102.1702/285
The Secretary of State to the Italian Ambassador (Martino)
The Secretary of State presents his compliments to his Excellency the Royal Italian Ambassador and, with reference to his note of February 17, 1928, relative to the activities in Italy of Agents of the United States Treasury Department, has the honor to advise him as follows.
As regards the Royal Italian Government’s expressed desire for the reduction of the investigative personnel of the Treasury Department assigned to work in Italy, it may be stated that the investigative personnel of the Florence office was reduced by fifty per cent, effective March 31, 1928.
Respecting the suggested limitation of the activities of this reduced personnel, the Secretary of State deems it advisable, before the Italian Government decides whether to press its request, briefly to recapitulate for its consideration certain of the facts and explanations which were originally presented in note No. 117 of May 14, 1925, and its attached memorandum from the American Embassy in Rome to the Royal Italian Ministry of Foreign Affairs6 and to point out certain difficulties which might possibly be met in case the activities of Treasury agents in Italy should further be curtailed.
The United States Customs tariff law7 prescribes four alternative legal bases of appraisement, as stated below, upon one of which duty must be assessed:
“Section 402. Value.—(a) For the purposes of this Act the value of imported merchandise shall be—
- (1)
- The foreign value or the export value, whichever is higher;
- (2)
- If neither the foreign value nor the export value can be ascertained to the satisfaction of the appraising officers, then the United States value;
- (3)
- If neither the foreign value, the export value, nor the United States value can be ascertained to the satisfaction of the appraising officers, then the cost of production.”
Section 499 of the Tariff Act provides that imported merchandise shall not be delivered from customs custody until it is reported by the Appraiser to have been truly and correctly invoiced. Section 500 imposes the obligation on the appraiser of appraising merchandise by ascertaining or estimating the value thereof by all reasonable ways and means in his power, “any statement of cost or cost of production in any invoice, affidavit, declaration or other document to the contrary notwithstanding”.
These sections, which are mandatory upon the Secretary of the Treasury and appraising officers, quite clearly indicate the legislative intent that statements of value which were not subject to verification would not be accepted as the bases for the assessment of ad valorem duties, and that, where recourse is had to “foreign value”, “export value” or “cost of production”, these should be subject to verification at the source by accredited representatives of the United States Treasury Department. Under the present law, in case foreign or export values cannot be verified at the sources, it becomes necessary to apply United States values, which may be verified in the United States without inquiry abroad. United States value is usually somewhat higher than the foreign value or the export value.
The relative merits of foreign values and domestic values as the basis for assessing ad valorem duties in times past has been the subject of considerable controversy. Those who had favored American valuation, so-called, based their claim on the alleged difficulties incident to verification of foreign values; advocates of foreign valuation, however, contended that basing duties on foreign values serves to remove an element of uncertainty which otherwise would exist, in so far as the exporter is concerned, as to the exact amount of duty to be paid. The inability of customs officers to verify foreign values may, under existing provisions of law, result in increased application of United States value as a basis for assessing duties. Whether the plan submitted would thus introduce an element of uncertainty regarding the amount of duties to be assessed on certain articles imported into the United States and interfere with the fixing and quoting of selling prices and placing of contracts, to the disadvantage of exporters and importers, is a question which seems to merit serious consideration.
It is believed that an attentive examination of the existing system and of its results will show:
- 1.
- That the number of bona fide protests against the activities of Treasury representatives in Italy is comparatively small, and that such protests have come from the very limited number of manufacturers [Page 107] and shippers of that country whose values have been found to be inaccurate.
- 2.
- That the proposed change might place Italian manufacturers whose merchandise comes to the United States at a disadvantage by depriving them of an opportunity they now have of presenting their records to accredited American customs experts for verification, in the absence of which United States value might be used as the basis of assessment of duty under the mandatory provisions of American customs law.
- 3.
- That since the passage of the American Tariff Act of 1922, Italian exporters have, with rare exceptions, shown themselves quite willing voluntarily to furnish necessary information to American Customs representatives and during this long period only two exporters “failed and refused” to show their books and records, resulting in the application of the measures prescribed in Section 510 of the American Tariff Act, which restrictions were, however, subsequently removed. This is a fair illustration of the extent to which refusals have been encountered.
It is of course impossible to predict the number of cases in which the further curtailment of activities of American Treasury agents in Italy might lead to application of the aforementioned alternative bases of valuation. In order, however, that the Italian Government may be fully apprised of the provisions of existing American law, it is deemed advisable to invite the attention of the Ambassador to the possibility of having to apply such alternative bases in a certain number of cases.
The Secretary of State has the honor to request the Royal Italian Ambassador to communicate to his Government the considerations outlined above.