descendent of the Austrian crown, and it will be treated as such when they come to apply this provision if it is enacted.

Senator MCCUMBER. Notwithstanding the fact that it is actually worth very much more?

Mr. DUFFY. In exchange terms it is.

Senator MCCUMBER. And still you think the Treasury Department would have no means of correcting that error because it is in the report of the officials?

Mr. DUFFY. The Director of the Mint. Let us see its practical operation. The director lays down 20.26 cents as the normal figure for the Austro-Hungarian crown. When the administrative officers. come to a Czechoslovakia invoice they see kronen. They say that the normal value of that is 20.26. We will allow, no matter what the importer pays for the money, only one-third of that. We will take arbitrarily one-third of it and allow only two-thirds to meet depreciation. When you get to that one-third line on the bottom, it does not matter whether Czechoslovakia is 10 points or 20 points above AustroHungarian money. It all drops out of consideration if they take one-third of this 20.26 as their maximum allowance.

Senator MCCUMBER. That is applying this proposed law. What I am trying to get at is whether to-day they regard the Czechoslovakia kronen of the same value in taking the invoice from Czechoslovakia that they would a like invoice coming from Austria-Hungary, measured in kronens.

Mr. DUFFY. They do not, sir. On Austrian shipments, after this long procedure under section 25, they allow the actual depreciation to be deducted in converting the invoice value.

With respect to Czechoslovakia, the Director of the Mint never having incorporated the crown of that country in his estimates, the Secretary of the Treasury has set schedules from week to week saying it is worth so much.

Senator WATSON. Why can he not incorporate the Czechoslovakian crown in his estimates? Why is he bound by that old rule you are laying down?

Mr. DUFFY. I think one thing that might hinder him from doing it is that we are not signatories of the treaty of Versailles, and we are technically at war with Austria.

Senator WATSON. Well, we are not at war with Czechoslovakia. Mr. DUFFY. No, sir; we are not. That is something in the mechanics of the mind of the Director of the Mint that I can not answer.

Senator SMOOT. Supposing he had not put it in that list. Then it does not really follow that they would not take the actual value of the Czechoslovakian crown. There is nothing in that that would prevent them from doing that?

Mr. DUFFY. The provision under which this proclamation is issued has reference to coin value, meaning a piece of metal.

Senator SMOOт. But supposing they left out two or three others? That would not affect any action that may be taken at the customhouse of New York or Boston.

- Mr. DUFFY. It has not so far.

Senator SMOOT. Well, it can not do it. That is not the law.

Senator WATSON. Senator, Mr. Walker says the reason they do not recognize the Czechoslovakian crown is that Czechoslovakia has as yet no standard at all.

Senator LA FOLLETTE. I understood you to say, Mr. Duffy, that you had been informed that the customhouse at New York would apply this rule just as you stated at the outset.

Mr. DUFFY. I had informal talks with some people there. It was a moot question between them, but the indication was that they might feel that this would govern them in that way.

Senator MCLEAN. Notwithstanding the fact that the exchange value might be different?

Mr. DUFFY. Notwithstanding the fact that the exchange value might be different. The exchange value would be nearer the standard value than in the case of Austria. However, I am stating our position, that we are apprehensive about this. The other view may be right, that we never having had a metal standard it would not apply

to us.

There is one other feature that I will illustrate briefly. It seems to me that it is a definite, undeniable demonstration of the unsoundness of this proposal to make this arbitrary fictitious 663 per cent delimitation. In speaking now I am qualified as a witness. I have tried cases out before the Board of General Appraisers, cases that had root in this very fact of depreciation, and I know as counsel in those cases what the facts are. It is a very brief story.

Czechoslovakia accepts no money of any power that is not up to standard or above the standard. They accept only gold. The mechanics of the operation are these: Mr. Schmits buys a bill of bent-wood furniture. It is invoiced in crowns. It is consulated on July 5. Mr. Schmits has made a deposit of United States gold for the same with a bank here in New York. The Czechoslovakian bank, the government bank, is advised that as against that invoice there is a deposit here in New York of so many thousand dollars. The rate of exchange that prevails on the date of consulation of that invoice is then taken by the Czechoslovakian bank and the gold converted on paper accordingly and the manufacturer of the furniture paid in Czechoslovakian paper crowns. So it is essentially a gold transaction governed by the rate of exchange.

This provision would disregard that entirely. The absolute truth would be stepped on. They would simply take 20.26 and allow us one-third of that, although we paid less than one-tenth of it.

Senator SMOOT. Well, that is the same position that was taken by the other importers. In the case of Germany it would be about five times the amount that the duty would be imposed upon.

Mr. DUFFY. The distinction, Senator, that I wish to make is this, that in Germany there is a remittance; here they deposit gold, and the Czechoslovakian Government uses that gold to buy its mercantile supplies here in this country.

Senator SMOOT. But so far as duty is concerned, it makes no difference, except that the exchange value is not the same.

Mr. DUFFY. It is a demonstration of the unsoundness of this amendment. I would like the committee to hear Mr. Schmits.

The CHAIRMAN. Does he desire to address the committee?

Mr. DUFFY. Yes, sir; simply to explain that schedule, Appendix A to my brief.

The CHAIRMAN. The committee will hear Mr. Schmits.

(The brief referred to by Mr. Duffy is as follows:)

NEW YORK, April 20, 1921.

The CHAIRMAN AND MEMBERS OF THE SENATE FINANCE COMMITTEE:

The undersigned, as importers of bentwood furniture from Czechoslovakia, earnestly solicit the attention of the committee to the vicious and dangerous character of that provision in H. R. 2435 (emergency tariff bill) which amends section 25 of the act of August 28, 1894, by adding thereto a second proviso reading:

"Provided further, That in the estimation and liquidation of duties upon any imported merchandise the collector of customs or person acting as such, shall not in any case estimate the depreciation in currency at more than 663 per cent."

Czechoslovakia is one of the new European republics that were the outgrowth of the Great War. It has never had a metallic currency, either silver or gold. Its money consists of its paper promises to pay, which under the very weighty burden of adverse exchange conditions it has hitherto religiously fulfilled. Its monetary reserve may be said to consist principally of the good will of its creators, the allied and associated powers.

The Czechoslovakian currency unit is the crown. The only metallic unit to which this crown can be related is the old Austrian crown, still recognized by the Director of the Mint as a subsisting coinage. (See Treasury Decisions, Vol. 39, No. 14, Apr. 7, 1921.) The standard or normal value in United States currency proclaimed by that authority for the Austrian crown is $0.2026. The Czechoslovakian crown to-day rules under $0.014.

Should this unsound and pernicious measure be enacted by the Congress and approved by the Executive without doubt we would witness the application of the proclaimed standard value for the old Austrian crown to the Czechoslovakian crown. The manifest consequences in the way of dislocation or complete obstruction of ordinary trade operations are such as at once to condemn this measure as impolitic legislation from an economic viewpoint and an unconscionable violation of the most ordinary standard; of business morality.

To illustrate: An invoice from Prague shows a dutiable total of 100,000 crowns. The duty upon our merchandise (par. 176) is 15 per cent. The crown is depreciated from the normal of 20.26 cents in United States money to, say, 1.40 cents.

It must be borne in mind that in marketing his goods the seller has taken into account this vast depreciation and has multiplied his prices and lowered his discounts commensurately. Whatever the currency, goods are sold in gold. (Witness our transactions for years past with South American markets in which gold and paper have been used side by side.)

Returning to our illustration: The sound and normal method of liquidating the assumed shipment upon entry here would show the following computation:

Liquidation under the artificial formula prescribed in the proposed amendment

to section 25 would show the result following:

Can such attempts to distort truth and reason out of all semblance to themselves be permitted? And were they permitted, would they not fail of their purpose, opposing as they do the fundamental mechanics of trade and commerce as conducted throughout the world?

Depreciation has not taken away the effectiveness of our tariff. It has caused the listed prices of goods in foreign markets to advance prodigiously and discounts

greatly to decrease. That this is true of bent-wood furniture is amply demonstrated by the figures exhibited in Appendix A, annexed hereto, to which reference is had. The amendment does not comport with the statute it would amend. It offends one-half the purpose of that statute, pointing out which will serve to bring into fuller light its unreason. Section 25 of the act of 1894 confers upon the Secretary of the Treasury a power to order reliquidation not only in cases of depreciated currency but also in cases of what has come to be styled appreciated currency. It gives him power to depart from the values proclaimed by the Director of the Mint whenever he shall find that there is a variance from the proclaimed value of 10 per cent more or less. That power he has exercised in the cases of certain foreign currencies that were favorably affected by war conditions. (T. D. 37743 and T. Ď. 38431.)

If this amendment had in it the remotest essence of reason or logic, it would go further and place the same limitation upon the upward movement of exchange in foreign moneys. That such a contingency as a foreign money having an upward movement to the degree that we have witnessed depreciation is remote or inconceivable does not serve to take away the sinister character of this proposed amendment. It is special legislation of the most arrant type and, at this time of turmoil and upset in business threatening as it does further and worse confusion, is without apology or excuse.

It is our conviction that as to Czecholovakia the amendment if permitted to become law would be tantamount to an embargo upon her trade with the United States. Respectfully submitted.

THONET-WANNER Co. (INC.), By LEO F: WANNER, President.

JACOB & JOSEPH KOHN (INC.), By WALTER D. SCHмITS, President.

1 crown equal to..
Increase by majorization
(per cent)..

Cost in

crowns, net.

$0.203 $0.0183 $0.0111 $0.0168 $0.0225 $0.0113 $0.0135 $0.0139 $0.0677

This table shows a considerable increase in list prices to offset the currency depreciation, both by majorization beginning with seven times, up to fifteen times prewar prices, and by increase of basic prices, besides discounts, were reduced from 19 to 24 per cent. The result is that current prices now average 70 per cent higher than before the war and have been averaging 59.3 per cent over prewar prices. The increase of duty by limiting the rate of exchange as proposed is 389 per cent. The duty under this proposed scheme would be about 73 per cent ad valorem, which of itself would prohibit further importation of this furniture. NOTE.-Home market prices in Czechoslovakia identical with American import prices.

STATEMENT BY MR. W. D. SCHMITS.

The CHAIRMAN. You reside in New York, Mr. Schmits?
Mr. SCHMITS. Yes, sir.

The CHAIRMAN. What business are you engaged in?

Mr. SCHMITS. I am an importer of bent-wood furniture.
The CHAIRMAN. From what country?

Mr. SCHMITS. Czechoslovakia.

The CHAIRMAN. Will you state what you desire to say to the committee?

Mr. SCHMITS. There seems to be a general impression that the depreciation of currency has enabled the importers to buy goods for less money than before the war. I have brought with me figures, which I propose to leave with the committee, showing that I pay to-day about 70 per cent more for my goods than I did before the

Of course, the currency has been changed over there since. After the armistice, when Czechoslovakia found herself in the predicament of having no currency, they had to fall back upon the Austrian moneys, which was one uniform currency throughout Hungary, Austria, and Czechoslovakia. They collected all her currency, had it stamped and returned only 50 per cent to the owners. In that way they were able to improve their currency from the start and put it upon a different footing from the Austrian and the Hungarian currency.

But at the same time I had to meet my payments here according to the subsequent fluctuations of their currency. The manufacturers over there in order to stabilize the charge to me had to increase their

44121-21-PT 22