You are advised that the bureau, upon further consideration and investigation, now holds that the unbleached palm oil free from artificial coloration when used in substantial qualities in relation to other ingredients may be used in the manufacture of oleomargarine otherwise free from artificial coloration without subjecting the finished product to tax at the rate of 10 cents per pound.

All rules of the Bureau of Internal Revenue in so far as they may be contrary to this holding are hereby revoked. You are requested to forward immediately to each manufacturer of oleomargarine in your district a copy of this letter. DAVID BURNET, Commissioner.

The evidence shows that palm oil exists in qualities sufficient to color more oleomargarine than is now manufactured. Since its use is permitted under the above-quoted ruling of the Commissioner of Internal Revenue, unlimited quantities of colored oleomargarine can be made by the use of palm oil as a natural ingredient, and the product will he subject to the one-fourth of 1 cent per pound tax. This completely nullifies the intent and purpose of the Congress in the passage of the Grout Act of 1902.

EMERGENCY CONFRONTING THE DAIRY INDUSTRY

The evidence shows that the oleomargarine trade is preparing an extensive advertising campaign to sell this yellow colored oleomargarine in greatly increased quantities. Some idea of the competition which confronts the dairy industry may be gathered from the relative cost of producing the two commodities, oleomargarine and butter. Two standard formulas for the manufacture of oleomargarine which are in general use have been secured. These, of course, are varied by different manufacturers, but they are sufficiently standard to give an indication of the competition to which the dairy industry is subjected.

When churned this will produce about 1,150 pounds of finished product. 103.2÷1,150=9 cents per pound cost of materials for 1 pound of oleomargarine.

When churned this will produce about 1,150 pounds of finished product. 78.85÷1,150=6.8 cents per pound cost of raw materials for 1 pound of vegetable-oil oleomargarine.

The prices used above are for the most part obtained from the Oil, Paint, and Drug Reporter of January 3, 1931. The new product known as refined palm oil is not quoted in that paper, but prices were obtained from a source which is considered authentic. You will see, therefore, that the raw materials used in making a pound of animal-fat oleomargarine cost 9 cents per pound, while the materials used in making a pound of vegetable-oil oleomargarine cost 6.8 cents.

Let us consider the cost of producing dairy butter. Prof. O. E. Reed, chief of the Bureau of Dairy Industry, furnished a year ago some figures as to the cost of producing butter, which were obtained as the result of investigations in several thousand herds throughout the country. The cost varied with the production, but in the group of herds producing 200 pounds of butterfat

annually, which is better than the average for the whole country, the cost of producing the cream at the farm, the raw material before manufacture, which is on the same basis used for the substitute, averaged 39 cents per pound of butter. Costs of producing butter may have decreased slightly in the meantime but not materially. The unrestrained sale of oleomargarine, costing as it does less than one-fourth the cost of dairy butter, will drive dairy farmers out of business.

PURPOSE OF THE TAX TO PREVENT FRAUD

It is the contention of the dairy industry that yellow is the natural color of butter and that oleomargarine manufacturers desire to color their product yellow for the purpose of imitating butter so that it will be used in larger quantities in the place of butter and its market be, therefore, largely increased. It is the purpose of the 10-cent tax to discourage this fraudulent imitation and to cause oleomargarine to be sold in its proper guise. This has been the policy of our Government for nearly 30 years, and this bill simply meets new conditions which have developed.

DOES PUBLIC POLICY DEMAND PROTECTION OF THE DAIRY INDUSTRY

The principal countries of the world have passed stringent laws to protect butter from its counterfeit oleomargarine. Some of these laws prevent coloration in imitation of butter, some prescribe difference in packages, and some even go so far as to provide that butter and oleomargarine shall not be sold in the same store. The Dominion of Canada absolutely prohibits the manufacture and sale of oleomargarine. The reason for this almost universal public policy is that butter made from cows' milk contains certain substances called vitamins which make it superior in the human diet to oleomargarine. On this point both Dr. E. V. McCollum, of Johns Hopkins University, and Dr. Walter H. Eddy, of Columbia University, were in complete agreement. Doctor McCollum stated to the committee that butter was rich in vitamin A and had considerable quantities of three other vitamins. A telegram from Doctor McCollum inserted in the record shows that crude palm oil contains only one-third as much of vitamin A as is found in butter, and he said, in his opinion, the method of refining palm oil would destroy its vitamin A content. Doctor Eddy, when question on this point, admitted that a pound of butter would have twenty-five times as much vitamin A as would a pound of oleomargarine made with palm oil as an ingredient. The evidence proves conclusively that oleomargarine is deficient in vitamin content and is not to be compared with butter as scurce of supply of these elements so essential to normal growth and well-being.

a

Dr. E. V. McCollum, of Johns Hopkins University, leading scientific autthority on this subject, testifying before our committee, said:

"Now, it takes a good many years to clear up the place in physiological processes of this substance vitamin A. We know now that when there is a deficiency of that substance in the diet a particular type of cell, known as the epithelial cells, is injured, and those epithelial cells cover all the mucous surfaces in the mouth, stomach, and intestinal tract; and this type of cell, specialized for peculiar functions, constitute the secretory cells in the shape of glands— salivary glands and digestive glands generally-and that these cells do not retain their physiological function unless they are provided with a satisfactory amount of vitamin A."

"In the 23 years I have been working in this field and talking about the subject of my researches and those of others, I have tried to keep in mind the quality of the human diet and to make such recommendations as would make for safety."

“Mr. PURNELL. Doctor, I think this committee would like to know your estimate of the relative nutritive value of butter and oleomargarine, for instance, whether colored artificially or with some natural product.

Doctor MCCOLLUM. Margarines have been made out of many different materials, mainly out of animal body fats and of vegetable fats, in the case of certain margarines; in the case of certain others very largely, if not exclusively, of vegetable fats. It happens that there are no vegetable fats which provide

vitamin A in any considerable amount. There are a few that contain traces of it, but very little. Animal fats vary in respect to this peculiar quality of vitamin A content, which I shall stress-vary because the food of the animal producing the fats varies. If a hog is kept on alfalfa, rape, or clover pasture and eats very liberally of leaves his fat will contain a demonstrable but not a large quantity of vitamin A; in fact, it is always low.

"You can depend on this, that any white fat r any fat that is nearly white, is practically lacking in vitamin A, because that quality goes with yellowness in fats, but yellowness only of a certain origin, not all kinds of yellow, are indicative of the presence of that vitamin.

"The body fats, so far as assays have been made—and they are exceedingly numerous-are inferior to even a low-grade butter as a source of vitamin A. I can answer your question, therefore, with great confidence, that I tell you the truth when I say that all butter substitutes, so far as I am aware, are distinctly inferior to even a low-grade butter."

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Mr. BRIGHAM. Now, the situation in this country seems to be this at the present time: Under a ruling made by the Commissioner of Internal Revenue, palm oil, yellow in color, can be used in the manufacture of oleomargarine, and unlimited quantities of oleomargarine made to imitate butter in color and texture can be put upon the market. The oleomargarine industry is planning a campaign, I am told, an extensive advertising campaign, to promote the sale of that yellow-colored product, which is taxed one-fourth cent per pound. If that should lead to the supplanting of butter by oleomargarine in the diet of the American people, what is your comment, as one of the leading food experts of the country, of the effect upon the people of the United States?

"Doctor MCCOLLUM. I think it would be a step in the wrong direction from the standpoint of the maintenance of the Nation's health; that any invasion of so precious a product as butter or any other dairy product should be so marked that there is no prospect that a purchaser may be deceived as to what he is purchasing and that no economic condition should be permitted to prevail which would enable an inferior food product to displace on the American table a superior food product such as butter."

From the economic viewpoint the dairy farmers of this country constitute the largest single branch of agriculture. While almost every farmer owns a cow, those supplying milk and its products which go into general consumption, number nearly 1,500,000 farm families. The total volume of milk annually produced is approximately 130,000,000,000 pounds. In normal years the value of this product at the farm will exceed $2,750,000,000. The industry is well established on a commercial basis in about 35 States and is making rapid 'headway in the Southern States, particularly in Virginia, the Carolinas, Alabama, Louisiana, and Texas. The relative commercial importance of the oleomargarine industry and the dairy industry are illustrated by the following comparison:

Oleomargarine produced in the fiscal year ending June 30, 1930, was 349.123,725 pounds. Of the above amount, 17,102,771 pounds were colored and paid the 10 cent tax; 332.020.954 pounds were uncolored and paid one-fourth of 1 cent tax.

Plants engaged in manufuacturing oleomargarine_

Number of wage earners_

Total value of products-

35

Value added by manufacture_

Plants engaged in manufacturing butter..

1, 369 $41, 328, 210 $13, 557, 271

3, 409

17, 805

$700, 867, 648

$104, 902, 071

Statistics show that the dairy industry is a much better customer of the cotton grower because the cottonseed meal consumed by dairy cows is many times the amount of cottonseed oil used in the manufacture of oleomargarine The emergency confronting the dairy industry demands immediate passage of this bill.

The passage of this bill will do no injustice to any industry and will deprive no industry of any right which it legitimately has. It will protect an essential food product necessary to the welfare of the American people from the com petition of a counterfeit and it will afford necessary protection to the dairy industry.

Mr. BANKHEAD. I have a letter here. I presume other members have received it, from Mr. J. S. Abbott, Institute of Oleomargarine Manufacturers, dated February 9, stating that the hearings of the opponents of this legislation have not been printed. Is that true? That all the hearings in favor of the bill have been printed and are available, but that the hearings of witnesses who opposed the bill before the committee have not been printed.

STATEMENT OF JOHN B. CLARKE, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW YORK

Mr. HAUGEN. Part of the hearings are held up pending certain information that is to be supplied the committee. I believe the material came in this morning.

Mr. BANKHEAD. As a matter of fact, the hearings in opposition to the bill are not available to this committee of the House.

Mr. HAUGEN. Only a part of the opponents' testimony, consisting of one day's hearings; the balance will go to the printer this evening. Mr. KETCHAM. Here is a copy of the hearings that are available up to the present time, numbering 164 pages; and 100 pages of this copy are given to the proponents, and statements of the opponents of the legislation are included in the last 64 pages, so that the statement Mr. Abbott makes is not correct to that degree.

Mr. BANKHEAD. How much more of the hearings in preparation are unavailable?

Mr. CLARKE. These hearings are not completed, for the reason that we requested from the Department of Agriculture the figures showing as nearly as we could approximate it, the distribution of oleomargarine in the country-that is, centers from which it is distributed-to get an answer to how much of it is going back to the farmers.

Mr. BANKHEAD. Do you not think we ought to have all the hear- ̧ ings available before we take this up?

Mr. CLARKE. That is all that is not included in the hearings, and that was at my request.

STATEMENT OF HON. GILBERT N. HAUGEN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF IOWA

The CHAIRMAN. How much more time would be necessary? Can you present all you want in half an hour?

Mr. HAUGEN. I can do it in five minutes.

The CHAIRMAN. It will not be necessary to hear the members of the Agriculture Committee or all the Members of the House. They could all file statements if they wish. There is no need to go over the same ground several times.

Mr. HAUGEN. We will take whatever time is agreeable to the committee.

The CHAIRMAN. We will hear you.

Mr. HAUGEN. The law now provides that a 10-cent tax shall be levied on oleomargarine artificially colored so as to cause it to look like butter of any shade of yellow. The bill proposes changes, so that if any person adds to the oleomargarine substances which cause

it to be yellow in color beyond the limit of 1.6 degrees of yellow a 10-cent tax shall be levied. In other words, if oleomargarine is artificially colored, it is held to be subject to a 10-cent tax. Under the proposed bill, if artificially or otherwise colored, it is subject to the 10-cent tax.

Mr. MICHENER. What do you mean by otherwise?

Mr. HAUGEN. Artificially or naturally so.

Mr. MICHENER. Or naturally so?

Mr. HAUGEN. Yes; that is the only difference. That is practically all there is to the bill. I shall not discuss the bill in detail. Mr. Brigham, who is the author of the bill, will discuss it in detail. For a number of years the contention has been made that oleomargarine should not be permitted to masquerade under false colors. The trade-mark of butter is yellow; therefore objection is raised to coloring it in imitation or in semblance of butter or to make it look like butter, so as to enable them to sell it as butter at butter prices. That is universally agreed.

Mr. MICHENER. The thing that bothered me was that natural. I have always done everything I could to prevent the masquerading of oleomargarine as butter, but if it is a natural color and nothing is done it is a wholesome food if it is natural.

Mr. HAUGEN. Under this bill if colored artificially or naturally beyond 1.6 degrees yellow it will be subject to a 10-cent tax.

Mr. BANKHEAD. The purpose of this bill is to put a 10-cent tax on all oleomargarine put on the market that has any appreciable percentage of coloring matter in it, whether it is natural or artificial coloring matter.

Mr. HAUGEN. One and six-tenths degrees yellow. That is as measured on the Lovibond tintometer-if it goes beyond that.

Mr. BANKHEAD. How many degrees of yellow constitute the full yellow?

Mr. HAUGEN. I presume that would be 10 degrees.

Mr. BANKHEAD. I want to get that cleared up. You allow 1.6 degrees of yellow.

Mr. HAUGEN. Yes.

Mr. BANKHEAD. I do not know whether you would call yellow full yellow or yellow yellow. I want to know what proportion. Mr. HAUGEN. I infer from testimony that 10 degrees would be full yellow; 10 degrees yellow or full yellow.

The CHAIRMAN. No remarks from the side lines.

Mr. HAUGEN. That is all that can be said about the bill. Mr. Brigham will discuss the bill. I shall extend my remarks. It has the approval of the Secretary of Agriculture and Assistant Secretary of the Treasury.

The proposed bill provides that oleomargarine shall be held to be yellow in color when it has a tint or shade containing more than 1,6-degree of yellow measured in the terms of the Lovibund tintometer scale or its equivalent. Such measurements shall be made under regulations prescribed by the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury.

Under the proposed bill, the color of 1.6-degree yellow shall determine the basis of taxation. If more than 1.6-degree yellow the tax shall be 10 cents; if less, one-fourth of 1 cent; no change under the present law of the tax rate to be collected.

Why the proposed change?