PARAGRAPH 20-DYEING OR TANNING WOODS, ETC.

The largest quantities of tanning extracts used in the United States are those made from chestnut wood and quebracho wood. These extracts are manufactured in Virginia, West Virginia, North Carolina, Tennessee, Pennsylvania, New York, and Connecticut. The chestnut wood used grows in Pennsylvania, Virginia, West Virginia, North Carolina, and Tennessee, and the quebracho wood is imported from the Republics of Argentina and Paraguay.

As already stated, a sample of the quebracho wood and of the bark has been submitted. This wood holds the same position as dyewoods, according to paragraphs 20 and 559 of the present law, and the same statement made for dyewood applies to quebracho wood.

We would add that after a quebracho tree has been cut down and allowed to lie on the ground, which is always the case, it becomes necessary to remove the bark; otherwise the sap contained in this bark breeds a large quantity of worms which immediately attack the wood and injures its value for extract purposes.

The duty thus created would add, as stated regarding dyewood extracts, an additional cost to the extract manufactured in this country of over 13 cents per pound. We pray that this word "peeling" will not be placed in these sections.

The first mention of quebracho distinct from other tanning extracts was made in the law of 1897. At that time only one grade was shipped into this country, as regards density or gravity, and that grade was a liquid article in barrels standing at about 28° Baumé and containing about 35 per cent of tannic acid, and the law of 1897 placed upon this grade one-half of 1 cent per pound.

Tanning extracts are sold by the pound, the price per pound based upon the percentage of tannic acid or tannin, as it is termed, contained in a pound; therefore, according to the strength or the weakness of the percentage of tan is fixed the price per pound on the market. Some time after 1897 and prior to 1909 great improvements were made in machinery and apparatus for the reducing of liquid extracts to solid extracts without injury to the article so reduced. Extracts from woods are very susceptible and can easily be ruined by excessive heat, nothing more so than tannic acid, and these new methods and improvements enabled the manufacturer of the liquid to reduce these extracts further, or, in other words, to take the liquid which was at 28° Baumé, representing one-half quebracho extract and one-half water and containing 35 per cent of tannic acid, to a heavier density by driving off the half amount of water, and producing what is known

as solid extract.

By driving off this water they of course made 1 pound of extract represent more quebracho and less water, the result showing that this solid article contained about 12 to 15 per cent of water only and 65 per cent of tannic acid. This decrease of water and increased percentage of tannic acid immediately increased the value per pound; therefore in 1909 the manufacturers of this extract in the United States asked that an adjustment or equalization be made to meet these new conditions, and that the duty of one-half of 1 cent per pound on the liquid quebracho remain as in the law of 1897, by adding the words "under 28° Baumé" (which is the universal standard in this country and all European countries to distinguish the

PARAGRAPH 20-DYEING OR TANNING WOODS, ETC. difference between liquid and solid extracts), and that the solid extract, or that above 28° Baumé, be placed at seven-eighths of 1 cent per pound, which would equal the one-half cent per pound on the liquid, as the solid was 65 per cent tannic acid instead of 35 per cent, as in the liquid.

The

The Congress at that time, in 1909, saw fit to make the rate of duty on the solid three-fourths of a cent per pound, as per paragraph 21 in present law, instead of seven-eighths of a cent, which we asked for, which was a slight reduction, as it made the duty based on the percentage of tannic acid (viz, 65 per cent) less than the old duty of one-half cent on the liquid (viz, 35 per cent) as in 1897. foreign manufacturer, in addition to this decrease in duty on sold, gained a reduction of freight, in that they did not pay on the weight. of barrels, as they put up and ship the solid in bags, which is a much cheaper package than barrels, also saving the freight on 50 per cent. water that they formerly paid on the liquid extract and getting about double the price they could get for the liquid which they brought in under the law of 1897.

Manufacturers of tanning extracts have always felt, and still do, that this adjustment was not an advance in 1909, but actually a reduction. Immediately after the passage of the 1909 law liquid extracts were no longer imported into this country, they coming only in solid form.

The foreign manufacturer is noted for his shrewdness, and were it not to his advantage he would not have dropped the liquid entirely in favor of the solid.

Our greatest competition in quebracho extract-in fact, we might say 90 per cent of it-comes from the Argentine Republic, and from one concern in that country known as the Forestal Land, Timber & Railways Co. In 1896 and 1897, when this extract was first manufactured in the United States, there were a number of small independent manufacturers in the Argentine, but certain Germans, seeing an opportunity for large combinations, started in, and late in 1907 our agent or representative in Buenos Aires wrote us a letter in which he said an agreement has been made between several of the quebrachoextract manufacturers, etc., of the Argentine as to the fixing of prices and the selling of the extract, and stating that "the signing parties are the Forestal Land, Timber & Railways Co., the Puerto Sastre Co., T. II. Bracht & Co., the Puerto Marie, the Industrial Del Chaco, and the Cassados."

Since that time we have been constantly hearing of the Forestal Trust, and nothing we think can be more convincing as to their increased growth and power and control of this business than to quote from their own reports and the newspaper statements, relative to v hat they have done.

In 1909 there appeared a small pamphlet published in London by this company, giving maps, views, and facts concerning their business, and they state in this prospectus that their chief business is to make the extract from the quebracho wood. We quote:

It is interesting to note that the pioneers of the quebracho-extract industry were Messrs. Hartneck, Portalis & Renner, now directors of the Forestal Land, Timber & Railways Co.

PARAGRAPH 20-DYEING OR TANNING WOODS, ETC.

The result of the labors of those gentlemen culminated in the formation of the Compania Forestal del Chaco, which built a factory at Guillermina, capable of turning out 24,000 tons of extract per annum, some 300 miles north of the factory which had already been established at Calchaqui, which had a capacity of 14,000 tons yearly, and they later on completed a third plant with a capacity of 7,000 tons yearly at Peguaho.

The business of that company was taken over by the Forestal Land, Timber & Railways Co. (Ltd.), as from the 1st January, 1906. This company has now a share capital of 1,200,000 pounds sterling, of which 1,171,500 pounds sterling has been issued, divided equally into preference and ordinary shares, besides 477,680 pounds sterling outstanding 5 per cent first mortgage debentures.

On a slip placed in this book after publication they say:

Since this pamphlet was sent to press, the Forestal Land, Timber & Railways Co. (Ltd.), has purchased $1,500,000 paper (or, say 130,000 pounds sterling) of 6 per cent first mortgage debentures of La Sociedad Quebrachales Fusionados at 90, and secured at the same time, the consignment of the total production of the Fusionados extract for the next seven years.

The Review of the River Plate (a trade paper published in Buenos Aires), under date of June 16, 1911, presents the report of the directors to the stockholders for the year 1910, and states:

The company has taken a substantial participation in the capital of the Ocampo Railway Co., which owns 36 kilometers of permanent way between the port of Ocampo and the terminus of the company's Malberti Railway, together with rolling stock, an investment which will conduce to the economical working of the Campo Redondo factory. The directors have been advised by cable that the long-deferred arrangement with the Fusionados Co. has been completed, and they await fuller mail particulars. The Fusionados Co. and the Hardy & Co. were the largest and strongest competitors the Forestal Co. had in the Argentine, and now they own or control them both.

In 1912, at their stockholders' meeting in London, they issued a statement, with a balance sheet (a copy of which we have) showing a profit of over 429,000 pounds sterling. They also declared for 1911 dividends, the same as previous year 1910, viz, 14 per cent on their preferred stock and 24 per cent on their ordinary or common stock. Next to the Argentine, the largest manufacturing interests of this extract, is found in Germany and was started some years ago in Hamburg by Mr. Herman Renner. This gentlemen, as already shown, is a director in the Forestal Land, Timber & Railways Co., and we now quote from a Hamburg paper of October 28, 1912, as follows:

[Gerb und Farbstoffwerke H. Renner & Cle, A. G. Hamburg.]

The principal object of the extraordinary stockholders' meeting held on October 28 was the proposition to accept an amalgamation of interests with the Forestal Land, Timber & Railways Co. (Ltd.), London. The presiding officer, Herr Geh. Kommerzieurat, Dr. Ing. Carl Delius opened the meeting with the statement that the executive committee felt sure that the amalgamation of interests would be beneficial to the shareholders. The principal points of the contract were as follows:

We conclude on January 1, 1913, an amalgamation of interest with the Forestal Land, Timber & Railways Co. (Ltd.), by handing over our total profit, including the dividends, received from our ownership of Forestal shares and other participations in connection with the Forestal Co.

The Renner Co. continues its present and absolutely independent organization; we in return are to receive a payment, which shall be governed by the dividend paid on the common and preferred shares of the Forestal. Calculating the dividend of 19 per cent paid for the past 2 years on the fully paid-in capital, said payment would amount to 1,940,000 marks a year.

PARAGRAPH 20-DYEING OR TANNING WOODS, ETC.

Every reduction of 1 per cent would be equal to a decrease of 100,000 marks; every addition of 1 per cent would represent an increase of 80,000 marks, but in no case shall the payment of the Forestal Co. exceed two and one-half millions yearly.

We to receive 10 per cent of all special reserves, but said amounts shall be deducted whenever said reserves later on are paid out in the shape of dividends.

We bind ourselves not to sell any of our participations" without the consent of the Forestal. This conditions does not include the 11,669 preferred Forestal and 9,624 common shares, procured last year, with which we can act as we please.

Any profit we may make by a sale of these shares does not belong to the Forestal Co., but to our stockholders; we have also reserved to ourselves the ownership of a special reserve fund of 600,000 marks set aside to be used for the purpose of a supplement to our dividends in special instances.

This agreement has been made for a period of 10 years and can be mutually canceled by giving notice 6 months in advance-earliest per January 1, 1920-by the payment of 30,000 pounds sterling as a compensation.

The compensation of a cancellation for 1921 is reduced to 25,000 pounds sterling and for 1922 to 20,000 pounds sterling.

The legal settlement of disputes shall be subject to the decision of the English auditors Deloitte, Plender, Griffiths & Co., and the Revision Treuhand A. G. Berlin. As a public indication of the amalgamation of interests, we propose the supplementary election of Mr. C. Hart neck, one of the directors of the Forestal Co., as a member of our executive committee.

We ourselves are represented on the board of the Forestal Co. by our president, Herr Kommerzieurat and Herman Renner.

The stockholders accepted the agreement unanimously by acclamation; in the same way Mr. Hartneck was elected a member of the executive committee.

In reply to the question of a stockholder, whether the possibility exists to receive for the current year a considerably higher dividend, the presiding officer stated that, taking as a basis the result of the past 9 months, it is believed that at least the same dividend as the one paid last year will be distributed.

But at the last moment he could not say whether a larger dividend could be paid, because it was impossible to foretell the result of the remaining three months, and, further, nobody could tell whether some complication in reference to the political situation may arise.

In regard to the future prospect of the Forestal Co., the president, Mr. Renner, stated that the present year was of less interest for said company than the years 1913 and 1914.

The outlook for the year 1913 could be called extraordinarily favorable, because there have been made such large sales of extract that it is believed that the average dividend of 19 per cent-paid for some years past is safe. In the future also we may count upon receiving the same good dividends regularly.

In reply to a further question the speaker gave the additional information that the stockholders' meeting of the Forestal Co. was taking place on October 28 at 3.30 p. m. in London, and in that way all formalities in reference to the amalgamation of interest were settled on the same day.

Again we quote from the Financial Times of London, under date of September 25, 1912:

The Financial Times, referring to the reported amalgamation of the Santa Fe Land Co. with the Forestal Land, Timber & Railways Co., remarks that this will enable them, if the project is realized, to keep up the present price of quebracho, the working of which is the principal object of the two companies.

Thus it seems that the control of this business is pretty well in the hands of one company, and all they require now in order to control

PARAGRAPH 20-DYEING OR TANNING WOODS, ETC.

a large part of the world is the American manufacturing interests which a reduced tariff rate would make it easy for them to accomplish.

In the hearings before your committee in 1909 Mr. Klipstein, the agent of the Forestal Land, Timber & Railways Co., undertook to deny a statement made by Mr. Skiddy that there had been a trust formed in the Argentine in 1907 to control the price of quebracho extract, but his denial is as follows:

Mr. Skiddy states that there was formed a trust in Argentine in 1907 to control the price of quebracho extract. As a matter of fact, the manufacturers of quebracho extract, in view of the impending panic, tried to form a combination to prevent enormous losses, but the panic was too severe, and the combine went to pieces, and the price of 2 cents per pound for quebracho extract, as mentioned in our first statement, was the result. The Argentine makers of extract had to take their panic medicine like all the rest of the world.

Please note that the price went to 2 cents per pound in 1908, as stated by Mr. Klipstein, prior to their purchase of 130,000 pounds sterling of the Fusionados Co., a very natural result of prices below the cost of manufacture.

Mr. Klipstein in 1909 furthermore stated before the Ways and Means Committee in a brief that the price used to be 4 cents to 5 cents per pound, and generally imported in the form of the liquid

extract.

Bear in mind, if you please, that Mr. Klipstein in this statement is referring back prior to the time of their making solid extract, and before they realized the growth of the American competition, and this competition when realized caused a reduction from 4 or 5 cents for liquid at 35 per cent tan to 4 cents for solid at 65 per cent tan (worth in the market almost double the price of the liquid), or, in other words, they were selling liquid without the American competition at a price equal to 9 cents per pound for the solid that they are selling to-day for 4 cents per pound. Why should not prices advance again without competition?

If the Forestal Co. or their representatives in this country undertake to claim that they are being frozen out and that the present rates of duty are so great they can not compete, then we would refer you to their statements already made in their reports to their stockholders at their annual meetings held in London and their continuing to pay 24 per cent on their ordinary stock and 14 per cent on their preferred stock.

Such dividends have not been and can not be earned by the American manufacturers. A reduction in the present duty would tend to bring about one of two results, either the closing out by the American manufacturers at great loss, or the temptation to get together, advance prices, and control the market.

We also have received a copy of the Daily Mail of Paris, under date of November 14, 1912, with an advertisement of the Forestal Land, Timber & Railways Co., stating that the capitalization is 1,700,000 pounds sterling, setting forth their great earning power, etc., and offering to sell 1,000,000 pounds sterling of 5 per cent first mortgage bonds.

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