AD VALOREM DUTIES.

Throughout the schedules of H. R. 3321 the effort has been made by the committee to base as many rates of duty as possible upon the ad valorem principle. Some exceptions are found to the general application of this idea, notably, in the chemical schedule and in that portion of Schedule B which relates to window and plate glass. Such exceptions have been made for special reasons in cases where either (1) the commodity in question was of a staple and unvarying character so that the question of value was not likely to be of fundamental importance in securing uniformity in the working of duties or (2) the commodity was of a nature whose actual composition and hence value could not be ascertained without difficult analyses to determine the extent to which given constituent elements appeared in it. In such cases it was deemed wiser to assume that the commodity upon which duties were levied was of a standard grade and value so that a given rate of duty could safely be assessed in the belief that it would correspond roughly to the ordinary commercial requirements of the situation.

The adoption of ad valorem rates in the majority of cases is the result of a definite policy on the part of the committee, which has thought best to minimize so far as possible the injustice which results from the use of a specific-duty system, or a system wherein specific and ad valorem duties are combined to form a composite rate. The specific-duty system fails to take account of fluctuations in value, and it therefore imposes a relatively low rate when prices are high and a relatively high rate when prices are low, notwithstanding the undesirability of such a method. Moreover, it is believed that the specific-duty system strongly tends to mask the real character and burden of the tariff, and thereby to keep the consumer who pays the cost in ignorance of his real contributions. Over and above these considerations, is the fact that the use of the specific system of duties necessitates classifications and descriptions of goods which open the way to fraud and evasion, and which would in many cases permit slight changes in industrial processes made for the purpose of shifting goods from one classification into another, and thereby avoiding the necessity of paying a higher rate of duty. This simplification of the classifications of the tariff is considered highly important and would alone justify any difficulties that might inhere in the extended use of the ad valorem system. It is believed, however, that the application of ad valorem duties will not cause serious difficulty if the customs administrative provisions under which they are applied are properly adjusted so as to avoid dangers that have in the past presented themselves as a result of undervaluation and improper application of rates.

CLASSIFICATION.

Few changes have been made in classification. Ad valorem rates, however, have been substituted for specific rates and for the complicated, intricate, and cumbersome compound rates of the Act of 1909. This is particularly true of the textile schedules-cotton,.flax, silk, and wool-in which schedules the present classifications depend upon various conditions such as the count of the thread, the condition of the yarns, and the weight and value of the fabric per square yard.

The division of classifications by values of the articles has been eliminated as far as possible. It was found necessary in a few instances, in order to place a low rate of duty on a common or cheap article of ordinary use, to make the classification dependent upon the value and place a higher rate upon the more expensive article of the same character and description. This is true in seven paragraphs, with a total of ten classifications according to value as against more than one hundred in the Payne law.

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In the Payne law the common earthenware used table of the poorest family is taxed at the same high rate as the most expensive and luxurious china. The earthenware, crockery, granite, and semiporcelain wares have been placed in one classification with a moderate rate of duty, while the fine china and porcelains have been only slightly reduced from the rates in the present law.

Steel ingots and other forms of steel not otherwise provided for are separated into two classifications, namely, those made by the Bessemer Siemens-Martin, open-hearth, or similar processes without the use of alloys carrying one rate, and those made by the crucible, electric, or cementation processes with or without the use of alloys another rate 2 rates against 14 in the corresponding paragraph of the Payne law.

The change of classification in Schedule I was fully explained in the committee's report on H. R. 12812. The classification by count of thread, weight, and value has been changed to a classification according to the size of the yarn used in the construction of the fabric. A differential has been added to compensate for coloring, dyeing, mercerizing, and figured weaves.

The hosiery paragraph contains only two divisions based on value instead of six, as in the present law.

In Schedule J, the flax threads and cords are still classified according to size, but only two divisions are used-those of thread, not finer than No. 5 being put in one class and all finer than No. 5 in the second class. Under the present law the statistics show that flax threads as fine as 230 were imported, making 225 rates under this paragraph.

The classification of linoleums and oilcloth has been changed to eliminate the provision for widths and one ad valorem rate provided for the plain, painted, or printed, and another rate for the inlaid. The oilcloths have been classified at a single rate. Classification according to weight and count of threads has been entirely discontinued.

Gill nets, webs, and seines have been given a straight ad valorem. rate instead of the complicated rate according to the number of the threads or yarns of which they are composed.

In Schedule K, all of the rates have been made ad valorem and the classification according to the weight and value of the fabric have been abolished.

In Schedule L, the classification of silk fabrics based in the present law upon the weight of the thread, the condition of the yarn, the percentage of silk and the value of the completed fabric, and, whether printed or plain, has been reduced to a simple ad valorem rate on all woven fabrics of silk or of which silk is the component material of chief value.

No change in classification has been made in Schedule M, but single ad valorem rates have been provided in place of the many compound and specific rates.

In Schedule N, the most important change in classification in this schedule is that of leather gloves. Instead of four different classifications according to the kind and finish of the leather, with a separate rate in each case and for men's gloves, only two divisions have been made, one for schmaschen gloves of glace finish and another for all other leather gloves except such as are made from the heavy leathers, such as horsehide, pigskin, and cattle hides, which latter class are made free of duty.

Cumulative duties for lining and prix and pique seams have been retained, but the addition for embroidery has been dropped as being the source of constant litigation.

The metal buttons previously provided for in this schedule have been transferred to the metal schedule and, instead of the old classification according to line measurement, have been placed under a straight ad valorem rate of duty, and the buttons remaining in this schedule are also provided for at a single ad valorem rate.

The jewelry paragraph has been simplified and the complicated, compound rates eliminated and a single ad valorem provided for all jewelry and similar ware.

The laces, embroideries, and similar articles of whatever material composed have been taken out of the various schedules in which they formerly appeared and combined in a single paragraph in this schedule.

The following table shows the imports and revenue by schedules for the fiscal year 1912 under the present law and the estimated imports and duties for the first 12-month period under H. R. 3321. This table indicates an estimated loss in customs revenue under H. R. 3321 of $37,896,000:

TABLE 9.-Comparative summary showing total revenue by schedules for the fiscal year ending June 30, 1912, and as estimated for the first 12-month period under H. R. 3321.

The value of the imports for 1912 transferred from the free list of the act of 1909 to this schedule by H. R. 3321 was $15,052, 409.

The decrease in the estimated value of imports and the increase in the equivalent ad valorem compared with the chemical bill vetoed by President Taft is caused by the transfer to the free list of tanning extracts, barks, and woods, oils used in soap-making, varnish gums, and also the increased rates on various articles such as coal-tar dyes and colors, licorice root, etc.