One of the most important exceptions to the general rule against quotas, from the point of view of the United States, is that permitting the use of import quotas on agricultural products where they are necessary to the enforcement of domestic marketing or production restriction programs. This will permit the continuance, for example, of import quotas on sugar under the provisions of the Sugar Act of 1948. Other important exceptions are found in article 45 and in article 99. The latter article clearly authorizes United States export restrictions which are considered necessary to the national security in time of international emergency.

The following changes in United States laws would be necessary to bring them into full conformity with the rule against quotas as stated in article 20:

(a) The prohibition on the export of tobacco seed (7 U. S. C. 516, 517) would have to be repealed.

(b) Article 45 of the charter expressly states that chapter IV shall not be construed to prevent adoption or enforcement of measures necessary to secure compliance with laws and regulations relating to the protection of copyright. In other words, the charter does not in any way interfere with reasonable laws and regulations necessary for the protection of copyright. However, article 45 states that members shall not use their copyright laws as disguised trade barriers. Section 16 of title 17 U. S. C. (commonly known as the manufacturing clause) provides that in order to be accorded copyright protection in the United States a book in English must, generally speaking, be printed in the United States from type set or from plates produced in the United States. A related provision, section 107, generally prohibits the importation into the United States during the existence of the American copyright, of any copy of a book in English which has not been manufactured in the United States. As an exception to these provisions, existing law permits temporary copyright protection up to 5 years of an English book published abroad (17 U. S. C. 22), and during this period not more than 1,500 copies of such English book printed abroad may be imported (17 U. S. C. 16). These provisions in effect preclude any book in English from receiving copyright protection in the United States unless every copy sold here (above a quota of 1,500) is manufactured in the United States. The place of manufacture of a book is obviously not necessary to protect the rights of the author. To the extent that these provisions deny copyright protection to books in English merely because the books are manufactured abroad rather than in the United States and because these provisions act as an absolute barrier to the importation of foreign manufactured books in English which are copyrighted in the United States (above the quota), they are inconsistent with the provisions of article 18 concerning internal laws and regulations, article 20 relating to import prohibitions and quotas, and article 45 concerning disguised trade barriers.

ARTICLE 34

Article 34, while condemning price dumping which is injurious to an industry in a member country, sets out rules designed to prevent the misuse of antidumping and countervailing duties to hamper normal competition in international trade. The article limits the use of antidumping and countervailing duties to the purpose of offsetting price dumping and subsidies. It provides that such special duties may not be imposed unless the effect of the dumping or subsidization would cause or threaten material injury to an industry in a member country. The policy of the United States with regard to the imposition of antidumping and countervailing duties, as set forth in the Antidumping Act of 1921 (19 U. S. C. 160-173) and in section 303 of the Tariff Act of 1930 (19 U. S. C. 1303), conforms generally to the charter requirements. In order to make our laws consistent with the principles of article 34, however, one important change in the countervailing duty law would be required. It is clear that the imposition of special duties of this kind should be limited to cases where injury is caused or threatened to a domestic industry. The existing Antidumping Act requires a finding of injury as a condition precedent to the assessment of antidumping duties, but our countervailing duty law does not. Accordingly, it would be necessary to amend section 303 of the Tariff Act to provide for a finding of injury before countervailing duties may be levied. In addition, three minor clarifications in the antidumping and countervailing duty laws are necessary to make them fully consistent with article 34: (a) a provision to make it clear that both antidumping and countervailing duties will not be imposed on particular merchandise to compensate for the same situation of dumping or export subsidization; (b) an amendment of the Antidumping Act to require a finding of

"material" injury to an industry rather than mere injury; and (c) an amendment to section 303 of the Tariff Act to provide that countervailing duty shall not be levied because of the ordinary remission or refund of taxes and duties allowed on exportation by most countries, including the United States. These latter three amendments are mere clarifications of the laws and would involve no change whatsoever in the administrative practice that has been followed since their enactment.

ARTICLE 35

The provisions of article 35 are designed to assure that fair valuation systems will be used in assessing ad valorem duties. They set forth the principle that the values to be used should be based on the actual value of the kind of goods inported and not on arbitrary or fictitious values nor on the values of domestic goods. The article establishes fair rules for the conversion of currencies in assessing ad valorem duties and provides that, whatever valuation methods are used by a country, such procedures should be stable and should be given sufficient publicity to enable traders to estimate with reasonable certainly what the value for customs purposes will be. In the main, existing United States valuation laws conform to article 35. Certain changes would be necessary, however, to make our laws fully consistent with the article.

(a) The use of "American selling price" as a basis of dutiable value would be inconsistent with article 35. To eliminate the use of "American selling price" would be a change in the method of calculating a tariff. It would not require a change in the level of the tariff.

Under existing law, most products subject to ad valorem duties are dutiable on the basis of the wholesale selling price of the imported articles in the country of export, but a few classes of merchandise are dutiable on the basis of the American selling price of similar domestic products. These products are competitive coal-tar products covered by paragraphs 27 and 28 of the Tariff Act (19 U. S. C. sec. 1001, pars. 27, 28), and certain classes of canned clams (T. D. 47031), woolen gloves and mittens (T. D. 48183), and rubber footwear (T. D. 46158) to which "American selling price" has been applied by proclamations under section 336 of the Tariff Act (19 U. S. C. 1336). The use of "American selling price" almost always results in much higher duties than would be the case if the normal basis of valuation were used. The existence in our tariff laws of provisions for the use of "American selling price" as a basis of dutiable value for a very few classes of imported articles, as an exception to the general rule that the normal basis for assessing ad valorem duties is the wholesale price of the goods in the country of export, tends to subject the United States to the charge that it is resorting to a device to conceal the amount of protection accorded to particular products. There is no good reason why the protection afforded these products should not be expressed in the same way that the protection for other products is expressed.

The abolition of "American selling price" as a basis of value to conform to article 35 will not necessitate any change in the level of tariff protection now enjoyed by the industries operating under American selling price. It is contemplated that the rates of duty on products now dutiable on that basis would be adjusted so as to maintain the level of existing protection (see par. 5 of the General Notes at the end of schedule XX of the General Agreement on Tariffs and Trade, where the United States expressly reserved the right to make such adjustments). The abolition of "American selling price" as a basis of value will require amendments to paragraphs 27 and 28 of the Tariff Act (19 U. S. C. sec. 1001, pars. 27, 28), sections 336 (b) and (j), and 402 (a) (4) and (g) of that act (19 U. S. C. 1336 (b) and (j), 1402 (a) (4) and (g)), and certain Presidential proclamations (T. D. 46158, T. D. 47031, and T. D. 48183).

(b) Other amendments to section 402 of the Tariff Act (19 U. S. C. 1402) contemplated to bring our valuation laws in conformity with the "actual value" standard of article 35 of the charter would be (1) the exclusion from dutiable value of internal taxes applied in foreign countries but not paid on exports; under prevailing administrative rulings and judicial decisions in the United States, such taxes are not regarded as a part of dutiable value in many instances but are so regarded in some cases; (2) the dropping of the rule of using "foreign value" or "export value," whichever is the higher, as the primary basis of value and substituting "export value" alone as the primary basis; (3) a definition of "usual wholesale quantities" which would relate dutiable value to prices prevailing in sales of the greater volume of merchandise in the trade

between the country of exportation and the United States, whereas under present law the usual wholesale quantity is the quantity in which the largest number of individual transactions occur; (4) the establishment of alternative dutiable values which are closely equivalent to "actual value"; this will involve amendment of the definitions of "United States value" and "Cost of production" in section 402 of the Tariff Act which presently provides for arbitrary additions to the ordinary commercial value of some imports.

(c) Paragraph 5 of article 35 prescribes that the conversion of currencies for customs purposes should as a general rule be based on the par values established under the International Monetary Fund; where no such par value has been established, the conversion rate should reflect the current value of the currency in commercial transactions and similar provision is made for the conversion of currencies for which multiple rates of exchange are maintained. Under existing law, the values of foreign gold coins as proclaimed quarterly by the Secretary of the Treasury, are made the primary basis for the conversion of foreign currencies. This procedure has become largely meaningless because of the almost complete disappearance of gold coinage as a significant factor in monetary systems. In practice, conversion for the generality of cases is based on the current market rates of exchange as certified by the Federal Reserve Bank of New York. The amendment of the United States law (section 522 of the Tariff Act, 31 U. S. C. 372) to conform to charter requirements will bring the United States into line with existing realities without any substantial change in the amounts of duty collected as compared with existing practice, since the par values under the Monetary Fund do not vary greatly from the commercial exchange rates.

ARTICLE 37

Article 37, relating to marks of origin, sets forth principles directed at the elimination of unnecessary marking requirements and the administration of marking laws and regulations in a fair manner so as not to unduly hamper trade. The United States general marking law, section 304 of the Tariff Act (19 U. S. C. 1304), is generally in accord with the principles and rules set forth in this article. In a few cases, however, the Tariff Act provides for special marking requirements for particular articles, principally cutlery, surgical, and scientific instruments and thermostatic bottles. (See pars. 354, 355, 357, 358, 359, 360, 361, and 1553 of the Tariff Act (13 U. S. C., sec. 1001, pars. 354, 355, 357, 358, 359, 360, 361, and 1553)). These paragraphs specify in effect that the articles enumerated shall be denied entry unless they have, when imported, the name of the maker or purchaser as well as the name of the country of origin conspicuously and indelibly marked on the outside of the articles. In order to conform to paragraph 3 of article 37 of the charter, it would be necessary to permit marking to be affixed at the time of importation.

CONCLUSION

The changes in United States laws which have been described in this memorandum include in substance all the changes which detailed study and analysis show would be required in order for the United States to conform to charter requirements at the inception of the ITO. Once the ITO is established, the Organization will, of course, engage in various studies on particular subjects, and make recommendations to members, in the field of international trade in order more fully to carry out the principles and objectives of the charter. It also is possible that in certain cases, members may make complaints that certain particular practices, including the laws and regulations, of particular countries do not in fact accord the treatment that it would be reasonable to expect under the charter. As in the case of other organizations, the ITO will consider differences between members and make recommendations for their solution.

Chairman KEE. Would our Government's assent to the Habana Charter require a repeal or a modification of the Sugar Act of 1948 which now imposes quota restrictions on imports of sugar generally and separate quota restrictions on imports of refined and liquid sugar? Mr. THORP. Mr. Chairman, I spoke concerning the relationship between domestic restriction programs and import quotas. In our opinion the Sugar Act would not contravene the charter with respect to dealing with problems such as that of sugar.

Chairman KEE. Does your opinion apply to the quotas on refined sugar and liquid sugar as well as the general quota on sugar?

Mr. THORP. Yes, we would feel the Sugar Act would be treated as an integrated whole.

Chairman KEE. That would be the position of the State Department if the question should ever be raised in the ITO?

Mr. THORP. Yes, sir. We have studied this problem very carefully and we are convinced that the position which I have stated is the

correct one.

Chairman KEE. Are there any reservations to the text of the charter which we have before us, any private agreements or understandings with any country?

Mr. THORP. NO, sir, there are no side agreements or private agreements or reservations or secret protocols, or anything in that category relating to the charter.

Chairman KEE. I understand that in addition to the interpretative notes set forth in annex P to the charter there are several subcommittee reports adopted by the Habana conference which contain explanatory comments on the text. What is the effect of these notes and Subcommittee reports?

Mr. THORP. Mr. Chairman, the notes are a part of the document and approval of the charter would include approval of the notes. They are an integral part of it. The reports are reports of the subcommittees which developed various chapters in the charter. They are a part of the negotiating history but they have no legal force with respect to any interpretations of the document.

However, we have examined the subcommittee reports and there is nothing in the reports which would change in any way the testimony that I have given or the opinion which I have just expressed with respect to the Sugar Act, specifically.

Mr. VORYS. Mr. Chairman, could I ask a question?

Chairman KEE. Mr. Vorys

Mr. VORYS. Is the reason that the Sugar Act would not contravene the charter the manner in which it limits domestic production, as well as imports? Is that the reason?

Mr. THORP. That is right. It is because the problem is approached without an effort to shift it over entirely on the foreign persons, but we have taken steps within the United States to deal with it which therefore permits us to restrict the access of foreign suppliers to our markets. That is the basic justification of it.

Mrs. BOLTON. To bring this about our own sugar growing has been very definitely restricted.

Mr. THORP. That is right.

Mrs. BOLTON. On that Mr. Vorys and I share a common anxiety because ours is a very large beet-sugar area.

Mr. THORP. We have also at the same time curtailed our purchases from Cuba.

Mrs. BOLTON. And we have also kept the price up to a point where the housewife is exceedingly unhappy and getting to be a little restless

under it.

Mr. JACKSON. Mr. Chairman, may I ask a question?

Chairman KEE. Certainly.

Mr. JACKSON. Is it felt that under the terms of the charter there would be any change in the provision of law which requires the source

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of origin of manufactured goods to be indicated on the manufactured products?

Mr. THORP. May I ask Mr. Brown to answer that.

STATEMENT OF WINTHROP G. BROWN, DIRECTOR OF INTERNATIONAL TRADE POLICY, DEPARTMENT OF STATE-Resumed

Mr. BROWN. There will be no change in the requirement that the source be indicated. The only change that would be involved would be that the label, the indication of source, might be put on at the time of importation. In other words, you still have to show clearly that it is a foreign product and you must show the country of manufacture. The only change might be one as to the time and place at which that label could be applied to the object.

Mr. JACKSON. It would still reach the consumer with the source or origin of manufacture or production clearly stated?

Mr. BROWN. It could not be imported unless it had the mark on it. Mr. JAVITS. Mr. Chairman, a parliamentary inquiry: Is it the Chair's intention to afford an opportunity for questioning the witness generally or shall we just ask him a few questions around the table? Chairman KEE. I thought if we could get through with just a few questions we would not start in under the 5-minute rule.

Mr. JAVITS. I have but two questions and I would like to ask them at the chairman's convenience.

Chairman KEE. Mr. Vorys, have you any questions?

Mr. VORYS. No, I yielded to my inquisitive colleagues.
Chairman KEE. Mr. Burleson-

Mr. BURLESON. No questions, Mr. Chairman.

Chairman KEE. Mrs. Bolton, have you any questions?

Mrs. BOLTON. I do not know how intelligent my questions will appear but I have a very definite purpose in asking them. The whole matter of our trade relations with other countries is an exceedingly important one and needs to be considered from many angles. As you know, Mr. Thorp, at Strasburg they have set up subcommittees, one of which is studying the whole problem of trade relations. The conversations which I have had with people over there indicate clearly that they are looking to us to find a formula or various formulas by which there shall be a cushioning of the effect of lowering the tariff barriers. They realize that we, too, will have to do that if there is to be an over-all give and take of material of trade.

I was wondering what study is being given by the Department to the actual effect upon our economy of lowering tariffs in the various industries of this country, and then what we propose under our American way of life. I would like to emphasize that it must be under the principle that men are able to govern themselves, not under a socialist or autocratic government that we must find ways to cushion the effect upon our workers.

Mr. THORP. The place where the specific problem with respect to specific industries is studied in the Government is the Tariff Commission. We in the State Department use and work with the other departments of the Government on domestic matters. We cannot pretend to have experts on particular industries, and so forth, in the United States.