prepared by the commodity division in cooperation with the economist assigned to the investigation and, upon approval by the advisory board, is submitted to the commission for final revision and approval. This preliminary statement of information sets forth, for the use of interested parties at the public hearing, the full facts developed in the investigation. After the conclusion of argument, whether oral or in the form of printed briefs or both, all evidential matter is reviewed and a final report is prepared.

IV. THE DIVISION OF PREFERENTIAL TARIFFS AND COMMERCIAL TREATIES

Section 704 of the act (1916) creating the Tariff Commission provides that

The commission shall have power to investigate the tariff relations between the United States and foreign countries, commercial treaties, preferential provisions, and economic alliances.

The division of preferential tariffs and commercial treaties has been mainly occupied during the last year with investigations relative to sections 316 and 317 of the tariff act of 1922, but certain other studies are in progress. The more important relate to the effects of the reciprocity treaty of 1902 with Cuba, and to the effects of the tariff relations between the United States and the Philippine Islands. The division prepares or contributes to all reports, other than investigations under section 315 of the tariff act, which touch upon the relations between the United States and foreign countries. It has assisted, for example, in the preparation of memoranda on the international convention on customs formalities, on the assessment of duties in Morocco, on possible negotiations under paragraph 1700 of the tariff act, and on tariff classifications and trade contingents or quotas.

(1) PROCEEDINGS UNDER SECTION 316

Section 316 of the tariff act of 1922 follows in general the suggestions made to the Congress in the report entitled "Dumping and unfair foreign competition in the United States," submitted by the Tariff Commission in 1919. It declares unlawful unfair methods of competition and unfair acts in the importation of articles into the United States or in their sale, the effect or tendency of which is to destroy or substantially to injure an industry efficiently and economically operated in the United States; the act further provides that, in order to assist the President in making any decisions under this section, the Tariff Commission is authorized to investigate any alleged violation on complaint under oath or upon its initiative. The commission has received a number of communications concerning alleged unfair competition and 13 applications, complaints under oath in accordance with the statute. In regard to these applications, 3 investigations have been ordered, 3 cases are pending (receiving consideration or preliminary examination), 1 has been withdrawn, another has been referred to the Treasury Department for inquiry under the antidumping law, and in 5 the preliminary examination resulted in no investigation being ordered. The investigations undertaken are as follows: Brierwood pipes. On August 11, 1923, the commission instituted an investigation of alleged unfair practices and unfair acts in the

importation of brierwood pipes and in the sale of such imported pipes at prices less than their cost of production in the country of origin. A public hearing was held in the office of the commission in Washington on September 24, 1923. The hearing was postponed successively to October 17, October 31, and November 8, 1923, on which date it was concluded. The interested parties filed briefs, but before the matter was determined, the applicants made known to the commission their desire to have their application treated as submitted under the provisions of section 315. The commission thereupon proceeded in the investigation instituted for the purposes of section 315 and instructed its representatives in Europe to obtain cost data and other information requisite in an investigation of that character. (See page 72.)

Revolvers. Since the publication of the eighth annual report of the commission the investigation instituted by the commission to assist the President in making a decision upon alleged unfair competition and unfair acts in the importation and sale of revolvers simulating revolvers manufactured by Smith & Wesson (Inc.), has been brought to a conclusion.

As stated in the last annual report, this investigation was instituted on June 3, 1924, and the President, on the same day, issued a temporary restraining order under subdivision (f) of section 316. A public hearing was held at the offices of the commission in Washington on July 21, 1924, and successively continued to September 29, September 30, and October 1, 1924, after which printed briefs were filed on behalf of interested parties.

On July 14, 1925, the findings of the commission were made and filed and copies thereof were served by registered mail upon parties of record, including the Spanish manufacturers of the articles complained of. The time allowed by section 316 for taking an appeal to the Court of Customs Appeals upon a question or questions of law expired without an appeal having been taken.

Thereupon, on November 7, 1925, the commission transmitted to the President the final findings, together with a transcript of the testimony in the investigation which, with the findings and recommendations of the commission, constitute the official record of the investigation. The opinion of the commission, its findings of fact, and its recommendations to the President will be found in the appendix at pp. 90, 109.

Sanitary napkins.-On October 14, 1924, the commission instituted an investigation of alleged unfair practices and unfair acts in the importation and sale of sanitary napkins packed and labeled so as to confuse or mislead the public into purchasing such imported articles as and for the domestic product marketed under the trademark "Kotex." A public hearing was held at the offices of the commission in Washington on November 18, 1924.

Section 316 was devised to meet cases of unfair competition in the importation and sale of goods. The word "the" was inadvertently inserted in a clause near the end of subdivision (c), reading as follows:

That the commission may modify its findings as to the facts or make new findings by reason of additional evidence which, if supported by the evidence, shall be conclusive as to the facts except that within such time and in such manner an appeal may be taken as aforesaid upon a question or questions of law only.

*

It is believed that certain other phraseology in subdivision (e) may interfere with the application of the section. The practices complained of may be those of foreign manufacturers rather than of importers, whose action in buying abroad can not be deemed unfair. The language of the latter part of subdivision (e) limits the extreme penalty of exclusion to "articles * * imported by any person violating the provisions of this act." A narrow construction of this phraseology might restrict the scope of the statute and in some cases nullify its intent. Similarly, the statute would be made somewhat more explicit if the words "exporter" and "sell for export" were inserted in subdivision (a) and if line 6 of subdivision (e) were changed to read, "articles exported, sold for export, or imported

(2) PROCEEDINGS UNDER SECTION 317

*

Section 317 is framed in accordance with the suggestions of the Tariff Commission contained in its report of 1919, entitled "Reciprocity and commercial treaties." In general, this section follows the precedent established by the maximum and minimum provisions of the act of 1909, which, to quote the conference committee, "had for its purpose the obtaining of equality of treatment for American overseas commerce." Section 317, however, is flexible, while the provi ions of the act of 1909 were inflexible and, as experience showed, comparatively ineffective, because they could not be adapted to the circumstances of each case.

* * *

Section 317, as finally enacted, provides, in effect, that the President shall endeavor to secure the removal of all discriminations which foreign countries may inflict upon the commerce of the United States. The second paragraph of section 317 may be viewed as implying that there may be cases (sanitary regulations may afford instances) in which a discrimination between American and certain other products is reasonable, but the section further provides that every country which "discriminates in fact in such manner as to place the commerce of the United States at a disadvantage compared with the commerce of any foreign country" is liable to discrimination against its commerce by the United States. The law itself thus defines discrimination and makes it clear that the point to be regarded is the effect upon American commerce and not the motive or intent of the foreign country in adopting its legislation or in adjusting its rates.

Section 317 covers discriminations of all varieties, whether in customs duties or other charges, or in classifications, prohibitions, restrictions, or regulations of any kind. The Tariff Commission is to keep itself informed of all discriminations against the commerce of the United States and to make recommendations concerning the action to be taken. If, then, the foreign country does not cease its discrimination when the matter is brought to its attention, the President may impose upon its products new or additional duties of not more than 50 per cent ad valorem; and if the foreign country still persists in its discriminations total prohibition may be inforced. In order to determine whether discriminations against American commerce exist and to obtain data in regard to their practical effect, questionnaires were sent to more than a thousand leading manufac

turers and exporters in all lines of trade, asking them to report upon the existence and effects of discrimination against American products. in their line of business. Information was also obtained through personal interviews with exporters.

Section 317, subdivision (e) provides for countervailing duties to offset industrial advantages obtained in foreign countries through differential export duties in third countries, including colonies of the said foreign countries.

For example, for some time the Indian Government maintained upon raw hides and skins a differential export duty which allowed British tanners to obtain their raw material more cheaply than the American tanner could obtain the same materials, to the extent of 10 per cent of the dutiable value in India. This situation, and the proper measures to offset it, were under consideration by the commission at the time when the differential duty was repealed.

1

Since July 1, 1924, the commission has submitted 8 reports dealing with alleged discriminations in 25 countries and colonies. In addition, it has responded to several special requests of the Secretary of State for information bearing upon our tariff relations with other countries.

The commission feels that it must again raise the question as to the adequacy of the present law to provide sufficient safeguards for domestic industries against attacks or threats of attack by other countries by way of export duties, restrictions, or embargoes upon raw materials. Section 317 provides for a countervailing duty to offset export duties, but the situation may be such that the remedy provided is inadequate.

Section 317 covers export duties, restrictions, or embargoes only when they have differential features. Some of our largest industries, notably rubber and tin, are entirely dependent on imported raw materials; others, such as the leather and paper industries, would be seriously crippled by the cutting off of foreign supplies.

(3) SURVEYS IN PROGRESS

The division has under way analyses of the effects of the reciprocity treaty of 1902 between the United States and Cuba, of the effects of the tariff relations between the United States and the Philippine Islands, and of the effects of the Canadian preferential tariff upon the exports of the United States and of Great Britain to Canada.

the

The analysis of the Cuban reciprocity treaty covers the full period during which the treaty has been in effect. It shows the extent of the trade which on each side benefits by the special treaty rates, extent of the concessions on each side converted to average ad valorem equivalents, the revenue sacrificed by each Government, the increase of the trade, comparing it with the increase of trade in other directions and pointing out other important influences which have stimulated it, and the extent to which the treaty enabled producers to sell in the favored market at higher prices per unit.

The study of American trade with the Philippines, not so far advanced, will show the financial aspects of the tariff relationship, the prominence of Government supplies in the development of the trade,

1 The 25 countries and colonies include 15 colonies of the British West Indian group covered by one report.

and in general will follow the lines of analysis of the situation arising from the Cuban treaty.

The analysis of the trade of the United States and of Great Britain with Canada is believed to be the first attempt at a thorough study of this subject. Many studies have gone as far as an examination of the general trend of the trade before and after the establishment of imperial preference but none has undertaken to follow a large number of individual articles throughout the period or to determine exactly which tariff differentials have been effective in turning the trade from the United States to Great Britain. The problem is complicated by changes of tariff classifications, by the rapid expansion of American export trade in all directions during the period, and by the development of Canadian industries.

V. THE ACCOUNTING DIVISION

On January 1, 1925, the special experts of the commission who were versed in accountancy were organized into the accounting division under the supervision of an experienced accountant. Practically all of the cost accounting work of the commission is carried on by regularly employed accounting experts, but in a few cases cost accountants, having specialized experience in an industry which is the subject of investigation, have been employed.

The chief functions of the accounting division are first, to conduct cost investigations in the field in cooperation with the commodity experts and the economists of the commission, and second, to tabulate and analyze the cost data when the field work is completed.

The initial stage of any investigation is the preparation of the cost schedule which may be outlined as follows: When an investigation is ordered involving cost work, the accounting division, in cooperation with the commodity experts, prepares a tentative cost schedule to be used as a basis of obtaining the cost data from foreign and domestic manufacturers. This tentative schedule is then sent, or taken in person, by agents of the commission, to one or more domestic producers of the commodity under investigation, for the purpose of obtaining criticism and additional information that may be necessary to its completion.

After the tentative schedule has been tried by actual experience in the field, it is revised and often completely redrafted before it is finally approved by the commission as a practical method of obtaining the cost data desired.

The cost schedule, as finally approved by the commission, may be used in three ways.

First, it may be mailed to producing companies with the request that they fill it out and return it to the commission under oath as to the accuracy of the information reported.

Second, it may be used as a guide, so to speak, in reporting cost data, with a request that if the company's own cost records are in sufficient detail as to give all information requested on the schedule, a report under oath on the company's own cost forms will be accepted in lieu of the schedule.

The third and most important use of the schedule is by the commission's agents in the field in obtaining the desired information directly from the company's records. This method is the one now almost invariably used in the commission's investigations.