of voiding the entire National Industrial Recovery Act that they did go to. Am I right or am I wrong in my suggestion that that had not been done before that time?

Mr. DORR. Frankly, it does not seem to me that the Court in the N. R. A. case went beyond what it has been the custom to do. I will have something to say about that when I come to it.

Mr. KELLER. All right, then. I want to get clear on it myself.

Mr. DORR. Frankly, it is a question of opinion. I am not going to express an opinion as to the propriety of the Supreme Court's giving its reasoning in a certain case.

Mr. KELLER. Why not? I do it.

Mr. DORR. I think that is a matter for its judgment and its sanctioning. If it will save the time of the committee, I am perfectly willing to put in a few pages about one or two things. That is entirely agreeable to me. Suppose I follow Mr. Matthew's example.

Mr. WELCH. There is no use propounding a lot of legal doctrines to laymen who do not know much more about it after you are through than before you started.

Mr. ELLENBOGEN. The committee will be glad to have your legal authorities, Mr. Dorr.

Mr. DORR. We will be glad to do that, Mr. Ellenbogen.

Mr. KELLER. We are going to separate the factual statements from the legal considerations.

Mr. ELLENBOGEN. Mr. Dorr, you are the chairman of the board of the Cotton Textile Institute, are you?

Mr. DORR. Yes, sir, I am.

Mr. ELLENBOGEN. And Mr. Murchison is the president?

Mr. DORR. Yes, sir.

Mr. ELLENBOGEN. That is the same organization, is it?

Mr. DORR. Yes, sir.

Mr. ELLENBOGEN. Has the Cotton Textile Institute appointed a special strategy committee, or whatever you call it?

Mr. DORR. A special what?

Mr. ELLENBOGEN. A strategy committee, or whatever you call it, to fight the enactment of this bill.

Mr. DORR. No, sir. They asked certain representatives or certain members of the industry whether they desired to appear here, and certain of them have appeared. Mr. West and Mr. Cone have appeared.

Mr. ELLENBOGEN. The Daily News Record, under today's date, carries a story that the Cotton Textile Institute has appointed a strategy committee to combat this bill.

Mr. DORR. NO; I don't think that is an accurate statement. not to my knowledge.

Mr. ELLENBOGEN. What has the committee done?

It is

Mr. DORR. Mr. West and Mr. Cone appeared here, and we considered the facts with regard to the industry, and so on, part of which had been presented to you by Mr. Murchison, Mr. West, and Mr. Cone; and others will be presented to you by Mr. Munroe as soon as I leave the stand.

Mr. ELLENBOGEN. Has Mr. Henry been appointed a member of the committee?

Mr. DORR. Mr. Henry was one of those who was considering testifying. He would have testified here on Thursday but for the

fact that he was a witness in a trial in Greenville. Much to his regret, he was unable to remain and appear here on Thursday.

Mr. ELLENBOGEN. How much money has the institute appropriated in this matter?

Mr. DORR. It has not appropriated any. It has very little to appropriate.

Mr. ELLENBOGEN. Has the Cotton Textile Institute mapped out a fight to permit the cotton-textile manufacturer to retain the processing taxes that had been impounded in the courts and that had been passed on the consumers?

Mr. DORR. No, sir; if you want to go into that, which does not have anything to do with this, I will be glad to go into it, because we want your help in a very serious situation. I was speaking to Congressman Keller about it the other day; and I am glad you raised the question, Mr. Ellenbogen.

Let me tell you just what our situation is.

Mr. ELLENBOGEN. Just tell me if you have done that.
Mr. DORR. No, sir.

Mr. ELLENBOGEN. Haven't you engaged in a concerted effort to bring about a situation which will permit the cotton-textile manufacturers to retain the processing taxes they collected as the agent of the Government and which they have passed on to the distributors and to the customers?

Mr. DORR. I will tell you what they have done, Mr. Ellenbogen. Last summer, when the Hoosac case was decided by the Circuit Court of Appeals

Mr. ELLENBOGEN. That was not last summer; it was last month. Mr. DORR. I mean when it was decided by the Circuit Court of Appeals and the Circuit Court of Appeals held the A. A. A. Act unconstitutional, our industry was confronted with a tremendously difficult situation. We are accustomed to doing business on longterm contracts. Our buyers immediately saw this situation: Suppose that the Supreme Court decides the same way as the lower court did in the Hoosac case, then there will be an immediate drop in the market price of cotton goods because of the invalidity of the processing tax. Consequently, buyers just stopped buying, because they did not want to tie themselves up with contracts that would extend beyond the period of the Supreme Court decision, which would leave them with stock on hand which had been bought at a price which might include the tax, or most of it, at any rate, and on future deliveries it would be higher than the market price. It was a very serious situation for customers, and they stopped buying. Consequently, in order to meet that situation, which was a very critical one to the industry, the industry, in conference with its buyers, adopted a clause under which they agreed that if the Supreme Court held the tax invalid, then the seller would make an adjustment on deliveries which had been made during this interim period, crediting back the amount of the tax, and on contracts which extended beyond the period of the A. A. A. they would make a similar reduction in price. The day after the Supreme Court decided it, Mr. Ellenbogen, there was an immediate drop in price, and the cotton. industry reduced the price by the amount of the tax on the goods, those goods having been manufactured before. Since that time they

have been endeavoring to work out a plan for the adjustment of back contracts, and that is now going forward.

Now, Mr. Ellenbogen, the industry does not feel that it would mean the closing down of mills and general bankruptcy if now Congress should pass a retroactive tax as to the goods which have been manufactured in the 5 months because in that event we were under contracts with our customers and would have to pay them the amount of tax and then also pay that into the hands of the Government. You can see the seriousness of that situation.

Mr. ELLENBOGEN. You are organizing a lobby to fight the enactment of the statute that will prevent it and thus enrich these textile manufacturers, are you not?

Mr. DORR. No, sir.

Mr. ELLENBOGEN. Didn't the Cotton Textile Institute under date of January 24 send out a circular letter in which they asked the manufacturers to withhold the cotton processing taxes that they had collected and not to return them?

Mr. DORR. They suggested that until a conference be held

Mr. ELLENBOGEN. You can tell us whether they sent a letter, and then you can explain it later.

Mr. DORR. I will tell you exactly what happened, because I know you are interested, and we are interested in getting this matter before you because we want your help. You are interested in the industry, and you do not want something to happen which would not merely be serious to the mills but serious to those who are employed in them. Mr. ELLENBOGEN. Most certainly not. But I do not want the manufacturers who have passed on the tax to retain the tax to the tune of $50,000,000.

Mr. DORR. Well, I can assure you that that is not what is being done, because we are paying it back.

Mr. ELLENBOGEN. As to paying it back, you have contracts as to paying it back for 4 months. Is that correct?

Mr. DORR. The period extends 120 days prior to the act..

Mr. ELLENBOGEN. That is 4 months.

Mr. DORR. Yes; 4 months.

Mr. ELLENBOGEN. What are you going to do with the taxes that were impounded prior to that time?

Mr. DORR. I suppose a large part of that money will be used in making this adjustment.

Mr. ELLENBOGEN. There is no obligation on the part of the manufacturers to make an adjustment, is there?

Mr. DORR. You mean as to the goods sold prior to that time? Mr. ELLENBOGEN. Yes; as to goods sold prior to that time. Mr. DORR. The goods sold prior to that time were goods which had been manufactured during a period, for the most part, when the mills were paying a tax. You see there is quite a lag.

Mr. ELLENBOGEN. There is always a lag. As a matter of fact, there are very few mills that paid any tax subsequent to February, aren't there?

Mr. DORR. Of yes; most mills did.

Mr. ELLENBOGEN. They paid it, but the tax is not paid by everybody.

Mr. DORR. NO; I think you will find some mills paid taxes, Mr. Ellenbogen, considerably after that, and some of them until September.

Mr. ELLENBOGEN. But very few of them paid any tax that took in a period subsequent to February?

Mr. DoRR. Oh, yes. But I think you are wrong on that.

Mr. KELLER. Was there a letter? If so, what did it contain? Mr. DORR. All that was written, Mr. Ellenbogen, was the suggestion to the mills that until the matter can be further considered that adjustments be held pending that further consideration. That further consideration was taken and the recommendation went out to the mills to make those adjustments just as promptly as they could be made.

Mr. ELLENBOGEN. But the letter was written asking them to withhold the adjustment, wasn't it?

Mr. DORR. Asking them to hold it. I think it was suggested to them until further conferences; that the matter remain in status quo. Mr. KELLER. In other words, not pay the tax?

Mr. DOOR. No; it was not a question of paying the tax at all. Mr. ELLENBOGEN. The letter had been sent out long before this letter in January asking them not to pay any taxes?

Mr. DORR. No; there was never a letter such as that.

Mr. ELLENBOGEN. The industry was notified not to pay the processing tax after this decision.

Mr. DORR. Not by the institute, not ever. As a matter of fact, the industry kept on paying taxes very generally and, in fact, completely, I would say until the circuit court of appeals had held them invalid.

But

Mr. ELLENBOGEN. But, Mr. Dorr, the taxes are not collected. when they are collected they are not paid up to the date of collection but for a period prior to that; so the industry, in most of the cases only paid the taxes up to February, and the contracts you have told us about are only 120-day contracts. What are you going to do with the money the industry has collected as the agent of the Government prior to this 120-day period?

Mr. DORR. It did not collect money as an agent of the Government.
Mr. KELLER. Did they collect money for processing taxes?
Mr. DORR. From whom? Do you mean from customers?

Mr. KELLER. Yes; from customers.

Mr. DORR. The processing tax was an element of cost like wages. The selling prices, as indicated by the examination of returns to the Federal Trade Commission, 1934, in many instances did not cover the processing tax. A large part of the goods were goods on which the mill had absorbed the tax and did not pass it on. It paid the tax to the Government but did not succeed in passing it on to the customer.

Mr. KELLER. If a manufacturer was really not collecting and not paying to the Government

Mr. DORR. No; they paid to the Government. They pay to the Government before they sell the goods, or, at any rate, about the same time.

Mr. KELLER. They really did the paying over to the Government? Mr. DORR. The tax is on the mills. It is not on the customer. Mr. KELLER. And it was the duty of the mill to pay it directly to the Government?

Mr. DORR. Yes; and they did pay it.

Mr. KELLER. That is what I am trying to get at.

Mr. ELLENBOGEN. The mill passed it on.

Mr. DORR. In some cases, yes, and in some cases, no.

Mr. ELLENBOGEN. You mean in practically all of the cases it was yes and in one or two cases it was no?

Mr. DORR. No, I do not. I mean in a large part of the industry, for instance, such as the production of basic gray fabrics, the prices. which have prevailed have not brought the mills out whole.

I think you can get some testimony that would interest you very much on that from the Tariff Commission, which made an examination under that situation in connection with Japanese competition where it appeared from the examinations they had made of mill records that that was the situation. I cannot give it to you in detail, but you can find it there.

Mr. ELLENBOGEN. There is at present an organized campaign. Every Member of Congress is getting letters every day urging him to fight the enactment of the tax in this case. And your institute is behind that.

Mr. DORR. Mr. Ellenbogen, the situation which the mills are interested in and the only thing on which they have expressed a view, is this, that it would wreck the industry if it has to pay the amount. it has to pay under its contracts with its customers and then has to pay those same amounts in a new retroactive tax to the Government. That is the one thing on which the industry has taken the position and is asking the aid of Congress. And we are going to ask your aid for that very thing. And when that matter comes up before a committee of Congress I am convinced that we are going to have your aid in what we asked for, and you will feel that we are not asking for a thing that we are not entitled to or not 1 cent more than we should, or not one more bit of protection than we should have. Mr. ELLENBOGEN. Suppose you should be given credit for any tax you paid?

Mr. DORR. And which we have refunded to our customers?
Mr. ELLENBOGEN. Yes; which you have refunded..

Mr. DORR. That is one of the things we are hoping to ask for if that sort of a bill goes through.

Mr. ELLENBOGEN. But what are you going to do with the money collected by those mills prior to the 120-day period?

Mr. DORR. As to that, Mr. Ellenbogen, the industry has taken no position. We are examining to see whether there will be that type of situation.

Mr. ELLENBOGEN. You know it exists. You say it exists in a few mills. I say it exists in most mills.

Mr. DORR. The view of the industry on that point is that if we make the refunds to our customers which we are bound to make, and take the losses on inventory which we are taking, that that will just about balance the situation.

Mr. ELLENBOGEN. You are not going to take any loss because you do not pay the tax.

Mr. DORR. A good many mills have paid the tax. I know some of them have.

Mr. ELLENBOGEN. Oh, yes; some of them have.

Mr. DORR. And, of course, if you impose a retroactive tax on all of these goods we will pay a tax, although we have sold them and are selling them now.