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PARAGRAPH 3-FORMALDEHYDE. Both are powerful antiseptic disinfectants and preservatives, employed in a number of ways, separately or in different combinations.
Formaldehyde is produced by the oxidation or partial combustion of methyl alcohol by an elaborate process of purifying crude wood alcohol.
The apparatus and plant necessary for the production of formalde hyde, consisting chiefly of large expensive copper stills and fittings, etc., are correspondingly higher in cost in the United States than in other countries, requiring a larger investment of capital, affecting overhead charges, including interest, insurance, and depreciation.
The price of formaldehyde and paraformaldehyde is governed by the price of crude wood alcohol. The price of wood alcohol is largely regulated by what the wood-alcohol producers secure for their byproducts, namely, acetate of lime and charcoal. For acetate of lime à relatively uniform market exists, while for charcoal great fluctuatio at times take place, on account of the varying demand on the part of the iron industry, in which charcoal is mostly consumed. Low prices of charcoal almost always mean higher prices for wood alcohol. The price of wood alcohol is also affected by the demand and supply, thus leaving the manufacturer of formaldehyde at the mercy of rather erratic fluctuating market conditions, as far as the supply of his raw material is concerned. On one side the constantly increasing demand for wood-alcohol products and on the other the fact that our depleted forests are not being replanted tends toward a marked increase in the value of all wood-alcohol products.
The Canadian competition, with its lower cost of labor and immense resources of undepleted forests, has cheaper raw material for the manufacture of wood alcohol at its disposal.
As pioneers of the formaldehyde industry in this country, we therefore petition that the adequate rate of duty on formaldehyde of 1} cents per pound specific, paraformaldehyde 7 cents per pound specific, be established, so that in case the reciprocity question between the United States and Canada should at any time be reopened and concessions on the United States import rates of duty be agreed to it will not endanger the American formaldehyde industry.
The Canadian competition in seeking the nearest market as an outlet for its formaldehyde surplus which can not be consumed at home may cause ruinous competition in the United States, which could not be checked, as our customs laws do not embody any “dumping" provision.
Approximate revenue estimates. Payne-Aldrich Tariff Act 1909:
Paragraph 3: Paraformaldehyde, basis 100 per cent pure, 25 per cent ad valorem, 25,000 pounds, at 7} cents per pound...
$1,812. 50 Paragraph 3: Formaldehyde, 40 per cent solution, 25 per cent ad valorem, 250,000 pounds, at 2 cents per pound...
5,000.00 Modified duty suggestion: Paraformaldehyde, 25,000 pounds, at 7 cents per pound.
1,750.00 Formaldehyde, 500,000 pounds, at 1} cents per pound..
PERTH AMBOY CHEMICAL WORKS,
BRIEF OF JOHN F. QUEENY, PRESIDENT MONSANTO CHEMICAL
WORKS, ST. LOUIS, MO. COMMITTEE ON WAYS AND MEANS,
House of Representatives, Washington, D. C. DEAR SIR: Pursuant to your notice of tariff hearings of December 11, 1912, we beg to say that we are engaged in the manufacture of a limited number of medicinal and fine chemicals, most of which, up to a few years ago, were manufactured exclusively in Europe -principally in Germany-and sold in the United States at materially higher prices than are now ruling, the reduction due entirely to our competition.
It is no unusual procedure for the foreign chemical manufacturers to maintain high prices here, so long as they have no competition, but immediately the manufacture of a product is undertaken here, the price is dropped to a point which makes its manufacture practically unprofitable in an endeavor to discourage the new manufacturer. This they are enabled to do, and at a profit to themselves, because they can maintain high prices at home, due to their combinations-å fact well known—and dump their surplus production here in competition with us.
To illustrate: The selling price of phenacetin (acetphenetidin)classified under paragraph 65—in the United States in wholesale quantities was $12 per pound for 17 years, up to and including the year 1906, during the time it was manufactured exclusively in Europe. The patent expired during 1906, and in 1907 its manufacture was taken up by us, with the result that the price in the United States to-day, in wholesale quantities, is about 90 cents per pound, as against $12 per pound six years ago, and $1.15 per pound the year following
Phenolphthalein--also imported under paragraph 65—was manufactured exclusively in Europe until about three years ago, and was sold in this country in wholesale quantities at $2.15 to $2.75 per pound. It is now manufactured by us in competition with the European manufacturers, with the result that the wholesale selling price is now $1.20 to $1.25 per pound, almost one-half the price previously obtained here by them. Nevertheless, thousands of pounds are still coming in from Europe.
The manufacturers of fine and medicinal chemicals are perhaps under greater expense proportionately to the amount of business done than any other line of manufacture. They must always maintain, at a considerable cost, a research laboratory, with no assured compensatory results to offset such cost. They must keep pace with the changes that are constantly taking place in processes of manufacture, which changes often make obsolete the machinery or apparatus then in use. This necessitates a complete change in the character of the machinery or apparatus at a considerable cost, and as part, and very often the greater part of the machinery and apparatus required in an installation, must be imported from Europe, the manufacturers of fine chemicals start out with an investment of at
least 45 per cent more than the European manufacturers in machinery and apparatus alone, as comparatively little of the machinery or apparatus required in this industry is now manufactured in the United States.
Chemists who are satisfied with a salary of $600 to $900 a year in Europe-Germany and Switzerland particularly--demand $1,800 to $3,000 a year under similar conditions of employment in the United States. The young men who graduate as chemists from our universities demand a salary of $900 the very first year they are out of college, while in Europe such graduates are glad of the opportunity to get in a factory at comparatively little or no compensation, to get a start and for the knowledge they acquire in such factories.
The manufacture of medicinal chemicals, even under the present tariff, is not in any too good a position, while Germany is spending an enormous amount every year for its development through its great universities, in which the professors and the chemical factories are working hand in hand with enormously good results.
Medicinal chemicals reach the consumer in very small quantities, and therefore any reduction in the present rates, which we ask you to retain, will not affect the ultimate cost to them to any appreciable extent, but will affect and discourage home manufacture, and at the same time reduce the revenue now obtained by the Government.
Our investment for the manufacture of the medicinal products we now make has been made within the past five years and represents about $300,000. This investment was made in good faith, based on the present tariff rates, and the benefits thus far obtained have been more for the consumers than for us, because they have obtained such products as we manufacture at from 25 per cent to 50 per cent less than they were paying when we started manufacturing: We ask, therefore, that the raw materials used in the manufacture of fine and medicinal chemicals be retained on the free list and the present rates be also maintained on the finished products, which are commensurate or with the conditions now existing in this country.
This will enable us to continue manufacturing, and further, it will encourage the manufacture of fine and medicinal chemicals in this country to the ultimate good of our whole people.
We respectfully submit the following:
Paragraph 3.-Alkalies, alkaloids, etc.: Caffeine being an alkaloid is now classified and imported under this paragraph and assessed at the rate of 25 per cent ad valorem.
Caffeine is very largely imported into the United States in competition with home manufacturers, and the quantity imported pays a good revenue to the Government. There should be no change, therefore, in the present rate, if tea siftings-the raw material-is retained on the free list.
With the present rate of 25 per cent on the entered foreign value for caffeine-equal to 76 cents per pound - we can and do compete, whereas if tea sistings-- the raw material--be made dutiable at 1 cent per pound-equal to about 40 per cent of its value--as proposed in H. R. 20182, then caffeine should be made dutiable at 40 per cent ad valorem, or preferably at a specific rate of $1.25 per pound.
We desire to call attention to an error in the caucus print of H. R. 20182, in which appears the average unit value of caffeine as $1.66 and $1.82 per pound (1910), (1911), whereas the entered value for the fiscal year 1911 is $3.06 per pound, as shown in a letter from the Treasury Department to us under date of April 24, 1912, appended herewith.
The actual market value of caffeine abroad in maximum quantities is 30 marks per kilo, equal to $3.24 per pound.
Washington, April 24, 1912. The MONSANTO CHEMICAL WORKS,
1800 South Second Street, St. Louis, Mo. GENTLEMEN: Referring to your letter of the 12th instant, and to previous correspondence, relative to the market value of caffeine imported during the past year, I have to advise you that an investigation of this subject discloses that the prices stated in your letters as the foreign value are approximately correct.
The collector of customs at New York reports that due to erroneous quantities having been recorded by the statistical clerk the quantities shown in the report published by the Bureau of Statistics are incorrect. The following is a correct report of the caffeine imported during the fiscal year 1911:
The price lists inclosed with your letter of January 20 last are herewith returned. Respectfully,
F. M. HalsTEAD, Chief Division of Customs.
Paragraph 15.-“Coal-tar dyes or colors, not specially provided for in this section, thirty per centum ad valorem; all other products or preparations of coal tar, not colors, or dyes and not medicinal, not specially provided for in this section.”
We strongly urge the retention of the words “and not medicinal” in this paragraph, which were omitted in paragraph 22, H. R. 20182, although included in the two succeeding paragraphs of that bill, i. e. paragraphs 23 and 24. The classification “not colors or dyes and not medicinal" covers a number of intermediate coal-tar products used in the manufacture of medicinal products, and the omission of the words "and not medicinal” in said paragraph is likely to cause confusion, trouble, and expense for the importer of such intermediate coal-tar products, with no apparent benefit to the Government.
The imports under the classification of “not colors or dyes and not medicinal” during the fiscal year ending June 30, 1910, amounted to $661,500 and the duties collected amounted to $130,312 as shown in Schedule A, Report No. 326, page 205. 78959°
Paragraph 65.-(1) “Medicinal preparations containing alcohol, or in the preparation of which alcohol is used, not specifically provided for in this section, fifty-five cents per pound, but in no case shall the same be less than twenty-five per centum ad valorem.”
The imports under this paragraph, paying the specific rate of 55 cents per pound, are apparently on the increase, as shown herewith:
In the manufacture of a number of articles coming under this paragraph the alcohol is transformed or lost during the process of manufacture and does not appear in the finished product. For that reason we ask that the wording of this paragraph (65) be retained as it now reads; otherwise products so made might come in under other classfications, with a loss of revenue to the Government. Paragraph 18 of H. R. 20182, introduced at the last session of Congress, would not cover such articles, for the reason that the finished products do not contain alcohol, as such, although alcohol was a raw material or the base for their manufacture.
Paragraph 83.--Vanillin, present rate 20 cents per ounce.
Vanillin is a synthetic chemical product manufactured from cloves. Until about 15 years ago it sold in the United States by European manufacturers at $5 per ounce, now selling at 32 to 35 cents per ounce, due to home competition.
The rate of duty was reduced in 1909 from 80 cents per ounce to 20 cents per ounce, the rate now ruling. The manufacture of this product requires a large investment for the quantity manufactured, its process of manufacture is very complicated, and requires, besides competent chemists, a number of dutiable chemical products for its manufacture in addition to the raw material, cloves.
Vanillin enters almost entirely into the manufacture of perfumery, flavoring extracts, biscuits, chocolate, and confectionery, the price of which would not be affected in the slightest by the cost of vanillin, even if it were two or three times its present selling price, because of its strong and far-reaching flavoring properties.
None would therefore suffer by continuing the present rate of 20 cents per ounce, with cloves, the raw material, on the free list. If cloves should be made dutiable at 2 cents per pound, then vanillin should be made dutiable at 25 cents per ounce.
Paragraph 679.--Cloves now on free list. About one-third of the entire quantity imported is used in the manufacture of vanillin. If cloves are made dutiable, a proportionate increase should be made in the rate on vanillin (par. 83); for instance, if cloves are made dutiable at 1 per cent per pound, the duty on vanillin should be increased 21 cents per ounce.
If cloves are made dutiable at 2 cents per pound, then the duty on vanillin should be increased 5 cents per ounce over the present rate.