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PARAGRAPH 559_CRUDE DRUGS, ETC.

PARAGRAPH 559.

Drugs, such as barks, beans, berries, balsams, buds, bulbs, bulbous roots, excrescences, fruits, flowers, dried fibers, dried insects, grains, gums, gum resin, herbs, leaves, lichens, mosses, nuts, nutgalls, roots, stems, spices, vegetables, seeds (aromatic, not garden seeds), seeds of morbid growth, weeds, and woods used expressly for dyeing or tanning; any of the foregoing which are natural and uncompounded drugs and not edible and not specially provided for in this section, and are in a crude state, not advanced in value or condition by any process or treatment whatever beyond that essential to the proper packing of the drugs and the prevention of decay or deterioration pending manufacture: Provided, That no article containing alcohol, or in the preparation of which alcohol is used, shall be admitted free of duty under this paragraph.

CRUDE DRUGS, ETC.

TESTIMONY OF W. J. SCHIEFFELIN, OF SCHIEFFELIN & CO.,

NEW YORK

The witness was duly sworn by the chairman.
Mr. HARRISON. You may proceed, Mr. Schieffelin.

Mr. SCHIEFFELIN. I have submitted a brief regarding crude drugs that are now on the free list, showing the number that were imported last

year and the values, and the small amount of revenue that would accrue if they were made dutiable, and our plea is that they are scarcely what could be called luxuries, hardly anything of these things people would buy if they could avoid them, and that enhancing their cost would be adding to the suffering of those who are sick.

Mr. Harrison. You do not believe that they are covered by the definition that has been used here by several gentlemen as articles of voluntary consumption.

Mr. SCHIEFFELIN. Scarcely.

Now, the suggestion has been made in a separate bill introduced last spring that preparations as well as surgical instruments used in hospital practice should have a reduced duty or be put on the free list. Of course, in the interest of the hospitals which are doing charitable work absolutely free, there is a strong argument in favor of that, and I believe those who are to ask that such things be put on the free list will appear before you to-day or to-morrow, and I simply want to urge that in the case of patented drugs that are more or less experimental, and that are not made in this country, and where the hospitals are regarded as educational and experimental institutions, such an exception might well be made. For instance, new drugs like “Salvarsan” ought surely to be gotten here at as low a price for trial as possible, but there is a very serious aspect in the suggestion to make this cover all the drugs used by the hospitals, because it might very well cause such inroads into the sales of those who make medicinal chemicals and plasters, the manufacturers on this side, that it would discourage and minimize the production to such an extent that if there came a time when for any reason, war or otherwise, we had to depend upon our own products, it would be a matter of serious public concern to be unable to produce a sufficient amount, and therefore, I would suggest that if any such provision be made, it be made to apply to those medicinal products not now manufactured in

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PARAGRAPH 559_CRUDE DRUGS, ETC.

this country; and we would be glad if the committee would get the opinion of those who are advocating this change when they come to appear before them.

Mr. Hill. Would not you strike out the word "now"'?
Mr. SCHIEFFELIN. How do you mean?

Mr. Hill. Haven't you made a suggestion "not manufactured in this country," so that the law would be continuous in effect?

Mr. SCHIEFFELIN. Certainly, I think that would be perfectly fair, and I think in the brief I have submitted the question of crude drugs is detailed. There is one point, it is very likely that the trouble and cost of collecting the duties would not leave a very large balance to be applied to revenue, and I think the total revenue that could be obtained will be in the neighborhood of a half million dollars, and I trust the committee will agree and decide that these are hardly subjects of added revenue. The witness at a later date filed the following documents:

New YORK, December 3, 1913. The COMMITTEE ON WAYS AND MEANS,

House of Representatives, Washington, D. C. GENTLEMEN: In behalf of the wholesale druggists of New York, and also of my own company, I have the honor to plead that crude drugs be kept upon the free list. The importations reported by the Bureau of Foreign and Domestic Commerce for the year ending June 30, 1912, as per annexed list, amounted to $4,041,590, made up of 36 different articles used in medicine. We urge that the revenue which might be secured by imposing duties upon these goods would be inconsiderable in comparison to the hardship which the enhanced price would inflict upon the sick and suffering. The time-honored policy of admitting free of duty crude medicinal substances, which are almost without exception not produced in this country, should not, in our opinion, be reversed. If a duty were imposed, it would doubtless have to be a specitic duty in each case, owing to the fluctuations in values.

While there is no doubt that it will be feasible to increase prices in order to meet such duty, it must not be forgotten that the cost of collection on such a wide variety of products will considerably reduce the net revenue obtained therefrom.

Respectfully submitted on behalf of the Metropolitan Drug Club, composed the wholesale druggists of New York, Schieffelin & Co., and drug trade section of the New York Board of Trade and Transportation.

Wm. Jay SCHIEFFELIN, President.

The importations of crude drugs on the free list for the year ending June 30, 1912, were valued at $4,041,590.93.

New YORK, December 28, 1912. Hon. O. W. UNDERWOOD, Chairman Committee on Ways and Means,

Washington, D. C. Dear Sir: Under Schedule A, we respectfully submit that crude drugs and medicinal chemicals, now on the free list, should be allowed to remain free of duty. The revenue obtained would not be large, and the enhanced price would have to be borne by those least able to pay it, namely, the sick.. For the reason we suggest that codliver oil should have a lower duty, and also olive oil, which, however, would come under the head of “Foods."

Under Schedule G, section 287, we urge the reduction or abolition of the duty on extract of meat, which is used for preparing bouillon, and the bulk of which is now, we believe, sold in the form of bouillon cubes.

During the year ending June 30, 1912, the Bureau of Foreign and Domestic Commerce reported that the amount collected as duty on extracts of meat amounted to, in round figures, about $57,000.

PARAGRAPH 559—CRUDE DRUGS, ETC.
We are certain that importations will be largely increased if the duty is reduced
or abolished.
Yours, very truly,

SCHIEFFELIN & Co.
Wm. Jay SCHIEFFELIN, President.

TESTIMONY OF DR. S. H. BAER, ST. LOUIS, MO., REPRESENTING

THE FLAVORING EXTRACT MANUFACTURING ASSOCIATION OF THE UNITED STATES.

The witness was duly sworn by the chairman.

Dr. BAER. I appear as the representative of the flavoring-extract manufacturers of the United States, who protest against the proposed duty of 50 cents per pound on vanilla beans. We come simply as representatives of the trade to present our views on this subject from the standpoint of the consumer and the manufacturer. We must look to the consumer for the use of our products, and as a result we are more solicitous of the consumer's interests than those of the merchants who handle our goods. It is the ultimate consumer who is the factor which keeps the wheels of industry in motion, and the consumer would have ultimately to pay for the additional duty. Your attention is called to four ways in which the proposed duty will affect the people as a whole. First, it will raise the price to the American consumer and add to the present high cost of living; second, it will curtail export business; third, it will put an excessive tax on flavoring extracts; fourth, it will not promote any industry in this country.

Va la beans are practically used exclusively for the making of vanilla flavoring, and vanilla extract constitutes nearly 80 per cent of the extracts used by the housewife in the flavoring of puddings, cakes desserts, ice cream, confectionery, etc., and, together with the other flavors, is a household necessity. The addition of a duty of 50 cents per pound on vanilla beans would entail such an increase in the cost of pure vanilla extract as would necessitate the raising of the price to the consumer either by charging more money for the goods or by reducing the size of the bottle. The result of this would be practically to force the mass of consumers to the use of imitation flavors, and that we do not believe it is your desire to do.

Mr. HARRISON. I understood your reasoning to be that there was no use in putting a duty on vanilla beans because it would not stimulate the growing of vanilla beans in this country?

Dr. BAER. Yes, sir. .

Mr. HARRISON. Of course, we agree with that. You could not grow the beans, because the climate is not suited to it. The purpose of putting a tax of 50 cents a pound on vanilla beans which was 294 per cent ad valorem on last year's prices was that it would mean a raise of $575,000 worth of revenue. The committee considered that vanilla beans go largely into the making of sweets and semiluxuries and would be a very good source from which to raise some revenue. Gentlemen who appear here very often consider the tariff only from

. a protective point of view.

Dr. Baer. I will omit the reference to the protective point of view and take the point of view of the export business and show you from that point of view how the addition of these duties would practically shut off the mass of manufacturers from any participation

PARAGRAPH 559CRUDE DRUGS, ETC.

whatever in the export trade and how the consumer would have to pay on a 10-cent bottle of extract pretty close to a 4-cent tax on the lemon extract and on the vanilla extract 2 cents tax.

Mr. HARRISON. What would be the possibility of replacing the extract of vanilla beans on this market if this tax were imposed ?

Dr. BAER. If you gentlemen should place a duty of that kind on vanilla extract, the result would be to force the 10-cent seller of pure extract to a 15-cent seller.

Mr. HARRISON. Do you take the position that vanillin is unhealthy or injurious in any way?

Dr. Baer. I am a doctor of philosophy and not a doctor of medicine, so I could not qualify for that question.

Mr. HARRISON. Are you a manufacturer of vanilla extracts ?
Dr. BAER. Yes, sir.

Mr. HARRISON. As a manufacturer, do you consider that your rival product is an injurious one?

Dr. BAER. No; but the tendency of the time is for the people to use pure foods as far as possible and not goods that are imitation, and that was the object of the pure-food law in compelling manufacturers to put up a pure extract of lemon as distinguished from an imitation extract.

Mr. HARRISON. It is not at all impossible in spite of all the efforts of manufacturers of vanilla extract that the imitation will gradually drive them out of the market?

Dr. Baer. Before the pure-food law went into effect the proportion of 10-cent extract sold was about 12 gross of imitation to i gross of pure. We make a specialty of putting up private brands of extracts for wholesale grocers, and they buy only the pure extract. They say that the demand is for pure goods, showing that the education of the people to use pure goods has induced them to insist upon using pure goods in preference to the other. They do not like the word "imitation” on the bottle.

Mr. HARRISON. You do not have any objection to our proposed reduction on vanillin to 40 per cent?

Dr. BAER. No, sir. I think that is a good thing, because that will enable the American manufacturer to make their product equal in quality to that made by the foreign manufacturer and give the foreign manufacturers a chance to force them to do that.

Mr. LONGWORTH. What is vanillin made of ?

Dr. BAER. It is made from eugenol, which is originally a principal constituent of oil of cloves, and it is an extract from the clove pod, and it can be obtained chemically from the oxidation of eugenol, and also as a product of the decomposition of coniferin.

Mr. LONGWORTH. And we reduced the duty on vanillin in the main law from 50 to 20 cents; has that stimulated the imports ?

Mr. HARRISON. Up to the extent of $34 in one year.
Dr. BAER. It is practically prohibitive.

What I have said about vanilla will apply to the essential oils. I would like to go into the export trade.

Mr. HARRISON. Would you not get the benefit of a drawback on vanilla beans or essential oils ?

Dr. Baer. That will apply only to alcoliol.

PARAGRAPH 559-CRUDE DRUGS, ETC.

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Mr. HARRISON. I beg your pardon. It would apply to the materials for manufacture which you import from abroad made into American products; you could get a drawback of 99 per cent on the duty you paid, when you come to export.

Dr. BAER. In that case, then, your proposed duty would not affect the import business. I will pass that. I was not aware of this drawback.

The CHAIRMAN (interposing). The law as it stands to-day, and as it will probably stand to-morrow, allows the American manufacturer, wherever he brings in an article and manufactures it and reexports it, to get a drawback of 99 per cent, and the Government takes i per cent for its trouble and expense in administering the law. That would not affect the import trade at all.

Dr. BAER. Regarding the excessive tax in the manufacture of vanilla extract, at least one-half a gallon of high proof spirit is used, and you, of course, realize that the internal-revenue tax on 1 gallon of proof spirit is $1.10 of the $1.35 we pay for the proof gallon of spirit, or a tax of $2.09 of the $2.60 we pay for the high proof. On the cost of a gallon of vanilla extract, then, the revenue tax on the spirit alone is 25 per cent of the cost of the product. This tax, of course, the consumer eventually pays.

Take the case of lemon extract. To comply with the standards enunciated by the Department of Agriculture, a gallon of standard extract of lemon contains 111.8 fluid ounces of 190 proof alcohol83 per cent absolute alcohol --which costs $2.28 with 190 proof alcohol at $2.60 per gallon.

This extract contains-a gallon of lemon extract contains 6.4 per cent fluid ounces of oil of lemon, 5 per cent by volume, which costs $1.07 at $3 per pound for oil of lemon, which is the present price.

This makes a total cost of raw material in a gallon of standard extract of $3.35. Of this cost $1.83 represents the internal-revenue tax on the alcohol used.

In other words, 54 per cent of the present cost of the gallon of lemon extract is tax. Now, if you add to this a duty of 20 per cent ad valorem on the oil of lemon used, 61 per cent of the cost will be tax, and this tax the consumer would have to pay.

Mr. HARRISON. Using the alcohol as a solvent, could not denatured alcohol be used ?

Dr. BAER. We can not.

Mr. HARRISON. Because it is used in some instances as a food product afterwards?

Dr. BAER. Yes, sir; anything that is used as a denaturant would very likely harm the flavoring ingredients—the lemon extract or vanilla extract.

In the second place, there is the possibility of the redistilling of the alcohol in a small way by the possible consumers where they bought it in larger quantities, and use the alcohol as a beverage. If that could be prevented we could save on the tax by having a paid inspector in our factories; we would be willing to pay the inspector's salary ourselves.

Mr. HARRISON. Of course, the lemon oil is now on the free list. Dr. BAER. Yes; the lemon oil is on the free list.

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