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(4) by striking out "value of more than 50 percent," in clause (iii) of such headnote (as redesignated by paragraph (1) of this Act) and inserting in lieu thereof "appropriate value specified in (ii) (A) (I), (II), or (III),".

SEC. 2. The amendments made by the first section of this

7 Act shall apply with respect to articles entered, or withdrawn 8 from warehouse, on or after January 1, 1978.

94-545 - 77-4

Mr. VANIK. I want to point out as chairman of the Trade Subcommittee, I serve as a member of the Ad Hoc Committee on Energy. I have asked my colleague, Mr. Jones, who has done such a marvelous job in chairing the task force, to take the responsibility for chairing this important hearing. I will yield now to Mr. Jones. I will remain here for such time as I can.

Mr. JONES [presiding]. Thank you, Mr. Chairman.

Mr. Chairman, we have very similar views on customs and trade

matters.

However, our views on energy matters differ considerably so I would rather have you stay here.

I do want to point out that the Task Force under the direction of Chairman Vanik has had a very interesting and educational few months learning about the Customs Service and hearing first hand some of the problems with, and opportunities for, customs modernization.

The purpose of the task force and subcommittee will be to complete hearings hopefully by Thursday of this week. We would appreciate brevity in all observations the witnesses may have, keeping in mind the point of the two bills before us so that perhaps Friday of this week and early next week we can resolve the remaining differences. Then in the 1 day next week allotted to us to mark up the bill, we can complete that action and we can have the bill ready for consideration by the full Ways and Means Committee immediately after the August recess and ready for the floor of the House of Representatives in September.

If we are going to get a procedural reform bill this year, we will have to move on this schedule. Next year I hope we can get the same kind of cooperation from government and industry witnesses and concerned people with regard to a major reorganization of the Customs Service and modernization of such things as valuation and the other tariff schedules that I think are very necessary to harmonize American trade and customs procedures with those of our trading allies.

Mr. Chairman, at this time we would like to enter into the record the results of the tests conducted with the assistance of GAO staff with respect to how well the Customs Service examines and assesses parcel mail. Figures indicate the Service is generally doing an excellent job in this area and the test dispels certain charges raised by brokers in last year's testimony to the effect the Customs Service was not adequately supervising this service.

The Service is to be commended for the job it is doing in this area. At this time we will call on Under Secretary Anderson and the rew Director of Customs, Mr. Chasen.

Would you summarize your testimony and the total text will be included in the record.

STATEMENTS OF HON. BETTE B. ANDERSON, UNDER SECRETARY, DEPARTMENT OF THE TREASURY, AND HON. ROBERT E. CHASEN, COMMISSIONER OF CUSTOMS, ACCOMPANIED BY G. R. DICKERSON, DEPUTY COMMISSIONER; THADDEUS ROJEK, ACTING CHIEF COUNSEL; LEONARD LEHMAN, ASSISTANT COMMISSIONER FOR THE OFFICE OF REGULATIONS AND RULINGS; AND RICHARD ABBEY, ACTING DEPUTY CHIEF COUNSEL

MS. ANDERSON. I am Bette B. Anderson, Under Secretary, Department of the Treasury. Included among my responsibilities is supervision of the U.S. Customs Service. Accompanying me this morning is Mr. Robert E. Chasen, Commissioner of Customs.

This is Mr. Chasen's first appearance before a congressional committee since his swearing in last Friday. He comes to the Government from a senior management position at ITT. He has also had previous experience in enforcement activities. We are fortunate in acquiring his talents and expect significant contributions to the management of customs resources and activities during his tenure.

We have submitted to the committee biographical data on Mr. Chasen, and also on me, since this is my first appearance too, before your committee.

At the table with us from the Customs Service is Mr. Bob Dickerson, Deputy Commissioner; Mr. Thaddeus Rojek, Acting Chief Counsel: Mr. Leonard Lehman, Assistant Commissioner for the Office of Regulations and Rulings; and Mr. Richard Abbey, Acting Deputy Chief Counsel. I would like to thank you, Mr. Vanik, and the committee for the invitation to discuss H.R. 8149 and H.R. 8367, the versions of the Customs Procedural Reform Act, and the other bills you are considering during these hearings.

On behalf of the Treasury Department and the administration, I vigorously endorse the purpose of this legislation. We believe it will substantially facilitate the flow of world trade. The President has stated his commitment to expanding opportunities for trade on a global scale and to strengthening the open international trading system.

In support of this policy, the Treasury Department wishes to initiate procedural reforms designed to expedite entry and accounting for importations and to make life simpler for travelers returning with foreign goods. The statutory authority to implement many of these programs is contained in the bills now before you.

The Customs Procedural Reform Act will be the first major statutory revision to modernize and simplify Customs procedures in over 20 years. Not since the Customs Simplification Act of 1956 has Congress enacted measures to facilitate the clearance of merchandise and passengers through our ports.

During the past 20 years, the volume of commerce coming into the country has risen dramatically. The value of importations and the amount of duties collected have increased five fold. Entries have. tripled from 1.1 million in 1956 to 3.4 million in 1976. The number of travelers processed has doubled during that time from 130 million to 266 million. The number of entries processed now averages more than 2,600 per import specialist per year, an increase of 74 percent

over the past 20 years. Inspector workloads have been similarly impacted as the number of importations and international travelers has risen.

Today customs is responsible for enforcing over 400 laws for more than 40 different Federal agencies. In order to carry out this mandate efficiently and effectively, customs must be able to adopt modern merchandise processing methods and financial programs. However, customs' efforts in this direction have been handicapped by antiquated laws and practices. In fact, the origins of many existing customs' procedures can be traced back to the Act of March 2, 1799, which was drafted with a specificity now associated with the Code of Federal Regulations. The specificity of these archaic laws and their resulting inflexibility have greatly retarded attempts by Customs to adopt modern business practices to cope with 20th century conditions.

Both versions of the proposed bill would build flexibility into the customs and navigation laws to permit application of accepted modern business techniques to the processing of passengers and merchandise, and the collection of duties. With this statutory authority we expect to (1) increase the efficiency and productivity of the customs workforce, (2) improve customs' responsiveness to the needs of the importing community and the traveling public, and (3) further insure compliance with customs laws and protection of the Government's revenue.

Title I of the proposed legislation would allow customs to institute modern business methods in the processing of merchandise and duties. In particular, it would permit customs to implement fully the automated merchandise processing system (AMPS). This is a computerized filing system designed to monitor information on entries, liquidations and duty collections. The system is updated by telecommunications input from duty assessment offices located around the country. The data is then used for control of warehouse inventory, in-bond shipments, importers' accounts, and merchandise quotas. Records are made of liquidations and duties, and importers are sent bills on a periodic basis. A segment of the system is now operating at Philadelphia, Chicago, Baltimore, Boston, and Miami, and will soon be installed at Los Angeles. This "early implementation" segment permits more effective enforcement of the laws and protection of the revenue by automatically identifying routine importations and highlighting complex or potentially incorrect entries at current locations, we have concluded that the total AMPS program would facilitate the delivery of merchandise to importers, reduce the amount of paperwork now required for entry, cut the number of financial transactions, and provide better statistical data more quickly.

Specifically, sections 102, 103, 104, and 109-110 in H.R. 8149— would give the Secretary of the Treasury or his designee the authority to prescribe where and when an entry shall be filed and to separate the payment of duties from the entry or withdrawal from warehouse procedure. Also necessary to this system are verification procedures contained in sections 105 through 108 of the act. These amendments revise existing statutes found in the Tariff Act of 1930 to enable customs to gain access to data substantiating the details

of an import transaction without burdening importers with addiional records to be retained.

Title I also addresses section 592 of the Tariff Act of 1930, the so-called fraud and penalty provision. In recent years this statute has been the subject of mounting criticism. Importers have objected to the severity of the penalty provisions and to the difficulty encountered in obtaining judicial review of an alleged violation.

Title II of the proposed legislation is a collection of various amendments to the Tariff Act of 1930 and related navigation laws. These are designed to facilitate the processing of international travelers and low-value importations. For instance, under the provisions of the Treasury bill, travelers would benefit from a proposal to raise personal exemptions for persons arriving from overseas from $100 to $250-$500 in the case of persons arriving from Guam, American Samoa, and the Virgin Islands. This increase would be introduced gradually over a period of 2 years to allow the touristbased economies of the American insular possessions to prepare for the new system. We believe these new levels are necessary in order to be consistent with our policy of dismantling the barriers erected in the 1960's to protect the overvalued dollar. They have also been urged by the traveling public in order to adjust the personal exemption ceiling set in 1961 to the impact of inflation on the dollar.

The administration's bill would also provide importers with additional protections. Section 222, for example, would establish a limitation of 1 year for an entry to be liquidated by the Government. This would eliminate unanticipated requests by customs for additional duties and would protect surety companies, which are jointly liable with importers against losses resulting from dissolution of their principals in instances where there have been undue delays in liquidation.

Amendments are also included which would enable customs better to serve the public. A 10-percent flat rate of duty would be imposed on articles accompanying returning residents intended for personal or household use not in excess of $600 fair retail value. This provision would greatly facilitate the calculation of duty owed by passengers and expedite their clearance. Section 211 would increase from $250 to $600 the maximum aggregate value of a shipment which may be entered through informal entry procedures. This section is designed to achieve administrative and operational efficiencies by granting customs officers greater operational flexibility and will contribute substantially to the effort of the Customs Service to decrease the backlog of unappraised and unliquidated formal entries.

In addition, arrest authority would also be granted to customs officers similar to the authority already granted to officers of the Immigration and Naturalization Service, the International Revenue Service, and the Secret Service.

We regard the proposed Customs Procedural Reform Act as an important step in the effort to bring customs laws and practices into the modern era of international commerce. It will enable customs to process imported merchandise and international travelers more quickly and efficiently. Although the versions of the bills now before you agree in this general aim, there are differences in policy that must be resolved. Commissioner Chasen's testimony will discuss