STATEMENT OF JAMES W. BEVANS, NEW YORK CITY, REPRESENTING THE NATIONAL COUNCIL OF AMERICAN IMPORTERS AND TRADERS (INC.) (The witness was duly sworn by the chairman of the committee.) Senator WALSH of Massachusetts. You represent the National Council of Importers and Traders? Mr. BEVANS. I represent the National Council of American Importers and Traders. In considering these administrative features I have had the benefit of some personal contact and experience in customs, having spent 14 years in the Division of Customs of the Treasury Department, and for 4 years of that time having served as assistant chief, which is now .the Deputy Commissioner of Customs. I want to consider first section 332. I have special reference to subdivision (d), which is entitled "Information for President and Congress." Senator SMOOт. (b) or (d)? Mr. BEVANS. (d). Subsections or subdivisions 4 and 5 of subparagraph or subdivision (d) authorizes the Tariff Commission to first ascertain import costs of such representative articles so selected, and, fifth, to ascertain the growers', producers', or manufacturers' selling prices in the principal growing, producing, or manufacturing centers of the United States of the articles of the United States so selected. The term "import cost," as used in subdivision 4, is defined under subparagraph E, subdivision 2, to be the freely offered price of the imported article in the ordinary course of trade, in the usual wholesale quantities, for exportation to the United States, including all necessary expenses, exclusive of customs, in bringing such articles to the United States. We therefore have authority for the commission to ascertain selling prices in the United States of the domestic article, while as to the imported article, the selling price in the foreign country is to be ascertained, with an addition only of the expenses of bringing such article from such foreign country to the United States. If, for the purposes of adjusting rates of duty, it is contemplated that a comparison is to be made between the landed cost of the imported article without duty, and the manufacturer's selling price in the United States of the domestic article, we submit that this is not a proper basis of comparison. If the selling price of the domestic article is to be taken there should be added to the "import cost," as defined in subparagraph (e), subdivision (2), the usual general expenses and profit. The foreign cost plus the necessary expenses of bringing the merchandise to the United States, general expenses, and profit (representative of the usual percentages based on the selling price of such imported merchandise in the United States), with the amount of duty which is to be determined, represents in its total the figure at which it must meet domestic competition. Senator SMOOT. What suggestion do you make in paragraph (2)? Mr. BEVANS. It is recommended that subparagraph (d) subdivision (4) of section 332 be amended to read as follows: (4) Ascertain import costs and port costs as defined in subdivision (2) of this section, of such representative articles so selected. You will note I have used a new term there "port costs." I shall define that in the definition under subdivision (e). And that subdivision (e) be amended to read as follows: (e) Definitions-when used in this subdivision and in subdivision (d)— (1) The term "article" includes any commodity, whether grown, produced, fabricated, manufactured or manipulated. There is no change there. (Continues reading :) (2) The term "port cost" means the price at which an article is freely offered for sale in the ordinary course of trade in the usual wholesale quantities for exportation to the United States plus, when not included in such price, all necessary expenses, exclusive of customs duties, of bringing such imported articles to the United States. (3) The term "import cost" means the price at which an article is freely offered for sale in the ordinary course of trade in the usual wholesale quantities for exportation to the United States, plus, when not included in such price, all necessary expenses, exclusive of customs duties, of bringing such imported article to the United States, and general expenses and profit representative of the usual percentages based on the selling price of the wholesaler to all purchasers in the principal markets of the United States, in the ordinary course of trade and in the usual wholesale quantities in such market. Senator GEORGE. The change you recommend merely calls for additional information as one of the elements? Mr. BEVANS. Yes, sir; additional information upon which a proper comparison can be made if you are comparing the selling price of the domestic article with the imported. There is no proper basis, in our opinion, for a determination between the comparison of the selling price in the United States of the domestic article and the import costs as defined in subdivision (e), which is merely the port cost; that is, laid down here without any of the additional expenses and overhead which are incurred on that article to the point of meeting the domestic article in competition in this market. Senator WALSH of Massachusetts. The result would be an increase in what is known as import costs on various articles? Mr. BEVANS. Yes, sir. My proposed definition of "import cost" would be the same as the present definition of "import costs" with the addition of the general expenses and profit, which is a proper basis of comparison, in my opinion. Now, gentlemen, I would like to turn to section 336, which is the so-called flexible provision. The title of it is "Equalization of Competitive Conditions." Senator BINGHAM. What subsection? Mr. BEVANS. I am considering first subparagraph (a), section 336. We are opposed to the changing of rates of duty by the President, or by any other official or commission, as we believe that the fixing of rates of duty on imported merchandise should be done by Congress. In order that Congress may have the proper information upon which to make the necessary adjustments of rates of duty we believe that the Tariff Commission, with the powers of investigation conferred upon it by section 332, is an important aid to Congress in determining what rates of duty shall be assessed on imported mer chandise, and that as a fact-finding commission it should be continued. The present section 315 of the tariff act of 1922, delegates to the President the right to adjust rates of duty, within certain limitations, in order to equalize the differences in cost of production of articles wholly or in part the growth or product of the United States, and like or similar articles wholly or in part the growth or product of competing foreign countries. That section was declared constitutional by the Supreme Court of the United States, in an opinion written April 9, 1928, in the case of J. W. Hampton, jr., Co., petitioner, v. United States, No. 242, October term, 1927, published in Treasury Decision 42706. It is apparent from a reading of that decision that the constitutionality of section 315 was sustained because on its face said section authorizes the President to adjust a rate of duty, with a limit of 50 per cent, to meet a difference in foreign and domestic costs of production of an article-an arithmetical computation. That is evidenced by a statement made by the Supreme Court, in its decision, that its conclusion is amply sustained in Field . Clark (142 U. S. 649, 680), for the reason that the decision referred to (Field . Clark) involved a case where Congress had definitely fixed rates of duty on certain articles, but provided that such rates should not be assessed unless foreign countries imposed duties or other exactions upon agricultural or other products of the United States. Section 316 as proposed in H. R. 2667, empowers the President to change ad valorem rates of duty, with the same limitation of 50 per cent, not upon an ascertained difference between the foreign and domestic costs of production of an article but to equalize differences in conditions of competition. It is obvious that the language in section 336 is much broader than that in the present section 315. While the difference between foreign and domestic costs of production are, at least in theory, definitely ascertainable, and the adjustment of a rate of duty to meet such differences a mere matter of computation, it is apparent that there may be many differences in conditions of competition that can not be reduced to money equivalents and that, therefore, any attempted adjustment of rates to meet such differences must necessarily be a matter of exercise of discretion on the part of the President. While Congress may have provided a yardstick in the present section 315, by which the President may adjust ad valorem duties without the exercise of any discretion, certainly by the change in the language no definite measure whatever is provided, and the adjustment of a rate in such a case by the President is, in fact, the fixing of a rate according to his discretion. We believe that this is a function committed by the Constitution only to Congress. Senator REED. Did you hear Mr. Gray's testimony? Mr. BEVANS. Yes, sir. Senator REED. He would add additional elements, any one of which at present might, in the discretion of the President or the Tariff Commission, be used to change the duty. Mr. BEVANS. And even more adding to the doubt as to the constitutionality of the provisions. Senator EDGE. How can you decide that until the Supreme Court passes upon it, as they have upon section 315? Mr. BEVANS. The proposed section, we believe, is of doubtful constitutionality. Certainly the decision of the Supreme Court on section 315 would not be controlling, because you have entirely different language in this proposed section, and certainly much broader language. Senator EDGE. I repeat you can not tell it is unconstitutional until the Supreme Court passes upon it. Senator COUZENS. Everybody knows we tested section 315 and found it constitutional. Mr. BEVANS. I can not forecast the decision of the Supreme Court upon any particular issue but it seems to me there are certain established law and principles of law that may lead us to form a pretty definite idea in our minds as to whether or not a given law is of doubtful constitutionality. Of course, if Congress proposes to enact a law for the purpose of having it tested out, that is a different matter. Senator KING. You act upon the presumption that Senators and Congressmen have to respect their oaths and the law and try to enact a constitutional law? Mr. BEVANS. Yes, sir; and there are some very good lawyers in the Senate. Senator KING. And that same thing would apply to articles on the free list? Mr. BEVANS. Yes. Senator KING. It would apply to anybody? Mr. BEVANS. Yes. In our opinion, Congress is solely authorized to levy taxes in the form of duties upon imported products, and not the President or any other body. We recommend that the Tariff Commission report direct to Congress and that section 336 be eliminated from the proposed law. If this recommendation is adopted section 332 will necessarily require amendment. If our recommendation is not adopted we urge that section 336 be redrawn for the reasons we have stated; that is, if we are going to have a flexible provision, if we are going to commit to the President the right to adjust rates, let us have something far more definite than to adjust them upon conditions of competition, a very doubtful, indefinite measure, in my opinion. We recommend also, if section 336 is enacted into law, that there be an amendment of sub-divisions (1) and (2) of sub-paragraph (d). Subparagraph (d) provides that the President, in ascertaining the differences in the conditions of competition between domestic articles and like or similar competitive imported articles, shall take into consideration, under subdivision (1): the cost of production of the domestic article, or the price at which such article is freely offered for sale to all purchasers in the principal market or markets of the United States, in the ordinary course of trade and in the usual wholesale quantities in such markets. And, under subdivision (2): the cost of production of the imported article, or the price or value set forth in its invoice, or its import cost as defined in subparagraph (e) of section 332. There again we have a comparison that may be adopted of the selling price of the domestic article with the port cost of the foreign article, and as I have stated in connection with section 332, we think is not a proper basis of comparison. The proper basis of comparison would be, first, the cost of production of the domestic article with the cost of production of the imported article, and in the absence of such cost of production its port cost; second, the selling price of the domestic article in the markets of the United States, in the usual wholesale quantities and in the ordinary course of trade, with the import cost as we defined this term in our suggested amendment to subdivision (e) of section 332. We, therefore, recommend that these definitions be amended accordingly. Now, I also want to say something with respect to the definition of "similarity". We also recommend that the definition of similarity in subdivision (2) of subparagraph (g) be changed, as the language used in the proposed subdivision is too broad. Under this proposed definition, we believe that it would be possible to compare articles which may differ very essentially in material, construction, and value. The United States Court of Customs Appeals, now the United States Court of Customs and Patent Appeals, has defined "similarity" under our customs law, and I think the definition is a very apt one and can be very properly written into this act. The definition is as follows: An imported article shall be considered like or similar to and competitive with a domestic article, if such imported and domestic articles are made of approximately the same materials, are commercially interchangeable, and are adapted to substantially the same uses, and are so used. It The effective date of the President's proclamation is 30 days. We think that if section 336 is enacted into law that that 30 days should be changed to 90 days in order to exclude from the proclamation merchandise that is on order and transit from distant countries. means that a rate may be changed by the President and merchandise that has been purchased already and is on the high seas will be caught with that high rate of duty. We think 90 days is a fairer limitation than 30 days. Senator COUZENS. If the rate were reduced you would want a shorter length of time? Mr. BEVANS. We may possibly [smilingly]. But we have not had very many reductions, except on paint brush handles and Bob White quails, which would not benefit us very much. Senator HARRISON. What was that? Mr. BEVANS. We have had some reduction on Bob White quail from Mexico, and I think on paint brushes from France. Senator EDGE. The application has not been made to peanuts yet, has it? Mr. BEVANS. I don't know. I have not been especially interesed in peanuts since I was a boy. Senator SMOOT. You would be in Bob White quails? Mr. BEVANS. How is that? Senator SMOOT. You would be interested in the quail, I suppose? Mr. BEVANS. No, sir. But the Bob White quail and the paint brush handles Senator SMOOT. You were interested in those, too? Mr. BEVANS. Not in the importation of them, no, Senator. Sometimes I eat quail, but not very often. But I was interested in noting in the published decisions the reduction of duty on Bob White quail. |