611.5131/763
The Secretary of State to the Chargé in France ( Armour )
Sir: With reference to the Embassy’s despatch No. 9400 of March 7, 1929, and your telegram No. 323, July 8, 4 p.m.,7 the Department quotes below for transmission to the French Government a note in answer to the French Government’s note of March 6, 1929:
“The proposals with regard to verification of value for customs purposes of French exports to the United States contained in the French Government’s aide memoire of March 6, 1929, have received earnest and sympathetic consideration by the Government of the United States which has made every effort to find therein a basis for a satisfactory adjustment of this situation which would at the same time be in full harmony with the laws of each of the two countries.
Before discussing the proposals themselves it would seem desirable to present a statement which may serve to clarify for the French Government the exact nature of the American law and the purpose for [Page 996] which investigations are made by officials of the United States Treasury Department. For the purpose of this discussion, there are four bases of value, foreign value, export value, United States value, and cost of production.
The value, for customs purposes, of merchandise imported into the United States is either the foreign value or the export value, whichever is higher. These values are the values of the merchandise in the country of exportation, and, depending upon whether it is sold for home consumption or for exportation to the United States, the value is the market value or the price at the time of exportation of such merchandise to the United States, at which such or similar merchandise is freely offered for sale to all purchasers in the principal markets of the country from which exported, in the usual wholesale quantities and in the ordinary course of trade.
If neither the foreign value nor the export value can be ascertained to the satisfaction of the appraising officer, then the United States value is used. The foreign value and export value are usually lower than the United States value. The United States value of imported merchandise is the price at which such or similar imported merchandise is freely offered for sale, packed ready for delivery, in the principal market of the United States to all purchasers, at the time of exportation of the imported merchandise, in the usual wholesale quantities and in the ordinary course of trade, allowance being made for duty, profit, general expenses, transportation and insurance costs, and certain other expenses incident to placing it on the American market.
If neither the foreign value, export value, nor United States value can be ascertained to the satisfaction of the appraising officer, the value shall be the cost of production.
It should be pointed out that it is rarely the case that neither the foreign value nor export value can be ascertained to the satisfaction of the appraising officers if there is opportunity of verification at the source. During the years that Treasury representatives were making verifications in France, it was very seldom necessary to resort to United States value.
There seems to have grown up in some quarters an erroneous understanding that since the withdrawal from France of agents of the United States Treasury Department, an act which was done in accordance with the desires of the French Government,8 all French imports into the United States have been appraised according to United States value. It should be made clear that this understanding is incorrect. For some time after the withdrawal of the United States Treasury agents from France, appraising officers of the United States customs were able to apply foreign value or export value to French imports on the basis of reports previously made by those agents. With the passing months the information contained in those reports became obsolescent or obsolete because of changes in prices and marketing conditions of certain articles. With respect to these articles it became necessary to apply United States value as a natural operation of the customs law.
[Page 997]When foreign merchandise is received at a port of entry in the United States, it is the duty of the appraising officer to appraise this merchandise in the unit of quantity in which it is usually bought and sold by ascertaining or estimating the value thereof by all reasonable ways and means in his power, any statement or cost of production in any invoice, affidavit, declaration, or other document to the contrary notwithstanding. The authority as well as the responsibility is placed upon him to fix the value of the merchandise. In very rare cases, however, the appraiser is unable to ascertain to his satisfaction the foreign value or export value of imported merchandise. In such cases the American law affords the person manufacturing, producing, selling, shipping, or consigning the merchandise an opportunity to make available to officers of this Government information which may assist the appraiser in ascertaining the foreign value or export value. The exporter, in these cases, is requested to permit a duly accredited officer of the United States to inspect his books and records pertaining to the market value of the merchandise in question. In the rare cases in which this request is made, it should be realized that its purpose is two-fold in that it furnishes the appraiser information which will assist him in ascertaining the value of the merchandise in question and at the same time affords the exporter opportunity to make this information available in order that it will not be necessary for the appraiser to use the United States value or other basis of value as provided for in the law in case neither the foreign value nor export value can be satisfactorily ascertained.
It is desired to emphasize certain of the features of the American law as outlined above. The foreign value or export value of merchandise is not necessarily determined by the values as stated in the invoice covering the shipment, and though the merchandise in question was sold at the prices indicated in the invoice, such prices may not be the foreign value or export value of such or similar merchandise at the time of exportation because other factors must be taken into consideration in determining value. The value is not determined by the price at which the specific merchandise was sold but by the market value of such or similar merchandise which has been freely offered for sale to all purchasers in the principal markets of the country from which exported, in the usual wholesale quantities and in the usual course of trade. Thus the invoice price may have nothing to do with the value of such or similar merchandise in the foreign country in question on the date of exportation. This is partly due to fluctuations in prices between the date of purchase and date of exportation.
It should be noted also that the customs appraiser ascertains or estimates the value of imported merchandise by all reasonable ways and means in his power. Invoices, affidavits, declarations and other documents, including reports made by officers who have examined the books of the exporter, are in any case only advisory. However, if the information contained in such reports is verified from the best sources by customs officers well versed in our law and court decisions, it is usually conclusive although not binding.
The first proposal contained in the French Government’s aide memoire of March 6, 1929, is that officers of the United States Treasury Department be attached to the American Consulate in order that such officers could determine the sincerity and exactitude of invoices of [Page 998] merchandise. As indicated above the values or prices stated in invoices would have, in general, little to do with the question of whether or not such stated values or prices are the actual foreign value or export value of the merchandise. Only in very rare cases is there any ground for questioning the sincerity and exactitude of invoices. Furthermore, it should be pointed out that officers of the United States Treasury Department in foreign countries do not fix the value of merchandise, which by law cannot be established until entry of the goods into the United States. Those officers only report the facts for the confidential use of appraising officers. The Government of the United States would perceive no objection, however, were officers of the United States Treasury Department attached in some manner to the American Consulate and in deference to the wishes of the French Government will be happy to give this matter its earnest attention with a view to determining in what way it can most appropriately meet the wishes of the French Government.
The Government of the United States would, of course, have no objection were a French exporter to submit proof to the Treasury agent of the sincerity and exactitude of his declaration, but such action on the part of the exporter would serve no useful purpose, because of the fact that only in very rare cases is there any question raised in respect of the sincerity and exactitude of the invoice declarations. Verifications, when made, are made not because the invoice may not correctly state the value at which the particular goods were sold, but because there is some question as to whether that price is, in fact, the foreign value or export value, as defined by American law.
The Government of the United States finds, after reconsideration of the question, that there is little that can be added to the statement made in its communication of October last concerning the proposal with regard to verification of value by experts of French nationality. The person making such verification must have a thorough knowledge of the United States Customs law. The verification of information respecting value is an extremely technical matter which can only be satisfactorily accomplished by an officer with long experience in the administration of the Customs law. The courts have construed almost every word and phrase in Section 402 of the Tariff Act9 and only officers of long experience and practice will claim even a fair knowledge of the subject. Reports would serve no useful purpose if they do not contain the exact information required by the appraising officer.
In an effort to meet the views of the French Government, the Government of the United States has given its most earnest consideration and study to this whole matter. In deference to the wishes of the French Government and in an effort to arrive at a satisfactory solution of the present situation, the Department of State and the Treasury Department have recommended to the Congress of the United States the repeal of Section 510 of the Tariff Act.10 In that section provision is made, which is mandatory upon the Secretary of the Treasury, to prohibit the importation of merchandise from any foreign manufacturer or shipper who refuses, upon request of a representative of the United States Treasury Department, to give the latter necessary information in order that the appraising officer in the United [Page 999] States may be able to find foreign value or export value. The French Government will find that this Section has been eliminated from the pending tariff bill as it was passed by the House of Representatives.
Thus, under the new law, if finally enacted, it will be entirely optional with the exporter whether he wishes to give to the United States Treasury Agent information which is necessary to the appraising officer in determining export value or foreign value. Under the proposed law, when an appraiser is unable to ascertain the foreign value or export value of any French merchandise, the Treasury Department will so advise its agent in France, and will instruct the agent to call upon the exporter in order to advise the latter of the situation. The agent will at the same time offer his services to the exporter with a view to obtaining the information required by the appraising officer in the United States. If the exporter desires to avail himself of the foreign value or export value, which are the lowest bases of value, he may do so at no expense to himself, and the exporter may rest assured that any information of a confidential character which it is necessary for the agent to obtain will be held in strictest confidence. The laws of the United States provide severe punishment for any officer who should divulge information of the above character. Treasury agents are under instructions to report facts as they find them whether they favor the Government or whether they favor the exporter. They are glad to assist exporters in correctly invoicing their merchandise in order to avoid misunderstanding when the merchandise is imported into the United States.
If it is agreeable to the French Government to permit the return to France of agents of the United States Treasury Department, the Government of the United States will be happy to assure the French Government that such agents will be officers of long standing and experience, fully versed in the French language and who will be in every way acceptable to the French Government.”
I am [etc.]