ADMINISTRATIVE.

BRIEF OF W. B. REUSSER, ST. LOUIS, MO.

The WAYS AND MEANS COMMITTEE,

Washington, D. C.

ST. LOUIS, Mo., December 31, 1912.

GENTLEMEN: I write to suggest that in the new tariff you insert a paragraph to read as follows:

"482. That each and every imported article dutiable at compound rates under any schedule of this act, except F. & H., upon which the duty to be collected amounts to more than 75 per cent ad valorem, shall be assessed for duty at the rate of 75 per cent ad valorem (or 60 per cent or lower)."

Under the tariff act as it now stands it often happens that importers have to pay as high as 200 per cent ad valorem on merchandise. For example, paragraph 382, providing for wearing apparel "composed wholly or in part of wool," calls for a duty of 44 cents per pound and 60 per cent ad valorem. It frequently occurs that some of my German friends import or receive as presents from Germany slippers, or "pantouffles, as they are called, composed of wool felt, some of which weigh as high as 1 pound per pair and are worth only about 50 cents per pair. The duty on such a pair of slippers would be about 75 cents, or 150 per cent. The Board of General Appraisers at New York recently decided that slippers containing only 2 per cent of wool and the balance cotton are dutiable at this rate of 44 cents per pound and 60 per cent. There are often very heavy articles composed in part of wool upon which duty must be collected under either paragraph 378 or 382.

No tariff act heretofore, to my knowledge, has had such a provision as the foregoing. The present tariff contains many paragraphs with provisos to the effect that "none of the above-named articles shall pay a less rate of duty than 45 per cent ad valorem (or 50 per cent, 60 per cent, etc.)."

Your party will, therefore, have the distinction of correcting the evils mentioned. As another illustration of this evil I will cite paragraph 17, which calls for a compound rate of 65 cents per pound and 30 per cent ad valorem, in addition, on articles composed wholly or in chief value of celluloid, and it frequently occurs that a heavy object, such as a cheap glass bottle, will be imported attached to a celluloid article, and when the celluloid part is the chief value the whole article is weighed together and duty assessed at 65 cents per pound and 30 per cent ad valorem. The duty often amounts to 200 per cent.

Then there is the pocketknife paragraph No. 152. This paragraph provides that knives valued at more than $3 per dozen shall pay 20 cents each and 40 per cent ad valorem. A pocket knife costing say 26 cents each would have to pay a duty of 30 cents each, or 150 per cent. The same is true of the rates on scissors and razors in the same paragraph; also table and other knives in paragraph 154.

Furthermore, I would suggest that in the new tariff, paragraphs be written so that they can be understood. For example, paragraph 195, which covers Cans, boxes, packages, etc.," is so worded that nobody can understand its meaning. Paragraph 197 provides for "Machine tools" 30 per cent ad valorem, and dealers in tools have testified in recent tariff hearings that there is no general trade understanding of the meaning of those words; so also the words "Fancy matches" in paragraph 436, and the words "Fancy or perfumed toilet soaps" in paragraph 69.

Many other paragraphs were written in such a manner as to admit of various constructions, such as the jewelry paragraph No. 448, which should be entirely rewritten. Paragraph 421, the bead paragraph, contains a proviso which should be dropped or else written so that it can be understood.

Furthermore, permit me to suggest that there are many lines of merchandise now dutiable at ad valorem rates upon which specific or pound rates should be assessed, because of the difficulty at arriving at the correct foreign-market value of same. The Government is having trouble with French and other chinaware, and it has found

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it necessary to send a commission over to Europe to investigate the question. It seems to me that pound rates could be provided on this merchandise. Chinaware could be separated into various classes, such as Japanese, French, English, German, and others and assessed by weight. The woven-flax paragraph is another one which is quite troublesome, and duty should be assessed at pound rates, classifying the goods according to weight per square yard, and according to quality, whether bleached or unbleached, and whether single or double damask, etc. W. B. REUSser, Equitable Building, St. Louis, Mo.

Yours, very respectfully,

P. S.-If you establish the maximum rate of 75 per cent, it would be well to except Schedules F and H, the tobacco and liquor paragraphs, upon which merchandise the duties will average more than 75 per cent. A great deal of the dissatisfaction with the present tariff is due to the fact that our foreign population, which is very large, receives thousands of parcels by mail, and otherwise, from abroad (mostly in the shape of presents), containing woolens, silks, cigars, etc., upon which the duties are very high, and if you establish a maximum or "safety valve" rate it will prevent a great deal of kicking.

BRIEF SUBMITTED BY CHARLES S. HAMLIN, BOSTON, MASS.

Hon. OSCAR W. UNDERWOOD,

Chairman Ways and Means Committee,

BOSTON, MASS., January 11, 1913.

House of Representatives, Washington, D. C.

MY DEAR SIR: The Hon. Andrew J. Peters has requested me to send to the Ways and Means Committee any suggestions I may care to make as to the reduction of customs taxation, in connection with the hearings now being held, and it gives me pleasure to comply with his request.

To my mind, the recent elections constitute a mandate to Congress to reduce radically the present customs duties, to the end that the entry of foreign products into United States markets may be facilitated and competition with home products increased. No system of tariff reduction which does not aim at this result will comply with the expressed will of the people. It is hardly necessary, however, to add that reduction of duties will not in all cases be followed by an increase of imports, for in some industries, perhaps in many, costs are now lower than abroad; in such cases, however, the reduction of duty will serve to prevent artificial enhancement of home prices beyond the point of a reasonable profit. Such a reduction of import duties can not fail to stimulate our great and growing export trade, now burdened with tariff taxes upon many crude and partially manufactured products, thus increasing cost of production in this country. True protection of our export trade, therefore, as well as the best interests of consumers generally, demands speedly reduction in import duties. The present time would seem to be most auspicious for this work of tariff reform. Industrial conditions now are very different from those prevailing prior to the enactment of the Wilson Tariff Act of 1894. Between the years 1890 and 1894 there was a severe industrial crisis affecting all the countries of the world and especially severe in the United States. For example, in 1893, in the United States, 158 national banks, 172 State banks, 177 private banks, and 47 savings banks failed; commercial failures increased 50 per cent in 1893 over the year 1892; in 1894, 156 railroads, constituting about one-quarter of the railroad capitalization of the United States, were in the hand of receivers; there was a startling decrease in bank deposits; bank clearings were the lowest since 1885; vast numbers of men were out of employment; in 1894 the corn crop was a failure, while the falling off in the demand of Europe for our wheat was registered by a price of less than 50 cents a bushel on the western farms. In addition to this, the Government revenues were not sufficient to pay for Government expenditures, there being a deficit for the 12 months ending September, 1892, just prior to the national elections, of over a million dollars, and while there was an excess of receipts for the fiscal year 1893 of a little over two millions of dollars, there was a deficit in the fiscal year 1894 of over $69,000,000-all this during the operation of the McKinley Tariff Act and before the Wilson Act had been enacted.

Conditions now, however, are very different from the foregoing. At the present time we witness a general revival of business following the panic of 1907; crops are excellent; the European was uncertainties are being cleared up; speculation is reduced to an almost negligible limit; there is every indication of an easier money market; and the soundness of underlying conditions would seem to point to an era of unusual commercial development.

At the same time, however, although business is good and agricultural interests prosperous, the consumers of the country are suffering from the extraordinary increase in the cost of living, for which the only immediate remedy, at least as to all those dependent upon fixed incomes, whether represented by daily toil or by past accumulations, would appear to be a thorough, radical revision of customs taxation.

Reserving for another communication the consideration of the proper measure of reduction, I want, in this letter, briefly to point out certain other changes which, in my opinion, should be made, concurrently with the reduction in taxation, and by which the administration of the new tariff law may be greatly simplified and made more efficient.

1. REFUNDS OF DUTIES.

In my opinion, a change should be made in the law providing for the refund to importers of duties collected by the Treasury which are held subsequently by the Board of General Appraisers or by the courts to have been in excess of the lawful rate. I believe that an investigation would show that in a great majority of these cases the importers have received the full amount of the excess duty paid in the price which they received from the sale in this country of the imported articles. Under such circumstances refunds of duties amount to pure gratuities, which belong, in equity and good conscience, to the consumers who ultimately had to pay them rather than to the importers who merely advanced the amount to the Government and have been repaid by the consumers.

A good illustration of this arose under the tariff act of 1883, which imposed a duty of 50 per cent on manufactures of silk, while under another section it imposed a duty of only 20 per cent upon hat trimmings. Thereupon immense quantities of silk goods were imported under the designation of hat trimmings in order to obtain the benefit of the lower duty, including not only goods which were commercially known as hat trimmings in the condition in which imported, but also goods in bales which could be, and were in fact, used for many other purposes, such as dresses, shoe ties, coffin linings, etc. The Treasury held that the legal duty on these importations was 50 per cent ad valorem as manufactures of silk. The importers protested, but had to pay the 50 per cent duty instead of the 20 per cent which they claimed to be the lawful rate. The matter finally reached the Supreme Court of the United States, and under its decisions refunds of large amounts were paid. Later these refunds were suspended by the Treasury Department-for reasons which I shall not now undertake to explain-and between the years 1893 and 1897 practically no refunds were paid. Many suits, however, were pending, and years later, in 1904, the Treasury entered into a compromise with the importers by which about $3,000,000 were refunded, which, added to refunds already paid, made total refunds probably of six or seven millions of dollars. As before stated, I believe it to be a fair assumption that in the vast majority of these cases these refunds were pure gratuities, as the importers in all probability received in the price of the goods, when finally sold, the amount of the excess duties levied by the Treasury.

I would respectfully suggest that Congress should enact a law providing that hereafter no refunds should be made to importers of duties found later to have been above the legal rate unless the importer can prove that these excess duties have not already been paid back to him in the price at which the goods were finally sold for consumption. If such a law were enacted it would do away with much customs litigation, but it would always be open to an importer to invoke the jurisdiction of the Board of General Appraisers and of the courts for the purpose of finding what the legal rate of duty should be upon future importations. It might also be just to provide that where the importer wins his suit, but can not prove that he has not received the excess duties in the price which he obtained for the goods, the court may allow him a reasonable sum for costs and attorney's fees. It may well be that many difficulties of proof will arise in carrying out such a law, but nevertheless it would seem both just and equitable to require proof from a claimant that the amount claimed has not already been paid him by the ultimate consumer.

A precedent for such a suggested law will be found in the act of February 1, 1909, which authorized the Treasury to refund all duties collected on anthracite coal imported between the dates of October 6, 1902, and January 15, 1903, but which also contained the following significant limitation:

"Provided, That the person or persons so to be paid shall produce satisfactory proof to the Secretary of the Treasury that they were not reimbursed for said tariffs in the sales to the consumer."

2. REPORTS OF REFUNDS TO CONGRESS.

I would also suggest that section 28, subsection 23, of the tariff act of August 5, 1909, should in the future be complied with by the Treasury Department. This provision of the law directs the Secretary of the Treasury each year, in his annual report, to transmit to Congress a detailed statement of all customs duties refunded to importers, together with copies of the rulings under which said refunds were made. This law was first enacted in the act of March 3, 1875, and was reenacted in the customs administrative act of 1890 and appears in the tariff act of 1909, herein before quoted.

The Secretary of the Treasury, in a letter to the Speaker of the House, dated March 7, 1912 (Doc. No. 610), stated that the annual statements under this provision of law have not in the past been complete, for the reason that at ports having separate accounting officers, known as naval officers-at which ports 90 per cent of the customs duties is collected only refunds based upon court decisions are reported to the Treasury, and that refunds based upon decisions of the Board of General Appraisers, upon rulings of the Treasury Department, and upon rulings of collectors under article 1072 of the Customs Regulations of 1908, authorizing collectors to reliquidate entries where satisfied that protests are well taken, without referring the same for decision to the Board of General Appraisers, are not reported.

Inasmuch as the Secretary further points out that the refunds made under court decisions are almost negligible as compared with the total amount of refunds, it would seem to follow, as the Secretary expressly states, that these reports to Congress are misleading, as they include only a very small portion of the total refunds actually

made.

The Secretary also calls attention to the fact that it has been the practice since 1875 under the before-mentioned law, to omit reference to decisions made by the Treasury, the Board of General Appraisers, and by the courts which have been already reported to Congress in previous reports, and that this omission is a failure to comply with the letter of the law.

The Secretary finally, in said letter, expresses the opinion that-in view of the cost involved of making a complete report as called for by the law, and of the fact that the information is all contained in the records at the respective ports, and of the further fact that all decisions of the Board of General Appraisers and of the courts are published by the Treasury-a separate report to Congress of the refunds and decisions under which they were made is unnecessary, and he recommends the repeal of the law requiring such reports.

With the greatest respect for the Secretary of the Treasury, and fully appreciating his earnest desire for and successful accomplishment of many valuable reforms, I venture to express the opinion that it is vitally important for Congress to have at hand in a simple, concise form an annual statement showing all refunds made and distinguishing clearly between refunds based upon court decisions, decisions of the Board of General Appraisers, rulings of the department, and rulings of collectors, and that, while the existing law may well be modified along the lines of simplicity and brevity, these reports should not be discontinued but should be transmitted annually to Congress, so that the various items may be published and.not left buried in the archives of the various ports.

3. AD VALOREM DUTIES.

It must be apparent that one important change in existing law will be made by Congress, and that is a general substitution of ad valorem duties for the specific and compound duties of the present tariff act. This change is a radical one and will require most careful treatment both from the legislative and administrative side.

I believe that a change from specific and compound duties to purely ad valorem duties is both advisable and practicable-advisable, because tending to uniformly and simplicity and at the same time showing exactly what the tax is which is being imposed; practicable in that such duties can be honestly and efficiently collected.

The objection will at once be raised that such a system, if extended greatly, will break down because of undervaluation. If, however, a complete history of the frauds upon the revenue could be written, we should witness, in my opinion, a close race for supremacy between those frauds which have grown out of evasion of specific duties at home and those arising from undervaluations abroad.

Be that as it may, however, it must be apparent that a tariff act substituting generally ad valorem for specific duties will call for extraordinary and increased vigilance of administrative officers, for vigorous and relentless war upon undervaluations of every kind, and perhaps for some changes in the existing administrative laws.

In the administration of the customs laws, no question either of policy or expediency can ever properly arise. While in the determination of a tariff act many such questions have been in the past and perhaps always will be involved, yet when the rates

of duty are finally fixed, they should be enforced by the administrative officers absolutely and exactly in compliance with the law as enacted by Congress. We should welcome, therefore, the most careful investigation into the workings of the present administrative act with a view to securing any changes needed to enable the administrative officers to collect duties upon the full market value of imported products. Such effective administration will be absolutely necessary to secure the large revenue needed for the support of the Government and a material portion of which must be raised by customs taxation.

It must, however, be frankly conceded that in extending the ad valorem principle we must be prepared to grapple with attempted undervaluation, and, moreover, that as to certain commodities it is often very difficult to ascertain just what the foreign values are even with the best intent on the part of the vast majority of the importers and of all of the administrative officers. The efficiency of our appraising system, however, has been greatly increased in past years, and I believe that the problem can be satisfactorily solved with perhaps some changes in the administrative law. Among possible changes in, or rather additions to, said law, I would suggest that the President be requested to open negotiations with foreign countries to obtain legislation abroad authorizing our consuls to administer oaths to consular invoices and making false statements under oaths, so administered, punishable as perjury by the laws of said foreign nations. This is now provided for by the laws of some countries.

4. UNIFORM AD VALOREM DUTIES.

I would also respectfully suggest that a law be enacted dividing all imports into a small number of classes, with a uniform ad valorem duty for each class, following the general lines of the Walker tariff of 1846, with the addition of a free list. Such a classification would not only avoid the many legal questions arising from varying specific duties based upon values, but would also make the tariff law simple and concise in place of present intricacies and voluminousness.

If such a classification be established as a final goal of customs taxation, Congress could then determine whether, in its judgment, that goal should be reached by one or by several successive reductions.

I feel, however, that it is of the highest importance in making these reductions to adopt the policy of a short postponement of the date of reduction, in order to protect existing stocks of goods which have been imported at the higher duties prevailing under the present act. A precedent for such a course will be found in the Wilson Tariff Act, which provided that the reductions therein made on manufactures of wool should not take effect until January 1, 1895, some four months after the date on which the act became effective.

5. NECESSITY FOR AMPLE REVENUE.

In framing a new tariff act I would also impress upon your committee the necessity of providing for ample revenue, inasmuch as it is almost a certainty that, pending the discussion of any new act, customs duties will fall off largely, and, furthermore, that a considerable period of time will probably elapse before the revenue-producing qualities of the new bill may be clearly demonstrated. To this end I would suggest that authority be given to the President to reimpose the so-called stamp duties if the occasion arises for increased revenue. It would seem to me much more satisfactory to obtain a temporary increase of revenue from taxation rather than from the issue of bonds under the act of June 13, 1898.

The necessity for some source of temporary income to tide over a temporary falling off of revenue will be realized when it is considered that customs duties declined from $199,000,000 in the year 1893, to $149,000,000 in the year 1895. I firmly believe, however, that the Wilson Tariff Act, even apart from the income tax, under normal conditions, would ultimately have yielded its proportionate share of the revenues of the United States.

If the proposed amendment to the Constitution of the United States, authorizing an income tax without apportionment, be ratified in time to provide the necessary revenue, the imposition of stamp duties would not be needed, but I would suggest the advisability of giving the power to impose them, even if that power never has to be exercised.

The necessity of raising a large amount of revenue from customs taxation will probably always be with us even with an income tax and stamp taxes. This will be realized when it is considered that the annual ordinary expenses of the Government have increased from an average of $357,000,000 during the operation of the tariff of 1894, to an average of $655,000,000 during the operation of the tariff of 1909, the expense per capita increasing in those periods from $5.09 to $7.13.