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injury if not destruction to various branches of the import business if the protests were decided adversely to the position taken by the Secretary of the Treasury.

This association readily admits that its proposed amendment is retroactive in nature but this is certainly not novel in legislation and cannot be construed as endangering the rights of the American protestant since changes in classification or rates of duty desired are the prime object of the protest and not the assessing of retroactive penalties with respect to importations which have been declared for entry in accordance with the rulings of the Secretary of the Treasury. The committee is reminded of the fact when tariff bills are enacted involving changes of rates of duties as well as of classification it is the usual thing for large quantities of goods to be stored in customs custody in bond which have been imported into the United States and have been entered under rates of duties prevailing before the new tariff act went into effect. Every new tariff act which changes rates in duties, in effect is a retroactive measure since it applies to large quantities of goods which were imported into the United States when other rates of duties applied. In many cases it is known that consumption entries have actually been made under the old rate although the withdrawals were finally consummated under a different rate of duty.

This association believes that the adoption of the amendment it proposes will be a forward step in that it will relieve importers from an unusual burden and will prevent injustice being done to innocent persons who have obeyed the rulings handed down by the Secretary of the Treasury or by the Commissioner of Customs. The long period necessary for the conducting of litigation under section 516 (b) has greatly increased the dangers of importers who are involved in cases such as the one cited in the testimony given by me on May 28, 1937, before the committee. In this particular case, the protest did not involve classification, rates of duties, or penalties. Nevertheless the liquidation of many thousands of entries has been held up for a considerable period of time and the possibility of this case being judicially determined before sometime in 1938 is remote.

PARAGRAPH 813 OF THE TARIFF ACT OF 1930

The association respectfully requests that the committee consider inserting in the bill at an appropriate place an amendment to paragraph 813 of the Tariff Act of 1930. This paragraph deals entirely with administrative matters and virtually provides that the United States Customs shall collect the tariff on quantitities of alcoholic beverages of all classes which have actually not been withdrawn for consumption from customs bonded warehouse. The paragraph now reads as follows:

"PAR. 813. There shall be no constructive or other allowance for breakage, leakage, or damage on wines, liquors, cordials, or distilled spirits, except that when it shall appear to the collector of customs from the gauger's return, verified by an affidavit by the importer to be filed within five days after the delivery of the merchandise, that a cask or package has been broken or otherwise injured in transit from a foreign port and as a result thereof a part of its contents, amounting to 10 per centum or more of the total value of the contents of the said cask or package in its condition as exported, has been lost, allowance therefor may be made in the liquidation of the duties.'

The association believes that it is not sound tariff administration to collect the duties on quantities of goods which, in some cases, never entered into the customs custody and in other cases disappeared through evaporation or leakage during storage in customs custody under conditions for which the importer could not be remotely held responsible. The provision as it now reads only relieves the importer of the payment of duty on merchandise lost or damaged if the injury amounts to more than 10 percent of the total value of the contents of the cask or package in the condition it was exported. It is often impossible for the importer to determine such damage within the 5-day period set forth by paragraph 813. All imported spirits and wines are subject to an internal-revenue tax but this tax is only collected on the quantities actually withdrawn from customs custody and is not collected on the quantities which may have been originally imported or may have been originally shown as shipped by the manifest covering the goods. It appears to us that a uniform system should be applied in the application of taxes to alcoholic beverages and that if it is entirely appropriate for the internalrevenue tax to be collected on the quantities actually withdrawn for consumption, the tariff should also be collected on the same basis. It is, therefore, suggested that paragraph 813 be amended to read as follows:

"Par. 813. The duties prescribed in schedule 8 and imposed by title 1 shall be collected only on the quantities of alcoholic beverages actually withdrawn from

customs custody, such quantities to be determined by a regage performed at the time of withdrawal."

The adoption of the foregoing amendment would greatly simplify the operations of customs' officers in the handling of alcoholic beverages of all types. It would become necessary to accurately gage the goods for the purposes of tariff and tax only at the time when the withdrawal was made from customs custody.

The Association is confident in its belief that Congress never seriously intended that the duties imposed by the Tariff Act of 1930 should be collected on merchandise which actually never entered into consumption in the United States. The amendment suggested by the Association is to correct an obvious injustice which has worked a grave hardship on members of the industry.

Respectfully submitted.

HARRY L. LOURIE, Executive Secretary.

Mr. McCORMACK. How long will it take to have this case decided? Mr. LOURIE. We began our case on May 24, 1935, and the decision of the Customs Court was handed down on March 7, 1937. Fifty-nine days after the decision, the domestic protestant appealed to the Customs Court of Appeals, which means that the case will probably not be decided until some time in 1938.

Mr. McCORMACK. Do those cases generally require about that same length of time?

Mr. LOURIE. I would say that is the normal length of time.

Mr. MCCORMACK. Could not provision be made that cases like that be given preferential consideration?

Mr. LOURIE. I presume so. I do not know anything about the statutes dealing with the procedure of the court.

Mr. McCORMACK. This is an unusual case.

Mr. LOURIE. Yes.

Mr. McCORMACK. Your case does not involve classifications or duties, but, nevertheless, you are similarly affected as the parties in those cases, except you will not be subject to a higher rate of duty. You would be required to return something you could not return, and I suppose you people are not worrying about that, because you cannot return what you cannot return.

Mr. LOURIE. If that was all that was involved, that is true, but that is not the case, because they can demand full payment under those bonds. That would be much more than any penalty that could be assessed against us.

Mr. McCORMACK. In any event, you are similarly situated, so far as urgency is concerned, as parties to cases under some other provisions of the law. You say the consequences would be somewhat greater in your case.

Mr. LOURIE. Yes, sir.

Mr. McCORMACK. Do you not think that the fair thing to do would be to provide for the immediate determination of this case?

Mr. LOURIE. If the matter could be handled in that way; yes, sir. Of course, one trouble is the fact that it is absolutely necessary for the Secretary of the Treasury to publish notice of these cases so that the importers may be informed of their liability. It is usual to give 30 days' notice on that score, and the attorneys always seem to want 3, 4, or 5 months to prepare the cases. If something could be worked out for handling the cases expeditiously, that part of the problem might be solved. I heard the other day a comparison between 30 marking protests and a hundred thousand protests. The protest in this particular case I have mentioned involves some 50,000 entries. Mr. COOPER. We thank you for your statement.

Mr. LOURIE. I thank you for the hearing.

Mr. COOPER. The next witness is Mr. C. O. Sherrill.

STATEMENT OF CLARENCE O. SHERRILL, PRESIDENT OF THE AMERICAN RETAIL FEDERATION

Mr. SHERRILL. My name is Clarence O. Sherrill, and I am president of the American Retail Federation. This organization is composed of State and national retail associations. Its membership at the present time includes 17 State retail associations as follows: Colorado, Illinois, Indiana, Iowa, Maine, Maryland, Massachusetts, Missouri, Nevada, New Hampshire, New Jersey, New York, Ohio, Pennsylvania, Tennessee, Texas, and Vermont; also 6 national retail-trade associations.

Speaking especially for the merchants in the border States and in support of statements heretofore made by Mr. Charles Boyd, secretary of the Detroit Retail Merchants Association, and Harold R. Young, of the National Retail Dry Goods Association, we wish to urge the adoption of section 29 of H. R. 6738-page 37 of the comparative print; page 9 of the synopsis-as now contained in the draft before your honorable committee, providing that the authorized exemption of $100 worth of purchases shall apply only to a

returning resident who has remained beyond the territorial limits of the United States for a period of not less than 48 hours and who has not taken advantage of the said exemption within the 30-day period immediately preceding his return to the United States.

This proposed draft of section 29 also allows Customs officials to require returning residents to declare at time of disembarking any merchandise they intend to include in exemption.

This 48-hour proviso is in effect at the present time in Canada but the exemption is allowed there only once in every 4 months, compared to our 30-day exemption period.

We also wish to recommend the following additional provision after the word "States" on page 38, line 8—

Provided further, That the exemption authorized by this section shall not apply to goods bought in a free port or a free zone, where such goods have been imported into the free port or free zone.

The retailers in the border States are anxious to secure adoption of this proposal, and the situation is particularly bad in southern California, northern Washington, Detroit, and Buffalo.

It is estimated by the California Retailers Association that over a million dollars worth of merchandise per year comes into the United States duty free through the free port of entry at Tijuana. The Retail Merchants Association of Detroit estimates that the total value of the free-of-duty merchandise entering at that port is in the neighborhood of $5,000,000 per year.

The type of merchandise being brought into the United States that would be stopped by the adoption of the suggested wording of section 29 is the type that would ordinarily exact a high rate of duty, and therefore constitutes a considerable leak in the United States revenues. In addition to this, there is considerable harm done to American manufacturers, American merchants, and American labor in bringing in these exempted goods duty-free. Our information is that some residents have taken advantage of the exemption provision of the present law to the extent of regularly bringing into the

border States large quantities of goods of European and other foreign manufacture duty-free.

Retailers do not object to legitimate use of the exemption feature that is, when it is used by residents of the United States returning from a bona fide tour through a foreign country-but they do strongly object to abuses which have grown up under the existing privilege, resulting in what might be termed "uncontrolled smuggling", resulting in a serious loss to American industry and to the United States Treasury.

I would like to read into the record a resolution adopted by the California Retailers Association on April 13, 1937. These resolutions were adopted unanimously, as follows:

Whereas residents of the United States are bringing into California duty free large quantities of goods of European manufacture; and

Whereas such importations are detrimental to the interests of the American manufacturers, American labor, and American merchants, as well as to the Federal revenues; and

Whereas a similar condition exists at all ports of entry on the Mexican and Canadian borders; and

Whereas such detrimental entry of goods free of duty is under the provision of paragraph 1798 of title II of the revenue act which grants an exemption on articles to the value of $100 under certain conditions to residents of the United States returning from abroad but without any requirement as to duration of absence from the United States of the person claiming such exemption: Therefore, be it

Resolved, That the California Retailers' Association, by vote of its trustees at this meeting, go on record in favor of the limitation of such free entry of goods into the United States by an amendment of paragraph 1798 of title II of the Tariff Act of 1930 by a provision that such exemption may not be claimed by a resident returning to the United States after an absence of less than 3 days; and be it further

Resolved, That the secretary of this association be instructed to request our Representatives in Congress, and the National Retail Dry Goods Association, the American Retailers' Federation, the National Association of Manufacturers, etc., to advocate the adoption by Congress of such amendment.

Mr. COOPER. Without objection, we will recess at this time until 2 o'clock.

(Thereupon the committee took a recess until 2 p. m.)

AFTERNOON SESSION

The recess having expired, the committee reconvened at 2 p. m., Hon. Jere Cooper presiding.

Mr. COOFER. The committee will be in order. The next witness on the calendar is Mr. S. R. Marshall, representing the National Wool Growers' Association.

STATEMENT OF F. R. MARSHALL, REPRESENTING THE NATIONAL WOOL GROWERS' ASSOCIATION

Mr. MARSHALL. Mr. Chairman and gentlemen:

My name is F. R. Marshall. My address is Salt Lake City, Utah. I am secretary of the National Wool Growers' Association. That is an organization with headquarters at Salt Lake City, consisting of 12 affiliated organizations in the Western States, where the principal sheep population of the United States is located.

The States connected with the National Wool Growers' Association, the 12 States, possess two-thirds of the sheep in the United States. I am also personally interested in a wool-growing enterprise in the State of Washington.

Mr. Chairman, I heard Mr. Johnson's testimony relative to section 27. My testimony will relate entirely to section 27.

Section 27 is a revision of paragraph 1101 of the present law, the 1930 act.

In 1936 there was imported under the free arrangement of paragraph 1101, 130,000,000 pounds of wool. We know that some parts of that wool were diverted from bond given to assure its use for the purposes enumerated in that paragraph 1101, carpets, floor coverings, camel's hair belting, press cloth, knit or felt boots, or heavy fulled lumbermen's socks.

I shall refer to those a number of times as the enumerated uses prescribed in paragraph 1101.

We are unable as yet, Mr. Chairman, to get from the Bureau of Customs the data as to the amount of wool so diverted from the bonds in any recent year. We asked for that the other day and it proved not to be on hand in Washington. The Treasury is now obtaining it from officers at the different ports where these wools come in, and if wanted by your committee I feel sure the Treasury Department will have it available within a few days.

As a matter of fact, we would prefer the present law to the proposed revision. However, we recognize that this provision for bonding for assurance of use for specified purposes involves some very serious administrative difficulties. The one that the section proposes to remove, the first one, is the 3-year limitation which is required under present law; that the importer is required to show within 3 years proof of use that the wool did go to those enumerated purposes before his bond can be released.

We are not very sympathetic with that. We are not entirely well posted on it, but inasmuch as the President has by recent proclamation already put that change into effect, we are not now here particularly raising the question.

We realize that there are many administrative difficulties, and we are in sympathy with the proposals in the section, but the suggested amendment which I have here will clear up some of those difficulties. Mr. CROWTHER. Is the period now 3 years? Was it not 4 years at one time? Did they not extend it 1 year at one time?

Mr. MARSHALL. My recollection is that the proclamation extended it without date. And that is certainly the proposal in this section

now.

Mr. CROWTHER. I will ask Mr. Hester if it was not made 4 years at one time?

Mr. HESTER. I do not recall at the moment.

Mr. CROWTHER. I think there was a year added.

Mr. MARSHALL. Mr. Chairman, a rate change is proposed in the present form of section 27 of the bill. It is proposed there to legalize and specify a rate of 14 cents per pound on noils from carpet wools which may be diverted from the uses, for the purposes enumerated in the present paragraph, for uses which are ordinarily dutiable. So far as I can find out, that is the rate now proposed in the bill.

Mr. Buck. Would you mind pointing out those lines in the bill? Mr. MARSHALL. Line 19, page 32. I understand from my friends in the Treasury Department that since 1928 they have been making a special rate. Of course, they naturally and properly now wish to have that confirmed by an act of Congress to protect them in what I believe they have conceded in this hearing to be the "doubtful validity" of some of their administrative acts and rulings.

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