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affected. Specific duties in very many cases are or become actually prohibitive without the fact becoming known or suspected by the consumers of competing domestic goods or the general public. The same is true of compound duties, which are specific duties in combination with ad valorem rates on the same articles, and compound duties are essentially as unfair and unjust as are specific duties. The present Schedule K abounds in compound and complicated duties which conceal enormous protection, invariably bearing more heavily on the cheaper goods. For example, on woolen and worsted cloths valued at not more than 40 cents per pound the present rate of duty is “ three times the duty imposed by this section on 1 pound of unwashed wool of the first class” (namely, 3 times 11 cents, or 33 cents) and, in addition, 50 per cent ad valorem.
On the same cloths valued at more than 70 cents per pound (the most expensive class in the present tariff arrangement of duties), the rate of duty is " four times the duty imposed by this section on 1 pound of unwashed wool of the first class" (namely, four times 11 cents, or 44 cents) and in addition, 55 per cent ad valorem. From a surface view it would seem that the more expensive goods are taxed at a higher rate than the cheaper goods, but it is impossible to tell the proportion of the tax to the actual value of the goods. However, by examining the record of imports for the fiscal year 1910, it is noted that the tax on the more expensive goods was equivalent to 96 per cent ad valorem, averaged for the year, while on the cheaper goods the tax was equivalent to 144 per cent ad valorem, similarly averaged. It is also noted that of the cheaper goods, the average value of which was 35 cents per pound, imports came in to the amount of only 6,016 pounds, yielding $2,111 in duties, while of the more expensive goods, the average value of which was $1.07 per pound, imports came in to the amount of 5,433,182 pounds, yielding $5,827,777 in duties. Evidently the enormous protection on the cheaper goods, which is practically the prohibition of imports, can pass unnoticed, while the open application of such a rate as 144 per cent ad valorem would expose the purpose and the situation, and would not be tolerated. In the case of these cheaper cloths the practical prohibition of imports is a serious hardship to the masses of our people of moderate means, who urgently need cheap, but good, woolen clothing.
Of course, rates of duty which are so extremely high as to almost or practically prohibit imports, cut off revenue from the Treasury, and serve only to farm out the public to the extortion of private interests. And all tariff duties, to the extent to which they go higher than the points at which competitive imports are not seriously restrained, necessarily approach closer and closer to the points at which imports are prohibited, and the duties become more damaging and destructive to the welfare of the Treasury and that of the people as the rates approach the prohibitive points. Specific and compound duties, especially those on manufactured goods, have, in many cases and circumstances, an automatic tendency to increase toward the prohibitive points, entirely apart from the matter of design and manipulation. When producing or manufacturing
. processes improve and the cost of production grows less, the specific duty, remaining the same, becomes in effect more protective and more burdensome. All the benefits of declining prices, from whatever cause, are to a great extent nullified within the range of the effect of specific or compound duties, which, unlike ad valorem rates, can not adjust themselves to changing conditions.
While the justice, fairness, and economic advantages of the ad valorem method are universally admitted, it is often maintained that it involves greater administrative difficulties than the use of specific duties and greater risk of loss to the Treasury through fraud. Even if this were true, the greater convenience of the Treasury could not justify the maintenance of unfair burdens on the people and undemocratic and demoralizing discriminations. But all experience has shown that an efficient customs service can collect proper ad valorem duties without more difficulty and fraud than are encountered under specific duties, and probably with less. In all recent tariff laws, notwithstanding the many specific duties, the ad valorem duties largely predominate. The specific duties are an incident and not a characteristic of our tariff laws. It would be impossible to have specific duties in most cases, as the injustice would be overwhelming. In Schedule K of the present law there are no purely specific duties except those on unmanufactured wools and on wastes. In the troublesome compound duties which predominate on manufactures of wool in the schedule as now in force, the specific parts of the duties are to compensate for the specific duties on the raw wools such as enter into the manufactures. By the force of circumstances, where these partly specific duties are used, each kind of commodity must be arbitrarily divided into various grades or classes, according to value or size, or both. For example, in the schedule now in force, blankets, if not more than 3 yards in length, are taxed at one set of rates, and if more than 3 yards in length are taxed at another set of rates; and each of these divisions according to size is subdivided into three divisions according to value, (1) those valued at not more than 40 cents per pound; (2) those valued at more than 40 and not more than 50 cents per pound (or at more than 40 and not more than 70 cents in the case of blankets more than 3 yards in length); and (3) those valued at more than 50 cents per pound, if not more than 3 yards in length, and at more than 70 cents per pound if more than 3 yards in length. Compound and complex duties of this sort are clumsy and cumbersome compromises between the ad valorem and specific methods, cover a multitude of private jobs and special favors, and offer extraordinary temptation to undervaluations.
Specific duties do not by any means prevent frauds on the Treasury, as is shown in the enormous frauds recently perpetrated by the Sugar Trust through the juggling of weights. The only administrative difficulty with ad valorem duties is in the risk of undervaluations. Importers do not incur the danger involved in undervaluations unless there is prospect of great gains from comparatively slight changes. When a duty is assessed on a commodity of a certain value much larger in proportion than when the value is a few cents less per pound or yard, the temptation is in many cases irresistible to have the lower value accepted for the sake of enjoying the much lower tax burden. For example, in Schedule K of the present act, yarns, valued at not more than 30 cents per pound, are taxed at 271 cents per pound and, in addition, 35 per cent ad valorem, so that the total duty amounts to 38 cents per pound, or 126.6 per cent of the tax is 38.5 cents per pound and in addition, 40 per cent ad valorem, so that the total duty amounts to 50.6 cents per pound, or 163 per cent of the value. Hence a change in the valuation of 1 cent per pound reduces the burden of the duty by 37 per cent. The substitution, in the bill herewith reported, of straight ad valorem duties on articles of one kind or sort, instead of the present rates increasing as arbitrary dividing lines of value are crossed, will remove the extraordinary temptations to undervaluations which now prevail, and make the task of the customs service easier, as far as the scope of this bill goes. Moreover, the substantial reductions provided for in this bill, from all the existing extremely high rates, will much further diminish the incentive to undervaluations, as reductions of duty always do. And the steadily increasing knowledge of trade conditions and values by our customs and other public officials, and their experience in passing on values, all constantly tend to make undervaluations more difficult and rare. At the present time, in the administration of the customs service, values are more closely studied than ever before, and by means of a number of tried and effective tests practically all invoice values are scrutinized and proved.
Almost continuously from the time of their enactment in 1897 to the present day, the duties on raw wools in Schedule K of the existing tariff have been denounced and attacked by manufacturers and consumers alike as far too burdensome, unfairly arranged, and destructive to a number of important manufacturing interests; while they provide unreasonable profits and monopolistic opportunities for other manufacturers who were made and intended to be made the beneficiaries of very special favor. Through public protests from a number of woolgrowers, the Carded Woolen Manufacturers' Association, tailors, various associations of clothing manufacturers, and a large part of the general public, the iniquities of these duties have become fairly well understood. The duties are defended only by the combination of woolgrowers and wool manufacturers for whose greater profit they were enacted, and, as has been stated above, even the President, who signed and praised the act of 1909, now repudiates the wool duties and the entire wool schedule.
The act of 1909 made no change whatever in the act of 1897 as to classifications, duties, and provisions covering raw or unmanufactured wools. The unmanufactured wools are now provided for in paragraphs 360 to 371, both inclusive, of the act of 1909 (paragraphs 348 to 360, both inclusive, of the act of 1897). In this prevailing scheme of duties the raw wools are divided for tariff purposes into three classes.
Class 1, generally known as carding or clothing wools, are described as merino, mestiza, metz, or metis wools, or other wools of merino blood, immediate or remote. Down clothing wools, and wools of like character with any of the preceding, including Bagdad wool, China lamb's wool, Castel Branco, Adrianople skin wool or butcher's wool, and such as have been heretofore usually imported into the United States from Buenos Aires, New Zealand, Australiii, Cape of Good Hope, Russia, Great Britain, Canada, Egypt, Morocco, and elsewhere, and all wools not hereinafter included in classes two and three.
These are fine wools, short in fiber, and are used for carding and spinning into woolen yarn. They consist principally of wools from sheep of merino blood, and are imported mainly from Australia and Argentina. These wools of class î are now dutiable at 11 cents per pound when unwashed, which means “shorn from the sheep without any cleansing"; that is, in their natural condition and when not on the skin.” If washed, these wools are taxed “twice the amount of the duty to which they would be subjected if imported unwashed," which means 22 cents per pound when not on the skin. When the wool is on the skin the duty is 1 cent less per pound than it would be if the same wool were not on the skin. If these wools of class 1 are scoured the duty is “three times the duty to which they would be subjected if imported unwashed,” which means 33 cents per pound. Washed wools are considered only “such as have been washed with water only on the sheep's back, or on the skin.” If washed in any other manner they are considered and taxed as scoured wool.
Class 2, generally known as combing wools, are described asLeicester, Cotswold. Lincolnshire, Down combing wools, Canada long wools, or other like combing wools of English blood, and usually known by the terms herein used, and also hair of the camel, Angora goat, alpaca, and other like animals.
These are long-fibered combing wools; that is, wools which are used for combing and spinning into worsted yarns. They come principally from the English breeds of long-haired sheep, such as the Cotswold, Lincolnshire, Romney Marsh, and Leicesters. The quantity of class 2 wools imported is much smaller than the quantities of classes 1 and 3, and they come principally from the United Kingdom. These wools of class 2 are now dutiable at 12 cents per pound, either washed or unwashed, when not on the skin, or at 11 cents per pound when on the skin. If scoured, class 2 wools are taxed three times the duty on unwashed wool, or 36 cents per pound. While class 1 wools when washed are taxed twice the amount of the duty on the unwashed—that is, 22 cents per pound in the fleece, or not on the skin-class 2 wools in the same condition are taxed no more than when unwashed—that is, 12 cents per pound not on the skin or 11 cents if on the skin. The great bulk of the importations of raw wools of all classes are not on the skin. The very special favor given to class 2 wools in permitting their importation when washed at no higher duty than when unwashed is for the particular benefit of the importers of class 2 wools, who are principally the manufacturers using these wools, which shrink the least in washing and scouring.
Class 3, coarse wools used only for carpets, are described asDonskoi, native South American, Cordova, Valparaiso, native Smyrna, Russian camel's hair, and all such wools of like character as have heretofore been usually imported into the United States from Turkey, Greece, Syria, and elsewhere, excepting improved wools hereinafter provided for.
Carpet wools are not produced to any extent in the United States, and form a large part of our wool imports. They are brought mainly from China, Russia, the United Kingdom, and Turkey. These class 3 wools are the coarsest and cheapest and do not enter into the manufacture of clothing except occasionally and to a very slight extent. These wools, in the present act, are divided into two subclasses according to value. Those valued at 12 cents or less per pound are dutiable at 4 cents per pound either washed or unwashed
dutiable at 7 cents per pound either washed or unwashed and not on the skin. As to both of these subclasses of class 3 wools, the above-mentioned rates are 1 cent per pound less if the wool is on the skin, or three times the amount if it is scoured.
There is also in the present act a special provision by which the duty is doubled on wools of class 1 and class 2," which shall be imported in any other than ordinary condition, or which has been sorted or increased in value by the rejection of any part of the original fleece,” except that this provision does not apply to "skirted wools as imported in 1890 and prior thereto." Skirted wools are those in which the coarsest and least valuable wool has been removed from the fleece. The meaning of the exception in this provision is that wools which were commercially “skirted” in or prior to 1890 are not doubly taxed as sorted wools under the general terms of the provision.
Imported wools are assigned to the classes above mentioned according to standard samples in the customhouses. It is also provided that whenever wools of class 3– shall have been improved by the admixture of Merino or English blood from their present character, as represented by the standard samples now or hereafter to be deposited in the principal customhouses of the United States, such improved wools shall be classified for duty either as class 1 or as class 2, as the case may be.
The object of this provision is to apply the higher duties to class 3 wools should they come in in such improved condition as to make them fit for use in the manufacture of clothing.
There is no sufficient reason for continuing the complicated and troublesome system of classification of raw wools, with the differentiations, qualifications, exceptions, and special provisions involved therein. This system is a great burden and annoyance to the customs service and adds to the expense of collecting duties on raw wools. It adds to the labors of the appraisers and causes constant friction, annoyance, and litigation in the admission of imports and collection of duties. This system was provided and elaborated as a part of the establishment of specific and high duties on wool. The division of the wools into three classes appears first in the act of 1867. Raw wools are of so many varieties and involve so many shades of difference in kind, quality, condition, and use that it is not possible to apply specific duties to them without a number of differentiations and special qualifications and provisions. It is plain that the existing complicated and vexatious arrangement of specific duties on wool can not be permitted to continue. Natural conditions prevent the just operation of the arrangement. Wools are not used at all in the absolutely raw or greasy state as clipped from the sheep and as they usually come to the market. In this state the wool is loaded down with animal grease, dried sweat, dirt, sand, and other foreign sub
It must be scoured and dried before passing to any stage ef manufacture. In the scouring and drying the wool shrinks, and this shrinkage varies greatly.
There is an almost endless variety of wools, according to the breed of the sheep and admixtures thereof, the countries and sections where the sheep are raised, and the conditions affecting the grazing and keeping. Almost every kind and variety of wool shrinks to a different degree in passing from the greasy to the scoured state, depending
98048-H. Rept. 45, 62-1—2*