PARAGRAPHS 220-222-WRAPPER AND FILLER TOBACCO. next year, when the duty was put back to $1.85, the amount imported was 6,150,746 pounds, with duties collected, $11,329,115, or nearly double what it was the year before. So that if that is any criterion to go by now it would be in favor of keeping the duty as it is, for clearly a reduction in duty means a corresponding reduction in revenue. Mr. LONGWORTH. Oh, no; it would be an argument in favor of raising the duty. Mr. Duys. Well, there is a limit to it, and I think 300 per cent is a plenty, gentlemen. Mr. HARRISON (in the chair). Is that all? [A pause and no response.] The Chair wishes to state to the gentlemen present in the audience that these witnesses appearing before the committee are sworn and their statements are given under oath; that they are therefore giving sworn testimony to this committee and not making speeches, and under these circumstances it is not becoming in the audience to applaud or in any other way express approval or disapproval of what they have to say. The following letter from C. H. Brenaman & Co., cigar manufacturers, Baltimore, was presented, to be incorporated in the proceedings of the hearings following Mr. Duys's statement: Mr. OSCAR W. UNDERWOOD, BALTIMORE, June 23, 1911. Chairman of the Ways and Means Committee, Washington, D. C. DEAR SIR: As a manufacturer of cigars of nearly 40 years in the city of Baltimore, I take the liberty of addressing you a few lines on a subject in which I am deeply interested. Knowing you, by your public acts, to be a man working for the good of your countrymen and in the interests of the masses of the people, my feeling that you believe in the principles of living and let live is the reason I address you. I have made a success in my business with the limited means with which I started years ago, and I only desire my boys to have the same opportunities that I have had. Our great trouble is the high tariff on Sumatra tobacco, which was introduced into our country some 25 years ago, and it is to-day the principal wrappers used by the manufacturers of cigars throughout the United States. All other manufacturers in the country are affected the same as I am. The tax on Sumatra wrappers by the Government is $1.85 per pound. This was done by a Republican Congress to protect a few growers in our country, who do not produce sufficient wrappers for one-tenth of the manufacturers, and what they do produce we can not work in our goods, because it does not contain the properties that Sumatra does. We have had samples sent us and made cigars of it, and when they became dry the wrapper would break and peel off. Our trade did not want it, and we could not work it. As it made inferior goods, we could not sell them. The Great Creator of the Universe, when he made the earth, placed certain properties in the land in different parts of the world to produce certain articles. It was never placed in the soil of our country to produce Sumatra wrappers. The same with Havana tobacco. There is no spot of earth on the globe that can produce tobacco of the same fine aroma and fine delicate flavor as the island of Cuba. It was tried in Florida during the Spanish War and proved to be a failure. The properties are not in the soil as in Cuba. The bulk of our manufacture and sales are first-class 5-cent cigars, made for the retail trade; we sell no jobbers; and 80 per cent of the cigars consumed in the United States are 5-cent goods. They are made with a Sumatra wrapper and fine qualities of domestic fillers grown in Ohio and Pennsylvania. Our prices are from $33 to $36 per thousand. It takes, Mr. Underwood, 24 pounds of light-colored Sumatra wrappers to cover 1,000 cigars. The Government duty per pound is $1.85; 2 times $1.85 makes $4.62. Now, the additional $3 internal revenue added to that makes $7.62 which the Government receives from PARAGRAPHS 220-222-WRAPPER AND FILLER TOBACCO. my little factory on every 5-cent cigar sold per 1,000. Dark Sumatra, naturally being heavier or less sprigs to the pound, will take pounds to cover 1.000 cigars, at $1.85 per pound. There is $5.55 for duty, $3 for internal revenue, making $8.55 per 1,000 on $33 and $35 cigars. We sell a million a year. The Government would receive $8,555. The last several years all fine qualities of domestic fillers have advanced in prices from 25 to 40 per cent, which has added to the cost of these goods, necessarily reducing our profits to such an extent there is no longer a living in the business. The Government had just as well take over the factories and run them, for they get the most out of them, as the conditions stand to-day. The Constitution of my country guarantees every man the right to make a living, and I am willing to work for it, being on the road five months of the year hustling, but with the high cost of living, and the high duty on Sumatra wrappers, we find it impossible to do so; 40 cents per pound would pay the Government as a duty on the tobacco; that would make the tax on nickel cigars $4 per 1,000. I remember just after the war between the North and South, when the Government was millions of dollars in debt, the tax on $35 cigars was only $5 per thousand. I don't suppose they had so many employees on the pay roll drawing salaries for services not rendered as were recently dismissed by our Democratic House of Representatives, when they took charge. I write you a true statement of our condition, and its the same with 100,000 others. The manufacturers of our city are awaiting patiently for your committee to reach the tobacco question, with a view to send a delegation to state our grievances against this obnoxious tariff on Sumatra tobacco. Kindly give this matter attention, and give us the opportunity to make a living. I beg to remain, very respectfully, yours, C. H. BRENAMAN & Co. Mr. HARRISON (in the chair). The next witness on the calendar is Mr. Thomas J. C. Brown, of the Cigar Manufacturers' Association of Key West, Fla. Is Mr. Brown present? Mr. BROWN. At a meeting of the Florida cigar manufacturers, held last evening, Mr. Edgar J. Stachelberg, of Tampa, was selected to make a statement in our behalf and file a brief. I will give way to him. Mr. HARRISON. Mr. Stachelberg's name appears on the waiting list. Does he represent the same interests that Mr. Brown represents? Mr. BROWN. Yes, sir. Mr. HARRISON. He will be recognized now for 10 minutes. Mr. Stachelberg will please come forward and be sworn. The CHAIRMAN. Come forward, Mr. Stachelberg. TESTIMONY OF EDGAR J. STACHELBERG, REPRESENTING THE CLEAR HAVANA CIGAR MANUFACTURERS OF FLORIDA. The witness was duly sworn by the chairman. Mr. STACHELBERG. Mr. Chairman and gentlemen of the committee, we have not prepared a brief. I have heard the long brief prepared by the other gentleman, but I am not going to consume so much time. We have just prepared a little letter setting forth what we would like to request of this committee as clear Havana cigar manufacturers of Florida. Col. Sparkman has told you about our industry and how large it is. In fact, it is the largest industry in the State of Florida. It represents about one-third of the entire business of the State of Florida, and that industry is practically confined to the cities of Tampa and Key West. PARAGRAPHS 220-222-WRAPPER AND FILLER TOBACCO. Representing the Havana cigar manufacturers of the State of Florida I beg to submit the following: Schedule F, paragraph 220, provides that wrappers and filler tobacco, when mixed with more than 15 per cent wrapper tobacco, pays full wrapper duty of $1.85 per pound on the entire bale. We respectfully request that this clause be changed to read: "That any bale containing 25 per cent or less of wrapper tobacco be assessed as all filler tobacco, and any bale containing more than 25 per cent of wrapper tobacco be assessed as all wrappers," for the reason that paying a wrapper duty on a bale of tobacco containing only 16 per cent wrappers places a great hardship upon the manufacturers of clear Havana cigars. On bales of tobacco containing over 25 per cent wrappers, there is always a percentage of from 5 to 40 per cent of filler tobacco, on which we now have to pay wrapper duty. Such being the case, in justice to the American manufacturer of clear Havana cigars, and in fairness on the part of the Government, we earnestly request that no wrapper duty should be assessed on bales containing 25 per cent or less of wrapper tobacco. Paragraph 221 provides that the term "wrapper tobacco" means that quality of leaf tobacco which is suitable for cigar wrappers. We respectfully submit the following change, viz, to provide "that grade of leaf tobacco which is commercially known as wrapper tobacco," for the reason that packers of leaf tobacco grade their tobaccos into what is known as wrappers, mixed seconds, and fillers, the seconds being used for binder purposes. These packers naturally select, grade, and pack their tobaccos in these separate classes for the reason that they charge and get a much higher price for wrapper tobacco than either of the other three classes, and they pack in the wrapper bales every leaf which they consider serviceable for wrapper tobacco, and such bale becomes commercially known as wrapper tobacco. As the law now stands the term "suitable" does not clearly define what wrapper tobacco is, causing discrimination at the different ports of entry on account of the examiners of the different ports not being practical leaf packers or cigar manufacturers and, therefore, naturally classifying tobacco according to their own personal opinions. I would furthermore respectfully request that tobacco be withdrawn from bonded warehouses at actual weights on such date of withdrawal instead of at entry weights, because bales of tobacco which are stored in the bonded warehouses lose a proportion of their original weight, owing to evaporation of moisture. BRIEF OF CIGAR MANUFACTURERS OF FLORIDA. Hon. OSCAR W. UNDERWOOD, WASHINGTON, D. C., January 27, 1913. Chairman Ways and Means Committee, Washington, D. C. MY DEAR SIR: When before the Committee on Ways and Means on the 17th instant, you kindly gave us, as representatives of the clear Havana cigar manufacturers of Florida, permission to file an additional statement of our position and views with reference to Schedule F in so far as it affects our industry, we having at the time PARAGRAPHS 220-222-WRAPPER AND FILLER TOBACCO. merely stated briefly our views as to what changes should be made, both in the interest of the Government and of the manufacturers. These, only three in number, were as follows: First. That paragraph 220, which provides that wrapper and filler tobacco when mixed with more than 15 per cent wrapper tobacco shall pay the full wrapper duty, be changed to read: “That any bale containing 25 per cent or less of wrapper tobacco be assessed as all filler and any bale containing more than 25 per cent wrapper tobacco be assessed as all wrapper.' Second. That paragraph 221, which provides that the term "wrapper tobacco" shall mean that quality of leaf tobacco suitable for cigar wrappers, be changed to read: "That grade of leaf tobacco which is commercially known as wrapper tobacco." Third. That tobacco be withdrawn from bonded warehouses at actual weight at the time of such withdrawal instead of at entry weight. In explanation of the first and second requests we, in addition to the reasons briefly furnished at the hearing on the 17th, submit the following statements: First. Havana tobacco is used both as wrapper and filler. Second. It is practically impossible to pack the tobacco in bales that would be all wrapper. Some will necessarily be filler. A leaf of tobacco to be suitable for wrapper must be fine of texture, having elasticity, be without spots or blotches of color, and be of a uniform light brown color. Third. At best it can only be a matter of opinion as to whether or not a particular leaf is wrapper tobacco or filler tobacco, depending on size, texture of leaf, quality, freedom from imperfections, and the condition of the tobacco. Besides, tobacco that might be suitable for wrapper at one time might in a few months become unsuitable for wrapper. Again, the same tobacco worked in dry, cold weather when the air is not moist, might be entirely unsuitable for wrapper tobacco, although in warm moist weather it would be capable of being used to wrap cigars. Still, again, a leaf of tobacco of small size might be capable of wrapping a small cigar while the same leaf would not be capable of wrapping cigars of larger size. In view of all these contingencies it may be stated as practically true that the characteristics of Sumatra leaf are such by reason of size, texture, and otherwise that it is wrapper tobacco commercially salable as wrapper, while Havana tobacco for the most part is not wrapper tobacco, or commercially salable as wrapper tobacco. Fourth. The clear Havana manufacturers of the United States are the victims of circumstances for which they are not responsible, and over which they have no control. The discrimination between wrapper and filler for the purpose of assessing duty is for the protection of the growers of Connecticut, Pennsylvania, Wisconsin, Ohio, and other States against the importation of Sumatra tobacco, the leaves of which are large and of fine texture and for the most part suitable for wrappers, and which, if admitted free or at a small duty, would displace domestic tobacco for wrappers in favor of Sumatra. Havana tobacco on the other hand does not compete with domestic tobacco in the manufacture of domestic cigars, and could not do so, because of the difference in price. Fifth. For the reason stated, in order to exclude Sumatra tobacco from competition with domestic tobacco in the manufacture of domestic cigars, a higher duty is imposed upon wrapper tobacco and any bale of tobacco containing over 15 per cent of wrapper is classified as wrapper tobacco, so that practically all Sumatra tobacco may be embraced in the higher duty, and a less duty is imposed upon filler tobacco to permit of the importation of Havana tobacco, which could not be used in the manufacture of cigars in the United States if it all bore the duty that Sumatra tobacco has to pay. Sixth. The bulk of clear Havana cigars made in the United States is classified as Pinas, Conchas, Londres, Regalias. Fully 50 per cent of the output is comprised of cigars for which the manufacturer obtains, on an average, less than $50 per 1,000. The wrapper on all such grades are of the same quality, size, and texture as is nec essary for filler in the larger and higher priced goods, and, should such tobacco be classified as subject to the wrapper rate of duty, it would immediately end the production of the smaller and cheaper sizes, resulting in throwing out of employment all of those workmen who are not sufficiently skilled to make the higher grades of cigars. It would also interfere with the production of the larger sizes by excluding from use therein as filler such tobacco as is essential to their proper manufacture of compelling the payment of wrapper duty thereon. Further, in order to manufacture 1,000 of an average size cigar it takes 20 pounds of filler tobacco and 5 pounds of wrapper tobacco. In the course of manufacture, out of the 20 pounds of filler, 18 pounds are used in the cigars while 2 pounds are broken up and returned to scrap; From the 5 pounds of wrapper, 3 pounds are trimmed and returned as cuttings and PARAGRAPHS 220-222-WRAPPER AND FILLER TOBACCO. only 2 pounds of tobacco is actually used for wrapper. The scrap and cuttings returned have a market value of from 40 cents to 50 cents per pound, but these are mainly used as fillers for 5-cent cigars, on which a domestic binder is used in conjunction with a Havana wrapper. It is, therefore, unreasonable for tobacco that is eventually used as filler to bear the higher rate of duty under wrapper classification. Seventh. In the cities of Tampa and West Tampa are upward of 50,000 inhabitants, one-half of whom are either engaged in the manufacture of Havana cigars or directly dependent thereon. The industry is a source of a large revenue to the Government in import duties. It is a tax paid by the wealthiest classes and has been finely adjusted through years of experience. The three cities, Tampa, West Tampa, and Key West, are largely dependent on the industry, and any reduction of duties on the manufactured or raising of duties on the raw material would practically ruin them add throw thousands out of employment. Eighth. The export of clear Havana cigars from Tampa alone exceeds the export business from Habana, and it would be an act of great injustice, as well as detrimental to the commercial interests of the country, to kill the clear Havana business in the United States in favor of manufacturers in Habana, which could readily be done even by an unfavorable administration of the present law. The clear Havana business is peculiar in that prices of cigars can not be increased. In other words, such cigars sell for 10 cents, two for a quarter, 25 cents, 35 cents, and upward, and by far the greater quantity of such cigars, excluding the 5-cent cigar made from scrap with a domestic binder, are sold at 10 cents or two for a quarter, and these prices can not be increased without either causing the smoker to buy a domestic or Porto Rico cigar, if he wishes to economize, or, if he is willing to pay a higher price, he will buy a cigar manufactured in Habana. As to the third suggestion, that tobacco be withdrawn from bonded warehouses at actual weight at the time of withdrawal, we beg to remind the committee that the practice is to require the payment of duties upon tobacco according to the weight as it enters the warehouse, which we contend works a hardship upon the person who withdraws this tobacco for manufacturing purposes. It is often packed and shipped in a partially green condition and loses nothing but rather gains in weight by reason of the absorption of moisture en route from the place of production. While it loses considerably in weight during the time of its storage in the bonded warehouse, the amount of such loss depends, of course, largely upon the length of time intervening between its reception there and its withdrawal. We deem it unjust to the manufacturer to be compelled to pay duty on this last weight, and trust that the law may be changed so as to avoid this injustice. Referring again to request No. 2, we beg to call the attention of the committee to the fact that under what is known as the McKinley law of 1890, which provided that if any portion of tobacco in any bale, box, or package, or in bulk, shall be suitable for cigar wrappers the entire quantity of tobacco contained in such bale, box, or package, or bulk, shall be dutiable as wrapper. Much confusion resulted and often great injustice was done the importer, who, in the case of clear Havana tobacco, was usually the American manufacturer. It was practically impossible to so pack a bale of filler that it would not have some leaves suitable for wrapper of certain grades of cigars; so that the law placed it within the power of the examiner and appraiser to classify each bale as wrapper, and thus to exact the higher duty. To remedy this evil the Treasury Department felt impelled to place a construction upon the law which, though possibly a little strained, had the effect of minimizing the hardship thus created. This construction was given in an order issued by the Hon. Charles S. Hamlin, Acting Secretary of the Treasury, on October 7, 1893, requiring the appraisers to give consideration to the claim even then being made by the manufacturers that only that class of tobacco which was commercially recognized as wrapper should be considered in determining the question as to whether or not a bale of tobacco had any portion of wrapper contained therein. We append hereto as Exhibit A this order, from which it will be seen that even before the passage of the Wilson bill in 1894 the difficulties attending the enforcement of the provision in the act of 1890, requiring the taxing as all wrapper any bale or package containing any portion of tobacco suitable for wrapper, were apparent. Afterwards the Wilson tariff law wrote the substance of this decision into the statute by providing that the term "wrapper tobacco," whenever used in that act, shall be taken to "mean that quality of leaf tobacco known commercially as wrapper tobacco." |