to any State court, that an importer would litigate in, the United States Customs Court would cut that time by one-third.

Mr. JENKINS. We could not expect it to be instantaneous or too rapid. Naturally it takes time.

Mr. LERCH. Moreover, you must remember that the importers' attorneys do not want it tried too quickly because there would not be enough involved. They also delay the cases until they amass a number of them before they are decided.

I want to dwell just a minute on the discretionary powers which you are attempting to vest in appraisers under section 15 to appraise merchandise. The comparative value is a direct attempt to give to the appraiser these nebulous powers which he can pull out of thin air in arriving at the differences between, let us say, a small glass and a large glass beautifully etched. How are you going to compare that? That same glass comes into, we will say, 10 ports in the United States. Ten different appraisers might pick other articles for comparison, arrive at grossly different allowances for workmanship, size, texture, and those attributes which you direct him to consider, and you would have 10 different values for the same thing. When each of those appraisers stamped his name on that invoice, after having written the value he determined, that is final on everybody, as I tried to show, since it is a discretionary power and cannot be reviewed. Is that the kind of basis we want to put our ad valorem rates on?

In that one section where they said the appropriate court, the comparative value section, I doubt very much whether the court can deal with that article by pulling out of thin air allowances for differences in workmanship, quality, and all the rest of it, which it has no way of knowing. Moreover, all of the other sections of that section 15 carry with them the same discretionary powers, although it is not written into those sections. Very carefully that section 15 has been worded so that you have to look to the definitions of export value and of United States value before you find the hidden discretion in the appraiser to ascertain and estimate what is a freely offered for sale article, what is a usual course of trade. Each one of those definitions of those terms vest power which the appraiser does not have now

discretion to ascertain. I think it is the most vicious piece of legislation I have read in the 40 years I have been connected with customs litigation and legislation.

Mr. JENKINS. There is no reason why when you come to comparative value you cannot use these other criteria, which appear in United States value and export value and so on. You could use all of those. A person passing on this could use all the judgment he had and all the information he had, and that would be enlightening.

Mr. LERCH. But it is all a guess, Mr. Jenkins.

Mr. JENKINS. Suppose you carry all these different classifications except comparative value, what would you say then?

Mr. LERCH. As I said a minute ago, export value and United States value by reason of the definitions that follow in subsection (h) of section 15 are also discretionary and they are also guesses.

In other words, by applying those definitions to the export value and the United States value, you arrive at an estimated value. That is an exercise of discretion which, as I have said, the Supreme Court has long since held cannot be reviewed in the United States courts. Is it the purpose through this back-door method to divest the Customs Court of all review of value cases, and put in the hands of the appraiser the right to find an arbitrary value which is final upon everybody? I say that is too much power to put in the hands of any individual, and it is an open invitation to fraud.

Mr. JENKINS. If the situation is such as you suggest, that that kind of practice might obtain, the appraiser might be unfair and so forth, of course he ought not to have an opportunity to show his unfairness. But on the other hand, if he is fair, it would seem to me he could take the definition of export value and the other definitions as set forth in this bill and apply them in connection with the comparative value section, and that will enable him to render a fair decision. If he wants to be unfair, of course he can be.

Mr. LERCH. As I stated to this committee before in my observation on this section, in the hands of a diligent man, who is high tariff minded, it could result in great protection. In the hands of a freetrader, who wanted to favor the importer, maybe with a few gratuities, it could result in great fraud. I do not think that a provision that is as nebulous and uncertain as that should form the basis of our duty appraisers.

Mr. JENKINS. Of course, in all our lifetime transactions in the Supreme Court, one judgment will go one way and one another. Sometimes they divide just about equally. Still we cannot throw the justices out just because they do not agree on everything.

Mr. LERCH. NO. The point I am trying to make, Mr. Jenkins, is that for 50 years we have litigated_the present section 402 on value. Everyone knows what it means. It may not be the most desirable method of appraising merchandise, but certainly it is factual, and it can be reviewed. It is the ascertainment of certain facts, namely, it is the price at which it is reely offered for sale and so on, that describes a set of facts. It leaves no discretion with anybody.

Mr. JENKINS. Of course, in that is the case, then that section might not be needed, because the other sections take care of themselves. Then you come down to the next one, constructive value. I thought that constructive value was more difficult to describe, and follow through on, than the comparative value, because that is the way you

decide whether you are going to buy one pair of shoes or another; you compare them.

Mr. LERCH. It is a little difficult for me with my familiarity with customs practice to see why anybody would ever get by the comparative value, because all you have to do under that provision is to find something coming into this country and pull out of thin air your various allowances and differences. How you would ever get by it, I do not know. I see no reason for going by it. That would form the basis of the appraisement of a vast quantity of merchandise.

May I just say a few more words on the conversion of currency. That section to my mind puts in the hands of a foreign country the right to allocate to any given commodity a kind of currency a a value which it sets. You could have one value on meat and potatoes, and another value on coal-tar products, and still another value on steel products, all depending on the kind of currency that the foreign government allocates to that given commodity. In other words, you allow the foreign government, by allocating currency to a given commodity, to say how much duty you are going to pay on ad valorem merchandise in this country. I say that is far too great a power.

My suggestion has always been that where countries have multiple currencies, it is only equitable and fair that we should use their highest currency for the purpose of conversion for duty porposes here. Why should we take anything less?

That is about all I have to say now.

Thank you.

Mr. KEAN. On that multiple currency, you say use the highest available currency rate. That would not be an actual reflection of what the cost of those goods was.

Mr. LERCH. It may not be, of course, but rather than jump back and forth and allow the foreign government by the allocation of currency to commodity to govern what duty is to be paid here, I think it would be only fair and equitable to take the highest rate. At least it would be certain.

Mr. KEAN. From what you say in your brief here, you believe that the determination is as important as the determination of value, which of course is true in a currency which is fluctuating. Then you say, "The collector's decision should be subject to review by our court." Of course where the decision is made by the Federal Reserve banks, that is a factual decision, and certainly there is no question that the court should not review. But I can see where it is going to be an arbitrary decision in this case as is provided by this bill, allowing the appraiser to reflect the commercial value of the foreign currency as related to the import in question, that it certainly is a matter of considerable discretion on his part. It seems to me that what you say here makes some sense.

Mr. LERCH. Mr. Kean, I suggest that they write a definition. Of course, there is no review of the Federal Reserve's finding today. Mr. KEAN. No, and I do not think there should be.

Mr. LERCH. My suggestion would be that you write a definition like in the old value section and tell the Federal Reserve what they shall proclaim at each day and let that be reviewable in the court.

Mr. KEAN. Is not your point that there is something more than the Federal Reserve in this proposal?

Mr. LERCH. That is right.

Mr. KEAN. Because it seems that the appraiser is the one who decides upon the commercial value of the foreign currency as related to the import in question specifically.

Mr. LERCH. Absolutely correct.

Mr. KEAN. In your brief, you complain a good deal about this $500. That is in the present law. There is no change in that one. Mr. LERCH. That is very true, but I can cry about it.

Mr. KEAN. You still complain about it, but there is nothing new in this bill about it.

Mr. JENKINS. If there is nothing further, the committee stands adjourned until 1:30.

(Thereupon, at 12:20 p. m., a recess was taken until 1:30 p. m., the same day.)


Mr. JENKINS. The committee will come to order.

The first witness on the schedule is Mr. Alfred F. Beiter, national president, National Customs Service Association, Chevy Chase, Md., and a former Congressman.


Mr. BEITER. Mr. Chairman, members of the committee, I represent the National Customs Service Association, an organization of officers and employees of the United States Customs Service. We appreciate the opportunity afforded us to present our views on H. R. 5106, which is of such vital interest to our members, all of whom spend the greater part of their working lives in the customs. Because of this it is much more than just a means of making a living our members have made a career of customs, they take unusual pride in the service they render. Understandably, we are concerned that the fundamental customs law, the Tariff Act which sets the tone for customs operations be of such a nature as to make customs efficient and effective, a service i which they can continue to take pride.

It is our belief that this bill is an improvement over the Simplification Act passed by the House at the last session, and that although it does not exhaust the possibilities for beneficial change in the administrative portions of the Tariff, it will, overall, improve customs administration and eliminate many of the hardships and uncertainties encountered in clearing merchandise through customs. We would remind the committee again that this bill, even if it measures up to the most optimistic hopes held for it by its framers and well-wishers, will not clear up the conditions which give rise to many of the justified complaints about the difficulties and uncertainties of importing.

There is a whole area of customs operations predicated on the rate structure of the tariff which produces as much, if not more, uncertainty than the situations sought to be corrected there. The rate structure of the tariff, as amended and reamended by the various trade agreements and Presidential proclamations, is confusion compounded. The Tariff Act of 1930, as enacted, was complex and the numberless refinements and alterations which have been worked on it in the last two decades have imparted an Alice-in-Wonderland lack

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