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PARAGRAPH 473-PENCIL LEADS.

facture in the United States and give the consumer the benefit of competition, but would also increase the revenue to the Treasury of the United States. Both the consumers of lead pencils and the Treasury would benefit. The only supporters of the existing rates of duty were certain domestic interests that have formed a combination among themselves and seek to destroy competition in the American market.

Attached is a statement from actual importations showing invoice number of leads, invoice price, weight, actual duty, and ad valorem equivalent to existing specific rate. Respectfully submitted.

JOAN JEROME ROONEY (For Richard Best, No. 61 Duane Street, New York).

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The CHAIRMAN. The committee stands adjourned until 10 o'clock to-morrow morning.

Whereupon, at 10.42 o'clock p. m., January 29, 1913, the committee adjourned until to-morrow, Thursday, January 30, 1913, at 10 o'clock a. m.

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BRIEFS ON PENCIL LEADS.

JANUARY 29, 1913.

BLACK LEADS.

The WAYS AND MEANS COMMITTEE,

Washington, D. C. GENTLEMEN: The cost of labor per gross of leads is three times the cost of the materials, averaging 14 cents for labor per gross against 3 cents in Germany. The cost of labor increases in proportion to the increase in diameter of the lead, and fixed charges, such as rent, power, insurance, and management, are in proportion to the other labor, which is from three to four times as much as in Germany, Austria, or in England, and about 15 times as much as in Japan, where they are now making pencil leads and pencils with the latest improved machinery from Germany.

COLORED AND COPYING LEADS.

The American manufacturer pays 8 cents duty per pound of milori blue and other colors and 30 per cent ad valorem for methyl violet, used for copying leads, which is equivalent to 15 cents duty per gross of leads. Under an ad valorem duty a profitable industry may be developed by importing these leads for the purpose of extracting the colors.

PARAGRAPH 473-PENCIL LEADS. Under a ruling of the United States Supreme Court some years ago, electric carbons had been entered in any length and had been constantly imported three times the actual size required for mercantile purposes, thereby reducing the tariff to one-third of what the legislators intended. The same law would hold good for pencil leads, the usual size of which is 7 inches, but which could be imported in long sticks and then cut down to any size required. For this reason the Payne tariff act changed the duty on pencil leads, which is now paid by the ounce, equaling about 25 per cent ad valorem. Government statistics (see Exhibit A, attached) also show that the importation of this article in 1909 was almost 10 times that of 1894, and though it decreased somewhat after that, owing to the establishment of several new pencil and lead factories in this country, the duties collected were about $3,144 in 1904 and increased constantly until in 1912 they were $31,291, showing conclusively that the tariff by weight protected the American industry and increased the revenue for the Government considerably. We ask, therefore, that you will continue the present rates, as follows:

“Pencil leads not in wood, or other material, black, three-fourths of one cent per ounce; colored, one and one-fourth cents per ounce; copying, two cents per ounce. Yours, respectfully,

PHILIP BEROLZHEIMER,

577 Broadway, New York. Representing: American Lead Pencil Co., Hoboken, N. J.; Joseph Dixon Crucible Co., Jersey City, N. J.; Eagle Pencil Co., New York; Essex Lumber Co., New York; Houston & Liggett, Lewisburg, Tenn.; Hudson Lumber Co., Chattanooga, Tenn.

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U.S. PENCIL Co.,

St. Paul, Minn., January 27, 1913. Hon. Oscar UNDERWOOD, Chairman Ways and Means Committee,

Washington, D. C. DEAR SIR: Will you kindly permit us to call your attention to the schedule of pencil leads. In the Payne bill this schedule was changed from ad valorem to specific duty and increased about 500 per cent over the former rate of 10 per cent ad valorem, but by our efforts and letters to the conference committee at that time it was reduced to the present specific rate, which is equal to about 30 per cent ad valorem and still an increase of 200 per cent over the old rate of 10 per cent.

It was very evident that this change had been dictated by the pencil combine, as there was absolutely no demand for it. The rate had been 10 per cent for years.

There is very little suitable graphite found in this country for pencils. It must be imported.

As near as we have been able to learn there are only one or two graphite mines in this country suitable for pencils, and these are owned by the Dixon and one of the other large companies, and they refuse to sell any material to others except at prohibitive prices.

The duty on leads should be restored to 10 per cent ad valorem for common leads, as well as copying leads. Yours, truly,

U.S. PENCIL Co.

PARAGRAPH 473-PENCIL LEADS.

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BLAISDELL PAPER PENCIL Co.,

Philadelphia, Pa., January 13, 1915. Hon. J. HAMPTON MOORE,

Washington, D. C. SIR: This petition to represent your constituents before the Ways and Means Committee on Schedule N, paragraph 473, "leads for pencils,” the hearings for which close Wednesday, January 29, is made as brief as possible, but I will be only too glad to furnish at your request complete detailed information.

This rate under the former tariff on this item was 10 per cent ad valorem. Under the present tariff the rate on black leads is three-fourths cent per ounce, and on colored leads 1} cents per ounce, and, while under the former tariff a dividend of 10 per cent was paid the stockholders of this company, no dividend was paid in 1912. A dividend would have been paid, however, out of the earnings for 1912 had the old tariff rate been unchanged.

The commercial rating of the “Big Four," or of those lead-pencil companies popularly termed “The Combination, as given by Dun, exceeds $3,500,000. As given by Bradstreet it exceeds $4,000,000. The present rating of this company, as given by Dun and Bradstreet, is from $35,000 to $75,000.

The Blaisdell Paper Pencil Co. is practically the exclusive importer of colored lead sticks and colored lead pencils constitute by far the largest percentage of our manufactured product. Therefore, we can not help but feel that the present duties of 13 cents per ounce on colored lead sticks, which by reason of the metallic pigment coloring matter and their larger diameters average not less than three times the weight of black-lead sticks, was enacted through the direct influence of concerns whose aim was to secure the patronage enjoyed by ourselves.

There is no patent protection on Blaisdell paper pencils and our products must be sold in direct competition with wooden pencils. There can be no price competition, as the average cost of pencils of our manufacture exceeds the average cost of wooden pencils manufactured by not less than 50 per cent. The average cost of Blaisdell pencils to the wholesale trade exceeds also by at least 50 per cent the average cost of all wooden pencils purchased by wholesalers. By reason of increased factory cost our products can only be sold in competition with the cheaper wooden pencils, owing to superior quality and their economical features. The difference in cost to wholesalers existed under the former tariff of 10 per cent ad valorem. Consequently, there was absolutely no need for the increased rate under the present tariff.

There are not less than 500 residents of Philadelphia and vicinity who are absolutely dependent for their living upon the prosperity of this company, and the average daily wage, exclusive of executive salaries, paid by the Blaisdell Paper Pencil Co., exceeds by not less than 25 per cent the average daily wage, exclusive of executive salaries paid by any or all of the wooden lead pencil companies. By far the largest percentage of our employees have been with us from 10 to 17 years. Consequently, their earning capacity if forced to seek employment elsewhere, would be materially decreased. In some cases this earning capacity would be decreased not less tha 50 per cent.

The present rate is an appalling menace to the welfare of this company and, although we would prefer to see both black leads and colored leads enter duty free under the classification of raw materials, to which they properly belong, we would be entirely satisfied if they were entered at former rate of 10 per cent ad valorem.

Our understanding of the tariff is that it should protect labor. The fact that the cost of labor which enters into the manufacture of lead sticks is less than 5 per cent of the total cost shows that there is very little necessity for so-called protection. We earnestly request your support and influence, and beg to remain, Respectfully, yours,

STUART H. HEIST.

PARAGRAPH 474-PHOTOGRAPHIC PLATES.

PARAGRAPH 474.

Photographic dry plates or films, not otherwise specially provided for in this section, twenty-five per centum ad valorem. Photographic film negatives, imported in any form, for use in any way in connection with moving-picture exhibits, or for making or reproducing pictures for such exhibits, and movingpicture films not developed or exposed, twenty-five per centum ad valorem. Photographic film positives, imported in any form, for use in any way in connection with moving-picture exhibits, inoiuding herein all moving, motion, moto-photography or cinematography film pictures, prints, positives or duplicates of every kind and nature, and of whatever substance made, one and one-half cents per linear or running foot.

PHOTOGRAPHIC PLATES.

TESTIMONY OF W. 0. GENNERT, 149 BROADWAY, NEW YORK

CITY, N. Y., ON THE SUBJECT OF PHOTOGRAPHIC FILMS.

Mr. GENNERT. Mr. Chairman, I desire to call the attention of the committee to section 474 of the present tariff act, which provides for a duty on photographic dry plates or films not otherwise specially provided for in this section at 25 per cent ad valorem.

I will say before going into the subject of films that I appeared before this committee and discussed the question of photographic cameras, and stated that they more properly belonged under manufactured articles in paragraph 474 than classed as optical instruments under paragraph 108.

The principal kind of film to which I desire to call the attention of this committee are photographic films unused or in the raw and ready for use to make pictures thereon, either in the little hand cameras or in the moving-picture cameras.

If you will read further in paragraph 474 you will find reference to photographic film negatives and photographic film positives, the former being taxed at 25 per cent and the latter at 1} cents per linear or running foot. Before taking up the merits of my articles, I would like to explain the difference between the two kinds of films, as it seems to have caused some confusion when the last tariff act was under discussion.

The only film that I am interested in is the raw film unused and ready to receive the picture. In the act that is the only film which is called "film;” but unfortunately in the popular parlance the finished picture is also referred to as a film. A film negative is not a film; it is a finished picture, the word "negative” simply meaning that the image is reversed. A film positive is simply a copy made from the film negative in which the picture is correctly transposed in its positive form and is ready to be used in the camera or thrown on the

We do not deal in either the photographic film positives or the photographic film negatives, which are finished pictures, the one being basic and the other being copies made from the basic negative. We are only interested in the raw film, as it is called in the act, not developed or exposed, and which we desire to sell to the photographers in America and to merchants using this film in making moving pictures.

Mr. Hull. Which paragraph is that under
Mr. GENNERT. Paragraph 474.

screen.

PARAGRAPH 474-PHOTOGRAPHIC PLATES. Mr. Hull. Which clause of that paragraph?

Mr. GENNERT. The unused film. "Photographic dry plates or films not otherwise specially provided for in this section, 25 per cent ad valorem.

The other two grades of pictures are not really films, namely, the film negative and the film positive, which are referred to in a separate section of that paragraph.

I will take up the films first and the plates afterwards. I desire that this committee place upon the free list photographic films not developed or exposed, for the reason that the manufacture and sale of these films in the United States at the present time is in the hands of an absolute monopoly, the Eastman Kodak Co. and its various subsidiary companies, who manufacture and sell, at a modest estimate, 95 per cent of the films used and sold in America. I might add that this same company sells probably from 75 to 85 per cent of all of the films used or sold in Europe. They have control of the German Kodak Co., they have control of the French Kodak Co., and they have control of the Kodak Co. (Ltd.), in England. They have established this absolute monopoly in the United States and partly in Europe through the use of unfair methods and restrictive methods in absolutely compelling the people to use their films. They are in a position, with their tremendous output and their tremendous profit, to make films cheaper than anybody.

For instance, they will go to a retail dealer who has, we will say, a film of ours in his window. Their demonstrator or their salesman will go in and say, "Take that out. ” If he did not take out the Gennert film he could not buy any more goods from the Eastman Kodak Co. With their tremendous resources and their advertising they have established such a demand for their goods that the average merchant is afraid to incur their wrath.

Mr. Hull. Have you called the attention of the Department of Justice to those facts ?

Mr. GENNERT. Yes, sir; the Department of Justice is now engaged upon a thorough investigation of the organization and methods of the Eastman Kodak Co.

Mr. HULL. What is the capital stock of that concern?

Mr. GENNERT. The capital stock of the Eastman Kodak Co. is approximately $6,000,000 (6 per cent) preferred and slightly less than $20,000,000 common. It paid in 1911, 42} per cent dividends on the common stock and had a surplus of over $12,000,000 and a reserve for depreciation of over $6,000,000.

Mr. Hull. How long has it been in existence?

Mr. GENNERT. In its present form approximately since 1902. The dividends started in that year at 2} per cent, and I believe in 1912 they were approximately 40 per cent. So far they have declared a measly dividend of 121 per cent in 1913 on the common stock.

Mr. Hull. Have they been increasing prices on these articles ?

Mr. GENNERT. Not lately. When the combination was started it increased prices on certain articles. For instance, photographic paper was raised from 75 cents to $1.35, after they had bought up practically all of the competing paper companies. I might say that

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