CUSTOMS SIMPLIFICATION

THURSDAY, MAY 28, 1953

HOUSE OF REPRESENTATIVES,
COMMITTEE ON WAYS AND MEANS,

Washington, D. C.

The committee met, pursuant to recess, at 10 a. m., in room 1102, House Office Building, Hon. Daniel A. Reed (chairman) presiding. The CHAIRMAN. The committee will come to order.

We will continue the hearings on the customs simplification. The first witness will be Mr. J. B. Colburn, Esquire, on behalf of the Association of the Customs Bar, New York City. If you will give your name and the capacity in which you appear, we will be very glad to hear you.

STATEMENT OF J. BRADLEY COLBURN, THE ASSOCIATION OF THE CUSTOMS BAR, NEW YORK, N. Y.

Mr. COLBURN. My name is J. Bradley Colburn, 25 Broadway, New York. I appear before the committee this morning on behalf of the Association of the Customs Bar. This association is composed of lawyers specializing primarily in the practice of customs law before the United States Customs Court, the Court of Customs and Patent Appeals, the Treasury Department, and other departments of the Government concerned with customs and tariff matters. The Customs Bar is directly interested in and concerned with the proposed legislation. Copies of the bill have been made available to all of the members and the statement which I shall present has been approved by the board of directors of the association and represents their composite views and specialized experience.

I would like to digress a moment, and say that it has been the effort of the bar in this connection to so far as possible strip their consideration of this measure from any partisan viewpoint. We tried to approach it without reference to the character of our respective clientele and to present a wholly objective statement to the committee.

The bill H. R. 5106 is offered as a measure to simplify some of the procedures connected with importation of merchandise into the United States but in fact goes far beyond mere simplification as such. The bill is replete with repeal or modification of specific limitations established by the Congress to guide and control administrative actions. The bill substitutes therefor general language which vests wide discretion in administrative officers and thereby may hamstring judicial review and subjects most of the procedures connected with the importation of merchandise into the United States to regulations by the Secretary of the Treasury. We believe it is bad policy to transfer such wide, unfettered discretion to any administrative officer, and we oppose the bill in its present form unless it be amended

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to make the intention of the Congress more definite and to provide clearly for adequate judicial review.

Mr. JENKINS. Do you intend to outline in detail in the statement what you think the amendments should be?

Mr. COLBURN. In connection with each criticism we make of the bill, Mr. Jenkins, we will offer the language of an amendment which we think could cure the objection.

Mr. JENKINS. That is fine; thank you.

Mr. COLBURN. The summary explanation of the bill issued by the committee contains statements indicating that proposed repeals and modifications of existing law are not intended to limit or do away, in any part, with judicial review. We suggest that importers and American manufacturers alike who have an interest in importation into the United States are entitled to a clear and affirmative statement of this intention by adoption of amendments to give definite expression thereto. Certainly no doubt should be permitted to exist on this point.

In much of the bill we have no particular interest as a bar, and we therefore offer no comments or suggestions. We confine our comments to certain provisions which we think are the most important, namely, section 2 dealing with repeal of certain provisions.

Section 3, dealing with effective dates of rates of duty.

Section 5, dealing with transportation of lead-bearing and zincbearing ores.

Section 7, dealing with American goods returned.

Section 15, dealing with dutiable values of imported merchandise. Section 19, dealing with amendment of entries.

Section 22, dealing with conversion of currency.

Section 23, dealing with transfer of goods in bonded warehouse. These sections will be discussed separately.

Section 2, repeal of obsolete accounting provisions: At the outset I would like to jump over in my statement and say first that some of these repeals were specifically included as a part of Reorganization Plan No. 3, which was rejected by the Senate in the last Congress. They are incorporated again in this measure.

Some of the statutes would deal with internal accounting procedures, and on those the bar has no comment. Others of these sections, however, seem to vitally affect the basis upon which rests the exercise of judicial review of administrative action.

Thus, Revised Statutes 2621, 2622, and 2623 (19 U. S. C. 33, 34, and 35) describe certain functions of collectors of customs. They require the receiving of entries at "each of the ports," the payment of duty there; the keeping of records there, and the delivery of the merchandise there. The proposed repeal is absolute and no substitute provisions are suggested. The result seems to be to substitute the unfettered discretion of the Secretary of the Treasury for the existing definite statutory provisions making mandatory on certain officers the keeping and disclosure of the basic information necessary to implement the right of judicial review. If the proposed repeal be adopted, the Secretary of the Treasury might cause such records to be kept in Washington or in certain headquarters ports or not at all, and unless the record is properly and conveniently located the right of judicial review is substantially denied. The customs courts have uniformly held that both the Government and the importer have the

right to a court hearing at the port where the entry was made and where the records are kept.

A recent case serves to illustrate the importance of retention of the requirement to preserve the records of the type here in question. A certain yacht arrived at the port of Brownsville, Tex., and formal customs entry was compelled to be made at that port. A dispute arose between the owner of the yacht and the Treasury Department as to whether or not duty accrued. A timely protest was filed against the assessment of duty and the case was docketed for hearing before the Customs Court at the port of Brownsville.

Shortly before trial it was ascertained by counsel for the yacht owner that the vessel manifest and other pertinent documents were no longer available for inspection at Brownsville. A request was made to the collector to make such documents available for inspection and it was learned that they had been placed in Government archives located at Fort Worth, Tex., and would not be returned to the port of entry without a court order. Counsel for the importer was forced to communicate with the Bureau of Customs in Washington and arrangements were made for the return of these documents to Brownsville. Two days before trial they had not yet arrived and considerable time and expense was involved in producing them in time for the hearing. Until the day before the trial the yacht owner's counsel was unable to learn the statements made in making entry of the vessel or the exact details surrounding the transaction by which a substantial amount of duty was levied. True, the foregoing situation arose under the present law and counsel in the case properly, we believe, took the position that the documents had been illegally removed from the port of entry, in which position he was sustained. This occurrence illustrates, however, what might well result if the statutory requirements be repealed and the matter left wholly to the discretion of administrative officers. Unless the collector be required to retain physical possession and control over the entry documents, he will be unable to comply with the mandatory provisions of section 515 of the Tariff Act (19 U. S. C. 1515) directing him to transmit the entry and accompanying papers to the United States Customs Court along with the importer's protest.

The repeal of the provisions here in question, namely, Revised Statutes 2621, 2622, and 2623 was specifically included as a part of the Reorganization Plan No. 3 of 1952, which the 82d Congress specifically refused to approve.

Section 3, effective dates of rates of duty: The bar has no comments on the proposed changes. We would like to suggest, however, a change in subdivision (d) of page 6, which is a reproduction of existing law.

That section subjects the right of an importer to notice prior to change in rate of duty, however, to a determination by the Secretary of the Treasury that the then existing practice has been an "established and uniform” one. While the burden would be difficult and the occasion rare, it is believed an importer should have the right to establish such a practice affirmatively and that his right to notice should not be hinged solely on administrative determination. It is accordingly suggested that the section be amended as follows:

Page 6, lines 14 and 15. Delete the words "the Secretary of the Treasury shall find to". Insert in lieu thereof the word "shall". Alternatively, the section might be amended as follows:

Page 6, line 15. Insert after the word "Treasury", the words "or the appropriate court".

Section 315, subdivision (d) would carry forward a 30-day notice of change in practice. In Treasury Decision 53093, of August 29, 1952, the Treasury Department extended this time to 90 days. It would seem that 90 days, rather than 30 days, would be a more equitable period of notice.

Section 5, transportation of lead-bearing and zinc-bearing ores: Under the present law the determination of a lead or zinc content of imported ores is specifically required to be made at "properly equipped sampling or smelting establishments" and "according to commercial methods." Import entries are specifically required to be liquidated on the basis of such reports. The proposed amendment in section 5 would repeal this definition of procedure by the Congress and substitute wholly undefined discretion in the Secretary of the Treasury.

Section 7, American goods returned: The change now proposed is the same as that contained in the proposed customs simplification bill of 1952, H. R. 5505. The Treasury Department then stated that such amendment was made in accord with a recommendation of McKinsey & Co. in a survey of the customs service conducted by that firm of management consultants. McKinsey & Co., however, made a further recommendation to eliminate an inequitable situation which in some instances requires importers to pay duties not rightfully incurred as follows:

We recommend the elimination of affidavits and evidence of exportation on entries of "American goods returned" when, upon examination of the merchandise it can definitely be determined that such merchandise is of American manufacture, growth, or product.

Paragraph 1615 (h) of the Tariff Act of 1930, as amended by the Administrative Act of 1938, provides:

(h) The allowance of total or partial exemption from duty under any provision of this paragraph shall be subject to such regulations as to proof of identity and compliance with the conditions of this paragraph as the Secretary of the Treasury may prescribe.

Those regulations have been construed by the courts to be mandatory and strict compliance with them to be a condition precedent to obtaining any of the relief intended to be given by the Congress thereunder. We believe that in consonance with the recommendation of the firm of McKinsey & Co. and to carry out what may have been the proper intent of the Congress, or in any event to create a more equitable situation that the right to relieve from assessment of duties on American goods returned, where their character can be established, should not be made to depend upon strict compliance with regulations, and that an importer should be left free to establish the facts before a competent review tribunal. To carry out that recommendation, Mr. Chairman, it is necessary, and we suggest that paragraph 1615 (h) of the Tariff Act be repealed. Relief from the payment of duties under paragraph 1615 has been denied on the ground of noncompliance with the regulations even where complete documentary proof was submitted after liquidation. (See United States v. Morris European and American Express Co., Ct. Cust. Appls. 146.)

It has even been held that the fact that customs officials knew that the particular merchandise was of American origin and were

familiar with all the facts connected with exportation and importation did not excuse the necessity for compliance with the regulations under the theory that the grant of free entry by the Congress in this paragraph was limited and the limitation must be strictly followed. (Maple Leaf Petroleum Ltd. v. United States (24 C. C. P. A. (Cust.) 5 T. D. 48976).)

The determination of American origin of imported merchandise should in and of itself be sufficient to permit duty free entry into the United States. The privilege of such free entry should not be qualified, limited or made contingent upon the furnishing of affidavits and other documentary proof frequently difficult, if not impossible, for the importer to obtain in order to satisfy customs regulations. The importer should be free to establish the character of his merchandise and if dissatisfied with the findings of the collector as to its duty free or dutiable status, should be permitted to have his rights established by court review just as in the case of any other merchandise sought to be brought into the United States.

For the foregoing reasons it is suggested that paragraph 1615 (h) of the Tariff Act of 1930, as amended be repealed.

Mr. EBERHARTER. In other words, you have to pay duty in cases where it is a known fact that the goods are of American manufacture, because you cannot follow the regulations of the Treasury that happens under present law and you suggest changing it?

Mr. COLBURN. That is the way under existing law the statute has been interpreted and applied. In my formal statement I cite to the committee several cases with court references where that has been the holding. We think that is an inequitable situation and while regulations may be necessary for proper administration, an importer should not be bound or stymied by those regulations and should be left free to establish the actual character.

Mr. EBERHARTER. And this bill would continue that procedure?

Mr. COLBURN. The bill as drafted would make no change in the law, and thereby perpetuate. Our suggestion is that there be an additional provision inserted to repeal that section, and take care of this matter.

Mr. EBERHARTER. Thank you.

Mr. COLBURN. Mr. Chairman, the proposed section 15 is a complete revision of existing law for finding dutiable value of imported merchandise. It would abolish the historic basic standard of using foreign value or export value, whichever is higher, and substitute a newly defined export value as the primary basis for assessment of ad valorem duties. Alternative bases provided for are United States value or selling price of the imported merchandise in the United States, constructed value, or cost of production, and a wholly new alternative basis called comparative value. This section is not only ambiguous, but would abolish definitions and limitations that have existed and been judicially defined over a long period of years, and substitute therefor administrative discretion.

It has been stated there is no purpose to abolish or limit historic judicial review in appraisement matters. If this be so, there can be no possible objection to the adoption of clarifying amendments which will give definite expression to that congressional purpose.

The CHAIRMAN. Mr. Jenkins will inquire.