under $25 in value because of the limitations in our clerical help to maintain such figures. However from the periodical checks that have been made we can satisfy the members of Your Honorable Body that the total value of the free of duty merchandise passed in our own port of entry at Detroit would be in the neighborhood of five million dollars annually. You may ask why the customs officials at all of the ports of entry on the Mexican and Canadian borders cannot stop this abuse. The answer is simple-the Tariff Act does not permit them to. The customs regulations, based on the wording of the act, do not permit the officials to take any latitude in handling this exemption of the commuter to Canada, as against the 6 months' tourist returning from Europe. These thousands of people who swarm over to Canada or Mexico in the morning and come back within an hour or two, loaded down with foodstuffs and other purchases, and claim exemption therefor, glibly inform the customs officials that they have been away on business or to visit a friend and have made the purchases as an incident of the trip. The exemption, of course, is granted, although it is the opinion of our customs officials that the vast majority of these people have gone over to Canada or Mexico for the express purpose of buying the foreign merchandise. May I call your attention to another phase of this abusive use of a privilege which results in a definite loss? The States of California, Washington, and Michigan have State sales-tax laws and each State raises much of its State revenue therefrom. In Michigan we have a 3-percent sales tax and on the items enumerated above, for just these 9 days where the total exemption is approximately $170,000, the State of Michigan lost over $5,000 in sales-tax revenue that would have been forthcoming to the State treasury if those same purchases had been made in Michigan. I recognize that some of them would have been made in other States, but a very large proportion of that loss was incurred by our own State and the corresponding situation prevails at other ports of entry in those States which have a sales tax. Is it fair that a loophole in our present tariff act should cause such injustices and permit continued and increasing abuses? Two years ago when the United States Tariff Commission had a committee for reciprocity information to study the questions arising in relation to a reciprocal treaty with Canada, we presented our briefs to that committee urging that if and when a reciprocal treaty was secured, Canada should grant to their Canadian residents the same privileges that the United States has been granting for many years past to our residents. For your information, previous to May 1936, just a year ago, Canadian residents who were returning from abroad were not permitted by regulations to secure any exemption on merchandise comparable to that provided in our regulations. Thar meant that while United States residents were going into Canada and making plenty of purchases and bringing them back into the United States free of any duty up to a hundred dollars of value, Canadian residents could not make any purchases in the United States and take them back into Canada under any such provision of exemption. When the reciprocal treaty was signed with Canada it subsequently provided that beginning in May of a year ago Canadian tourists returning to Canada from abroad could bring back, up to a hundred dollars' worth of merchandise duty free if— and this is the important point-they had been out of the Dominion of Canada for more than 48 hours and the burden of proof is on the tourist. The Canadian regulations also stipulated that the exemption would be allowed only once in every 4 months-not once in 30 days, as is our regulation. We are convinced that the Canadian regulations established a most acceptable precedent as to how we can correct the difficulty faced by our retailers and our State sales-tax treasuries here in the United States. It is in that connection that I wish to call your attention to section 29 of H. R. 6738, a bill to amend certain administrative provisions of the Tariff Act of 1930, where, commencing at line 15 on page 37 thereof, a provision is made to the effect that the United States residents must be out of the United States for 48 hours or more before they can bring back duty-free merchandise up to the value of a hundred dollars. We are satisfied that such a limitation would go a long ways toward correcting the present rapidly increasing abuse of this privilege which has been available through our tariff act for nearly a decade. The United States Treasury Department is interested in this measure and speaking for the affected retailers of the country, we beseech your active support of the amendment as detailed in section 29 of H. R. 6738. Respectfully submitted. CHARLES E. BOYD, Secretary, Retail Merchants Association of Detroit, Mich. CUSTOMS ADMINISTRATIVE ACT OF 1937 THURSDAY, MAY 27, 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. The chair is informed that when the committee adjourned yesterday Mr. Henry Bahr, representing the National Lumber Manufacturers' Association, had not completed his statement. Mr. Bahr, if you will come forward we will be very glad to have you complete your statement at this time. STATEMENT OF HENRY BAHR, REPRESENTING NATIONAL LUMBER MANUFACTURERS' ASSOCIATION-Resumed Mr. BAHR. Mr. Chairman, I now want to discuss section 15 of the bill. Section 15 of the pending bill proposes the revision of section 516 (b) of the Tariff Act of 1930. The principal change proposed is the elimination of the present provision for suspension of liquidation of entries pending disposition by the Customs Court of the complaint of the American manufacturer. Conceding that there may be some inequity in the procedure under the existing law, it seems to us that the inequity, if it exists, could be corrected more simply and more properly by making provision for more expeditious handling of protests before the court. The proposed amendment would enable importers to avoid an unfavorable decision and to continue an unjustified low rate of duty indefinitely by the use of dilatory tactics before the courts. Expediting disposition of the court proceedings would avoid this possibility. Since this section of the tariff act is under consideration at this time, there are two or three amendments for which the National Lumber Manufacturers' Association asks your consideration. Several years ago, shortly after the enactment of the excise tax on lumber imports in the revenue act of 1932, a question was raised as to the method of measuring lumber in assessing the excise tax. The West Coast Lumberman's Association, believing that the proper tax was being evaded by improper measurement, filed a protest under section 516 (b). The court dismissed this protest, because, it held, a trade association is not a manufacturer, producer, or wholesaler. That is a rather absurd ruling, we think, to say that where you have 500 members in one association, that association is not 147979-37—12 175 allowed to protest, whereas one individual manufacturer is allowed to protest. We believe that this section should be amended to permit trade associations to file protests. Proceedings under this section entail considerable trouble and expense. An individual manufacturer generally will not feel justified in undertaking this burden by himself. He naturally will seek the support and assistance of other members of his own industry, generally through their trade association. There is no good reason why the trade association should not be permitted to proceed with these protests in its own name, accomplishing by direct action what must now be accomplished by indirection. An amendment to permit this should be adopted, we believe. After the dismissal of the protest filed by the West Coast Lumbermen's Association, to which I referred a moment ago, there followed a protest made by an individual manufacturer of lumber on the west coast, the E. C. Miller Cedar Lumber Co., which filed two separate protests on the measurement of two different shipments of lumber. One of these protests was dismissed by the Customs Court because the protest was filed more than 30 days after liquidation by the collector, although the collector did not notify the protestant until 21 days after the liquidation. Thus, instead of 30 days, the protestant actually had only 9 days in which to file his protest, and I think that procedure is questionable. Notice in 21 days is not immediate notice. Suppose the collector took 31 days to give notice. The American manufacturer would then be deprived entirely of his right to protest, as he was practically in the case I just mentioned. The provision for notice of liquidation and the filing of protest should be amended by changing the wording of the bill, on page 18, line 21, by substituting the words "notice of such liquidation" for the words "date of such liquidation.' وو In other words, the manufacturer should have 30 days after he has been notified that the shipment has been liquidated, rather than 30 days after it has been liquidated, where he knows nothing about the liquidation. The CHAIRMAN. Have you discussed the proposed amendments with Mr. Hester, or any other representative of the Treasury Department? Mr. BAHR. I have not, sir. The CHAIRMAN. May I make the suggestion that if you will do that you might be able to reach an agreement? Mr. BAHR. I appreciate the suggestion, Mr. Chairman. Mr. Buck. If I have read your amendment correctly, and I have been trying to read it while you were speaking, you also desire that your association, or manufacturers, producers, or wholesalers may be able to appeal from any administrative regulation that may be put into effect. Mr. BAHR. Yes. That is suggested for the purpose of permitting us to protest any arbitrary ruling of the Treasury Department under the marking provision, primarily. There may be other administrative regulations under other provisions of the Tariff Act which it would be desirable to protest also. But when the Treasury Department makes an arbitrary decision as to the marking of lumber, we would like to have the opportunity to protest against such a regulation. The second protest of the Miller Co. which I mentioned a while ago was dismissed by the customs court on the ground that section 516 (b) does not give an American manufacturer the right to protest against the amount of duty assessed against imported articles, but it limits his right of protest to classification and rate of duty. The protest involving the measurement of lumber was held not to involve either classification or rate of duty and accordingly was dismissed. We believe that section 516 (b) should be broadened to permit protests against the amount of duty collected and that the language used should be broad enough to permit protests against administrative regulations drafted under the color of statutory authority, such as in the case of exceptions from the marking requirement. Mr. THOMPSON. I do not quite understand your statement yesterday that there was a difference in the case of lumber between tariff duties and excise taxes. Will you explain that? You just mentioned the fact that the rulings regarding measurement could not be followed. Mr. BAHR. That is correct. In enacting the tariff act in 1930 the Congress said that the duty on certain species of lumber should be $1 per thousand feet, board measure, and they added a little clause, providing that for the purpose of the paragraph "no deduction shall be made on account of planing, tonguing, and grooving." That particular paragraph has been in tariff acts since 1898. It is not necessary to use that language, as in no event is there that deduction for planing, tonguing, and grooving, or for shrinkage in the measurement of lumber. Lumber is universally measured on its rough, green size. Mr. THOMPSON. That is the way it is sold to the trade. Mr. BAHR. Not only that, but the measurement on the basis of the rough, green size is followed not only in the United States but in Canada as well. If you get a piece the size of which is 1 by 12, when it is imported dressed it measures twenty-five thirty-seconds by eleven and a half, and actually contains only 75 percent of the volume of the original piece. This board measure is universal in the lumber trade in the United States and Canada, and in enacting the excise tax in 1932 Congress intended that the tax be based on that board measure but they did not put in the same qualifying phrase which was used in the tariff act. The customs court construed the difference in language between paragraph 401 and section 601 (c) (6) of the Revenue Act of 1932. They said if Congress put in the qualifying phrase in one instance it must have been necessary. In the second place, not having used it they must have intended that it should not be applied. Therefore, they said that for the purpose of the excise tax the net dimensions of the lumber should be used in computing the board measure. As a result, when a thousand feet of lumber is imported and measured for duty purposes, it is measured as 1,000 feet, while for excise purposes it is measured as 750 feet, and it pays only three quarters of the proper excise tax. Mr. THOMPSON. I think that situation should be corrected, because as you have stated, the trade knows the measure of standard board feet, without any allowance for planing or dressing. Mr. BAHR. The Canadian Lumbermen's Association rules provide as do all American rules, that the board measurement of dressed lumber of standard size shall be based upon corresponding dimensions of rough, green lumber. The rule is the same throughout the trade. It is merely a chiseling proposition, and I do not think Congress should protect chiseling of that kind. Mr. THOMPSON. I thoroughly agree with you. The CHAIRMAN. We thank you very much for your appearance and the statement you have made to the committee. Subsequently, at the request of Mr. Cooper, the following brief was filed by Mr. Bahr: NATIONAL LUMBER MANUFACTURERS ASSOCIATION, Hon. ROBERT L. DOUGHTON, House of Representatives, Washington, D. C. DEAR MR. DOUGHTON: When I appeared before the committee yesterday, several members of the committee addressed inquiries to me concerning II. R. 7045, introduced by Representative Martin Smith, of Washington, which has been referred to your committee. As it was necessary to recess the hearing early, because of the memorial services in the House, I did not get an opportunity to answer the questions addressed to me as fully as they deserved. I, therefore, would respectfully request that this letter be incorporated in the hearings as a further exposition of H. R. 7045. The bill H. R. 7045, introduced by Representative Martin Smith of Washington, is designed to correct two technical difficulties in the construction of section 601 (c) (6) of the Revenue Act of 1932. That section provides the excise tax on lumber imports. When this tax was enacted, it was thought that it was written in clear and specific terms and that there would be no misunderstanding of its language. Section 601 (b) of the Revenue Act specifically provided that the taxes on imports provided in section 601 (c) should be levied, assessed, collected, and paid in the same manner as duties imposed by the Tariff Act of 1930. Paragraph 401 of the Tariff Act of 1930 provided: "Timber, hewn, sided, or squared, otherwise than by sawing, and round timber used for spars or in building wharves, sawed lumber and timber not specifically provided for; all the foregoing, if of fir, spruce, pine, hemlock, or larch, $1 per thousand feet, board measure, and in estimating board measure for the purposes of this paragraph no deduction shall be made on account of planing, tonguing, and grooving." On the other hand, section 601 (c) (6) of the Revenue Act of 1932 provided: "Lumber, rough, or planed or dressed on one or more sides, except flooring made of maple (except Japanese maple), birch, and beech, $3 per thousand feet, board measure; but the tax on the articles described in this paragraph shall apply only with respect to the importation of such articles." The two questions of interpretation which have arisen are (1) the interpretation of the meaning of the word "lumber" as to whether it included "timber" or not, and (2) the difficulty in the determination of board measure for the purpose of assessing the excise tax. In answering both of these questions, customs court has interpreted the wording of the two statutory provisions and has completely disregarded the meaning of the words used in the universal practice in the lumber trade. As to the timber question, a case was brought in the customs court in which it was contended that timber, not being specifically provided for in the excise tax-although it was so provided for in the tariff act-should not be construed as being encompassed by the general term "lumber" and, therefore, should not be subject to the excise tax. The court sus |