In our opinion the intent of this amendment to section 516 (b) is to repeal the right of the American manufacturer to a judicial determination of the proper rate of duty to be imposed upon imported merchandise. The same provision, 2 years ago, was incorporated in a customs brokers bill as section (b) and failed of passage, the Senate having refused to pass the said bill with that provision in it. We feel that if it is the intent of the proponents of this bill to repeal section 516 (b) of the Tariff Act of 1930, it should be done in so many words.

In the testimony of the Government attorneys it was stated that a comparatively small number of complaints had been filed since 1930 and gave the ultimate outcome of these complaints. Every time a domestic manufacturer calls to the attention of the Treasury Department a mistake in classification, it is a potential 516 (b) case. Many of these cases upon investigation by the Department result in a reclassification at a higher rate. They do not fall within the designation by the Government attorney of a "complaint", and hence are not included in the Government's tabulation. Had the domestic manufacturer not succeeded in having the Department increase the duty, in a large number of these cases a complaint would have been filed and prosecuted. Hence, we feel that the effectiveness of section 516 (b) cannot be measured by the number of complaints or the litigation growing out of the same.

The proposed revised 516 (b) as distinguished from the present 516 (b) contemplates expensive litigation on the part of the domestic interests to determine the proper rate of duty to be effective upon importations made after the decision of the Customs Court or the Court of Customs and Patent Appeals. In other words, the domestic interest is to find himself hard-pressed by foreign competition, engaging in expensive litigation to a successful conclusion, only to find that his importing competitor has received sufficient merchandise to carry on unfair competition, possibly in stated lines for years to come, although he, the domestic interest, has been successful in the costly litigation. The present act provides that once litigation has been started by protest, all liquidations are suspended until a final decision of the court, which guarantees to the domestic manufacturer the protection to which he was entitled under the law, and to the Government, the revenue to which it was entitled. With these safeguards removed, as has been effectively done in the pages above enumerated, there will be no more remedy for American manufacturers. If this is the intent of Congress, we feel that it should be so expressed, since we feel that this is the effect of the proposed amendment.

At the hearing we suggested that the court had construed section 516 (b) in such a technical way as to render ineffective the remedy provided. This construction should be corrected, and we submit a redraft of section 516 (b) for the consideration of the committee. The language suggested would eliminate the present technicalities and afford the domestic producer the same right to litigate as the importer and under the same conditions. Under existing law, when an importer is dissatisfied with the rate or amount of duty assessed by the collector, all that need be done is to address a letter to the collector setting forth his claims, and that is termed a protest, invoking the provisions of section 514. The courts have held that the act contemplated no formality and no technicality. Under the wording of the present section 516 (b), the United States Customs Court has held that each of the provisions outlining the steps to be taken, such as request for information as to classification, the reply by the Secretary, notice of dissatisfaction by the American producer, etc., are all conditions precedent to a valid protest filed under the terms of that section. The court has also construed very technically the language of the act setting forth each of these steps, and if any step is not literally complied with the protest is dismissed. In many instances, a domestic producer has sufficient knowledge of an importation by an importer to at once file his protest, but regardless of this, he must write to the Secretary to determine how merchandise of this class is being classified, receive the Secretary's answer, file a complaint, and all the other steps contemplated by section 516 (b) before he may invoke the jurisdiction of the court. We can see no reason for this elaborate proceeding, for the same procedure set forth in section 514 would give to the Collector and the secretary the right to review the protest and satisfy the claims made therein, or forward it to the United States Customs Court as they now do an importer's protest. In other words, we feel that the language proposed in our suggested redraft of section 516 (b) would place within the hands of the domestic producer means of obtaining knowledge upon which to base a protest if he did not

possess sufficient knowledge, but would remove the technicalities in the present law and make effective the remedy which Congress intended.

"(b) CLASSIFICATION.—If requested by an American manufacturer, producer, or wholesaler, the Secretary of the Treasury shall furnish the classification of and the rate of duty, if any, imposed upon designated imported merchandise of a class or kind manufactured, produced, or sold at wholesale by him. If a manufacturer, producer, or wholesaler objects to the rate of duty imposed he may file a complaint with the Secretary of the Treasury setting forth the reasons for his objection. Within 60 days from the filing of such complaint the Secretary of the Treasury shall render his decision. If the Secretary decides that the classification of or rate of duty assessed upon the merchandise is not correct, he shall notify collectors of customs as to the proper classification and rate of duty and shall so inform such manufacturer, producer, or wholesaler, and such rate of duty shall be assessed upon all such merchandise imported or withdrawn from warehouse after 30 days after the date of such notice to the collectors. If the Secretary decides that the classification and rate of duty are correct, he shall so inform such manufacturer, producer, or wholesaler, and shall, under such regulations as he may prescribe, immediately cause publication to be made of his decision. If an American manufacturer, producer, or wholesaler, is dissatisfied with the decision of the Secretary and is not possessed of the necessary information as to the entry, the consignee, and the port of entry of the imported merchandise in which he is interested, he may request the Secretary to furnish him the necessary information upon which to file a protest and upon receipt of such request, the Secretary shall furnish him with information as to the entries, the consignees, and the ports of entry, together with the dates of liquidation as will enable him to protest the classification of, or the rate of duty imposed upon, the merchandise the subject of the request. Such manufacturer, producer, or wholesaler may file within 60 days after receipt of notice of liquidation by the Secretary or a collector of customs, with the collector of the port where the imported merchandise was entered, a protest in writing setting forth a description of the merchandise and the classification and the rate of duty he believes proper, with the same effect as the protest of an importer, consignee, or agent, filed under the provisions of sections 514 and 515 of this Act. Upon the filing of typical protests the collector shall notify the Secretary of the Treasury, who shall order the suspension pending the final decision of the United States Customs Court, of the liquidation, at all ports, of all unliquidated entries of such merchandise imported or withdrawn from warehouse after the expiration of the 30 days after the publication of the Secretary's decision. All entries of such merchandise so imported or withdrawn shall be liquidated, or if already liquidated, shall, if necessary, be reliquidated, in conformity with such decision of the United States Customs Court. If, upon appeal to the Court of Customs and Patent Appeals, the decision of the United States Customs Court is reversed, the classification of the merchandise and the rate of duty imposed thereon shall be in accordance with the decision of the Court of Customs and Patent Appeals, and any necessary reliquidation shall be made. The provisions of this subdivision shall apply only in the case of complaints filed after the effective date of this act."

SECTION 18

On page 23, on line 14, "Taxes not to be construed as duties," we feel that this section should be deleted, to wit, lines 13 to 20, inclusive.

For a number of years, it has been settled law that all exactions made by the Collector whether in the guise of duties, excise taxes, revenue, or any other name, if collected on importations by the Collector of Customs, for customs purposes, are duties, and subject to all of the requirements of regular duties paid on imported merchandise. We appreciate that this section would render far more arduous the recovery of excise taxes, etc., paid on imported merchandise by importers, since it would take them out of the customs tribunals and leave them to their remedy at law. We feel that if section 516 (b) is to be amended as proposed in this law, section 528 might well be enacted into the law. On the other hand, if the domestic interests are to retain their present remedy under section 516 (b), it will afford the only possibility of review for the Government against the erroneous assessment of excise taxes, internal-revenue taxes, etc., on imported merchandise. Obviously, the importer is not going to litigate the assessment of a tax which is too low. The Collector who makes the

assessment cannot start a proceeding against himself. The only certainty of the proper adjudication of the rate or amount of one of these taxes is through 516 (b), instituted by an American manufacturer. We submit, therefore, that if this provision is to be enacted into the law, it is an added reason for the present wording of 516 (b).

SECTION 31

On page 40, lines 21 to 25 inclusive. We seriously recommend that this entire provision be deleted.

This provision, we feel, is the result of the growing tendency on the part of the present officials of the Treasury Department to take over the jurisdiction conferred upon the Bureau of Customs, the Commissioner of Customs, and the officers of the Bureau of Customs by the act of March 3, 1927. For a long period of customs administration, it was found that the administration of customs could be best served by a Bureau devoted wholly to that purpose. After the enactment of the law of 1927 there was assembled in that Bureau the best of the trained minds in the Customs Service. They have functioned efficiently. By means of five lines in the proposed bill, the jurisdiction of the Bureau of Customs will be effectively ended. If this provision is enacted into law, through an order of the Secretary, all jurisdiction now conferred upon the officers of the Bureau of Customs may be transferred to the Assistant Secretary of the Treasury in charge of Customs, to be assigned to officers and employees of the Treasury Department, thereby divesting the Bureau of Customs of all of its jurisdiction.

When the act of March 3, 1927, was before the Ways and Means Committee that committee reported to the Committee of the Whole on April 1, 1926, Report No. 758, Sixty-ninth Congress, first session. On page 1 of that report the com

mittee stated:

"The defects of the present system are believed to be many, and among the more important may be mentioned the fact that under the existing organization the Secretary of the Treasury is required to pass upon a multitude of details involving a highly specialized and intricate branch of the law in the course of its administration in the collection of customs duties. The bill will enable the Secretary to impose this detail upon the Commissioner of Customs while retaining general supervision and control of all customs officials."

We feel that the history of the legislation of March 3, 1927, will show the necessity for the retention of this act. The performance of the Bureau of Customs since the enactment of this legislation will show that the efficiency of the Customs Service has been greatly enhanced. We therefore submit that before this proposed provision is enacted into law, the purpose of its enactment should be clearly shown, and unless the act of March 3, 1927, is shown to be fundamentally deficient, it should be retained.

THE AMERICAN TARIFF LEAGUE,
LAMB & LERCH, Counsel.
JOHN G. LERCH.

The CHAIRMAN. The hearings are concluded for the day and the committee will meet tomorrow at 10 o'clock.

(Whereupon a recess was taken until Friday, May 28, 1937, at 10 a. m.)

CUSTOMS ADMINISTRATIVE ACT OF 1937

FRIDAY, MAY 25, 1937

HOUSE OF REPRESENTATIVES,
COMMITTEE ON WAYS AND MEANS,

Washington, D. C.

The committee met at 10 a. m., Hon. Robert L. Doughton (chairman) presiding.

The CHAIRMAN. The committee will be in order. The first witness on the calendar this morning is Mr. Frederick L. Kraemer, representing the New York Customs Brokers' Association.

STATEMENT OF FREDERICK L. KRAEMER, REPRESENTING THE COMMITTEE ON ADMINISTRATIVE LAWS, THE NEW YORK CUSTOMS BROKERS' ASSOCIATION, 24 STATE STREET, NEW YORK

The CHAIRMAN. Mr. Kraemer, will you give your name and address, and the capacity in which you appear?

Mr. KRAEMER. My name is Frederick L. Kraemer, 24 State Street, New York. I appear here in behalf of the Customs Brokers' Association of New York.

I wish to file a brief with the committee.

I would like to state that we are very much in sympathy with the administrative proposals in this bill. The only thing we would like to have is a modification of the marking act. The marking act has been the most difficult one to administer and has imposed heavy duties on people who have suffered innocently.

I have in mind an amendment that all containers, containing free goods, such as cocoa, coffee, rubber, products instantly recognized as foreign products, that go to a mill to be processed, shall be exempted from marking.

The proposed amendment exempts the article itself if it goes to a mill or factory for further processing. But the container is not exempt. It has got to be marked.

There is no rhyme or reason why a bag of coffee should be marked "Brazil." I had a case where it is marked "Brasil" and held to be illegally marked, because that was the Portuguese way of spelling Brazil.

Rubber, for instance, may be marked "Penang, Singapore," etc.these are different seaports of the Dutch East Indies. This stuff goes right to Akron, to be made up into rubber tires. Why the container should be marked, we do not know.

I had 20,000 bags of cocoa come in here 2 weeks ago. It was marked in French, "British Africa." 'The marking in French was a violation of the law and the additional duty that that cocoa would

217

have to stand was something like $15,000. The cocoa was returned to Liverpool.

The CHAIRMAN. Are you an importer?

Mr. KRAEMER. I am a customhouse broker. We are the people who work under these administrative provisions. We are the representative, practically speaking, of the American manufacturer and the American importer.

The CHAIRMAN. According to the calendar, you represent the Customs House Brokers Association. Will you amplify that a little? What is a customs house broker?

Mr. KRAEMER. The broker has to proceed under your complex and complicated customs procedure. A customs broker has to study the administrative features, because a great many penalties or additional duties are provided in those provisions which can be averted if the importer is properly advised.

For instance, in the marking act, just to give you an example of how drastic our present act is, it has this provision. Here is a piece of ordinary wrapping paper [indicating paper]. That was placed around two books weighing 8 pounds. This was held to be a container and not legally marked, although it had a label pasted on it giving name of the publisher with his address, 168 Boulevard d'Montparnasse, Paris. That was in a case containing these books, which was marked "France", which was legal. But in the construction of the meaning of the law, the courts do not allow the Secretary of the Treasury any leeway. This ordinary piece of paper was around the books to keep them clean, to keep them dustproof. The importer was assessed $350 because it was held to be a container.

Those are the things that we are trying to avoid.

The CHAIRMAN. Have you ever discussed this situation with Treasury officials?

Mr. KRAEMER. Yes.

The CHAIRMAN. How do they feel toward the change which you wish to make?

Mr. KRAEMER. I think the Treasury officials desire to liberalize the provision as indicated by their amendment in H. R. 6738. We think that is a step in the right direction. It is simply a question as to the interpretation of the provision. After all, the marking law is for the purpose of informing the consumer where the stuff that he wants to buy comes from.

The CHAIRMAN. That certainly is the intent of the law.

Mr. KRAEMER. Yes; that is the intent of the law. If a man buys rubber, for instance-and we have had cases of that kind; the Firestone people or the Goodrich people buy rubber in Singapore and it is marked "Singapore." In that case there may be an additional duty on the rubber, which is a product free of duty, and that additional duty may run up into substantial sums. There is no way for these people to avoid that, because the importer has got to rely upon the exporter and the exporter relies upon a shipping clerk and the shipping clerk does not always know the legal name of his country.

For instance, I had the case of Burma. Burma is probably older than British India. We had about five or six hundred cases of rubber come in marked "Burma"; and it was held not legally marked because Burma is not a country officially. The correct marking was supposed to be "British India."