The daily times., 1921-09-15
AMERICAN VALUATION PLAN
EXPLAINED

Because of numerous inquiries
that have come to The Chronicle con-
cerning the American valuation plan
proposed in the tariff act now penu-
ing. the following explanation is pre-
sented If we have included eXpla-
nation of elemental fact and arlth-
metic with which, as we are well
aware. our readers are thoroughly IA
miliar, it has been out OF excess Oh
caution, so that no point could pos
sibIy remain in doubt.
What is meant by the American
valuation scheme proposed as a basis
for calculating ad valorem duties on
imported goods?
An ad valorem duty is a customs
charge fixed at a certain percentage
of the value of the article. For ex-
ample, an American importer brings
in a French automobile valued at
$4,000 The tariff act now in force
imposes an import duty of As per
cent ad valorem on such automobiles.
Therefore, the importer pays Uncle
Sam As per cent of $4,000, or 5000
in duties.
In fixing ad valorem duties ques-
tion arises before law makers. Shall
the duty be a percentage of the value
CT the article in the country from
which it comes, or shall it be a per-
centage of the value of the article in
the United States?
1t is clear that this makes a differ
epce. For if an automobile costing
$4,000 in France can profitably be i'm
ported into this. country it must be
worth here at least $4,000 plus the
freight and plus the tariff. 1t must
also be worth here as much more as
the cost of building such a machine
i'll France is less than it is in the
United States
Let us say that this car, which
cost $4,000 in France, cannot be built
and sold wholesale in the United
States for less than $4,000. Then it's
value here is $4,000.
Under the present tariff act ad
valorem duties are calculated on the
cost of the article in the country
from which it came. Hence, on this
French automobile the importer pays
rs per cent of $4,000, or 5000.
The American valuation plan
adopts the other method 1t makes
the cost of the article in the United
States the basis on which to calcu-
late the duty.
But it is not quite so simple as
this sounds. There is a complication.
The duty on our automobile would
not be As per cent of $4,000, even as
suming that 45 per cent will remain
the figure in the new act
Perhaps we can best get at the
matter by quoting the old and new
acts. The act now in force reads:
THE duty shall be assessed upon
the actual market value or whole
sale price thereof at the time of ex-
rortation to the United States. in the
principal markets of the country
whence exported"
The proposed amendment act
reads:
'The duty shall be assessed upon
the actual market value or whole
sale price thereof at the time of ex-
rortation in the principal markets of
the United States, deducting there
from United States import duties
The puzzle picture is in this last
clause, "deducting therefrom United
States import duties"
Taking our automobile again and
assuming that the ad valorem rate
On such automobile will remain at
AS per cent, we shall have to plunge
into mathematics.
First we observe that though
$4,000 is the figure we must take as
the cost of the car in the United
States, it is not the figure on which
we reckon the 5 per cent duty. Be
fore we can apply our As per cent we
must subtract from $4,000 the
amount of our duty before we know
what it is? But it can be done.
When we have subtracted the
amount of the duty from $4,000 we
will have the amount on which the
duty is calculated. Therefore, $4,000
must be the amount Of the duty plus
the sum on which the d1ty is figured