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Mr. Jones. Thank you very much. I wasn't really looking up, and I didn't recognize Mr. Gilbert. He is an old friend. Do you have anything to add ?
Mr. GILBERT. No; I think the points have been made by other witnesses.
Mr. JONES. Mr. Frenzel ?
Mr. JONES. Thank you both very much. Your testimony will be helpful to our deliberations.
Mr. Evans. Thank you. .
Mr. Jones. Our final witness today is Mr. Richard Lentz of the Brittania Sportswear Co. of Seattle, Wash. Your full testimony will be included in the record, also, Mr. Lentz.
STATEMENT OF JONATHAN BLANK, COUNSEL, BRITTANIA
SPORTSWEAR CO., SEATTLE, WASH. Mr. BLANK. I am not Mr. Lentz, Mr. Chairman. I am representing him.
Mr. Chairman, my name is Jonathan Blank and I am an attorney with the law firm of Preston, Thorgrimson, Ellis, Holman & Fletcher. I am appearing today as counsel for Brittania Sportswear Co., a division of Schoenfeld Industries, Inc.
Brittania Sportswear Co. is a major wholesaler of men's and women's sportswear and will import sportswear in the United States in 1977 having a first cost of approximately $45 million.
The chairman of the corporation, Walter Schoenfeld, and the president of Brittania Sportswear Co., Richard Lentz, had hoped to be present to testify before the committee. However, due to the short notice and scheduling complexities, they are not able to appear today.
Let me say at the outset that we applaud both the philosophy and the structure of H.R. 8149. The statutory procedures for the Customs Service have long been in need of substantial reform designed to reflect current business conditions in international trade and, in the words of H.R. 8149, to “facilitate the commerce of the United States."
Because of the limited time available to testify before the committee today, we request permission from the committee to present additional written testimony regarding other aspects of H.R. 8149. We will limit discussion today to a major concern of the company, namely, the extensive delays in liquidation of entries which the proposed legislation addresses, but which we fear it does not resolve.
Mr. Jones. That would be fine. When would the additional written testimony be in?
Mr. BLANK. We will have it in next week.
Mr. BLANK. First, we are in support of the time limitation on liquidation added by section 218(a) on page 30 of H.R. 8149. Under current law, there is no time limit on liquidation and the bookkeeping and contingent liability problems that result are starting.
The specific situation with Brittania Sportswear Co. is an illustration of the general problems facing importers. Brittania Sportswear Co. began importing in 1973. The volume of the sportswear
imported began increasing substantially in early 1974 and has steadily grown since.
In April of 1974, two foreign inquiries involving major foreign manufacturers for Brittania were instituted by the Seattle District Customs Office. The inquiries were returned by the foreign customs agents in January of 1976, but the information provided was incomplete. The Seattle office then requested further information from Brittania, which was provided within a 2-month period.
However, the Seattle District Custom Office does not have the necessary staff to use the information to begin liquidating the affected entries. Consequently, Brittania has 3,184 unliquidated entries as of the last quarterly report on July 1, 1977. These unliquidated entries are 50 percent of Brittania Sportswear's total entries since it began importing sportswear in 1973 and many of these entries date back over 4 years.
The effect of this delay is to impose a heavy bookkeeping burden on the company to keep adequate information for specific entries made over 4 years ago. However, the more critical import is the delay and uncertainty involving the true cost of goods sold.
The duty is a significant factor in the cost of goods sold for Brittania. The duty rates for the goods imported by Brittania range from 0 percent to 48 percent, with the bulk of the sportswear ranging from 16 percent to 35 percent and the average duty rate approximately 25 percent.
The committee can appreciate the problem for the importer when the confusing and somewhat arbitrary nature of the classification categories and the inability of the local district officials to make binding decisions as to the categorization of goods prior to the importation of commercial shipments are combined with the significant delays in liquidation of entries.
For example, a style of jeans may be initially classified as “nondecorated” with a duty rate of 16 percent. A switch in decision, classifying the goods as decorated, would involve a duty rate of 35 percent. Consequently, a modification in the classification of goods and the corresponding alteration of the duty rate many years after the goods have been imported and sold could not only eliminate the profit on the transaction for the importer, but could destroy the importer itself.
This long-term contingent liability problem imposes a burden not faced by other businesses. The potential liability inhibits the importer's ability to grow and finance its activities. There appears to be no national interest served by the delay in liquidation, only an adverse impact on importers.
The conclusion is that the one-year limitation on_liquidation contained in H.R. 8149 is highly desirable. However, Brittania is concerned that the power of the Secretary of the Treasury under the proposed section 504(b) (1) to extend the one-year limitation when Customs needs further information will amount to an automatic extension to a 5-year limitation period. This is scarcely superior to the current system.
We urge the committee to consider altering the bill to delete this discretionary extension by the Secretary and to limit the extensions
to those provided by the Secretary and to limit the extensions to those provided by statute or by court order.
If Customs lacks the resources to meet a 1-year limitation period, then more resources should be allocated to Customs, and, if necessary, the initial time limitation should be extended to 18 months or 2 years. A short, definitive time limitation is needed.
In the alternative, we suggest that the proposed section 504 (b) (1) be revised to require that the notice of an extension by the Secretary be mailed or delivered to the importer and that the notice contain a statement of the reasons for the extension and a description of the specific information needed. Present notice requirements in the statutes and regulations do not provide adequate notice to the importer.
Again, I would like to emphasize that this is the chief concern of Brittania with regard to this bill, and we will submit other comments with regard to other sections.
Mr. Joxes. I thank you for your testimony. I think Mr. Frenzel, I think I can speak for him and for myself, in saying that the whole tariff schedule is one that I think we ought to be getting into, and hopefully next year we will get into it, perhaps in connection with trade talks. I don't know in what degree, but it certainly is something that ought to be simplified.
With regard to your comments on the time period on liquidations, some of the witnesses you heard today said one year is not enough from an industry viewpoint.
Mr. BLANK. Well, Brittania, obviously, feels that it is, and I was chiefly concerned with the fact that it is carrying contingent liability on its books probably well in excess of its net worth. This is caused in part by liquidation.
The chief concern with the bill as drafted is that they would automatically receive before a 1-year period a notice that they had received insufficient information, and there would automatically be a delay each time. Therefore, there should be something more definitive. I don't think they would have objection to extending the period to 18 months.
Mr. Jones. I understand that, and I think we can give consideration to requiring Customs to be more specific when they want an extension. I think if we did it that way then the committee could oversee the activities of Customs and how they are reacting to this particular provision.
We can get information as to why they are asking for extensions if they are doing that.
Does anybody on the staff have questions? Thank you very much. We will resume the hearing tomorrow at 10 a.m. in room 1302 of the Longworth House Office Building. I believe that is one of the Agriculture Subcommittee hearing rooms.
The committee will be in recess until 10 a.m. in 1302 Longworth Building, on Thursday morning.
Thank you very much.
[Whereupon, at 1:45 p.m. the committee adjourned, to reconvene at 10 a.m. on Thursday, July 21, 1977, in room 1302, Longworth House Office Building.]
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