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PARAGRAPH 449-PRECIOUS STONES.

monds and pearls and things of that kind in London and Paris, where the syndicates exist, and make these prices.

Mr. PAYNE. Were you importing diamonds at that time?

Mr. NISSEN. Yes, sir.

Mr. PAYNE. Is it not a fact that diamonds could be bought in this country at a lower price than an honest importer could import them for and pay 25 per cent duty?

Mr. NISSEN. It was a fact.

Mr. PAYNE. That was universally so?

Mr. NISSEN. That was almost universally so, because 80 per cent of the goods that came into this country during the operation of that bill were smuggled. During the last year of the operation of the Wilson bill the regular importations entering through the customhouse ran down to $2,600,000. The revenue collected upon those importations was $416,000, under a 25 per cent duty upon finished goods and a 10 per cent duty upon the rough; whereas for the three previous years, when there was no duty upon the rough and a 10 per cent duty upon the finished goods, the revenue amounted to nearly a million and a half dollars, on the average.

Mr. HARRISON. Do you not believe that if the Government were to bend its attention to the matter, that a higher rate of duty could be levied on diamonds?

Mr. NISSEN. I think it absolutely impossible, no matter how much the Government would spend in the detection and prevention of smuggling.

Mr. HARRISON. Is there not a great deal more attention being paid now to smuggling than was paid to it even three or four years ago? Mr. NISSEN. There has been during the last four years a great deal better result in achieving some revenue for the Government by a very strict enforcement of the law at the New York entrance.

Mr. HARRISON. Are there not revenue agents in the foreign capitals who are keeping track of purchases of jewels.

Mr. NISSEN. To a very small extent.

Mr. HARRISON. Do you not believe that by extending that system a higher rate of duty could be collected upon diamonds at our ports? Mr. NISSEN. I do not. I think it is absolutely impossible to collect a higher rate of duty upon diamonds. You will create the incentive for smuggling, which it will be absolutely impossible for the Government to circumvent, because with our enormous coast lines east and west, and our long stretches of borders south and north, it would not be possible to detect and prevent the smuggling of articles, of which you can put a million dollars worth into one man's pocket without indicating that he has anything.

Mr. HARRISON. Would not a stricter supervision of the sources from which they come make it possible to collect a higher rate of duty on them here?

Mr. NISSEN. I do not believe it, because the Government has so far, with its revenue agents on the other side, paid very little attention to actual smuggling. They do pay some attention to undervaluations, and mostly of bulky goods and things of that kind, but they can not go into the hearts and safes of the people in Amsterdam and Antwerp who do this business. They never have been able to do it up to the present time.

PARAGRAPH 449-PRECIOUS STONES.

Mr. HARRISON. You must realize that it is going to be very hard for the Democratic Party to defend a 10 per cent ad valorem duty upon luxuries like diamonds.

Mr. NISSEN. Unless we can convince the Democrats that that would be the greatest benefit to the Treasury Department in the collection. Now, we understand of course that this committee will legislate for the benefit of the Treasury Department of the United States, and we want to convince you that while we are here, of course, to maintain ourselves in business, we are also here to help the Government in making a schedule which shall be just to the importer, the cutter, and the retailer, as well as equitable to the Government itself, and one which will produce the largest amount of revenue.

Mr. PAYNE. I do not suppose that it is harder for a Democrat to stand up for what is right than it is for a Republican, if he only has the courage of his convictions. You need not answer that.

Mr. HARRISON. Do I understand my colleague has withdrawn that remark?

Mr. PAYNE. No; I do not withdraw it.

Mr. HARRISON. It is not going to be very hard upon the Democrats who have announced to the country that they are going to put a tax upon luxuries and reduce the tax upon necessities, which is just the reverse of the process of my brother Payne, to defend so low a rate of duty as 10 per cent on diamonds.

Mr. NISSEN. Except upon the theory that that is the best possible schedule that can be devised for the getting of revenue.

There is another thing to be considered, however, gentlemen. We are here as an absolute unit in our trade, from the cutter down to the workman and to the retailer.

We have submitted a brief, which we shall take the liberty of supplementing later on, by putting more names upon it, but already upon that brief appear the names of the best jewelers of 22 States in this Union, who are all in accord. There is absolutely no controversy between us, and we feel that after coming here so absolutely united and wanting only that which we feel is just to ourselves and equitable to the Government, it is proper to ask this committee, in view of the many hundreds of millions of dollars that are invested in this business, not to make these investments of American capital the prey of foreign pirates, who will succeed in getting goods into this country without paying duty upon them.

The CHAIRMAN. Your time has expired, Mr. Nissen; that is all. Mr. PAYNE. Just a moment. I suppose the question is whether the Government should collect a higher rate of duty or allow them to come in free whenever the pirates bring them in?

Mr. NISSEN. That would be the question under this schedule. We claim that under a 10 per cent duty the revenue can be collected. We claim that under a higher duty than 10 per cent it can not be collected. The incentive for smuggling would be so great that the Government can not possibly detect it.

PARAGRAPH 449-PRECIOUS STONES.

BRIEF RELATING TO DIAMONDS, Pearls, and PRECIOUS STONES, now Covered IN SCHEDULES Nos. 449 AND 555.

The COMMITTEE ON WAYS AND MEANS,

House of Representatives, Washington, D. C.

DEAR SIRS: The undersigned, representing practically all of the importers and dealers in precious stones and pearls and imitation precious stones and pearls and cutters of diamonds and other precious stones, together with the workingmen employed in such cutting establishments, from whom a memorial is appended hereto, respectfully request your committee to retain the present schedules Nos. 449 and 555 in the exact form and substance as they now stand in the statutes.

Such schedules are strictly the fruit of experience and were adopted only after the Government discovered the practical impossibility of collecting duties when assessed at rates higher than those now existing. The experiment was not only unprofitable from the standpoint of the Government, due to the enormous shrinkage in duties collected, but was disastrous to the honest importers who found themselves unable to compete when offering their goods on which duty had been paid in competition with goods which had paid no duty whatever.

It is a matter of record that in 1892, two years before the act of 1894, when the duty on precious stones was increased from 10 to 25 per cent ad valorem and uncut precious stones were taken from the free list and scheduled at 10 per cent ad valorem, imports of precious stones cut and uncut were $12,882,784, and the duties paid thereon amounted to $1,238,417; in the year following that act, 1895, the imports through the customhouse dropped to $4,725,455, a falling off of imports to the extent of $8,163,329, while the Government received in duties thereon $804,219.76, a falling off of revenue to the extent of $434,197; in 1896 the total imports were $6,791,633, the duties paid thereon amounted to $1,096,193, representing a falling off of imports as compared with those of the year 1892 amounting to $6,091,151, and a falling off of revenue of $142,224; in 1897 the total imports were $2,698,879, and the duties paid thereon amounted to $418,767, representing a falling off of imports as compared with those of the year 1892 amounting to $10,183,905, and a falling off of revenue of $819,650. Two years after the act of 1897, when the duty on precious stones had been reduced to 10 per cent ad valorem, and the duty on uncut stones had been removed, on which basis such items now stand in the schedules, the imports rose to $17,208,531, and have now risen to about forty millions. In answer to general arguments that may be advanced that articles of luxury should be made to bear higher rates of duty than those now imposed upon such articles, we respectfully submit that experience has shown that more than 10 per cent can not be collected on precious stones and pearls for the reason that such commodities embody large value in small bulk and are therefore easily concealed; hence a higher duty than 10 per cent places a premium on dishonest methods by encouraging and inviting smuggling and undervaluing, and as a matter of fact it has been proven that as the duty increases the revenue to the Government decreases and at the same time reputable merchants are practically put out of business.

Even to-day at existing rates a basis that might be described as one of minimum temptation to defraud, there is an unshakable belief that unscrupulous dealers have been successful in evading the vigilance of the Government agents, notwithstanding the fact that never in the history of our trade has there been greater confidence, based on actual achievement, in the character and ability of the officials charged with the collection of customs duties; nevertheless we recognize the magnitude of their task; our vast coast line and extensive ternational boundaries make it practically impossible to detect and apprehend all parties who seem to have a constitutional objection to the payment of customs duties. Even under the present duty of 10 per cent American tourists buy many millions of dollars worth of our commodities abroad, comparatively very few of which are declared upon their arrival home. What would happen if you widen the margin of cost between here and abroad by increasing the rate of duty? You would simply increase the insatiable desire of the average man and womar to smuggle, for few people consider it in the least wrong to defraud the Government. It is for these reasons that the importers, at their own expense and at a cost of many thousands of dollars, have been maintaining an association (the American Jewelers' Protective Association) for the purpose of cooperating with and supplementing the work of the Government in its efforts to reduce to a minimum the practices of smuggling and undervaluing to which our trade, by its nature, is peculiarly exposed. All of which is respectfully submitted by the following committee representing firms and individuals throughout the United States:

Ludwig Nissen, chairman, Emanuel Arnstein, H. H. Butts, Michael
Dreicer, Harry Durand, Jacob Good friend, Arthur Henius, Arthur
Lorsch, Lee Reichmann, St. John Wood.

PARAGRAPH 449-PRECIOUS STONES.

BY LUDWIG NISSEN.

GENTLEMEN: I represent, with other members of our committee, who are here, the diamond, pearl, precious and semiprecious stone interests of the United States, from New York to California and from Maine to Texas, including all branches of the trade, namely, the cutters, importers, jobbers, manufacturers who use these stones in their products, retailers, and the workingmen employed in the cutting establishments. And, though I have no warrant from them, I know that I represent the interests of all the consumers of these commodities who buy their articles of adornment and pleasure within the borders of this country. We are here to ask you to maintain the present status of schedules 449 and 555, which cover all the articles before mentioned. To the ordinary mind it would seem that, as certain necessaries of life are made to bear a higher percentage of duty, these articles of luxury could be made to bear a higher duty than is now imposed upon them. Experience of the past, however, has shown that a higher duty than is now levied can not be collected. Up to the time of the enactment of the Wilson bill the duty on these commodities was never higher than 10 per cent ad valorem. Representations were then made to the Committee on Ways and Means that the higher the duty the lower would be the revenue accruing from the importations of these goods. Nevertheless the duty at that time was placed at 25 per cent on all finished goods and 10 per cent on the rough, with the result that during the operation of that bill the revenue dropped to less than one-half of what it had been for the three previous years under a duty of 10 per cent on finished goods and rough on the free list, though it should have been increased from 150 to 200 per cent. Two years later, after the duty had been reduced again to what it had been before the Wilson bill, and as it has remained since, the revenue was more than four times as large as it had been during the last year of that bill. But, besides these disastrous effects upon the collection of revenue, it had the still wider effect of putting the honest importer practically out of business. Gentlemen, there are hundreds of millions of dollars invested in our business and we deem it proper to ask you not to allow these investments of American capital to become the prey of foreign pirates who will succeed in getting their goods into this market without much danger of being apprehended, for, with our immense coast lines east and west and the long stretches of border lines north and south the Government can not possibly detect and prevent smuggling of articles of which you can put a million dollars' worth into one man's pockets without indicating that he has anything. We submit that from a revenue producing standpoint the schedules covering our particular line of goods are the best that could possibly be devised, and we trust that you will not deem it necessary to put this statement to the test of further demonstration than the proof furnished by the operation of the Wilson bill. We have gone into more details in the brief which has been filed with your committee, and I shall say nothing further unless it is in answer to questions that may be asked of me.

TESTIMONY OF COL. H. H. TREADWELL, NEW YORK CITY.

The CHAIRMAN. The next witness is Col. H. H. Treadwell, representing Tiffany & Co., Fifth Avenue, New York City.

The witness was duly sworn by the chairman.

Mr. TREADWELL. Mr. Chairman and gentlemen, as the question is of such vital importance to our business, we venture to address you regarding paragraph 449 of the precious-stone schedule of the tariff act of 1909 and to solicit your aid and interest in having it remain as it now reads.

The important considerations in the settlement of the rates to be adopted are:

First. At what rate will the Government receive the largest revenue which can be collected from these goods?

Second. At what rate will the industry of cutting and polishing in this country receive the greatest possible protection; and,

Third. Shall the business be carried on by reputable merchants or allowed to revert to smugglers?

78959°-VOL 5-13-49

PARAGRAPH 449-PRECIOUS STONES.

It is our conscientious opinion, based upon long experience and intimate knowledge of the precious-stone market, that a tariff of over 10 per cent is largely uncollectible, for the reason that the value of the merchandise affected is so enormous that any advance whatever over the rate of 10 per cent places so great a profit upon smuggling that it will be simply impossible for the honest importer to meet the competition.

Facts and figures prove that with the duty of 10 per cent a large amount of revenue has been collected and that a higher rate of duty can not be collected. We submit practical examples for the year 1893, under the McKinley bill, with a rate of duty at 10 per cent, and for the year 1896, under the Wilson bill, with a rate of duty at 25 per cent:

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When in 1898 the duties were reduced to 10 per cent under the Dingley bill, the importations for the first year amounted to $12,934,752, and they have steadily increased in value up to the present time, and in 1912 they amounted to approximately $31,016,389.

Any duty upon rough or uncut diamonds is impracticable, for the reason that there is no one in the Government employ or available to the Government capable of valuing uncut stones. This, in our opinion, will lead to wholesale undervaluations.

The CHAIRMAN. Mr. Treadwell, I understand that your argument is that although diamonds are a luxury, if we could collect a tax, we would be justified in greatly increasing this duty, yet, if we do increase the duty, it will result in so much smuggling that we would not increase the revenue?

Mr. TREADWELL. That has been our experience, Mr. Chairman.
The CHAIRMAN. I think we understand that.

Mr. TREADWELL. Thank you, sir.

The CHAIRMAN. There are several witnesses on the list representing a wholesale saddlery association, but Mr. Campbell told me to-day that he was expecting to speak for them to-morrow morning, so I will not call those names.

The next witness is Mr. William E. Humphrey. Is he here?

Mr. FORDNEY. Mr. Humphrey requested me to have his name presented. He wants to talk before we get through with the hearings. The CHAIRMAN. I had his name presented for Friday.

Mr. FORDNEY. Will it be agreeable to the chairman if he comes here to-morrow?

The CHAIRMAN. I understood that he wants to speak on Friday. Mr. FORDNEY. Do you understand that?

The CHAIRMAN. He told me so to-day.

Mr. FORDNEY. I did not know that. Thank you.

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