Mr. COCKRAN. But you can review his action on a writ of certiorari? Secretary SHAW. I doubt if you can in any State except New York, and they say that you do not get a trial there.

Mr. MCCLEARY. There is another thing. Every State, for the vital purpose of supporting its own life, breaks its own laws as to the rights of the individual. In my State it is a felony to charge more than 10 per cent interest, but my State charges 12 per cent interest on taxes that are delayed in payment.

Mr. COCKRAN. But gives that man a hearing if he comes in and shows any reason why that should not be exacted?

Mr. MCCLEARY. And these men get a hearing.

Mr. COCKRAN. No, sir; they do not; they are not entitled to one word of hearing.

Mr. BOUTELL. I would like to ask one question for information about this matter of penalties, to see whether I understand it correctly. Suppose a traveler in Geneva goes into a store and selects a watch, for which he pays $200. He knows no more about the value of watches than he does about the value of laces, or any other subject of which he is totally ignorant. He states the market value of his import at cost, $200, the price he paid for it, and he states it honestly and in a straightforward way. If the appraisers think that watch is worth $300 is he penalized?

Secretary SHAW. Yes.

Mr. BOUTELL. Suppose a surgeon in Washington sends to Berlin to a manufacturer of surgical instruments and buys a surgical instrument for $500. It comes here to Georgetown and he goes there and swears that he paid $500 for it. He is perfectly honest and straightforward in his statement, and the facts entirely agree with it. But the appraiser thinks the instrument is worth $800. That is forfeited? Secretary SHAW. It is not forfeited, but they seize it and enter their proceedings of forfeiture. The case is tried in court, and if the courts decides under the law that he undervalued it with fraudulent intentand the presumption prevails that he did then the court has nothing else to do but forfeit it.

Mr. BOUTELL. I want to get at the question whether or not any of these amendments would help out that unfortunate individual, because I do not see how such a traveler or surgeon could have done otherwise. Secretary SHAW. In practice he never has any trouble about that. In practice you will find that he has two invoices, because for nearly everything you buy in Europe they will ask you if you want two invoices.

Mr. BOUTELL. That point was covered by my question. I said, assuming everything to be honest and straightforward.

Secretary SHAW. If he shows that there was no fraudulent intent he only pays the additional duty.

A member of the Board here tells me that he was in London and went to a wholesale house and said: "I wish you would go down to the factory and get a dress pattern for my wife." He went down and bought, through a wholesale London merchant, a dress pattern for his wife, and bought it at the wholesale factory price. He came back to New York and gave it to his wife, thinking he had done something very fine. His wife went down town and matched it at retail for less than he bought it at the factory in London at wholesale. Mr. COCKRAN. I am very sorry for her.

Mr. MCCLEARY. In cases cited by my friend the purchaser was buying for his own use. He was not a dealer and would not be likely to get goods at less than the wholesale price.

Secretary SHAW. If we are through with this matter I would like to speak about the classification cases.

Mr. SMITH. Secretary Shaw is now about to address the committee on a bill he has introduced, different from the one now under consideration. I want to ask whether we will be allowed any time to reply to what he has said on our bill.

The CHAIRMAN. Certainly; the committee will hear both sides.

Secretary SHAW. Perhaps it would be better to finish up this matter first.

Mr. SMITH. I want to be heard on the classification bill and on the broker's license bill. What I want to know is whether I am to be heard now or later.

The CHAIRMAN pro tem. (Mr. Dalzell). That would depend on how long it would take to close up this matter. We want to close it up now if we can.

Mr.

Secretary SHAW. I would like to have the committee hear the members of the Board of General Appraisers about these matters. De Vries is here and Mr. Fisher is here. Mr. De Vries is the president of the Board and Mr. Fisher was president for the preceding year. The CHAIRMAN pro tem. (Mr. Dalzell). We will be glad to hear them. STATEMENT OF MARION DE VRIES, MEMBER OF THE BOARD OF GENERAL APPRAISERS, NEW YORK CITY, N. Y.a

Mr. DE VRIES. Mr. Chairman and gentlemen, I suppose the most important feature of the bill now under consideration is that relating to open hearings, at least that is the one which has excited the most comment. I think we may clear up the situation somewhat by giving you a thorough understanding of the exact procedure of the Board of General Appraisers, and the basis upon which tariff duties are assessed.

The statute provides that duties are to be levied upon the wholesale market price of goods at the port of exportation, at the time of exportation, when purchased in the usual wholesale quantities. In the ascertainment of that market value the statute provides three methods. If there is a market value, we proceed to take direct testimony as to that market value. If the goods are not such as are sold in the market abroad, we then proceed, under the statute, to ascertain the dutiable value by evidence as to the cost of production of the merchandise; and in some cases we are permitted, under the statute, to take into consideration the domestic value of goods.

The Board of General Appraisers is a tribunal organized for the purpose of ascertaining dutíable value. In the first place, the goods arrive at the port where they are imported into this country, and a valuation is placed upon them by the local appraiser. If the manufacturer is dissatisfied with that valuation, he has a right of appeal to a single general appraiser. I am now speaking of a reappraisement case. Mr. COCKRAN. You are speaking of the practice under the present law?

a For further statements of Mr. De Vries, see pp. 68, 91.

Mr. DE VRIES. Of the practice under the law and the instructions of the Treasury Department, which is a part of the law, the Treasury Department being authorized to make these regulations. When the case comes to the Board of General Appraisers, it is set for hearing before a single appraiser and notice is sent out that the case will be heard at a certain time. The importer is invited to be present with his counsel and such witnesses as he may want to produce with respect to his entry value, and as to the value abroad. After that hearing, the general appraiser usually sends for the local appraiser below, and hears what he has to say in support of his valuation upon the goods.

If the general appraiser is still dissatisfied as to the dutiable value of the merchandise, we constantly pursue the practice of sending in to the trade and subpoenaing, of our own accord, witnesses versed in the value of the particular merchandise in question, and when these witnesses appear the member of the Board, who is presumed to know something of the value of the particular class of merchandise and who has some ability in the examination of witnesses, examines the witnesses as to their qualifications as experts in the particular trade, and calls upon them to produce invoices which they may have in their possession, so as to show at what price they are buying the goods abroad. Upon such a full hearing the single general appraiser fixes the dutiable value of the merchandise, always examining the merchandise himself.

If the manufacturer is dissatisfied with that value, he then has a right of appeal to a board of three general appraisers. When the case is sent to the board of three general appraisers another notice is given to the importer, and he has another opportunity of appearing before the Board with counsel. He has a right to suggest to the Board, and is always afforded that right, the names of such witnesses and such other importers in the trade as he may wish to subpoena, and he has a right to appear before the Board with his counsel and introduce such testimony as he sees fit, in order to fix the valuation of the merchandise for dutiable purposes.

When the Board has heard the importer, his counsel, and his witnesses, they then send for the examiner and general appraiser who have passed upon the merchandise, and hear the reasons which actuated them in the findings they have made. If they are still dissatisfied with regard to the valuation they send into the trade. They are conversant, by reason of their experience upon the Board, with those who deal in that kind of merchandise, and they take such testimony as they can get in the trade. They also send for reports of special agents abroad, which are given in a confidential capacity. These special agents have gone into the factories and gathered such evidence as they are able to obtain. The record is made up on the finding of the board of three general appraisers arrived at in this way, and it is a final decision upon the dutiable value of the merchandise.

I think I have correctly stated the procedure. Have I not, Mr. Smith?.

Mr. SMITH. I am not familiar with what procedure you take except in my presence. So far as you have stated the procedure which has taken place in my presence you have stated it correctly. What you do when you see the other side I do not know.

Mr. CLARK. What is the reason of the law which makes the decision of the three general appraisers final up to 50 per cent and then puts the matter in a United States court above 50 per cent?

Mr. DE VRIES. I suppose that question is best answered by the Supreme Court of the United States, when it says that if there were not some summary proceeding adopted for the collection of taxes and revenue it would be impossible for any government to exist. The proceedings must be summary to a certain extent. Another reason is that if they were allowed to sue on every small item, from a dollar upward, there would be endless litigation and there would never be any taxes collected.

Mr. COCKRAN. If this tax was collected at the time and the Government had the money in their possession, that reason would not apply. Mr. DE VRIES. It would result in endless litigation.

Mr. COCKRAN. Would it not be pretty expensive to the importer, and would he be likely to undertake it for a small amount?

Mr. DE VRIES. I would say that the question as to whether or not there should be a penalty collected is not before us. This is a hearing upon the matter of having these hearings openly; and whether the penalty shall be 1 per cent or 2 per cent is a matter for Congress to determine.

Mr. COCKRAN. I think Mr. Clark's question is kindred to the one I propounded myself, and it is with reference to this: Whether out of this discussion concerning the advisability of providing for open hearings we might not be able to agree here upon a substitute which, recognizing the difficulty in the administration of the law by open hearings, would refuse them, but would give to one aggrieved, after he had paid the duty, the right to recover it if he showed that he had been injured. Is there any objection, in your judgment, to that, so far as the administration and proficiency of the customs law is concerned?

Mr. DE VRIES. I think it would result in a great multiplicity of suits.

Mr. COCKRAN. That would affect the Department of Justice and not the Treasury Department.

Mr. DE VRIES. It would delay the collection of taxes.

Mr. COCKRAN. Why should it, if the taxes were collected just as they are now and the person claiming that he was injured was put to a suit to recover them?

Mr. DE VRIES. Because the final amount is not determined until it is concluded.

You simply give him the Would that interfere with

Mr. COCKRAN. It is concluded by you. right to sue the Government to recover. the administration and efficiency of the system?

Mr. DE VRIES. It would hold up the final conclusion of that case. Mr. COCKRAN. The conclusion of the case is an abstract question. It would not prevent the collection of the revenue.

Mr. DE VRIES. We have practically the same thing now, in the appeal on classification cases, and we have now about 70,000 protests awaiting the decision of those cases.

Mr. COCKRAN. That does not hurt anybody particularly.

Mr. DE VRIES. I think it does hurt a great many people.

Mr. COCKRAN. It does not hurt you so that your efficiency is impaired?

Mr. DE VRIES. No; we feel that we have been getting along very well.

Mr. COCKRAN. What objection would there be to extending this system?

Mr. DE VRIES. That is a matter for Congress to pass upon.

Mr. COCKRAN. I am merely asking you to give your opinion about it. Mr. DE VRIES. I would not care to give an opinion on that subject offhand at this moment.

Mr. DALZELL. That question is not now before this committee.

Mr. BOUTELL. I want to ask just one question as to the administration of the law. Is there any regulation as to whether or not the single general appraiser who has heard the case below shall sit with the other three and hear the final appeal?

Mr. DE VRIES. Yes, sir; he can not. It goes to three other members of the Board. I think it would be found, if you compare this method of procedure for the collection of revenues and support of the Government with the laws of any State in the Union or with the procedure in any other nation, that there are greater opportunities afforded for the purposes of determining the taxable value of property under this system than under any other.

Mr. HILL. It is entirely within the power of this Board to have open hearings if they desire?

Mr. DE VRIES. It is, Mr. Hill; and they have been granted by the Board.

Mr. HILL. But there is no compulsion about it under the law?
Mr. DE VRIES. No, sir.

Mr. DALZELL. They can use their discretion as to how they may best inform themselves in a particular case.

Mr. DE VRIES. Yes, sir; and they do. When we divert from the methods which I have just described and grant open hearings before the Board the first difficulty we are going to encounter is this: A merchant wants to undertake the importation of a particular kind of merchandise; he sees that other people are successful in that particular line of business and he would like to know where they buy their goods and what they pay for them; he would like to know where they are selling those goods. He will bring in a small importation, land the goods, and probably enter them at a low value. They will be raised. in price.

Now, if that importer has the right to an open hearing he has the right of cross-examination. The Government produces its examiner to give testimony as to his reasons for making that valuation, and then immediately the examiner is cross-examined: "Why did you fix this value upon this property?" He answers: "I did it because there are other invoices on file in my office." He is asked to produce those invoices, and when they are produced there is an opportunity for the importer to examine the invoices of other merchants who have been importing goods of that character, to find out who the manufacturers are and at what price the goods are sold. He finds out all the trade secrets. I submit that under any such system you will not have more than thirty days' procedure before the Board of General Appraisers before it is converted into a regular organization for the secret dissemination of information about manufactured goods.

Mr. HILL. As a matter of fact this rule is as much for the benefit of the manufacturer as it is for the Government. Mr. DE VRIES. Yes, sir. Suppose that a particular class of merchandise is not sold on the market abroad and its manufacture is a secret. There is something about it which they want to have protected. All that would be necessary would be to make an importation