The changes made by this bill over the Tariff Act of 1922 are as follows:

[Matter stricken is inclosed in black brackets; new matter is in italic]

SCHEDULE 5.-SUGAR, MOLASSES, AND MANUFACTURES OF

PAR. 501. Sugars, tank bottoms, sirups of cane juice, melada, concentrated melada, concrete and concentrated molasses, testing by the polariscope not above seventy-five sugar degrees, and all mixtures containing sugar and water, testing by the polariscope above fifty sugar degrees and not above seventy-five sugar degrees, [1] 1.5625 cents per pound, and for each additional sugar degree shown by the polariscopic test, but not above ninety-four sugar degrees, [forty-six one-thousandths] six hundred and twenty-five ten-thousandths of 1 cent per pound additional, and fractions of a degree in proportion; testing by the polariscope ninety-four sugar degrees, 2 cents per pound, and for each additional sugar degree shown by the polariscopic test, one hundred and twenty-five thousandths of 1 cent per pound additional, and fractions of a degree in proportion.

PAR. 502. Molasses and sugar sirups, not specially provided for, testing not above 48 per centum total sugars, [twenty-five one-hundredths of 1 cent] S cents per gallon; testing above 48 per centum total sugars, [two hundred and seventy-five one-thousandths] six-tenths of 1 cent additional for each per centum of total sugars and fractions of a per centum in [proportion; molasses testing not above 52 per centum total sugars] proportion. Molasses not imported to be commercially used for the extraction of sugar, or for human consumption, or for distilling purposes, [one-sixth of 1 cent per gallon] three one-hundredths of 1 cent per pound of total sugars; [testing above 52 and not above 56 per centum total sugars not imported to be commercially used for the extraction of sugar, or for human consumption, one-sixth of 1 cent additional for each per centum of total sugars and fractions of a per centum in proportion.] molasses imported to be commercially used for distilling purposes, thirty-six one-hundredths of 1 cent per pound of total sugars.

PAR. 503. Maple sugar [and maple sirup, 4], 71⁄2 cents per pound; maple sirup 5 cents per pound; dextrose testing not above 99.7 per centum and dextrose sirup, [12] 2 cents per pound. [Sugar cane in its natural state, $1 per ton of two thousand pounds; sugar contained in dried sugar cane, or in sugar cane in any other than its natural state, 75 per centum of the rate of duty applicable to manufactured sugar of like polariscopic test.]

PAR. [503] 504. Sugar cane in its natural state, $3 per ton of two thousand pounds; sugar contained in dried sugar cane, or in sugar cane in any other than its natural state, 75 per centum of the rate of duty applicable to manufactured sugar of like polariscopic test.

PAR. [504] 505. Adonite, arabinose, dulcite, galactose, inosite, inulin, levulose, mannite, d-talose, d-tagatose, ribose, melibiose, dextrose testing above 99.7 per centum, mannose, melezitose, raffinose, rhamnose, salicin, sorbite, xylose, lactose, and other saccharides, 50 per centum ad valorem.

PAR. [505] 506. Sugar candy and all confectionery not specially provided for, and sugar after being refined, when tinctured, colored, or in any way adulterated, 40 per centum ad valorem.

SCHEDULE 6.-TOBACCO AND MANUFACTURES OF

REPORT BY THE SUBCOMMITTEE

HARRY A. ESTEP, Chairman
FRANK CROWTHER

CHARLES C. KEARNS

The committee, in considering whether any changes in this schedule are necessary from an economic standpoint to protect the industry from foreign competition, has, we believe, thoroughly examined all the evidence presented during the hearings held before the full committee and by briefs submitted by the various interested organizations and witnesses, together with such other facts and statistics as could be obtained through the various Government agencies, and report our conclusions, as follows:

First-Schedule 6 contains five paragraphs covering the different classes of tobacco and tobacco manufactures, the said paragraphs in the Act of 1922 being numbered 601, 602, 603, 604, and 605. During the hearing on the schedule, held January 23, 1929, there was no witness who advocated any change in the last four paragraphs.

Paragraph 601 seems to be the only paragraph in controversy. Many witnesses appeared in connection with paragraph 601, some advocating an increase and some a decrease in duty on Sumatra

wrapper.

The paragraph as it appears in the Tariff Act of 1922 reads as follows:

PAR. 601. Wrapper tobacco, and filler tobacco when mixed or packed with more than 35 per centum of wrapper tobacco, and all leaf tobacco the product of two or more countries or dependencies when mixed or packed together, if unstemmed, $2.10 per pound; if stemmed, $2.75 per pound; filler tobacco not specially provided for, if unstemmed, 35 cents per pound; if stemmed, 50 cents per pound.

Those advocating an increase in duty seek to have the unstemmed product raised from $2.10 per pound to $4.62 per pound and stemmed from $2.75 per pound to $5.25 per pound.

Those urging reduction suggest revision downward to as low as $1.50 per pound although the more conservative fix the figure at $1.85 per pound which was the rate under the tariff acts of 1909 and 1913. There were no proponents for a reduction of the duty on stemmed tobacco. One witness appeared, representing the American Chamber of Commerce of Cuba and the Association of Growers and Dealers of Cuba, asking for a reduction of 10 cents per pound duty on filler tobacco.

The witnesses asking for increase in duty under paragraph 601 in the main represented the shade-grown wrapper industry located in the Connecticut Valley and the States of Georgia and Florida. Some represented that portion of the industry growing what is known as sun types and further designated as broadleaf and Habana seed, for the growing of which 23,000 acres were under cultivation in 1927. Only a small percentage of this sun-grown tobacco is now used for

wrapper.

In analyzing the situation from the standpoint of the growers of shade-grown tobacco, we find that in 1928 there was a total of 11,800 acres under cultivation in the United States. Of this total 8,000

acres were in the Connecticut Valley and 3,800 in Florida and Georgia, producing that year 11,166,000 pounds. Not all of this production was suitable for wrappers, but it is estimated that from 60 to 90 per cent was so used, the balance being used for binder and filler on domestic cigars and for export to Europe as cheap binder and to Porto Rico for use as wrapper on low-grade native cigars. Some of the very lowest grades were sold to the manufacturers of chewing tobacco.

According to information received from the Tariff Commission, the major portion of the shade-grown acreage is controlled by 18 corporations, 13 in Connecticut and 5 in Georgia and Florida. The commission further reports that representatives of the shade growers agree with the Tobacco Merchants Association that $1,500 per acre is a reasonable capitalization for this industry. Therefore, on the basis of the 1928 acreage, the capitalization of these companies and the individual growers of this grade would be $17,700,000. No statistics are available as to how many persons are employed by the companies and there is no satisfactory method known for making such an estimate.

It is generally conceded that the shade-grown wrapper tobacco of the Connecticut Valley is of a high quality and is used largely on the higher-priced cigars manufactured in the United States. Therefore, the major portion of that grade does not enter into competition with the imported Sumatra wrapper for use in the 5-cent cigar industry. The broad leaf and Havana seed furnish a limited amount of wrappers, but figures indicate that only about 3 per cent of the total of this grade is so used. Therefore we can safely assume that the Connecticut Valley growers have no serious competition by reason of the importation of the grade of Sumatra used on the 5-cent cigar.

It appears that the investment in the tobacco industry in the Connecticut Valley amounts to $100,000,000, of which $25,000,000 is in shade grown and $75,000,000 is sun grown.

Second. The producers of shade-grown wrapper in Georgia and Florida contend that Sumatra comes in direct competition with their product. They have 3,800 acres under production, which at a cost of $1,500 per acre makes a total investment of $5,700,000. The total production in 1928 was 4,230,000 pounds.

The statement of the Georgia and Florida growers of shade grown as to Sumatra entering into direct competition with their product is in all probability true so far as wrappers for class A cigars is concerned, because they produce a cheaper grade of wrapper, which could not be used on higher-priced cigars. Therefore these producers have but one outlet, the 5-cent cigar industry, although some of the advocates for lower duty contended that its proper place is on cigars retailing for less than 5 cents.

One witness, representing the Georgia and Florida interests, presented an elaborate brief in which he seeks to support their argument that the duty on Sumatra wrapper should be increased from $2.10 per pound to $4.62 per pound. In connection with the brief he submitted a number of tables to show acreage cost of production and also the amount of money invested and expended in any current year. An analysis of some of these tables indicates that their reasons for reaching certain figures are subject to question, and if their

1

statements are wrong their argument for an increase is materially weakened.

For example, Table No. 1 in said brief gives a summary of the cost of production of shade-grown leaf tobacco for the crop year of 1928 and Table No. 2 shows the cost for 1914. There are certain figures in each of the tables covering the same item which should bear careful scrutiny as to whether they are correct or not.

Table No. 1, item 1, sets forth $150 as the cost of labor per acre, while Table No. 2, same item, gives the cost as $80 per acre. In the explanation of that item in Table No. 1, he gives the labor of one man and one woman as the basis of cost. The man is paid $1.50 per day and the woman $1 per day, housing free. This would appear on the face of the explanation as a rather low rate of wages for 1928, therefore to have reached the figure of $80 for labor in 1914 the rate of wages would have been approximately half and yet he gives no explanation in connection with Table No. 2, item 1, as to the rate per day for a man and a woman, leaving this a matter of guesswork so far as your subcommittee is concerned.

In Table No. 1, item 12, "All other growing and harvesting costs," the figure given is $237.50 per acre and the same item in Table No. 2 is given as $37.88. Thus if we take these figures without explanation it appears there is a difference of approximately $200 in the total growing and harvesting costs between the years 1914 and 1928. In Table No. 1, item 7, he shows that the fertilizer cost per acre was $190, while in Table No. 2, item 7, it is shown as $98.75, or a difference of $91.25. The reason given is that in recent years they have been compelled to move to new land each year. This, they contend, has increased the fertilization cost, because in 1914 the same land was used for an average of 10 years, and this land being highly fertilized it was only necessary to use about three-fourths ton of meal and three-fourths ton of tobacco mixture per acre each year, while in moving to new ground each year it was necessary to use 1 ton of meal and 11⁄2 tons of tobacco mixture per acre.

This moving to new acreage, it was explained, is necessitated by the presence of the "black shank" disease and it is set forth in a notation in the brief that

Due to this disease it is absolutely necessary to move shades each year (for self-preservation), and which accounts for the extra cost, that has not been in existence in former years, and makes the cost to growers fully 20 to 23 cents per pound more. This is one reason why we need a higher tariff on tobacco, so better prices could be available to the farmer.

It is therefore self-evident that by reason of this disease the cost per pound to the tobacco grower has increased 20 to 23 cents. This is an unfortunate situation, but we do not believe that an increase in the tariff is the proper remedy. What they require is some attention from the plant disease experts of the Department of Agriculture. The venture seems to have lost its standing as an economic business proposition.

Your committee believes that the proponents for an increase in duty have failed to sustain their case.

Third. The witnesses appearing and advocating a reduction in duty from $2.10 to $1.85, or down to $1.50 on Sumatra were divided into two groups, those who represented the manufacturers of class A cigars and those who represented the growers of filler and binder in

the States of Wisconsin, Ohio, Pennsylvania, the Connecticut Valley, and other sections where this type of tobacco is grown.

The cigar manufacturers contend that to make a 5-cent cigar which will appeal to the taste of the average smoker who is the purchaser of the class A cigar that they must, in conjunction with domestic binder and filler, use Sumatra wrapper, first, because of appearance and some slight advantage in taste and aroma, and second, because it only requires 2 pounds of Sumatra to wrap 1,000 cigars as compared with 21⁄2 pounds of domestic wrapper of the Georgia-Florida shade grown and 3 pounds of primed Havana seed. The price of Havana seed is too high to use on 5-cent cigars.

The computation as to how much money can be expended for wrappers in manufacturing 1,000 5-cent cigars is given as not to exceed $6 or $6.50, and this is the approximate cost, including the duty paid on Sumatra wrapper used.

There are approximately 6,500,000,000 cigars of all types produced in the United States, of which 3,000,000,000 are class A cigars selling at 5 cents or less. Into class A cigars goes binder and filler raised in some of the Northern States and about 6,000,000 pounds of Sumatra wrapper is imported of which 80 per cent goes into the class A cigars. The major part of the 3,500,000,000 higher priced cigars are finished with domestic wrapper and various estimates suggest a consumption of 180,000,000 pounds of filler and binder in domestic cigars of all types. Some 20,000,000 pounds of filler tobacco is imported from Cuba and goes into high-priced cigars. Of the domestic filler and binder tobacco, about 60 per cent, or 90,000,000 pounds, goes into the manufacture of 5-cent cigars.

The Tariff Commission estimates that about 48 per cent of the cigars manufactured in this country in 1927 were class A cigars and in 1928 the percentage was probably close to 50 per cent. The commission further estimates about $145,000,000 in capital is invested in the production of class A cigars, and 45,000 persons employed.

In the production of binder and filler tobacco for class A cigars, 40,000 farmers cultivated approximately 110,000 acres and produced about 150,000,000 pounds of tobacco.

The farmer asks for a reduction in the duty on wrapper on the theory that the manufacturer will be able to purchase his wrapper cheaper and will be able to pass some of this saving along to the farmer, thus increasing his price for binder and filler raised in the United States. This may be so or not, but it is a fact that the farmer at the present time is enjoying prosperity in connection with the raising of tobacco, and we believe in a number of States, Pennsylvania for example, that they are getting more per pound than in several decades. This situation has been brought about to a certain extent by reason of the fact that Congress in 1926 reduced the internal-revenue tax on class A cigars from $4 per thousand to $2 per thousand. This reduction was reflected in increased prices to farmers and, we believe, in a superior 5-cent cigar.

Your committee with all these facts before them and being convinced that the manufacturer was benefited to a great extent by the reduction in the tax, that the grower profited to a certain extent, and, also, because of the condition of the manufacturing industry and the production end, believes that no further reduction in duty is necessary