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Mr. BEITER. Mr. Chairman and members of the committee, I am Alfred F. Beiter, president of the National Customs Service Associ, ation, an organization composed of employees and officers of the United States customs service.

As you may know, customs is a career service. All of its employees with the exception of 52 top-level officers, are under civil service and nearly all of our members have 20 and more years of service.

We have given very careful study to Secretary Graham's clear exposition of the Department's views on Reorganization Plan No. 3 relating to the customs service, and just last week, subsequent to the pubJishing of our special news letter and Mr. Graham's testimony, we sat in, at the invitation of the Bureau of Customs, at a conference in which we were given a rather full and frank discussion of what is intended to be done under this plan.

I might add here that both Mr. Reynolds and Mr. Loeffler have been very helpful to me. Both of these gentlemen have a broad knowledge of the subject and were willing at all times to give freely of their valuable time. The committee is fortunate, indeed, in having the services of two such well-qualified and able men.

The CHAIRMAN. Thank you. The committee has appreciated their services. We think they are very competent.

Mr. BEITER. All of the foregoing has contributed greatly to our understanding of the plan, but it has not lessened our conviction that its approval would be harmful to the customs service.

One of our major concerns about this plan was our belief, based on informal legal opinion, that in the course of abolishing the various offices held by political appointees it destroyed the system set up in the Tariff Act whereby the determination, assessment, and collection of customs duties, is carried on by three interacting, coordinated, but independent offices—that is, collector, comptroller, and appraiser.

Since we feel very strongly that this system, and the checks and balances it provides, are one of the principal protections the customs service possesses against laxity, fraud, and corruption, we are anxious that this separation and independence be continued in the organizational structure of the customs service. Consequently, we urged our members to solicit congressional rejection of this plan for this and other reasons.

In a disturbing sort of way, the conference had with the Customs Bureau has relieved us of our fears in this connection, for the time being. The Bureau tells us that authority given the Secretary under plan 26 of 1950 is sufficient to scrap this system regardless of the fate of plan 3. It seems therefore that this particular horse fled the barn 2 years ago, and there isn't anything that can be done about it at this time. The Bureau has assured us, however, that there is no intention of using such authority to abandon this system. Present officials cannot bind their successors, and we can only hope that, as time goes on, successive Secretaries of the Treasury continue to exercise the same restraint.

The elimination of Presidential appointees from the various toplevel offices is, in our opinion, a political question and its effect on the over-all functioning of the customs service would not be of exceeding significance either way.

Section 3 of this plan eliminates vital duties of the Comptroller of Customs. In our opinion, these duties are so fundamental to a properly organized customs service that their continuance should be guaranteed by statute, that under no circumstances should administrative discretion be submitted for these tariff requirements. We are speaking now particularly of the requirement that comptrollersverify all assessments of duties and allowances of drawback made by collectors in connection with liquidation thereofsection 523 of the Tariff Act, and the obligation of masters of vessels from foreign ports to send a copy of each such vessel's manifest to the comptroller for the district, section 439 of the Tariff Act.

A ship's manifest must contain among other information a detailed account of all merchandise on board, the descriptive marks and numbers of each package of the same, be it case, package, bale, barrel, or other, and the names of the individual consignees of each piece or lot of merchandise in conformity with the bills of lading issued. This is a copy of the manifest which has been deposited with the collector at the port of entry and against which the merchandise unloaded from the vessel is checked as part of the procedure governing entrance and clearance of merchandise.

The comptroller now completely checks the collector's report on the manifest of each such vessel to make certain that all incoming cargo is accounted for. The desirability of such a check is apparent. The direct receipt by the comptroller of a copy of the vessel's manifest, listing all the cargo brought into the country, makes positive independent assurance that all merchandise brought into the country is in fact entered at the customhouse, that connivance to bypass customs entry and examination has small hope of success.

The department plans to substitute for this a type of spot check by traveling field auditors on the original manifests in the collector's offices. A fair-sized vessel, carrying general merchandise, will have thousands of tons of cargo, broken down into hundreds of lots varying from a small package to a hundred or more cases or barrels. This on a single fairly representative ship’s manifest. Multiply this by thousands of vessels and other carriers that arrive at United States ports in the course of the year, and there is a staggering total of these manifests.

Secretary Graham, in his statement, put the number of formal entrees made in 1951 at 900,000. This, then, would be about the number of separate consignments of cargo contained in the many thousands of individual manifests to be spot-checked by field auditors. The mere statement of the numbers of transactions involved suggests the inadequacy of the spot check for this type of work.

The protection needed here is not against error; lost cargo is rare and eventually turns up in most cases. The present system guards against diverted cargo and reducing it to a spot check is an invitation to smuggling and venality. Weakness invites attack.

It may be that there is a case for cutting down on the comptroller's audit of the collectors' accounts, and so forth. Error or fraud are

' more likely to follow a pattern in disposition and disbursement of moneys and expendables. And these are more susceptible to control by a commercial type of internal check. This type of transaction is not peculiar to customs and does not differ materially from Government work in other agencies. Even here there is a real question whether it can be handled more effectively and economically than

under the present system where all the comptroller's functions for the United States and its possessions, including 100 percent verification and complete manifest control, are handled by slightly more than 200 employees at an annual cost of approximately $1,200,000.

Spot check is not suitable, however, for the comptroller verification of the collectors' duty assessments and refunds. This is not, as has been suggested, merely a duplication of the collector's work. It is a primary verification of the complex conclusion which the collector's fiquidator makes when he makes the duty assessment on merchandise. A consideration of what is involved in the decision of the collector's liquidator, which is now completely checked by the comptroller, will be valuable in appreciating the necessity for the comptroller's check. The liquidator has before him the shipper's invoice, the entry papersincluding the bill of lading and any affidavits or other documents that the nature of the particular importation may require—the appraiser's description of the merchandise, and report of its value and condition, the inspector's tally of over-all quantity or weights and perhaps a chemical analysis.

Initially, he must satisfy himself that the various papers before him are sufficient for his purposes and seek supplementary information when they are not. Then he determines the quantity of the merchandise to be assessed and ascertains the dutiable value thereof, after having reconciled any discrepancies among the shipping papers and the miscellany of official reports before him. Then from the maze of overlapping provisions and fine distinctions which characterize the enormously complicated present-day tariff, he selects the one category and rate of duty which is applicable to the merchandise and computes the duty down to the penny.

This process applies for each commodity in the shipment and many invoices cover numerous commodities. The complexity of this process and the consequent need for a complete check of the assessments, and so forth, it produces is demonstrated by the fact that the errors found by comptrollers, though minute percentagewise, still produce revenue differences running into six or seven figures annually. This takes no account of the value of a detected error as a means of correcting an erroneous practice. In this respect errors found have a value quite unrelated to whether the revenue difference in the particular verification is large or small. In this sense no error is too small to ignore.

Savings under this plan are put at $300,000 annually. Since half of this is attributable to the elimination of political appointees which could be effected by the President without this plan if he so desires, the real money-saving value of the plan is $150,000. For this we are to inject an element of weakness in a system which collects $800,000,000

a in revenue yearly and has been free of major scandal. One or two cases of contraband slipped in as diverted cargo could make this the most expensive short-cut in customs history.

We think that a greater degree of accuracy and a higher level of integrity should be demanded of Government operations for the very reason that they are Government operations. The conduct of public business has greater significance and importance than corresponding activity of a commercial nature and the greatest care should be taken that the affairs of Government agencies, particularly an enforcement and revenue agency like the Customs, be identified in the public mind with complete integrity and maximum effectiveness. The substantive provisions of plan $ would have quite an opposite effect. At a time when customs controls should, if anything, be strengthened, they are proposed to be weaknened.

We hope the plan relating to the shake-up in the customs will be disapproved by the Congress.

Thank you.

The CHAIRMAN. Thank you very much, Mr. Beiter.

The Chair will direct the Clerk to have inserted in the record a selection of the letters that we have received regarding this plan. I do not want to have all of them inserted in the record, but would like to get a cross section of the sentiment from the interests that are directly affected by the plan.

Mr. BEITER. It is my understanding that a number of customs employees throughout the country have sent in such letters.

The CHAIRMAN. We are not going to burden the record with all of them, but we will take a cross section of them.

(The matter referred to is as follows:)

UNITED STATES SENATE,
COMMITTEE ON ARMED SERVICES,

May 20, 1952.
Hon. John L. MCCLELLAN,
Chairman. Committee on Government Operations,

Washington, D. O. DEAR SIR: I am enclosing a communication which I have received from one of my constituents. I will appreciate your giving serious consideration to this problem, based on its merits.

Please let me have as prompt a reply as possible, returning the enclosure, in order that I can inform the writer. Sincerely,

LYNDON B. JOHNSON.

FISHER G. LORSEY INTERESTS,

Houston, Tex., May 13, 1952. Hon. LYNDON JOHNSON, United States Senator,

Washington 25, D. C. DEAR SIR: I was very much surprised when I learned that the hearing to be conducted by the Committee on Expenditures in Executive Departments is to be held Wednesday, May 14, on the President's Reorganization Plan No. 3, which provides for the reorganization of the United States customs service, placing the entire personnel of the customs service under civil service.

Since practically no publicity has been given the President's Reorganization Plan No. 3, or to the hearing in respect thereto, it is urgently requested that sufficient publicity be given this program, together with an opportunity for the opposition to express its views at a later hearing.

It is only by accident that the writer learned of this hearing at this late date, although I try to keep posted on all matters affecting transportation, international trade, and those matters affecting our port. I have discussed this program with many of my associates and find that they are also completely in the dark as to the provisions of the President's Reorganization Plan No. 3 and its probable effect on international trade.

Due to the corrupt practices uncovered in several of the Government agencies recently, we naturally welcome a general housecleaning; but let's let the customs service alone, at least for the present, and see what improvement, if any, results from the reorganization of those departments where reorganization has been authorized, since the United States customs service not only pays its way but makes a profit.

There is no doubt that the main objective of the President's recommendation for the reorganization of the Customs Service, and placing it under civil service, is under the guise of economy. However, economy and civil service cannot be associated together so long as the present civil-service law, and the regulations in respect thereto, prevail.

I refer specifically to the basis for rating supervisory employees whose rating and compensation is based upon the number of employees under their supervision-supervisory employee's incentive therefore being to find ways and means of adding employees under their supervision rather than reducing the number.

The only possible economy that the most visionary optimist could expect, as a result of the President's recommendation, would be the elimination of 50 percent of the present 14 customs collectors. There is no reduction in the workload in each district; therefore, the number of employees will certainly not be less under civil service and the net results being that all collectors would be placed under civil service with the same incentive for adding personnel under their supervision rather than holding personnel to a minimum.

This very important matter should be brought to the attention of all interested parties, in order that they might be given an opportunity to study the effect upon commerce and international trade, before approval by Congress; and again I urge that you give all interested parties this opportunity, in order that they may be prepared to express themselves before your body at a later date.

In making this request, I am sure that I am expressing the opinion of many had they been familiar with the provisions of the President's recommendation and its possible effect. Sincerely yours,

(Signed) F. G. Dorsey.
(Typed) FISHER G. DORSEY.

UNITED STATES SENATE,
('OMMITTEE ON ARMED SERVICES,

May 26, 1952.
Mr. WALTER REYNOLDS,
Chief Clerk, Committee on Government Operations,

Senate Office Building, Washington, D. C. DEAR SIR: With reference to a telephone conversation between members of your committee and my office, I am attaching a letter from Mr. Sydnor Oden, of the Houston Chamber of Commerce.

I would appreciate your consideration of the remarks contained in Mr. Oden's letter and a reply thereto in order that I may advise him more fully of information regarding Reorganization Plan No. 3. With best wishes, I am, Sincerely,

LYNDON B. JOHNSON.

HOUSTON CHAMBER OF COMMERCE,

Houston, Ter., May 23, 1952. Hon. LYNDON B. JOHNSON, Senator from Texas,

Senate of the United States, Washington, D. C. DEAR SENATOR JOHNSON: The attached resolution regarding Reorganization Plan No. 3 of 1952, as affecting the customs service, was drafted by direction of our world trade committee in its May 14 meeting and subsequently approved by the executive committee of the Houston Chamber of Commerce on May 20. In offering this resolution for your consideration, we would emphasize our first purpose to be governmental economy and to that end we urge you to devote your best and unrelenting efforts.

The customs service is one of the few self-liquidating agencies of the Federal Government; if its operation be impaired, by whatever good intention, not only will our imports be delayed and our importers injured monetarily but the Government will lose revenue.

Our copy of Reorganization Plan No. 3 as it affects the customs service, gives no specific or detailed explanation of its general proposals so that it is impossible to calculate the probable effect on imports, importers, and the Government. This chamber of commerce has repeatedly urged passage of the Customs Simplification Act as a practical and sound approach to efficiency and economy in the customs service. The proposed plan might have some sound provisions to recommend it and it might contain objectionable features deserving congressional

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