the mills are either closed entirely or running very short time, and there is a general paralysis of business. Among other causes that is due to a certain extent to the great increase of imports the past year, and we are fearful that when you take up, as you are about to take up, the question of the revision of the tariff, as has always been the case in the past, the imports will increase to a very alarming extent in anticipation of any increase of duties, so that having in mind the time which it would of necessity take to prepare a new bill we can see that the question of imports will be a very serious menace to the industries of the country during that period. All business to-day, as I say, is prostrated, and it seems as if there should be some sort of emergency legislation put through now that would as far as that could remedy the distressful conditions that exist, so that it might go into effect as soon as possible, to prevent the great flood of imports that will come before. One of the things that has impressed us the more we have studied the matter is this question of the effect that the foreign exchange situation has upon the imports, and I think that possibly the committee which I represent may take less of your time if I run through this very brief memorandum which we have drawn up on the subject. Mr. GARNER. Would it not be as well to have it inserted in the record as it is and then make such comments as you wish? I think Congress ought to have the benefit of these suggestions. The CHAIRMAN. We will insert it in the record. (The statement referred to is as follows:) A PLAN FOR EQUALIZING CHANGES IN TARIFF DUTIES DUE TO FLUCTUATIONS IN EXCHANGE. When the Underwood-Simmons law was enacted, all nations were on a gold basis. At the present time, with the exception of the United States and Japan, all nations are on a paper basis, and some are on a printing-press basis. The United States import tariff is built on the assumption that exchange conditions with the chief trading countries will remain comparatively stable. Neither by law nor by regulation are the present unstable conditions adequately provided for. The currency of some countries is now almost worthless in American money, and that of even such important commercial countries as England and France shows marked depreciation. There is no ground for expectation that normal or even steady rates of exchange will be restored for several years. The plan proposed herewith is designed to restore purchases in foreign money to the same relative value in American dollars that they had in 1914. The two parts of the plan are as follows: 1. The present regulations by which duties are assessed on the basis of the foreign purchase values in depreciated currencies should be rescinded, and all duties provided in the present tariff schedule should be collected on the basis of the foreign cost of normal rates of exchange, or if the foreign invoice is in United States money, the difference between the current rate of exchange of the country of origin at the time of purchase and the normal rate of exchange should be added to the invoice, and the duty collected on the total. In this way there would be restored the amount of duties intended to be collected under the present tariff law. 2. In order to correct the present alarming possibilities for dumping huge quantities of raw and manufactured products from countries with depressed currencies, it is proposed that in the case of all foreign purchases, whether dutiable or not, the Federal Government shall collect in the form of an equalizing charge on all imports, in addition to any duties provided by the tariff law, the difference between the amount paid the foreign seller figured at the current rates of exchange and the same amount figured at the normal rate of exchange. The equalizing charge thus provided for might be limited to say 30 per cent of the foreign value of the merchandise at par of exchange. Under the present distressing conditions of business in this country, with the increasing amount of imports now coming in, and with the impossibility of tariff revision before the lapse of many months, some immediate action is imperative in order to save certain industries from destruction. Some emergency legislation should be passed immediately, and we believe the suggestions made offer more general and more certain relief than any other plan thus far proposed. We also call your attention to the fact that in the making of any tariff bill for protection of American producers, or to prevent the dumping of foreign goods into the American markets, the current rates of exchange of the different countries will have to be considered. Otherwise the tariff bill would have its effectiveness impaired by every important change in the value of foreign currencies. Concrete examples of the operation of the plan are given as follows: 1. Purchase of merchandise in England duty free. Current exchange, $3.49. The equalizing charge in this case is equivalent to a duty of 39.44 per cent ad valorem. 2. Purchase of merchandise in England dutiable at 35 per cent. The equalizing charge and duty in this case are equivalent to 88.24 per cent ad valorem. 3. Purchase of merchandise in France dutiable at 35 per cent. The equalizing charge and duty in this case are equivalent to 334.25 per cent ad valorem. 4. Purchase of merchandise in Germany dutiable at 35 per cent. The equalizing charge and duty in this case are equivalent to 2,042 per cent advalorem. NOTE. The equalizing charge should not in any case exceed 30 per cent of the invoice at the normal rate of exchange. Wages. Based on current rates of exchange, wages in the United States now are three times wages in England, six to seven times wages in France, and 13 to 14 times wages in Germany. Exchange. From February to December the pound sterling (par $4.8665) fluctuated from $3.19 to $4.07; present quotation, $3.44. The French franc (par 19.3 cents), from 8.62 cents to 5.70 cents; present quotation, 5.86 cents. German mark (par 23.8 cents), from 4 cents to 1 cent; now 1.32 cents. Mr. HAWLEY. If I understand the proposition on page 1 of this memorandum, which has been placed in the record, the first paragraph provides that when an invoice is rendered in foreign money that the tariff shall be collected on that at the gold value of the foreign money. Mr. HOBBS. Yes, sir. Mr. HAWLEY. In the second paragraph it provides that when such invoice is rendered there shall be an addition to the tariff on the goods at the gold value of the foreign standard. Mr. HOBBS. Yes, sir. Mr. HAWLEY. And it provides for an additional 30 per cent of the difference between the depreciated value of their credit instruments and the gold value. Mr. HOBBS. That is right. If I may, I would just comment on this memorandum to bring some points out. Mr. GARNER. That is not my understanding of these provisions. I wish Mr. Hawley would state that again. Mr. HOBBS. The idea is that since the 17th of November, 1919, by an Executive order under a statute that was passed in 1799, but which has still continued, the President and the Secretary of the Treasury issued an order that after that date whenever our consul in any foreign port stated on the invoice the prevailing rate of exchange in that country at that time that the duties called for by the present law should be assessed on that rate of exchange on the value of the depreciated currency. That was November 17, 1919, so that since that date there has not been levied the amount in dollars that it was planned to levy at the time the present law was passed. In the case of England, there is being levied on imports that are dutiable about two-thirds of the amount that would have been levied on the gold basis of par. In the case of France there is about one-third, and it gets down to Germany and Austria and is so low that we have not tried to figure it. That is the proposition that we maintain, that the intent of that law was that certain amounts of duty should be levied and that under this Executive order these amounts are not now being levied, and we suggest that that order should be canceled and that the duties should be levied for the amount based on the value of the American dollar and not on the depreciated exchange. Mr. GARNER. Will you be good enough to put the law and Executive order into the record? Mr. HOBBS. I have it right here. The CHAIRMAN. It may be inserted in the record at this point. (The statement referred to is as follows:) STATEMENT OF THE LAW AND REGULATIONS RELATIVE TO THE ASSESSMENT OF DUTIES AT AD VALOREM RATES ON GOODS IMPORTED INTO THE UNITED STATES WHERE THERE HAS BEEN A DEPRECIATION IN FOREIGN CURRENCIES OR A DEPRECIATION IN THE VALUE IN UNITED STATES CURRENCY OF FOREIGN MONEYS. Merchandise imported into the United States and subject to ad valorem rates of duty is assessed upon the basis of its wholesale market value existing in the principal markets of the country from whence shipped upon the dates of exportation. (Sec. 3, Par. I, tariff act of Oct. 3, 1913). It has been held that such market value is the value at which the merchandise is freely offered for sale for domestic consumption in the country from which it has been exported (U. S. v. Passavant, 169 U. S., 16). These foreign values when thus ascertained are converted into our currency at the proclaimed values in United States currency for the respective standard foreign coin. (The said proclaimed values in our currency are estimated quarterly by the Director of the Mint and proclaimed by the Secretary of the Treasury (28 Stat., 522, sec. 25 of the act of Aug. 27, 1894). This practice is followed when conditions are normal and there has been no appreciation or depreciation in either the foreign currencies or in the value in United States currency of the particular foreign money specified in the invoice. For a long time the said proclaimed value of the British pound sterling has been $4.8665, for the franc $0.193, and for the lire $0.193. Method by which allowance of duty can be obtained by importers at the time of entry when there has been a depreciation in the foreign currency or a depreciation in the value of the United States currency of the foreign money specified in the invoice." Section 2903 of the Revised Statutes of the United States reads as follows: "The President may cause to be established fit and proper regulations for estimating the duties on merchandise imported into the United States in respect to which the original cost shall be exhibited in a depreciated currency, issued and circulated under authority of any foreign Government. 66 (a) This statute was passed many years ago. The Presidents of the United States, acting in pursuance of the authority granted to them under said statute, have issued from time to time various regulations. The regulation under which the various departments of the Government have been working since 1896 is known as Article 692 of the Consular Regulations of the United States for 1896." Said Article 692 has been amended at various times by the Executive without any material change until on or about November, 1919, when a decided amendment was made to said article, which is hereinafter referred to. Said article 692 provided prior to November, 1919, that when a foreign currency has depreciated, a currency certificate (form 144) must be attached by the American consul to the consular invoice. This form must show the percentage which the foreign currency has depreciated and must also state the total depreciated value of the foreign currency expressed in the particular foreign coin. If said form 144 is attached showing the information as stated, the importer upon his entry may show the depreciated value in the foreign currency, which is then converted into United States currency at the value in our currency for the particular foreign coin, as estimated by the Director of the Mint, under authority granted him by said section 25 referred to above. It may be helpful if what I say is illustrated with figures. Suppose, for example, the foreign market value of a particular commodity purchased in England was £600–0–0 and at the time the invoice was consulated there was a depreciation of 20 per cent. Form 144 would show the depreciation of 20 per cent and the total depreciated value, namely, £480-0-0. Twenty per cent of £600 being £120 and deducted from £600 is £480; £480 would then be converted by the importer upon his entry at $4/8665, which is the proclaimed value in United States currency for the British pound sterling, equal $2,336. Duty would then be assessed upon this value, namely, $2,336. If said Form 144 is not attached to the consular invoice, no allowance for a depreciation in the foreign currency will be made. It is to be noted in this connection that said section 2903 and said article 692 of the said Consular Regulations prior to the amendment hereinafter referred to on November 17, 1919, made no provision for a deduction in the payment of duty upon merchandise because of any depreciation in the value in United States currency of the foreign money specified in the invoice. The said statute and said article 692 prior to November 17, 1919, only recognized the depreciation in the foreign currency. (b) On November 17, 1919, the President of the United States did, however, officially recognize the fact that there was a depreciation in the value in United States currency of foreign moneys, and consequently issued an Executive order amending said article 692. (This was published in T. D. 38187, Nov. 17, 1919). Said article 692 as amended, provided that if a form known as 144A was attached to the consular invoice showing the value in United States currency of the foreign money specified in the invoice as of the date of consulation of the invoice that duty would be assessed at the time of entry at the said depreciated value in United States currency upon the said certificate. For example, take the same foreign value as referred to previously, £600, and assuming that the depreciation was the same, namely, 20 per cent; Form 144A would show the value in our money for the pound sterling to be $3.90, which is approximately 20 per cent off of $4.8665. The invoice would show £600, but it would be converted into the dutiable value at the rate of $3.90, which would make $2,340, which is approximately the same dutiable value in dollars as the previous illustration. The duty would be assessed upon this value, namely, $2,340. (As a matter of practice, said forms 144A are not always attached to the consular invoices, but the information required by the said forms is either stamped or printed upon the consular invoice.) This amendment to the said article 692 of the consular regulations is the first official act by which the importer has the privilege of paying duties upon the basis of the depreciation of the value in United States currency, so far as I have been able to ascertain, at the time of entry. "Method by which allowance of duty can be obtained by importers when there has been a depreciation in the foreign currency or a depreciation in the value of the United States currency of the foreign money specified in the invoice after entry has been made and after liquidation. Section 25 of the act of August 27, 1894, contains the following proviso: "Provided, That the Secretary of the Treasury may order the reliquidation of any entry at a different value whenever satisfactory evidence shall be produced to him showing that the value in United States currency of the foreign money specified in the invoice was, at date of certification, at least 10 per cent more or less than the value proclaimed during the quarter in which the consular certification occurred.” It is to be noted that under said section 25 no refund of duty on account of any depreciation in United States currency of the foreign money specified in the invoice can be had unless the Secretary of the Treasury directs the collector of customs to do so, and further the Secretary can not order the reliquidation of any particular entry unless (1) the depreciation or appreciation was at least 10 per centum, and (2) "satisfactory evidence shall be produced to him," etc. It is entirely discretionary with the Secretary whether or not he is obliged to take any action under said proviso upon thǝ evidence presented to him with reference to any particular entry. Attention is also called to the fact that at the time of entry before November 17, 1919, an importer was entitled under said R. S. 2903 and said article 692 to an allowance of duty because of a depreciation in foreign currency. Since November 17, 1919, in consequence of said statute and the Executive amendment to said article 692, this allowance is granted at the time of entry either because of a depreciation in the foreign currency or because of a depreciation in the value in United States currency of the particular foreign money. The importer was and is entitled to receive this allowance at the time of entry regardless of the percentage of the depreciation. He is entitled to an allowance of duty even if the depreciation is only per cent, whereas after entry and after liquidation the percentage of depreciation under the proviso of said section 25 must be at least 10 per cent before the importer is entitled to apply to the secretary for a refund of duty because of said depreciation in the foreign currency. The Secretary of the Treasury decided favorably and ordered reliquidation of entries against which protests had been filed in the case of the depreciation in— Italian currency, T. D. 37486, January 25, 1918. French currency, T. D. 37883, January 20, 1919. British currency, T. D. 38363 April 9, 1920. Respectfully submitted. BOSTON, MASS., November 1, 1920. JOSEPH F. LOCKETT. |
