Mrq-06

H3

REVENUE FOR THE PHILIPPINE ISLANDS.

COMMITTEE ON THE PHILIPPINES,

UNITED STATES SENATE,

Saturday, January 20, 1906.

The committee met at 10.30 o'clock a. m.

Present: The chairman (Senator Lodge) and Senators Beveridge, Burrows, Long, McCreary, Nixon, Dubois, Stone, and Culberson. The CHAIRMAN. House bill No. 3 is before the committee. The bill under consideration is as follows:

[H. R. 3. Fifty-ninth Congress, first session.]

AN ACT to amend an act entitled "An act temporarily to provide revenue for the Philippine Islands, and for other purposes," approved March eighth, nineteen hundred and two.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That the second section of the act entitled "An act temporarily to provide revenue for the Philippine Islands, and for other purposes," approved March eighth, nineteen hundred and two, is hereby amended to read as follows:

"SEC. 2. That on and after the passage of this act there shall be levied, collected, and paid upon all articles coming into the United States from the Philippine Islands the rates of duty which are required to be levied, collected, and paid upon like articles imported from foreign countries: Provided, That ali articles wholly the growth and product of the Philippine Islands coming into the United States from the Philippine Islands shall hereafter be admitted free of duty, except sugar, tobacco, and rice manufactured and unmanufactured. upon which there shall be levied, collected, and paid only twenty-five per centum of the rates of duty aforesaid: And provided further, That the rates of duty which are required hereby to be levied, collected, and paid upon products of the Philippine Islands coming into the United States shall be less any duty or taxes levied, collected, and paid thereon upon the shipment thereof from the Philippine Islands, as provided by law, under such rules and regulations as the Secretary of the Treasury may prescribe; but all articles wholly the growth and product of the Philippine Islands admitted into the ports of the United States free of duty under the provisions of this act, and coming directly from said islands to the United States for use and consumption therein. shall be hereafter exempt from any export duties imposed in the Philippine Islands: Provided, however, That in consideration of the rates of duty aforesaid, sugar and tobacco, both manufactured and unmanufactured, wholly the growth and product of the United States, shall be admitted to the Philippine Islands from the United States free of duty: And provided further, That on and after the eleventh day of April, nineteen hundred and nine, all articles and merchandise going from the United States into the Philippine Islands, and all articles wholly the growth and product of the Philippine Islands coming into the United States from the Philippine Islands, shall be admitted free of duty: And provided further, That in addition to said duty when levied and in case said articles are admitted into the United States free of duty, there shall be paid upon articles of merchandise of Philippine Islands manufacture coming into the United States and withdrawn for consumption or sale a tax equal to the internal-revenue tax imposed in the United States upon the like articles of merchandise of domestic manufacture; such tax to be paid by internal-revenue stamp or stamps to be provided by the Commissioner of Internal Revenue and to be procured by purchase from the collector of internal revenue at or most

convenient to the port of entry of said merchandise in the United States, and to be affixed under such regulations as the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury, shall prescribe, and such articles of Philippine Islands manufacture mentioned in this proviso shall be exempt from payment of any tax imposed by the internal-revenue laws of the Philippine Islands: And provided further, That in addition to the duty hereinbefore provided when levied and in case said articles are admitted into the Philippine Islands free of duty, there shall be paid upon articles of merchandise manufactured in the United States and going into the Philippine Islands and withdrawn for consumption or sale, a tax equal to the internal-revenue tax imposed in the Philippine Islands upon the like articles of merchandise when manufactured in the Philippine Islands; such tax to be paid by internal-revenue stamps or otherwise as provided by the laws in force in the Philippine Islands upon the like articles; and such articles manufactured in the United States mentioned in this proviso and going into the Philippine Islands shall be exempt from payment of any tax imposed by the internal-revenue laws of the United States. All the moneys collected under this section as amended shall, until the eleventh day of April, nineteen hundred and nine, be paid over and disposed of as provided in section four of the act hereby amended, and shall not be covered into the Treasury of the United States."

SEC. 2. That on and after the day when this act shall go into effect all goods, wares, and merchandise previously imported from the Philippine Islands, for which no entry has been made, and all goods, wares, and merchandise previously entered without payment of duty and under bond for warehousing, transportation, or any other purpose, for which no permit of delivery to the importer or his agent has been issued, shall be subjected to the duties imposed by law prior to the passage of this act, and to no other duty, upon the entry or the withdrawal thereof: Provided, That when duties are based upon the weight of merchandise deposited in any public or private bonded warehouse said duties shall be levied and collected upon the weight of such merchandise at the time of its entry.

The CHAIRMAN. Mr. Peabody is here and desires to be heard in regard to this bill, and I will call upon him first.

STATEMENT OF MR. HENRY W. PEABODY.

Mr. PEABODY. My name is Henry W. Peabody, of Henry W. Peabody & Co., Boston and New York.

Mr. Chairman, I am in favor of the proposed reduction of duties upon imports of the Philippine products, sugar, tobacco, and rice, and the abolition of the remaining duties after April 11, 1909. With one exception, I believe that I approve House bill No. 3. This exception to which I object is section 2, which subjects the goods imported from the Philippines now in bonded warehouses to the duties imposed by law prior to the passage of this act.

In the old days, when the merchants in the Philippine trade loaded their own ships with hemp or sugar, or both, according to the indications for a good market, they were for sale on owner's account. In the last fifteen or twenty years the consumption of hemp has greatly increased, and the Philippine merchants sell to the manufacturers of cordage and binder twine before shipment for delivery at designated ports in the United States. On the other hand, sugar has been shipped irregularly by a seller cargo or port cargo, now and then by some merchants in the Philippines, who had faith in the market indications and the enterprise to ship for sale on their own account.

Last winter the value of sugar throughout the world was advancing. Under those circumstances sugar was shipped by some of the Philippine merchants, believing it could be sold at a profit in the United States. The merchants expected to make a profit, and they

considered that they were protected by the existing law, which guaranteed them the right to hold in warehouses for not more than three years and advantage of any reduction in duty while so stored, in harmony with the usage and in accord with existing law, by which--

any merchandise deposited in any public or private bonded warehouse may be withdrawn for consumption within three years from the date of original importation on payment of the duties and charges to which it may be subject by law at the time of such withdrawal: Provided, That the same rate of duty shall be collected thereon as may be imposed by law on like articles of merchandise imported at the time of withdrawal.

These low-grade sugars are not so readily salable as the Cuban centrifugal 96 sugars, even at 1 cent lower price. The owners of these sugars reasonably expect that the application of our tariff shall be the same to these sugars as to the imports of former years. They expected to sell them on equal terms with other sugars which may come in under the reduction of duty upon even equality. If this amendment which is proposed by the House bill to exclude these sugars from the benefit of the reduction should prevail, it would put the owners of these sugars to great disadvantage in the sale of the sugars, as they would always have in competition sugars that would cost two-thirds of a cent less, and it is against this discrimination against these merchants that I desire to register my objection to section 2 of this bill. These merchants in the Philippines are not here to speak for themselves. My firm are the agents for one of the houses, and I desire to speak in their behalf. The sugar market last winter was an advancing one, and a larger volume of sugar was shipped to this market, in the confidence that it would be required and would be salable in this country at a profit. Since the goods have been upon the ocean and before arrival and during the process of arrival the markets have materially declined, and they are not now salable without considerable loss. It is not the expectation of these merchants that you will adjust the market for them, but they desire to not be handicapped by sugar which may arrive on top of these sugars at a lower rate of duty than those which they hold in bond and believe to be entitled to the duties according to law.

Senator BEVERIDGE. Still those sugars were shipped by the merchants with perfect understanding of the present state of the law, and they knew what obligations they would have to pay, and they took the common risks of trade, did they not, when they shipped them? What you are asking is that the law be made retroactive? Mr. PEABODY. Senator, I do not understand that there is any doubt as to the position of the law. As I am informed, and as I read, I consider that the general statute of December 15, 1902, which I referred to and from which I read an extract, applies to any goods in any warehouse.

Senator BEVERIDGE. Oh, no; but you are asking that this act shall apply to goods now in the warehouse or on the way?

Mr. PEABODY. I refer to that because there was a clause inserted by the House committee distinctly excluding these bonded sugars from the benefits of the proposed reduction and subjecting them to the duties which were in effect prior to the passage of the bill. Senator LONG. That is section 2 of this bill?

Mr. PEABODY. Yes, sir; section 2 of this bill, and that is what I am objecting to.

Senator BEVERIDGE. But the question I am asking you is this: All of those sugars that were shipped to this country, now in bonded warehouse, and all now in transit were shipped with a perfect understanding of existing law and of existing legal and commercial conditions. Why then should they be specially exempted; why should the act be made retroactive as to them?

Mr. PEABODY. It has been

Senator BEVERIDGE. I have no views one way or the other; I am asking for light on the subject.

Mr. PEABODY. It has been the practice, so far as I am aware, ever since the McKinley tariff was enacted in 1890 to append to all the changes in tariff what has been called section 20, which distinctly provides that goods in warehouses shall be entered out for consumption at the rate of duty applicable then to goods arriving at that time.

Senator LONG. At the time they were withdrawn from bonded warehouses?

Mr. PEABODY. They are not chargeable with duty at the time of arriving.

Senator BEVERIDGE. But at the time of withdrawal?

Mr. PEABODY. Yes.

Senator BEVERIDGE. You hold it would be an unjust discrimination as against these goods that are in warehouses and not withdrawn? Mr. PEABODY. I do.

Senator BEVERIDGE. I see.

Senator CULBERSON. Before you pass from that, are you certain about that construction of law; that in the absence, for instance, of section 2 the duty you pay upon this sugar would be the duty in existence at the passage of the new law, or would it relate back to the old law?

Mr. PEABODY. I understand that this law which I read, this section, is an independent statute enacted on the 15th of December, 1902.

Senator BEVERIDGE. One more question and then I think I will not interrupt you again. If it should turn out that you are wrong in this construction of the Dingley law, if it should turn out that you are wrong in the statement of what the custom has been thereunder then your contention would logically fall to the ground as to section 2? Mr. PEABODY. Yes, sir.

Senator BEVERIDGE. So you rest on the question as to whether you are right or wrong on the construction of that law?

Mr. PEABODY. But every tariff that has been made since the Dingley tariff and the Porto Rican reduction of duty and the reduction of duty on tea in December, 1902, three days before this general statute provided for the withdrawal of tea, which was not provided for in the act of march, 1902, and the importers found that they were not going to receive the benefit of that reduction on 88,000.000 pounds of tea which was in bonded warehouse, and there was consternation among them, and a special act of Congress, a joint resolution, was secured, I think it was on the 12th of December, 1902, providing that goods in warehouse should be withdrawn as to duty provided after the 1st of January following, the same as new importation should be.

The CHAIRMAN. I will read the section from the Dingley Act and