PARAGRAPH 1-ACIDS. The glossary on Schedule A prepared by the tariff board gives the ad volorem duty on imports in 1910 at a rate of 10 cents per pound (under the Dingley tariff) as 32.84 per cent. At the rate of 5 cents per pound (under the present tariff) as 30.36 per cent. This seems contradictory; if the rate of 10 cents per pound is 32.84 per cent, the rate of 5 cents per pound should be 16.52 per cent and not 30.36 per cent. We can explain this apparent discrepancy by the statement that the salicylic acid imported in the year 1910 at a rate of duty of 5 cents per pound was not pure salicylic acid, but a crude product which was sold very much below the value of the regular salicylic acid standardized by the United States Pharmacopoeia. The above compilations have been made as carefully and conscientiously as possible, and we believe that they are correct. NEW YORK, December 20, 1912. BRIEF OF MERCK & CO., NEW YORK, N. Y., ST. LOUIS, MO., AND RAHWAY, N. J. The COMMITTEE ON WAYS AND MEANS, House of Representatives, Washington, D. C. Schedule A should be modernized as to classification. There are many anomalies in classification resulting from the patchwork methods of past revisions. This condition requires no extended comment, as it has already been pointed out by the report on Schedule A by your committee in connection with H. R. 20182, passed at the last session of Congress. It is entirely in order that there should be revision of the text of the law to modernize the classification. Basket-clause definitions should be precise.-In the tariff acts of the past there has been too much uncertainty, and it has frequently required protracted litigation to find out the meaning of tariff terms in Schedule A. The new law should set definite standards and make clear what is the precise meaning, for tariff purposes, of the terms used in the various basket clauses, such as acids, chemical compounds, chemical mixtures (whatever these may be), drugs, medicinal preparations, etc. Radical revision of rates downward. Revision of the rates downward in Schedule A to any such extent, for instance, as provided in H. R. 20182 of the last session, would seriously disturb the chemical industry of this country. We are large importers, as well as large manufacturers, of the class of so-called fine chemicals, and where we might be put to a disadvantage by a reduction of the rates in one case we would gain correspondingly on the side of our import business. We would probably be less affected than any other American house in our line by radical changes such, for instance, as were adopted by the old H. R. 20182, so far as direct effects upon our manufacturing and import costs are concerned. But we fear that a cut from the present average of about 25 per cent to a rate of, say, 15 per cent, cutting the old one almost in half, would result in a serious unsettlement of trade conditions in the chemical industry. It is our opinion, based upon our dual experience and interest as manufacturers and importers, that the average rate of about 25 per cent, in general, marks the legitimate line of division between protection and revenue for fine chemicals. We do not argue for or against protection as such, but we strongly urge against such radical revision as will surely upset trade condi PARAGRAPH 1-ACIDS. tions and ruin running plants which have existed for decades. Both protectionists and free traders must agree that sudden transition from one condition of cost basis to another is as unhealthy for commercial organizations as is a violent change of temperature or atmospheric pressure to the individual human organism. And we insist that an absolute reduction of 10 per cent ad valorem in a rate of duty is a radical cut. The increased amount of revenue that may be collected as a result of such cut will be incommensurate with the indirect effect upon the commerce in that product. Raw materials now free should not be assessed.-We urge upon your committee also the danger and unwisdom of imposing heavy taxes on such raw materials as are now free of duty. They are not only burdensome to the manufacturer in unsettling his business, which has hitherto adjusted itself to the natural trade conditions, but they are, eventually, transferred to the consumer in increased measure through concentration of the product, additional profits, etc., provided, of course, that the manufacturer is not altogether put out of the business of making the articles in which the raw material is used. Dynamiting the tariff wall.-Your honorable chairman is reported to have stated in an interview as follows: "To reach this result I prefer to lower the tariff wall, by taking bricks off the top of the wall, rather than dynamiting the structure at the bottom. We would respectfully express our conviction that assessment of duties on such raw materials as are now being supplied to the trade free of duty is applying dynamite at the bottom of the structure. If theory of protection justifiable at all, is so in chemical industry.—If the element of protection to infant industry is to be considered to any degree, it may be noted in passing that the chemical industry as a whole in this country is, generally speaking, far behind that of Germany, which has attained a high state of development. ("Her supremacy as a whole is at present undisputed, etc."-Page 363, report on Schedule A of Committee on Ways and Means, 1912.) STATEMENT AS TO SPECIAL ITEMS. Paragraph 1: Acid, salicylic.-The present rate on this article is 5 cents per pound, and this should not be changed. The present current German market value ranges from 2.40 marks to 2.80 marks per ko. (26 to 30 cents per pound). The short price is for 1,000 ko. (= 1 ton). A duty of 2 cents per pound-as fixed, for instance, in H. R. 20182-is equivalent therefore to a very low and unfair ad valorem rate, and such a rate will simply put the American salicylic acid business out of existence. Error in report of Tariff Board. In the appendix attached to the report on Schedule A (H. R. 20182) the ad valorem equivalent of the specific duty of 5 cents per pound on salicylic acid (act 1909) is given as about 30 per cent for the year 1910; under the act of 1897 (year 1905), with the duty at 10 cents per pound, the equivalent ad valorem rate is calculated at 32 per cent. These figures manifestly embody an error; comparison with present values shows that 5 cents per pound figures less than 20 per cent. PARAGRAPH 1-ACIDS. Paragraph 593: Iodine, crude.-Iodine, crude, being a raw material, should be retained on the free list for the reasons previously stated in our general remarks in regard to the taxation of raw products. Iodine is used in preparing many important pharmaceutical and photographic preparations and also in the manufacture of aniline dyes. Paragraph 41: Opium, morphine, coca leaves, cocaine.-The tariff tax on opium, coca leaves, etc., should not at this time be further increased, as they are already carrying an exceptionally heavy rate for drugs and as it is also contemplated to impose an internal-revenue tax on these products and to assess in addition a special tax on manufacturers of and dealers in these articles and preparations. Internal-revenue taxes on narcotics.-The collection of such internalrevenue taxes on these products will create efficient machinery for restricting the traffic with habitués. An increased tariff tax would not have any effect on the illegitimate traffic, but in the meantime the accumulated charges will have considerably augmented the cost to the legitimate consumer. Rate on morphine and cocaine. However, if the duty is increased on opium and on coca leaves (as was done in H. R. 20182), then there should also be a revision of the duty rate on their alkaloids accordingly. Respectfully submitted. MERCK & Co., New York, N. Y., St. Louis, Mo., and Rahway, N. J. JANUARY 6, 1913. STATEMENT OF ELSON & BREWER (INC.), NEW YORK, N. Y. Hon. OSCAR W. UNDERWOOD, NEW YORK, January 11, 1913. House of Representatives, Ways and Means Committee, SIR: We beg herewith to urge a further reduction in the duty on salicylic acid. Act H. R. 20182 provided a specific duty of 2 cents per pound, which at present prices would be about 11 per cent on the chemically pure product and 15 per cent on the technical salicylic acid. Inasmuch as both grades are largely used as basic raw materials for the manufacture of medicinal chemicals, it is evident that it would be to the interest of the masses to transfer this product to the free list. Respectfully, yours, ELSON, President, Paris and Lyon (France). American Agents for the Societe Chimique des Usines du Rhone, PARAGRAPH 1-ACIDS. GALLIC AND PYROGALLIC ACIDS. STATEMENT OF WILLIAM A. WHITE, OF HARTFORD, REPRESENTING THE EASTERN CHEMICAL WORKS. The CHAIRMAN. We will now hear Mr. William A. White, representing the Eastern Chemical Works. Mr. WHITE. Mr. Chairman, we have made our brief filed before the Finance Committee of the Senate a part of this brief, and I think, perhaps, I had better read from that first. [Reading:] GALLIC AND PYROGALLIC ACIDS. This company was organized in 1910, and after extensive experiments purchased land, erected buildings, and had special machinery constructed for the manufacture of pyrogallic and gallic acids, which are at present entirely imported from Germany. The prospects of success were based upon the assumption that an infant industry such as this, struggling against great odds, would be protected from ruinous competition from abroad. The foreign manufacturers of the above-mentioned products are unquestionably in a much better position, for they enjoy the advantages of enormous capital, long established works, sales organizations, extensive experience in the art and particularly cheap manual and professional labor. In order to succeed in the manufacture of these chemicals in the United States, it was necessary to work out entirely different processes in order to avoid manual labor as far as possible. After the expenditure of much time and money we are now so far advanced that the appearance of our product on the market is only a matter of a few months. If, however, the proposed bill should be enacted into law, all our labor and money will be lost for the following reasons. Pyrogallol was not specifically mentioned in the tariff act of August 5, 1909; it came in under the head of a "medicinal preparation not specially provided for" (Schedule A, 65) at 25 per cent ad valorem-we would call attention to the fact that it is a United States Pharmacopoeia article-later it came in under the head of "all other products or preparations of coal tar, not colors or dyes and not medicinal, not especially provided for" (Schedule A, 15) at 20 per cent ad valorem. And this in spite of the fact that it is a medicinal preparation mentioned in the United States Pharmacopoeia and is also used as a dye in dyeing furs. Gallic acid enters under the specific duty of 8 cents per pound (Schedule A, 1). The proposed bill makes a specific duty of 4 cents per pound on gallic acid and of 6 cents per pound on pyrogallic acid. Gallic acid can not be made in this country under so small a protection, until the manufacturers have become well known to the trade and have had time to refine the processes so as to reduce the cost of production as much as possible. The reasons for this are that the raw material, nutgalls, must be imported at great risk to the buyer, as shipments are very irregular and at times impossible on account of the political conditions in the only countries where this crop is gathered, namely, China, Turkey, and Persia. This is shown by the imports of gall nuts during the last six months. Under normal conditions the crop is gathered so that the first shipments start about August and most of the crop follows during the fall and winter, but during the six months ending March 1, 1912, we can only get a record of a few small lots. Another very important "reason is that the consumption of gallic acid is not great enough to warrant its manufacture in large quantities at one time, which means that the labor element constitutes a very large proportion of the cost of production; and it must also be mentioned that the manufacture requires skilled labor and a well-trained chemist. It is a well-known fact that as soon as the manufacture of any kind of chemicals is taken up here, the foreign manufacturer reduces his price, and this is well illustrated in the case of hydroquinone, which is used in photography for same purpose as pyro. Here we are told that the only American producer has been forced to sell his product at so near cost as to leave scarcely any profit, and were it not for the loss in capital invested in machinery etc., would abandon the manufacture at once. This gallic acid is the product of which pyrogallic acid is made, and theoretically 2 pounds of pyro will be produced from 3 pounds of gallic, but in actual practice the yield does not approximate any such amount on account of the unavoidable losses in operation. It will therefore be seen that in this case the duty on the prime material (gallic acid) is virtually higher than that on the finished product (pyrogallic acid); PARAGRAPH 1-ACIDS. for example, 3 pounds of gallic acid with the proposed duty of 4 cents per pound amount to 12 cents, while the duty on the pyro that can be obtained from 3 pounds of gallic acid would amount to only about 9 cents at proposed rate of 6 cents per pound. That was our brief before the Senate Finance Committee. Mr. HARRISON. But the ad valorem equivalents are very much the same thing on the figures taken from the Treasury books, in one case 10.14, and in the other 9.60. Those are the only figures we can go by. Mr. WHITE. Yes; but you are taking the figures of the proportionate tariff per pound or per dollar's worth, but gallic acid is practically a raw material for pyrogallic acid. Mr. KITCHIN. How much is the product in the United States for 1912? Mr. WHITE. How much was it? Mr. KITCHIN. How much did it amount to, the American product? Mr. WHITE. I have no report for 1912, but I gave it in my previous evidence for 1907, 1908, 1909, 1910 and 1911. The Oil, Paint, and Drug Report gives it for 1907, 1908, 1909, 1910, and 1911. It was 38,000 pounds for 1907. This is merely in thousands. Mr. KITCHIN. How much is that in dollars? How much would it be, about? Mr. WHITE. For the fiscal year 1908-9 the average invoice price was $1.04. This is the price on which duty was computed. In 1908, it was 32,000 pounds, 23,000 pounds in 1909, 37,000 pounds in 1910, 22,000 pounds in 1911. [Reading:] Since appearing before the Committee on Finance of the United States Senate, we have entered the market and we have found that the statements made in our brief submitted to that committee and hereto appended have been fully substantiated by the facts brought to light by our actual manufacturing experience. Especial attention should be called to the fact that we find the item for wages and salaries to all employees to constitute about 35 per cent of the present selling price. This item alone is well known to be at least twice as high as that borne by the German manufacturer and is the chief reason why we are compelled to ask for a continuance of the present rate of 25 per cent ad valorem for pyrogallic acid and of 8 cents per pound on gallic acid. The now existing rates are barely sufficient to equalize the difference in the item of wages and salaries above mentioned. Another reason is that the revenue would decrease, for the amount of pyrogallic and gallic acids imported would not increase at all by any lowering of the duty, since at present the entire consumption of this country is imported from Germany, and consequently the revenue would be smaller in exactly the same proportion as the duty is lowered. The Germans and their agents here would be the only ones benefited by such a measure. The manufacture of these articles, which is a difficult one, would be ruined by their competitive practices and they would be given the monopoly which we are now trying to wrest from them. As they are not hindered, and, if anything, encouraged to form syndicates, which are unlawful in this country, they will dump their goods on our market until we are ruined and then reimburse themselves by fixing the prices so high after that end is once attained that the consumer will be much worse off than if through a slight protection competition had been kept alive. The practice here mentioned is proven by the statistics of importations. For instance, during the fiscal year 1908-9 the average invoice price of pyrogallic acid was $1.04. In 1909-10 the average invoice price of pyrogallic acid was $0.68. In 1910-11 the average invoice price of pyrogallic acid was $0.641. That was owing to the tremendous competition between manufacturers in Germany who afterwards got together, and the price for the last quarter of 1911 and 1912 was 95 cents. We have invested a large sum of money in experiments to adapt this difficult industry to the peculiar conditions existing here, and more money was spent in buying land and building and equipping a factory. The equipment is all of such a nature that it had to be designed and built specially for our particular needs, and if we are |