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Mr. Jones. I think what he means is that he cannot recommend something to Justice for bringing suit that disagrees with the prior ruling that customs has made, but what happens in Justice?

Mr. ABBEY. It is the importer who normally brings the action and cites a ruling that we issued. The Justice Department will not be bound by that ruling if they feel there is a more appropriate classification or legal interpretation.

Mr. JONES. And you will?
Mr. ABBEY. And we will.
Mr. LEHMAN. Administratively we will.

Mr. JONES. All right. That moves 115. We will recess for about 5 minutes.

[Recess. ]
Mr. Jones. All right, we are ready to resume.

We are on section 116. Add the 3-year renewal retirement to licensing, and so forth.

Do you have any opinions on this? This is something else the committee is going to have to discuss privately.

Mr. DICKERSON. We would strongly ask that consideration on that brokerage provision be deferred. We had a complete brokerage bill that we deferred, because we thought it would be controversial and might tie this bill up.

In addition, we have undertaken some current studies of whether we should regulate, and if so, how much.

Mr. JONES. When will the studies be done?
Mr. ABBEY. In the fall.

Mr. DICKERSON. It will be at least in the fall. Our recommendation would be to defer action on this.

Mr. ROHR. Mr. Dickerson, could you describe these studies ?
What are you trying to get at in your studies?

Mr. DICKERSON. The problem now is that we theoretically regulate brokers, but the regulations pretty well extend only to issuing licenses and determining qualifications at the time a brokerage firm is set up.

We conduct some audits, but not very extensive audits relating to brokers' activities after that.

So, we are sort of in a position of authorizing the performance of these functions by brokers, but not really being in a good position to regulate the activities that take place.

Another side of the picture is that we have given some consideration to whether we should even be in the regulation business, that the brokerage firms should be self-regulating.

Obviously, these are fairly weighty issues, and we have a study group set up which is exploring both of those alternatives to see which course of action should be best for the Government.

Mr. Rohr. Does your group, or would your group have any preliminary thoughts in these areas that might help us out in the next few days to decide what we ought to do?

Mr. ROJEK. I don't think so. It is a very complex subject.

Mr. DICKERSON. We are looking at the overall picture on whether or not to regulate. It is very complicated. I might say that philosophically we have no problem with a 3-year extension.

We are not quite sure what it is going to accomplish unless you put with the 3-year period the requirement that the license will only be renewed if the licensee continues to meet our qualifications.

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Mr. Jones. The part we were worried about was that you say to the public that the Government put its good housekeeping seal of approval on this brokerage house, and then you don't see that much of the brokerage house from then on.

Perhaps what we ought to do is have some kind of an audit requirement on a more periodic basis just to make sure you know what your licensed brokers are doing.

I am not sure. What do you think about something like that?

Mr. DICKERSON. We have been doing more extensive and more timely audits in the past 2 or 3 years, and we have had some surprises as a result of this limited auditing activity that we are undertaking right now.

I think we have the same common goal in this. Our only question is: Should we move to do a couple of things that we are not sure would accomplish a lot at this time, or should we wait and study it more and come up with more reasonable recommendations?

Mr. ABBEY. May I make a further comment ?

We have always assumed that it was our responsibility under the law to license and regulate brokers, and the bill we had introduced last year, H.R. 9220, went into a great deal of specifics as to what we thought would improve the section 641, and our ability to license and regulate.

I think we have a whole new concept now, the idea of deregulation, and we have never given much consideration to that, but perhaps the brokers could better regulate themselves, and we are approaching it from that standpoint.

What are the brokers doing for customs, what are the brokers doing for the importers, and what are the brokers doing for the public, and how does this all relate!

Certain things such as our own cargo security program and the fact that we do review the integrity of an individual before giving him a broker's license, and the fact that only a limited number of people, therefore, get to see customs documents.

It has to be considered along with his integrity with respect to handling and paying money.

Mr. JONES. Why don't we defer that now and move on to section 202, eliminate stamping requirements, on alcoholic beverages.

No problem there? Mr. LEHMAN. No.

Mr. Jones. 203 converts dimensions to metric and equalizes the personal cigarette and liquor provision between U.S. residents and nonresident aliens.

The suggestion from one of the witnesses was add the word "and cigarettes" and the word "beverages" because unless corrected, it would apply to U.S. citizens and not to aliens entering.

Are there any qualms about that?
Mr. Rohr. Cigarettes were inadvertently left out.
Mr. LAMAR. And insert a number there as well?
Mr. LEHMAN. We see no problem.
Mr. Jones. All right.

The effective date of January 1, 1980 should only apply to those amendments relating to metrification.

Is there a problem with that?
Mr. DICKERSON. No problem.

Mr. JONES. All right, section 204 increases the personal exemption from $100 to $200 and $200 to $400 for U.S. possessions. That gets the Virgin Island problem before us. You have heard, of course, the administration bill, which is $250 and $500.

Mr. DICKERSON. We would move immediately to $200 and after 18 months to $250.

Mr. JONES. Why do you want to have that interval?
Why_18 months going in stages?

Mr. DICKERSON. Merely to give the Virgin Islands some time to adjust to the added increase.

Mr. CALHOUN. Wouldn't you want the adjustment on the first $100 rather than the last $50 ?

In fact, in light of the testimony yesterday, they seemed to be more concerned more with the first $100 increment. I am not advocating that that should be done, but it seems that the logic is reversed.

Mr. DICKERSON. I would be inclined to agree with you. [Laughter.] The administration's bill reflects an agreement worked out between the administration and the Virgin Islands as a means of trying to make the thing as easy as possible.

Mr. LAMAR. Mr. Chairman, there was another suggestion, I believe, in the hearing on this one, and that has to do with restoring goods not accompanying the returning resident.

Mr. LEHMAN. Articles to follow, yes.

Mr. DICKERSON. We would have an awful lot of problems with that. We had a provision one time where tourists overseas could mail back articles to follow under duty-free provisions, and it was an absolute administrative nightmare.

Even though this would be limited to the Virgin Islands and the territories, it would be almost impossible to enforce from our standpoint.

I would almost rather see a provision that anybody in the Virgin Islands could bring anything back free if they wanted to without limitation, because you really can't do anything about it.

You can send 6 packages back a day, or 10 packages back a day.

Mr. JONES. Get me a ticket. [Laughter.] I can see the administrative problems. It is not a bad suggestion. [Laughter.]

Mr. DICKERSON. That would really simplify it.

Mr. Jones. What would happen there if we accepted something like that?

Mr. DICKERSON. I am afraid what might happen is that certain interests in the United States would be concerned if you had no limitation.

A person could go down there and send back vast quantities of articles which might be harmful to those interests in the United States.

Mr. Jones. I am sure that would change these gift and fashion shops' merchandise.

Mr. DICKERSON. That is right.
Mr. JoNEs. What else do we have here on the personal exemption ?

We have a divergence of opinion, obviously, from the Virgin Islands, and I think that is something we will have to sit down on with the committee.

OK, section 205 authorizes a flat 10-percent duty rate for non. commercial importation for personal use if not over $600 in retail value in the country of acquisition.

Mr. DICKERSON. We very much favor that position.

Mr. JONES. Section 206 authorizes effective date of administrative ruling resulting from imposition of higher rate of duty to be established in the publication in the Federal Register, and so forth.

Mr. DICKERSON. We favor that provision.

Mr. JONES. Section 207 increases dollar limit to reduced administration costs which are disproportionate to revenues reduced.

Mr. DICKERSON. These are largely changes to account for inflation, and we favor those provisions.

Mr. CALHOUN. That does include an increase of $25 for the frequent traveler?

Mr. DICKERSON. Yes. You have a situation on the border where people do their shopping across the border, and they can bring in $10 a day currently, and this would permit $25.

Mr. JONES. All right. Section 208 authorizes a monetary penalty as alternative to seizure of vessel for failure to declare vessel repairs.

First of all, what is your comment?
Mr. DICKERSON. We favor that.

Mr. JONES. The ABA penalties and procedures in this says that "penalties and procedures in this section should be handled in the same way as other imports under section 211 of the bill," and other brokers object to this provision, since it should incorporate section 212 revisions.

Mr. ROJEK. We said this morning we should study that at greater length.

Mr. Jones. Does anybody have any comment ?

Section 209, conform the airway bill to bill of lading, and so forth. OK?

Mr. LEHMAN. OK.

Mr. JONES. Section 210 reduces from 1 year to 6 months the time in which merchandise must be retained in a general warehouse before it may be sold by Customs and authorized disposition of seized liquor, et cetera, in the same manner as unclaimed or abandoned liquor.

Mr. DICKERSON. We are in favor of that provision.

Mr. JONES. Section 211 increases dollar limit on informal entries from $250 to $600. Mr. DICKERSON. We favor that provision.

Mr. JONES. Why do the southern brokers say that the $600 limit is not appropriate for noncommercial importation ?

Mr. SAMOLIS. Both the National Brokers Association and the southern brokers make the same point that they are not concerned about the noncommercial shipments, and essentially no limit is needed there, but when talking about commercial shipments, they feel a $600 limit might have a detrimental impact.

Mr. JONES. A detrimental effect?
Mr. SAMOLIS. Yes.
Mr. Jones. Section 212. Does anybody have any comments on that?
It classifies the time in which to file a request for relief.

The suggestion is strike, “not amounting to an error in the construction of the law," or in the alternative, after "inadvertence" add "including an inadvertency in the construction of a law whether the Customs is a party to the inadvertency," et cetera. [Laughter.] Mr. LAMAR. It would never happen. (Laughter.] Mr. Jones. Where are we in the bill, page 27. Do you have any comment on that? Mr. LEHMAN. We don't think it should be expanded to include differences as to legal construction.

We think the kind of error contemplated by the provision is a mistake of fact.

Misplacing a decimal point so that you report a unit value as a dollar rather than $10. The purpose here is to give a longer statute of limitations to correct that error.

But, if you have a difference as to a legal interpretation, we think that ought to go through the regular process.

This is an exception to the general rule. This is for mistakes of fact,

Mr. ABBEY. Congress provides for the correction of mistakes of law through the protest procedure in section 514 in the Tariff Act.

Mr. JONES. We will talk about that some more.

Now, what about this new definition of clerical error in the construction of law, including but not limited to errors in classification, appraisal, calculations, and so forth?

Mr. LEHMAN. This is to take the 90 days that we allow for protesting and turn it into a 1-year period.

You are taking every legal controversy as between the parties, and turning it into a subject of petition for a period of a year after the decision has been made. I think the 90 days now allowed for protest is adequate time to deal with these legal questions—to raise them for administrative reconsideration.

Mr. CALHOUX. As I recall, though, the criticism was not so much that. Rather, it was a question of what was considered to be a legal question for purposes of protest.

Mr. LEHMAN. For purposes of the protest, you are actually not limited to legal questions. You can raise any question.

But, if the question happens to be a matter of a mistake of fact, then you are given extra time to raise the question.

Mr. CALHOUN. I thought the tesimony indicated that they were not happy with the demarcation between a question of fact and a question of law.

Mr. LEHMAN. The only consequence is that there is sime question as to how fast they have to raise it with us. If they raise it within 90 days of the protest, they are protected. If the 90 days have passed, and it is a question of fact, then they are given extra time to raise it through this petition process.

But, to take away the demarcation gives then 1 full year to raise all questions, instead of the 90 days.

I think 90 days is adequate for the administrative appeal process, and it compares to the IRS deficiency procedure.

Mr. Jones. 213 authorizes the Secretary to grant exemption, and so forth, in limited quantities of trademark merchandise accompanying an arriving person.

OK.

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