While the Secretary of the Treasury could take appropriate action, much time would undoubtedly elapse (the horses would have run out of the stable long since) and much damage would have been done to American importers, manufacturers, merchants and labor in the interim before action could be secured. It certainly would be better to prevent this situation instead of seeking relief after the door has been opened to an inevitable increase in foreign mail order business. As a practical matter, how could proof be presented that importations were getting out of hand unless all packages containing such importations were opened and examined and proof secured in that way? Furthermore, certainly a spot check of packages valued under $3 would of necessity have to be made without any recompense to the Government.

It is respectfully suggested that to change the present limit would in effect be a change in tariffs, rather than a simplification of customs procedure, notwithstanding the fact that no specific items are mentioned. Consequently, it would seem that such a proposal should be considered as a tariff measure since it affects the duties to be collected. To include changes in duties in legislation dealing with other than tariff matters might in time prove dangerous and troublesome. May we call your attention to a statement made by Senator George W. Malone at the conclusion of his appearance before the House Ways and Means Committee on September 15, 1951 (reported on p. 593 of the hearings) wherein he indicated that a customs simplification bill should not be used to change tariffs.

In summation, it would seem that if the level is raised to $3, then the following results may be expected.

Potential growth of foreign mail-order business: With any raise of the duty-free level, it may be that foreign concerns and possibly some American firms would undoubtedly take advantage of duty-free provisions giving them a competitive advantage, not alone in relation to American products but also over those firms who import similar foreign merchandise and pay the duty thereon. From past experience, it can be expected that mail-order houses would offer lines of merchandise to be shipped from abroad especially attractive to American buyers, emphasizing that these goods are duty free and, where applicable, no excise taxes must be paid;

Possible net loss of revenue instead of saving:

(a) Loss of duties on mail-order shipments under $3. There would have to be a spot check of packages marked $3 and under, which would entail the cost of examination without any return.

(b) Because of these duty-free mail shipments, loss of business to American importers, manufacturers, and merchants would result in potential lessening of their income taxes.

(c) Loss of excise taxes where applicable, both at the manufacturer's and retailer's level.

And in addition to that there would be a loss to the local communities of their sales taxes, both city and State.

Then there is a possible effect on employment.

Unemployment might well result in many lines, particularly soft goods and costume jewelry were the value of duty-free mail packages raised to $3.

In addition to presentation which has just been made, I should like to state for the record that the Jewelers Vigilance Committee did not

learn until Jaunary 1952 (after the bill had been passed by the House) of the proposal contained in H. R. 5505 to raise the level from $1 to $10 on duty-free mail shipments. Otherwise, arguments would certainly have been presented to the Ways and Means Committee when that bill was being considered.

Issue is taken with the statement of Mr. Joseph A. Sinclair, secretary of the Commerce and Industry Association and director of its world trade department, contained in a letter addressed to Chairman Reed and published in the Journal of Commerce of May 22, 1953. In that letter he said:

The more controversial provisions of the legislation in the form adopted by the House in 1951 have been removed.

As you will recall, the former bill, H. R. 5505, was pigeonholed by the Senate Finance Committee, possibly because of some of the controversial proposals contained therein, facts pertaining thereto having been presented before that committee. It is to be regretted that the matter of raising the level of duty-free mail shipments is once more an issue, since it again revives controversy in connection with the present bill.

In view of the above facts and on behalf of the thousands of jewelers throughout the country, the plea is earnestly made that the present value of the duty-free mail shipments be retained at $1.

Thank you very much for your consideration.

Mr. JENKINS. You made a very fine statement and we appreciate your coming.

Mr. GRINBERG. Thank you.

Mr. JENKINS. Are there any questions?

Mr. KEAN. Mr. Grinberg, this $1 limitation has been in the law for a long time, has it not?

Mr. GRINBERG. Yes, sir.

Mr. KEAN. Previous to 1940 when the world inflation started and certainly the cost of goods throughout the world has doubled, did you have these troubles that you are expecting now?

Mr. GRINBERG. No, we did not have the trouble because whether the inflationary spiral has caused a change in the basic evaluation or not, I think it can readily be understood that the merchant entering into a mail order business and having to limit his duty free shipments to a dollar value-shall I say that the merchant would not enter into a business of that level. But there are thousands of items made outside of this country which could be imported at the $3 foreign value, which would, as I indicated before, be possibly 6, 8 or 10 or even 12 dollars American value. The potential in appoach to the American buying public is much stronger on that level than it would be at the dollar level, because for the merchant to bring in the item at the $1, there are the incidental costs to production, handling and shipping and a spread from a dollar down even though the values have increased which is not comparable with the $3 level. We feel very keenly as we indicated in this one advertisement we submitted today, the range of things which can be picked up and which can be produced abroad to cost no more than a dollar. So you can readily see that a great many more items would be able to be sent in were the value to be raised at all. Mr. KEAN. I was interested in the advertisement you put in from the Saturday Review which represents an organization which has its headquarters in Newark.

Mr. GRINBERG. Yes, that is very interesting. That emphasizes the fact that certainly we have many keen merchants in this country as well as abroad. Also it is interesting to note that immediately the bill was passed by the House last time, these English concerns began to advertise in American papers preparatory to stating "duty free". Mr. JENKINS. Any other questions? If not, we thank you again. Mr. GRINBERG. Thank you, sir.

Mr. JENKINS. Has Mr. Altschuler come into the room since we called his name?

Mr. BRUNO. Mr. Chairman, I understand he is coming but has been delayed.

Mr. JENKINS. We will call him later.

The next is Dr. Cary Wagner, president of the Synthetic Organic Chemical Manufacturers Association. Do you have a statement?

STATEMENT OF DR. CARY WAGNER, PRESIDENT, THE SYNTHETIC ORGANIC CHEMICAL MANUFACTURERS ASSOCIATION OF THE UNITED STATES, AND THE MANUFACTURING CHEMISTS ASSOCIATION, INC.

Mr. WAGNER. Yes, sir. May I ask your indulgence for a somewhat longer statement than we would normally present since I am here representing two associations of chemical manufacturers who constitute more than 90 percent of the entire chemical industry, and whose employees number in excess of 350,000, and those products enter the daily lives of every man, woman and child in the United States.

Mr. JENKINS. Do you have two statements you want to present? Mr. WAGNER. No, sir. I have consolidated it in one statement but the one statement is longer than it would have been had we been representing just one association.

Mr. JENKINS. You can appreciate that we have quite a number of witnesses yet and you have a long statement. If you can cut some out it will be appreciated, but otherwise you go right ahead with your statement.

Mr. WAGNER. Thank you. My name is Cary R. Wagner. I am appearing here in my capacity as president of the Synthetic Organic Chemical Manufacturers Association of the United States. Our association consists of 92 domestic manufacturers who account for more than 90 percent of the productive capacity of the organic chemical industry. I also represent the Manufacturing Chemists' Association, Inc., composed of more than 120 manufacturers of chemicals, including in addition to organic compounds, heavy chemicals, such as acids, alkalies, and their salts; plastics, gases such as chlorine; synthetic fibers, pesticides and thousands of other chemical compounds. These associations have often appeared through their representatives before this committee, and I believe that the committee is well informed on the composition of the chemical industry and its importance to the welfare and security of the United States.

The organic chemical industry is highly developed in the United States as well as in Europe. The basic raw material, coal tar, is universally available in each of the major producing countries of Europe, namely, the United Kingdom, Western Germany, Switzerland, France and Italy. The United States has no natural advantage

so far as raw materials are concerned. Furthermore, the industry here as well as abroad is essentially a batch process industry. That is to say, it is not one which lends itself well to mass production methods. The techniques of the industry largely originated in Europe and certainly are now common knowledge in all producing countries. The United States, consequently, possesses no technical advantage over the other producing countries in the world. On the other hand, our industry in the United States is at a disadvantage because a large portion of the processing costs in the industry is represented by labor costs. Wage rates in the European industry range from one-sixth to one-fourth of the rates prevailing in the organic chemical industry in this country.

It is a familiar fact that the organic chemical industry in Europe is cartelized. In the United Kingdom two companies, one of which is Swiss owned, control about 85 percent of the industry. In France 2 companies, 1 controlled by the French Government, the other by the Swiss, account for 95 percent of the industry. In Italy 2 firms control 80 percent of capacity and the Italian Government holds a 49 percent interest in the larger of these firms. In Switzerland 3 firms probably control about 95 percent of the productive capacity. The European producers formerly operated through the international. dyestuffs cartel which was dominated by I. G. Farben of Germany.

Efforts have been made in Western Germany by the United States to decartelize I. G. Farben, but it is not anticipated that these efforts will have any lasting effect. European governments do not share our views on cartels, and the European chemical industry will continue to protect itself through international cartel agreements.

The organic chemical industry in this country came into being and grew only throught the assistance and protection conferred by the Tariff Act of 1922 which made coal-tar products imported into this country subject to dutiable value based upon the American selling price of competitive products of domestic manufacture. This legislation resulted from the keen awareness by the Congress and President Wilson of the grave weakness of our industrial capacity during World War I when Germany dominated the organic chemical industry and the United States was without any similar industry worthy of the

name.

Today, the importance of chemicals to our national economy in peace and in war is well understood. The chemical industry is the largest segment of American industry-greater than food, or iron and steel. In peacetime, the products of the chemical industry are indispensable in our food, shelter, clothing, transportation, recreation, and health. In time of war, the tremendous productive capacity of the chemical industry is geared to the supply of military requirements for explosives, drugs, plastics, synthetic rubber, aviation gasoline, atomic energy, and chemical warfare products.

The chemical industry is extremely complex and interdependent. From a few basic materials stem a large number of interrelated compounds which by chemical processing are converted into a wide diversity of finished goods such as organic dyes, pigments, pharmaceuticals, fine chemicals, industrial chemicals, intermediates, plastics, and explosives. The interdependence of these products and their marketability in the United States is vital to the existence of the industry. To disturb this balance would be to sow the seeds of destruction in

the industry with all of the disastrous connotations which that unhappy event could have to our country in this age of the cold war where a full mobilization potential is essential to the security of the United States and the free world.

With this background, I would like to turn to events which have transpired since World War II that threaten the existence of our industry. First, the State Department at the Towquay Conference, over the protests of this industry, entered into an agreement with Germany reducing by nearly 50 percent, the prevailing rate of duty on most of our products. Under the most-favored-nation policy, the other important European producers of chemicals secure the benefit of these concessions. Secondly, in the customs simplification bill introduced in the 82d Congress, 1st session, as H. R. 1535 an attempt was made under the guise of simplification to repeal entirely the American selling price provisions of the Tariff Act of 1930 which were derived from the Tariff Act of 1922.

Without the American selling price provision, the organic chemical industry could not have come into existence. Without its continued presence in our tariff laws, the industry cannot possibly survive. Fortunately this committee was alert to the dangers present in that attempt, and it eliminated that provision from the clean bill which the committee introduced as H. R. 5505 following its hearings on the customs simplification bill. H. R. 5106 fortunately does not attempt to repeat the dangerous maneuver of attacking the American selling price provision of the Tariff Act.

The chemical industry sympathizes with the stated objectives of the customs simplification bill. If the efficiency of customs administration can be promoted by changes in the law which will protect the customs revenue and maintain the status quo on presently effective duty schedules, we could not object. Many of the provisions of the proposed bill would contribute to such an agreeable result. A few, however, will not. They neither simplify nor protect the status quo on duties. On the contrary, they drastically affect the value component of existing ad valorem duties to the detriment of our customs revenue and the prejudice of the domestic chemical industry. They have no proper place in a customs simplification bill. It is unfortunate that these few provisions detract from the worthwhile portions of the bill. Because they threaten our industry, however, we cannot remain silent. I speak of sections 15, 17, 19, and 22 of the proposed bill.

Section 15. The most important provision of H. R. 5106 is section 15 which establishes a new basis for ascertaining the value of imported merchandise. The duties which affect our industry are principally those provided in schedule 1 of the Tariff Act, the chemical schedule. Preponderently they are ad valorem duties. The proponents of the customs simplification bill state that the bill does not alter the tariff rates which now afford protection to domestic industry and so they conclude that the bill does not in any way threaten our industries. Where ad valorem duties are concerned such a statement is naive and misleading. Ad valorem duties are the resultant of two components; the rate component and the value component. Each of these factors plays a significant part in the determination of the duty which must be paid by the importer. It is no answer to say that rates of duty are not being changed by the bill if the bill significantly changes the