PARAGRAPH 1-ACIDS. House of Representatives. As our statements made before the Senate committee are matters of public record, we refrain from repeating them. We beg, however, to submit herewith some facts regarding salicylic acid, for which we request kind consideration in fixing the duty on this product in the new tariff bill which is expected to be passed next summer. Salicylic acid is a basic product used in the manufacture of a number of chemicals for pharmaceutical purposes. It is, therefore, of considerable importance for the chemical industry in this country that its source of supply should not become entirely foreign. The European market of salicylic acid is, and has been for more than 25 years, controlled by a syndicate, which has fixed uniform selling prices for all countries except the United States, and is a strong competitor to the salicylic acid manufacturers in our country. The fight between the European syndicate and the American salicylic acid manufacturers is fully 20 years old. In order to afford the American industry an adequate protection against the competition of the European Salicylic Acid Trust, the Dingley tariff provided for a duty of 10 cents per pound on salicylic acid. This rate was reduced to 5 cents per pound in the Payne-Aldrich tariff, not without causing considerable injuries to the American salicylic acid manufacturers, and ever since then they have been hard pressed by their European competitors. The tariff bill (H. R. 20182) which was passed by the House of Representatives on February 15, 1912, made a further reduction of the present rate of duty to 24 cents per pound. When we started 12 years ago to manufacture salicylic acid in our factory at Garfield, N. J., there existed, besides us, four other salicylic acid manufacturers, but the prices have declined to such an extent that three of them have since that time failed or suspended the manufacture of the product. In the month of November, 1912, alone, 12,700 pounds of salicylic acid have been imported into this country, and were sold at prices which we had to decline to meet, in spite of the duty of 5 cents per pound. A further increase in these importations will reduce our sales of salicylic acid to a point where we can not continue to manufacture advantageously. The importation of above 12,700 pounds was preceded by the offer of one member of the European salicylic acid syndicate to withdraw its competition from the American market if we would pay a yearly indemnity of 10,000 francs, which was promptly declined. We are fully aware of the fact that the tariff bill to be introduced next summer will be "a tariff for revenue," but we can not believe that it is the intention to secure the revenue, in this case, at the expense of the destruction of an American industry. Our pay roll for the manufacture of salicylic acid amounts to $28,000 per year. Should the duty on salicylic acid be reduced below the present rate of 5 cents per pound and the American manufacturers forced to discontinue the production of salicylic acid, the total revenue on about 500,000 pounds of salicylic acid, which would then have to be imported into this country, would amount to only $12,500 per annum. To obtain this amount of revenue, property invested in buildings and machinery for the manufacture of salicylic acid to the extent of more than $200,000 would have to be destroyed and many American workmen (about 40) would be thrown out of employment. It has been stated that the interest of the consumer shall receive first consideration in fixing the rates of the new tariff bill. The consumer would not profit by a reduction in the rate on salicylic acid, for if the European trust thereby succeeds in driving its only competitors in America out of business, it will then have an opportunity to advance the prices in this country without fear that the American manufacturers would revive, because they would know that as soon as they start operations again the trust prices would again be put down to a basis where the manufacture in America becomes unprofitable. We can not compete here against German manufacturers with a duty of 2 cents per pound on salicylic acid, because our expense for labor and chemists' salaries amounts to more than twice as much as that of the European manufacturers, our buildings and machinery cost at least 50 per cent more, and therefore the depreciation is 50 per cent higher, and our raw materials cost also considerably more here than in Germany. We depend on the European markets for cur supply of carbolic acid. This product has, in recent years, become so expensive that the large and successful salicylic acid manufacturers abroad have introduced in their works synthetic processes, starting from benzol instead of carbolic acid. In order to be able to compete, we shall be obliged to do the same in this country, but the bill (H. R. 20182) which passed the PARAGRAPH 1-ACIDS. House in February provides for a duty of 5 per cent ad valorem on benzol. It provides also for a duty of one-quarter of 1 per cent per pound, equal to about 10 per cent ad valorem, on caustic soda, the raw material which ranges second in importance in the manufacture of salicylic acid, and sulphuric acid and muriatic acid, two other materials, are almost twice as expensive here as in Germany. We are able to produce evidence that the cost of making salicylic acid here is considerably more than 2 cents per pound higher than in Germany, and we are convinced that a duty of 5 cents per pound, as now levied, is about the lowest measure necessary to equalize the difference in conditions existing here and abroad. The lowest price for pure salicylic acid is in Germany to-day 26 cents per pound. A duty of 24 cents per pound would be less than 10 per cent ad valorem. No other fine chemical which requires a similar amount of labor and expensive machinery to manufacture has been put down in tariff bill H. R. 20182 at such a low rate. We respectfully request that in fixing the new tariff rates the duty of 5 cents per pound for salicylic acid be maintained, so that the American industry may be able to keep up its existence against the competition of the European trust. Our country would not benefit if it should become dependent on a European monopoly for the supply of salicylic acid. The following statement contains such information as we are able to give in regard to the outline suggested for preparation of briefs by the Hon. O. W. Underwood. SCHEDULE "A," PARAGRAPH I, SALICYLIC ACID. In the foregoing memorandum we respectfully recommend the maintenance of present duty of 5 cents per pound on salicylic acid, because the manufacturers in the United States need this duty in order to maintain their existence against members of the European salicylic acid syndicate, which use the American market to dispose of their overproduction at much lower rates than they obtain in their own home markets. The amount of salicylic acid sold in the year 1910 by all the salicylic acid manufacturers in the United States was approxi- Pounds. mately.... Pounds. 440,000 The importations in 1910, according to glossary on Schedule A, prepared by the tariff board, amounted to.. 62, 000 Total..... 502, 000 The importations in the year 1911 to. The sales of the American manufacturers in 1911 amounted approximately to.. 500,000 Total.... 530,000 The sales by the American manufacturers in the year 1912 are We obtain our information regarding the importations in the year 1911 and 1912 from import lists published in trade papers, which, however, are not complete and not perfectly reliable, and from the knowledge of sales of imported salicylic acid made in these years. A further increase of importations and a proportionate decrease of the sales of the domestic manufacturers would greatly increase the cost of manufacture of salicylic acid, because it would mean that the factories could only be run part of the time, which is always very uneconomical. It would then perhaps be better to entirely discontinue the manufacture. The total revenue to be derived by a duty of 5 cents per pound, if all the salicylic acid sold in this country is imported, will be about $25,000 per year. With a duty of 5 cents per pound the American industry will, however, continue and perhaps 50,000 pounds will be imported, the same as in previous years. The revenue on this amount will be $2,500. Should the duty be cut to 24 cents per pound, and should all salicylic acid be imported, the revenue derived therefrom would amount to $12,500. This revenue would then have been procured by destruction of the domestic industry. PARAGRAPH 1-ACIDS. The glossary on Schedule A prepared by the tariff board gives the ad volorem duty on imports in 1910 at a rate of 10 cents per pound (under the Dingley tariff) as 32.84 per cent. At the rate of 5 cents per pound (under the present tariff) as 30.36 per cent. This seems contradictory; if the rate of 10 cents per pound is 32.84 per cent, the rate of 5 cents per pound should be 16.52 per cent and not 30.36 per cent. We can explain this apparent discrepancy by the statement that the salicylic acid imported in the year 1910 at a rate of duty of 5 cents per pound was not pure salicylic acid, but a crude product which was sold very much below the value of the regular salicylic acid standardized by the United States Pharmacopoeia. The above compilations have been made as carefully and conscientiously as possible, and we believe that they are correct. NEW YORK, December 20, 1912. BRIEF OF MERCK & CO., NEW YORK, N. Y., ST. LOUIS, MO., AND RAHWAY, N. J. The COMMITTEE ON WAYS AND MEANS, House of Representatives, Washington, D. C. Schedule A should be modernized as to classification.-There are many anomalies in classification resulting from the patchwork methods of past revisions. This condition requires no extended comment, as it has already been pointed out by the report on Schedule A by your committee in connection with H. R. 20182, passed at the last session of Congress. It is entirely in order that there should be revision of the text of the law to modernize the classification. Basket-clause definitions should be precise. In the tariff acts of the past there has been too much uncertainty, and it has frequently required protracted litigation to find out the meaning of tariff terms in Schedule A. The new law should set definite standards and make clear what is the precise meaning, for tariff purposes, of the terms used in the various basket clauses, such as acids, chemical compounds, chemical mixtures (whatever these may be), drugs, medicinal preparations, etc. Radical revision of rates downward.-Revision of the rates downward in Schedule A to any such extent, for instance, as provided in H. R. 20182 of the last session, would seriously disturb the chemical industry of this country. We are large importers, as well as large manufacturers, of the class of so-called fine chemicals, and where we might be put to a disadvantage by a reduction of the rates in one case we would gain correspondingly on the side of our import business. We would probably be less affected than any other American house in our line by radical changes such, for instance, as were adopted by the old H. R. 20182, so far as direct effects upon our manufacturing and import costs are concerned. But we fear that a cut from the present average of about 25 per cent to a rate of, say, 15 per cent, cutting the old one almost in half, would result in a serious unsettlement of trade conditions in the chemical industry. It is our opinion, based upon our dual experience and interest as manufacturers and importers, that the average rate of about 25 per cent, in general, marks the legitimate line of division between protection and revenue for fine chemicals. We do not argue for or against protection as such, but we strongly urge against such radical revision as will surely upset trade condi PARAGRAPH 1-ACIDS. tions and ruin running plants which have existed for decades. Both protectionists and free traders must agree that sudden transition from one condition of cost basis to another is as unhealthy for commercial organizations as is a violent change of temperature or atmospheric pressure to the individual human organism. And we insist that an absolute reduction of 10 per cent ad valorem in a rate of duty is a radical cut. The increased amount of revenue that may be collected as a result of such cut will be incommensurate with the indirect effect upon the commerce in that product. Raw materials now free should not be assessed.-We urge upon your committee also the danger and unwisdom of imposing heavy taxes on such raw materials as are now free of duty. They are not only burdensome to the manufacturer in unsettling his business, which has hitherto adjusted itself to the natural trade conditions, but they are, eventually, transferred to the consumer in increased measure through concentration of the product, additional profits, etc., provided, of course, that the manufacturer is not altogether put out of the business of making the articles in which the raw material is used. Dynamiting the tariff wall.-Your honorable chairman is reported to have stated in an interview as follows: "To reach this result I prefer to lower the tariff wall, by taking bricks off the top of the wall, rather than dynamiting the structure at the bottom." We would respectfully express our conviction that assessment of duties on such raw materials as are now being supplied to the trade free of duty is applying dynamite at the bottom of the structure. If theory of protection justifiable at all, is so in chemical industry.-If the element of protection to infant industry is to be considered to any degree, it may be noted in passing that the chemical industry as a whole in this country is, generally speaking, far behind that of Germany, which has attained a high state of development. ("Her supremacy as a whole is at present undisputed, etc."-Page 363, report on Schedule A of Committee on Ways and Means, 1912.) STATEMENT AS TO SPECIAL ITEMS. Paragraph 1: Acid, salicylic. The present rate on this article is 5 cents per pound, and this should not be changed. The present current German market value ranges from 2.40 marks to 2.80 marks per ko. (261 to 30 cents per pound). The short price is for 1,000 ko. (=1 ton). A duty of 24 cents per pound-as fixed, for instance, in H. R. 20182 is equivalent therefore to a very low and unfair ad valorem rate, and such a rate will simply put the American salicylic acid business out of existence. Error in report of Tariff Board.-In the appendix attached to the report on Schedule A (H. R. 20182) the ad valorem equivalent of the specific duty of 5 cents per pound on salicylic acid (act 1909) is given as about 30 per cent for the year 1910; under the act of 1897 year 1905), with the duty at 10 cents per pound, the equivalent ad valorem rate is calculated at 32 per cent. These figures manifestly embody an error; comparison with present values shows that 5 cents per pound figures less than 20 per cent. PARAGRAPH 1-ACIDS. Paragraph 593: Iodine, crude.-Iodine, crude, being a raw material, should be retained on the free list for the reasons previously stated in our general remarks in regard to the taxation of raw products. Iodine is used in preparing many important pharmaceutical and photographic preparations and also in the manufacture of aniline dyes. Paragraph 41: Opium, morphine, coca leaves, cocaine. The tariff tax on opium, coca leaves, etc., should not at this time be further increased, as they are already carrying an exceptionally heavy rate for drugs and as it is also contemplated to impose an internal-revenue tax on these products and to assess in addition a special tax on manufacturers of and dealers in these articles and preparations. Internal-revenue taxes on narcotics.-The collection of such internalrevenue taxes on these products will create efficient machinery for restricting the traffic with habitués. An increased tariff tax would not have any effect on the illegitimate traffic, but in the meantime the accumulated charges will have considerably augmented the cost to the legitimate consumer. Rate on morphine and cocaine. However, if the duty is increased on opium and on coca leaves (as was done in H. R. 20182), then there should also be a revision of the duty rate on their alkaloids accordingly. Respectfully submitted. MERCK & Co., New York, N. Y., St. Louis, Mo., and Rahway, N. J. JANUARY 6, 1913. STATEMENT OF ELSON & BREWER (INC.), NEW YORK, N. Y. Hon. OSCAR W. UNDERWOOD, NEW YORK, January 11, 1913. House of Representatives, Ways and Means Committee, SIR: We beg herewith to urge a further reduction in the duty on salicylic acid. Act H. R. 20182 provided a specific duty of 2 cents per pound, which at present prices would be about 11 per cent on the chemically pure product and 15 per cent on the technical salicylic acid. Inasmuch as both grades are largely used as basic raw materials for the manufacture of medicinal chemicals, it is evident that it would be to the interest of the masses to transfer this product to the free list. Respectfully, yours, ELSON & BREWER (INC.), American Agents for the Societe Chimique des Usines du Rhone, Paris and Lyon (France). |