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making entry. That refers to the payment of duty after entry. We feel that it should read “not to exceed 30 days from the release of the merchandise.”

The reason for that is that Customs has already, we think, quasilegally given importers 10-days credit, and if that possibility continues to exist, the 30 days could become 40 or 45 because they could simply allow "entry” to take place 15 or 20 days after release and pay the duty after another 30 days. We know it is not the intent of the Customs Service to do that, but I think it would be wise for the committee to write the law so that the possibility to do so would not exist.

Mr. Jones. I think that is a suggestion we will consider and put in the committee report.

Mr. Wilson. We would also like to see attention given to surety protests. Under the present system we are restricted from making a protest. As the system is set up, we are not advised of an increase in duty until we are time-barred by the statute from making a protest. We would like to have the right to make a protest to be 60 days after the demand on surety is made. It is just impossible for us, as the system is set up now, to make a protest if we are not advised at the time the action takes place.

We are most interested, of course, in the statute of limitations, which imposes a limitation of 1 year after entry to liquidate. The present system gives us what we call in the industry, "a long tail”. Years after the entry is filed, demand is sometimes made on surety and the importer has frequently gone out of business.

We would like to see section 504 left as is. Possibly the importer could be given the right to ask for extension. We would like to have the extension be regarded the same as a suspension as in section 109(d) of the bill so that we will be advised by publication in the Federal Register whenever extension of the time period for liquidation is granted by Customs.

In answer to the question that you are asking each witness, as to whether it would be better to hold up the bill to add some other things, or broaden it, we think that the committee has done an. admirable job so far in pushing for a bill. We would like to see the bill exactly as it is rather than no bill.

Again, I thank the subcommittee. If there are any questions, we certainly will be happy to address ourselves to them.

[The prepared statement follows:]

PREPARED STATEMENT OF BRUCE A. WILSON, PRESIDENT, ROANOKE AGENCY, INC.

Bruce A. Wilson is President of Roanoke Agency, Inc., an Illinois corporation having its prinicpal office at 2150 Landmeier Road, Elk Grove Village, Illinois 60007. Roanoke Agency, Inc., is an agent for sureties who are principal carriers of U.S. Customs bonds. Roanoke Agency, Inc., underwrites bonds, handles claims, has draft authority and performs all the administrative functions for the placement of Customs bonds. To the extent that the proposed legislation has an impact on sureties, it also impacts upon the agency. Roanoke Agency, Inc., has a direct economic interest in this legislation because of its position as an intermediary between customhouse brokers, importers and the sureties.

Roanoke Agency, Inc., is also the parent company of J. E. Bernard & Co., which has been a licensed customhouse broker since 1925. To the extent that this legislation regulates or impacts upon the business of the customhouse broker, J. E. Bernard & Co., and Roanoke Agency, Inc., have a material interest therein.

BACKGROUND

Being in the custom bond business inextricably binds us to the entire importation process. Thus involved, we have attempted to actively participate in various stages of the shaping of the Customs Modernization Act. Some of our activities have been :

August 5, 1976–Testimony before this committee, then chaired by Wm. J. Green.

February 1, 1977–Meetings with othe surety industry representatives and Mr. Allan J. Rappoport, Director, U.S. Customs Service AMPS, to discuss proposed changes in the basic bonding structure and related regulations.

March 3, 1977–Submission of written comments on the Customs Modernization Act to Vernon Acreę.

April 4, 1977–Submission of revisions and further comments on the Customs Modernization Act.

May 2, 1977–Submission of comments and background material to this committee.

Throughout this period and in each of our written submissions we have endeavored to explore the background of the current system, the desired modifications and the very vital role that the surety industry plays in the importation process. The members of this committee have been provided with this material. We urge you to give serious consideration to the problems addressed therein.

RECOMMENDATIONS

As with most legislation, the current bill represents much discussion and a great deal of compromise between the various private parties, industries and governmental units which it affects.

We strongly favor and urge you to adopt this bill as it represents a major step forward in an area which has not seen much progress in the last fifty years.

We believe, however, that there remain some weaknesses which should be remedied.

SECTION 104 amending subsection (a) of Section 505, Tariff Act of 1930, as amended (19 U.S.C. 1505) should be revised.

The clause reading “..., not to exceed thirty days from the time of making entry ... ,” should be amended to read “..., not to exceed thirty days from the release of the merchandise,

Presently, there are no constraints on customs' ability to expand the allowable time between release of merchandise and filing the entry. We believe the intention of the drafters of this bill was to require the deposit of estimated duties within 30 days of the merchandise being entered into the commerce of the United States. This amendment will carry out that intention and express a clear operative directive to Customs.

SECTION 109 of the bill amending Section 514 of the Tariff Act of 1930 as amended (19 U.S.C. 1514), should include further amendments to subsection 514 (b) by inserting after the word "extraction” in the last sentence thereof, “including the surety company on any bond covering the entry” and by adding subparagraph (b) (2) (C).

“(b) (2) (C) In circumstances where subparagraph (A) and (B) are inapplicable, the date of payment of any charge or exaction, fine, penalty or amount of liquidated damages, by a surety on the bond covering subject entries where protest is being made by said surety."

The amendments to subsection (b) are recommended to clarify what we believe is already the intent and language of this section. Under the “Customs Concept” importers and brokers will be billed on a monthy basis. The bill date will be the liquidation date for all entries liquidated that month, including items liquidated at an increase. The broker or importer will then have 10 days to remit any balance due or he is considered delinquent. As a practical matter, it is not contemplated that demand will be made on surety until the broker or importer is at least 60 days delinquent. Therefore, the procedure would work automatically to notify the surety at a point in time where it may be timebarred from filing a protest. This amendment will remove that problem by clarifying the surety's rights as a party to the transaction for which it is otherwise held jointly and severally liable.

SECTION 218(a) of the bill amending the Tariff Act of 1930, as amended, by adding a new Section 504 which is a statute of Limitations on the liquidation of entries is the most significant portion of this legislation from a surety viewpoint. We have previously testified and commented on the problems created by customs failure to liquidate entries in a timely fashion. This enabling legislation will authorize modern computer systems which will have on line capacity to liquidate transactions which were previously handled manually over a period of weeks, months, or years. We believe that liquidation should take place within one year from the date of the entry regardless of the type of entry.

We are unable to ascertain the precise operative intent of subparagraphs (a) (2) and (3). Not only do these subparagraphs make a distinction between importers who have been granted deferred payment status and those that have not, it appears to arbitrarily extend the Statute of Limitations to 4 years before notification of suspension might be required. We are unaware of any reason why Customs should not be able to liquidate warehouse entries in the same timely fashion thaa consumption entries are liquidated. Under the present system and the system provided for by subparagraphs (2) and (3) the deposit of duties when merchandise is withdrawn from warehouse will be estimated duties only. We do not object to the delaying of the payments until withdrawal or shortly thereafter. However, we see no logical reason why the duties to be deposited at that time should not be actual rather than estimated.

Subsection 504 (b) should be clarified with respect to subparagraph (1) to make it clear that an extension of the statute in order to gather information is in fact a suspension of liquidation within the meaning of Section 109 of the bill. (Section 514(d) of the Tariff Act). This can be done by restating subparagraph (1):

(1) Liquidation is suspended because information needed for the proper appraisement or classification of the merchandise is not available to the appropriate Customs officer ;'

SECTION 218(b) of the bill relating to the effective date of the section should be revised so the section applies to entries made on or after the enactment of the Act. There has been no justification shown as to why the statute should not apply immediately or even why it should not apply retroactively.

CONCLUSION

In conclusion, I would restate that this legislation represents substantial progress in many long neglected areas of the Customs Law. We strongly favor and urge you to adopt this bill. The total modernization effort, together with surety safguards will insure the continued vitality of the surety industry which is essential to the smooth flow of commerce and the protection of the revenue.

Mr. JONES. I think it is very helpful. You did suggest that the importer be allowed as well as Customs the right to extend the 1 year statute of limitations?

Mr. WILSON. We have mixed emotions as to whether that should be allowed to happen. I think Customs could structure their procedures so that importers couldn't frivolously ask for extensions. I think there are reasons why a person would want to get an extension. Sometimes for “reconstructed value” 1 year is not long enough. I think attention should be given to that point, rather than extending the limitation on liquidation from 1 year to 2 years.

Mr. Jones. Does counsel have questions? Thank you all very much. Mr. GUSTAFSON. Thank you. Mr. JONES. The next panel is our colleague and delegate from the Virgin Islands, Mr. Ron de Lugo, and will you be testifying by yourself?

Mr. DE Lugo. No; I have the panel with me. Mr. Jones. That would be Dr. Auguste Rimpel, Willard Hurd, Thomas Travis, and Gilbert Lee Sandler, Marianne Vernon and Robert Moss are for the chamber of commerce and Governor Paiewonsky.

We saw many of you in Florida, Ron. Although you were not there, they did å wonderful job of testifying, almost as good as you do upholding the Virgin Islands' interests in the Congress.

You may proceed.

PANEL CONSISTING OF HON. RON DE LUGO, RESIDENT COMMIS

SIONER IN CONGRESS FROM THE VIRGIN ISLANDS; DR. AUGUSTE RIMPEL, COMMISSIONER OF COMMERCE, GOVERNMENT OF THE VIRGIN ISLANDS; WILLIAM R. HURD, PRESIDENT, VIRGIN ISLANDS MANUFACTURERS & IMPORTERS ASSOCIATION, ACCOMPANIED BY THOMAS G. TRAVIS AND GILBERT LEE SANDLER, COUNSELS; MARIANNE VERNON, CHAIRPERSON, AND GEN. DONALD DAWSON, MEMBER, VIRGIN ISLANDS GIFT AND FASHION SHOPS COMMITTEE; ROBERT MOSS, ST. THOMAS-ST. JOHN CHAMBER OF COMMERCE; AND RALPH M. PAIEWONSKY, CHAIRMAN, BOARD OF DIRECTORS, A. H. RIISE, INC.

STATEMENT OF HON. RON DE LUGO

Mr. DE LUGO. I will try to be very brief and move right along here. In addition to the names that were listed here, we also have Gen. Donald Dawson who is counsel for the Gift Shop Association, accompanying Marianne Vernon, chairman of the association.

I want to commend those Virgin Islanders for being here. They came to town over the weekend, and I think their presence both here and in Miami indicates the seriousness with which we view the legislation that is before you today and its importance to this U.S. territory.

I have already had an opportunity to talk with you at great length on both my bill, which would address itself to headnote 3–a, meaning jobs for U.S. citizens, as well as the administration's bill, one part of which deals with the duty-free exemption. You already know our position, so I will attempt to be as brief as possible.

I also want to commend the Department of the Interior for its support of my bill, and in particular I want to recommend to your attention the very strong statement given this morning by the Under Secretary, Jim Joseph, before your committee. I think that the presence of the Under Secretary of Interior also indicates the importance with which the administration views my legislation on headnote 3-a. It is absolutely crucial to these American territories. The reason is that Congress, in its wisdom, back in the 1950's gave us certain economic tools in the Organic Act and in the Customs laws, which have been eroded by events beyond our control. Specifically, we have been impacted by dollar devaluation, inflation, and duty-free status accorded an ever-growing number of developing countries under the 1974 Trade Act. As you know in the last Congress

I came before this very committee and asked you to save our watch industry, where employment was down to 400 people.

94-54577—30

We are not talking about a large number of jobs, but they are important to us. This committee in its wisdom saved the watch industry in the Virgin Islands by increasing the amount of allowable foreign parts under the general headnote 3–a formula from 50 to 70 percent.

As a result, our watch industry employment is now back up. We now have about a 1,000 jobs in the watch industry.

I also want to indicate to you that what my bill would do is simply extend to the other small industries in the Virgin Islands, and those would locate in the Virgin Islands, the same provisions that apply to the watch industry, with one additional criterion. We put in a quota of $25 million per product to make sure that we will not threaten the dislocation of any mainland jobs or industry.

I would also like to point out this quota is not just for the Virgin Islands, but for all U.S. territories. We will share this. This means that there will be no threat to mainland industry, there is no need for concern. We are not going to take one job from a U.S. citizen on the mainland. We are going to provide jobs for U.S. citizens in the U.S. Virgin Islands and in the other territories. If these companies don't come to the U.S. territories, where are they going to go? They are going to go where they can get cheap labor. They are going to go to Hong Kong or someplace like that.

When they come to the U.S. territories, they pay at the present time above the minimum wage. All our Federal labor laws apply in the U.S. territories. So we have to give some advantage here to these territories, and that is where I urge this committee to support my bill that addresses itself to headnote 3-a.

I am not even going to read my statement. I will submit it for the record, but I would also like to address myself at this time to two other items of vital interest to the Virgin Islands.

[The prepared statement follows:] PREPERED STATEMENT OF HON. RON DE LUGO, RESIDENT COMMISSIONER OF THE

VIRGIN ISLANDS

Mr. Chairman and honorable members of the House Ways and Means Subcommittee on Trade, I am grateful for this opportunity to testify on a number of pending legislative proposals which have substantial bearing on the future economic security of the United States Virgin Islands. First, I would like to comment briefly on the impact of increasing the duty-free personal exemption under H.R. 8149 and H.R. 8367 on our tourist-based economy. Second, I would like to explain the importance of H.R. 8222, legislation I have introduced to restore the competitive position of light industry in the insular territories in view of recent changes in the international economic environment and Congressionally-mandated trade prferences for developing countries.

A significant percentage of the Virgin Islands tourist industry has developed over recent years as a direct result of the current differential in the personal exemption as it is applied to those tourists returning from abroad and those from American areas. As you know, while a tourist is limited to $100 of dutyfree purchases abroad, he may bring back up to $200 if he returns from either the Virgin Islands, Guam or American Samoa. The differential is especially critical with respect to the ever-growing segment of the tourist trade that relies heavily on the cruise boat passenger, which in the most recent calendar year accounted for over 50% of total passenger arrivals in the Virgin Islands.

A number of government and private studies have indicated that the buying patterns of the cruise boat passenger, who generally has limited disposable income and calls on a number of competing Caribbean ports, is significantly influenced by the present $100/$200 differential. Since the Virgin Islands is

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