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PARAGRAPH 488-COPAL GUM.
suitable for the masses in colors as fast to light, washing, and wear as can be found in the finest goods obtainable anywhere in the world, and (2) enabling the cotton manufacturer to better serve the consuming public and particularly that large portion able only to buy coarse fabrics.
It should be remembered that all this is now a settled condition in the textile industry of the United States; it is inconceivable that the industry go backward; the whole question, therefore, seems to be as to whether, in the judgment of your honorable committee, these are materials for which the colored-goods mills should be directly taxed, and through them the working people, or if in their interest should remain on the free list.
ADOLF KUTTROFF, President.
Amber, and amberoid unmanufactured, or crude gum, gum Kauri, and gum copal.
TESTIMONY OF M. DORIAN, REPRESENTING THE AMERICAN GRAPHOPHONE CO.
Mr. DORIAN. Mr. Chairman and gentlemen, I do not know whether I want to take up much of your time or not, because I am not informed as to what the purpose is, but in House bill No. 20182, section 37, there was a proposed duty on shellac and copal gum.
The CHAIRMAN. Thirty-seven, gum.
Mr. DORIAN. Gum, that is right.
The CHAIRMAN. Did you give your name and address to the stenographer?
Mr. DORIAN. Mr. M. Dorian.
I am the treasurer of the American Graphophone Co. Our company, which is a manufacturing concern, is very largely interested in two of the items mentioned in this paragraph 37; that is to say, shellac and copal gum, of both of which products we use quite a large quantity.
We are manufacturers, among other things, of what are known as talking-machine records, and especially of the disk type, and these two products enter largely into the manufacture of those records. Both these products, shellac and copal gum, are foreign products entirely, coming from East India. They are not produced in this country at all. There is no substitute for them at all. Our company, and some of the other companies which make use of them, have spent large sums of money in an endeavor to secure or produce some substitute for especially the shellac, and after very extensive experiments of this kind, and very costly experiments, have abandoned all further attempt to produce any substitute. The copal gum we use as a sort of body for the record. It forms the interior of the record, and it is also used largely, as the gentlemen of the committee probably understand already, in composition work, and is used in varnishes.
I mention that because I want the committee to understand that these are products in which American manufacturers, other than our own company, are very largely interested. To most of these manufacturers they are, I may say, indispensable products. We use them; manufacturers of buttons use them; manufacturers of composition goods, such as poker chips and a number of things of that
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kind, use these articles, and they are also in competition in the use of them with foreign manufacturers, particularly German and British. Now, emphasizing once more to the committee the importance of the fact that these are products which can not be produced in this country, can not be duplicated, can not be substituted for in any particular, I want to say that both products have been for many years on the free list, and I appear here in support of the proposition to leave them there. The question of imposing a duty, even a slight one, on either or both of these products was under consideration, I believe, by the Payne committee, and after consideration they decided that they were products which were not properly taxable, and they left them on the free list. Now, there is a point that I want to bring to the notice of the committee in particular; that is as to the question of the value of the imports, because some of the gentlemen of the committee have been interested in that and have asked questions about it.
I had the honor of appearing before the Finance Committee of the Senate on this same subject in March of last year, and that question was asked by Senator Cullom, and Senator Smoot was kind enough to furnish these figures, which he took from some official document, that in 1910 the importation of copal gum was 15,837,432 pounds. Senator Smoot also furnished this information as to the value of that importation in dollars and cents; that is to say, in 1910 it amounted to $976,603, and for shellac the value was $3,575,342. He furnished this information also, that from a revenue-producing point of view these two articles were expected to produce: Shellac, $201,340; copal gum, an increase in the revenue of $89,285. Now, I have not had an opportunity or occasion to verify those figures at all. I give them to the committee for just such value as they may be to them. Mr. JAMES. That was under the bill that passed the House?
Mr. DORIAN. Yes, sir; I believe that is right, sir. That was House bill No. 20182.
Mr. JAMES. These increased rates of revenue derived, which you have just read-who would pay that?
Mr. DORIAN. That would be paid by the importer.
Mr. JAMES. Yes.
Mr. DORIAN. You understand, sir, those products
Mr. JAMES. Would it increase the sale to the consumer?
Mr. DORIAN. Undoubtedly; yes, sir.
Mr. HARRISON. Mr. Chairman, I will call Mr. James's attention to the fact that these are raw materials for the manufacture of varnish, and the same bill proposes to reduce the rate of duty on varnish from 35 to 25 per cent, in an endeavor to make the manufacturer bear the burden of this tax, and not hand it down to the public.
Mr. HILL. But both of them bear a reduction, on the finished product and a tax on the raw material. This makes it both ways.
Mr. DORIAN. As those products come into the country, gentlemen, they are absolutely worthless. That is to say, in their crude, raw state they are not useful in any way. With respect to our finished product, they have to go through a very complex, difficult, and expensive manufacturing process; the process of elimination, for instancethe elimination of impurities. Now, we get these goods, as I say,
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from the East, and it takes anywhere from two to three months to get a shipment after an order is placed before the goods can arrive
Now, that is an important feature for the American manufacturer, because the copal gum, especially, is packed and marked at point of embarkation. For instance, if we buy in Ceylon, the cases are marked there, and we pay on the weight marked in Ceylon. If the cases are three months in transit they dry out, and they reach us with a shrinkage of a very considerable amount. For instance, if a case is marked 225 pounds, when it reaches New York it may weigh 200 pounds, but we pay on the 225. Now, that is important for two reasons. Of course it means that we pay for more material than we actually obtain, but it means also that our competitor, who is nearer that market, has an advantage, because his loss on a similar case will be much less, and because with the British and German manufacturer, with whom we are in competition with respect to both the shellac and copal gum, he has the other advantage that he has better shipping facilities; he has about 10 or 20 ships to our 1; he has a cheaper freight rate, and he has no duty on his`raw material, either in England or Germany, so that he has, at the start, an advantage over the American manufacturer and so great is that advantage, that we, as a manufacturing concern, have to meet, with respect to our European trade, that our company has endeavored to meet it by the erection of a factory at London, or near London, from which we supply all our European trade with the records manufactured from those and other ingredients.
Now, that factory has equipment and plant capable of employing anywhere from 500 to 700 men. At present we are employing 150 there. For the past few months we have been operating a very small plant in Canada very much for the same reason, that we must meet conditions in those countries where we have business worth taking care of. Now, then, we are particularly interested in these two products for our export trade. So far as our American trade is concerned, I will state frankly to the committee that the question does not trouble us at all, because we are protected not only by a duty on talking-machine records coming in, but we are also protected by the patent situation, so we are not in competition in this country with foreign manufacturers; but we are in competition with them in all foreign countries and especially in the South American countries, in Mexico, Japan, China, and the Philippines. And in those countries we are competing with English, German, French, and Italian manufacturers of talking-machine records of the disk type.
The CHAIRMAN. I understand you get a drawback for your export trade?
Mr. DORIAN. You understand what?
The CHAIRMAN. I understand you get a drawback for your export trade.
Mr. DORIAN. In what way, sir?
The CHAIRMAN. Why, if you import this raw material and manufacture it into finished products and wish to export it, you get a drawback of 99 per cent of the tax you have paid."
Mr. DORIAN. Under your new bill?
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The CHAIRMAN. Well, we assume that that same law will be carried into the new bill. It is in the present law. The drawback feature of the tariff law authorizes you, so far as your export trade is concerned, when you have paid a tax on your raw material, and then export it from the country
Mr. DORIAN (interposing). We have not paid a tax up to this time. The CHAIRMAN. I know, but
Mr. DORIAN. I get your point.
The CHAIRMAN. You would only pay 1 per cent of the whole tax, ultimately.
Mr. DORIAN. But there is this other feature about it: We are employing in our factory-our main factory is located at Bridgeport, Conn., and there, at this time of year, we are employing 1,500 workOur pay roll will run anywhere from $15,000 to $20,000 a week, and of that number, I should say 30 per cent are employed upon the manufacture of these records.
The CHAIRMAN. As I understand you, you say you have a patent in this country?
Mr. DORIAN. Yes.
The CHAIRMAN. Then, nobody can compete with you here?
Mr. DORIAN. I am not asking any help for this country.
The CHAIRMAN. Then, if you get a drawback on your export business, as you will have
Mr. DORIAN. Yes.
The CHAIRMAN (continuing). Of 99 per cent of the tax you pay-
The CHAIRMAN (continuing). Why, it does not seem to me that you are very seriously affected so far as building up your business is concerned.
Mr. DORIAN. I will be perfectly frank with the committee and say we will not be very much affected anyhow, for this reason: Thirty per cent of our product manufactured now in Bridgeport is for export and about 30 per cent-the same proportion of our labor there is engaged on that class of work. Now, we can ship for export to South America, to China and Japan, just as well from our factory in London, and really better, because we will have better freight facilities than we can get from Bridgeport, and we have always been able to do that; but we have never taken that into consideration at all. But if we are further handicapped-we have a handicap now, as I have tried to show the committee in the difference in the freight, the difference in the shrinkage, and the quicker service-but if we are further handicapped by a duty on these raw materials, which are indispensable to us, and which can not be replaced by any other product, why, we shall have to very seriously consider how much of that sort of work— that is, that export business-we can handle from our factory in London, where we are under no such handicaps at all, and where we will be on a basis of equality with the foreign manufacturers.
The CHAIRMAN. Well, on your export trade I assume you will have
the drawback on this material.
Mr. DORIAN. Well, that is very good too, but I would like to be able to impress the committee with the importance of leaving these articles on the free list not only for the benefit it will be to us, but for the benefit it will be to other American manufacturers. There is no
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industry in America that needs protection by imposing a duty on either of these products. There is no American industry which would be injured by leaving them on the free list.
The CHAIRMAN. I will state to you the purpose of putting the tax on this particular article, about a 9 per cent tax, which is a low rate. It will raise about $300,000, and we are of the opinion that these industries, such as the talking-machine industry and the poker-chip industries and the industries that use this raw material are prosperous and should pay a small tax to the United States Government. In other words, it distributes $300,000 among the various industries that are prosperous or supposed to be.
Mr. DORIAN. I understand that those products are used very largely, not only by the poker-chip industry, but by hat manufacturers. You may get that revenue-unquestionably you will-but if some of these industries should, like our own, find these indispensable why it is a doubtful benefit it seems to me. I only suggest that to the committee.
The CHAIRMAN. The purpose of the committee is to tax purely for revenue. Of course if you do not think the industries which you represent can stand the tax, we do not want to put a burdensome tax upon you, but if it is a reasonable tax you ought to pay it.
Mr. DORIAN. I do not assume to speak for these other industries. I know what the effect would be upon us. I know that when the question was up before in the Senate there were a number of other representatives of the talking-machine interests who made the same statement that I have made to the committee.
We have been doing this part of our work in America and at Bridgeport for many years, when we could have made money by transferring it to London. We wanted to give the American workmen all the opportunity and advantage that we could.
Mr. KITCHIN. If you had to pay this tax, you would add it to the cost of the talking machines?
Mr. DORIAN. Unquestionably, if it cost us more to produce it.
Mr. DORIAN. The public.
Mr. KITCHIN. The moving-talking-machine man or the consumer. It would not hurt the talking-machine man, would it; it would be passed on to somebody else?
Mr. DORIAN. Certainly.
Mr. RAINEY. Under your patents, and under the law, as construed by the courts, you can regulate the price to suit yourself down to the jobber and clear down to the consumer?
Mr. DORIAN. I am not so sure about that.
Mr. KITCHIN. Under the Oldfield bill?
Mr. DORIAN. Mr. Oldfield says that we can do that.
Mr. RAINEY. So far have you been doing it?
Mr. DORIAN. Oh, yes.
Mr. RAINEY. Under your patent you have been fixing the price to
Mr. DORIAN. Oh, no.
Mr. RAINEY. You have been selling at a fixed price to the consumers, have you not?
Mr. DORIAN. A fixed price; yes, sir.