PARAGRAPH 31-EPSOM SALTS.

CONCLUSION.

As manufacturers of carbon dioxide, the process which we are now using will not be the most economical if the duty on Epsom salts is reduced. We have already been seriously considering the abandonment of same and substituting the method of manufacture from the combustion of coke, and any curtailment of our present profits by reason of a reduction in the duty will certainly force us to take this step. Should we abandon the manufacture of Epsom salts the whole southern territory will be surrendered to the foreign monopoly, for the reason that the ocean freights even now to western points are much lower than our railroad rates to the same places, and any manufacturers remaining in the East will not be able to supply this territory in competition to the foreign monopoly. N. P. PRATT LABORATORY, By S. G. BOYKIN,

Vice President and Treasurer.

STATEMENT OF J. G. SHOLES, ESQ., REPRESENTING THE OHIO CHEMICAL & MANUFACTURING CO.

Mr. SHOLES. Mr. Chairman and gentlemen, I represent the Ohio Chemical & Manufacturing Co., of Cleveland. We are intensely interested in Epsom salts, or sulphate of magnesia.

The present tariff is one-fifth of 1 cent per pound, while the proposed tariff is one-tenth of 1 cent per pound. We believe that the present tariff is the best revenue getter, and is truly a competitive tariff. During 1907 there were imported 4,113,000 pounds of Epsom salts, and four years later the importations were 8,000,000 pounds, almost double, showing the rapid increase. The domestic production during 1912, as near as we can figure it, was 16,000,000 pounds. Consequently one-third is imported, while two-thirds is produced.

If the new traiff goes into effect it will be necessary to import double the quantity to obtain the same revenue. Of course, reducing the domestic production to one-third will practically stop domestic manufacture. The imports come from the German Potash Syndicate, who obtain Epsom salts as a by-product. They now ship it into this country at a very low price, from about 37 to 39 cents, and the duty, dockage, insurance, etc., brings it up to 61 or 67 cents. Those at a distance from the coast are able to manufacture and sell it at a very small profit; but if the duty is reduced of course the importations will take its place.

Epsom salts is manufactured from Grecian magnesite and sulphuric acid. Consequently the sulphuric-acid industry is to an extent interested in the production of the Epsom salts; it assists in the production of it.

During one-half of the year we use crude Grecian magnesite, which comes into the country free, and during the other half of the year we use calcined magnesite, which in the past has come in free, but the present schedule, I believe, proposes to put a tariff of $1 a ton on that. Consequently we are hit both going and coming.

The amount of calcined magnesite imported during the fiscal year 1912 was 204,997,000 pounds, and the revenue from that would be $102,000. Our consumption of calcined magnesite, although it means a great deal to us, is only a small part of that, and we feel we have no right to object to the proposed tariff for revenue purposes on the calcined magnesite; nevertheless it makes it pretty hard for us, and we hope that the duty of one-fifth of 1 cent per pound will be retained.

PARAGRAPH 31-EPSOM SALTS.

With the opening of the Panama Canal we will be able to get our crude magnesite from California, where there are the largest deposits of magnesite in the world, and it will develop mines there which are now inactive, I believe, on account of the very small production on the coast.

Mr. HARRISON. Do I understand that for half the year you get your raw material crude?

Mr. SHOLES. Yes.

Mr. HARRISON. And during the other half of the year it is calcined magnesite?

Mr. SHOLES. Yes.

Mr. HARRISON. What benefit, if any, would your Epsom salts derive from our placing sulphuric acid on the free list?

Mr. SHOLES. None at all.

Mr. HARRISON. Why is that?

Mr. SHOLES. Because we could not import sulphuric acid from any other country, I do not think, as cheaply as we could buy it at our door.

Mr. HARRISON. Is that on account of the difficulties of transportation or because of the price?

Mr. SHOLES. On account of the difficulties of transportation, I would say.

Mr. HILL. This business, as stated here in the brief, by a reduction of 10 cents a hundred pounds, will probably stop the manufacture of Epsom salts in the United States?

Mr. SHOLES. Yes, sir.

Mr. HILL. That is, $2 a ton?

Mr. SHOLES. It can be very easily figured. It takes 1 pound of calcined magnesite and 3 pounds of sulphuric acid to produce 5 pounds of Epsom salts. Roughly the cost would be 2 cents at the present time, although actually slightly in excess of that. To be more accurate, the crude material only costs us in Cleveland 56 cents a hundred pounds. The imported can be purchased at 61 cents f. o. b. New York. Our 56 cents is without even a barrel. A barrel will raise the price on that 10 cents a hundred, making it 66 cents. Mr. HILL. There is not much labor involved in its manufacture? Mr. SHOLES. About 5 cents a hundred. Consequently our figures of 73 cents, or 71 cents during 1911, is what it costs us.

Mr. HILL. The entire labor of manufacturing would be $1 a ton at 5 cents a hundred?

Mr. SHOLES. Yes, sir.

Mr. HILL. That is as much as the entire labor involved in the production?

Mr. SHOLES. Yes, sir; twice as much. Moreover, the price of labor should be added to the cost of crude material.

Mr. HILL. It is not a question of the price of labor in this matter at all?

Mr. SHOLES. No.

Mr. HILL. It is simply a question of the turning of it over to the German Potash Syndicate, of which the Government is a part owner? Mr. SHOLES. Yes.

Mr. HARRISON. They do not manufacture Epsom salts.
Mr. SHOLES. Yes, sir.

PARAGRAPH 31-EPSOM SALTS.

Mr. HARRISON. It is a by-product?

Mr. SHOLES. The German Potash Syndicate obtains Epsom salts as a by-product, and if they import to such an extent that domestic manufacturers cease to manufacture I do not believe they will continue to sell it at a low price. They have not done it in other things. The present price of Epsom salts in Germany, France, and England to-day is equal to this country or above this country.

Mr. HILL. You think they will absorb the reduction if it is made? Mr. SHOLES. They will get the advantage of it, and perhaps the domestic manufacturers will go out of business. Then, I believe, when we are unprepared to manufacture and give competition, they will raise the price.

One thing more. I do not think the ultimate consumer will obtain any benefit of a reduction of one-tenth of 1 cent, inasmuch as the man who buys Epsom salts at a drug store pays 5 or 10 cents and obtains a package. It goes into certain preparations, such as mineral waters, and things like that, but the price of those will not be reduced.

Mr. RAINEY. Do you think when the Panama Canal is opened you can get your raw material much cheaper?

Mr. SHOLES. Not much cheaper; but it will be a higher grade of raw material, at probably about the same price. It will be the natural source for us to obtain our supply. We have been trying to do so for the past 5 or 10 years.

Mr. RAINEY. You are now getting it from Germany, you say? Mr. SHOLES. We are now getting the raw material from Greece. Mr. RAINEY. When the Panama Canal is opened up, and you get cheaper freight rates from California, you will not need any tariff?

Mr. SHOLES. Not on the crude material. I do not think the raw material will be decreased in price when the Panama Canal opens, but we will be able to obtain a higher grade of magnesite in probably a little more convenient way. At present it is very difficult to obtain magnesite, because we have to order sometimes six months in advance of our requirements.

Mr. RAINEY. Then you will be able to make a better profit?

Mr. SHOLES. No; not a better profit. If crude magnesite comes from Greece and contains 48 per cent of magnesia, we get 48 per cent out of it.

Mr. RAINEY. Then you will be able to make Epsom salts cheaper; is that it?

Mr. SHOLES. I do not think it will be any cheaper.

Mr. RAINEY. What is the use of using this better stuff you are going to get from California?

Mr. SHOLES. It might be fractionally cheaper. It requires less labor in a way, and it probably would be somewhat cheaper. It is problematical.

Mr. RAINEY. Is it a cheaper process of manufacture?

Mr. SHOLES. No; it is simply a better grade.

Mr. RAINEY. You say you can not make any better salts?

Mr. SHOLES. NO; because we can only get 52 per cent of magnesia out of rock from California. In buying from Greece we get 48 per cent, or approximately those figures. Those figures may not be exact but they show the ratio. It depends upon what the price will

PARAGRAPH 31-EPSOM SALTS.

be and whether it will be lower or higher, to tell whether it will be cheaper or not.

Mr. RAINEY. I do not see any use of using the California product at all, then, if you can not make it better or cheaper.

Mr. SHOLES. We will be able to get it more regularly and more quickly, and perhaps a, little cheaper, but we can not tell what the price will be.

Mr. NEEDHAM. There is no duty on magnesite?

Mr. SHOLES. There is no duty on the raw magnesite, but on calcined magnesite the duty proposed is $1 a ton, and that is what we use one-half of the year.

Mr. NEEDHAM. Your hope is that by the completion of the Panama Canal you can obtain it cheaper?

Mr. SHOLES. We will be able to get the crude material from California, which we have been trying to get for a number of years. Mr. PAYNE. This article is sold in the drug stores, is it not? Mr. SHOLES. Yes, sir.

Mr. PAYNE. It is sold in small quantities to individual consumers? Mr. SHOLES. Yes, sir.

Mr. PAYNE. Three or four ounces as a usual thing?

Mr. SHOLES. Yes, sir.

Mr. PAYNE. What effect would it have on the price to the ultimate consumer if we did reduce this duty to one-tenth of 1 cent a pound? Have you figured it out?

Mr. SHOLES. The ultimate consumer would undoubtedly get no benefit, but the wholesale druggist would.

Mr. PAYNE. The 10 per cent would get lost before it got to him. Mr. HILL. I notice in your brief your last statement is:

These facts are not presented to you at this time as an argument for protection, but to assist you in demonstrating the fact that the greatest amount of revenue can be received by allowing the present duty to stand.

Mr. SHOLES. We believe it will produce a more equitable revenue to the Government.

Mr. HILL. Is it your interest to give the Government a larger revenue in your particular industry?

Mr. SHOLES. No, not entirely. Each one of us is interested in what we are doing, and if we do not continue in manufacture, we do not believe the Government will get as large a revenue at one-tenth of 1 cent per pound as they do now at one-fifth of 1 cent per pound. Mr. HILL. As a matter of fact, in one case it is protection and in the other case it is not?

Mr. SHOLES. It is incidental protection.

Mr. HILL. There is no such thing as incidental protection.

Mr. SHOLES. It would undoubtedly reach this.

Mr. HILL. In this case your argument is for protection to your industry?

Mr. LONGWORTH. I suggest you use an equivalent word. One gentleman did not like the sound of protection.

Mr. SHOLES. I do not know anything else that would

Mr. HILL (interposing). You do not like the word?

Mr. SHOLES. I want protection, but I do not like the word. [Laughter.]

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PARAGRAPH 31-EPSOM SALTS.

Mr. HARRISON. What interests your company most is the increased revenue the Government will get if we increase this tax, or is it the increased profits you will be able to contribute to your stockholders?

Mr. SHOLES. We want to continue to manufacture, and we do not believe the Government will receive any benefit by our going out of manufacture. By our ceasing to manufacture we believe the Government will obtain a less revenue rather than a greater revenue eventually.

Mr. JAMES. You stated that this reduction in the tariff would not

make the article any cheaper to the consumer. Then how is your company affected if it would not affect the price to the consumer?

Mr. SHOLES. The ultimate consumer is the man who buys a small amount at the drug store at the price of 5 or 10 cents. It will affect the wholesale druggist.

Mr. HILL. Is not this used for manufacturing purposes, to some extent, in the textiles?

Mr. SHOLES. Not so much. It is not used in the textiles to amount to anything; it is very little, as I understand it. That statement has been made, but I have not been able to verify it. It is used in the tanning industry.

Mr. JAMES. So, then to take the tariff off will not cheapen the article and to increase the tariff will not raise the price?

Mr. SHOLES. I do not quite get that.

Mr. JAMES. So the tariff does not affect it at all?

Mr. SHOLES. Not to the ultimate consumer. We believe the present tariff of 20 cents a hundred or one-fifth of 1 cent a pound is the best tariff, for the reason that it is a competitive one. We have to hustle, and we make very little money on it.

Mr. RAINEY. Do you know that the Government only collected $7,000 on Epsom salts?

Mr. SHOLES. My figures for last year show they collected $16,000. Mr. RAINEY. What is the difference between sulphate of magnesia and Epsom salts?

Mr. SHOLES. They are the same thing.

Mr. RAINEY. The figures that the Treasury Department give show that they got $7,000 out of it last year. Oh, yes; it is $16,000; you are right.

But if we reduce this tariff we will bring in more of it, will we not? Mr. SHOLES. You will bring in more of it.

Mr. RAINEY. Therefore we will get more revenue?

Mr. SHOLES. You will have to increase just double. In other words, you will have to bring in 16,000,000 pounds in order to get the present revenue of $16,000. Epsom salts amounts to very little to the Government. I should think that the calcined magnesite would be of greater interest.

Mr. LONGWORTH. Do you or do you not think this, that generally in the chemical industry it would not only not be to the benefit but to the damage of the ultimate consumer in this country to drive any American chemical works out of business?

Mr. SHOLES. I do.

Mr. LONGWORTH. In other words, do you not think that the German manufacturers, if they were relieved of the competition here of