PARAGRAPH 429-CORK.

PETITION OF FERDINAND GUTMANN & CO., NEW YORK, FOR REDUCTION OF DUTIES ON CORK.

I. General conditions of the cork trade. The petitioners have been engaged in the business of importing cork for upward of 20 years and are thoroughly acquainted with the cork trade in this country and abroad. They ask that the duties imposed by the present law (sec. 429) be reduced. The effect of these duties is to prohibit the importation of cork products of the lower and medium grades. Only cork of the highest and most expensive grades can be imported at all, and, for reasons hereafter stated, that can be imported only at a cost far above its intrinsic value.

To give a clear understanding of the petitioner's reasons for asking these reductions of duty it will be desirable to explain briefly the way in which cork bark is procured and the manner in which its various products are manufactured in this country and abroad. It is a natural product, grown principally in certain parts of Spain and Portugal. Like other natural products, the grade of the commodity grown in any particular district or upon any particular tree, varies from year to year, depending upon natural causes From an examination of a sheet of the bark as it comes from the trees and before it is cut into strips or squares it is impossible for any expert to determine the quality of the material or the quantity of marketable cork that it will produce. It is not even possible to assume that all of the cork taken at one time from one tree or even all of the cork contained in one sheet of bark will be uniform in quality. It is only after the material has been partially manufactured that its porosity and other characteristics can be learned. All cork is fit for some purpose, but the purposes for which cork of the several qualities is suitable differ and there is a material difference in the value of material of the several grades. In the trade certain grades have been established into which the material is divided, during its manufacture, and the most important process in its manufacture is the assortment of the pieces into which the bark is cut, so that those allotted to any one class or grade shall be of uniform quality. No machine has been or can be devised which would be capable of doing this work. It has to be done by hand and by persons who, through long experience, have become expert in that art. In Spain and Portugal there is a class of people whose sole occupation it is to assort cork. The operation is a very tedious one, requiring not only high degree of skill, but close and consistent application to the work. According to the standards of American labor the tax thus made upon the faculties of the operative is out of all proportion to the small value of the cork, even after it has been properly assorted. In one large Spanish factory the average change in the personnel of employces has been found to be only 4 per cent per annum, while in a factory which the petitioners attempted to operate in the United States on a plane of efficiency equal to that prevailing in Spain but 6 per cent of the employees remained after the factory had been in operation for 17 months. That was not occasioned by dissatisfaction with the wages paid. The women employed were paid as much as $14 a week. Most of them left to take positions paying only $7 and gave as their reason for leaving, their unwillingness to devote to the work the close and consistent attention essential for the proper assortment of the cork. These facts are mentioned to show that in the nature of things the cork industry is not one in which the United States can hope to compete with Spain, however long the domestic industry might receive protection amounting to prohibition.

Cork bark in the form in which it is taken from the trees and before being cut into strips or pieces, is classed as raw material, and may be imported free of duty under the tariff act of 1909. There are about fifteen firms in this country engaged in importing the raw material and the manufacture of various cork products. Of these, one firm produces about 80 per cent of the entire amount of cork manufactured in the United States. This firm, known as the Armstrong Cork Co., was formed many years ago by the merger of the Canastoga Cork Co., Lancaster Cork Co., Truslow & Co., the Williamsburg Co., and all of the more important manufacturers of cork. Since the merger, a new system of grading cork has come into use, and the market prices of cork of all grades have been increased. The prices charged by all manufacturers have been practically the same as those published from time to time by the Armstrong Co.

As stated above, the duty imposed by the tariff act of 1909 has prevented and does prevent the importation of manufactured cork of the lower and medium grades and, as to them, the American manufacturers have a monopoly, with one firm doing 80 per cent of the business. To illustrate the operation of the present law and the way in which it discriminates against the lower grades of cork, or those which enter into

PARAGRAPH 429-CORK.

common use, we give the comparative costs of importation and the selling prices of cork of the higher and the lower grade:

Higher grade:

Cost in Spain..

.do.... 40

Duty (weight per gross of high-grade cork is less than weight of low-grade

cork).

Freight..

per gross.. 131 ...do.... 11

.do.... 55 ...do.... 70

It will be seen that the margin between the bare cost of importation and the selling price of cork of the lower grade is too small to cover the outlay that an importer would have to make as interest upon the money involved in the transaction, cost of handling the material, and selling it, together with a reasonable profit. In the case of highgrade cork, the margin between the cost of importation and the selling price in the United States is ample.

The result of this is that American manufacturers are given a monopoly in cork of the lower and medium grades. That leads to an undue increase of the market price of the higher grades, which is not by any means attributable to, or commensurate with, the duty imposed by the present law. In consequence of the lack of uniformity in quality of cork bark, a foreign producer will not agree to supply an American importer with cork of the higher grade at the market rate which prevails in Europe. The bottling system prevailing in Europe is different from that prevailing in America. Necessarily there is a difference in the sizes of the corks used here and abroad. The foreign manufacturer tells the American importer that he will supply him with American sizes at the European rates, provided that he will take, along with cork of the higher grade, that of the lower and medium grades. It being impossible for the American to import cork of the medium and lower grades, the foreign manufacturer, accordingly, increases his rate for the higher grade to a point which will indemnify him for the loss of the cork which could be used for articles of the medium and lower grades. For the American sizes of such articles, there would be no sale abroad and the material would become waste. The result is that the American importer is obliged to pay more for his cork than it is worth and must sell it in this country for more than it is worth. This enables the American manufacturers to market their product at more than a fair profit over the cost or production, without fear of competition from imported material.

II. Reductions of duty desired; reasons for asking them.-Section 429 of the tariff act of 1909 reads: "Cork bark cut into squares, cubes, or quarters, 8 cents per pound. Manufactured corks over three-fourths of an inch in diameter, measured at the larger end, 15 cents per pound.

Three-fourths of an inch and less in diameter, measured at the larger end, 25 cents per pound.

Cork, artificial, or cork substitutes, manufactured, or cork waste or granulated cork, and not otherwise provided for in this section, 6 cents per pound. Manufactures wholly or in chief value of cork or of cork bark or of artificial cork or cork substitutes, granulated or ground cork not specially provided for in this section, 30 per cent ad valorem.' ""

The petitioner asks that the following reductions of duty be made:

(1) Cork bark cut in squares, cubes, or quarters, from 8 cents per pound to 5 cents per pound.

(2) Manufactured corks over three-fourths of an inch in diameter, measured at the larger end, from 15 cents per pound to 8 cents per pound.

(3) Manufactured corks three-fourths of an inch and less in diameter, from 25 cents per pound to 10 cents per pound.

(4) Cork, artificial, or cork substitutes, etc., from 6 cents per pound to 4 cents per pound.

(5) Manufactures wholly or in chief value of cork or cork bark, etc., from 30 per cent ad valorem to 20 per cent ad valorem.

PARAGRAPH 429-CORK.

It is the belief of the petitioner and other importers of manufactured, or partly manufactured, articles, that, with these reductions of duty, cork of the lower and medium grades, i. e., the kind which is suitable for general use, could be imported and marketed in competition with cork of domestic manufacture. This would result not only in lowering the price of cork of these grades, but also in a much greater decrease of the price of the higher grade. It would result also in an improvement in the quality of the material. It would lead to larger imports and an increase of the revenue derived from them.

Taking an average of the values of cork of all grades, a duty of 8 cents per pound for corks over three-fourths of an inch in diameter (the rafe proposed, supra) would be equivalent to an ad valorem duty of from 25 to 30 per cent. That would cover, fairly, the difference between the labor cost here and in Spain.

In the case of corks of three-fourths of an inch in diameter or less, the present duty of 25 cents per pound results in a serious burden to the people in general. Cork of this grade, which is imported and put in competition with material of domestic manufacture, represents only 1 per cent of the total amount used in this country. Most of the cork manufactured in this size is of the type known in the trade as taper corks. They are used almost exclusively for the bottling of medicines. Last year the imports amounted to only $17,700, out of $1,500,000 worth consumed in the United States.

III. Decrease of duty would result in increase of imports and increase of revenue.— If the duty on manufactured corks over three-fourths of an inch in diameter were reduced from 15 cents a pound to 8 cents, it is believed that the quantity imported would be increased at least three times, and the revenue that the United States would derive from such increased imports, at the rate of 8 cents a pound, would be at least $200,000. The revenue derived from imports at the present rate (15 cents per pound) was about $135,000.

In addition to corks proper, which are completed articles, available for immediate use as stoppers, a large business has grown up in what are known as cork disks, or thin wafers of cork, which are used chiefly in the manufacture of patent stoppers. These stoppers are usually composed of a metal cap, having a lining of paper and a second lining of cork. The annual consumption of corks proper in this country amounts to about $4,000,000. According to the official report for 1912, importations of cork amounted to $1,891,372. Of the latter amount, cork disks made up $1,752,000. Of corks proper, importations were made to the amount of only $139,372.

It is believed that if the duty on cork disks of more than three-fourths of an inch in diameter were reduced from 15 cents to 8 cents, the quantity imported would be doubled, at least, and that the Government would receive about the same revenue from imports of such articles as it receives now, but that with the prospective growth of the bottling trade, and the corresponding increase of the demand for disks, a larger proportion of imported disks would be used and, in consequence, there would be an increase of the Government's revenue.

In the case of corks of three-fourths of an inch diameter and less it is estimated that with the duty fixed at 10 cents per pound (the rate proposed, supra), about 25 per cent of the entire amount consumed annually would be imported and that the Government's revenue from imports would be at least $125,000 a year. If the duty were reduced to 8 cents per pound, 40 per cent of the corks used would be imported and the revenue would amount to $180,000 a year. If the duty were reduced to 5 cents per pound, at least 60 per cent of the quantity of corks used would be imported and the revenue would be increased to $225,000 a year.

In the remaining classes, "Artificial cork or substitutes for cork, manufactured from waste," and "Manufactures wholly or in chief value of cork," it is believed that the proposed reductions of duty would permit the importation of materials now excluded by the prohibitive duty; that the Government would derive revenue from such importations, and that, in consequence of competition between the domestic and imported articles, the people of the country would be supplied with better and cheaper articles, without depriving domestic manufacturers of fair and reasonable profit.

IV. Changes desired in the phraseology of the present law and its administration.-The business in cork disks is one of comparatively recent origin, yet, at the present time, eork disks make up about 90 per cent of the total value of all cork imported. The conditions affecting that business are different from those which govern the trade in corks proper, and it is believed that it would be to the advantage of the Government, of consumers, and of dealers, if separate classification were to be made of cork and cork disks.

JAMES H. HAYDEN,

Attorney for Ferdinand Gutmann & Co.

PARAGRAPH 429-CORK,

BRIEF OF THE ARMSTRONG CORK CO.

Hon. OSCAR W. UNDERWOOD,

Chairman of the Ways and Means Committee,

House of Representatives, Washington, D. C.

SIR: Article 429 of the tariff act of August 5, 1909, on imports into the United States reads:

"Cork bark cut into squares, cubes, or quarters, eight cents per pound; manufactured corks over three-fourths of an inch in diameter, measured at larger end, fifteen cents per pound; three-fourths of an inch and less in diameter, measured at larger end, twenty-five cents per pound; cork, artificial, or cork substitutes, manufactured from cork waste or granulated cork, and not otherwise provided for in this section, six cents per pound; manufactures, wholly or in chief value of cork, or of cork bark, or of artificial cork or cork substitutes, granulated or ground cork, not specially provided for in this section, thirty per centum ad valorem."

All of the cork bark used in the United States is imported, practically all coming from Spain, Portugal, and Algeria. The great volume of manufactured cork is from Spain, but occasional lots come from Portugal and other European countries.

The total annual consumption of corks in the United States is between $6,000,000 and $7,000,000, and in the year ending June 30, 1912, manufactured cork to the value of $2,178,085 was imported, on which the United States Government collected $437,991.98 in duties.

We call special attention to the fact that in the records of "Imports entered for consumption," compiled by the Department of Commerce and Labor, cork bark suitable and used for making corks has not been kept in a class separate from cork waste, granulated cork, etc., which latter materials are used for other purposes and not at all in the making of corks. As the imports have grown rapidly of late years, a natural inference from the statistics would be that there has been a corresponding increase in the volume of corks manufactured in the United States, but this is not the case. During the last five years there has been a great development in the business of cork insulation, and very large quantities of cork waste have been imported for that purpose and also for use in the linoleum industry. The statistics show the average value per pound of the corkwood or cork bark unmanufactured to be $0.03 in 1908, $0.026 in 1909-10, and $0.027 for the year ending June 30, 1912. These figures are very misleading, as they are really an average of the value of the cork waste and cork bark. The value of cork waste fluctuates widely and varies from $0.01 to $0.02 per pound, while the average value of cork bark used for cork making is $0.10 per pound and the fluctuation is within narrow limits. As nearly as we can estimate, the $3,247,086 free imports shown in the statistics for the year ending June 30, 1912, are made up of $2,000,000 for cork bark suitable for cork making, the balance representing the value of cork waste, granulated cork, etc.

We copy from the Government statistics the following figures, showing the percentage of the total cork imports which contributed to the revenue of the United States Government:

Taking the year 1912 and assuming $2,000,000 to be the value of the cork bark suitable for cork making, the imports of dutiable material are in excess of the value of the raw material employed in this country for the manufacture of corks. In other words, approximately 50 per cent of the manufactured corks consumed in this country are made abroad and are brought in under the present duties.

This company manufactures at its Spanish plant practically all of the cork insoles, life-preserver blocks, and seine floats which it sells, and which articles pay duty under the 30 per cent ad valorem clause. It is much more economical to pay this duty than

PARAGRAPH 429-CORK.

to manufacture them in America. We naturally dislike the idea of being forced, by a reduction in the tariff, to increase our plant abroad and do a larger portion of our manufacturing there. It would practically necessitate the duplication of our manufacturing facilities of all kinds in Spain, and it would mean at least the partial dismantling of our American plant, which would result in very heavy pecuniary loss.

For your better understanding of cork commodities, we make the following state

ment:

Cork bark cut into squares, cubes, or quarters is corks partly manufactured. Formerly all corks were made in this way, but the process is practically obsolete; consequently, the importations of this article are small and will probably disappear entirely in the course of a few years. Exhibit 1 shows a few specimens of cork squares or quarters.

The clause reading “Manufactured corks over three fourths of an inch in diameter, measured at larger end, fifteen cents per pound; three fourths of an inch and less in diameter, measured at larger end, twenty five cents per pound," covers manufactured corks of all kinds. Corks naturally divide themselves into two general classes(a) Corks having a diameter of inch or less. (Exhibit 2.)

Those having a diameter of more than inch. (Exhibit 3.) In this class are included disks, or caps, thin circular wafers of cork, employed as liners for tin caps used in the systems of bottle closure represented by the device commonly known as the " "crown or crown cork." (Exhibit 4.)

Corks of class A are used principally by pharmacists, manufacturing chemists, patent medicine manufacturers, and for whiskey flasks and similar purposes. The quality varies greatly, and the manufactured corks range in value from 50 cents to $1 or more per pound, depending upon the quality of the cork bark from which they are made and the percentage rejected as being unsuited for the grade desired.

Class B.-The majority of corks coming under this class are used by bottlers of water, wine, beer, whiskey, oils, condiments, etc., but a small proportion are used for wide mouth bottles, jugs, barrels, etc.

Class B also includes disks or wafers of cork, not used as stoppers but as liners for "crown or similar caps, which have largely displaced the old style straight bottle cork. These are practically of one quality, as porous or low quality disks will not make a tight closure. The present duty is equivalent to an ad valorem rate of less than 20 per cent, and is not sufficient to enable the home manufacturer to produce these disks in competition with Europe. Of the disks used in the United States fully 75 per cent are made abroad and imported under the present tariff. A reduction would probably increase the imports slightly, but would surely destroy the little of this business left to the American manufacturer. There would be a heavy net loss in revenue to the United States Government, and it is altogether unlikely that the American consumer would get the benefit of any cut in the duty.

The clause reading "Cork, artificial, or cork substitutes, manufactured from cork waste or granulated cork, and not otherwise provided for in this section, six cents per pound" we think was meant to cover cork compositions designed for the manufacture of cork stoppers. (Exhibit 5.) This substitute for cork has not been very satisfactory, very little of the material is used, and consequently this clause of article 429 is, at the present time, of comparatively little importance.

The last clause of article 429, reading "Manufactures, wholly or in chief value of cork, or of cork bark, or of artificial cork or cork substitutes, granulated or ground cork, not specially provided for in this section, thirty per centum ad valorem," covers all other manufactures of cork. The commodities of principal value coming under this head are:

Cork paper, used principally for tips of cigarettes. (Exhibit 6).

Seine corks or floats, used on fishing nets. (Exhibit 7.)

Cork insoles. (Exhibit 8.)

Blocks of cork, solid or pieced together, for filling pockets of life preservers. (Exhibit 9.)

A few words in reference to these items may be of service to your committee.

Cork paper is an article which has assumed considerable importance during the last few years. At least 65 per cent of that consumed in the United States is imported, coming from Germany, Holland, and Spain. The tariff of 30 per cent ad valorem does not cover the difference in the cost of manufacture.

SEINE FLOATS, CORK INSOLES, AND LIFE-PRESERVER BLOCKS.

These items are not of great importance, and practically all used in the United States are manufactured abroad. We find it is more economical to make them in