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changes. I find no obstacle in those changes and would be pleased to support them as an amendment to my bill.
I want to emphasize that increasing the number of manufacturing jobs in Eddystone, Pa., a small community in the heart of an economically depressed area, would be beneficial indeed, and I welcomed the opportunity to relieve the company of its difficulty by offering H.R. 6750.
I thank the subcommittee for its attention to this bill, and for the opportunity to speak to you today. I would now draw on the expertise of Mr. Longaker, who will describe in just a brief statement in a little more detail what in fact this fabric is used for.
Mr. VANIK. Mr. Longaker, your entire statement will be in the record as submitted. You may read from it or excerpt from it, whichever you see fit.
STATEMENT OF R. G. LONGAKER, VICE PRESIDENT AND
GENERAL COUNSEL, HOVER SYSTEMS, INC. Mr. LONGAKER. Yes, sir.
Congressman Edgar's summary has succinctly presented the condition which prevails relative to the tariff on the Hovercraft skirt material. HSI has presented a prepared statement.
Due to the fact that it is somewhat redundant and in the interest of the committee's time I would not read that.
The material in question is distinctly a specialty product both in manufacturing technique and end use. The subcommittee staff I believe has passed a sample of the material and a picture of its end use. And we believe that that examination draws the sharpest prospective to the material of a nontextile product,
Mr. VANIK. Tell me about Hovercraft. Is this a craft that floats over water or land?
Mr. LONGAKER. Yes, sir. It is a structure in which the skirt incloses a periphery of a generally steel boxed barge shaped vehicle. The deck penetration with a large fan, driven generally by a diesel engine, pumps air under it. The skirt actually does not lift the craft. They inflate, they hold the air inside so the air pressure can work on the entire bottom of the craft.
Mr. VANIK. It is the principal of an air balloon.
Mr. VANIK. Is it a navigable craft that you can navigate and move it in any direction you want to?
Mr. LONGAKER. Most of them are not. They are usually winched, pushed, or pulled. The one that brought this case before this committee is a self-propelled craft for the State of Alaska. It is driven by large turret tires with hydraulic motors for turning them. So it is navigable in that case on ice and on land with water wheel attachments in the water.
Mr. VANIK. It could go on ice and float on open water?
Mr. LONGAKER. Yes, sir, it is on the air cushion at all times when it is operating.
Mr. VANIK. I would assume it useful in the development of petroleum resources or mining?
Mr. LONGAKER. Extremely useful. They are looking at it with increasing interest every month, yes, sir.
cumbersome. The duty imposed does not provide an incentive to "buy American” because it is imposed at the end of the 7-10 years of the product's useful life and not at the beginning.
It is a very negligible percentage duty-4.4 percent-and this is already scheduled to be phased out over the next 6 years. Yet, this duty, as a nuisance, is a considerable burden to people who wish to buy these boxes that have been retired due to deteriorated physical condition.
It costs more to collect the duty, in my opinion, and for customs to inspect the boxes in detail than the revenue derived from the duty. And as far as the administration's comments on size are concerned, I have no objection to seeing that the bill is expanded to include all ocean freight containers.
Ninety-nine percent of them are the sort identified in the bill as originally drafted, and the expansion of the bill's terms to include all of the sizes indicated would be perfectly agreeable.
The administration of the tariff is unusually difficult. Some of the times the tariff is collected unfairly in recognition of the fact that the imported boxes are reexported. At other times the duty is not collected, even thought if should be under the existing law. We feel the best solution is to eliminate what is admittedly a nuisance tariff.
Mr. VANIK. Thank you very much. We may need some discussion as to the language and solve some problems there. Do you have any further comments?
Mr. Sikes. This is all I have, sir. Thank you very much.
Mr. VANIK. Do you have anything to add, Mr. Woolley? STATEMENT OF EDWARD A. WOOLLEY, ON BEHALF OF THE
CTI-CONTAINER TRANSPORT INTERNATIONAL, INC., ITEL CORP., TRANSAMERICA ICS, INC., TRANS OCEAN LEASING CORP., FLEXI-VAN CORP., AND XTRA, INC.
Mr. WOOLLEY. Yes, I do. Mr. Congressman, I am authorized to say that I also represent, in addition to the five companies listed in my prepared statement, Xtra, Inc., another major leasing company in the United States.
The main interest of these companies is in the administrative problem. Their main interest is that they are compelled to exercise efforts to track the containers and compel their customers to track the containers to prevent them from deviating from the restrictions of the customs regulations as instruments of international traffic. And it is primarily with that interest in mind that these six leasing companies support the bill.
I support what Mr. Sikes has said previously, but I do need to make clear the interest of these leasing companies. They have a fleet of approximately 850,000 20-foot equivalent units, and they do not pay duty on most of them because they are maintained under treaty and regulations as instruments of international traffic. So that the domestic industry is not really affected by this tariff.
I would like to say in response to the points that were made earlier by the administration, Mr. Chairman, that the reason the domestic industry's numbers are so low is not related to the tariff, because containers are not bought in large quantities from these manufacturers now. And looking at their figures, there was a value
of $75 milllion manufactured in 1979, Mr. Chairman, consisting of 9,145 units. If you do a little division, you come out with about $8,000 per unit.
That means that those containers were in some way specialized containers, presumably refrigerated containers or tank containers. And those are clearly not the volume of our problem.
The administration noted that that value manufactured was about $75 million. The interest of the leasing companies that I represent may be valued in terms of replacement value at $2 billion. I think there is a large interest, a large American interest here, that deserves consideration in considering this tariff.
Second, the administration was concerned that these containers might be used domestically. And it seems to me that we ought to keep in mind that if there was a serious threat that they would be used domestically, they would be used domestically now. People would domesticate the containers, pay the tariff, and use them now.
In addition, it should be noted that containers are quite different from trailers. Containers must meet a number of strength requirements that trailers do not have to meet. Containers need to meet the strength requirements of the marine mode, in particular. They need to have corner fittings which are heavy fittings which appear in each of the eight corners of the container so the container can be lifted from the top or attached from the bottom to each other.
They must have stacking capacity so each can bear approximately five on top of it, since they are stacked six high in the ship. They must bear the racking strains and stresses that a ship imposes from side to side and up and down and not just the stresses and strains that are natural in the land mode of forward and backward.
So there are a number of reasons why containers are not naturally suitable for domestic transport.
I think I should finally say that we also believe that there should be a slight amendment of the definition to include all cargo freight containers, including the 35's, 24's, 27's, and 30's, and those that might be 9 or 942 feet high.
[The prepared statement follows:]
STATEMENT OF EDWARD A. WOOLLEY My name is Edward A. Woolley, and I submit this statement, as special counsel, in support of H.R. 7660 to exempt freight containers from customs duty, on behalf of the following United States container leasing companies: CTI-Container Transport International, Inc.; ITEL Container Division; Transamerica ICS Inc.; Trans Ocean Leasing Corporation; Uni-Flex Division, Flexi-Van Corporation.
SUMMARY AND TOPICAL OUTLINE H.R. 7660 offers the opportunity to strike a blow for free trade, reduction of costs to the consumer, reduction of the federal budget, deregulation, and promotion of the United States container leasing and maritime industries all at once. It will do this by eliminating on enactment a tariff now being eliminated gradually over an eight year staging period by the GATT Treaty. This statement will describe the container industry, reductions in costs if the bill is passed, the lack of protective and revenue interests, and a requested amendment to the definition of container.
CONTAINER INDUSTRY Containerization is a relatively new industry, having become a serious factor in marine and intermodal transportation only at the end of the 1960s. Freight containers are essentially large boxes built to certain sizes so as to be interchangeable with