failures and defects of the House bill rendered the task of amending that bill impossible, and made the preparation of a comprehensive and consistent measure of relief and revision necessary. We submit this substitute to the judgment of the Senate, and invite for it full and careful scrutiny. The time which has elapsed since the House bill reached the Senate has been diligently employed by your committee in a careful investigation of the diverse and important questions involved in a general tariff revision, and in hearing such representatives of the vast number of interests affected by changes in the tariff schedules as could be heard in the limited time at their disposal.

Other interested parties are desirous of being heard, and it is the intention of the committee, with the approval of the Senate, to give such time to further hearings as shall be possible during the period the bill may be under discussion, with a view of eliciting the fullest information, in order that the provisions of the substitute, and of such amendments as shall be suggested, may be acted upon with the greatest degree of intelligence.

The committee estimate that the annual revenues would be reduced by the provisions of the substitute as follows: By the reduction of the duty on sugar, $27,759,783.95; by adding to the free list the forty-two items named in Appendix C, $6,428,095.56; by the abolition of the interual-revenue taxes on the production or sale of tobacco and the reduction of the tax on cigars, $24,371,460.98; and by the provisions which allow the use of alcohol in the industrial arts free from tax, $7,000,000, or a total reduction of $65,559,340.49.

An estimate has also been carefully prepared (Appendix B) of the effect which the other changes in the tariff schedules would have upon importations and the revenue. If this estimate should prove to be cor. rect, the total reduction in revenue effected by the substitute would be $73,668,994.30.

In order to obtain the necessary reduction of revenue, the committee have selected such duties or taxes for reduction or repeal as would, while effecting that object, secure the most beneficial results to the masses of our people, and would not disturb or injure any industry or pursuit entitled to protection.

The excessive duty of from 2 to 3 cents per pound now imposed upon sugar adds a considerable sum to the daily cost of living of every family in the United States, where in most cases the cost of sugar is greater than the cost of bread. The high rates of duty which have been levied upon this important article of food have not successfully developed the sugar-producing industry of the United States. The great natural advantages which the producers of cane sugars in the tropical islands have over those of the United States preclude domestic competition upon equal terms. If it were not for the fact that parties interested in the production of sugar from sorghum or beets are confident of the rapid development of these industries in the United States the committee

would recommend a still greater reduction in the rate of duty upon sugar, as the advantages of this reduction would be felt through a larger circle than any other which could be made in our tariff schedules.

The articles which are placed on the free list include jute, jute butts, sisal grass, manilla, and other crude materials, not produced in this country, whose free admission would benefit both the producers and consumers of manufactures from these materials.

The provisions of the substitute which allow the use of alcohol in the industrial arts free from taxation would prove of great benefit to a large number of important manufactures. Alcohol is used in the production of more than five hundred chemical and pharmaceutical preparations and in many of the mechanical and industrial arts, and its use in all these directions would be largely extended if the onerous tax should be abolished. The heavy tax upon alcohol unnecessarily increases the price of many manufactured products, with no corresponding benefit except the resulting revenue, which is now unnecessary.

Your committee have considered numerous suggestions for the repeal of all internal-revenue taxes and the abolition of the entire internalrevenue system, but they deem the adoption of this course at present both impracticable and unwise, not only because the repeal of these taxes would create a large annual deficit, but for the further reason that the taxes levied on distilled spirits used as a beverage and on beer should be retained, and the legislation to protect American dairy products from fraudulent imitations should be enforced.

The proposition for a repeal of all internal-revenue taxes on tobacco is presented in compliance with a universal demand.

The provisions of the carefully prepared bill to prevent undervalua tions, heretofore reported from the Committee on Finance and adopted by the Senate, are incorporated in the substitute.

We have inserted a provision intended to prevent the importation of all articles of foreign manufacture when marked or labeled in such a manner as to represent that they were manufactured in the United States.

Section 39 provides that upon the exportation of articles manufact ured from dutiable imported materials the entire sum paid for duties on such materials shall be repaid in the form of a drawback.

In the revision of the dutiable schedules and the free list submitted constant effort has been made to correct the inequalities and to eliminate the ambiguities of the existing tariff, and careful attention has been given to the recommendations of the executive officers and to the statements of merchants, manufacturers, and workmen whose business has suffered from admitted defects.

In pursuance of our general plan to lessen the evils of undervaluation; to secure more certainty, uniformity, and equality in the collection of duties as well as economy in administration, specific or com. pound rates have been substituted for ad valorem rates wherever prac

ticable, or when the necessary data could be obtained. Whenever changes of this character have been made they have been adjusted upon information obtained from customs experts or from other reliable

sources.

It will be observed that all of the tariff schedules have been thoroughly revised, re-arranged, and greatly simplified. They have been divided into paragraphs and numbered consecutively, in order that, in the future, amendments may be made to a single paragraph or schedule without a general re-enactment of all the schedules, as is now necessary to prevent confusion. The number of paragraphs has been reduced from 495 in the tariff of 1883 to 440 in the substitute submitted.

To secure the proper relation between the rates imposed upon the numerous articles produced in our related and interdependent indus. tries is the most difficult problem of tariff adjustment. The committee have endeavored, in the revision of rates proposed, to accomplish this necessary equalization. Reductions have been made whenever they have seemed desirable, and we have increased rates whenever it seemed necessary to preserve the workingmen engaged in any American industry requiring protection from ruinous or unequal competition.

The present anomalous and inadequate duties on tin and terne plates have received the attention of your committee, who believe that such a readjustment of these rates should be made as would encourage the manufacture of these articles in this country. We have not, however, up to this time been able to obtain the definite information upon which to base a recommendation for an increase of rates upon the gauges which could now or might in the near future be produced in this country if protection were afforded; but as soon as the requisite information can be obtained we shall offer an amendment for this purpose. We also, if found necessary after further examination, reserve the privilege of suggesting amendments to other paragraphs.

In all the numerous changes suggested your committee have had constantly in view the preparation of a consistent measure whose beneficent influences would be felt in every section and by every class of our people, which would give greater diversity to our industries, and by strengthening and invigorating the American system of protection secure the harmonious development and prosperity of agriculture, manufactures, and commerce.

The differences between the House bill and the substitute reported by your committee are fundamental. The House bill has been formulated on the theory that a diminution of revenues can only be secured by a reduction or repeal of protective duties, and that tariff revision means simply that indiscriminate cutting down of rates which encourages importations, benefits foreign manufacturers, and produces free trade.

The substitute proposes to reduce revenues and at the same time to preserve the American system. It is based upon the idea that tariff S. Rep. 2332-4

revision implies an equitable readjustment of duties in the interest and for the benefit of the people of the United States, and in the distribution of rates its framers have not hesitated to erect or to maintain defensive barriers which would carry confidence and comfort into American homes.

The committee express regret that through severe illness they have been deprived of the mature judgment and counsel of the chairman of the Finance Committee, Justin S. Morrill, of Vermont, the author of the tariff bill of 1862, which formed the basis of our present protective system.

APPENDICES.

APPENDIX A.

SPECIFIC DUTIES.

In 1795 Secretary Hamilton reports to the House of Representatives that, by existing laws, about one-third of the duties was derived from articles rated ad valorem, and adds:

"In other nations, where this branch of revenue, as with us, is of principal or very considerable consequence, and where no peculiarity of situation has tended to keep the duty low, experience has led to contract more and more the number of articles rated ad valorem, and, of course, to extend the number of those rated specifically, that is, according to weight, measure, or other rules of quantity. The reason of this is obvious; it is to guard against evasions, which infallibly happens in a greater or less degree when duties are high. It is needless to repeat that this will

contribute as much to the interest of the fair trader as to that of the revenue.

"It is believed that in our system the method of rating ad valorem could, with convenience, be brought within a much narrower compass, and it is evident that to do so will contribute materially to the security of the revenue." (American State Papers, Finance, vol. 1, p. 348.)

Secretary Gallatin, reporting to the Senate in 1801, said:

"In order to guard as far as possible against the value of goods being underrated in the invoices, it would be eligible to lay specific duties on all such articles now paying duties ad valorem as may be susceptible of that alteration." (American State Papers, Finance, vol. 1, p. 702.)

Secretary Dallas, reporting to the House of Representatives in 1816, says:

"Articles imported to a great amount should rather be charged with specific duties upon their weight and measure, in order to guard against evasions and frauds, than with ad valorem duties on their value." (American State Papers, Finance, vol. 3, p. 91.)

Secretary Crawford, in 1817, in the report concerning revision of the revenue laws already referred to, calls attention to the subject of frauds, particularly in the importation of articles upon consignment paying ad valorem duties, and recommends a series of remedial provisions, which are mainly applicable to importations subjected to ad valorem duty, to which he adds:

"Whatever may be the reliance which ought to be placed in the efficacy of the foregoing provisions, it is certainly prudent to diminish as far as practicable the list of articles paying ad valorem duties," and submits a list of one hundred and twenty-four enumerations to be transferred to the class of specifics. In 1819 he submitted a further list. (American State papers, Finance, vol. 3, pp. 236, 415.) Secretary Meredith, in his Report of December 3, 1849, says:

"I propose a return to the system of specific duties on articles on which they can be conveniently laid. The effects of the present ad valorem system are twofold, viz, on the revenue and on our own productions. Experience has, I think, demonstrated that, looking exclusively to the revenue, a specific duty is more easily assessed, more favorable to commerce, more equal, and less exposed to frauds than any other system. Of course such a duty is not laid without reference to the average cost of the commodity. This system obviates the difficulties and controversies which attend an appraisement of the foreign market value of each invoice, and it imposes an equal duty on equal quantities of the same commodity. Under the ad valorem system goods of the same kind and quality, and between which there can not be a difference in value in the same market at any given time, nevertheless may often pay different amounts of duty. Thus the hazards of trade are unnecessarily increased."