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Mr. CAMPBELL. Oh, yes. I understand that they are the ones that have been in large measure responsible for the advancement of this form of legislation.

As I said a moment ago, this is not a law that we in the Department of Agriculture enforce. This law is enforced by the Treasury Department. My only purpose in appearing was to make a statement of the interest of the Department of Agriculture in it and the sympathy of the department with the legislation.

Senator WHEELER. If this is made like oleomargarine, why should it not be subject to the same tax as is imposed on oleomargarine?

Mr. CAMPBELL. That is just what everyone thought it was, until the court held in two different instances that because of the interpretation of the wording of the existing statute this product was exempt, and this legislation is for the purpose of correcting that particular defect in the law.

STATEMENT OF A. M. LOOMIS, WASHINGTON, D. C., SECRETARY OF THE NATIONAL DAIRY UNION, AND WASHINGTON REPRESENTATIVE OF THE AMERICAN ASSOCIATION OF CREAMERY BUTTER MANUFACTURERS

Mr. LOOMIS. My name is A. M. Loomis, 630 Louisiana Avenue, Washington, D. C. I am secretary of the National Dairy Union, Washington representative of the American Association of Creamery Butter Manufacturers, and until last December secretary of the American Dairy Federation, which has now withdrawn its Washington office and with which I am no longer connected.

I mention that because of the fact that the American Dairy Federation has supported and indorsed this bill since its first introduction.

I want to read to the committee a list of the trade names under which the agents of the Internal Revenue Bureau have found these products being sold in various parts of the country: Flavo Nut, Nu-Ine, Higgins-Nut Product, Rumford, Rich-Nut, New Nut, Penobscot, Danish Nut Product, Sunflower, E-Z-Cook, Ver-Co, Sunbeam, Nu-Blend, Mayflower, Golden Rod, Ni-Kine, Nutlet, EverReady, De Luxe, Dixie, Delight, Nu-Blend, Nut-X, Table BrandThat sticks out from the rest of the list.

Senator TOWNSEND. That is made by all the manufacturers?

Mr. LOOMIS. Since there are more names than there are manufacturers, I assume that some manufacturers manufacture more than one brand [continuing the reading of the list]: Tops-All, Golden Treat, Extra Fine, Southern Nut Product, Nut-Z-All, CakoNut, Sonny Boy.

The Internal Revenue Bureau does not believe for a minute that they have got all of them. These have been manufactured by 22 different firms in the United States.

The CHAIRMAN. And escapes the tax that oleomargarine carries? Mr. LOOMIS. Yes. That is the reason the oleomargarine people are here.

I do not like to take the time of the committee on a matter that has been gone into as fully as this has, but for the sake of clearing up the record on one particular point. I want to say that I am not an expert; I have had no experience in the manufacture of these products. If you care to follow this up by hearing testimony of those who know,

that can be done. But it seems, as the evidence has been presented, that these products are made in exactly the same machinery, with exactly the same materials, that oleomargarine is made with one single exception, and that is that the oils which are used in the manufacture of oleomargarine are mixed and emulsified in milk, while the oils which are used to make these products are mixed and emulsified in brine or water. With that one exception the two products are identically made in the same machinery.

Any oleomargarine factory overnight can turn to the manufacture of these products; any manufacturer of these products can turn overnight to the manufacture of oleomargarine.

The absence of milk in the final product left it lacking a little in distinctive flavor in the early history of this product.

The process of manufacture which I am describing left the same amount of water in oleomargarine as in this product. A cooking fat has no water in it. Water can only be incorporated to make the texture the same as that of butter and for no other reason. There is no possible reason why moisture should be incorporated in these products except to make them so that they taste and feel the same on the tongue as butter.

When these products were first put on the market there was a distinctive lack of flavor. The product which was submitted to the Internal Revenue Bureau and because of which the first letter was written to these people in Rhode Island under which they operated for the time exempt from the law, did not taste like butter, but they very soon learned to improve the product in that respect.

I do not know whether they are using this flavoring material or not [exhibiting a small bottle], but whether they are or not, it can be used. This is an imitation butter flavor which our friends, the chemists, have produced. It smells so that I do not care to demonstrate it very much.

Senator FRAZIER. What is it made of?

Mr. LOOMIS. So far as we can learn, it is made from buturic acid, an acid which is extracted from spoiled butter. These things are in use, undoubtedly.

I had a friend go to the Center Market here in Washington one day, who never had seen any of these products. I asked him to sample some of them, to taste them. He is a former State dairy and food commissioner of 10 or 12 years' standing in one of the dairy States. He said, "Mr. Loomis, it tastes like butter."

Up to that time I had never seen these synthetic flavors, but shortly after that I came in contact with them. I have no knowledge of whether they are using them or not, but I know that the stuff tastes like butter. It was this accumulation of evidence which came to us as to the method of manufacture, the method of marketing, the method of merchandising and advertising used which led us to believe that these were put on the market solely to be sold upon the reputation and standing and use of butter. Consequently this legislation was prepared and introduced in Congress, and the butter industry and the oleomargarine industry are asking for the passage of this legislation.

Senator TOWNSEND. Where are the principal manufacturers of these articles located?

Mr. LOOMIS. Here is a tub of the product just coming in [indicating sample being brought into the hearing room at the moment]. The Bureau of Internal Revenue reports the following list of manu facturers:

Harrow-Taylor Butter Co., Kansas City, Mo.
Kansas Nut Margarine Co., Salina, Kans.
Olson Food Products Co., Kansas City, Mo.
Baltimore Butterine Co., Baltimore, Md.
Filbert-Kauhlemann Co., Baltimore, Md.
Danish-Packing Co., Providence, R. I.
Ever-Ready Food Products Co., St. Louis, Mo.
Dixie Nut Margarine Co., Memphis, Tenn.
Ed. S. Vail Co., Chicago, Ill.

Ideal Products Co., Peoria, Ill.

Golden Rod Food Products Co., Kansas City, Mo.

Southern Product Co., El Paso, Tex., and Oklahoma City, Okla.

Ill-Mo Nut Margarine Co., East St. Louis, Ill.

Wisconsin Food Products Co., Jefferson, Wis.

Decoursey Creamery Co., Kansas City, Kans.
Rumford Churning Co., Providence, R. I.

Mayfair Margarine Co., Providence, R. I.
E. F. Drew & Co., Boonton, N. J.

Standard Nut Margarine Co. of Florida, Jacksonville, Fla.
Higgins Manufacturing Co., Providence, R. I.

J. H. Filbert Co., Baltimore, Md.

National Food Products Co., New Orleans, La.

Senator KENDRICK. What is it that you are proposing to do here? Mr. LOOMIS. To add a sentence to the definition of oleomargarine. That is the principal change. The substance of it is that if these oils which are enumerated in the definition and which have heretofore been enumerated-we make only a very slight change in that—are mixed in milk, cream, water, or other liquid and contain moisture in excess of 1 per cent, and salt, they shall be defined as oleomargarine. We make an arbitrary definition of oleomargarine. We are perfectly willing to accept the term "arbitrary" in connection with it, and can defend it, so that it can be protected by the chemist's scales. We are taking the uncertainty out of the legal definition of oleomargarine, and that is the purpose of the bill.

Mr. Steele, of one of the large oleomargarine companies, is here. I had not expected to take any of the time of the committee this morning. If there can be a moment for Mr. Steele to tell about his products, I would be very glad to have him do so.

The CHAIRMAN. Very well. You just referred to moisture content as one of the factors in the expansion of the term "oleomargarine." Do you not also include fish fats and oils?

Mr. LOOMIS. I should say that we have added fish fats and oils. and we have inserted a certain comma in the definition over which there has been certain judicial uncertainty.

The CHAIRMAN. Are fish oils and fats used in the preparation of these products?

Mr. LOOMIS. They are not in this country, but they are largely used abroad.

The CHAIRMAN. It is merely anticipatory?

Mr. LOOMIS. Yes.

STATEMENT OF W. M. STEELE, VICE PRESIDENT AND GENERAL MANAGER OF THE JOHN F. JELKE CO., OF CHICAGO, REPRESENTING THE OLEOMARGARINE INTERESTS

The CHAIRMAN. Give your name for the record, please.

Mr. STEELE. My name is W. M. Steele, vice president and general manager of the John F. Jelke Co., of Chicago, manufacturers of oleomargarine.

Gentlemen of the committee, the bill as it appears to the John F. Jelke Co. and the oleomargarine interests is a very simple one. It is simply intended to take this product, which I will show you here, out of the favored class, which it now enjoys, and to put it into the class of this product [indicating], which is subject to a 10 cents a pound tax. The only difference, gentlemen, between these two products is the fact that one is emulsified in skimmed milk and the other is emulsified in water.

Senator WALCOTT. The same constituents exactly, other than that? Mr. STEELE. Yes, sir; with one exception. I will explain. This product here [exhibiting] is made of coconut oil

The CHAIRMAN. Just what is "this product"? Identify it.
Mr. STEELE. Higgins Nut Product.

The CHAIRMAN. That does not come under the oleomargarine tax? Mr. STEELE. No, sir. That is made, as I understand it, from coconut oil, peanut oil, water, salt, and coloring matter.

This product [exhibiting] is made by the John F. Jelke Co.

The CHAIRMAN. What is that product?

Mr. STEELE. It is just branded "Oleomargarine."

The CHAIRMAN. It is really oleomargarine?

Mr. STEELE. Yes, sir. That is the way it is marked, with the word "Oleomargarine."

Senator RANSDELL. That pays 10 cents tax?

Mr. STEELE. Yes.

Senator TOWNSEND. Is there any added color in it?

Mr. STEELE. Yes, sir. It has the word "Colored" on it in four places.

Senator RANSDELL. It is really an imitation of butter, but it is honest and pays the tax. Is that the idea?

Mr. STEELE. Yes, sir.

The CHAIRMAN. What is the difference between the two? You started to compare them as to their constituent elements.

Mr. STEELE. Oleomargarine is composed of coconut oil, cottonseed oil, skimmed milk, coloring matter, and salt. It pays 10 cents. a pound tax.

This product [exhibiting] is made of cottonseed oil or peanut oil, coconut oil, coloring matter, salt, emulsified in water

The CHAIRMAN. And pays no tax?

Mr. STEELE. And pays no tax. The difference between the two products, briefly, is the milk solids which would be contained in the skimmed milk which goes into the one and not into the other.

The CHAIRMAN. Can one be used as a substitute for the other? Mr. STEELE. They can be used interchangeably; certainly. I will leave those two samples to anybody to taste them and try them to see what a similarity there is.

Senator THOMAS of Idaho. Is there any difference between the costs of manufacture?

Mr. STEELE. They are comparatively the same.

Senator KENDRICK. How do they compare in price to the consumer? Mr. STEELE. Oleomargairne is being sold on the Baltimore market around 35 cents a pound. The other compound was bought for 25

cents.

The oleomargarine people simply contend that the two products, being so near alike, should be subject to the same regulations.

Before we can manufacture these goods we have got to go to the Internal Revenue Department, send them a sketch of our building, give them an inventory of the machinery that we are going to use, apply for a license, and pay $600 a year as a manufacturer. We have to pay 10 cents a pound on every pound of it before it goes out. We have to furnish a bond, if we are large manufacturers, of $100,000 to the Government, which would cost us $500 a year for a surety company bond. Our jobber has to pay $480 a year for the privilege of selling it. The retail dealer has to pay $48 a year for the privilege of selling it. We could start the manufacture of the nontaxable goods to-morrow morning without any restriction whatever.

Senator KENDRICK. It is your idea that the producer of this nut product is required to pay a tax and that product must sell at the same price in competition with the other?

Mr. STEELE. Our idea is that they should be under the same regulations exactly; yes, sir.

Senator KENDRICK. The idea is that they could not then undersell you?

Mr. STEELE. Yes.

Senator KENDRICK. It is your opinion that if they pay the tax the same as you do, they could not undersell you in the market?

Mr. STEELE. Naturally the price would be about the same.

The CHAIRMAN. Have you any idea of the quantity of this competitive product, whatever you call it, that is being sold? Is it a growing industry?

Mr. STEELE. It was, Senator, very rapidly growing until the case which was brought by the Government in Kansas City last year. Since that time it has been rather lying dormant, but ready to spring up again if this legislation is not passed.

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Senator RANSDELL. Speaking in the interest of the producers of oleomargarine, just where does the public come in on this? Is one product as good as the other? I understood you to say it was. assume that since you are subject to very great restrictions or safeguards thrown around yourmanufacture, you think the public certainly is interested to have the same kind of safeguards thrown around the production of the nontaxable product?

Mr. STEELE. I do; yes, sir. I think that when we have to have a Government inspector come into our plant, when we have to submit samples to the revenue department every month of all the oils we use in our plant, and in addition to that we manufacture animal fat oil and we have a Government inspector from the Bureau of Animal Industry in our palnt every day and we can not operate that plant a half hour overtime without asking permission of the Government to have a man there to see that it is all right, and we can not operate

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