International Trade files, lot 57 D 284, “Custom Bill”
Memorandum by the Deputy Director of the Office of Economic Defense and Trade Policy (Vernon) to the Assistant Secretary of State for Economic Affairs (Linder)1
- Customs Reform Bill
We have been discussing with Treasury the character of the customs improvement legislation which the Administration should submit to the Congress for its consideration.
The principal issue which has arisen in our discussions is the question of how far should such legislation go. Should the legislation be a straight customs simplification measure consisting of relatively noncontroversial provisions or should it go farther and be a genuine customs improvement measure dealing with such controversial questions as the elimination of American selling price, the general simplification of our existing tariff classifications, the elimination of discriminatory internal taxes and the like?
Treasury is divided on the issue. The customs people in Treasury have been pushing for a fairly limited, customs simplification bill, feeling that even such a bill would be a substantial improvement over the present situation and that any more ambitious bill would fail of passage completely, with a resulting loss of even noncontroversial reforms. Andy Overby and the people in the Office of International [Page 133] Finance in Treasury favor a stronger, customs improvement bill, feeling that the present difficulties in the field of customs administration require such a bill and that once a customs bill has been passed, it would be very difficult to come back later and obtain additional legislation even if the earlier bill were not adequate.
We have also been inclined to support a stronger bill for these reasons. As regards the feasibility of passage of such a bill, we have been impressed by the substantial sentiment among business groups and others for customs reform. We have argued that how strong a bill could be gotten through the Congress depends on the extent to which the Administration is prepared to support such an approach and that, therefore, the issue should be presented to the President and the heads of the interested agencies (notably Treasury, Commerce and State) in the form of a fairly inclusive bill. We appreciate that if a strong bill is put up to the Congress, it might be harder to get through than a weak bill. We have not felt, however, that if a strong bill should be put up to the Congress and the latter should be unreceptive to it, all would necessarily be lost as the proponents of a weak bill have tended to argue. If the Congress were not prepared to accept particular controversial provisions, it could always drop them and enact the rest. There are risks of delay and perhaps even of complete failure but they do not seem to us as great as the possible gains if the Administration were prepared to press for a strong bill.
We have tried to define in the attached paper2 a possible minimum and maximum approach. The minimum approach would start with the Customs Bill as it passed the House last year and would add to it a number of noncontroversial items. The maximum approach would include all of the minimum approach plus provisions for the elimination of American selling price, the repeal of the three cent processing tax on coconut oil, the repeal of certain discriminatory internal revenue taxes, the granting of equal treatment for foreign and domestic seed, the modification of present requirements for the prohibition of imports from a country affected by the hoof and mouth disease and perhaps one or two other items of lesser importance. Although not discussed in our paper, the maximum bill would also include: (a) a provision for the repeal of Section 516(b) of the Tariff Act3 allowing producers to contest duty classifications in the courts, a section which had been repealed, so far as trade agreement rates were concerned, in 1934 and restored [Page 134] in the last extension of the Trade Agreements Act4 and which serves only protectionist purposes by stimulating further litigation and thereby hindering trade; and (b) some provision for simplifying our present complicated tariff structure and alleviating the problems arising from the classification of commodities for the purpose of application of duties. These last two matters had not been dealt with in our customs paper because we had thought of handling them in connection with the renewal of the Trade Agreements Act rather than in a customs improvement bill but on further reflection they would probably fall more appropriately into a customs bill than a trade act.
The classification problem perhaps deserves a further word. Our present tariff structure is exceedingly complicated with a bias towards maximizing the amount of protection accorded, and leads to delays and uncertainties and endless litigation in the courts. In the fiscal year 1952 alone nearly 30,000 cases were received in the Customs Courts; at the end of fiscal 1952 approximately 146,000 cases were pending in the courts. As the Bell report on trade policy now in draft will point out, “litigation may be regarded as an integral part of the process of final settlement of obligations on import entries”.5 This problem was not dealt with in the Customs Simplification Bill submitted to Congress by the Administration last year and as a result leaves an extremely important part, perhaps even a major part, of the problem of customs reform untouched. There is attached a paper,6 prepared by the Department for the PAB, which more fully describes the problem and contains, on pp. 6–7, a specific suggestion for dealing with it. (I should warn you that the introductory Summary of the paper prepared by the PAB Staff is inadequate.)
Since our talk with Treasury a compromise approach for new customs legislation has been suggested to Mr. Overby by members of his staff. Under this approach the Administration would send up to Congress a minimum bill, much like the minimum bill suggested in the attached paper. At the time of submission of the bill, however, the President would indicate that the measure he is suggesting is strictly a customs simplification bill, that more is needed in the field of customs improvement, and that he is, therefore, setting up [Page 135] an advisory committee of business men to recommend to him additional measures for legislative action.
While this approach has some merit in keeping the issue alive, we think it is far less desirable than a strong bill. We know what additional measures are needed and do not need a committee to tell us. The real issue is whether the Administration wants to take on the political fight involved in getting comprehensive customs improvement legislation. Only if the Administration decides not to seek such comprehensive legislation, would it be worth considering the compromise approach suggested to Overby.
Since Treasury is pushing ahead quickly to jell on the nature of a bill, we think it would be highly desirable if you could get together at the earliest possible date with Overby and Treasury’s new Assistant Secretary Rose.7 Mr. Rose, we are told, is responsible for Treasury’s customs work, including the preparation of new customs legislation for submission to the Congress. In any such discussion we recommend you follow the line indicated in this memorandum.
- Drafted by Leonard Weiss, Acting Assistant Chief of the Commercial Policy Staff.↩
- Not printed.↩
- Reference is to the Tariff Act of 1930 (Public Law 361), enacted June 17, 1930; for text, see 46 Stat. 590.↩
- The last extension referred to here was the Trade Agreements Extension Act of 1951.↩
- The report, entitled “A Trade and Tariff Policy in the National Interest,” was submitted to President Eisenhower in February 1953, by the Public Advisory Board for Mutual Security. Daniel W. Bell, President of the American Security and Trust Company and former Under Secretary of the Treasury, was the acting chairman of the PAB, which included businessmen, labor leaders, scholars, journalists, and farm spokesmen.↩
- Not found with the source text.↩
- H. Chapman Rose.↩