CUSTOMS ADMINISTRATIVE ACT OF 1937 TUESDAY, MAY 25, 1937 HOUSE OF REPRESENTATIVES, Washington, D. C. The Committee met at 10 a. m., Hon. Robert L. Doughton (chairman) presiding. The CHAIRMAN. The committee will be in order. Mr. Hester, we are ready to have you resume with your presentation of H. R. 6738. STATEMENTS OF CLINTON M. HESTER, ASSISTANT GENERAL COUNSEL; WILLIAM R. JOHNSON, CHIEF COUNSEL, BUREAU OF CUSTOMS; AND STEPHEN J. SPINGARN, OFFICE OF GENERAL COUNSEL, TREASURY DEPARTMENT-Resumed Mr. HESTER. Mr. Chairman, the next section is section 15. Mr. DINGELL. Mr. Chairman, are we through with the discussion of the overtime_provision? Mr. HESTER. Yes. Mr. DINGELL. I just want to say for the record that we have two witnesses to appear in behalf of the customs employees, who are well-informed on that subject; Mr. Boynton, of Detroit, and Mr. Eli Frank, Jr. Mr. HESTER. We are glad to give way to them right now, if you wish. Mr. DINGELL. That is not necessary. I just want the Treasury Department to know that they are here and ready to testify at any time. Also, we have some correspondence from Mr. Anthony P. Geisler and Mr. Charles C. Martin of the American Federation of Government Employees at Detroit, which sheds some light on it. The CHAIRMAN. Please proceed, Mr. Hester. Mr. HESTER. The next section is section 15. Mr. Spingarn will explain that section. Mr. SPINGARN. Section 15 appears on page 17 of the bill. It is an amendment to section 516 (b) of the Tariff Act of 1930. That provision at present provides machinery whereby domestic manufacturers, producers, and wholesalers may protest the classification or rate of duty imposed on imported articles of the same class or kind as that which they manufacture, produce or sell. At present, if an American manufacturer, wholesaler, or producer complains to the Secretary of the Treasury that a certain foreign 147979-37--7 95 96 CUSTOMS ADMINISTRATIVE BILL article of the same class or kind as that which he manufa duces, or sells is being wrongly classified, the Secretary ha natives. He may either agree with the complainant, in he notifies the collectors at the various ports and 30 day fication the higher rate of duty-that is, the one whic plainant maintains is the proper one-goes into effect. retary may disagree with the complainant. That is, he n position that the rate of duty which has been imposed in the correct one. In that case, he so notifies the complai publishes this decision, together with a statement of the f liquidation-which means the final ascertainment of du entries of merchandise of that class imported or witho warehouse after 30 days after the date of publication of adverse to the complainant shall be suspended, provide plainant decides to protest to the customs court. The present statute does not set any time within which test must be made, and this affords an opportunity for the consequent prolongment of the suspension period. makes his protest, the complainant goes into the customs attempts to establish that the higher rate of duty should In the meanwhile, the liquidation of entries, as I have merchandise of that class is held in suspension, pendin decision of the customs courts. That may run anywhere, show, from 6 months to 32 years. It averages a year When the customs courts decide-it may be the lower United States Customs Court, or it may be the higher United States Court of Customs and Patent Appeals-bu decision finally comes down, entries are liquidated in with that decision. But in the meanwhile, remember tha dation of all entries of that merchandise at all ports ha pended. This may involve the suspension of the liquidati ally thousands of entries. The result is that importers of of merchandise have hanging over their heads a continger in some instances, for tremendous sums. The suspension of liquidation of entries in these cases virtual embargo on all imports of that character, by importers, because the responsible importer does not k duties he is finally going to have to pay, until the final the customs courts comes down. Perhaps I can make it a little clearer by giving you situation. Suppose that I am an importer and have been cotton gloves as woven cotton gloves; at least they are c woven cotton gloves, which carries an assessment of 25 valorem under paragraph 915 of the Tariff Act. A domestic manufacturer of cotton gloves claims that are being wrongly classified and should be classified as gloves, in which case the duty would be 60 percent a under the same paragraph, or almost 150 percent more. He complains to the Secretary of the Treasury and the after the most careful and exhaustive consideration of t by the Department, decides that the 25 percent rate of d rect. He then notifies the complainant of his decision and that decision together with notice that 30 days after suc tion, if the domestic manufacturer protests to the custo the liquidation of all entries of the gloves described, shall be suspended pending a final decision of the customs courts. In other words, the many importers of woven cotton gloves do not know until the final decision of the customs courts, which may not be for 3 and a half years, whether or not they will have to pay 25 percent or 60 percent ad valorem. Of course, an irresponsible importer might continue to import. A responsible importer could not. We have information that in some instances, worthless corporations have been organized to take advantage of that situation. I want to furnish you now with the statistics showing Mr. DINGELL. On that point, what do they do? Do they go out of business, and in that event there is no recourse against them? Mr. SPINGARN. I am so informed. In other words, they are gambling on the probability, which is amply supported by the figures which I am about to furnish you, that the courts will agree. with the Secretary of the Treasury that the rate which has been: imposed in the past will be sustained. Mr. DINGELL. And the other fellow who is a responsible person or businessman is nicked very severely if there is an adverse decision of the customs court? Mr. SPRINGARN. That is right. But if he is a responsible importer, he would probably desist from importing merchandise of that character. Mr. DINGELL. But if he took the chance Mr. SPINGARN. If he took the chance, he would be nicked. Mr. SPINGARN. That is correct, Mr. Reed; page 5 of the synopsis. Revises the law with respect to protests by American manufacturers, producers, and wholesalers against rates of duty assessed on imports competing with their products. Under the new law importers may import their merchandise upon payment of duties in accordance with Treasury findings until a prima facie case against the correctness of such findings is made by a judicial decision adverse to the Treasury's findings. This will curb the use of the law by domestic interests to harass importers. Mr. SPINGARN. I shall furnish you with statistics supporting that statement right now, Mr. Reed. Our statistics under the 1930 Tariff Act carry through October 4, 1936. They indicate that during that period, from June 18, 1930, the effective date of the 1930 Tariff Act, through October 4, 1936, 30 complaints were filed with the Secretary of the Treasury by domestic manufacturers, wholesalers, and producers against the classification or rates of duty imposed on imported articles. Of those, two complaints were agreed to by the Secretary. In other words, he decided that the complaint was justified and 30 days after his decision, the higher rate of duty went into effect. Twentyeight of the thirty were disallowed. The Secretary held that the rate of duty which had been in effect was the proper one. Of the 28, 3 were abandoned without protest to the courts; 5 are still pending in the Bureau; and 20 have to date-that is, to October 4, 1936been protested to the courts. Of those 20, gentlemen, not one single protest has as yet been sustained. Four are still pending in the But the other 16 have all been overruled or dismissed by the courts on one ground or another. That is the experience under the 1930 act, and that I think supports the statement to which you have reference, Mr. Reed. Mr. REED. Yes. Mr. SPINGARN. The corresponding provision of the 1922 act provided a different scheme of procedure, and hence the experience under that is not analogous. Under that prior act there were 15 complaints to the Secretary. Of those, he allowed 1 and disallowed 14. Two were abandoned and the other 12 were protested to the court. Of those protests, five were sustained by the courts and seven were overruled. So the experience under the 1930 act, to date, is that not a single protest has been sustained under it, and under the 1922 act, only five. You may remember that this committee considered this same amendment in 1935, and that your reaction at that time was favorable. The Senate Finance Committee actually reported this amendment out in 1935-Senate Report No. 1170 on S. 3286, Seventy-fourth Congress. It was part of another bill which dealt with customhouse brokers, and which was enacted into law after having been reported favorably by this committee. However, since it was near the end of the 1935 session and since these protest provisions had certain controversial aspects, it was determined to omit them from that bill, without prejudice to their later consideration, so as not to retard the passage of the customhouse broker features of the bill which, because of a bad situation then existing in New York, were urgently needed at that time. Mr. CROWTHER. Is it not a fact that section 516 (b) is inoperative now; that it has been suspended under the Reciprocal Trade Act? Mr. SPINGARN. It is inoperative only with respect to articles which are the subject of a foreign trade agreement. But with respect to all other articles it is operative. There is an express provision in the Trade Agreement Act excluding Mr. CROWTHER. As I understand, there are 16 trade agreements in effect thus far, and I should think probably they would embody almost everything of a controversial nature. Mr. SPINGARN. There is still a large number of articles not covered by the trade agreements, Dr. Crowther. Mr. CROWTHER. They will be shortly. I just happened to remember that in the Reciprocal Trade Act section 516 (b) was declared inoperative or declared suspended in the act. Mr. SPINGARN. That is, with respect to articles covered by trade agreements. Mr. CROWTHER. Such articles with respect to which trade agreements were entered into? Mr. SPINGARN. That is correct. Mr. CROWTHER. Do you think there has been any concerted effort or concerted activity on the part of American producers to use this in an effort to stop merchandise from coming in, probably delay the consideration of cases, and throw difficulties in the way of the adjudication of those cases, in order to accomplish their own purpose; that is, stop the merchandise from being imported? Mr. SPINGARN. I would hesitate to make a statement of that kind, Dr. Crowther, but I would simply point to the record of the protests that have been made to date under the 1930 act and particu |