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Above figures are from quarterly statement imports entered for consumption.

The Monthly Summary of Commerce and Labor gives total spices for year ending June 30, 1912:

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The CHAIRMAN. Of course, you understand we levy this duty purely for a revenue; it could not be a protective duty because there are no spices grown in this country. At what price does a manufacturer or grinder of spices sell them to the middleman ?

Mr. DURKEE. The spices to-day are sold in small packages. The profit of the manufacturer, as the statement which I filed with the committee shows in detail, is about 10 per cent; less than 10 per cent; a little over 9 per cent.

The CHAIRMAN. You would have to carry that tax down to the middleman. of course ?

Mr. DURKEE. We would have to increase our price.

The CHAIRMAN. That is what I mean; you would put it on. Now, take an ordinary package of spices. What is a typical package ?

PARAGRAPH 679 SPICES.

You can tell me better than I can state one. Would a package of cloves be a typical package, or what would you call a typical illustration ?

Mr. DURKEE. Pepper, I would say, is the spice that is in greatest use.

The CHAIRMAN. At what price do you sell an ordinary package of pepper?

Mr. DURKEE. We sell it at 36 cents a dozen, that is, 3 cents for a can holding an ounce and a half.

The CHAIRMAN. That is, 3 cents apiece ?
Mr. DURKEE. Yes, sir.

The CHAIRMAN. What does the middleman sell that to the consumer for ?

Mr. DURKEE. He sells it at 45 cents a dozen, and the retailer sells it for 60 cents a dozen, and the consumer pays 5 cents a can.

The CHAIRMAN. There is a difference between your price and what the consumer pays of from between 36 cents and 60 cents ?

Mr. DURKEE. Yes, sir. But that difference is not absorbed by the seller. Out of that difference has to be paid the freight and the cost of doing business, leaving a profit to the wholesaler of about 10 per cent, and the profit to the retailer, the gross profit, is 33} per cent, out of which comes his cost of doing business.

The CHAIRMAN. He gets 33} per cent and he sells a package at 5 cents ?

Mr. DURKEE. Yes.

The CHAIRMAN. And he would have to continue to sell that package at 5 cents ?

Mr. DURKEE. No; I do not think he could continue to sell it at that price. Ile would either have to pay more for the same weight of package or would get a lesser quantity in the package.

The CHAIRMAN. What did you say the imported price was?
Mr. DURKEE. The cost to the manufacturer ?

The CHAIRMAN. No; I mean the imported price, where a tax would be levied.

Mr. DURKEE. The cost of whole pepper, for instanca, is about 10 cents a pound—103 cents.

The CHAIRMAN. What would be the cost at the customhouse for the importation of the pepper; that is, one of these 5-cent packages !

Mr. DURKEE. Well, there being an ounce and a half to a package, a dozen would hold a pound and a quarter.

The CHAIRMAN. And what is the price per pound?

Mr. DURKEE. Ten cents; that would be, say, 124 cents, at to-day's market, for the contents of a package. But the cost of putting the stuff in the package, grinding, labor charges, and so forth, is 19 cents and a fraction.

The CHAIRMAN. But the tax, carried down to the retailer, would not amount to more than about one-fourth of a cent, or less than one-fourth of a cent, on a package of pepper, would it? It would amount to less than that?

Mr. DURKEE. I think it would not amount to very much, sir.
The CHAIRMAN. Therefore the consumer would not pay it?

Mr. DERKEE. Well, for instance, the contents of a dozen packages would be something like twelve sixty-five. These goods are sold on

PARAGRAPH 679_SPICES.

a percentage basis, and, for instance, if the whole pepper is worth 10 cents, and you put a duty of 1 cent a pound on it you are taxing it 10 per cent.

The CHAIRMAN. I know, but that would be 1 cent on a pound. The tax would amount to 1 cent on a pound, and you sell it in packages of how many ounces?

Mr. DURKEE. Well, this particular package was an ounce and a half.

The CHAIRMAN. Onecent a pound on an ounce and a half would make that tax, if carried down to the final package that goes to the consumer, less than one-sixth of a cent. I can not see how that would

Mr. DURKEE (interposing). One cent a pound on 10 cents is 10 per cent.

The CHAIRMAN. If we put a tax on it it would be 10 per cent or it would be 1 cent a pound, and you sell to the ultimate consumer in this package that you speak of, an ounce and a half, and an ounce and a half would be about one-tenth of a pound, and one-tenth of a pound would be, the tax being a cent a pound, about one-tenth of a cent that would arrive to the ultimate consumer, if you did not increase your price?

Mr. DURKEE. There would be an additional cost to the grinder, added to the 1 cent a pound, which he would pay on the landed weight. If he paid 1 cent a pound on the landed weight he would not sell—there would be a shrinkage in the warehouse; there is a shrinkage in grinding, there is a shrinkage in packing into small packages, and the price would be increased by the difference as figured out in percentage, which would be added to the initial duty of 1 cent.

The CHAIRMAN. It would not be double, would it?
Mr. DURKEE. No, sir.

The CHAIRMAN. Well, assuming that it would be double, it would only be one-fifth of a cent per package that would go to the ultimate consumer?

Mr. DURKEE. Well, the margin at the present moment to the manufacturer is less than 10 per cent. Now, any increased cost must be added to the selling price, and the profits all the way through are percentage profits, and the final consumer would pay more than would be apparent from such a small advance, and it would be paid by everybody. Then there would be a great source of complaint, because spices are necessities, not luxuries, and I think the expectation of everyone is that necessities of every-day life are not to be increased, because

The CHAIRMAN (interposing). In fact, are not a great many of these spices not necessities but used for manufacturing purposes? Is not a large percentage of the imports used in the manufacture of things that are not necessities? Is that not so ?

Mr. DURKEE. No, sir; I do not think there is any sort of spice that could be used for manufacturing purposes that would come under that head. For instance, in making sausages, or mince pies, if you like, the ultimate product is a matter of food.

The CHAIRMAN. Of course, we will give careful consideration to your suggestions, but the committee's idea was that there was a large

PARAGRAPH 679-SPICES.

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margin of profit between the price of the manufacturer or importer and the price of the retailer.

Mr. DURKEE. Well, that is a mistake.

The CHAIRMAN. And that there might properly be a tax levied for the purpose of revenue only, in order that whatever goes down to the consumer

Mr. DURKEE (interposing). It would certainly go to the consumer.

The CHAIRMAN. Well, I am sure you think that way, but I can not conceive how one-fifth of a cent on an ounce and a half package could add anything to the price paid by the consumer.

Mr. DURKEE. It would not be perceptible if the profits were considerable, but the manufacturer makes less than 10 per cent, the jobber would not make over 10 per cent, and the retailer's gross profit is not considerable, and out of that profit he has his expenses of doing business to meet, and those are considerable. He loses a good deal in bad debts, he loses in deferred payments of his bills, and he has his cost of delivery, and all that, to be deducted from his gross profit. So on his spices he is not left a very large profit.

The CHAIRMAN. Are there any other questions, gentlemen?

Mr. Hull. During the hearings a great many manufacturers have contended that the tariff on articles that go into the manufacture of their particular product naturally enhanced the price they were obliged to pay for those articles, to a more or less extent, and, of course, correspondingly increased the cost of manufacture. On the other hand, when they have been asked whether the consumer would get the benefit of a tariff reduction on the products they manufactured they have almost invariably said no, and I have wondered how it is they would get the benefit of a reduction on the articles they use, whereas the consumer, according to their line of reasoning, would not, as a rule, secure any benefits from reductions on the products they manufacture. I suppose they were referring, by implication, at least, to the middleman, so-called, the jobber and the retailer, and I was wondering whether you had any ideas as to the actual effect of a reduction of the tariff on their products.

Mr. DURKEE. Well, spices are, at the present time, free.

Mr. Hull. I understand about spices, but I was asking you generally.

Mr. DURKEE. I think the sharp competition that exists in this country means that a competitor who can produce goods cheaper by reason of any fact, either of a duty or a lower market price, almost instantly varies his price and reduces his prices in accordance with that production. I do not come in contact with the products of other manufacturers very much, but I remember that a number of years ago we sold a great deal of chocolate and from time to time there were marked changes in the price. At times the manufacturers would put up their price and then at times they would reduce the price. Sometimes the reduction was made not merely on purchases that would be made at that time but on existing stock in the hands of a distributor or jobber, and the very next day, or the very instant that reduction was made on his stock he would send telegrams to his salesmen and try to be the first to make the reduction to his customers.

Mr. Hull. You think, then, that domestic competition is entirely sufficient to keep the prices on a legitimate level ?

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PARAGRAPH 679-SPICES.

Mr. DURKEE. As far as I know anything about the trade, that is absolutely so. It is illustrated again in this way, in spices: Take whole spices. If there be a decline in Holland or in London, cable advices come that pepper is lower in Holland or in London--and the larger number of these spices come from Holland and London-and almost instantly some one will take advantage of that to make the point to his customers of being a cheap seller, and he will lower his prices to get the trade.

Mr. Hull. You are talking about spices ?

Mr. DURKEE. Yes, sir; I do not know much about anything else. But it seems to me that the analogy would exist as to other articles; in other words, any articles where competition is very close.

Mr. Hull. You do not have any particular knowledge as to any other lines of business?

Mr. DURKEE. No, sir; I have not.

Mr. Hull. You do insist, though, that where a reduction is made by the manufacturer in your line, that it is carried on to the consumer and not held up by the jobber or retailer?

Mr. DURKEE. No, sir; it is not. In a great many cases the goods are trade-mark goods, and I think every manufacturer wants to prevent his trade mark goods being sold at too high a price. For instance, an article could be kept from sale if a trade-mark article, for instance, was sold at an exorbitant price by the retailer, and the manufacturer of that trade-mark article would suffer, because the price would be so high that other goods would take its place. He wants his goods to go out to the consumers as cheaply as possible. The cheaper a standard article—a good article sold under a trademark, called for under that trade-mark—is sold, the better for the business of the manufacturer.

Sometimes the manufacturers have placed a restriction upon the sale of goods at an exorbitant price. In our own business we have bad to restrict the price—that is, to tell a man we would not sell to him if he was going to continue getting those exorbitant prices. In other words, we wanted our trade-mark goods to get out at a reasonable price. We want the men who handle our goods to make some profit, but we do not want them to ask an excessive price on our goods to the consumer, and we have said we would absolutely refuse to sell unless they did sell at a reasonable price.

Mr. HULL. On the other hand, have you refused to sell unless they agreed to sell at a uniform price?

Mr. DURKEE. We do not attempt to restrict the selling price in any way except that we will not, if we can prevent it, allow them to make an exorbitant price, because to do that will hurt the sale of our brands.

Mr. HULL. What methods does your trade have for the purpose of bringing about stability of prices—that is, preventing the cutting and slashing of prices in the retailing and jobbing trade?

Mr. ĐURKEE. I do not think they have any. It is impossible to do that. For instance, you will very often see in the newspapers advertisements of department stores cutting the prices on certain articles for the purpose of overcoming the opposition of another store and in order to gain more trade in other lines. We would have great difficulty in preventing that, although it might be injurious to the

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