PARAGRAPH 536-COAL-TAR PRODUCTS. PARAGRAPH 524. Bullion, gold or silver. PARAGRAPH 525. Burgundy pitch. PARAGRAPH 526. Cadmium. PARAGRAPH 527. Camphor, crude, natural. PARAGRAPH 528. Castor or castoreum. PARAGRAPH 529. Catgut, whip gut, or worm gut, unmanufactured. PARAGRAPH 530. Cerium, cerite, or cerium ore. PARAGRAPH 531. Chalk, crude, not ground, bolted, precipitated, or otherwise manufactured. PARAGRAPH 532. Chromate of iron or chromic ore. PARAGRAPH 533. PARAGRAPH 534. Clay: Common blue clay and Gross-Almerode glass-pot clay, in cases or casks suitable for the manufacture of crucibles and glass melting pots or tank blocks. PARAGRAPH 535. Coal, anthracite, and coal stores of American vessels, but none shall be unloaded. PARAGRAPH 536. Coal tar, crude, pitch of coal tar, and products of coal tar, known as dead or creosote oil, benzol, toluol, naphthalin, xylol, phenol, cresol, toluidine, xylidin, cumidin, binitrotoluol, binitrobenzol, benzidin, tolidin, dianisidin, naphtol, naphtylamin, diphenylamin, benzaldehyde, benzyl chloride, resorcin, nitro-benzol, and nitro-toluol, naphtylamin sulfoacids and their sodium or potassium salts, naphtolsulfoacids and their sodium or potassium salts, amidonaphtolsulfoacids and their sodium or potassium salts, amidosalicylic acid, binitrochlorbenzol, diamidostilbendisulfoacid, metanilic acid, paranitranilin, dimethylanilin; all the foregoing not medicinal and not colors or dyes. COAL-TAR PRODUCTS. TESTIMONY OF J. F. SCHOELLKOPF, REPRESENTING SCHOELLKOPF, HARTFORT & HANNA CO.; HELLER & MERZ CO.; CENTRAL DYESTUFF CHEMICAL CO. The witness was duly sworn by the chairman. Mr. SCHOELLKOPF. Mr. Chairman, before reading the brief I have prepared on the free list I would like to call your attention again to the highly competitive nature of our industry. Last year there were 85 per cent of the consumption of coal-tar dyes imported; and I am afraid that if an attempt is made to make that industry more competitive by either decreasing the rate or putting the raw materials on the dutiable list it will soon result very disastrously to us. If you are going to do that or reduce the duty on the finished colors we are liable to have no competition at all, for the reason that the PARAGRAPH 536-COAL-TAR PRODUCTS. industry could not stand it. It is pretty close to the cushion now and couldn't stand much more competition from abroad. Another thing: From a purely revenue standpoint, by reducing the duty on colors you are bound to lose 5 per cent, as proposed in the last bill. The CHAIRMAN. How many manufacturers are engaged in this business in this country now? Mr. SCHOELLKOPF. Three-four. The CHAIRMAN. Hasn't a large manufacturer formed a combination, or hasn't there been a purchase of plants by some of them recently? Mr. SCHOELLKOPF. No, sir; not that I know of. Mr. DIXON. What is the total production of this in the United States? Mr. SCHOELLKOPF. Why, the total domestic production is less than a million and a half. Mr. DIXON. How much is imported? Mr. SCHOELLKOPF. Nearly $8,000,000, by adding a 30 per cent duty to the import value. As I was saying, the revenue you would lose by reducing the duty on the colors 5 per cent is bound to be $300,000 on last year's imports; and even if the imports should increase $1,000,000, then the revenue would be less than under the present duty by $50,000. But of course if importations increased $1,000,000 that would practically wipe out the American manufacturers. Mr. HARRISON. But you have perhaps realized that the chief reason of the reduction proposed is because they are used by textile manufacturers, and other bills have passed the House greatly reducing the duty for the textile men. So that it is not proposed for the sake of revenue, but for the sake of the consumer. Mr. SCHOELLKOPF. Well, I don't see, Mr. Harrison, how the consumer is going to be benefited by a reduction of 5 per cent. It won't be $300,000. Now, if you distribute that over all the consumers, it is merely infinitesimal, as it Mr. HARRISON. Well, now, just let me interrupt you one moment, Mr. Schoellkopf. The greater portion of our consumption of these products in this country is imported, is it not? Mr. SCHOELLKOPF. Yes, sir. Mr. HARRISON. So that there is no question as to who pays the tax; there can be no question can there? If three-fourths of it is imported, the impost duty is considerable, is it not? Mr. SCHOELLKOPF. It would seem so. Mr. HARRISON. Well, as to the three-fourths that are imported, they have to pay the customs duty, don't they? Mr. SCHOELLKOPF. Yes, sir. Mr. HARRISON. Well, as to the three-fourths, does the duty raise the price? Mr. SCHOELLKOPF. Well, now, a reduction of 5 per cent would affect three-fourths of the stuff consumed in the United States. We would save $300,000 after the Mr. HARRISON. We proposed this as a matter of economy to the consumer and not for the purpose of raising revenue. Mr. SCHOELLKOPF. I would say that $300,000 distributed over the consumers, whether manufacturers or ultimate consumers, is not going to make any difference in the cost of the industry. That is one PARAGRAPH 536-COAL-TAR PRODUCTS. phase of it, but it is not all, because we have a case like alizarin, which was selling at 11 cents a pound when paying a duty, now 22 cents a pound, and they let it come in free. The CHAIRMAN. Well, isn't it a fact that in the matter of alizarin there were two factories or plants making alizarin in this country and one sold out to the other, so that there is only one now? Mr. SCHOELLKOPF. No; so far as I know, alizarin was never made in this country. The CHAIRMAN. Isn't it manufactured here now? Mr. SCHOELLKOPF. No, sir; I think not. Alizarin and the alizarin colors are controlled by two or three large manufacturers on the other side. Mr. HARRISON. I beg your pardon, but you are not now talking about the same articles. The articles which you first mentioned are protected by a 30 per cent duty. Alizarin and anthracene are on the free list. Mr. SCHOELLKOPF. Yes; I think anthracene colors are on the free list. Mr. HARRISON. Yes; they were specifically excepted and put upon the free list Mr. SCHOELLKOPF. It is a matter of experience. The fact that you reduce the duty on these colors does not make them any cheaper to the consumer. In these particular cases they went up in price. In other words, I think the competition that we are giving them here has a great deal to do with the cheap prices that these colors are selling at. Mr. HARRISON. Had alizarin and indigoes ever been manufactured synthetically in the United States? Mr. SCHOELLKOPF. No; because they were always on the free list, and they would cost less to manufacture in other countries. It shows the power of competition. Under an absolutely open market we never could do away with competition. While they were in competition among themselves, the Government took the duty off, but instead of benefiting the American consumer we see it was otherwise. Mr. HARRISON. The foreigners combined among themselves? Mr. SCHOELLKOPF. Yes. In other words, if you reduce the duty now and eliminate American competition, then the chances are that they would get together and put the price up. The CHAIRMAN. A trust, would it be? Mr. SCHOELLKOPF. That is what it would amount to. But as to the ultimate consumer, you realize, I think, Mr. Harrison, that he will not benefit. Mr. HARRISON. I didn't admit that at all. It would be a benefit very greatly to be able to buy textile cloths cheaper, and if we do that in justice to the textile manufacturer we ought to reduce pro tanto the goods that the textile manufacturer concerned buys, and we know he buys. Mr. SCHOELLKOPF. I do not agree with you. I don't think it is going to make any difference to the United States, as far as the ultimate consumer is concerned. It would make a difference of $50,000, and he could not distribute Mr. HARRISON. Mr. Schoellkopf, that is the argument every manufacturer who has come before us has made, and at the same time the PARAGRAPH 536-COAL-TAR PRODUCTS. sum total of all these comparatively small reductions will amount to a very considerable sum. Mr. SCHOELLKOPF. I desire to proceed with the reading of this brief if I may. (Reads brief.) Mr. HARRISON. Suppose it is decided that we have enough revenue in this bill and leave these products on the free list, would you then think you could stand a reduction to 25 per cent ad valorem? Mr. SCHOELLKOPF. You can judge as to that as well as I can. Mr. SCHOELLKOPF. I don't believe we would go out of business. It would simply reduce our profits to that extent, and our profits are small enough. We are making now less than 5 per cent on our investment, and if we have got to sell our colors 5 per cent cheaper it would practically wipe out all our profits. We are making 5 per cent, and they are making 50 on the other side. As to this matter of patents, I know of a number of cases where the patent had expired on the other side and it was still in effect on this side, and the manufactured goods sold on this side at 10 times es much, and still the import duty was paid on the foreign valuation. It doesn't mean anything to us if they are patented, but it doesn't seem fair that the American consumer should pay 10 times the price the foreigner pays and the American Government collect duty only on the foreign valuation. And this other section 11 of the act, which provides for an addition of not less than 8 per cent and not more than 50 per cent on the total cost as thus ascertained: It seems to me that when an importer refuses to give a price at which an article is sold on the other side and leaves it to the inspector or appraiser to ascertain the cost where his only reason can be that his selling price on the other side is higher than he wants to pay duty on, and he figures that by leaving the inspector to ascertain the cost and then making an addition to that, he will be better off than by giving a selling price in the first place. Very often it happens that they have, for instance, conventions on the other side on certain things, and in the case of certain articles they are selling a product on the other side, say, for $1 a pound, and in America there is no convention, and under the open market the consumer will pay for it perhaps 30 cents a pound. Well, the real selling price on the other side may be $1, but they will import it at 22 cents a pound, only 22 cents a pound. Mr. HILL. I think there is now one provision in the administrative portion of the bill of 1909, that under certain conditions where it is impossible to ascertain clearly the foreign market price, the domestic price may be taken as a basis. Personally I was in favor of extending that to all of them and making the duty apply to the domestic price. Is that your idea-is that your suggestion now? Mr. SCHOELLKOPF. Why, no. Mr. HILL. If so, the rates would have been decreased proportionately; but in the administration of the law, which in your judgment would be fairer to all parties in this country-to have a lower percentage on a uniform American valuation, or to take a varying valuation in various countries as a basis? PARAGRAPH 536-COAL-TAR PRODUCTS. Mr. SCHOELLKOPF. That would depend on the article itself. Some articles are sold lower in Germany than in America. Other articles, again, are under combination on the other side and sell at a very much higher price than here in the United States; and of course on those articles, if the law says they shall pay the duty on the foreign valuation, then they will have to pay it on the price at which the product is sold on the other side. Mr. HILL. Yes; but a great many come by consignment and it is difficult to tell. Mr. SCHOELLKOPF. You will know if the importers Mr. HILL. Suppose an article is manufactured over there and comes over here by consignment, how are you to know? Mr. SCHOELLKOPF. It doesn't depend upon that for it. Mr. HILL. Why, yes; a great many articles are manufactured for the American market only. Mr. SCHOELLKOPF. Well, then, in that case it is just in line with the suggestion I make here that after ascertaining the cost under section 11 a minimum addition of 50 per cent and a maximum of 100 per centum be made. Mr. HILL. Well, that would be practically applying the duty to the American value. That would come one way to it; it would not necessarily be absolutely correct. In your judgment, which would be the best plan, to apply the duty all the way through to an article, the value to be fixed daily by the customhouse, or the other way? Mr. SCHOELLKOPF. Well, I should say on articles that are not patented in America use the foreign price, but on products which are patented use our price. Mr. HILL. What difference does it make what you apply it to? Mr. SCHOELLKOPF. I just want to reverse that, and to say on products which are not patented in America use the price here, and on those which are patented here to apply the foreign price. The CHAIRMAN. Are you through, Mr. Schoellkopf ? Mr. SCHOELLKOPF. Yes, sir. BUFFALO, N. Y., January 27, 1913. Hon. OSCAR W. UNDERWOOD, Chairman Ways and Means Committee, Washington, D. C. DEAR SIR: I desire to protest against the transferring of the coal-tar products now on the free list and covered by paragraphs 482, 536, 491, and 639 of the Payne bill to the dutiable list, as contemplated by H. R. 20182, paragraphs 1, 23, and 24. These products enter very largely into the manufacture of our coal-tar colors, and we have shown in our briefs submitted to you under date of January 6 and 23 that even with products on the free list and a duty of 30 per cent on the coal-tar colors we are barely able to hold our own against our foreign competitors. We believe it is not contended that the proposed duties are levied for the purpose of protection and to stimulate the manufacture of these products in America. The revenue under any conditions, however, would not be large, and if the American manufacturers of coal-tar colors should be obliged to curtail their consumption of these taxed products the income from this source would be trifling. Under present conditions it is obviously impossible for us to stand an increase in the cost of our raw materials, as in that case the duty on coal-tar colors should be increased to at least 35 per cent rather than be reduced to 25 per cent, as contemplated under paragraph 21 of H. R. 20182. Section 28 of the tariff act of 1909 refers to an act entitled "An act to simplify the laws in relation to the collection of the revenues." |