There is no hestitation that should come from a large group of citizens in saying to the Senate of the United States:

We put this baby in your lap. After all, we don't know what to do with it. You are our elected representatives, and you figure out something that you can do. Here is the thing that is going to happen to us.

Now, if you don't want it to happen and if there is anything we can do in this fight, we are perfectly willing to do it.

The CHAIRMAN. Of course, Mr. Barnes, the practical thing to do, if this plan has all of the evils in it that you have expressed here, is to reject the plan.

Mr. BARNES. That is right.

The CHAIRMAN. Now, if a majority will not reject the plan, you can appreciate how improbable it is that it will pass legislation and go through with it, because we have the issue before us right now. Mr. BARNES. That is right.

The CHAIRMAN. The plan can be rejected and another plan submitted. I understand you do not oppose the plan as such.

Mr. BARNES. No.

The CHAIRMAN. You do not care about that.

Mr. BARNES. That is not any of our business. It is political. The CHAIRMAN. All you want is to preserve this right of review. Mr. BARNES. That is all.

The CHAIRMAN. That is all you want?

Mr. BARNES. Yes.

The CHAIRMAN. Well, the plan could be rejected if the Senate were to do that solely for that purpose.

Mr. BARNES. And then sent back here with the protection we suggest.

The CHAIRMAN. A new plan could be submitted with the protective language in it.

Mr. BARNES. Then I will give you the great pleasure of not having to listen to me again. I will be perfectly satisfied if that happens. The CHAIRMAN. I may send for you. We might issue a subpena to have you come back.

All right, thank you very much. You are speaking of legislation that will be practical in this period of Congress. This being an election year and other things being what they are, no one could have any optimism about getting such a bill through. The practical thing to do is to simply reject the plan for that reason and let the executive branch submit a new plan.

Mr. BARNES. The time is short in which to give it adequate consideration.

The CHAIRMAN. Well, I think that in the past, as I recall, we have rejected plan No. 1 of 1950.

Mr. BARNES. And the Senate just clamped the lid down on you when you did it.

The CHAIRMAN. They resubmitted the plan with modifications. Mr. BARNES. About the Comptroller of the Currency.

That is all we are interested in here. We are asking that this right of judicial review which you yourselves enacted as the legislative body of the United States, not be taken away and handed to the nonreviewable discretion of the Secretary of the Treasury.

The CHAIRMAN. I have a letter here from the Treasury which I will insert in the record, commenting on this matter of judicial review.

I will state this: If the Senate is in doubt about that, if there is reasonable doubt as to whether the plan does preserve the right of judicial review, then the Senate should resolve that doubt by rejecting this plan with the idea that a new plan which would preserve that right will be submitted.

Mr. BARNES. That is what I would like to see happen.

The CHAIRMAN. That is all you want?

Mr. BARNES. That is all I want.

The CHAIRMAN. If the Treasury is correct in saying that this plan does not abolish that right, then it could have no objection to submitting a new plan that specifically preserves it.

Mr. BARNES. I cannot let this opportunity go by without saying again that I thoroughly and completely disagree with the conclusions that the bureau attorneys in the Treasury have come to in patting themselves on the back and saying, "Our language couldn't be beaten."

That isn't correct. The peril is there, but you can't sell a bill of goods to a fellow and induce him to repudiate his own charge. There is no way I know of doing that.

Now, do I understand that the deadline for the approval of this is the 19th or the 20th?

The CHAIRMAN. Midnight on the 20th, I am advised by Mr. Reynolds.

Mr. BARNES. Midnight of the 20th?

The CHAIRMAN. Yes.

Thank you very much, Mr. Barnes.

Mr. BARNES. I thank you.

The CHAIRMAN. At this point in the record we will have printed a letter which I have received from the acting Secretary of the Treasury, Hon. John S. Graham, together with a memorandum from the general counsel of the Treasury which set forth the Department's views regarding the issue you have raised.

Mr. BARNES. I understand that a similar letter addressed to the chairman of the House Committee on Expenditures overlooks entirely the fact that we are talking here about a statutory right to sue the United States, not a right to sue the collector as an individual. That is a very different thing.

The CHAIRMAN. I am sure the Congress wants to preserve that right.

Thank you very much, Mr. Barnes.

(The letters referred to are as follows:)

Hon. JOHN L. MCCLELLAN,

Chairman, Committee on Government Operations,
United States Senate, Washington, D. C.

JUNE 9, 1952.

MY DEAR MR. CHAIRMAN: At the hearing before your committee on June 4, 1952, two witnesses expressed concern with what they suggested were possible effects of Reorganization Plan No. 3 of 1952. One witness indicated concern that the plan would deprive the United States Customs Court of its jurisdiction and thus the right of judicial review will be jeopardized. Another witness indicated concern that the plan would eliminate checks and balances in the Bureau of Customs which he believes to be the principal protections against laxity, fraud, and corruption.

While the Department has previously expressed its views to your committee on both of these points, the following additional comments may be helpful in giving your committee assurance that the fears expressed by these two witnesses are quite groundless :

JUDICIAL REVIEW

The first point relates to concern that the present jurisdiction of the United States Customs Court to review decisions made in the administration of the customs laws will be lost under Reorganization Plan No. 3 of 1952. There is attached an opinion of the General Counsel for the Treasury Department which analyzes this suggestion and concludes that there is no foundation for concern in this regard.

In brief, the jurisdiction of the Customs Court arises from statutes which provide that protested decisions of collectors and appraisers shall, if affirmed administratively, be transmitted to the Customs Court for determination. The concern that has been expressed appears to be based upon the theory that abolition of the statutory offices of collector and appraiser affords an opportunity to abolish the right of review by the Customs Court. This, of course, is not the

case.

All functions of collectors and appraisers were transferred to the Secretary of the Treasury almost 2 years ago by Reorganization Plan No. 26 of 1950. Every function performed by a collector or appraiser today, including the making of the decisions which are reviewed by the Customs Court, is performed solely by virtue of a delegation from the Secretary. This circumstance has in no way affected the jurisdiction of the Customs Court, nor would it affect the jurisdiction of the court if the Secretary made the decisions himself or if they were made by any other officer to whom he had delegated that function. It is the making of the decision that gives the Customs Court jurisdiction, not the use of the word "collector" or the word "appraiser" in the statute, and the Secretary now has the authority to transfer at will the duty of making the decision.

The Reorganization Act of 1949 contains savings provisions which expressly cover this situation, specifically providing for transfer of functions from one officer to another without upsetting statutory rights and duties prescribed by law. Those who are concerned lest the plan deprive the Customs Court of jurisdiction have apparently either overlooked or misunderstood section 9 of the act, which the committee report explains as a saving provision with respect to the status, after a reorganization, of statutory provisions relating to any agency or function affected by the reorganization.

The transfer of functions under a reorganization plan binds the public as well as the officials involved. A case cited in the General Counsel's opinion makes it clear that even criminal liability continues through changes by reorganization of officials specified in the statutes involved.

Surely if criminal liability continues, the right to a judicial review provided by the Congress will not be dissipated by a simple change of officials under a reorganization plan which contains no suggestion of such a consequence, and as to which the President has in his transmittal message stated precisely the contrary intent.

INTERNAL AUDIT

The second point relates to concern that the plan will weaken controls over customs revenues. This concern apparently arises because of a lack of understanding of the system of internal audit proposed for the Bureau of Customs as a result of studies under the GAO-Treasury-Budget joint accounting improvement program.

One of the objectives of the Budget and Accounting Procedures Act of 1950 and of the joint accounting improvement program is to assure in every agency a system of internal audit designed and operated according to modern concepts. Internal audit, properly conceived and carried out, is an indispensable part of an adequate system of internal control over financial operations. It is now generally recognized in business management that internal audit is a safeguard of the greatest importance with respect to the proper conduct of financial transactions, the protection of funds and other assets, and the full and fair disclosure of the results of financial activities. Properly performed, it is also a fertile source of information, to be explored by those with management, operating, and accounting responsibilities, for doing things in better ways.

The modern concept of internal auditing, although it is widely accepted in business, is fairly new in the Federal Government. The functions comptrollers of customs are required to perform today is a form of internal audit, but not an internal audit in the most enlightened and economical sense. The present system of poring over a great volume of papers and establishing duplicate records makes no allowance whatsoever for the considerations which a modern system

takes into account. Consequently, time and effort are now required to be devoted to checking many relatively unimportant papers when they could be devoted to far more useful auditing activities and money would be saved in the bargain. The system of internal audit proposed for customs, for which the plan will pave the way by eliminating existing inflexible requirements, is designed according to modern concepts and is directly in furtherance of the objectives of the Budget and Accounting Procedures Act of 1950 and the joint accounting improvement program. Examination and audit work under it will be fully as independent as the work of the comptrollers is today and none of the present safeguards will be relaxed in any real sense. The important point, however, as indicated before, is that the new system will strengthen financial controls in respects not heretofore covered.

It appears that a misconception with respect to the term "spot check" as used in auditing may have given rise to the concern expressed to your committee. A much better term is "selective examination," selective because in determining auditing procedures attention is given to the degree of importance of transactions under review, the efficiency of the internal checks under review, and the number and seriousness of deficiencies found during examination. The extent of the internal auditor's examination of liquidated customs entries and other transactions should depend on these factors. As a matter of fact, the system proposed to be installed in customs recognizes that there should be a 100 percent review of certain types of customs transactions because of their importance.

In summary the system of internal audit proposed for customs will not only preserve all necessary present safeguards, but it will also strengthen financial control in customs in other respects.

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It is hoped that this information will be useful to your committee in its consideration of Reorganization Plan No. 3 of 1952.

The view was expressed in testimony before the Senate Committee on Government Operations on June 4, 1952, that Reorganization Plan No. 3 of 1952 would seriously jeopardize the existing rights of importers and American manufacturers to obtain review in the United States Customs Court of decisions made in the administration of the customs laws. On June 5, 1952, Senator George introduced Senate Resolution 331, a resolution which would disapprove Reorganization Plan No. 3 of 1952. Senator George explained that by submitting the resolution he did not intend to convey the thought that he necessarily opposes the Plan, but that he thought the committee should be able to inform the Senate whether judicial review is preserved.

The statutory right to review by the Customs Court derives from the provisions of sections 501, 514, 515, and 516 of the Tariff Act of 1930, as amended (19 U. S. C. 1501, 1514, 1515, and 1516). Section 501 provides for notice by the collector to the importer if the appraiser has set a value upon imported merchandise likely to be adverse to the importer; and the section also authorizes an appeal for reappraisement by the Customs Court to be filed within a specified period after the collector's notice. Section 514 provides that decisions of collectors of customs shall be final unless the importer files a protest in writing. Section 515 provides that upon the filing of a protest the collector shall review his decision, and if he affirms it then the matter shall be transmitted to the United States Customs Court for determination. Section 516 provides that American producers who believe the appraisement of competitive merchandise is too low or the classification improper may similarly be heard in the Customs Court after the appropriate protests have been filed.

The concern that has been expressed appears to be based upon the theory that, because the foregoing sections specifically mention "collector" and "appraiser," abolition of the statutory offices of collector and appraiser will abolish with it the right of review by the Customs Court.

It would seem to be an answer to this concern that sections 401 (h) and (j) of the Tariff Act of 1930 (19 U. S. C. 401 (h) and (j)) provide that the words "collector" and "appraiser" means any person authorized by law or regulations of the Secretary of the Treasury to perform the duties of collector or appraiser. It does not appear to be contended, for example, that abolition of certain offices of appraiser in 1932 deprive the Customs Court of jurisdiction under sections 501 or 516 of cases arising through the officers who replace those appraisers. It is not suggested that the decisions of the Customs Court in those cases over the last twenty years are null and void or that the Customs Court acted improperly in hearing them.

But if those who express concern over the effect of Reorganization Plan No. 3 are not convinced by this history, additional conclusive evidence is not hard to find.

As a basic fact it must be remembered that the present collectors and appraisers have no functions by virture of any statute. All of their functions were transferred to the Secretary of the Treasury by Reorganization Plan No. 26 of 1950 almost 2 years ago. Every function that a collector or an appraiser performs today, including the making of the decisions which the Customs Court reviews, is performed solely by virtue of a delegation from the Secretary. This circumstance has in no way affected the jurisdiction of the Customs Court, nor would it affect the jurisdiction of the court if the Secretary made the decisions himself or if they were made by any other officer to whom he had delegated that function. To hold otherwise would be to hold that every review by the court of a decision made since Reorganization Plan No. 26 of 1950 went into effect is null and void because the court had no jurisdiction.

It is of course the making of the decision that gives the court jurisdiction, not the use of the word "collector" or the word “appraiser" in a statute enacted before a reorganization went into effect. As a matter of fact, if the Secretary should delegate the making of these decisions to officers with other titles, the codifiers of the statutory law would promptly substitute those titles in sections 501, 514, 515, and 516 just as they have done in many instances in the past.

The Reorganization Act of 1949 expressly sets out savings provisions which cover this situation fully, providing specifically for transfer of functions from one officer to another without upsetting rights and duties prescribed by law. Those who express concern that the plan may deprive the Customs Court of jurisdiction have apparently either overlooked or misunderstood section 9 of the act, which provides in part as follows: "Any statute enacted

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before the effective date of such reorganization, shall, except to the extent rescinded, modified, superseded, or made inapplicable by or under authority of law or by the abolition of a function, have the same effect as if such reorganization had not been made; but where any such statute, regulation, or other action has vested the function in the agency [by definition "agency" includes "officer"] from which it is removed under the plan, such function shall * * be considered as vested in the agency under which

*

the function is placed by the plan."

The report of the House Committee on Expenditures in the Executive Departments (H. Rept. No. 23, 81st Cong.) said in explaining this section that it "contains saving provisions with respect to the status, after a reorganization, of statutory provisions, regulations and other actions, and suits and other proceedings, having a relation to any agency or function affected by such reorganization." It is difficult to understand how the reorganization authority could have any usefulness or efficacy at all if what the critics of Reorganization Plan No. 3 of 1952 suggest, rather than what the House Expenditures Committee said above, is the true criterion.

There are court decisions which make it very clear that the transfer of functions under a reorganization plan is not only binding on the officials involved but is also binding on the public with respect to duties required to be performed by the public. One of these decisions is Czarnecki v. United States (95 F. (2d) 32), which upheld the conviction of two individuals for possessing an unregistered still. The provision of law under which these individuals were convicted had originally required registration of stills with the Collector of Internal Revenue for the taxpayer's district. By an Executive order and Treasury decision issued pursuant to a reorganization act, it was provided that stills should be registered with the district supervisor of the Alcohol Tax Unit. In holding that the transfer of functions under the reorganization was binding on the public, the court had this to say: