to higher jewel count. I take the liberty of quoting the brief which makes the following specific descriptions of these advantages:

"1. Duo-Fix was invented without any thought of facilitating remanufacture to add jewels. The device was suggested to its inventors by the construction of shock-absorbing devices then generally in use in the industry in shock-resistant watch movements, and was invented by employees of a company producing these shock-absorbing devices. Work on the invention began in 1949, long before any controversy with respect to “upjeweling” had arisen in this country, and long before the increase in United States watch duties in June 1954. The original patent on Duo-Fix was applied for on June 6, 1951, and was granted on May 15, 1953. A supplemental patent was applied for on October 2, 1952, and has since been granted. The invention is protected in this country by United States patent application No. 383043. A number of comparable devices, differing only in minor respects, are now being manufactured by other Swiss companies.

2. The Duo-Fix construction provides significant technical advantages over the former method of assembling the two elements in a watch bearing. In the classical method of construction, the hole bearing, usually a jewel, is inserted into a hole in the plate or bridge of the watch and held in place by friction. The cap bearing is mounted at one end of a separate strip of metal called a plaquette, which is held in place on the plate or bridge by a small screw at the opposite end from the bearing. This method of construction presents two principal technical difficulties:

"First, the position of the hole bearing with respect to the end of the pivot is fixed and cannot be adjusted to take account of slight variations in the length of the pivot without disturbing the proper relationship between the hole bearing and the cap.

"Second, in order to properly lubricate the bearing assembly, the bottom surface of the cap must be at a precise distance, in the neighborhood of one-thousandth of an inch, from the top surface of the hole bearing; the bottom surface of the cap must be perpendicular to the axis of the hole bearing; and the cap must be accurately centered over the hole bearing. All these relationships were very difficult to maintain under the old system with the result that frequently the lubrication characteristics of the bearing assembly were inadequate and the watch would not function properly.

"The Duo-Fix method of construction avoids both of these defects of the classical method. When it is used, the entire housing may be moved up or down in the plate to take account of variations in the length of the pivot; and it is so designed as to assure that all the critical relationships will be maintained automatically and simply in a mass-production operation.

"3. The Duo-Fix construction has important cost advantages over the former method. In the classical method of construction the following preliminary operations on the plate or bridge were required for each bearing assembly: a hole had to be drilled to receive the hole bearing; a recess had to be machined to receive the plaquette; and a threaded hole had to be made to receive the plaquette screw. These operations were not only costly, but introduced additional possibilities for minor errors and variations which would adversely affect the functioning of the watch. With the Duo-Fix construction only a single hole needs to be drilled in the plate to receive the Duo-Fix housing. All other preparatory operations are eliminated. The cost savings have been dramatic. So much so that Swiss watch companies now find it possible to use the superior two-jewel assembly on additional wheels of the watch, where heretofore the costs were prohibitive.

"4. The Duo-Fix construction facilitates disassembly, repair, and reassembly of the watch. The defects and difficulties of the classical method of construction described in 2 above were magnified whenever a watch needed to be taken apart for cleaning or repair. The delicate controls which could be maintained in the factory to minimize these defects could not be maintained by the jewelry store repairman. Moveover, the threads of the plaquette screw, which are very delicate, frequently became worn or broken after several disassemblies, thus making it impossible to reset the plaquette properly no matter what degree of care was used. All these difficulties are obviated by the use of Duo-Fix in the bearing assembly. "5. Duo-Fix permits the use of the two-jewel bearing assembly on smaller watches. The plaquette takes up considerable room in the watch movement, and its size

cannot be reduced beyond a certain point. The result was that the classical method of construction could not be used in watches below a certain diameter. The present trend of watches is to smaller and smaller diameters, these being much preferred by the consumer. Until the invention of Duo-Fix, it was impossible to obtain the advantages of the two-jewel bearing assembly in these smalldiameter watches. The Duo-Fix, however, takes up hardly more room than the hole jewel itself and so permits the use of the two-jewel assembly, with its attendant technical advantages on the very popular small size watch movements."

It seems to me that these statements of fact demonstrate conclusively that the Treasury Department is in error when it states that Duo-Fix has no useful funetion except in the upjeweling process.

I am informed that the Duo-Fix and similar devices have become standard construction on all high-grade Swiss watch movements whether made for use in Switzerland itself, for export elsewhere abroad or to the United States.

Actually, the proposed regulation would force an importer to pay a higher rate of duty on the basis of his presumed "intent" to remanufacture his product in this country. As the Benrus brief points out, the courts have consistently held that duties should be based on the condition of merchandise at the time it is received in this country, and not on the basis of its ultimate, remanufactured form.

In a long series of decisions, involving many types of products, the courts have found that it would be both illegal and impractical to attempt to trace imported goods to their subsequent conditions, and to try to impose rates of duty based on the final products sold to consumers. The courts have held that only Congress can change this principle.

The current customs classification applicable to imported watches have been on the books for 25 years, and the courts have ruled specifically on the right of a watch importer to convert his products to higher-jewel count without paying a prohibitive duty. Yet, during all of these years, Congress has never seriously considered a change in the regulations.

It seems to me that any fair-minded person who considers the facts presented in the Benrus brief would be persuaded by their obvious merit. From a legal standpoint, it is almost inconceivable that the Treasury Department can ignore these compelling arguments.

Mr. TYDINGS. Thank you.

The CHAIRMAN. Next is Mr. John Kinsey. Is Mr. Kinsey present?

STATEMENT OF JOHN W. KINSEY, EXPORT MANAGER, MICROMATIC HONE CORP., DETROIT, MICH.

The CHAIRMAN. Please give your name and your address and the capacity in which you appear.

Mr. KINSEY. We felt that you people might be interested in the problems of a small plant in the Midwest, and so I have prepared this statement.

My name is John W. Kinsey. I wish to thank the committee for providing this opportunity for me to appear and testify on behalf of the Micromatic Hone Corp., where I am the export manager. I am also the chairman of the world affairs committee of the Detroit Board of Commerce.

The Micromatic Hone Corp. is incorporated under the laws of the State of Michigan. Its main office is at 8100 Schoolcraft Avenue, in the city of Detroit, and it has plants in Guilford, Conn., Evanston, Ill.; Pendleton, Ind.; Los Angeles, Calif.; and Brantford, Ontario, Canada. It also has licensing arrangements for the manufacture of certain of its products with firms in England, France, and Italy.

57600-55-pt. 1- -25

The Micromatic Hone Corp. manufactures honing machines, honing tools, honing fixtures and honing abrasives. For your further information, honing is an abrading, metal-removing process, usually the final finishing process on many of the component parts used in the automotive, aircraft, refrigeration and many other industries.

The Micromatic Hone Corp. employs a total of 820 people, and its products are sold worldwide through a network of approximately 70 native machine tool dealers. In this selling abroad, the Micromatic Hone Corp. successfully competes with foreign manufacturers and also competes with them in the domestic market, in spite of extremely keen competition in those exports markets where we have no tariff protection whatsoever, and also in spite of the fact that the wage scale of the Micromatic Hone Corp. is among the highest in the United States.

The total output annually of the Micromatic Hone Corp. is divided with machines, tools and fixtures accounting for 70 percent and abrasives 30 percent. The number of people employed in the manufacture of the machines and tools is 744, and 76 people in the abrasives. Due to our licensing arrangements, we do not participate very heavily in the abrasive end of our business by exporting. However, in the manufacture of machines, tools, and fixtures, our export sales are never less than 10 percent a year, and have been known to account for 25 percent and more. Taking the past three fiscal years as an example, this means that 111 of our employees owe their jobs directly to our export business. An interesting sidelight is the fact that we use instruments and machine tools in our own production, purchased in England, Switzerland, and Italy.

We feel that with the passage of the Trade Agreements Extension Act of 1955, the President will be able to negotiate the reduction of trade obstacles, which will enable us to maintain at least as many, and possibly more, people working on export orders. This bill could foster increased sales of our products abroad in the long run through the reductions of tariffs of many countries. This would lead to a direct increase; but there might also be an indirect increase through a further reduction of the United States' tariffs, enabling more dollars to go abroad for the purchase of American equipment, possibly products of the Micromatic Hone Corp.

If the President invoked the maximum reduction of the United States tariff on machine tools to bring about a reduction of foreign tariffs on our products, we would not object. We can and do successfully compete abroad in many countries at the present time and without the benefit of tariff protection. We feel that we can hold our own at home, because there is considerably more to competition in the machine tool industry than a mere comparison of price.

Furthermore, the provisions of H. R. 1 are more than just a lowering of tariffs. Behind it all is a stimulation of foreign trade, which we feel will not only strengthen the economies of nations we wish to keep friendly to us, but also provide the trade ties which are stronger in our opinion than military agreements and mutual defense pacts.

For these reasons, the Micromatic Hone Corp. supports the provisions of H. R. 1, The Trade Agreements Extension Act of 1955, and urges the committee to report the measure favorably back to the House. The CHAIRMAN. Does that complete your statement?

Mr. KINSEY. Yes, it does.

The CHAIRMAN. Are there any questions?

We thank you for your appearance, and the splendid statement you have given the committee.

Mr. KINSEY. Thank you.

The CHAIRMAN. Next is Mr. Irving C. Reynolds.

Will you come forward, please, sir.

Will you please give your name, and address and the capacity in which you appear, for the record.

STATEMENT OF IRVING C. REYNOLDS, CHAIRMAN, DAIRY EXPORT ADVISORY COMMITTEE, TOLEDO, OHIO

Mr. REYNOLDS. My name is Irving Reynolds, from Toledo, Ohio, and I am a dairy processor, 33 years in that business, and a dairy farmer for some 15 years.

I am chairman of the Export Advisory Committee to the Foreign Agricultural Service of the Department of Agriculture, and I wish to present the views as my own and to a substantial degree the composite views of the members of the Export Advisory Committee of the Foreign Agriculture Service of the United States Department of Agriculture.

The speaker is past president of a national trade association of the ice cream industry, and also recent past president of the Dairy Industries Society, International. The advisory committee referred to is made up of 15 representatives of various segments of the dairy industry of the United States.

As a committee advising the Department of Agriculture, we are considering all phases of the development of sales of dairy products to other countries. In this connection we are not only considering the present surpluses of the United States dairy products, but are thinking of the surpluses of dairy products from other producing countries as well.

We recognize that in a very real sense we are to be either cooperators with other dairy producers or competitors of theirs. In our thinking and plans we are tending very strongly toward establishing broader bases of sales of dairy products in countries where such products are in short supply, and in such efforts we favor cooperation with other dairy producing countries, thus establishing better relations with them.

In cooperation with them we hope to show the way to improved opportunity for the dairy farmer and the dairy processing industry everywhere in the world where dairy products can be economically produced.

In establishing relations with countries where we may sell, at competitive prices, our dairy products, we are immediately concerned with trade restrictions which may exist, and with trade quotas and other features that may hinder or help the transactions we are promoting. It is quite apparent to me that the effect of the provisions. for negotiating trade agreements under the proposed bill would be to facilitate the sales of dairy products. Together with other laws that are now in effect and with currency exchange procedures that may be provided, it is our thought and belief that there is a very encouraging prospect for the development of a considerable dairy export trade

from not only the United States but from other dairy countries that might be cooperating with us.

We expect such trade to continue as a beneficial influence to the world dairy industry, not solely as a measure for disposing of our present surpluses.

Surely it is apparent that the wider use of dairy products would be highly beneficial to countries now lacking in dairy foods. The results in better physical and mental health cannot be fully estimated herein, but it is evident, we are sure, that there would be substantial benefit to these dairy-deficit countries. We are working on plans that would make sales at fair prices for the items sold.

Obvious, again, is the fact that we must buy if we sell. We believe there are goods in practically every country that the United States might buy in sufficient quantities to provide that country with the exchange necessary to procure an improved diet of dairy foods under purchase plans. In some cases the trade may be "three way" rather than a direct bilateral method.

Our Communistic competitors for the building of international friendships do not have surpluses of dairy products that they can share with dairy-deficit countries. Their own needs are not adequately met. Therefore, it may well be important for us, and some other countries friendly to us, to cooperate in building up nutrition in the needy countries. It will demonstrate good-will and good faith. Such transactions in valuable food supplies will, in my judgment, prove beneficial in building and maintaining better friendships on an international basis-and be effective in demonstrating that the way of the free world produces better economic and health benefits.

The speaker, at the request of the United States Department of Agriculture, made a trip to several of the dairy-deficit countries during the summer of 1954, and established beyond doubt the possibility of establishing trade in dairy products, in substantial quantities, in many of these countries.

In several countries, however, trade restrictions would need to be cleared away before operations could be carried on at the proper price level. In 1947 the speaker made a similar survey of the Far East for the Quartermaster General, and arranged for shipment of American dairy products to that area. As a result of this survey, several substantial dairy products plants, which have been operating economically and efficiently (and with complete satisfaction), for several years, demonstrate the feasibility of such enterprises. These plants re-combine milk ingredients to serve United States military and civilian groups in those areas.

It is assumed that no trade would be encouraged except on a basis of mutually agreeable arrangements.

It is my belief that American business can, and will, improve United States foreign relations by investing abroad, by employment of many citizens of those foreign countries, and by forthright cooperation in the building of business in those countries. The dairy processing and distributing business calls for establishment of business enterprises in many areas wherever dairy products are not already well established. Almost every area of urban population of 100,000 people or more in the dairy-deficit countries is a prospective location. The benefit to international relations would be very great.

I believe that H. R. 1 approaches this problem in a proper way, and will help the free world to widen markets and expand production.