recently received notice of the liquidation of an entry and immediately filed its protest. As of this date, almost one and a half years after the proceeding was commenced, the protest has not yet been forwarded by Customs to the U.S. Customs Court. During this entire period, imports have continued to enter the United States at the lower rate of duty which the domestic manufacturer claims Customs has been wrong in assessing. Regardless of the final outcome of the pending case, the importers will have been allowed to benefit, to the detriment of the domestic manufacturer, from the lower rate of duty which Customs has continued to assess upon their merchandise. What is needed is an expeditious and effective remedy for domestic manufacturers injured by the improper administration of customs laws with respect to imports of merchandise of a class or kind manufactured, produced, or sold at wholesale by them. It seems to us that the easiest way of allowing domestic industry an effective remedy against unfavorable customs administration without unduly prejudicing the rights of importers would be to grant to the U.Š. Customs Courts jurisdiction over an action by interested domestic manufacturers in the nature of a mandamus or certiorari against the acts of customs officers. Such a form of action should also constitute a procedure whereby domestic manufacturers could compel customs officers to enforce such existing laws as the marketing laws, previously discussed. Need for more effective adjustment assistance provisions The so-called adjustment assistance provisions of title III, sections 301, et cetera, of the Trade Expansion Act for 1962 are in need of amendment if they are to have any effect. The present requirements for qualification have proved far too restrictive. Consequently, not one of 21 petitioners have been found eligible for relief under the act. The requirements that (1) trade agreement concessions must have been the major cause of the increased imports of an article into the United States and that (2) such increased imports must have been the major factor in causing, or threatening to cause, serious injury to the domestic industry producing an article like or competitive with the imported article, must be relaxed. It should be sufficient that the increased imports were in part caused by the concessions and that such increased imports were a factor in causing, or threatening to cause, serious injury to the domestic industry. Without such modification the adjustment assistance provisions will continue as sterile as they have been and industries, workers, and/or firms which have suffered injury as a direct result of trade agreement concessions will continue to suffer such injury without recourse to the emergency relief which Congress obviously intended them to be able to obtain. Conclusion Perhaps the most needed innovation in customs matters is for Congress to reassert its constitutional authority to determine and oversee the operation of customs laws and their administration. These legislative oversight hearings are a welcome step in the right direction. The establishment of a standing subcommittee to regularly oversee customs matters would be a further restoration of Congress collective role as ombudsman or public representative charged with the direction and review of the administration of customs laws. We sincerely hope these hearings are a forerunner of future increased congressional interest in customs matters. APPENDIX MEMBER COMPANIES OF THE INDUSTRIAL RUBBER PRODUCTS DIVISION of Rubber MANUFACTURERS ASSOCIATION, INC. Ace Rubber Products, Inc. 100 Beech Street, Akron, Ohio 44308. Acme-Hamilton Manufacturing Corp., Post Office Box 361, Trenton, N.J. 08603. American Biltrite Rubber Co., Inc., Boston Woven Hose & Rubber Division, Post Office Box 1071, Boston, Mass. 02103. American Rubber Manufacturing Co., 1145 Park Avenue, Oakland, Calif. 94608. Ames American Co., North Easton, Mass. 02356. Bearfoot Sole Co., First and Water Streets, Wadsworth, Ohio 44281. Beebe Rubber Co., 20-22 Marshall Street, Nashua, N.H. Buffalo Weaving & Belting Co., Inc., 260 Chandler Street, Buffalo, N.Y. 14207. Buxbaum Co., 1212 Seventh Street, S.W., Canton, Ohio 44707. Carlisle Tire & Rubber Division Carlisle Corp., College and C Streets, Carlisle, Pa. 17013. Cincinnati Rubber Manufacturing Co., Franklin Avenue, Cincinnati, Ohio 45212. Continental Rubber Works, 2000 Liberty Street, Erie, Pa. 16506. Tyer Rubber Corp., 392 Pearl Street, Malden, Mass. 02148. Crown Products Co., Ralston, Nebr. 68051. Dayco Corp., Post Office Box 1004, Dayton, Ohio 45401. Dunlop Tire & Rubber Corp., Post Office 1109, Buffalo, N.Y. 14240. Easthampton Rubber Thread Co., 26 Payson Avenue, Easthampton, Mass. 01027. Electric Hoe & Rubber Co., 12th and Dure Streets, Wilmington, Del. 19899. Firestone Tire & Rubber Co., 1200 Firestone Parkway, Akron, Ohio 44317. Garlock, Inc., 402 East Main Street, Palmyra, N. Y. 14522. Globe Manufacturing Co., 221 Pleasant Street, Fall River, Mass. 02722. Goodall Rubber Co., 572 Whitehead Road, Trenton, N.J. 08604. B. F. Goodrich Industrial Products Co., 500 South Main Street, Akron, Ohio 44318. Goodyear Tire & Rubber Co., 1144 East Market Street, Akron, Ohio 44316. Home Rubber Co., 30 Woolverton Avenue, Trenton, N.J. 08605. Jomac Roller Co., Inc., 2218 West Lake Street, Chicago, Ill. 60612. Karpex Manufacturing Co., Inc., 1436 East 19th Street, Indianapolis, Ind. 46218. McCreary Tire & Rubber Co., Post Office Box 749, Indiana, Pa. 15701. Moreland Corp., York & Fitzwatertown Road, Willow Grove, Pa. 19090. National Hose Co., West Clinton Street, Dover, N.J. 07801. Parker, Stearns & Co., Inc., 300 Sheffield Avenue, Brooklyn, N.Y. 11207. RCA Rubber Co., 1833 East Market Street, Akron, Ohio 44305. Rapid Roller Co., 5050 South Kedzie Avenue, Chicago, Ill. 60632. Raybestos-Manhattan, Inc., Manhattan Rubber Division, 61 Willett Street, Passaic, N.J. 07056. Rubber Rolls, Inc., 1905 Boulevard of the Allies, Pittsburgh, Pa. 15219. Stowe Woodward Co., Division of S-W Industries, Inc., 181 Oak Street, Newton, Swan Rubber Co., 436 East Mansfield Street, Bucyrus, Ohio 44820. Vail Rubber Works, Inc., 521 Langley Avenue, St. Joseph, Mich. 49085. Valuation of Imported Goods EXECUTIVE BRANCH STATEMENT I. INTRODUCTION The Tariff Act of 1930, as amended, specifies the dutiable treatment to be accorded merchandise imported into the United States. A large group of commodities are free of duty. The remainder are subject to duties in one form or another. The Tariff Act levies two main types of duties: Specific and ad valorem. Specific duties are assessed on such characteristics of the products as count, weight, volume, area. Examples of these would be rates such as 10 cents per dozen, 5 cents per pound, 2 cents per gallon, 6 cents per square foot. Some specific rates apply to goods on the basis of value range: For example, valued over 40 cents per pound, valued not over $1.75 per dozen. Application of such rates requires an appraisement of the value of the import before the appropriate specific rate can be determined. Ad valorem rates, which are expressed as percentages of the value of the goods, also require an appraisement. When both a specific rate and an ad valorem rate are assessed on a particular product-e.g., 3 cents per pound plus 15 percent ad valorem-the combination is termed a compound rate of duty. Prior to any determination of value, imported commodities must be classified; that is, must be identified by reference to applicable provisions of the Tariff Act. In addition to physical identification, this process often requires chemical analysis, use identification, et cetera. If the goods are classified in a tariff item that bears either no duty or a specific rate of duty not dependent upon value, the import transaction ordinarily may be completed by what is known as a liquidation. If, however, it is determined that an ad valorem or a compound rate of duty applies, then a statutory value must be determined. II. DESCRIPTION OF CUSTOMS VALUATION STANDARDS The bases of value are defined in the administrative provisions of the Tariff Act in sections 402 and 402a (19 U.S.C. 1401a and 1402). There are nine bases of value and their application depends upon the type of commodity and on conditions under which it is marketed. The nine bases are: Section 402: Export value, U.S. value, constructed value, and American selling price. Section 402a: Foreign value, export value, U.S. value, cost of production and American selling price. Section 402 is now the basic U.S. valuation method. It became effective in 1958 as a result of the passage of the Customs Simplification Act of 1956. Section 402a is the continuation of the system in effect prior to the passage of the act and is applicable to commodities appearing on the "Final List." Prior to the Customs Simplification Act of 1956, the statute required appraisement on either foreign value or export value, whichever was the higher. In the absence of either of these, U.S. value had to be determined or, lacking this, cost of production. American selling price was applicable only to certain commodities specified either by statute or by Presidential proclamation under the authority of section 336 of the Tariff Act. A brief description of the bases of value provided for in section 402a follows: Foreign value is defined as the market value or price at which the imported goods are freely offered for sale for home consumption in the principal markets of the country of exportation in the usual wholesale quantities and in the ordinary course of trade to all who wish to purchase. Export value is the market value or price at which the imported goods are freely offered for sale for exportation to the United States in the principal markets of the country of exportation in the usual wholesale quantities and in the ordinary course of trade to all who wish to purchase. If the appraising officer finds that there is neither a foreign value nor an export value for the goods, he will find the U.S. value, if it exists. The U.S. value is the price at which such or similar imported merchandise is freely offered for sale in the United States to all who wish to buy, in usual wholesale quantities and in the ordinary course of trade, less U.S. customs duty, transportation costs and insurance and other necessary expenses from the place of shipment to the place of delivery; a commission not exceeding 6 percent, if any has been paid or contracted to be paid on goods secured otherwise than by purchase, or profits not to exceed 8 percent and a reasonable allowance for general expenses, not to exceed 8 percent on purchased goods. If neither a foreign value, export value, nor U.S. value can be found, the customs valuation will then be based on the cost of production of the imported goods. The cost of production is the sum of the cost of materials and of fabrication, manipulation, or other process employed in manufacturing or producing such or similar goods, plus the usual general expenses (not less than 10 percent), profit (not less than 8 percent of both of the above elements), and cost of packing. American selling price is a basis for valuation of certain commodities. It is the price at the time of exportation of the imported articles to the United States at which like or similar competitive articles produced in the United States and packed ready for delivery are sold or offered for sale for consumption in the principal U.S. market in the usual wholesale quantities, or the price which a U.S. manufacturer would have received or was willing to receive for them when sold for consumption in the United States. The two main commodity groups subject to American selling price valuation are a large class of chemicals (benzenoids) and certain footwear of the sneaker or basketball type. In the case of chemicals, use of the American selling price has resulted in duties as high as 170 percent of the invoice value of the imported products. In the case of footwear, the 20-percent duty, when assessed on the American selling price, may result in duty as high as 100 percent of the invoice value of the imported footwear. Not only is the degree of protection afforded by American selling price inordinately high, but the whole American selling price system is, in a sense, arbitrary as well as difficult to administer. Administration is difficult because customs officers are required to undertake the burden of exploring the domestic markets for comparable products and to determine appropriate value. More importantly, however, the American selling price system is unique and arbitrary in that, in effect, it allows the American producer to set the value on which his competitor's goods will be appraised. He can do this by making suitable adjustments in his offers and sales. Moreover, one aspect of the law requires customs officials to appraise on what a producer would have been willing to receive for an article which, in fact, he did not sell. Obviously, this provision gives the producer a virtually unlimited power to fix the value of the affected goods. For these reasons, American selling price valuation has come to be regarded as an unfair trade barrier by many foreign countries. III. ADMINISTRATIVE PROBLEMS The mounting backlog of unappraised entries in the early 1950's caused considerable concern and prompted a search for improved methods of appraisement. It was determined that the delay could be imputed to two major factors: first, the existence of foreign value as a basis for appraisement; and, second, the difficulties inherent in the definitions of each basis of appraisement. To lessen these delays, Treasury proposed to amend the Tariff Act of 1930 by eliminating foreign value and redefining the remaining bases to accord with commercial trade practices. In 1956, a bill was introduced in Congress which became the Customs Simplification Act of 1956, and which was designed to simplify and expedite the determination of value on imported articles. A study of the proposed bill revealed, however, that a slightly lower valuation would result therefrom. It was estimated that this decrease would average about 21/2 percent for all ad valorem products but in some cases would substantially exceed the average reduction. In order to overcome objections to decreases which were likely to be greater than average, the bill was redrafted to separate such products from the main body of imports and retain the then-existing provisions for use solely in valuing such commodities. The Congress instructed the Secretary of the Treasury to prepare a list of commodities which, under the provision of the new law, would be appraised at a value of 95 percent or less than the value at which they were actually appraised in fiscal year 1954. Such articles were to continue to be appraised under the old standard, which was redesignated as section 402a. The list contains 1,015 items and is referred to as the "final list." The Secretary of the Treasury is not authorized to add to or delete items from this list. In order to apply the valuation provisions of the Tariff Act to imported merchandise, customs officers must determine which of the two sections of the law apply. On a casual reading of the standards, sections 402 and 402a would appear to be identical for all practical purposes. However, there are signficant distinctions between them. Some of the distinctions are as follows: The two standards for U.S. value differ in their treatment of the amounts which may be deducted from the sale price in the United States of the imported merchandise to allow for commissions, profits, 87-822-68-pt. 1-3 |