6. H.R. 7723-SUSPENSION OF DUTY ON CERTAIN TROPICAL HARDWOOD (Passed the House on October 21, 1965) This bill temporarily suspends the duty on certain tropical hardwood lumber. The lumber involved may be rough, dressed, or worked. The most important woods affected by the bill are balsa, teak, mahogany, lignumvitae, virola, Spanish cedar, and obeche. (There is no duty on unworked logs.) Under the bill, the duty on this tropical lumber would be suspended until January 1, 1968, unless the United States receives appropriate trade concessions under the Trade Expansion Act. In such an event the duty-free treatment provided by this bill may be made permanent by Presidential proclamation. The Trade Expansion Act provides for complete elimination of duty on certain tropical hardwoods which the President determines are not produced in significant quantities in the United States and with respect to which he also determines that the Common Market is eliminating its tariffs on the same products. It is also provided in the Trade Expansion Act that these tariffs may be eliminated immediately and not subjected to the general requirement for gradual elimination over a 4-year period. The tariff on mahogany lumber could be eliminated under the Trade Expansion Act, but, since that lumber is not a "tropical product" as defined in that act, the elimination of the duty would have to be staged over a 4-year period. Under this bill the duty on lumber of mahogany could be terminated immediately. The duty on lumber from the tropical wood covered by this bill ranges from less than 1 percent to about 2.5 percent ad valorem or its equivalent, the average being about 1 percent ad valorem during 1964. The 10 leading supplying countries in 1964 and the amounts of tropical hardwood lumber supplied from each are shown in the following table: Country Colombia... Ghana. British Honduras_ Malaysia. Nicaragua. Thailand Ecuador Mexico... Brazil.. Quantity (1.000 board feet) 21, 888 12, 441 6, 523 9, 732 6, 922 1, 210 6, 299 3, 139 4, 248 4, 932 Imports from these countries accounted for about $11.2 million of the total of $13.7 million of tropical lumber imported in 1964. Balsa lumber is used in the manufacture of models and toys, boats, aircraft, lifesaving equipment, insulation, lightweight doors, and cores for lightweight panels. There is no timber comparable to balsa grown or produced in the United States. Teak lumber is used for boat building, flooring, decking, furniture, and decorative objects. For exterior uses there are few satisfactory domestic equivalents. Mahogany lumber is used for models and patterns, furniture, boat construction, interior trim, paneling, radio and television cabinets, caskets, and precision instruments. It is unexcelled for pattern stock because of its great stability. Some domestic hardwoods and the white pines are also used for pattern stock because of lower price, greater availability, or adequacy for certain uses. The remaining category other hardwoods-includes a large number of species embracing a wide range of physical characteristics and uses. A number have the same uses as domestic hardwoods and compete with them. Others have special uses, e.g., lignumvitae, a hard, dense, oily wood, for wooden bearings for ships, for which there is no domestic substitute. Virola is used for furniture and cabinets, paneling, and interior trim; obeche for patterns, furniture, interior trim, and boxes and containers. The amendments made by this bill would apply to lumber entered or withdrawn from warehouse for consumption after the date of enactment of the bill. 7. H.R. 8210.-EUROPEAN SPACE RESEARCH ORGANIZATION (Passed the House on October 21, 1965) This bill authorizes the President to extend tax and tariff exemption (and other immunities) to the European Space Research Organization (and its foreign employees) just as such exemptions and immunities may be extended to a public international organization in which the United States participates. Under present law, the President is authorized to extend tax and tariff exemption to a public international organization of which the United States is a member, and which is organized pursuant to a treaty or an act of Congress. Employees of such organizations who are foreign citizens or nationals similarly may be extended tax and tariff exemption and other immunities. These exemptions and immunities are provided for under the International Organizations Immunities Act (22 U.S.C. sec. 288). However, the benefits of this act are not available if the United States is not a member of the international organization. The European Space Research Organization is a cooperative organization sponsored by 11 European nations: Belgium, Denmark, the Federal Republic of Germany, France, Italy, the Netherlands, Norway, Spain, Sweden, Switzerland, and the United Kingdom. It was established to "provide for, and to promote, collaboration among European stations in space research and technology, exclusively for peaceful purposes." The United States is not a member of this organization, and, thus, under existing law, the President may not designate the European Space Research Organization as a "public international organization." The ESRO is seeking to build a tracking station in Fairbanks, Alaska, for use in its space research program. If the ESRO is recognized as an "international organization" for purposes of the International Organizations Immunities Act, it would be treated as though it were a foreign government entitled to bring into the United States such materials and equipment as are necessary for the construction of a tracking station without the payment of duties. Among other things, the baggage and effects of its personnel and their families would be exempt from duties and taxes imposed by reason of importation if the articles are imported in connection with their arrival in the United States. The taxes for which exemption may be provided under the International Organizations Immunities Act include income taxes, social security, unemployment, and withholding taxes, and excise taxes. It is understood that other nations generally afford analogous treatment to the United States in conjunction with tracking stations constructed abroad by the National Aeronautics and Space Administration in connection with our Mercury, Gemini, and Apollo programs. H.R. 8210 represents a concession to the foreign countries for the treatment that our Government seeks and obtains from them when it wants to build a tracking station abroad. Organizations which presently are designated as "international organizations" for purposes of exemptions and immunities include the Caribbean Organization, Coffee Study Group, Food and Agriculture Organization, Great Lakes Fishery Commission, Inter-American Defense Board, Inter-American Development Bank, Inter-American Institute of Agricultural Sciences, Inter-American Statistical Institute, Inter-American Tropical Tuna Commission, Intergovernmental Maritime Consultive Organization, International Atomic Energy Agency, International Bank for Reconstruction and Development, International Civil Aviation Organization, International Cotton Advisory Committee, International Finance Corporation, International Hydrographic Bureau, International Joint Commission-United States and Canada, International Labor Organization, International Monetary Fund, International Pacific Halibut Commission, International Telecommunication Union, International Wheat Advisory Committee (International Wheat Council), Organization of American States (including Pan American Union), Pan American Health Organization, South Pacific Commission, Southeast Asia Treaty Organization, United Nations, United Nations Educational, Scientific, and Cultural Organization, Universal Postal Union, World Health Organization, and World Meteorological Organization. 8. H.R. 8436-WATCH MOVEMENTS FROM INSULAR POSSESSIONS (Passed the House on October 21, 1965) This bill relates to the tariff treatment of watches, clocks, and timing devices imported from insular possessions outside the customs territory of the United States. Under present law these articles and any others which are "products of insular possessions" as defined in the headnotes to the Tariff Schedules, are free of U.S. duty. Generally, this statutory test is satisfied if the product as it comes to the mainland (or Hawaii) does not contain foreign materials costing more than 50 percent of its total dutiable value. This treatment of products of insular possessions was enacted by Congress in 1954 to stimulate the development of light industry in the possessions. However, in some instances the duty-free privilege has been manipulated to the detriment of domestic industries on the mainland. Thus, in the case of wristwatch movements, for instance, the regular duty ranges from $2.70 to $3.85 for a 17-jewel movement and is $10.75 for a 21-jewel movement. An identical product imported from the Virgin Islands or Guam would be duty free. This tariff savings has prompted the formation of at least 14 assembly plants in the Virgin Islands-5 owned by U.S. watch movement producers— which in 1965 shipped approximately 3.6 million jewel-lever watch movements to the mainland free of duty. This was about 12 percent of U.S. consumption of all watch movements and about one-fourth of U.S. consumption of jewel-lever movements. In addition to the Virgin Islands operations, it is understood that there is presently one assembly plant functioning on Guam. Both the Guam and the Virgin Islands plants use parts originating in Japan, France, or West Germany, and in both possessions the assembly work is peformed by local employees-about 600 in the Virgin Islands and 40 on Guam. Recently, in anticipation of Federal restrictions on the duty-free treatment of products shipped from the possessions, the Virgin Islands Legislature approved a measure to restrain shipments of watch movements to the mainland to about one-ninth of U.S. consumption. H.R. 8436, by specifically excluding the Virgin Islands from its application, in effect gives recognition to this local statute. Under the bill watches, clocks, and timing devices assembled in Guam or American Samoa would become dutiable at the regular rates. Specifically, the duty would be at the rate which would apply if the assembled movement were imported from the country of origin of the component of chief value. Such articles assembled in the Virgin Islands, however, would continue to be duty free. 9. H.R. 8445-RETIRED PAY OF JUDGES OF THE TAX COURT (Passed the House on October 21, 1965) Under present law the retired pay of a judge of the Tax Court is based on the salary payable to him as a judge "at the time he ceases to be a judge." Under this bill, the retired pay of Tax Court judges is to be computed on the basis of the salary of the office, that is, in a manner similar to that presently provided for judges of other Federal tribunals. The provisions of the bill would be effective with respect to retired pay accruing on or after the first day of the first calendar month which begins after the date of enactment. 10. H.R. 10625-TREATMENT OF CERTAIN AMOUNTS PAID TO SERVICEMEN AND THEIR SURVIVORS (Passed the House on October 21, 1965) Presently, amounts paid to survivors under the retired serviceman's family protection plan do not qualify as payments from qualified pension plans because the plan is not funded. Therefore, retired servicemen who elect to receive a reduced amount of retirement pay in order to provide an annuity for their survivors are taxed as if no reduction were made. Furthermore, their survivors are not eligible for the $5,000 exclusion for death benefits paid to a survivor by reason of the death before retirement of an employee. Nor are such plans eligible 1 On Nov. 15, 1963, the Secretary of the Treasury submitted legislation to Congress designed to amend present law with respect to possessions to stop further "development of a loophole." See H. R. 9320 of the 88th Cong. for certain estate and gift tax provisions available to qualified pension or annuity plans. Under this bill, the amount of a reduction in retirement pay accepted to provide survivors' annuities is no longer to be taxed as income to a retired serviceman when he receives the reduced retirement pay. Such amounts included in the taxable income of servicemen in the past may be offset against otherwise taxable retirement pay received in the future. Moreover, the exclusion of up to $5,000 paid to a survivor on account of the death of an employee is made available to survivors of servicemen who retire because of disability and die before attaining normal retirement age. Finally, the estate and gift tax exclusions available under present law for the value of survivors' annuities in the case of civil service annuities are made available in the case of annuities provided to survivors under the retired serviceman's family protection plan. The bill's income tax provisions would apply to retirement pay received after December 31, 1965, or, in the case of the death benefit exclusion, to those who die after that date. The estate tax amendment applies to estates of decedents dying after December 31, 1965, and the gift tax amendments to gifts made after the calendar year 1965. 11. H.R. 11029-CERTAIN WOVEN FABRICS (Passed the House on October 5, 1965) This bill relates to the tariff status of two types of woven fabric. The first type involves fabrics made of a mixture of ramie (or flax), rayon or other manmade fibers, and cotton. The other fabric is made of blended yarn containing small amounts of high-value rabbit hair and a large amount of low-value reprocessed wool. Ramie-rayon-cotton fabric In the Tariff Schedules Technical Amendments Act of 1965, Congress dealt with a tariff avoidance problem whereby fabric made of yarn containing more than 50 percent by weight of rayon or other manmade fibers and a small amount of high-value ramie or flax was avoiding the relatively high U.S. tariff on fabrics of manmade fibers. Even before the 1965 act finally became law, means were found to avoid the amendment Congress was in the process of enacting. The new method involves the addition of small amounts of cotton to yarns as a substitute for rayon, thereby reducing the manmade. fiber content of the fabric to less than 50 percent. As a result, the fabrics become dutiable at 6.5 percent or 10 percent ad valorem rather than at the rayon rate of 25 cents per pound plus 22.5 percent ad valorem. This bill would further amend the 1965 amendment to reinstate the rayon rates to this fabric. Under the bill the duty on this type of cloth would be 25 cents a pound plus 22.5 percent ad valorem. Wool-rabbit fur fabric The 1965 act also dealt with a second rate avoidance problem, this one involving a combination of a small quantity of high-value flax (or ramie) with a large quantity of low-value wool (generally reprocessed or reused wool) to create a fabric which, although 75 to 85 percent by weight of wool, was nevertheless in chief value of the vegetable fiber |