SPECIAL PROVISIONS OF THE TARIFF ACT OF 1930 CALLING SEC. 340. DOMESTIC VALUE-CONVERSION OF RATES (a) Conversion of Rates by Commission. The commission shall ascertain, with respect to each of the ad valorem rates of duty, and each of the rates of duty regulated by the value of the article, specified in this Act, an ad valorem rate (or a rate regulated by the value of the article, as the case may be) which if applied upon the basis of domestic value would have resulted as nearly as possible in the imposition, during the period from July 1, 1927, to June 30, 1929, both dates inclusive, of amounts of duty neither greater nor less than would have been collectible at the rate specified in this Act applied upon the basis of value defined in section 402 of the Tariff Act of 1922. (b) Report to Congress by Commission.-The commission shall, as soon as practicable, but in no event later than July 1, 1932, submit a report to the Congress setting forth the classes of articles with respect to which the conversion of rates has been made, together with the converted rates applicable thereto. (c) Data to be Furnished by Secretary of Treasury and Secretary of Commerce. To assist the commission in carrying out the provisions of this section, the Secretary of the Treasury and the Secretary of Commerce are authorized and directed to furnish to the commission, upon request, any data or information in the possession or control of their respective departments relating to the importation, entry, appraisement, and classification of merchandise and the collection of duties thereon. (d) Definitions.-When used in this section (1) The term "domestic value," applied with respect to imported merchandise, means (A) the price at which such or similar imported merchandise is freely offered for sale, at the time of exportation of the imported merchandise, packed ready for delivery, in the principal market of the United States to all purchasers, in the usual wholesale quantities and in the ordinary course of trade, or (B) if such or similar imported merchandise is not so offered for sale in the United States, then an estimated value, based on the price at which merchandise, whether imported or domestic, comparable in construction or use with the imported merchandise, is so offered for sale, with such adjustments as may be necessary owing to differences in size, material, construction, texture, and other differences. (2) The term "rate of duty regulated by the value of the article" means a rate of duty regulated in any manner by the value of the article, and includes the value classification by which such rate is regulated. 1 REPORT ON THE INVESTIGATION MADE BY THE TARIFF COMMISSION IN COMPLIANCE WITH SECTION 340 OF THE TARIFF ACT OF 1930 INTRODUCTION Section 340 of the tariff act of 1930 provides that the Tariff Commission shall ascertain with respect to ad valorem duties the rates which, if applied upon the basis of domestic value in the United States, would have resulted in the imposition, during the two years ended June 30, 1929, of amounts of duty equal to what would have been collectible at the rates specified in the tariff act of 1930. In addition to the conversion of ad valorem rates of duty the law also provides for conversions respecting "the rates of duty regulated by the value of the article." After approximately 16 months of field work the commission submits the result of the valuation investigation in this report. The first part of the report is a discussion of the problems encountered in the investigation and the methods of treating them. Many of these problems are illustrated by the use of summary tables compiled from the basic information. The second part of the report consists largely of tabular material arranged by paragraphs of the tariff act which are affected by the valuation study, namely, those containing ad valorem rates and value brackets. The first part of the report is divided into four sections. Section 1 is a discussion of the law and its implications from the point of view of the valuation study; section 2 deals with the methods and purposes of the commission's field work, including the office tabulations in New York; section 3 explains the form of the published information illustrated by a number of sample tables; and section 4 is a discussion of special problems. At the end of the first part is a brief summary of the methods of valuation in other countries. 1. PROVISIONS OF SECTION 340 OF THE TARIFF ACT OF 1930 There are a number of important points to be taken into consideration in connection with the provisions of section 340, of which the following are of special significance. All ad valorem duties and value brackets are to be converted. Duties upon the domestic basis are to be equivalent to the present rates upon the foreign basis. Domestic value is carefully defined. Prices in the principal markets are to be used. Domestic value must be based upon the sale of merchandise in wholesale quantities in the ordinary course of trade. Although the basis of dutiable values as specified in section 402 of the tariff act of 1922 gives several alternates, most of the imports 2 under that act were in fact dutiable upon the basis of the foreign value. (The same is true at the present time.) For brevity, therefore, the term "foreign value" will be used as equivalent to the basis of value as specified in the law. The ad valorem duties, whether in the simple form or as a part of compound duties, or as maximum or minimum rates, must be converted from the basis of foreign value to the basis of domestic value in the United States as defined in this section. "Rates of duty regulated by the value of the article," i. e., value brackets, must also be converted, whether the duties under such bracket are ad valorem or specific. In the case of specific duties in value brackets, it will be observed that it is not literally the rate which is to be converted, but rather the foreign dutiable value marking the limits of each bracket which must be converted to the basis of domestic value; that is to say, if an article valued at more than $1 and less than $2 per pound is dutiable at 25 cents per pound, and from $2 to $3 is dutiable at 50 cents per pound, the foreign value limits under the present law are to be converted to the domestic values of such or similar products when sold in the United States. The period covered by the valuation study was the two fiscal years beginning July 1, 1927, and ending June 30, 1929. This period, therefore, covers imports entirely dutiable under the tariff act of 1922. The ad valorem rates of duty in the tariff act of 1930 are to be converted upon the basis of foreign and domestic prices of the products imported immediately preceding the period of the last tariff revision, and at the domestic prices prevailing at the time the bill was under consideration by the Congress. The fact that the duties or value brackets under the tariff act of 1930 are to be applied to imports which were made prior to the enactment of the law of 1930 creates some awkwardness of expression in the report when reference is made to imports under a particular paragraph of the act of 1930. For example, many sentences in the body of the report speak of imports under various duty brackets during the valuation period. Of course no imports were made under these brackets of the tariff act of 1930 because that act had not been passed. These statements should be understood to mean "imports of goods which would now be classified under this duty bracket" or "under this ad valorem rate," as the case may be. When reference is made to the dutiable value of goods subject to specific duty during the valuation period it should be understood that in fact these goods had no dutiable value, being on a specific basis, but that reference is made to what would have been the dutiable value had the goods been subject to ad valorem rates. Special emphasis is placed in the law upon the question of equivalent duties. The first paragraph of the section provides for converted rates "which if applied upon the basis of domestic value would have resulted as nearly as possible in the imposition [during the valuation period] of amounts of duty neither greater nor less than would have been collectible at the rates specified in this Act [act of 1930] applied upon the basis of value defined in section 402 of the Tariff Act of 1922." Essentially this means that the commission is to determine dutiable value under the act of 1922 of articles imported during the valuation period, apply the ad valorem rates of duty in the tariff act of 1930 to these values, and then, by dividing the calculated amount of duty by the domestic selling price of such products, determine the equ The definition of domestic value is given in two parts in sert 340. Under (A) domestic value is essentially the wholesale se price in the United States of the imported merchandise at the time exportation. Under (B) it is an estimated value based upon the pi at which merchandise, whether imported or domestic, comparable construction or use with the imported merchandise, is so offered ir sale, with provisions for adjustment in size, material, constructio texture, "and other differences." It appears, therefore, that if t domestic value can not be obtained for the merchandise when s in approximately the condition imported, resort may be had to th price of similar products, whether of domestic or foreign origin, i estimating the domestic value. In connection with the first definition of domestic value, namely wholesale selling price of the imported article in the United States the phrase "at the time of exportation of the imported merchandise deserves some consideration. Taken literally, this would mean that the comparison of foreign and domestic value should be made pre-i cisely as of the date of exportation from a foreign country of the merchandise in question. By this strict interpretation the purchase and sales prices of identical merchandise never could be used except in rare cases of advance sales. From the practical standpoint sales of comparable merchandise were rarely found on precisely the date of exportation of the imported product. This was especially true of goods selling in relatively small volume or when representative samples were tabulated. Such samples may have been sold infrequently, although the general type of product may have been sold daily. The question of specific date of exportation would also involve a comparison of prices for individual shipments of merchandise, and would preclude averages over considerable periods of time. та la Another point of emphasis in the law is that of the principal market. The sales of merchandise for the determination of the domestic value are to be "in the principal market of the United States, to all purchasers." In some cases the principal market may be distinct from the principal port of entry, but as a rule the two are identical for practical purposes. The exceptions are largely in the nature of transit trade, such as imports through the port of Buffalo for the New York market, or imports through San Francisco for interior markets. In some cases the actual sales are made in the principal market, whereas for convenience the imports may be entered at other markets, such as shipments through Baltimore and Philadelphia of goods sold in New York. The last point of emphasis in the law to which attention is especially called is that of sales "in the usual wholesale quantities and in the ordinary course of trade." Although sales in the United States of imported merchandise in wholesale quantities may be considered the normal method of disposing of the merchandise, there are important exceptions to this rule. The two principal exceptions are found in the importation by large establishments for sale at retail, and in the importation by manufacturers of materials for further processing before a sale is made. Under the law neither of these forms of sale can be used for converting ad valorem rates from foreign to domestic es C value. As above indicated, in such cases the wholesale price of simiar products, whether of domestic or foreign origin, may be used in estimating the domestic value. DETERMINATION OF CONVERTED RATES VERSUS APPLICATION OF THEM TO All of the foregoing discussion of the law has special bearing on the activities of the commission in preparing a report to the Congress in regard to the conversion of rates. If a change should be made by action of the Congress in the basis of valuation from the present form to that of domestic value a related, but somewhat different, group of problems from those outlined above would be encountered by customs officials in assessing the duties on the new basis. In conducting the valuation study it has been necessary to have in mind these problems to some extent in order that the commission's basis for finding the equivalent rate would be approximately in harmony with the probable facts as found by customs officials in individual cases if the basis of valuation should be changed. Generally speaking, the commission must find equivalent converted rates upon the basis of representative or average data, whereas the customs officials, should the converted rates become effective, presumably would be required to apply them to individual importations. It is quite important, therefore, that the commission in obtaining these average or representative data should cover, so far as practicable, about the same range of experience as would be encountered by customs officials in the administration of the law should the rates become effective. For this reason the commission has exercised special care in obtaining information from representative importers, for typical samples of the product, and for importations widely distributed through the valuation period in cases where it was impracticable to tabulate all of the purchase and sales data. From the same point of view attention has also been given to the obvious cases of different principal markets for different varieties or grades of the same product in order that the commission's report may reflect the approximate conditions to be found in the import trade. Different conditions which may be encountered with respect to wholesale quantities through various channels of trade have also been considered, and when important the distinction has been carried in the summary tables showing the converted rate. 2. METHODS AND PURPOSES OF FIELD WORK In order to carry out the provisions of the law it was necessary to obtain from the importers' records the dutiable value of imported merchandise during the two years of the valuation period, namely, July 1, 1927, to June 30, 1929, inclusive, and the domestic selling price of the same or similar articles. Inasmuch as the records of a single importer might cover many hundred importations, and thousands of individual sales during the period, it was not practicable to tabulate the purchase and sales data for all products imported under each rate of duty or value bracket by all the importers. A process of selection or sampling was used in many cases for the purpose of obtaining average figures that would be representative of total imports. The selective process was applied from three points of view-first, the selection of representative importers out of a large total number in |