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PARAGRAPH 274-PESERVED PINEAPPLES.

Mr. SMITH. Yes; to reduce the rate 5 per cent and make the rate 20 per cent, and to strike out the differential of 1 cent per pound and 35 per cent.

The CHAIRMAN. You want a flat rate on everything ?

Mr. SMITH. A flat rate of 20 per cent. We have always had a flat rate until this bill, and we want to go back to a flat rate, and make that flat rate a little lower than it used to be.

The CHAIRMAN. Is there much importation of these pineapples that have spirits or alcohol in them?

Mr. SMITH. I am not familiar with anything of that kind. We do not use any with spirits at all; we do not use any spirits at all in our goods.

I will continue. As these papers were prepared at different times we repeat a little bit in the second part, I am sorry to note.

In Schedule G, agricultural products and provisions, paragraph 274, the closing sentence reads "pineapples preserved in their own juice, not having sugar, spirits, or molasses added thereto, 25 per cent ad valorem.”

The clause “not having sugar, spirits, or molasses added thereto," has the effect of placing pineapples having either of the ingredients specified, in any quantity whatever, added thereto, under the operation of the rates provided in the preceding portions of the paragraph; thus, pineapples having any sugar added, fall under the rate of 1 cent per pound and 35 per cent ad valorem.

For the purpose of illustrating how this works out, I will take a case of 24 No. 2 cans of pineapple, this being the size most in use.

In the Bahamas the factory cost of pineapples, labor, and superintendence for a case of goods of this description is about $1, of which about 10 per cent represents the labor and superintendence. On this valuation--cans and cases being of domestic origin, not considered—the duty would be 25 cents.

Mr. Hull. May I interrupt you there? What does that amount to as a total ad valorem equivalent, the 1 cent?

Mr. Smith. Including the price of cases and all other expenses?

Mr. Hull. Under the compound rate you have just read there is a duty of 1 cent per pound and 35 per cent; what is the ad valorem equivalent?

Mr. Smith. The next paragraph explains that. The custom of the trade requires the addition of a small quantity of sugar to the pineapple and in the Bahama goods about 10 cents worth (bond price) of sugar is added to the case, so the cost of pineapple, labor, and superintendence, and sugar is $1.10. The duty on this now jumps to 1 cent per pound and 35 per cent ad valorem, or about 70 cents per case. The addition of 10 cents worth of sugar (there being absolutely no other addition in the cost) increases the duty 45 cents on the case. This is 450 per cent duty on sugar, or if a less quantity of sugar be used, the percentage .of duty is greater still. Four hundred and fifty per cent duty on sugar looks pretty steep.

It may well be asked, what is the object of this extraordinary differential? This question will bring us to the "milk in the coconut.” The Hawaiian pack is chiefly of goods containing sugar, and the Hawaiian packers coveted a monopoly of the trade in these. I am informed that this clause in the tariff was inserted at their instance and for their benefit, and it has certainly well nigh accomplished their purpose.

The plea made by the Hawaiian interests for this ungodly rate was that theirs being an infant industry it was entitled to Government protection. Let us admit, for the moment, that this plea as to infancy was justified. Many other domestic infants receiving protection, so should theirs. The degree of protection very generally conceded as permissible is measured by the difference in labor costs between the foreign and domestic producers, and this with some degree of liberality in favor of the domestic producer. The labor cost, including superintendence, in the Bahamas, is about 10 per cent of the total cost of the foreign elements in the canned pineapple produced there. The prevailing labor rates in Hawaii are about 75 per cent higher than in the Bahamas (let us call it 100 per cent higher). Then it follows PARAGRAPH 274PESERVED PINEAPPLES. that a duty of 10 per cent on the Bahama goods would equalize the labor costs of the two classes of producers. Adding another 10 per cent to that, making the duty rate 20 per cent, would seem to provide a very liberal degree of protection for this extraordinary Hawaiian infant, which has grown from 20,000 cases in 1904 to 1,000,000 cases in 1912, the most phenomenal growth ever witnessed in the canned goods business.

The Hawaiian packer pays, substantially, the same price per ton for pineapples delivered at his factory as the Bahamas packer. The variety of fruit he packs averages much larger than the Bahama fruit, and, being thinner skinned and eyes not set so deep, the waste in paring is much less, so that a ton of his fruit will yield many more cases of goods than a ton of the Bahama fruit. This advantage alone should go far toward offsetting the difference in labor even if there were no protecting tariff at all.

If the Hawaiian packer would make an entirely frank statement on this subject, it would probably be about like this: We want as high a tariff as we can get, but we really don't need any.

Pineapples were canned in the Bahamas as early as 1857, when the Hawaiian Islands were a semibarbarous foreign country. The industry, however, did not become continuous until 1876, when J. S. Johnson and associates took it up. In 1892 the J. S. Johnson Co. was organized under the laws of New Jersey, and Imerican capital bought out the Johnson interests, since which the business has been run by American citizens, who have invested a considerable amount of money in factory buildings and equipment in the Bahamas. Always handicapped by a pretty heavy duty, the busiDess has never been very profitable, but afforded modest returns on the investment.

The extraordinary differential duty on goods containing sugar, imposed by the Payne-Aldrich bill, has proven practically prohibitory, and the production of this class of goods by the Johnson Co. has fallen off about 75 per cent, such as are still

produced being marketed at cost or less, solely with a view of keeping its brand known to the trade until such time as Congress should again revise the tariff, when, it is confidently hoped that the gross injustice of the present rate of duty would become apparent, and remedied.

We do not ask of Congress any favoritism, but, as citizens, having the same rights to Government recognition as those citizens interested in the Hawaiian industry, we simply ask that the Government do not crush the life out of our business solely for the purpose of affording a clear road to monopoly for our competitors. Impose a rate of duty on our goods which will amply equalize labor costs, then let the universal laws of business competition govern the rest of the race.

The Hawaiian Islands are domestic territory and the Bahamas foreign. Politically, this is a wide difference, but from a practical business standpoint the difference is not so great, for while the Bahamas are foreign politically, commercially they an adjunct of this country,

Their Government "Blue Books” for years past show that about 75 per cent of their total annual importations are from this country, and consist of our domestic products. This means that of every dollar paid out by the Johnson Co. for fruit and labor there, 75 cents comes back to this country to pay for merchandise bought here. Suspend the operations of our company in the Bahamas and immediately their trade with this country would fall off to the extent of what our expenditures for fruit, labor, and salaries had been.

The natives of the Bahamas who get the benefit of our expenditures for fruit and labor are eligible to citizenship in this country. Those who reap the benefits of similar expenditures in the Hawaiian factories are chiefly Chinese and Japs, who are not eligible to such citizenship.

Those who enjoy the profits of the manufactured goods are, in both cases, American citizens. On what grounds can the Government be justified in throttling the business of one set of citizens solely to enable the other set to secure a monopoly? This is exactly what is taking place under the existing tariff.

Mr. Hull. That 1 cent per pound is specific ?

Mr. SMITH. The 1 cent per pound is specific and the 35 per cent per pound is ad valorem. That is where the tariff adds to the rate, making a combined rate of about 70 per cent.

The CHAIRMAN. Mr. Smith, your time is up.

PARAGRAPH 274-PESERVED PINEAPPLES.

Mr. Smith also presented the following papers:

BRIEF.

The COMMITTEE ON WAYS AND MEANS,

House of Representatives, Washington, D. C. GENTLEMEN: In asking for a reduction of the duty on canned pineapples, we have based the rate which we ask for on the foreign cost of production of these goods. If, however, this is not to be the basis for calculation of the tariff, then we ask for a further reduction in proportion to the fictitious items which must be added to make a dutiable value.

As an illustration of what we mean, we will show how the present administrative act works in our case. The duty in the present tariff on pineapple with sugar added is 35 per cent ad valorem, and i cent per pound specific. This rate when made was certainly based on the cost of production, as that is the point from which the Republican Party started in making its rates. Now they put in a provision in the administrative act (paragraph 11, latter part), which completely nullifies the basis of the rate and makes a wholly new and artificial basis.

The real effect of this new basis is to greatly increase the published rates in the tariff act. At present we are fighting an increase in the valuations on the sugared goods, which if confirmed will really amount to making the ad valorem rate not 35 per cent as published in the tariff, but 45 per cent. On the pineapples without sugar, the tariff rate is 25 per cent ad valorem. Using the administrative act, the appraiser has increased our valuations to such a point, which if confirmed, will practically amount to making the rate from 46 to 73 per cent. The reasons for these enormous increases is that in figuring back from the selling price, an arbitrary amount has been deducted, and not our actual expenses, and a fair profit. This arbitrary amount does pot nearly equal the actual figures.

We submit therefore in considering what rates should be placed on different articles that the basis for dutiable value be made a fair and equitable one. Respectfully suggested for consideration.

J. S. JOHNSON Co.,

By Wm. H. Smith, Vice President. JANUARY 28, 1913.

SUPPLEMENTAL BRIEP. The COMMITTEE ON WAYS AND MEANS,

House of Representatives, Washington, D. C.: The following data has come to hand since the filing of our brief on “Reduction of rates on canned pineapples,” paragraph 274, Schedule G, tariff of August 5, 1909:

Prior to the adoption of this tariff considerable quantities of canned pineapples had been imported annually from Singapore, such importations reaching 272,000 cases in 1907; 173,000 in 1908. Owing to the operation of the differential duty on sugared goods these Singapore importations have practically ceased, only about 30,000 cases having been imported in 1912, of which the greater part were the unsweetened goods. It is reasonable to suppose that if the rate of 20 per cent, which we ask for, is adopted that the importations of these goods will be resumed, thus affording a source of revenue to the Government which it has lost through the present existing tariff. These goods being of a poorer quality so far as flavor is concerned, do not really compete with the higher grade Hawaiian and Bahaman goods. but being lower in price they find their market for themselves among that large class of people who can not afford to pay the high prices which the highest grade goods command.

As a comment on the claim of the Hawaiian people that their business needs the protection of the rates in the existing tariff, we submit statistics copied from Moody's Manual of Corporation Securities, showing how profitable this business is, and has been, to one of the Hawaiian companies, the only one listed on an exchange. Notice the fine dividends that they have been paying and the magnificent surplus of undivided profits which they have piled up.

“In looking up the Hawaiian Pineapple Co. (Ltd.) in Moody's Manual of Corporation Securities of 1912 we find it was incorporated December 4, 1901, under the laws of the Territory of Hawaii for purpose of producing and canning pineapples. Plantations are located at Wahiawa and Koolan, Oahu, Hawaii, and cannery at Honolulu. Capacity, 350,000 cases of canned pineapples per annum; production, 225,000 to 350,000 cases per annum. Owns the entire $105,000 capital stock of the Koolan Fruit Co. and a majority of the capital stock of the Hawaiian Pineapple Products Co. (Ltd.). PARAGRAPH 274-PRESERVED PINEAPPLES.

Capital stock.-Authorized, $500,000; outstanding, $424,620; par, $20; no bonds. Stock transferred at company's office. Dividends have been paid as follows: 1907, 2 per cent; 1908, 1909, and 1910, 12 per cent; 1911, 15 per cent; payments last day of each month at Honolulu.

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General balance sheet.—January 1, 1911: Capital stock, $500,000; bills and accounts payable, $91,313; undivided profits, $208,248; total, $799,561. Contra: Plantation, buildings, equipments, etc., $256,625; Honolulu plant, $101,110; treasury stock, $75,380; Haiku Fruit & Packing Co., $55,000; Hawaiian Pineapple Products Co. stock account, $9,954; accounts receivable, $63,820; merchandise, $236,849; cash, $823; total, $799,561.

The last quotation on this stock of which we have knowledge in December, 1912, was $44.50 per share, or more than 100 per cent above its par. We are informed that its dividend for 1912 was 18 per cent.

The writer did not have time before the committee on Monday to explain that the
20 per cent rate which we asked for is to be assessed on the foreign cost, and not on a
manipulated and built-up value as is possible under section 11 of the administration
department of the present existing tariff, for under this section it is quite possible—and,
as a matter of fact, has been actually done—the actual foreign costs have been built
up 100 per cent and over.
Respectfully suggested for consideration.

J. S. JOHNSON Co.,
Per R. TYNES Smith, President.

The COMMITTEE ON WAYS AND Means,

House of Representatives, Washington, D. C. Gentlemen: At the hearing you so courteously accorded me on Monday, January 20, 1913, I left with your assistant clerk a suggestion as to an entirely new article of the tariff, of which the following is a copy: "COMMITTEE ON WAYS AND MEANS,

House of Representatives, Washington, D. C.: "If, in the case of any country or dependency of any country having independent control of its own fiscal affairs, it can be shown to the satisfaction of the President that not less than 50 per cent of the importations consist of the domestic products of the United States, the President shall, by proclamation, grant such country or dependency of a country a reduction of 50 per cent of the regular tariff rates on the domestic productions of such country or dependency of a country when imported direct into the United States, provided there be no export duties levied on such products.

"Respectfully suggested for consideration." but had no opportunity of making any comment on same, and now venture to add a bit of argument in favor of the adoption of an article embodying the idea suggested.

Such a reciprocal arrangement as proposed would be a powerful incentive to the peoples of other countries, particularly those of the West Indies, Central and South American countries, to increase their purchases of goods from the United States, and it seems to me that that would almost certainly develop a greatly increased commerce with those countries. The only instance of which the writer is aware in which such a provision would become immediately applicable is in the case of the Bahama Islands, but it is almost certain that other countries would promptly seek to secure the advantages of reduced duties offered by this proposition.

It will be noted that some such simple arrangement as this would avoid all question of the favored-nation clause in our treaties, as the advantage offered would be open to all or any, upon their compliance with the condition. Respectfully submitted for consideration.

PARAGRAPH 274–PESERVED PINEAPPLES.

STATEMENT BY THOMAS ROBERTS & CO., PHILADELPHIA, PA.

PRESERVED PINEAPPLE.

PHILADELPHIA, January 11, 1913. Hon. Oscar W. UNDERWOOD,

Chairman Ways and Means Committee, Washington, D. C. DEAR SIR: We desire to call your attention to paragraph 207, Schedule G of the Payne-Aldrich Tariff Act, and in particular to the duty on canned pineapple. Under thé Dingley Act, which preceded the Payne-Aldrich' Act, pineapple containing not more than 21 per cent of total sugars was admitted upon payment of 25 per cent ad valorem duty. Operating under Schedule G, paragraph 270 of the Payne-Aldrich Act, which reads: "Fruits of all kinds preserved or packed in sugar, or having sugar added, are dutiable at 35 per cent ad valorem and 1 cent per pound,” the duty was increased about 150 per cent. In other words, under the Dingley Act the duty varied from 13 cents to 14 cents per dozen and produced a revenue of possibly $150,000 to the United States Government. Under the Payne-Aldrich Act the duty on the same size tin was about 37 cents to 40 cents per dozen and was so heavy that it prevented its importation.

The change in classification in the Payne-Aldrich Act has, as stated above, had the effect of prohibiting the importation of canned Singapore pineapple, which is of inferior quality of pineapple to that packed in this country and its insular possessions.

Operating under the Dingley Act, the imports of Singapore pineapple in 1903 were 77,614 cases and by 1907 had increased to upward of 290,000 cases.

The radical increase in duty levied under the Payne-Aldrich Act was so severe and so oppressive that this commodity was driven from the American market, and the imports to-day are practically nothing.

We would respectfully suggest that in revising Schedule G, paragraph 207, such portion of the paragraph that relates to canned pineapple be amended to read: "Canned pineapple preserved in its own juice, shown by test containing not over 21 per cent total sugars, 25 per cent ad valorem.'' Yours, very truly,

THOMAS ROBERTS & Co.
WM. H. Hahn.

STATEMENT OF HON. J. K. KALANIANAOLE RELATIVE TO

PRESERVED PINEAPPLES.

The chairman and members of the Committee on Ways and Means:

As the representative of the people of the Territory of Hawaii, I beg to call the attention of your committee to a few facts regarding the pineapple industry, which I hope will convince you that the present tariff should not be reduced.

The pineapple industry of the Hawaiian Islands amounted to practically nothing at the time of annexation to the United States in 1898 and it has grown very rapidly, the output for the calendar year 1912 amounting to approximately 1,135,000 cases, or, say, about 27,000,000 cans, and of a value of approximately $3,600,000.

The Hawaiian Islands are naturally adapted to the growth of pineapples, but the rapid growth of the business has been due, no doubt, to a considerable degree to the protection which has been given canned pineapples produced within the tariff boundaries of the United States by the Dingley and Payne Tariff Acts, which, by increasing the price of the very cheap product from Singapore and the West Indies, has made it easier for us to introduce our more costly and higher priced but superior product, and largely to displace these products in the markets of the United States.

We have full faith in the quality of our product and, while our industry is young and unseisoned, yet we do not ask any special favor for it, but we desire to point out and to have the committee realize fully the conditions which make it seem to us only fair and reasonable that the tariff on canned or preserved pineapple should not be reduced.

Practically all of the material which we use in turning out canned pineapple, as well as the machinery, etc., required, are at present protected by tariff duties and for this reason in many, if not most, instances cost us more than the same materials would cost producers of canned pineapple in other pineapple-producing countries, such as, particularly, the Straits Settlements and the West Indies.

Chief among these items is tin plate, second sugar, and so on down the line, includ. ing box shooks, cutlery, machinery, farm implements, rubber gloves (of which several thousind dollars' worth per annum are used in the pineapple canneries) and various other materials.

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