"The need for customs simplification was acknowledged by all witnesses who appeared before your committee. Their testimony on the provisions now con-tained in H. R. 5505 differed, in general, only in technical and drafting details." In our memorandum filed with the Ways and Means Committee with referenceto said H. R. 1535 we strongly objected to a proposal to amend section 201 (a) of the antidumping act of 1921. It read in part: "Whenever the Secretary of the Treasury (hereinafter called the 'Secretary'), after such investigation as he deems necessary, finds that an industry in the United States is being or is likely to be materially injured, or is prevented or materially retarded from being established, * * * " he may make a public finding of dumping. We made an extensive argument in support of our suggestion that the word "materially” should be deleted. We are pleased to note that in H. R. 5505 “materially” was deleted. We are not repeating our argument in this memorandum in support of our proposition because it is our opinion that the elimination of the word “materially” is satisfactory to all parties. We urge, however, your committee not to insert it in the pending bill. [Emphasis ours.] II. COMMENTS ON PARTICULAR SECTIONS 1. Section 13. Value (p. 17): Said section 13 proposes to amend section 402 of the Tariff Act of 1930 by eliminating the basis of "foreign value." We are particularly interested in this section because it eliminates “foreign value" as one of the bases to be considered under section 402 of the said Tariff Act of 1930 by the United States appraisers when appraising the values of imported merchandise subject to ad valorem rates of duty. Your committee undoubtedly knows that under said section 402 the said appraisers first have to determine whether there is a "foreign value" and/or an "export value." If both values exist in accordance with the definition set forth in said section 402, the appraisers must take whichever of the two values is the higher. If there isn't any foreign value, then they must determine if there is an export value. It is our opinion that the elimination of "foreign value" as one of the basis of consideration would not only create greater uncertainty as to the real price of a product but might also be used indirectly by foreign manufacturers interested. in building up export markets. The domestic manufacturers now have a certain degree of protection which would be denied to them if said section 13 of H. R. 5505 is enacted into law not only by the elimination of foreign value as one basis of consideration but also by the other definitions proposed by said section 13. The proposals in said section. 13 appear to be particularly important to our industry because it is reasonable to assume that foreign manufacturers of wool carpets, rugs, and floor coverings might greatly increase their export trade and the values of such articles would have to be determined according to their export values, in the absence of the foreign value provision. Foreign manufacturers, for example, might get export values considerably below the actual values of the merchandise in order to gain an increased United States market. When the greatly reduced rates were applied to such fictitious export values it might produce a situation distinctly unfair to American manufacturers. Said section 13 of the bill also proposes new definitions for the other bases of value as now defined in said section 402 of the Tariff Act of 1930, as amended. The primary value to be considered for the purposes of the Tariff Act would be "export value" as redefined. Without discussing each definition pertaining to value we wish to point out, however, that the term "Freely sold or offered for sale" (on p. 22, lines 17 to 25, inclusive, of H. R. 5505) has been defined by the proposed amendment so that any restrictions imposed by law on prices, such as price controls, shall not be construed to prevent the finding that goods are “freely sold or offered for sale." Thus the existence of a governmental price control will not interfere with the establishment of any of the values to be used under the tariff act if so amended. Also there is a definition of "purchasers at wholesale" (p. 23, lines 7 to 14, inclusive, of H. R. 5505) which will clarify the finding of values, eliminating the present requirement that goods be offered for sale "to all purchasers" which did not always mean "purchasers at wholesale." Refinements have also been made in the definition of “ordinary course of trade” (p. 23, lines 1 to 6, inclusive, of H. R. 5505) and “usual wholesale quantities" (p. 24, lines 15 to 19, inclusive, of H. R. 5505) which are supposed to lead to a more accurate value, or a value which more nearly approximates the actual value of the merchandise. We think it is important to call to the attention of the committee that if section 13 is amended to provide for various definitions which differ from those in the act of 1930, as amended, many of the thousands of court decisions handed down over the past sixty-odd years might be of little or no value in interpreting said section 402 of the Tariff Act of 1930, as amended by the proposed section 13. Furthermore, it is reasonable to assume that if said section 13 becomes law, there would be many cases brought thereunder and new decisions rendered. Many years might elapse before such decisions could serve as precedents. 2. Section 17. Undervaluation (p. 27): Said section 17 is titled "Amendment of Entries and Duties on Undervaluation." Said section 489 is proposed to be amended so as to provide, among other things, that the special duty for undervaluation shall not be assessed unless the consignee “* shall have failed * * to furnish the appraiser, before that officer has signed his report of value to the collector, all information required by customs officers which is relevant to the value of the merchandise and available to him at the time of entry or within a reasonable time thereafter, and all such information that is so available to the person, if any, in whose behalf the entry was made. Thus, if the undervaluation is in good faith, and the importer has furnished the information so required, there would be no need for an amendment of the entry, and the special duty for undervaluation would not be assessed. * This is a radical departure from the present law. Said section 489 of the Tariff Act of 1930, as amended, provided, in substance, that an importer must enter his goods at his peril, so to speak, in the matter of the values of articles subject to ad valorem rates of duty. In other words, the additional duties are assessed ipso facto if the appraised values exceed the entered values. Such additional duties cannot be remitted “* * * nor payment thereof in any way avoided * * except in the case of a clerical error upon the finding of the Secretary of the Treasury or in any case upon the finding of the United States Customs Court, upon a petition filed * that the entry of the merchandise at a less value than that returned upon final appraisement was without any intention to defraud the revenue of the United States or to conceal or misrepresent the facts of the case or to deceive the appraiser as to the value of the merchandise. * * *"" * * * The customs courts have decided many cases involving petitions for the ahatement or refund of additional duties under the present section 489. In most of such cases importers have been able to prove that the entry of merchandise at values less than the appraised values was without intention to defraud the Government or to deceive the appraiser. Therefore, such additional duties were ultimately refunded. However, the increased duties were retained by the Government. To summarize, our view is that section 489 of the Tariff Act of 1930, as amended, acts as a deterrent to carelessness or indifference by an importer when deciding upon the values at which merchandise, subject to ad valorem rates of duty, is to be entered. Furthermore, under the proposal as set forth in H. R. 5505 a review of undervaluation cases, so-called, could still be made by the United States Customs Court and that such court could order the remission of such duties if it finds that undervaluation was made "* * without any culpable negligence * or intention to conceal or misrepresent the facts of the case or to deceive the appraisers as to the value of the merchandise." This language is found in subsection (b) on page 29 (lines 6 to 9, inclusive) of the bill. Our opinion is that if this language should be incorporated in any law which may be enacted it would seem to relax somewhat the obligation of an importer. In other words, it might make it possible for him to more easily prove good intentions than under the language of section 489 of the present Tariff Act, which reads in part, “* ** * without any intention to defraud the revenue or to conceal or misrepresent the facts." 3. Section 13. Value (p. 17): We discussed under 2. Undervaluation, beginning on page 6 of this memorandum. However, we desire to call particular attention to subsection (d) which purports to amend section 503 of the present Tariff Act, which proposal is on page 30 of the bill (lines 12 to 16, inclusive). It restates in effect that duty shall be paid on the basis of the final appraised. values, and therefore the entered values are not to be considered. Said section 503 of the present Tariff Act, if amended by a proposed subsection (d) would then read as follows insofar as subsections (a) and (b) of the present section503 are concerned : "(a) Except as provided in section 562 of this Act (relating to withdrawal from manipulating warehouse) and in subdivision (b) of this section, the basis for the assessment of duties on imported merchandise subject to ad valorem rates of duty shall be the final appraised value." [Emphasis ours.] "(b) For the purpose of determining the rate of duty to be assessed upon any merchandise when the rate is based upon or regulated in any manner by the value of the merchandise, the final appraised value shall (except as provided in sec. 562 of this Act) be taken to be the value of the merchandise." The result of this amendment, if adopted, would be that in cases where an importer enters goods at a value higher than that at which it is finally appraised, the final appraised value shall be taken to be the value of the goods, and the importer would not be penalized in any way for entering them at a higher value; and furthermore the difference between the higher duty paid and the duty ultimately assesssed will be refunded to him upon final liquidation of the entry. We feel that said section 503 should not be amended as proposed by said section 17 (d) of H. R. 1535. 4. Section 20. Conversion of currency (pp. 33 to 36, inclusive): Section 20 (a) of H. R. 1535 proposes to amend section 522 of the Tariff Act of 1930 by bringing the methods of converting foreign currencies for customs purposes in line with the articles of agreement of the International Monetary Fund. At present the primary basis for currency conversion is the value of foreign gold coin as published quarterly by the Secretary of the Treasury. The amendment proposed provides instead for the current publication, by the Secretary of the Treasury, of a list of the par values of foreign currencies which are maintained pursuant to the articles of agreement of the International Monetary Fund, or pursuant to any other international agreement entered into by the United States. All currency conversion must, if possible, be based upon the par value so determined. Under the present law (sec. 522) if the par value of a currency as established by its gold content should vary by 5 percent or more from the value measured by the buying rate in New York at noon on the day of exportation of the merchandise involved, then such buying rate is to be taken as the basis for conversion. The proposed amendment provides that in case there be no par value as determined by the International Monetary Fund or by other international agreement, then the value to be used for converting is the buying rate of the foreign currency in New York at noon on the date of exportation. Under the present practice, where the gold standard has largely disappeared, the par value based upon gold content is not used, but in place thereof, the current buying rate in New York is usually employed in converting currency. Based on the record we question the efficacy at the present time of the determinations of par values set by the International Monetary Fund. The rates which have been set thereunder have been the rates which the countries involved have set themselves, and it seems that such rates would be thereby arbitrary, and would not reflect a true and accurate value. A far more accurate or actual value would appear to be attainable by using the buying rate at New York, as is done at the present time, and therefore we can see no reason for departing from section 522 of the present Tariff Act of 1930 as amended. Moreover, in case no rate has been set by the International Monetary Fund, then the rate to be used, in accordance with the proposed amendment, is the buying rate at New York at noon on the date of exportation of the merchandise involved, the same basis as is now being used when the rate based upon gold content cannot be employed. It seems that in a great many cases, therefore, the buying rate at New York would be used under the amendment, just as that rate is now being used under the present section 522. This amendment, therefore, does not seem to be justified. The proposed amendment also provides for the application of a rate of exchange where the Federal Reserve bank certifies that more than one rate of exchange exists for the merchandise in question. At the present time such a situation is amply covered by the procedure followed since the decision of Barr v. United States (324 U. S. 83, 65 S. Ct. 522 (1945)). That case held that where there exists both an "official" rate and a "free" rate of exchange for British pounds, the rate to be used in converting to United States dollars should be the rate applicable to the merchandise in question, i. e., the rate at which the importer obtained the pounds used in his purchase of the merchandise. Since the importer, in that case, purchased pounds at the "free" rate of $3.475138 the Court held that such rate should be used instead of the "official" rate of $4.035. Customs officials since that decision have been governed accordingly, and the rates used now appear to be as realistic as it is possible to achieve. Mr. Justice Douglas, in writing the majority opinion of the Supreme Court in Barr v. United States, supra, said in part: "This history [of sec. 522] makes clear the search which has been made for a measure of the true dollar values of imported merchandise for customs purposes which was accurate * * * and at the same time administratively feasible and efficient. The formula finally selected is dependent on the actual value of the foreign currency in our own money. The rate for the foreign exchange with which the imported goods are purchased is recognized as the measure of value of the foreign currency; the use of that rate reflects values in United States currency which are deemed sufficiently accurate to serve as the measure of the valuation of the goods for purposes of the ad valorem tax. "We would depart from that scheme if we were to read section 522 (c) as saying that on a given date only one buying rate for a specified foreign currency could be certified by the Federal Reserve Bank of New York or proclaimed by the Secretary of the Treasury" (324 U. S. 89, 90). "We assume that the 'official' rate was the all-inclusive rate and could have been used in payment of exported goods of all kinds. But section 522 (c) means to us that that buying rate is to be used which is in fact applicable to the particular transaction. To look to other transactions for the buying rate is to make a valuation of a wholly hypothetical import not a valuation of the actual one before the collector of customs * The language of section 522 (c) * * read against the background of these statutes indicates to us that Congress undertook to provide in each case the rate which gives the closest approximation to the value in dollars of the imported merchandise" (324 U. S. 91, 92). To sum up our position, the tying of conversion rates to the International Monetary Fund is a marked departure from present practice which has been built up over many years, and which is familiar to all persons engaged in foreign trade. The current practice of converting foreign currency is effective, and approaches the problem in a realistic manner. The case of Barr v. United States, supra, establishes a guide in the case of multiple rates of exchange which can be followed, and is being followed, with satisfaction. Any change in conversion methods at this time would seem to lead to confusion and would not give domestic manufacturers any more definite criteria to be followed in determining such conversion. In addition, it might lessen the protection which domestic manufacturers now receive, even under the present low rates of duty. We strongly urge, therefore, that section 20 (a) of H. R. 5505 not be enacted into law. III. CONCLUSION As stated, we are heartily in favor of any action which will further simplify the administration of customs procedures. However, because the rates of duties on carpets and rugs have been reduced in some cases as much as 75 percent from certain rates in the Tariff Act of 1930 and because imports have shown remarkable increases in spite of existing tariff duties, we are concerned that such simplification of administrative procedures be purely that and not provide an indirect route for circumventing in any way existing tariff duties. We urge that these points be given consideration in connection with the proposed bill. Respectfully submitted. CARPET INSTITUTE, INC. COMMERCE AND INDUSTRY ASSOCIATION OF NEW YORK, INC., Mrs. ELIZABETH B. SPRINGER, Chief Clerk, Senate Committee on Finance, Senate Office Building, Washington, D. C. DEAR MRS. SPRINGER: Reference is made to our telephone conversation yesterday afternoon, and certain specific changes in language in H. R. 5505, the Customs Specification Act, recommended by Mr. Fred Bennett during his testimony before the Senate Committee on Finance, on Wednesday, April 23, 1952. Attached herewith you will find the two specific changes referred to by Mr. Bennett. I would appreciate it if you would include these recommendations in the record of hearings on this proposed legislation. Thanking you for your cooperation, I wish to remain Very truly yours, VINCENT J. BRUNO, Manager, Import Division, World Trade Department. RECOMMENDED CHANGES IN LANGUAGE IN SECTION 17 OF THE CUSTOMS (1) On page 27, line 13, amend section 17 (a) to read as follows: "SEC. 17. (a) Section 487 of the Tariff Act of 1930 (U. S. C., 1946 edition, title 19, sec. 1487) is amended by deleting therefrom, or at any time before the invoice or the merchandise has come under the observation of the appraiser for the purpose of appraisement,', and substituting therefor, or at any time prior to the lodging of the appraiser's report of value with the collector,'." (2) On page 28, lines 3 and 4, delete "all information required by customs officers", and substitute therefor "such information as is requested in writing by customs officers." BOUDIN, COHN & GLICKSTEIN, UNITED STATES SENATE, COMMITTEE ON FINANCE, (Attention: Mrs. Elizabeth B. Springer, Chief Clerk.) GENTLEMEN: Enclosed please find statement by the undersigned, submitted on behalf of the Pocketbook Workers Union. The undersigned testified orally before the committee on April 28 and was granted permission to file a written statement. Enclosed you will also find corrected transcript. Very truly yours, BOUDIN, COHN & GLICKSTEIN. By SAMUEL HARRIS COHEN. STATEMENT MADE BY SAMUEL HARRIS COHEN, ATTORNEY FOR THE POCKETBOOK WORKERS UNION, A. F. OF L. Honorable sirs, I appear as attorney for the Pocketbook Workers Union, affiliated with the International Handbag, Luggage, Belt & Novelty Workers Union, A. F. of L., in opposition to the proposed amendment in section 321 of H. R 5505. This union has about 12,000 members who work in the ladies' handbag industry situated in the greater area of metropolitan New York City. These members work for some 335 employers who manufacture handmade or quality handbags, and for some 150 employers who manufacture personal leather goods. Fifty-five percent of the said handbag production of the United States is produced by the members of the Pocketbook Workers Union. The 55-percent figure is misleading in that almost 90 percent of the higher-priced handbags is made in metropolitan New York. The out-of-town companies for the most part produce the less expensive handbags retailing from $1 to $5. Quality bags retail from $7.50 and up, with an average of from $10.50 to $12.50. The union for which I speak is experiencing at this time the worst business conditions it has ever had since about 1935. From the legal work required we get an insight into the depressed business conditions in New York. In the last 2 years my firm has been concerned with the collection of wages, vacation, and holiday pay and unemployment-insurance benefits. For the first time in recent years employers have been asking for, and receiving, an extension of time in which to remit to the union holiday and vacation pay and to pay wages to the employees. As stated before, the New York market primarily produces the quality handbags. It is this part of the industry that is most directly affected by the unfair imports of handbags. The proposed change in section 321 of H. R. 5505 will aggravate to a great extent the unfairness of the foreign competition to the quality handbag employer and worker, by encouraging imports of handmade quality purposes. The person of means is the purchaser of these handbags and also is the foreign traveler. The proposed amendment would encourage this group of citizens to purchase their handbags abroad, or through mail orders. Without the benefit of this proposed tax gift the foreign producer has many advantages. The wages of the hand pocketbook makers in the foreign countries are estimated to be from 30 percent, in countries like France, Germany, and Austria, to 40 percent in countries like England and Italy of the American wages. The foreign worker works from 48 hours to 54 hours per week as compared with the 371⁄2 hours worked by the members of the Pocketbook Workers |