[Congressional Record Volume 142, Number 85 (Tuesday, June 11, 1996)]
[Extensions of Remarks]
[Pages E1049-E1050]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




         INTRODUCTION OF LEGISLATION REGARDING PRECIOUS METALS

                                 ______


                       HON. BARBARA F. VUCANOVICH

                               of nevada

                    in the house of representatives

                         Tuesday, June 11, 1996

  Mrs. VUCANOVICH. Mr. Speaker, along with my colleagues, 
Representative John Ensign and Representative Jimmy Hayes, I am 
introducing today legislation that will broaden investor options for 
individually directed retirement accounts and other self-directed 
accounts in qualified retirement plans, and ensure that the continued 
importation of minted gold and silver bullion will remain duty-free. 
This legislation will have no revenue impact.
  Precious metals have been used for savings and investments since the 
dawn of civilization. Millions of Americans invest in precious metals 
today. They recognize that precious metals are an excellent way to 
diversify a portfolio and to provide a hedge against inflation and 
financial uncertainty. Similarly, investors have long recognized the 
value of investing in legal tender coinage. Such coins are seen by many 
investors to be an important compliment to a total precious metals 
portfolio. Precious metals and legal tender coinage can bring a balance 
to other portfolio assets like stocks, bonds, and mutual funds, 
reducing the volatility caused by fluctuations in the securities 
markets.
  Today, investors in individually directed retirement accounts may 
invest in a wide selection of precious metals mining stocks and mutual 
funds, yet they are unnecessarily restricted in their choice of 
physical precious

[[Page E1050]]

metals investments. Current law limits the precious metals choices for 
investors in these retirement accounts to gold and silver American 
Eagle bullion coins, minted by the U.S. Mint. While American Eagles are 
convenient for small transactions, they have a high premium relative to 
bullion bars, making them less attractive for investors choosing to 
invest larger amounts in precious metals.
  Current law also permits legal tender coinage to be included in 
defined contribution pension and profit-sharing plans, but not 
individually directed retirement accounts and other self-directed 
retirement plans. Removing current restriction would allow small 
investors, many whose total investment programs consist of the IRA's, 
to select from the same menu of investment options currently available 
to other investors.
  The legislation my colleagues and I are introducing today will amend 
section 408(m) of the Internal Revenue Code and expand the qualified 
precious metals investments for individually directed retirement 
accounts to include gold, silver, platinum, and palladium bullion 
products in bar or coin form, and legal tender coinage. This will 
permit American investors a wider range of investment options for their 
individually directed retirement accounts, and other self-directed 
accounts in qualified retirement plans, while having no revenue impact 
for the Federal Government.
  This bill also will correct an unintentional drafting error which 
occurred with the conversion, in 1989, of the tariff schedules of the 
United States [TSUS] into the harmonized tariff schedule of the United 
States [HTS] and will allow the importation of gold and silver bullion 
to continue duty-free. This measure will amend subchapter II of chapter 
71 of the HTS and correct the definition of gold and silver bullion 
bars which are both cast and minted.
  For more than a century, gold and silver bars imported into the 
United States have been classified under the duty-free tariff 
provisions covering gold and silver bullion and more. Until the 1970's, 
bars were universally produced by the casting method, whereby molten 
metal is poured into a mold where it hardens into a bar. Technological 
advancements some 20 years ago permitted bullion bars to be minted 
rather than cast. Minted bars are stamped out of flat strips of rolled 
gold or silver to the required dimensions. In the case of smaller 
quantities of metal, minting bars is more efficient, precise, and cost-
effective. This new production method had no effect on the product. 
Whether cast or minted, the bars are at least 99.5 percent pure gold or 
silver, and both are recognized internationally as bullion products of 
similar quality and purity.
  Our bill would correct an unintentional drafting error which occurred 
in the conversion of the TSUS to the HTS. In 1989, the United States 
adopted the HTS, replacing the TSUS. In the conversion, the drafters of 
the HTS, through an oversight, made the provisions for gold and silver 
bullion a subcategory of the provisions for unwrought forms of gold and 
silver. In the HTS, the definition of the term ``unwrought'' excludes 
articles that are produced using a rolling process. The drafters failed 
to take into account that in order to mint the bars, the gold and 
silver must first be rolled into a flat strip, which, according to the 
U.S. Customs Service, removed the bars from the unwrought category. 
However, minted bullion bars continued to be imported duty-free for the 
next 4 years.
  In 1993, the Customs Service sought to classify minted gold and 
silver bars under the provisions for other articles of gold and silver, 
in HTS heading 7115 at a duty of 7.8 percent and 5.4 percent, 
respectively. By 1994, the proposal had caused a major stir in the 
international precious metals market until it was held in abeyance by 
the Department of the Treasury, an action still in effect.
  This measure would remedy the drafting error in the HTS by affirming 
the longstanding duty-free provisions for semimanufactured gold and 
silver and for other articles of gold and silver. The bill before us 
will properly retain the duty-free treatment accorded to the 
importation of gold and silver bullion bars for over 100 years.
  Because gold and silver bullion bars, whether cast or minted, 
regardless of size, have always been duty-free, enactment of the 
proposed corrective provisions in this measure would simply retain that 
status, and would not deprive the Treasury of revenue. Consequently, 
this change in the HTS will have no revenue impact.
  I urge my colleagues to work with Congressman Hayes, Congressman 
Ensign, and myself to enact this bill to restore fairness for those 
with individually directed retirement accounts and to correct an 
unintended drafting error in the HTS.

                          ____________________