sellers new to the American market. The ECA received a great number of complaints from Europeans about difficulties they have had, or fear, from United States customs. The passage of the proposed bill would not only give valuable assurance to Europeans of America's genuine interest in fostering European trade but would also remove many actual barriers inherent in present customs machinery. As far as Mutual Security Agency's program is concerned some features of the proposed legislation stand out as of particular importance. I have in mind the proposed revision of criteria for the valuation of imported articles the proposed removal of special-marking requirements, and the provision on countervailing duties. Senator HOEY. Thank you very much, Mr. Taylor. Mr. TAYLOR. Thank you, Mr. Chairman. Senator HOEY. Mr. Rowland Jones, Jr. Have a seat, Mr. Jones. STATEMENT OF ROWLAND JONES, JR., PRESIDENT, AMERICAN RETAIL FEDERATION Mr. JONES. Good morning, Mr. Chairman. Mr. Chairman, my name is Rowland Jones, Jr. I am president of the American Retail Federation, and I would ask leave to file a short brief with your committee and only hit the high spots of that brief orally. Senator HOEY. That will be entirely agreeable. The entire brief will be placed in the record. Mr. JONES. Attached to the statement is a list of the 22 national retail associations, and 34 State retail associations, which are members of the American Retail Federation. Senator HOEY. They will be included in the record. Mr. JONES. Mr. Chairman, today we confine our interest in the pending bill to section 321 (b) (2) which would raise the duty-free import valuation from the present figure of $1 to $10. The only argument in favor of this proposal that we have found in the discussion of this bill publicly has been the cost of handling small packages through customs. While that may be a matter of importance to the Government and in the matter of cost of administering our customs and our imports, we think a large number of rather important considerations outweigh any saving which might accrue to the Government. So far as we know, all that the Customs Service claims for this section of the bill is that it would have the effect of saving a considerable amount of money in the processing of many packages in a value of $10 or less. Senator HOEY. Have you any estimate of the difference in amount of revenues that would be derived under the present law and under this one? Mr. JONES. Well, it is claimed by customs, we understand, that it costs on the average of $1.59 to process a package through customs. Senator HOEY. And this bill changes it from $1 to $10? Mr. JONES. That is right. They claim it would make that customs inspection unnecessary for packages to citizens of the United States for their personal use shipped from abroad-it would save the inspection costs. A large number of other considerations, however, we think, negate any savings which might be made. In the first place, we would expect that if this section were approved by the Congress, a very large increase in the volume of duty-free imports to come into this country in classifications of products of all kinds. It constitutes an open invitation for the establishment of foreign mail-order businesses, not only in European and Asiatic countries, but also substantially from Canada and Mexico. The prestige of foreign imports is now substantial in this country, even with the duty, and I would offer for the record the language of an advertisement in the New York Times magazine. The rate for a single insertion in that magazine is $3,370, and it advertises women's capes and skirts, with duty, respectively, of $2.75 and $2.50, respectively, for the cape and the skirt, but with a price of $7.95 and $8.95, respectively. In other words, there must be a tremendous volume of this kind of imports now paying the duty. You take the duty off and you give a tremendous impetus, and the package handling of customs, we are sure, would skyrocket in valuations of less than $10. Senator HOEY. Does this bill eliminate the tax altogether where it is for personal use? Mr. JONES. It is duty-free where it is shipped into this country to individuals for personal use and not for resale; it is duty-free up to $10. (The advertisement referred to is as follows:) [Advertisement from the New York Times, February 24, 1952] ORDER YOUR "ROYAL PLAID" SEPARATES DIRECT FROM LONDON The personal tartans of the royal princesses in the season's newest silhouettespencil slim or flaring skirt in finely woven 100-percent virgin British woolen, superbly tailored. The matching stole-cape, lavishly garlanded with wool fringe, to wear a dozen different ways. Richard Shops of Regent Street, London, are able to offer you these unbelievable buys only because of the current favorable rate of the dollar exchange to residents of the United States of America. American sizes__ 10 12 14 16 18 Length 25 26 27 28 30 Straight skirt, $7.95. Delivery will take about 4 weeks and you pay a customs duty of about $2.50 for the straight skirt, $2.75 for the flared skirt, and $2.50 for the matching stole-cape to your postman on receipt. RICHARD SHOPS, Cut this out and send to London Dept. NT-1, 180 Regent Street, London, England: Please send me the following Dereta skirts. I understand if I am not satisfied the purchase price will be refunded. Name Address City Zone_ State___. Princess Elizabeth tartan__ Flared $8.95; straight $7.95; sizes___ To speed delivery, airmail from anywhere in United States, 15 cents. We pay postage on all shipments Mr. JONES. It should be borne in mind also that the $10 valuation represents the value in terms of foreign currencies and not American currencies, which makes that level higher than the $10 figure. We are certain that there would be a great loss in customs revenue to the Government if this section were approved, and, second, I would call the committee's attention to the fact that in this country we have a broad system of excise taxes on a great many products which sell for less than $10 in this country. We have the 20-percent excise taxes at retail, a very heavy tax which includes cosmetics, jewelry, and luggage, and in addition, many States have sales taxes on all products except food, ranging up to 3 percent. In addition, we have excise taxes at the manufacturer's level as high as 25 percent of the manufacturer's price over a wide range of items. To open our imports into this country duty-free on valuations up to $10 would give a tremendous incentive to American citizens to order all of these categories of goods from foreign mail-order companies which are certain would spring up immediately, and there would be a great loss to the Federal Treasury in these excise taxes because they would not be applicable on foreign imports from foreign countries; a great loss to the States in State sales taxes on those sales, which we believe would mushroom rapidly. In addition, many cities in this country today, on top of that, have sales taxes which would not apply to these imports. So, State, national, and local, the taxes lost on opening up this situation would be very substantial and far outweigh the cost of the inspection which the Customs Service offers as their main excuse for opening up these imports duty-free up to this figure. There would also be the collateral loss to the Treasury and to the States in the collection of corporate and personal income taxes representing the profits on this business which would be diverted to foreign mail-order operations. In addition also inevitably it would bring a loss of employment opportunity in the manufacturing establishments of this country. There are some safeguards in this section of the bill giving the Secretary of the Treasury the authority to move in and abrogate the $10 rule, but we feel that that safeguard is not adequate, and in no sense would protect against the serious evils which we think would accrue. Now, the argument may be made in regard to this section that it will be very helpful to foreign countries which are short on dollars and need it in their foreign exchange and need it for healthy rebuilding of foreign countries. We think that this is not a matter-this is not a way in which we should help foreign nations increase their dollar balances and their exchange position. We are doing that in many, many other ways in the amount of billions of dollars, and we do not think that this foreign aid should now be injected to relief for foreign mail-order importers into this country on the basis that it helps those foreign countries in their dollar exchange. We also approve the airlines' proposal for informal entries into this country, which is a procedural matter, which would greatly simplify the incoming import packages by airlines. The procedural situation now makes it very difficult for them to get prompt access to foreign shipments coming in by airlines, which are legitimate in every way. Over-all, Mr. Chairman, the retailer of this country hopes that he will not be subjected to a mushrooming mail-order competition from abroad, particularly from Canada and Mexico where we are so close by. We know that tremendous businesses would be built in Canada. and Mexico immediately, because of the savings in taxes that Americans can avoid by simply sending a mail order to Canada or Mexico, and we know we all like to avoid taxes wherever we can. There is also that fascination of imported goods to American people-not always justified-but which is water on this wheel, and we hope this committee will not approve the increase from $1 to $10 of the import-duty freedom in the existing law, and to leave the existing law as it now stands in this regard. Senator HOEY. Thank you for your appearance, Mr. Jones. (The prepared statement of Mr. Jones is as follows:) STATEMENT OF ROWLAND JONES, JR., PRESIDENT OF THE AMERICAN RETAIL FEDERATION, REGARDING H. R. 5505, THE CUSTOMS SIMPLIFICATION ACT OF 1951 My name is Rowland Jones, Jr. I am the president of the American Retail Federation, with offices at 1625 Eye Street NW., Washington, D. C. The American Retail Federation is a federation of 21 national retail-trade associations and 32 State-wide retail associations. The names of the members of the federation are attached to this statement. The members of the federation are opposed to that part of section 11 of H. R.' 5505 which proposes to amend section 321 (b) (2) of the Tariff Act of 1930. This section would permit the importation of articles-otherwise than on the person or in the baggage of an individual arriving in the United States-without payment of duty in cases where the aggregate value of all articles in a shipment did not exceed $10, and the articles are for personal or household use and not for resale. (An exception is made for alcoholic beverages and tobacco products, which are not eligible for this exemption.) The purpose of this provision, according to the bill, is to avoid expense and inconvenience to the Government disproportionate to the amount of revenue that would otherwise be collected. The retail industry feels strongly that the enactment of this provision would not accomplish the purpose set forth in the bill, and that, on the contrary, substantial amounts of revenue would be lost to the Federal Government if this provision becomes law. Large volume of imports seen This provision, if enacted, would open the door to the establishment of a large importing business. It is a cordial invitation to foreign manufacturers and producers to advertise extensively in our newspapers and magazines that their articles can now be obtained duty-free. A certain glamour, undeserved in many cases, I think, attaches to imported articles at all times, and the American public is always quite conscious of any chance to buy an article at a reduced price, particularly if the reduction is caused by the elimination of a tax. Foreign firms already have discovered that there is a good market in this country through mail-order business. As an example this advertisment offers imported skirts and capes direct from London. This advertisement, placed by the Richard Shops, cost the company $3,370 for one insertion. Obviously the Richard Shops must expect to sell a large number of skirts and capes to pay for the cost of the advertisement. It is easy to see how much more appeal the ad would have if instead of stating that the American customer will pay the postman about $2.50 duty on a $4.95 cape, or $2.75 on a 7.95 skirt, the advertisement could say that the items ordered direct would come in duty-free whereas the same imported item purchased in a local store would have a customs duty in its price. Therefore, the retail industry feels that if this provision becomes law, an import business in articles of less than $10 in value and it might be well to emphasize here that the $10 figure refers to foreign value, not domestic value, which would be a higher figure this import business, I repeat, would mushroom to vast proportions almost overnight, with a substantial loss to the Treasury, not only in customs duties, but also in internal revenue. Customs loss could be material The loss in customs duties, retailers believe, would be substantial. The purpose of this section of the bill, as already stated, is to relieve the Government of the expense of collecting small amounts of duty, where the cost of collection is in excess of the duty. The latest figure available on this cost is approximately $1.59 per mail package. However, in the advertisement just mentioned, the duties on items of less than $10 run considerably higher than this cost of collection. Duties on other items in the luxury or semiluxury class-and these would be the items most likely to appeal to American consumers-would probably exceed the collection cost in many cases also. Loss in excise taxes Aside from the loss in customs revenue there is the certain loss to the Treasury from diminished excise-tax collections. Many of the items which would appeal to American purchasers are those which are domestically taxed at 20 percent of the retail selling price, such as jewelry items, luggage, toilet preparations, and furs. Hundreds, if not thousands, of items in these categories would come within the less than $10 value classification. As imports they would not be subject to the 20 percent excise tax and the saving of a 20 percent tax would be a forceful appeal to the bargain-minded American customer. In addition there are many items which might be imported under this provision which are subject to a 10 or 15 percent manufacturer's tax if produced domestically. Included in these are small electric appliances, sporting goods, cigarette lighters, and some others. The loss to the Treasury from the importation of these articles, which would come in duty-free and excise-tax-free, would be anything but inconsequential. Loss in income-tax collections The growth of a large import business from foreign manufacturers and dealers direct to the American consumer could not help but have a noticeable effect on income taxes as well. Retailers who suffered from a loss in sales due to this foreign competition would have their profits reduced and pay less income taxes to the Federal Government. American manufacturers producing items in competition with the imported items would also suffer a loss in sales which would shortly be reflected in curtailed payrolls and unemployment. Safeguards anything but adequate The danger that this provision would open the doors to a mail-order business of vast proportions was clearly recognized in the hearings before the Ways and Means Committee, and admitted by Treasury representatives who testified on the bill. They felt, however, that they had provided ample safeguards in the provision in subsection (c) of the proposed new section 321, by giving the Secretary of the Treasury power to prescribe exceptions to this exemption and to reduce the $10 maximum whenever necessary to protect the revenue or prevent unlawful importations. The Ways and Means Committee report also stated that it was the desire of the committee that the Secretary should use these powers to prevent abuses by mail-order business engaging in direct shipment of dutiable articles to purchasers in the United States. The retail industry does not consider these safeguards as adequate It would take some time to detect the extent to which the provision was being used to build up a mail-order business in this country, and it would take more time to determine the extent to which the Secretary should exercise his powers to make exceptions, to restrict certain articles from the privilege, or to reduce the $10 maximum to some lesser figure. By that time the damage would have been done. Faced with a definite loss of revenue in customs collections, excise-tax collections and damage to manufacturers, retailers, and their employees, it would be far better to keep the door closed by striking this section from the bill. |