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PARAGRAPH 296–POTATO STARCH.
cornstarch is starch produced in this country, and for that reason there is a duty on it to protect the domestic industry.
Mr. MORNINGSTAR. All the time it was being protected we were bringing in more and more goods.
Mr. FORDNEY. And the Government got a good revenue from it.
Mr. MORNINGSTAR. Yes; if you are in for revenue, this is a good revenue producer.
Mír. HARRISON. I notice from the table here $458,000 worth of starch was imported in the year 1912, and during the same year we exported nearly $2,000,000 worth.
Mr. MORNINGSTAR. Yes, sir. That shows that we do not need any duty at all on starch.
Mr. HARRISON. Where is it made?
Mr. MORNINGSTAR. In Maine, and a little was made in New York. Now the potato-starch industry in this country is based more or less upon calamitous crops. When we have poor potatoes, too poor for much of anything else, they make them into starch.
Mr. FORDNEY. The starch industry in this country would be greater if we had greater protection from foreign competition, would it not?
Mr. MORNINGSTAR. No, sir; the starch industry is rather an intricate. business. Some manufacturers substitute the other starches, for instance, tapioca, but it is not as good as potato starch.
Mr. HARRISON. The competition that Mr. Fordney mentions is the 2 per cent of imports compared to our native production.
Mr. MORNINGSTAR. Yes; but there is a certain percentage of men in this country who would like to establish the business if they could do so without paying the penalty of 14 cents a pound.
Mr. FORDNEY. You just said you imported your own production from Germany, didn't you?
Mr. MORNINGSTAR. No, sir.
Mr. MORNINGSTAR. Yes, there must be until Americans will have arrived at that scientific method of manufacturing starch that prevails abroad.
Mr. FORDNEY. You are a foreign producer, aren't you?
Mr. MORNINGSTAR. No, sir. I am a dealer in foreign starch, and also in American starch.
Mr. FORDNEY. You are like all the importers. I have failed to find an importer that was not a free trader.
Mr. MORNINGSTAR. I believe in protection, but I think it should be placed where it belongs, and it does not apply to this industry at all. It has had its fair chance, and it has not flourished under protection.
STATEMENT OF MR. WILLIAM A. MARTIN.
Potato starch is made from small and partly affected potatoes which are practically valueless for any other purpose. Its use is almost exclusively in cotton mills for sizing and sometimes for finishing. Practically none of it is used for household or laundry purposes, and none of it is exported. The value of the industry to the farmer is that whenever by reason of adverse climatic conditions the quality of the potato crop is impaired, the starch factories utilize a large quantity of undersized and poor potatoes, thereby affording the farmer a market for that part of his crop which would otherwise be of little value. Recognizing this fact, the State of North Dakota at
PARAGRAPH 296–POTATO STARCH. one time passed a law paying a bounty of 1 cent per pound for all potato starch made within that State. Even with the present duty, potato starch can not be made at a profit from potatoes costing over 50 cents per barrel, such as are so used being the refuse stock of crops raised primarily for the table.
The industry is confined to 70 potato starch factories in the county of Aroostook, Me., and 17 in the two States of Wisconsin and Minnesota, having an approximate value of $10,000 each, or a total investment of $870,000.
The following figures are offered as showing the necessity of maintaining the present duty if this industry is to continue. All averages given are based on the past ten years exclusive of 1912, as the figures of that year are not yet available: Total potato starch manufactured past 10 years..
-pounds.. 200,000,000 Total value at $0.038 per pound..
$7,600,000 Total number of starch potatoes used.
..barrels.. 10,000,000 Paid for same at average price, 45 cents.
$4,500,000 A ton of potato starch costs the manufacturer: 100 barrels starch potatoes, at 45 cents...
$45. 00 Overhead charges..
15. 20 Operating expenses..
10.00 Total (or $0.0351 per pound).....
Average profit last 10 years:
Profit per pound (29 cents per 100 pounds)...... Average price of foreign potato starch last 10 years. Duty....
0390 Average price domestic potato starch last 10 years...
.0380 Difference (or 10 cents per 100 pounds).......
..0010 It is very evident if the potato starch industry is to be maintained and continue to furnish a market for these otherwise valueless potatoes the present duty must be maintained.
We would further suggest that although the total of the above figures seems insignificant, and its value to the farmers of the country as a whole too slight to be of importance, nevertheless, the factories being practically all located in one county of one State, the preservation of the industry is of enormous importance to the farmers of that section.
BRIEF SUBMITTED BY BREWER & CO., WORCESTER, MASS.
WORCESTER, Mass., January 13, 1913. Hon. O. W. UNDERWOOD,
Chairman Committee on Ways and Means, Washington, D. C. Dear Sir: Referring to the matter of reconsideration of the tariff, particularly section 296, Schedule G, reading as follows:
“Starch made from potatoes, 14 cents per pound; all other starch, including all preparations, from whatever substance produced, fit for use as starch, 1 cent per pound.”
We understand that there is some disposition on the part of the committee to reduce the tariff on potato starch from 14 cents per pound, as above stated, to 1 cent per pound. We do not think that this should be done, for the following reasons:
The starch industry in this country has developed naturally, and small factories are placed at centers where raw material is easily obtained. There are some 60 to 70 factories in Maine, costing originally about $10,000 each and calling for an investment of nearly $1,000,000, including the western starch factories.
The present potato-starch industry in this country is likely to be wiped out of existence by a further reduction in tariff. We are running a starch factory and, hence, have access to information of the experience of others.
PARAGRAPH 296–POTATO STARCH,
The following statement of the cost of production of potato starch in this country we believe to be substantially correct for the year 1912. Cost of potatoes, 5 barrels per 100 pounds starch, at 55 cents per barrel... $2.75 Manufacturing expenses..
. 60 Packages.. Depreciation on plant, interest charges, insurance, etc.
The selling price of Maine potato starch opened this year at 47 cents per pound, f. o. b. point of production, and is now, January 13, 4 cents per pound, f. o. b. point of production.
The selling price of imported potato starch made in Germany and Belgium is 4 cents per pound, duty paid, f. o. b. Boston. Deduct duty of l} cents per pound and ocean freight of about 17 cents per 100 pounds, and the foreign manufacturer is receiving about $2.33 per 100 pounds.
It is clear from the above that the Aroostook County potato-starch manufacturer, paying $2.75 per 100 pounds of starch for potatoes, and the foreign manufacturer, selling his potato starch finished at $2.33 per 100 pounds, f. o. b. foreign port, is paying 20 per cent more this year for potatoes than his foreign competitor gets for his starch all finished.
The production of Maine starch this year was considerably below the average, not owing to lack of potatoes so much as to the impossibility of getting cheap labor to gather the starch potatoes and separate them from the market potatoes.
It is evident from the above that the high cost of labor in Aroostook County prevents the farmers from gathering starch (or small) potatoes suitable for starch manufacture.
It is further evident that the profit for the Maine manufacturer, at the selling price prevailing at this date, is about 10 per cent, and not large enough to be a great inducement to manufacture.
If the tariff is reduced one-half cent per pound, basing the cost of productiou on the results of this past season, you will see that the foreign starch could be sold at 34 cents per pound, or 5 per cent less than the cost of production in Maine, and the result of that would be to shut up the factories.
The second reason is that it would not be to the interest of the American manufacturer to have these factories closed.
The production of Maine potato starch in the United States is estimated at about 10,000 to 15,000 tons as a normal make, but there seems to be no definite statistics on this point available. If this production is seriously curtailed or prevented, the manufacturers in this country will be entirely dependent for their supplies upon foreign starch manufacturers, who would naturally advance the price as much as possible, so that the reduction of duty would deliberately play into the hands of the foreign manufacturer without benefiting the American consumer.
The standard price previous years for potatoes for starch making in Maine has been 40 cents per barrel or $2 per 100 pounds of starch. This is only 33 cents per 100 pounds less than the foreign manufacturer's price f. o. b. foreign port. The American manufacturer has all the expense of manufacture, freights, packages, etc., on top of that.
The difference of one-half cent per pound in the selling price of potato starch in this country would hardly be felt by the consumer because the starch item is a very small proportion of the entire cost of production of cotton yarn or cotton goods on which the starch is used.
Should the industry be ruined it would deprive the farmers of the United States of an income of $400,000 per year. This is based on an average estimated starch production of 10,000 tons, requiring 100 barrels of potatoes to make a ton, valuing a barrel of potatoes at 40 cents.
This is without mentioning the profit on the production of starch itself and distribution each year of $120,000 for labor. Thus the expenditure of nearly three-quarters of a million dollars, making a total expenditure of $650,000 annually, would be done away with and with the same amount added to the business in Germany and Holland.
Why not keep this business alive in this country when the advantage to the country is practically nil, and the advantages of keeping it alive are considerable? Why encourage foreign manufacturers and discourage our own?
A bill of this sort passed would be to the everlasting discredit of any Congress that permitted it to go through. It would be taking away the livelihood of a large number of people and giving the country nothing in return for it. Yours, very respectfully,
BREWER & Co.
PARAGRAPH 296-POTATO STARCH.
BRIEF OF F. BEHREND, NEW YORK, IN RE POTATO STARCH.
New YORK, January 18, 1913. The COMMITTEE ON WAYS AND MEANS,
House of Representatives, Washington, D. C. GENTLEMEN: I respectfully call your attention to the high import duty on potato starch and potato dextrine, as per paragraphs 296 and 297.
At the present high price of the best grade of potato starch in Germany the present duty of 19 cents per pound would mean 60 per cent ad valorem. The crop this year in Germany was not very good; otherwise the price for potato starch in Germany would be considerably lower, and the ad valorem duty still much higher. Potato starch is used by cotton manufacturers, cotton printers, who have to compete with the rest of the world with their products, and therefore should buy these articles as low as possible. In my opinion, potato starch should be put on the free list. If this is impossible, one-half cent per pound would be ample protection for domestic manufacturers.
There are only very few factories making potato starch in this country, and that only when there was a surplus of potatoes, which was very seldom the case.
So far, large quantities of potatoes have been imported from Europe to supply any deficiency in this country, but as a new law forbids the importation of potatoes, the price for potatoes in this country no doubt will advance, and will become too expensive for manufacturing purposes.
The duty collected on potato starch in 1911 was $115,873.70. This equals an ad valorem rate of 57.23 per cent. The ad valorem rate would have been considerably higher if the potato crop in 1911 had not been a failure all over Europe, and prices ruled very high.
The same can be said of potato dextrine. At the present price of the best grade in
Prime German potato dextrine.--Present price in Germany, 3} cents per pound; import duty, l} cents per pound; equals an ad valorem duty of about 480 per cent. On lower grades the ad valorem duty would be still higher.
Prime German potato starch.- Present price in Germany, 24 cents per pound; import duty, 14 cents per pound; equals an ad valorem duty of 60 per cent. On lower grades the ad valorem duty would be still higher.
BRIEF OF VICTOR G. BLOEDE CO., BALTIMORE, MD.
BALTIMORE, January 18, 1913. Hon. OsCAR UNDERWOOD,
Chairman Ways and Means Committee, Washington, D. C. Dear Sir: In the matter of potato starch and dextrine now being considered by your honorable committee in your tariff-revision hearing, we beg to call your attention to the fact that if potato starch which is the base of dextrine, or the crude material from which it is made, is not to be admitted free, there should be a very substantial difference in the rates of duty as between the crude material, potato starch, and the finished product, dextrine, unless the American manufacturer of these products is to be driven out of business.
So far as the writer's personal opinion on the tariff question is concerned, he is heartily in accord with a horizontal revision downward on all manufactured proucts, and free raw or crude material, but we recognize the fact that potato starch in a limited way is produced in this country, and that for this reason manufacturers of potato starch might justly feel that they were entitled to some protection so long as the principle of protection is incorporated in the laws of our country.
The reason for a large differential between potato starch and dextrine, or rather its justification, is not only due to the fact that labor (and other expenses) entering into the production of this article is much higher here than in Germany or other foreign countries where this material is produced (the old and somewhat threadbare argument), but that the loss in moisture through conversion of potato starch into dextrine will run as high as 25 per cent. This loss or shrinkage in manufacture is to
PARAGRAPH 296-POTATO STARCH.
some extent offset by a reabsorption of moisture subsequently, but it will be seen from the facts above given that it would be very easy for a foreign manufacturer to evade the payment of a just duty by sending the material over in dry or anhydrous form as it comes from the converters, and storing the material in this country after it has passed the customs, thereby adding from 15 to 20 per cent to its weight as between the product as marketed and the weight upon which duty is paid to the Government.
There are many other reasons which could be mentioned for a high duty on dextrine (so long as any duties at all exist), but we think the facts above presented will satisfy your
committee that, entirely outside of the question of labor and expenses, or if allowance for these is made, an additional 25 per cent on dextrine would be justi fied to protect the Government as well as the domestic manufacturers against a possible evasion, of the spirit, if not the letter, of the law imposing such differential duty. Respectfully submitted.
VICTOR G. BLOEDE Co.,
THE CHAMBER OF COMMERCE OF HOULTON, ME., SUBMITS
BRIEF ON THE POTATO-STARCH INDUSTRY.
JANUARY 20, 1913. The COMMITTEE ON WAYS AND MEANS,
House of Representatives, Washington, D. C. Gentlemen: We believe that the tariff should be such as to promote free, active, and open competition with products both in this country and those from abroad; that it should not permit any combination to control the prices of the product. It should, however, encourage home industries. Duties should not be levied such as would retard the use and development of this country's resources. We wish to urge that the present duty, fixed by the Wilson law, of 14 cents per pound on potato starch be maintained.
At the outset we want to emphasize the distinction between potato starch and all other starches, whether corn, wheat, rice, tapioca, or any other starch.
We respectfully submit the following in the interest of the potato-starch industry.
We earnestly request that you carefully consider this industry from four different standpoints, viz: First, as to trusts and competition; second, as to exports; third, as to imports; fourth, as to revenue.
There is no trust or combination.
The potato-starch industry in the United States is confined to 87 factories, 70 of which are located in the county of Aroostook, Me., and the remaining 17 in the States of Minnesota and Wisconsin.
The ownership of the Minnesota and Wisconsin factories is not so familiar to the writer, but of the 70 factories in Maine there are 49 different owners, some of the factories being owned by associations of farmers, in cooperation with the local granges.
The largest number of factories owned by any one man, firm, corporation, or association is 8; the next largest, 7; and of the remaining 55 no more than 2 have the same ownership
We would further say that there exists between all of these different manufacturers free and untrammeled competition. There is no “gentlemen's agreement” of any kind, either to control the price paid the farmers for potatoes or the price asked for the finished product.
There is no potato starch exported.
At all times within the last 10 years there has been a substantial importation of the foreign potato starch. These figures appear in the following table: