PARAGRAPH 86-CEMENT. other Gulf ports would be undersold in these cities by the European plants, which could ship their cement as ballast in vessels returning for cargoes of cotton. The cement market in gulf ports is now kept at reasonable levels by competition between the Alabama plants and those of New York and Pennsylvania. Surely the citizens of Alabama would not wish their plants to meet additional competition through unfair dumping of European surplus stocks in periods of depression, nor do we believe that the cement users of the North Atlantic seaboard would prefer the opportunity of obtaining foreign cement at low figures in occasional years to the establishment of a new all-American enterprise on the Atlantic seaboard. Now, if the New England Portland Cement Co. is engaged in a legitimate, proper attempt to develop an hitherto latent resource of the New England States it has the right to ask at the hands of your committee such protection as will prevent undue and unfair dumping of foreign surplus stocks during periods of depression abroad-provided that the protection which it asks will not in the long run place an undue burden upon the consuming public. It is our contention that the cement users of the Atlantic seaboard will in the long run in the average year receive their cement at lower prices by virtue of the existence of the New England Portland Cement Co. under the present duty than those that would prevail without the New England Portland Cement Co. and with no duty. The argument on which this statement is based is, first, that the New England Portland Cement Co. by introducing additional competition in the coastwise cement trade of the United States will keep cement prices at reasonable levels at levels lower than would be made by imports of foreign cement during periods of prosperity in Europe. It would only be during occasional periods of European depression that imports of European cement could lower appreciably the prices of cement on the Atlantic seaboard. Therefore, the total gain to consumers in years of European prosperity would more than offset the total loss to them in years of European depression, and the tariff in this case would actually result in a saving to the cement users of the Atlantic seaboard. In the second place, we have no hesitation in saying that the present duty is a very reasonable one, amounting as it does to only 20 per cent of the average import value of Portland cement during the past calendar year. It is our understanding that this is less than half of the average rate of duty collected on imports during the past year. As to the effect of a duty of 30 cents per barrel on the ultimate consumer, even in a year when prices in some localities might be reduced to the extent of such a duty, it may be said that the average cost of a cubic yard of mass concrete is about $5 and that this amount of concrete requires only one barrel of cement, on which the tariff protection would be 30 cents, or 6 per cent of the total cost of the concrete. In reenforced concrete buildings, etc., the cement used accounts for a far smaller percentage of the value of a complete job than in the case of mass concrete, and it is doubtful it the ultimate effect of 30 cents per barrel addition to or deduction from the price of cement would affect the cost of constructing an office building or manufacturing plant as much as one-half of 1 per cent, an amount too small to be reflected in rent. We therefore maintain that we are not asking to have a burden put upon the consumers in this country to enable us to establish a plant at Rockland, for we believe that the establishment of our plant there will result in a substantial gain to them. We further believe that in establishing at Rockland a plant manufacturing 1,000,000 barrels of cement per annum, employing 300 American workingmen, consuming annually over 100,000 tons of American coal, requiring the investment of $2,000,000 American capital, and providing new tonnage for shipment in American coastwise vessels, we would be engaged in the highest and most praiseworthy type of industrial development and that our attempt to expand the industry and commerce at New England is entitled to the very kindest treatment at the hands of the Governmentespecially since the treatment that we ask involves in no way a special privilege or over a term of years a taxation of the consumer for our benefit. We feel that we are especially entitled to consideration in this matter for the reason that we are pioneers in the field of cement manufacture in the New England States and also on the Atlantic seaboard, and if we are willing to take the risk of developing these deposits and expending capital in their exploitation we feel that we are entitled to all the protection which can be given us without taxing others for our benefit. There is a further question to be considered in this connection; it is that of discrimination. In years of depression, with surplus production and low freight rates, the manufacturers of Europe will be able to place cement at the Atlantic seaboard at prices 30 cents per barrel below those which could be made by the American plants. Under such conditions the Atlantic seaboard would receive its cement at very much lower prices than those that could prevail 300 miles back from the coast line, for the reason that a haul of 300 miles inland will cost on the average more than 30 cents per PARAGRAPH 86-CEMENT. barrel in freight rates and therefore use up all of the tariff protection. Since the natural protection of freight rates makes prices independent of the tariff, excepting on a very narrow belt along the coast line, a reduction in price in any year through a removal of duties would constitute an actual discrimination by the Government against the entire interior territory and in favor of a very narrow strip along the coast. The question also arises as to whether or not foreign competition is necessary to prevent undue increase in cement prices as a result of combination among American producers. In reply, it may be stated with full confidence that there is not, has not been, and never will be, a cement trust in the United States; that there has not been, and is not now, any agreement among leading producers of cement looking to the restriction of output, restriction of territory, or maintenance of the price of Portland cement; the very conditions of occurrence of the raw materials of Portland cement in the United States makes it impossible that a cement trust should ever develop. In an industry of this sort, control of the output could be obtained only through a control of the raw materials and these occur so widely distributed over the United States that no man or set of men can ever monopolize them. The largest interest now engaged in the manufacture of Portland cement is the Atlas Cement Co., which makes about 15 per cent of the total production of the United States. The next largest is the United States Steel Corporation, which manufactures the so-called Universal Cement from blast furnace slag and limestone and accounts for 10 per cent of the entire production of the country. The remaining 75 per cent of the production come from widely scattered, small, independent companies in all parts of the United States. The very course of cement prices and production in recent years shows that there has been no combination in the industry. If combination in the industry would have the effect of increasing the total production of cement in the United States from 5,800,000 barrels in 1899 to 78,528,000 barrels in 1911, and at the same time decreasing its price from $1.80 per barrel at the mill in 1899 to 84 cents in 1911, it would seem to be to the interest of the Government to foster combination of that sort. Such is not the result of combination, however; it is the result of free, independent competition, such as now exists and which has, incidentally, brought the price of Portland Cement to a level so low that its manufacture is profitable only at a few plants which have such locations that freight rates give protection. In conclusion, we respectfully ask, that your honorable committee, when considering the question of tariff rates on Portland cement, take into consideration the aims of the New England Portland Cement Co., and look to the future rather than to the present in considering the possible effect of foreign competition, remembering always that we ask for protection not on a basis of what now exists but on a basis of what may exist under certain probable conditions in Europe; and if you agree with us that the New England Portland Cement Co. in this attempt to develop a latent but hitherto unexploited resource of the New England States, is doing a proper and valuable service to the New England States and to this country as a whole, we respectfully ask that you retain the present reasonable rate of duty of 8 cents per 100 pounds on Portland cement. IMPORTS INTO CANAL ZONE. DEPARTMENT OF COMMERCE AND LABOR, Hon. OSCAR W. Underwood, House of Representatives, Washington, D. C. MY DEAR SIR: In reply to your telephone inquiry to-day I beg to inform you that imports into the Canal Zone are subject to the customs treatment prescribed by the laws of the Republic of Panama, and no distinction whatever is made between imports from the United States and those of other countries. All articles imported by the Isthmian Canal Commission or by the Panama Railroad are admitted free of duty independent of their country of origin. In this connection your attention is invited to an article on the tariff system of Panama herewith inclosed (from Foreign Tariff Notes, No. 7, pp. 195–200). Very truly, yours, A. H. BALDWIN, Chief of Bureau. 1 PARAGRAPH 86-CEMENT. MAJ. F. C. BOGGS TRANSMITS DATA ON CEMENT FURNISHED ISTHMIAN CANAL COMMISSION. Mr. RAINEY. The question was raised yesterday as to whether or not the bids made by foreign manufacturers of cement were lower than bids made by domestic manufacturers of cement for the work on the Panama Canal. I have addressed some inquiries to the Isthmian Canal Commission, and I have an answer to-day, which was that 14 bids were submitted by foreign manufacturers of cement, and every one of them without exception was higher than the bids submitted by the Atlas Cement Co., to whom the contract for 4,500,000 barrels was awarded. The foreign bids ranged from $1.25 up to $2.10, and the contract was awarded to the Atlas Cement Co. for $1.19, and the letter of the Isthmian Canal Commission to me contains this statement: "The bids for foreign cement were all higher than the bid of the Atlas Portland Cement Co." I ask permission to insert this letter into the record. The CHAIRMAN. The stenographer will insert the letter in the record. ISTHMIAN CANAL COMMISSION, Hon. HENRY T. RAINEY, PURCHASING DEPARTMENT, Washington, D. C., January 10, 1913. House of Representatives, United States, Washington, D. C. SIR: Referring to your letter of January 9, 1913, asking certain questions relative to cement contracts for the Panama Canal, I would advise as follows: It is understood that your request concerns the large contracts for furnishing cement for the locks on the canal and for other purposes, it being noted that very little cement is used in the Gatum Dam or other dams on the canal. It is also noted that the information given below does not include a few small orders for cement which were placed before the request for the large amount required. In connection with the larger contracts, which include practically 95 per cent of all the cement used, it is noted that two requests for bids have been issued: 1. Under Isthmian Canal Commission Circular 420, which was opened June 1, 1908, and under which contract was awarded for 4,500,000 barrels of cement, with authority for the commission, at its option, to increase or decrease this amount by 15 per cent. The cement called for was to be delivered over a period of approximately three years. 2. Circular 721, which was opened on September 3, 1912, called for 1,000,000 barrels of cement and was issued on account of the need for cement in addition to the material called for under Circular 420. The information you ask in your letter will be given below and will be indicated for each circular separately. Who let the contract? INFORMATION UNDER CIRCULAR 420. All bids were forwarded to the authorities on the Isthmus, where they were canvassed and contract was awarded in accordance with instructions from the chairman and chief engineer, Col. Goethals, in his letter of August 14, 1908. How much were they to furnish and what was the price? The contract was awarded to the Altas Portland Cement Co., of Northampton, Pa., for the total amount called for under the circular, viz, 4,500,000 barrels, there being two alternative prices covered in the contract. (1) For material delivered in wooden barrels, $1.19. (2) For material delivered in double sacks, which, at the rate of four sackfuls of cement to the barrel, was contracted for at $1.60. The contract provided, however, for a rebate of 8 cents for each of the eight sacks returned which made the net price of the cement $0.92. Where do the contractors deliver the cement under the contract? PARAGRAPH 86 CEMENT. Were there any bids from foreign contractors? Yes. What were the bids? Foreign bids were received as indicated in the table attached hereto. If the contract had been awarded to foreign factories, would the foreign manufac turers have been compelled to pay any duty to the United States Government? In other words, was the tariff a factor at all in the bidding between American and foreign firms for cement? As a matter of fact the bids for foreign cement were all higher than the bid of the Atlas Portland Cement Co. However, if there had been any lower bids, the question of duty would have been considered on the following account: "Joint resolution providing for the purchase of material and equipment for use in the construction of the Panama Canal was passed by the Senate and House of Repre sentatives, and approved on June 25, 1906, as follows: "Resolved by the Senate and House of Representatives of the United States of America in Congress assembled, That purchases of material and equipment for use in the construction of the Panama Canal shall be restricted to articles of domestic production and manufacture, from the lowest responsible bidder, unless the President shall, in any case, deem the bids or tenders therefor to be extortionate or unreasonable." In order to permit a decision as to what was meant by extortionate or unreasonable prices, inquiry was made of the President by the chairman of the commission under date of September 20, 1906, and the chairman of the commission was advised as follows: "Your letter of the 17th instant has been received, and in reply the President directs me to say that he approves your recommendations as to making awards where bids submitted on material of foreign production are lower than on material of domestic production or manufacture, after adding to the bids received on foreign materials such duty as would have to be paid on same if brought into the United States; and where bids on material manufactured in the United States are the lowest, although some or all of the raw material used in manufacturing them may have been of foreign origin.” In accordance with this instruction it would have been necessary to have added to the foreign bid the duty per barrel on cement which was in existence at that time for cement brought into the United States. The resulting figure would then have been compared with the domestic bid. As indicated above, however, all foreign bids were higher than the domestic bid, and therefore the duty did not enter as a factor in the award. If the contract had been awarded to foreign factories where would they have been expected to deliver the cement. The circular asked for alternative propositions permitting delivery at seaports in various countries or at Colon. The table attached indicates that most bidders submitted bids on material delivered at Colon. Why was the contract awarded to the American bidders? Because they were the low bidders on a well-known Portland cement which was perfectly satisfactory to the authorities on the Isthmus, and whose bid was strictly in accordance with our specifications. INFORMATION UNDER CIRCULAR 721. The details of the awarding under Circular 721 are clearly set forth in the memorandum addressed to the Acting Secretary of War under date of September 12, 1912, copy attached hereto. The recommendation contained in this memorandum was approved by the Acting Secretary of War and the contract has been let accordingly. No bids were received from foreign bidders under this circular, although requests to bid were sent out as usual. If there had been any foreign bids under this circular the same rule relative to duty would have applied. Trusting that the above gives you the information that you desire, I am, Very respectfully, F. C. BOGGS, Major, Corps of Engineers, U. S. Army, Memorandum for the Acting Secretary of War: Our contract with the Atlas Portland Cement Co., Washington, Order 15517, calls for 4,500,000 barrels of cement, with authority to increase or decrease this amount by 15 per cent. When this contract was originally let, it was anticipated that the variation allowed would cover all the cement needed in the construction of the canal. PARAGRAPH 86-CEMENT. However, due to change of plans and new work, it has been found that additional cement will be needed and Isthmian Canal Commission Circular 721 was accordingly issued, asking for bids on an additional million barrels. Under this circular only two bids were received, as follows: Alpha and Lehigh Portland Cement Cos., combined; barrels $1.51; bags, $1.91, with rebate of 10 cents per bag, making the net price in bags $1.11, delivered Jersey City. Santa Cruz Portland Cement Co., no bid in barrels; in bags $1.97, with rebate of 10 cents per bag, making the net price $1.17 delivered San Francisco. The specifications under Circular 721 referred to are practically the same as under the contract with the Atlas Portland Cement Co. and in fact the Atlas Co. are supplying materials in addition to their contract which would practically make the carrying out of their work agree with the requirements of Circular 721. The bids on this cement were opened on September 4. Previous to the opening, a letter was submitted by the Atlas Portland Cement Co., dated August 31, in which they state that subject to our acceptance before September 20, they would extend the contract to cover all the additional quantity of cement required to complete the work on the Canal Zone under the terms of the contract now in force. They also stated. personally that they did not intend to submit a bid under the new circular. Under the contract with the Atlas Co. we were purchasing cement delivered at Jersey City at $1.19 in barrels and $1.60 in bags, with a rebate of 84 cents per bag, making the net price of cement in bags 92 cents. Comparing the low bid received under the present circular with the price now in force under the contract with the Atlas Portland Cement Co., it is noted that there would be a saving per barrel of cement delivered in wood of 32 cents, or assuming that all bags were returned, a saving per barrel when delivered in bags of 19 cents. In other words, if the bid in bags were accepted, the total price under the low bid on the circular for 1,000,000 barrels would be $1,110,000, whereas the total cost under the present contract with the Atlas Portland Cement Co. would be $920,000, or a saving of $190,000. Under date of September 5, I cabled to the Isthmus the results of the opening of the Circular, as indicated above, and also advised that I had in hand the proposition from the Atlas Portland Cement Co., as indicated above. In reply to this cable I received cablegram dated September 9 as follows: "Circular 721, referring to your cable of the 5th instant, reject all bids and provide for continuing contract with Atlas Portland Cement Co. to furnish cement to complete all work in connection with the canal." On receipt of this cable, I replied as follows: "Circular 721, referring to your cable of the 9th instant, directing continuation contract Atlas Portland Cement Co., presume matter should be referred to Secretary for final authority. Advise." And am now in receipt of the following cablegram: Referring to your cable of the 10th instant, Circular 721. Get Secretary's approval, if it is necessary.' After consulting with the assistant examiner of accounts in this office, I am of the opinion that your approval is necessary for the above transaction. In addition to the above and for your information, I would invite attention to the following telegram received from the Hon. Julius Kahn, Member of Congress. "I understand eastern bidders on cement for canal only 6 cents per barrel lower than Pacific coast bidders. As large quantity of the cement is to be used on Pacific coast side I strongly urge that Pacific coast cement producers be given a fair proportion of the contract. This will avoid cost to railroad company for transportation of cement across the Isthmus and will also give encouragement to development of the cement industry on the Pacific coast. Kindly advise me of your action." In reply to this telegram Mr. Kahn was advised that all bids had been referred to the Isthmus. Mr. Kahn apparently cabled Col. Goethals in the same tenor, as under date of September 7 we received the following cable from Col. Goethals, which was immediately wired to Mr. Kahn: "Wire Julius Kahn, San Francisco, Cal., referring to his cable of the 7th instant, Pacific coast highest bidders cement, and award can not be made to them." I am to-day in receipt of the following additional telegram from Mr. Kahn: "Your telegram 10th regarding cement received. Cement manufacturers here are working earnestly to develop industry. The Government ought to help them, for occasion will arise when Government will need plant output. Awarding a portion of the cement requirements to Pacific coast bidders will encourage them and will be no additional expense on cement used on Pacific side of Isthmus. Can a portion of this be awarded to Pacific coast bidders?" |