Mr. MCCLOSKEY. But that is the cargo preference law; is it not? Mr. VASTINE. It is definitely relating to trade, as I understand it, between U.S. ports, coastwise trade. I further understand that it is accepted international practice, that other countries have precisely the same type of laws. Mr. MCCLOSKEY. Do you keep a record of the waivers granted in the national interest to the coast wise shipping restrictions? Mr. HAUSMAN. Yes; we do. Mr. MCCLOSKEY. I wonder, Mr. Chairman, if I might ask that he submit for the record a list of all waivers granted to coastal shipping restrictions during the past 5 years? Mr. HAUSMAN. We certainly can. Mr. DOWNING. Without objection, that will be placed in the record at this point. [The information referred to follows:] SUMMARY OF ADMINISTRATIVE WAIVERS OF NAVIGATION LAWS ADMINISTERED BY THE CUSTOMS SERVICE UNDER THE ACT OF DEC. 27, 1950 (64 STAT. 1120; T.D. 52646), SINCE JULY 1, 1970 By whom requested Purpose FAA. DOD... Commerce. DOD... DOD DOD. DOD.... Atomic Energy Treasury... Extended waiver No. 88 (waiver of 46 U.S.C. 289, 883, Waiver of 46 U.S.C. 289, 883, to permit foreign vessel Extended. Waiver of entry, clearance, and coastwise laws to Waiver of navigation laws to permit use of vessels of Waiver of navigation laws to permit foreign vessel to Navigation laws waived to the extent necessary to Mr. MCCLOSKEY. Now, on page 11 of your testimony you indicated that back in 1969 we received total payments for international ocean freight transactions of $1.9 billion and we paid out $1.85 billion. Mr. VASTINE. Yes. Mr. MCCLOSKEY. And over a 5-year period the ratio of receipts to payments goes from a plus position to a minus position, so that by 1972 the payments exceeded the receipts. It would appear that over these 5 years, since we have enacted the Shipping Act of 1970, there has been a trend to cause the payments to exceed receipts, rather than vice versa. Do you have a reason for that trend? Mr. VASTINE. I think we might get some clue to this, Mr. McCloskey, by looking at the item, or subitem under total receipts, port expenditures. That seems to be the only clue as to why the receipts might not have kept pace with the payments. In 1969 port expenditures were $1,270,000. I think it is an extremely interesting question. I do not know why otherwise that trend would have occurred. I suggest you might want to ask the Maritime Administration, or we will, if you like. Mr. MCCLOSKEY. What does that term port expenditures and payments and receipts refer to? Mr. VASTINE. It means what foreign-flag vessels spend in U.S. ports, and includes everything from crew on the ship, where the seamen spend their pay in port, fuel purchased at U.S. ports, payments to the longshoremen for loading and unloading, incidentals-probably repairs and other incidental port costs. Mr. MCCLOSKEY. Let me interrupt. Rather than clutter up the record with speculation, I think it would be appropriate for you to submit a detailed explanation of why, in Treasury's judgment, the relationship of payments to receipts in international ocean freight transactions have decreased over the 5 years covered in your record here of 1969-73. I think you could update it for us to include 1974 and your projections in 1975. Mr. VASTINE. That will have to be preliminary data, but we will attempt to do that. The final 1974 data are not available. Mr. MCCLOSKEY. I think it is a significant factor. There is not much of a change, but it certainly indicates the 5 years covered by this chart that our receipts have declined with respect to payments. That is very much a matter of the intention of this committee, and I think we should have your detailed comment and discussion. Mr. VASTINE. We will be glad to provide that. [The following was submitted:] REPLY TO REQUEST BY MR. MCCLOSKEY Question. Submit a detailed explanation of why, in Treasury's judgment, the relationship of payments to receipts in international ocean freight transactions has decreased over the five years covered in your record here of 1969 to 1973, and I think you could update it for us to include 1974 and your projections in 1975. Answer. Data on revenues and expenditures in international shipping transactions are estimates based on incomplete information furnished on questionnaires to the Balance of Payments Division of the Bureau of Economic Analysis of the Department of Commerce. Since these estimates were subject to considerable margins of error only mapor trends shown by these estimates can be considered to be significant. The estimates shown in the attached table show a shift from net receipts of about $80 million per year in the years 1969 to 1971 to net payments of about $100 million per year in the years 1972 to 1974. These amounts are very small compared with the total of international receipts and payments resulting from maritime transportation which averaged $4.2 billion in the first three year period, and $6.5 billion in the second three year period. Theoretically many factors could have been responsible for the change in the balance. Among these could have been a decline in the share of U.S. vessels in the carriage of U.S. exports and imports, a decline in U.S. earnings from the carriage of cargo between foreign countries, or larger increase in freight rates paid to foreign vessels than those earned by U.S. vessels, a change in the trade itself, including shipping routes, composition and the relation between total imports and exports with imports rising more than exports, or a larger rise in U.S. "port expenditures" abroad than in foreign "port expenditures" in the U.S. in relation to freight earnings. (The major part of port expenditures is accounted for by purchases of fuels and the costs of loading and unloading vessels.) The sources on which the estimates of international receipts and payments are based do not provide the information which would be required to determine the reasons for the decline in the balance. From data collected by the Bureau of the Census it is evident. however, that changes in the shares of international trade carried by U.S. vessels in the tonnage carried increased over that period as shown in table II. Probably a major factor contributing to the change in the balance was the faster increase in the tonnage of imports, particularly of tanker cargo, than in the tonnage of exports, as shown in table III. Data for 1974 is included in the attached tables. It is not possible at this time to make meaninfiful estimates for the U.S. exports and imports in 1975 and consequently meaningful estimates for ocean freight transactions are not possible. TABLE 1.-INTERNATIONAL OCEAN FREIGHT TRANSACTIONS 1969-75 Source: Balance of Payments Division, Bureau of Economic Analysis, Department of Commerce. Source: Foreign Trade Division, Bureau of the Census, Department of Commerce. Source: Foreign Trade Division, Bureau of Census, Department of Commerce. 24.4 26.8 9. 20.2 22.3 10. 131.5 164.5 25. 93.4 103.7 11. 15.7 18.8 19. 145.9 213.9 46. Mr. MCCLOSKEY. Now, I take it from your testimony that you would oppose any increase in cargo preference laws, or expansion of the cargo preference laws; is that correct? Mr. VASTINE. Right. Mr. MCCLOSKEY. Your representatives have participated in the recent interagency discussions of cargo preference options, have they not? Mr. VASTINE. I believe so, although I am personally not familiar with the discussions. Mr. MCCLOSKEY. Who is the representative of Treasury that is your leadman in the cargo preference discussions, that I believe commenced earlier this year? Mr. VASTINE. I do not know. Mr. MCCLOSKEY. Who should we ask to come before this committee in that respect? Mr. VASTINE. John Borkman, who is a systems analyst in the Office for Energy Policy, within the Treasury Department, is the working level person responsible for this issue. Mr. McCLOSKEY. So he would be your expert on cargo preference, and the possibilities that you have considered? Mr. VASTINE. Yes, sir. He is the expert with respect to the technical economic questions. Mr. Dell Perry, Director, Office of Regulatory and Legislative Policy within the Office for Energy Policy, handles the legal analysis of the oil cargo preference. Mr. MCCLOSKEY. In your testimony you have referred to the fact that the Customs Service is a major arm of the Treasury Department. Mr. VASTINE. Yes, sir. Mr. McCLOSKEY. And in your effort to make American business more profitable, and thus contribute more tax revenues to the United States, have you had occasion to study the impact of the present Custom Services' law and jurisdiction on the difficulties that American exporters have paid? Mr. VASTINE. I certainly have not had that occasion, sir. Mr. MCCLOSKEY. You are familiar with President Ford's recent statement that one of the missions of his administration would be to reduce the regulatory impact of some of the bureaucratic complexities that hurt American business, and hamper attempts to expand exports? Mr. VASTINE. Yes, sir. Mr. MCCLOSKEY. In view of your testimony, I would like to ask another question, and I would say that September would be a reason able time to get this information from you. Just to relate to you the fact that in my district in California there are a number of businesses engaged in the export business who contend that a major item. of frustration in the expansion of their exports is the unlimited power of the Customs Service to impose penalties under the law on excess valuations of goods that are sent abroad, and then returned here after some manufacturing processes abroad. It would seem that there is need to study this law because the nature of the penalties that can be imposed on an exporter, if he makes a mistake in the evaluation of the product sent abroad, or the evaluation of the value added when it comes back. The nature of those penalties are such that they are presently causing many exporters to consider getting out of the business or face penalties that will force them out of the business. I think it would behoove Treasury to make a thorough study as to how we might reduce the impact of the Cuustoms Service and the existing laws and regulations of the Customs Service on the expansion of exports. Mr. VASTINE. Yes, sir. [The following was submitted:] REPLY TO ADDITIONAL QUESTION FROM MR. MCCLOSKEY Question. How might we reduce the impact of the Customs Service and the existing laws and regulations of the Customs Service on the expansion of exports? Answer. The Customs laws and regulations have a minimal impact on most American exporters. The Customs Service does not, on its own behalf. place any restrictions on exporters. In its traditional role, the Customs Service enforces the export laws and regulations of other Federal agencies, in particular, the export control laws (50 App. U.S.C. 2401 et seq.) for the Department of Commerce and the laws relating to the exportation of arms, ammunitions, implements of war and war materials (22 U.S.C. 401 and 1934) for the Department of State and the Bureau of Alcohol, Tobacco and Firearms. Except for the regulations relating to drawback, in those few instances where a document is filed on exportation pursuant to Customs regulations, it sole purpose is to facilitate the reimportation of the article. Thus, when articles are exported for repair or alteration under item 806.30. TSUS, a Certificate of Registration. Customs Form 4455, is required to be filed, but is returned to the exporter or accompanies the exported articles for use in connection with the return of the articles to the United States. Drawback refers to a refund of duties paid upon exportation of articles manufactured or produced in the United States with the use of imported merchandise. The drawback laws and regulations are designed to encourage manufacturing and production in the United States. Consistent with this Congressional policy, the Customs Service in recent years streamlined the procedures for filing drawback claims and refund of these duties. Any further changes to the drawback laws and regulations to encourage and stimulate exportation of American products awaits the results of a study commenced by the United States International Trade Commission and legislative action. Indirectly, the Customs laws and regulations affect American businesses engaged in exporting American-made articles to be assembled abroad and then returned to the United States. Under item 807.00, TSUS, American manufacturers and producers can take advantage of beneficial foreign labor markets and reduced production costs by exporting American-made components and importing fully assembled and packaged articles with duty only on the cost of assembly and any foreign products added to the assembled articles. The Customs Service does not require any documentation at the time of exportation of the articles to be assembled. Export declarations which must be filed for each shipment are filed pursuant to Department of Commerce regulations. When the assembled article is imported into the United States, the importer is required |