1-18-39 LETTER OF TRANSMITTAL UNITED STATES TARIFF COMMISSION, Hon. W. C. HAWLEY, Chairman Committee on Ways and Means, House of Representatives, Washington, D. C. MY DEAR MR. CHAIRMAN: With further reference to your letter of June 27, 1930, addressed to Hon. Edgar B. Brossard, then chairman of this commission, I have the honor to inform you that the commission has examined the provisions referred to in your letter, and to inclose the result of its examination in the form of a report on the Differential Between Raw and Refined Sugar. Very truly yours, HENRY P. FLETCHER, Chairman. REPORT ON THE DIFFERENTIAL BETWEEN RAW AND REFINED SUGAR By letter dated June 27, 1930, the Ways and Means Committee of the House of Representatives requested the Tariff Commission to obtain and report to the committee certain data with regard to the differential in the duty between raw and refined sugar. The request reads as follows: Under the provisions of the tariff act of 1930, sugar testing by the polariscope not above 75 sugar degrees is dutiable at 1.7125 cents per pound, and for each additional degree 0.0375 of 1 cent per pound. Under the tariff act of 1922, the rate was 1.24 cents per pound at 75°, and the rate of progression was 0.046 of 1 cent per pound. When these rates are worked out on the basis of Cuban sugar, it develops that the differential between 96° and 100° sugar under the act of 1922 was 0.1472 cents per pound against 0.12 cents per pound in the act of 1930, or a reduction of 2.72 cents per 100 pounds. It is contended that this differential affords no protection to the American refiners and that there should be a higher rate of progression on the sugar testing 97, 98, 99°, and 100°. It will be appreciated, therefore, if the commission will examine the provisions referred to and advise the committee what differential, in its opinion, would be necessary to afford the proper protection to the refining industry. The differential in duty between refined sugar and raw sugar may involve two factors: (1) The amount necessary to compensate for the duty on the quantity of raw sugar required to make refined sugar; (2) the protective portion designed to equalize any difference between foreign and domestic costs of refining, cost of containers, and difference between the costs of transporting raw and refined sugar to the United States. (1) The amount of differential necessary to compensate for the duty on raw sugar may be computed as follows: Approximately 107 pounds of 96° raw sugar are required to produce 100 pounds of refined sugar, and as a by-product approximately 6 pounds of molasses are produced. On imports from Cuba under the act of 1930, there is a spread of 12 cents per 100 pounds between the duty on 96° raw sugar and that on 100° refined sugar. On the basis of the relationship of the quantities stated, the differential necessary to compensate for the duty on raw sugar, as shown in the accompanying table, amounts to 13.90 cents, instead of 12 cents per 100 pounds. In other words, using imports from Cuba, the present duty on refined sugar lacks 1.9 cents per 100 pounds (or 0.019 of 1 cent per pound) of being compensatory as against the 96° raw sugar. This is equal to 0.475 cent per 100 pounds for each degree between 96 and 100. In other words, to equalize this difference would necessitate raising the increment for each degree of sugar above 96° to $0.03475 per 100 pounds per degree instead of the present increment of $0.03 per 100 pounds per degree. On sugar paying the full duty, the corresponding change would be from an increment of $0.0375 per 100 pounds per degree to an increment of $0.0434. 50701-31 1 (2) The protective portion of the duty on refining may be computed as follows: On imports from Cuba under the act of 1922, the actual spread between 96° raw sugar and 100° refined sugar was 14.72 cents per 100 pounds. On the basis of the stated quantity of raw sugar required to produce 100 pounds of refined sugar and the yield of molasses, a spread of 12.25 cents per 100 pounds between 96° and 100° sugar would have been a sufficient compensatory differential. The difference between this amount and the actual spread is 2.47 cents per 100 pounds, which represents approximately the extent of protection to the refiner under the act of 1922. If the differential in the act of 1930 had been made to give the same degree of protection to the refiners as that in the act of 1922, the differential in the Cuban sugar, instead of being $0.03 per 100 pounds per degree, would have been $0.0410 per degree, or a total of $0.164 per 100 pounds between Cuban sugar of 96° and 100°. The corresponding increment on sugar paying the full duty instead of being $0.0375 per 100 pounds per degree would have been $0.0512, which is equivalent to a differential of $0.2050 per 100 pounds as between full-duty sugar of 96° and 100°. The following table shows the basic data on which the figures given are calculated: Analysis of the differential in duty on imports from Cuba, on 96° raw sugar and on 100° refined sugar under the tariff acts of 1922 and 1930 The commission does not possess adequate information to determine what, if any, differential in addition to that necessary to compensate for raw sugar is necessary on refined sugar in order to equalize costs of refining as between the United States and foreign countries. To obtain this information would entail an extensive investigation, not only into the costs of the refining process but also into the costs of containers and the relative costs of transporting raw sugar and refined sugar from Cuba and other countries to the United States. Among points which have a bearing upon the relative position of Cuban refiners and American refiners two may be mentioned, although no evidence as to the extent of their influence is available. (a) Some of the Cuban refineries produce their refined sugar by a continuous process. Where this is the practice, the sugar is not ordinarily crystallized in raw form, but is taken into the refining process in liquid form. To this extent there might be a saving to the Cuban refiners in operating costs as well as the elimination of the cost of bags in which raw sugar is purchased by the American refiners. S |
