Part 68

What few travellers realize is that there is no automatic movement of merchandise arriving by ship from overseas. Someone has to be on hand to clear each shipment with Customs and pay any duties that might be due. Someone must see to it that the merchandise is moved from the piers to its destination. And this is usually the job of the broker, a point which many people do not understand and which causes considerable difficulty.

The broker is the expediter of the multi-billion-dollar flow of merchandise through the ports of entry in the United States. He is the legal representative of his client in dealing with Customs problems.

The Customs Service is not interested in merchandise until it arrives within the limits of a port of entry to be unloaded. At this point the merchandise legally becomes an import. And the merchandise passes through Customs under two types of general entries. One is called the “consumption entry” and the other is known as a “warehouse entry.”

Most imports arrive and are passed through Customs under the consumption entry, which permits the importer to pay the duties, obtain a release, and get immediate possession of all of his merchandise.

When merchandise is brought into the country under a warehouse entry, the major part of the merchandise is sent to a Customs bonded warehouse for storage. No duties are deposited when the papers are filed except for that portion of the merchandise which is to be taken immediately by the importer. In other words, the importer is permitted to place his goods in storage without payment of duties and then is permitted the privilege of making partial withdrawals from the warehouse, paying duties on whatever he draws for consumption.

There is a continual movement of merchandise from one bonded warehouse to another. This is particularly true in movements of liquor from one part of the country to another. Liquors may move across the country and may be in six or a dozen different bonded warehouses before they are withdrawn for consumption and taxes are paid. This system permits merchants to move their merchandise freely to meet shifting consumer demands.

The normal period for bonded storage is three years, but this period may be extended. If no extension is granted and the goods still remain in a bonded warehouse beyond the three-year period, they are considered unclaimed and abandoned to the government. The government then puts the merchandise up for public auction.

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A point of constant friction in the field of imports is the law which requires that imports shall be marked “legibly and conspicuously” with the name of the country of origin. It has been the Customs Bureau’s position that if the marking can be reasonably expected to remain on the article until it reaches the ultimate purchaser, then that is all that the laws requires. But there are many exporters and importers who disagree with the Customs interpretation of the law.

As one Customs veteran explained: “The domestic people, of course, would like to have great big red letters 40 feet high on a 20-foot article spelling out the name of the country of origin. Of course, it frequently happens that the importer would like to have this name about as small as the Lord’s Prayer on the point of a pin.

“The markings from some countries increase the value of the article. Chinaware from England, for example. The English are very happy to put their marking under the glaze, where it will remain. There are other countries that are just as happy to put this identification on by paper sticker, which may come off in the rain. So we always are in the middle in the argument over markings on imports.”

The purpose of the law, of course, is to inform the ultimate buyer of the country from which the merchandise came. Normally the ultimate purchaser is considered to be the man who buys it across the counter--the last person to receive the article in the condition in which it was imported.

A great deal of merchandise is permitted into the country under what is known as the “informal entry procedure.” The informal entry is used where the value of a shipment does not exceed $250. The entry was devised for the benefit particularly of persons passing across the borders of the United States from Canada and Mexico.

In such border crossings, there is no formal appraisement. The Customs officers on duty write up the entries, take a look at the merchandise and decide themselves whether the value is correct. Then the duty is paid on the spot and the merchandise is released.

This informal entry procedure is also used at the airfields to expedite shipments of merchandise by air. It is used in the clearing of baggage through Customs when travellers arrive from overseas, and in the clearance of non-commercial shipments which include personal and household effects.

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In the vast majority of importations, the broker plays an important part. The broker may be an individual, a partnership, corporation, or association. In any case, those acting as brokers must be licensed by the Customs Bureau, meet certain standards, and submit to Federal regulation of their operations.

Applicants for individual broker’s licenses must undergo an examination at the headquarters port in the Customs district in which the broker intends to operate. The purpose of this examination is to determine the applicants knowledge of Customs laws and procedure and his fitness to render a service to importers and exporters. This knowledge must necessarily be quite broad in scope, and a grade of 75 per cent is required for passing.

However, those applying for a broker’s license as a corporation, partnership, or association do not take an examination. Their applications are forwarded by the Collector to the Supervising Customs Agent, who conducts an investigation and then makes a report and recommendation. The agents verify the correctness of the statements made in the applications and the qualifications of the person or persons who will actually handle the customs business. The government requires that each broker keep current records reflecting his financial transactions as a broker, and these records must be available for government inspection at any time.

The Customs Service has no part in fixing the fees charged by customs brokers for their services. However, if a complaint is made against an individual broker or a brokerage house, then the complaint is investigated by Customs Service agents and if the fees charged by the broker are found to be excessive or “unconscionable,” then action is taken by the Service to correct the situation. In cases where investigation discloses irregularities, the Secretary of the Treasury has the authority to suspend or revoke the license of a broker. Such action is taken, however, only after a quasi-judicial hearing in which the accused broker has the right of cross-examining witnesses. If the decision goes against him, then the broker may, if he wishes, appeal his case to a U.S. Circuit Court of Appeals.

The broker plays a prominent role as the middle man in the import-export business, but this does not mean that an importer must necessarily seek the services of a broker in bringing merchandise into the country. Under the law, any citizen may act as his own agent in clearing his own imports through Customs and no license is required.

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One of the ancient devices to aid the importer is known as the “drawback” privilege. “Drawback” is a word which is found in customs language through the centuries, and it is another word for “refund.”

In brief, the drawback works in this fashion: an importer brings merchandise into the United States to be used in the manufacture of certain articles. At the time of importation, he pays the normal duty. After the articles are manufactured, they are exported to another country. It is then that the manufacturer is entitled to a refund on that part of the imports which he shipped back out of the country.

The drawback plays an important part in the manufacturing operations of all nations. It enables manufacturers to meet competition in the export market. For example, an automobile manufacturer in the United States imports a large amount of steel to be used in the manufacturing of his automobiles. Ten per cent of this steel is used in cars which are shipped overseas. Thus the manufacturer is entitled to a drawback or refund of 10 per cent of the duties he paid on the imported steel.

Congress has liberalized the drawback provisions so that a manufacturer does not necessarily have to use the imported materials in his exports in order to qualify for a refund of duties. An automobile manufacturer may export automobiles made entirely of domestic steel. But if the steel he used in the exports is of “the same kind and quality” as the imported steel, then he is allowed to obtain a refund on that quantity of steel used in the exported automobiles.

Virtually every manufacturer who is in the export business takes advantage of this drawback material, and its value to the manufacturing industry in the United States is realized when it is noted that the refunds paid in recent years have been running about $9 million annually.

Oddly enough, there are some American manufacturers who do not even know that they have the privilege of a duty refund. They have been importing materials for years, paying duties, and then exporting the finished products without making any claim for a refund of duties on the materials shipped back overseas. One midwestern manufacturer in recent years discovered that he had paid the government in excess of $1,500,000 in duties--and he was entitled to a refund of the entire amount.