PARAGRAPH 473-PENCIL LEADS. Mr. ROONEY. I looked over the source book. I asked for the privilege of seeing some of the figures and I looked over the source book and I saw that that is a misprint. Translated into the ad valorem equivalent, I find that the source book gives the ad valorem equivalent on black-that is, three-fourths of 1 cent per ounce-as about 20 or 21 or 22 per cent. As a matter of fact that is a mistake also. I have here the actual number of importations showing that the ad valorem equivalent on that lead, taken from invoices of this one concern that I represent-and which, by the way, did not go into the gentleman's agreement and has refused to go into it up to the present minute that the ad valorem equivalent runs from 20 up to about 90 per cent. There is the result of throwing it from the 10 per cent rate over into this specific rate on the ounce. Mr. KITCHIN. That is only an increase from 100 to about 800 per cent? Mr. ROONEY. Of course, and that is the nigger in the woodpile. Mr. KITCHIN. That is the revision downward. Mr. ROONEY. That is the revision downward that we got in the conference committee in the upper House. Mr. PALMER. Is that a Rhode Island industry? Mr. ROONEY. That is the Aldrich end of the Payne-Aldrich bill on this particular item. Mr. PALMER. I am asking about the industry. Where is it located? Mr. ROONEY. It is not a Rhode Island industry, but it sounds very much like it. It did not come out this way. This House stood on the 10 per cent rate-the old rate that had gone on right along. The present petitioner asks that the old rate of 10 per cent be restored or, if in your wisdom you think and personally I think that it should be taken off entirely-it should be put on the free list. Mr. KITCHIN. As a punishment for the way they slipped it across in 1909 ? Mr. ROONEY. Yes, sir. If you want to suit me you will put it on the free list, but if you want to put on the old rate of 10 per cent you will be taking, what I consider, a very conservative step. I urged my client to recommend that it be put on the free list entirely, and he said he had no objection to that." I think that is all I can say, gentlemen, except that if we can get this article with which we are all familiar on a reasonable basis, this article which is the essential part of the manufacture of lead pencils, we will have a better chance for competition in lead pencils, because this is the only concern that has kept up active competition with the combination that has absolutely shielded itself behind the tariff and behind a peculiarly insiduous form of tariff. I would like to submit this brief. Mr. HILL. Do you manufacture lead pencils? Mr. ROONEY. No, sir; I do not. Mr. HILL. Do you represent anybody that does? Mr. ROONEY. I represent a gentleman whose name is on the list, Mr. Richard Best, of New York, who has been a friend of mine for the last 23 years. PARAGRAPH 473-PENCIL LEADS. Mr. HILL. Does he recommend a similar reduction on the finished product? Mr. ROONEY. I did not ask him anything about it. He did not tell me anything about it; but as far as I am concerned, if you ask me I would say yes. Mr. HILL. As his attorney, you do recommend a reduction on the finished product? Mr. ROONEY. As his attorney, I have no recommendations to make, because he did not ask me to make any recommendation, but if you want my personal opinion, which I am authorized to make for myself, I would think it would be a good thing to make a reduction all around, not only in the matter of lead pencils, but on every article that will come before this committee. I thank you, gentlemen. BRIEF OF JOHN J. ROONEY. To the WAYS AND MEANS COMMITTEE, House of Representatives. This is a request to revise substantially downward paragraph 473 of the act of the existing tariff (Schedule N-Sundries). 1. The existing tariff provides, under the paragraph named above, as follows: "473. 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." 2. Under all tariffs since 1883, including the so-called McKinley bill of 1890, the so-called Wilson bill of 1894, and the so-called Dingley bill of 1897, a duty was levied upon pencil leads of 10 per cent ad valorem, the object of this rate being to provide a moderate rate of duty upon the raw material for the manufacture of pencils in this country. 3. The Ways and Means Committee of the House in 1909 proposed a continuance of this 10 per cent ad valorem duty, but the Senate Finance Committee changed the basis of the duty from an ad valorem rate to a specific rate. The result of this change which was embodied in the existing tariff was that the ad valorem equivalent of the new, and now existing, rates amounted to from 50 to 90 per cent. 4. The object of this advance was to put a prohibitive rate of duty against the raw material which was used in manufacturing a pencil made in the United States in competition with a combination of other American pencil manufacturers. No other article used as a raw material was assessed, under the act of 1909, under such an enormous rate of duty. 5. The intent in putting such an article as black and colored lead under a specific duty levied by the ounce instead of by the pound or the hundred pound must be manifest. The statement that it was difficult to find the correct market value of such an article as black, colored, and copying leads, which had been imported for many years and whose values were well known, is ridiculous in the extreme. 6. But that this was a mere excuse for handicapping a rival American manufacture is manifest by comparing the long-standing 10 per cent rate with the new and now existing 50 to 90 per cent rate, against which we protest. The change was simply a cloak to cover an exceedingly onerous and almost prohibitory rate of duty. The object was to handicap and possibly kill an independent and competing American industry. 7. The entire pencil industry of the United States was built up upon a basis of 10 per cent duty on pencil leads. All the manufacturers of lead pencils in this country were started on this basis. The leads were imported and the pencils were finished here. 8. A combination, or trust, was started in this country. Petitioners never joined this combination, but started a factory in this country to manufacture lead pencils, relying upon the duty of 10 per cent on the leads. Thereupon the combination sought and succeeded in obtaining the existing enormous specific duties against the pencil leads, for the manufacture of which they were especially equipped. 9. The revenue to the Treasury, never large from this small item, has increased under the new rates, but is still small. 10. The rate of duty should be restored to the old rate of 10 per cent ad valorem or put on the free list. This rate would not only tend to encourage independent manu 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. JOHN JEROME ROONEY (For Richard Best, No. 61 Duane Street, New York). 1 Black,cent. Colored, 11 cents. Copying, 2 cents. 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. 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, 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. 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. Hon. J. HAMPTON MOORE, Washington, D. C. BLAISDELL PAPER PENCIL Co., 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 than 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. |