ADMINISTRATIVE CUSTOMS LAW. COMMITTEE ON WAYS AND MEANS, Friday, February 23, 1906-10 o'clock a. m. The committee met at 10 o'clock a. m., pursuant to the call of the chairman, with Hon. Sereno E. Payne in the chair. Present: The chairman, and Messrs. Dalzell, Grosvenor, McCleary, Hill, Boutell, Needham, Cockran, and Underwood. The CHAIRMAN. The hearing appointed for this morning is with reference to amendments to the customs administrative law, which has remained largely as it is now since 1890. I introduced a bill (H. R. No. 7113)" in the beginning of this session to amend certain sections of that act. Mr. Olcott has also introduced a bill' which, I understand from him, embraces suggestions proposed by the Merchants' Association of New York, and which was printed and came to this committee yesterday. The committee has both bills before it. We will first hear Secretary Shaw. Secretary SHAW. The gentlemen proposing the amendments are here, and if it does not matter to the committee, I would prefer that they should be heard from before I make my statement. The CHAIRMAN. Inasmuch as the Merchants' Association has presented more amendments than anyone else, perhaps we had better hear their representatives first, and unless there is some preference about the order we will hear Mr. Smith. STATEMENT OF WICKHAM SMITH, ATTORNEY AT LAW, NO. 20 WILLIAMS STREET, NEW YORK CITY, N. Y.c Mr. SMITH. Mr. Chairman and gentlemen of the committee, I appear here as counsel for the Merchants' Association of New York which, as has been already stated by the chairman, has had a billa introduced by Representative Olcott of New York, which, as I understand it, is now before the committee. This bill proposes a number of changes in the customs administrative law. Many of them are slight verbal alterations, intended to make the law clearer. I shall not take up the time of the committee by discussing the trivial amendments which are proposed, but will confine myself to four or five of the proposals of the Merchants' Association which makes changes, more or less radical, in the law. The first of the amendments to which, with your permission, I will call your attention, is a change which proposes to amend the law allow a For copy of H. R. 7113, by Mr. Payne, see p. 101. 5 ing consignees of imported merchandise to make additions to the invoice values of their merchandise at the time of entry, a right, which under the law as it now stands, is confined to the owners of merchandise. The CHAIRMAN. To what section is that an amendment? Mr. SMITH. It is an amendment to section 7 and proposes to strike out of that section the words "which has been actually purchased." If you have the text of the law before you, Mr. Chairman, I will call your attention to the precise point. It is in about the second line of the section which reads: That the owner, consignee, or agent of any imported merchandise which has been actually purchased may at the time when he shall verify his written entry of such merchandise, etc. The amendment proposes to strike out the words "which has been actually purchased" and also to strike, about three lines farther down in the section, the words "otherwise than by actual purchase,” in the clause which reads: But no such addition shall be made upon entry to the invoice value of any imported merchandise obtained other than by actual purchase. If the nature of the amendment is clear to the Committee I have a few words to say in favor of it. Prior to 1890 the right to advance the value of merchandise at the time of making entry was allowed to all importers, irrespective of whether they were consignees or purchasers of imported goods. When the customs administrative act of 1890 was passed the law was so changed as to restrict the right of making additions on entry to owners of purchased goods, and to deprive consignees of that right. That was done, as avowed by the late President McKinley in reporting upon the bill, upon the theory that the purchaser of goods might not be familiar with changes in market value; but the consignee of goods should, at all times, know what the market value of imported merchandise was. The result of the system, as practiced for the last sixteen years, has been this: The consignees of imported merchandise make an entry at the custom-house and values are advanced by the appraising officers. Then reappraisement proceedings are instituted, which last anywhere from several weeks to several months. In the meantime they are receiving constant consignments of these goods, and they are not allowed to make any addition at the time they make entry to bring their market value up to the value which has been fixed by the appraisers. The result is that, if the reappraisement proceedings are ultimately decided against them, they are mulcted in penalties on all of the importations they have been making pending the proceedings, because the law provides that whenever an importer's invoice is raised by the appraisers he shall, in addition to paying the duty on the higher value fixed by the appraisers, pay an additional duty of 1 per cent for each 1 per cent by which the appraised value exceeds the entered value. The consequence is that men have to pay penalties on frequent importations even if they are convinced after the proceedings are instituted that their market values are too low and are desirous of raising them and making them correct. They are not allowed to do so under the law as it now stands. They are obliged to go to the custom-house and enter their goods on their invoiced value and swear that the values stated in the invoice are correct, notwithstanding they may have become convinced that it is not correct and that it ought to be higher. In other words, the law as it stands puts them in the position frequently of having to swear that a thing is the truth when they do not really believe in the truth of it at all. I think the customs authorities at New York agree with us on this subject, for the collector has reported in favor of the adoption of this amendment in order to allow every man, whether he is a producer or a consignee, when he enters his goods, to make a declaration as to their market value and be bound by it, but not be bound by invoices made out on the other side, if inquiry has shown him that the true market value abroad is higher than that stated in his invoices. It is further proposed to amend this section so as to allow the importer, whether he is a purchaser or a consignee, at the time he makes his entry to enter the goods at what he believes to be their market value, whether that value be higher or lower than that stated in the invoices. It frequently happens that people buy goods several months ahead of time. They are to be delivered in this country, and by the time the goods arrive in this country the market value in the country of exportation at the time of shipment, which is the time adopted by the appraising officers, has increased; and the law allows the importer to add to his entry enough to save himself from the penalties. But, if between the time that he places his order and the time the goods are shipped, the market on the other side goes down, and the price at the time of shipment is lower than the price he gives, he is not allowed to lower his invoice to meet the market value conditions on the other side. But the law says that duty shall not be assessed on less than invoice values. This we regard as an injustice. We think that if the market value is to govern at the time of shipment, it ought to apply equally whether that market value is higher than the price paid for the goods a month in advance, or whether it is lower. Therefore we also propose that, when the goods have been entered at the market value on the date shipped, and assessed upon that market value by the customs officers, whether that value be higher or lower than the value stated in the invoice, the duty shall be assessed upon that value. The merchants also propose a change in the law in this respect. The law, as it now stands, provides that if the appraised value of merchandise exceeds its entry value, for every 1 per cent by which the appraised value exceeds the entry value there shall be paid by the importer an additional or penal duty of 1 per cent. Of course the imposition of these penalties upon importers is a great hardship. It has been found by experience I think the Board of General Appraisers will stand for the proposition that I am now making in some form--that it is impossible to appraise merchandise so closely as within 1 or 2 per cent; and if the appraiser differs from the importer in his estimate of the value of the goods by 2 or 3 per cent, it is not fair that the importer should be mulcted in a penalty. Therefore it is proposed to amend section 7 by providing that where the law saysif the appraised value of any article of imported merchandise subject to an ad valorem duty or to a duty based upon or regulated in any manner by the value thereof shall exceed the value declared in the entry, there shall be levied, collected, and paid, in addition to the duties imposed by the law on such merchandise, an additional duty of one per centum of the total invoice value thereof for each one per centum that such appraised value exceeds the value declared in the entry, it is proposed to insert "five per centum" so that the provision would read as follows: "shall exceed by more than five per centum the value declared in the entry;" then, for each 1 per cent in excess of 5 per cent by which the proposed value exceeds the entry there shall be paid an additional duty of 1 per cent. I think it is conceded by the customs officers that this is only fair and reasonable; and that the hard and fast line which is contained in the law, by which importers have to pay a penalty, if their goods are advanced 1 or 2 per cent, is an unnecessarily harsh provision. Another change proposed by this association is this: There are many paragraphs in the present tariff law which provide specific rates of duty on imported merchandise, which paragraphs conclude with a proviso that in no case shall the duty be less than a certain per centum ad valorem. It frequently happens that the appraiser advances the value of the goods, but after he has advanced that value the advance does not change the amount of duty in any way. The duty still remains as specified, the advance in value not being great enough to carry the goods up on the ad valorem list. Under this law, as it stands, although the advance has not increased the amount of duty, and although there has apparently been no temptation or inducement to undervalue his goods, the importer is taxed with a penalty of 1 per cent for each 1 per cent of advance by the appraiser, notwithstanding the fact that the advance has not, in any way, changed the duty on the goods. The CHAIRMAN. Where does that amendment come in? Mr. SMITH. It is an amendment to section 7. The CHAIRMAN. On what page is it in this report? a Mr. SMITH. The proposed amendment is on page 14. The provision of the law is found on page 31 of that book. The law says: There shall be levied, collected, and paid, in addition to the duties imposed by law on such merchandise, an additional duty of 1 per centum of the total appraised value thereof for each 1 per centum that such appraised value exceeds the value declared in the entry, but the additional duty shall only be applied to the particular article or articles in each invoice that are so undervalued, and shall be limited to 50 per centum of the appraised value of such article or articles. Right after the word "undervalued" it is proposed to insert the following and shall not be imposed upon any article upon which the amount of duty imposed by law, on account of the appraised value, does not exceed the amount of duty that would be imposed if the appraised value did not exceed the entered value. I may say here we contended that the law, as it stood, was sufficient to provide for what we are now suggesting. But we took that question to the Supreme Court of the United States, and they decided that the law as it stood required the imposition of the penalty if the appraised value exceeded the entry value, even though the result of the addition was not to increase in any way the duty on the goods. It is because of that decision, construing the law as it now stands, that we ask for this proposed amendment, which will prevent the imposition of penalties on people who have no temptation or inducement to undervalue, and nothing to gain by an undervaluation. a Report of committee on revenue laws and customs service of the Merchants' Association of New York, January, 1906. |