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and the cost of the goods; in fact, the statute provides it, and the examiner passes on the value of these coverings right along, so that that objection can be waived aside. In fact, even as to tins which are included in the value of the goods, they are separately specified on the invoices. I don't think, outside of those canned goods and similar articles, there is 1 per cent of goods that to-day are bought in the packed condition. They are bought on the other side, so much for a hundred sets of china, so much for so many dozens of this and that and the other thing, and then at the bottom of the invoice they add the packing.
There is one other provision I would like to speak about, in the administrative act, and that is what is known as subsection 11, which has been referred to here, and that relates to market value. It provides that,
The actual market value or wholesale price, as defined by law, of any imported merchandise which is consigned for sale in the United States, or which is sold for exportation to the United States, and which is not actually sold or freely offered for sale in usual wholesale quantities in the open market of the country of exportation to all purchasers, shall not in any case be appraised at less then the wholesale price at which such or similar imported merchandise is actually sold or freely offered for sale in usual wholesale quantities in the United States in the open market, due allowance by deduction being made for estimated duties thereon, cost of transportation, insurance, and other necessary expenses from the place of shipment to the place of delivery, and a commission not exceeding 6 per cent, if any has been paid or contracted to be paid, on consigned goods, or a reasonable allowance for general expenses and profits (not to exceed 8 per cent) on purchased goods.
That provision has operated very harshly on importers, and, as a matter of fact, I think a little reflection will show that it is absolutely impracticable to use it fairly. The goods come in; the examiner says he can not find the market value of this article. He goes around to the importers of the goods, or to importers of similar goods-and I did want to call attention to another section, section 15 of this act, which permits him to force anyone of these competitors to submit any data he has of his own private business. That section has been abused to all kinds of extents by the special agents, who have forced merchants to give up papers, which the Constitution of the United States really prohibits.
They get this price, this American selling price, and then they will figure back, and they tell the merchant how much profit he ought to make, and if it exceeds 8 per cent—and there has always been a question whether that 8 per cent did not include selling expenses having deducted that, they find that he ought not to have bought these goods at 5 francs, as appears on his invoice, because he is making 20 per cent profit, or 15 per cent profit, or 9 per cent profit, and the law says only 8. Now, this man naturally wants to make 9 per cent profit, if he has been making that, but the examiner advances his goods several per cent. Naturally, to make his 9 per cent he has to put up his American selling price again, and then the examiner, on the next shipment, gets this new selling price and he advances it once more, and then the merchant, still wanting to make his 9 per cent profit, increases his American selling price, and so on ad infinitum. That is section 11. The difficulty is that in spite of the fact that importers have frequently submitted duly verified statements of cost of production, verilied by the consul, and the exporter's books have
been shown to the special agents on the other side, the appraisers have frequently refused to take these accounts of production, and have taken the American selling price.
Mr. Hill. You say this refers only to goods for which there is no market price in Europe, being made especially for the American market?
Mr. LEVETT. Exactly, and also consigned goods.
Mr. Hill. It distinctly specifies goods for which there is no regular foreign market ?
Mr. LEVETT. It says no market to all purchasers.
Mr. Hill. If you take that out you would absolutely give power to the foreign importer to make his own price, and you couldn't make him sell at any price to any other market.
Mr. LEVETT. In the same paragraph you have a provision which permits the purchaser to take the cost of production on the other side, and add expense and profits.
Mr. Hill. If there is no foreign market it has got to be made up somewhere.
Mr. LEVETT. There is no objection to taking the cost of production, that is fair, because that is a fact; but the American selling price, with an estimate of what profit the importer shall make, to be fixed by an appraiser who doesn't know anything about the merchant's business is unfair.
Mr. FORDNEY. You don't pay duty on goods on the American value?
Mr. LEVETT. Yes, sir; that is just the point. I believe along certain lines instructions were issued within the past year or two, that all examiners must call in the importers and find out what they are selling the goods for.
Mr. FORDNEY. That is because there is no foreign market for those goods?
Mr. LEVETT. But they can find the cost of production. I have a case in mind where labor, costs of production, were submitted and the books on the other side were thrown open, but that didn't do any good.
The CHAIRMAN. You are talking about the provision found in the last law?
Mr. LEVETT. Yes, sir. .
Mr. Hill. The last part of the clause, Mr. Chairman; where there was no foreign market they should take the domestic market, and tear down from that price in order to ascertain the actual value; and he says the Government is placed entirely in the hands of the foreign market.
The CHAIRMAN. Your contention is that instead of being put on the American market price, they ought to take the cost of production?
Mr. LEVETT. Why, the law I won't say the cost of production; I say the law, as it was before this section 11 was put in in the Senate, when this bill was passed—the House never had anything to do with it; it was put in in the Senate; then it was submitted to the House and the House was forced to put it in.
Mr. FORDNEY. Under the old law, weren't there undervaluations ?
Mr. LEVETT. Mr. Fordney, I have no brief on this question of undervaluations. I have been listening to several of these men here. I am coming to the point; I will answer you directly. I was connected with the Board of General Appraisers as Government attorney, and I was with them for 10 years, and I have been practicing on the outside for six years. I know something of undervaluations. By actual figures—if you will take the trouble to send to the Treasury Department, I think you will get a report that was made to the Secretary of the Treasury, Shaw, showing that the undervaluations did not amount in New York to more than one-tenth of 1 per cent of the importations.
Mr. FORDNEY. On what?
Mr. FORDNEY. There is a gentleman in this room that testified to this, that four years ago he went abroad, as a committee of one, to run down a certain article that was being sold in this country and found that in the neighborhood of $9,000,000 of stuff at cost had been brought into this market for less than $5,000,000.
Mr. LEVETT. Why, that may be true, Mr. Fordney. Now, there are some undervaluations, but I am talking of the total importations. I say this, that I agree with Mr. Bonheim that this talk of great undervaluation is mere talk, is a bugbear.
Mr. FORDNEY. I will agree with you in regard to the undervaluation, but the desire of the importer is always to get into your markets at the least possible cost.
Mr. LEVETT. Of course, that is business.
The CHAIRMAN. Let me ask you a question right there. You say the customs authorities of New York made a report to Secretary Shaw ?
Mr. LEVETT. I am informed that is so. I so by an official who used to be in the Treasury Department. Just where that report is I do not know, but, Mr. Underwood, you can ascertain the truth without it if you will figure this: If you will take the total amount of the importations and the total amount of ordinary duties collected and the total amount of reappraisements, figure the amount of the entries under reappraisement, which represent those that are advanced by the examiner, compare that with the total number of entries and importations of the port, and you will find, I believe, they do not exceed one-tenth of 1 per cent-I have said that the undervaluations do not exceed 1 per cent; I have published that in an open letter to Secretary MacVeagh. I wanted to be conservative. I'think those figures can be verified at any time, but certain interests have found it to their interest to hide the fact and give the impression that the undervaluations are enormous. In the latest report of the Secretary of the Treasury he speaks of the comparatively insignificant amount collected from the smugglers in New York, which amounted to about $10,000,000, and then he speaks of the great amount collected from undervaluations, which amounted to $8,000,000 in three years.
On this undervaluation, as I say, I hold no brief for importers or for anyone else, but I do think, in justice, that the question of alleged gross undervaluation ought to be investigated.
PARAGRAPH 639-OILS. The brief submitted by Mr. Levett follows.
New York, January 30, 1919. The COMMITTEE ON WAYS AND MEANS,
Washington, D. C. Sırs: We respectfully call attention to the provision in subsection 18 of section 28 of the act of August 5, 1909, which fixes the market value of imported merchandise as the usual selling price of the goods, "including the value of cartons, cases, crates, boxes, sacks, casks, barrels, hogsheads, bottles, jars, demijohns, carboys, and other containers or coverings, whether holding liquids or solids, and all other costs, charges, or expenses incidental to placing the merchandise in condition packed ready for ship- . ment to the United States.”
On behalf of numerous importers we ask that this paragraph be amended by striking out the word “including” and inserting the word "excluding” in lieu thereof. In other words, that the proposed administrative act fix the dutiable value on ad valorem merchandise as the value of the goods exclusive of the packing charges.
From time immemorial there has been no duty on coverings or containers of goods paying a specific rate of duty, nor on those which are free of duty, except where there has been a special provision designed to reach certain particular kinds of containers, such, for instance, as glass bottles, which are susceptible of being used again after importation. Another exception is that incorporated for the first time in the present act for cylindrical vessels for holding gas, liquids, or solids, a type of container which received the special attention of Congress during the discussion of the act of 1909.
A duty on the packing charges of ad valorem goods is manifestly unfair when it is considered that if the same goods paid a specific rate the coverings or containers would be free. Under the act of 1883 packing charges were not dutiable and the excuse for making them dutiable in the act of 1890 seems to have been the fear that valuable containers might be imported as packing at a less rate than they would pay if separately imported. But the administrative act of 1890 also contained the provision in the same section that “if there be used for covering or holding imported merchandise, whether dutiable or free, any unusual article or form designed for use otherwise than in the bona fide transportation of such merchandise to the United States addi. tional duty shall be levied and collected upon such material or article at the rate at which same would be subjected if separately imported.”
This provision remains in the law to-day, so that the amendment suggested would affect only the usual coverings.
The assessment of duty on wooden cases, paper wrappings, etc., works a hardship and is unfair. Take, for instance, a cask containing decorated china which pays à duty of 60 per cent ad valorem. That 60 per cent applies not only to the china itself but to the cask of wood, to the straw packing, and the paper wrappings, the value of all of which must be included in the dutiable value. If the casks came in empty they would pay a rate of 35 per cent as manufactures of wood; the paper would come in under the paper schedule at the appropriate rate according to its character, but unquestionably considerably below 60 per cent; and the straw would come in under the provision in paragraph 267 at the rate of $1.50 per ton, which, based on the importation of 1912, is an equivalent of 27.7 per cent.
Now, let us take the same cask, the same straw, and the same paper, and use it to import the same china, but undecorated, and it pays only 55 per cent. If it be used to import Rockingham ware it pays 40 per cent, while if we use it to import common brown earthenware it would pay 25 per cent, and if we use it to import certain classes of earthenware tiles which pay a specific duty it would come in free.
There is therefore no reason why the same article should be free of duty where the contents are specific or free and dutiable at various rates, running the whole scale of the ad valorem rate in the tariff, when ad valorem goods are imported in them. It is a matter of common knowledge that with the exception of canned goods and the like, goods are very rarely sold at a price in the packed condition, and it is seldom that a consular invoice does not itemize the packing separately, and this even on canned goods. If it be desired to take especial care of such articles this could be very readily done; in fact it is done in the present tariff. In paragraph 251, for instance, which provides for “beans, pease, mushrooms, and truffles in tins, jars, bottles, or similar packages," the rate is fixed for the articles “including the weight of immediate coverings. This also occurs in the paragraph for chocolate and cocoa which specially provides that the "weight and value of all covers other than wooden shall be included in the value of the foregoing merchandise.” Respectfully submitted.
MASTERS & LEVETT, 17 State Street, New York City.
BRIEF SUBMITTED BY LAMONT, CORLISS & CO., NEW YORK,
The COMMITTEE ON WAYS AND MEANS,
Washington, D. C. GENTLEMEN: The undersigned are importers of peanut oil, which is now admitted free of duty under the provision in paragraph 639 for “nut oil or oil of nuts." We respectfully ask that this article be retained on the free list, and that if the provision for nut oil under which it now comes be placed on the dutiable list, that a special provision be inserted in the free list for peanut oil. In support of this request we assign the following reasons:
1. It is not produced in this country and is a raw material used in the manufacture of butterine, a wholesome and nutritious substitute used as butter by the poorer classes and by bakers in making cheap bread.
2. A duty thereon would operate to depreciate the quality of butterine and cheap bread, while little revenue would be derived therefrom, as its importation would greatly decrease.
Peanut oil is a raw material used in the manufacture of butterine, a wholesome and nutritious substitute used as butter by the poorer classes and by bakers in making cheap bread.
Peanut oil, as its name indicates, is the expressed oil of the peanut. Its most important use is in the manufacture of butterine, an article used as a substitute for butter by the poorer classes and by bakers in the making of bread. It is not an adulterant, but is wholesome and nutritious, and enables the baker to produce a cheap bread without lowering its quality. While it is possible to produce oil from all peanuts, the oil used in making butterine must be neutral--that is, without flavor; and experiments have demonstrated that the only grade of peanut oil fit for this purpose is that made from the West African peanut, a small nut which is practically tasteless. So far as we can ascertain, peanut oil is not produced from the American peanut, as its strongly pronounced flavor would preclude its use in butterine, and its only uses would be those of other oils that could be more cheaply produced.
Peanut oil was first introduced into this country about eight or nine years ago, and although never specially enumerated has ever since come in free of duty under the provision for “nut oil or oil of nuts,” which has been on the free list since the act of 1890.
A duty on peanut oil would not only operate to depreciate the quality of butterin and cheap bread, but would result in a very slight increase in the revenue.
The exaction of a duty on peanut oil would force the manufacturers of butterine to use cheaper and less wholesome articles in place of this oil. Its increased cost would in all probability prevent its use as an ingredient of butterine, and as this is the chief purpose for which it is employed, its importation would greatly decrease.
A glance at the importations for the past three years will illustrate how they decrease as the price of the article advances. In 1910, when the price was 47.6 cents, the importations were 3,284,064 gallons. In 1911 the average price was 60.2 cents, and the importations 1,121,097-a little over one-third. In 1912 the price increased to 15.8 cents and the importations were 878,659.57. These figures tell in the strongest language that a duty of 10 cents per gallon, as was proposed in House bill 20182, will very quickly shut out the product almost entirely.
We therefore submit that as the article is not produced in this country, as it is chiefly used as a raw material, and as its assessment would add little to the revenue, it should be retained on the free list, and we ask the insertion of a provision reading:
“ Peanut oil." Respectfully submitted.
LAMONT, Corliss & Co.,
78 Hudson Street, New York.
MARCH 5, 1913. Hon. Oscar W. UNDERWOOD,
Chairman Committee on Ways and Means, Washington, D. C. Sir: Referring to brief filed by me on behalf of Lamont, Corliss & Co., in connection with my testimony on peanut oil, now free of duty under paragraph 639, I desire to point out as an additional reason why peanut oil should be on the free list the fact that when butterine is made without peanut oil it sticks to the roof of the mouth and does not melt as butter does, but possesses a more or less tallow-like, pasty