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in such legislation of provisions which would result in injury to domestic business, including that of importers and retail dealers.

In this connection, we are particularly concerned about the amendment to .section 321 of the present Tariff Act, proposed by section 11, subdivision (b) (2) of said H. R. 5505.

Section 7 of the Customs Administrative Act of 1938 (U. S. C., 1946 ed., title 19, sec. 1321) amended the Tariff Act of 1930 by adding at the end of part I of title III a new section entitled "Sec. 321. Administrative Exemptions," which reads in part as follows:

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"Collectors of customs are hereby authorized, under such regulations as the Secretary of the Treasury may prescribe, * * to admit articles free of duty when the expense and inconvenience of collecting the duty accruing thereon would be disproportionate to the amount of such duty, but the aggregate value of articles imported by one person on one day and exempted from the payment of duty under the authority of this section shall not exceed $5 in the case of articles accompanying, and for the personal or household use of, persons arriving in the United States, or, $1 in any other case."

It will be noted that under the above-quoted provisions of said section 321, articles exceeding $1 in value, accompanying persons arriving in the United States but not for their personal or household use, and also articles exceeding $1 in value, imported otherwise than on the person or in the accompanying baggage of a person arriving in the United States, are not exempt from the payment. of duty.

Section 11 of H. R. 5505 proposes certain amendments to said section 321, including the following:

"SEC. 321. ADMINISTRATIVE EXEMPTIONS

"(a)

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"(b) Subject to such exceptions and under such regulations as the Secretary of the Treasury shall prescribe, articles (not including alcoholic beverages, manufactured tobacco, snuff, cigars, or cigarettes) shall be admitted free of duty and of any tax imposed on or by reason of importation in the following cases :

"(1) When the articles are on the person or in the accompanying baggage of an individual arriving in the United States who is not entitled to any exemption from duty or tax under paragraph 1798 (c) (2) of this Act and the aggregate value of such articles is not over $10, if the articles are intended for the personal or household use of such individual and not for sale, or $5 in any other case. This exemption shall not be allowed to any person more than once in one day.

"(2) When the articles are imported otherwise than on the person or in the accompanying baggage of an individual arriving in the United States and the aggregate value of all articles in the shipment is not over $10, if the articles are intended for the personal or household use of the consignee and not for sale, or $5 in any other case. The privilege of this subdivision shall not be granted to any C. O. D. shipment or in any case in which merchandise covered by a single order or contract is forwarded in separate lots to secure the benefit of this subdivision.

"(c) The purpose of this section is to avoid expense and inconvenience to the Government disproportionate to the amount of revenue that would otherwise be collected. Therefore, the Secretary of the Treasury is authorized by regulations to diminish any dollar amount specified heretofore in this section and to prescribe exceptions to any exemption provided for in this section whenever he finds that such diminutions or exceptions are consistent with the purpose above stated, or are for any reason necessary to protect the revenue or to prevent unlawful importations."

It will be noted that the proposed amendments provided by subdivisions (b) (1) and (2), quoted above, constitute a drastic departure from the former practice respecting the dutiable status of articles imported on the person or in the accompanying baggage of a person, and those imported otherwise than on the person or in the accompanying baggage of a person arriving in the United States. Since subdivision (b) (1) provides for articles imported on the person or in the accompanying baggage of an individual arriving in the United States, it is clear that subdivision (b) (2) applies exclusively to articles imported otherwise than on the person or in the accompanying baggage of an individual arriving in the United States.

We do not favor the amendment proposed by said subdivision (b) (2) and desire to record our firm opposition thereto. The members of this association are convinced from their experience in the domestic watch industry that the right to import articles free of duty and tax, as provided in proposed subdivision

(b) (2), to an aggregate value of $10, when intended for the personal or household use of the consignee and not for sale, or to an aggregate value of $5 in any other case, will cause much hardship and result in serious injury to a large number of domestic retail dealers, as well as to manufacturers, wholesalers, and importers engaged in business in this country.

The members of this association are engaged in the wholesale watch business in the United States and represent a substantial portion of that industry. The majority of our members produce watches in this country with the use of imported and domestic materials. Watches are also imported complete by some of our members and all of these watches, whether produced in this country or imported complete, are merchandised through over 30,000 retail jewelers, department stores, and other retail outlets. Past experience has shown that the watch industry is a highly competitive one and that customs duties, and the retail excise taxes, are an important consideration in the price the ultimate consumer pays for our products.

So, with respect to watches, if proposed subdivision (b) (2) is enacted into law in its present form, it would provide an opportunity for any number of alert domestic and foreign persons or firms to establish foreign businesses to supply directly to consumers in this country, for their peronal use, millions of watches that are now supplied by those engaged in the domestic watch business, and at prices which it would be impossible for the domestic firms to meet. Under subdivision (b) (2) watches could be advertised here for purchase and importation directly by consumers at prices not including customs duty and retail excise tax, and this would constitute such a tremendous appeal to the buyers that the volume of such business quickly would grow to substantial proportions. Domestic retail dealers could not possibly compete pricewise with foreign sellers engaged in that kind of business.

The effect of subdivision (b) (2) is to bypass the regular importers, distributors, and retail dealers. Transactions under this proposed provision would avoid not only customs duties and excise taxes, but also sales taxes, and the costs usually incurred by those engaged in the importing and entry of merchandise into his country, as well as Federal and State income taxes on the profits, and all other provisions relating to social security taxes, unemployment taxes, and similar obligations. The volume of watches supplied under this proposed provision, under such conditions, rapidly would reach at least 3 million units a year and in time probably would materially exceed this figure.

Under such circumstances, the low and medium priced watch business of the retail jewelers and others dealing in such watches would be virtually ruined, with the result that the business of the regular watch importers, manufacturers, and distributors, who are the suppliers of the retail jewelers, likewise would be seriously injured.

It is obvious that what we have stated concerning the direct purchase of watches by consumers from foreign suppliers applies with equal force to thousands of other items which could be imported under subdivision (b) (2) free of duty and excise tax, and of the other obligations above mentioned, if this proposed amendment is enacted into law. Some of the more important goods would include perfumes and other toilet articles, costume jewelry, wearing apparel, shoes and other leather goods, glassware, hardware and tools, and foodstuff. The business of all of the regular domestic manufacturers and producers, importers, wholesalers, and retail dealers handing such items, and hundreds of others, unquestionably would be adversely affected by the imports that would surely follow the passage of said amendment.

The tremendous possibilities offered by proposed subdivision (b) (2) undoubtedly would be taken advantage of by many foreign suppliers at the earliest moment after enactment. Also, domestic suppliers could open branches in contiguous countries, such as Canada and Mexico, for the purpose of availing themselves of the benefits to be derived by doing the business possible under this proposed amendment.

We recognize that under proposed subdivision (c) of section 321, the Secretary of the Treasury is given the power, in his discretion, to reduce any dollar amount specified in the said section, and to prescribe exceptions to the exemptions provided therein when deemed necessary to protect the revenue. Also, that in report No. 1089 to accompany H. R. 5505, the Committee on Ways and Means. said, respecting section 11 (p. 13), as follows:

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It is the desire of the committee that the Secretary of the Treasury shall exercise his authority under this section in such a manner that the section will not be subjected to abuses by mail-order businesses engaging in the direct shipment of dutiable articles to purchasers in the United States."

However, even though the Secretary of the Treasury would have the authority to take remedial action under said subdivision (c), and to correct abuses which might arise, it would, we submit, be almost impossible to cover the vast range of items within the scope of subdivision (b) (2) with regulations and exceptions, without more or less nullifying the privileges granted by that subdivision. In the meantime, the injury resulting from the imports would be suffered. Therefore, it would seem appropriate to take steps at this time that will eliminate the danger inherent in the said subdivision.

This could be accomplished very simply by deleting entirely from section 11 the proposed subdivision (b) (2), and reducing to $1 the figure $5, which now appears in subdivision (b) (1), line 16, page 15 of the bill, which action we strongly recommend be taken.

If, however, the committee favors the separate provisions for articles imported on the person or in the accompanying baggage of an individual, and for those imported otherwise than on the person or in the accompanying baggage, then we suggest, in the alternative, that the figure $10, in subdivision (b) (2), appearing in line 22, page 15, be reduced to $1, and the figure $5, in line 24, likewise be reduced to $1.

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If it is finally decided neither to eliminate subdivision (b) (2) nor to change the present value provisions of subdivisions (b) (1) and (2), then we suggest that all items subject to the retail-excise tax should be excluded from the provisions of said subdivisions (b) (1) and (2), because the entry of certain items free of duty is a sufficient advantage to an individual and should not be extended to include those also subject to retail excise tax. This could be accomplished by amending the exceptions provided in subdivision (b) to read as follows: (not including alcoholic beverages, manufactured tobacco, snuff, cigars, cigarettes, or any article or material subject to the retail excise tax)." It is submitted that favorable consideration of one or the other of the recommendations and suggestions outlined above is not only desirable but necessary to prevent a serious situation that will rapidly develop, and affect adversely the various domestic businesses hereinbefore mentioned if the said proposed subdivision (b) (2) is enacted into law in its present form. Respectfully,

Senator WALTER F. GEORGE,

AMERICAN WATCH ASSOCIATION, INC.
S. RALPH LAZRUS, President.
WILLIAM H. Fox, Counsel.

Senate Office Building, Washington, D. C.

R. F. DOWNING & CO., INC.,
New York, April 17, 1952.

DEAR SENATOR GEORGE: I am addressing you in connection with the customs: simplification bill, H. R. 5505, which will be the object of public hearings before the Senate Committee on Finance starting Tuesday, April 22, 1952.

In common with many other customs brokers, I am concerned over a provision in the pending measure which would authorize free entry for "noncommercial" shipments valued at $10 or less. Increase from the present limit of $1 value is understood to be favored by the Treasury Department on the premise it would reduce work for customs personnel and expedite procedure.

Aside from the possible damage to legitimate importers and the likelihood of encouraging a greatly increased volume of small packages from abroad by parcel post and air, I am convinced the proposed change would add greatly to the work for Customs and quite likely pose a threat to revenue. The only way to determine whether a package should have free entry for value under $10 would be to examine the contents and obtain a shippers invoice. Hence, it would be no saving in work or time. It would actually make matters worse because of eagerness on the part of shippers abroad and persons in this country

to get apparel, books, hardware, and countless small items. At the same time, it would harm the legitimate importer now paying duty and handling such goods in quantity.

I have been a customs broker for 30 years and at one time head of Foreign Freight Forwarders and Brokers at the port of New York. I was also a candidate for Congress on the Democratic ticket from the Sixth District, New Jersey, in 1944 and 1946. If you would desire further information, I shall be pleased to respond at any time.

Yours very truly,

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Senator HOEY. This concludes the schedule of witnesses for this morning. The committee will now take a recess until tomorrow morning at 10 o'clock.

(Whereupon, at 11:10 a. m., the committee recessed, to reconvene at 10 a. m. Wednesday, April 23, 1952.)

CUSTOMS SIMPLIFICATION ACT

WEDNESDAY, APRIL 23, 1952

UNITED STATES SENATE,
COMMITTEE ON FINANCE,
Washington, D. C.

The committee met, pursuant to adjournment, at 10 a. m., in room 312, Senate Office Building, Senator Clyde R. Hoey presiding. Present: Senators Hoey, Kerr, Frear, and Williams.

Also present: Elizabeth B. Springer, chief clerk; and Serge N. Benson, professional staff member.

Senator HOEY. The committee will come to order, please.

Mr. Wayne C. Taylor?

Mr. TAYLOR. Yes, sir.

Senator HOEY. Mr. Taylor, do you have a statement you would like to make at this time? If you do, will you give your name and address to the reporter?

STATEMENT OF WAYNE C. TAYLOR, CONSULTANT, MUTUAL

SECURITY AGENCY

Mr. TAYLOR. My name is Wayne C. Taylor, and I live in Heathsville, Va., sir; I am a consultant to the Mutual Security Agency.

Mr. Chairman, the Mutual Security Agency strongly supports the position taken by its predecessor agency, the Economic Cooperation Administration, in the letter of February 1, 1951, from Mr. William C. Foster, the Administrator, to the Honorable R. L. Doughton, chairman of the Ways and Means Committee. In this letter Mr. Foster pointed out that the passage of H. R. 1535 would go a long way toward clearing up the numerous uncertainties and complexities of United States customs procedures.

The Mutual Security Agency wishes to take this opportunity to reiterate our opinion that the simplification of customs procedures would make a substantial contribution to the fostering of a mutually advantageous and permanent increase in trade between Europe and the United States. As you know, one of the most serious economic problems that ECA, and now MSA, had to deal with in Western Europe was the existence of a substantial deficit in Europe's trade with the United States. While this deficit for a brief period tended to disappear under the pressure of the mobilization effort, the basic causes continue to exist and will continue to threaten the security of the European economy and the success of our mutual defense efforts with our NATO and other European allies. There is no question that the complexities and uncertainties of customs procedure, which the proposed bill seeks to eliminate, have been a major deterrent to European

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