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TESTIMONY OF B. A. LEVETT, NEW YORK, N. Y.

The witness was duly sworn by Mr. Harrison.

Mr. LEVETT. If the committee will permit me, I want to talk for a minute or two on peanut oil, and then on the administrative.

In the House bill that was introduced at the last session and passed, peanut oil was taken off of the free list and put on the dutiable list, under the chemical schedule, at 10 cents a gallon, and I want to call the attention of the committee to the fact that this peanut oil is, so far as we are able to understand, not made in this country. It is an oil which is made from the African peanut, and is used in the manufacture chiefly of butterine, which is in turn used in the making of cheap bread and food stuffs, in place of the poorer oils which would be used if we could not get this peanut oil.

It is different from the oil which could be extracted from the peanut of this country, in that the African nut is a peculiar species which has very little flavor. It is what they call neutral, so that this oil can be used in the making of the butterine, because it has no flavor whatever. If it is not used, the poorer oils-in fact, cottonseed oil-is used when they can not get this peanut oil. I presume the oil was taken off the free list as a revenue proposition.

Mr. HARRISON. Do you maintain that it is used only in the manufacture of butterine?

Mr. LEVETT. I think that is its chief use; I won't say the only use. I know they did try to introduce it as a substitute for salad oil, but it is not going. The quantity is decreasing, as people find they do not like it. I know I tried it at home, but I could not get my wife to use it. Mr. HARRISON. It is your contention that it is used only in food? Mr. LEVETT. Chiefly in food; yes, sir.

Mr. HARRISON. Not in manufacture?

Mr. LEVETT. Not so far as I have been able to find out; and I have tried to find out if there is any manufacturing use.

Mr. HARRISON. Suppose we did not have a duty of half a cent on peanuts, could we make that peanut oil in America?

Mr. LEVETT. If they brought in the African peanut, undoubtedly they could.

Mr. HARRISON. Can they not make oil out of the American peanut? Mr. LEVETT. Yes; but the American peanut oil, so far as I know, would not serve any purpose which would not be fulfilled by the cheaper oils cottonseed oil and the like. That is the reason they do not bother with peanut oil in this country.

Mr. HARRISON. Would the African peanuts compete as a food product in the American markets with the American peanuts?

Mr. LEVETT. I think not; I don't think you would care to eat an African peanut; they are very small and tasteless.

Mr. HARRISON. Not fit for food, really?

Mr. LEVETT. Not as you and I would eat peanuts.

Mr. HARRISON. What is the bulk of these peanuts that come in? Are they African peanuts?

Mr. LEVETT. I can not tell you.

Mr. HARRISON. Japanese, aren't they?

Mr. LEVETT. I am not informed.

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Mr. HARRISON. If they were put on the free list, do you believe it would start an industry in making peanut oil here?

Mr. LEVETT. If you will look at the statistics, and look at the small quantity imported, I doubt whether any industry here would find it worth while to start in. They can accomplish the purpose with the other oils which are manufactured here so much more cheaply; and if you will look at the statistics that you have before you, you will see what a small increase in the price of peanut oil does to importations. In 1910, when the price was 47.6 cents, importations were 3,284,064 gallons; in 1911 the average price was 60.2 cents and the importations were 1,121,097 gallons, a little over onethird; in 1912 the price increased to 65.8 cents and the importations were 878,659.57 gallons.

Mr. HARRISON. Now, one moment, Mr. Levett. Isn't that probably due to the fact that there was a r se in all kinds of oil here, beginning with the failure of the flax crop?

Mr. LEVETT. The oils here?

Mr. HARRISON. Yes.

Mr. LEVETT. But this was imported oil.

Mr. HARRISON. I say, import more oil but pay the highest price. Mr. LEVETT. We have imported less oil as the years go on.

Mr. HARRISON. The demand sent the price up so that it was not profitable to import peanut oil.

Mr. LEVETT. But if you will look at cottonseed oil you will find the importations went up in proportion as peanut oil went down, showing that cottonseed oil was being used in place of peanut oil. If a duty is put on peanut oil, no man can tell, but I think it is fair to assume that importations of peanut oil will probably be wiped out entirely, because it won't pay to import it.

Mr. NEEDHAM. Four years ago the peanut growers in Virginia, through their representatives in Congress, appealed to this committee very strongly and convinced me that they needed more duty. Mr. LEVETT. On peanuts, but not on peanut oil.

Mr. NEEDHAM. You can't have the peanut oil if you don't raise the peanuts.

Mr. LEVETT. I can not say positively; I have nothing to say at all about peanuts. Still I can say positively about peanut oil, I am pretty well satisfied that none is produced in this country at all.

ADMINISTRATIVE.

I would like to say a word on the administrative act, especially in regard to subsection 18 of section 28, which fixes the market value of imported merchandise as the usual selling price of the goods-and I quote now--"including the value of all cartons, cases, crates, boxes, sacks, casks, barrels, hogsheads, bottles, jars, demijohns, carboys, and other containers or coverings, whether holding liquids or solids, and all other costs, charges and expenses incident to placing the merchandise in condition, packed ready for shipment to the United States." I ask this committee to amend that paragraph by striking out the word "including," and inserting instead the word "excluding"; in other words, to make the market value of merchandise imported

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the value of the merchandise and not the value of the packing charges and the cases. There is this

Mr. HILL. What section is that?

Mr. LEVETT. Subsection 18 of section 28 of the act of June 20, 1899, as amended. There is this to say in regard to discrimination. You take goods that pay a specific duty, and their coverings and wrappings are free, except in special instances, such as canned goods, where there is a special provision that cans are to be included, and in regard to bottles, which are specially provided for.

Now, you take the same goods, and if they were free the packing and cases would be free; but place those goods at an ad valorem rate and the coverings pay duty, and it is not a uniform duty. Let us illustrate by a cask of china. The cask is of wood, of course, and inside you will find straw and paper covering this china. If the china is decorated china, it pays 60 per cent, and you collect a duty of 60 per cent on the wooden cask, on the paper and on the straw. If the china is undecorated, you collect a duty of 55 per cent on the cask, the straw, and the paper. If it is Rockingham ware, you collect a duty of 40 per cent on this same cask, paper, and straw. If it is common brown earthenware, you collect 25 per cent, and if it happens to be a certain kind of earthenware tiles, dutiable at a specific rate, you do.not collect any duty. If they take a compound rate of 15 cents per square foot and 10 per cent ad valorem; you collect 10 per cent ad valorem on these same coverings. If the goods are free, of course the coverings come in free.

I suggest to the committee that there ought to be some uniformity. If you are going to put a duty on ad valorem containers, there ought to be the same duty on all of them, whether the goods pay a high or a low rate; but there is no really valid reason why any usual and necessary coverings should pay any duty whatever. It has been suggested in former times that this duty on coverings was put on because of the practice of certain importers to bring in fancy cases, in some cases worth more than the value of the goods themselves. But in the very act which provided for coverings-that is, the administrative act of 1890-they had the provision in the very same paragraph that

If there be used for covering or holding imported merchandise, whether dutiable or free, any unusual article or form designed for use otherwise than in the bona fide transportation of such merchandise to the United States, additional duty shall be levied and collected upon such material or article at the rate to which the same would be subjected if separately imported.

In other words, if I brought in a fancy cask or a barrel of decorated china, I would not only pay 60 per cent duty on that cask, but I would pay 35 per cent duty on the cask in addition, as a manufacture of wood. So there was absolutely no reason for this special provision for containers, inasmuch as there was a provision for the containers if they were unusual. There was some talk also, I believe, that importers would give the containers a higher valuation than they really were, thus reducing the value of the imported article. But I will wager that there are not 5 per cent of the invoices that come in to-day-consular invoices, I am not speaking of the little pro forma invoices-which do not separate the cost of the coverings

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and the cost of the goods; in fact, the statute provides it, and the examiner passes on the value of these coverings right along, so that that objection can be waived aside. In fact, even as to tins which are included in the value of the goods, they are separately specified on the invoices. I don't think, outside of those canned goods and similar articles, there is 1 per cent of goods that to-day are bought in the packed condition. They are bought on the other side, so much for a hundred sets of china, so much for so many dozens of this and that and the other thing, and then at the bottom of the invoice they add the packing.

There is one other provision I would like to speak about, in the administrative act, and that is what is known as subsection 11, which has been referred to here, and that relates to market value. It provides that—

The actual market value or wholesale price, as defined by law, of any imported merchandise which is consigned for sale in the United States, or which is sold for exportation to the United States, and which is not actually sold or freely offered for sale in usual wholesale quantities in the open market of the country of exportation to all purchasers, shall not in any case be appraised at less then the wholesale price at which such or similar imported merchandise is actually sold or freely offered for sale in usual wholesale quantities in the United States in the open market, due allowance by deduction being made for estimated duties thereon, cost of transportation, insurance, and other necessary expenses from the place of shipment to the place of delivery, and a commission not exceeding 6 per cent, if any has been paid or contracted to be paid, on consigned goods, or a reasonable allowance for general expenses and profits [not to exceed 8 per cent] on purchased goods.

That provision has operated very harshly on importers, and, as a matter of fact, I think a little reflection will show that it is absolutely impracticable to use it fairly. The goods come in; the examiner says he can not find the market value of this article. He goes around to the importers of the goods, or to importers of similar goods-and I did want to call attention to another section, section 15 of this act, which permits him to force anyone of these competitors to submit any data he has of his own private business. That section has been abused to all kinds of extents by the special agents, who have forced merchants to give up papers, which the Constitution of the United States really prohibits.

They get this price, this American selling price, and then they will figure back, and they tell the merchant how much profit he ought to make, and if it exceeds 8 per cent and there has always been a question whether that 8 per cent did not include selling expenseshaving deducted that, they find that he ought not to have bought these goods at 5 francs, as appears on his invoice, because he is making 20 per cent profit, or 15 per cent profit, or 9 per cent profit, and the law says only 8. Now, this man naturally wants to make 9 per cent profit, if he has been making that, but the examiner advances his goods several per cent. Naturally, to make his 9 per cent he has to put up his American selling price again, and then the examiner, on the next shipment, gets this new selling price and he advances it once more, and then the merchant, still wanting to make his 9 per cent profit, increases his American selling price, and so on ad infinitum. That is section 11. The difficulty is that in spite of the fact that importers have frequently submitted duly verified statements of cost of production, verified by the consul, and the exporter's books have

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been shown to the special agents on the other side, the appraisers have frequently refused to take these accounts of production, and have taken the American selling price.

Mr. HILL. You say this refers only to goods for which there is no market price in Europe, being made especially for the American market?

Mr. LEVETT. Exactly, and also consigned goods.

Mr. HILL. It distinctly specifies goods for which there is no regular foreign market?

Mr. LEVETT. It says no market to all purchasers.

Mr. HILL. Of course, that is what it means.

Mr. LEVETT. What does "all purchasers" mean?

Mr. HILL. If you take that out you would absolutely give power to the foreign importer to make his own price, and you couldn't make him sell at any price to any other market.

Mr. LEVETT. In the same paragraph you have a provision which permits the purchaser to take the cost of production on the other side, and add expense and profits.

Mr. HILL. If there is no foreign market it has got to be made up somewhere.

Mr. LEVETT. There is no objection to taking the cost of production, that is fair, because that is a fact; but the American selling price, with an estimate of what profit the importer shall make, to be fixed by an appraiser who doesn't know anything about the merchant's

business is unfair.

Mr. FORDNEY. You don't pay duty on goods on the American value?

Mr. LEVETT. Yes, sir; that is just the point. I believe along certain lines instructions were issued within the past year or two, that all examiners must call in the importers and find out what they are selling the goods for.

Mr. FORDNEY. That is because there is no foreign market for those goods?

Mr. LEVETT. But they can find the cost of production. I have a case in mind where labor, costs of production, were submitted and the books on the other side were thrown open, but that didn't do any good.

The CHAIRMAN. You are talking about the provision found in the last law?

Mr. LEVETT. Yes, sir.

Mr. HILL. The last part of the clause, Mr. Chairman; where there was no foreign market they should take the domestic market, and tear down from that price in order to ascertain the actual value; and he says the Government is placed entirely in the hands of the foreign market.

The CHAIRMAN. Your contention is that instead of being put on the American market price, they ought to take the cost of production? Mr. LEVETT. Why, the law-I won't say the cost of production; I say the law, as it was before this section 11 was put in in the Senate, when this bill was passed-the House never had anything to do with it; it was put in in the Senate; then it was submitted to the House and the House was forced to put it in.

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