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United States Tariff Commission
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Title: Men's Sewed Straw Hats
Report of the United Stated Tariff Commission to the
President of the United States (1926)
Author: United States Tariff Commission
Release Date: December 6, 2006 [EBook #20041]
Language: English
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UNITED STATES TARIFF COMMISSION
WASHINGTON
MEN'S SEWED STRAW HATS
REPORT
OF THE
UNITED STATES TARIFF COMMISSION
TO THE
PRESIDENT OF THE UNITED STATES
INVESTIGATION OF THE COSTS OF PRODUCTION OF
MEN'S SEWED STRAW HATS IN THE UNITED
STATES AND IN THE PRINCIPAL
COMPETING FOREIGN
COUNTRIES
WITH APPENDIX
PROCLAMATION BY THE PRESIDENT
WASHINGTON
GOVERNMENT PRINTING OFFICE
1926
UNITED STATES TARIFF COMMISSION
Office: Eighth and E Streets NW., Washington, D. C.
COMMISSIONERS
THOMAS O. MARVIN, _Chairman_.
ALFRED P. DENNIS, _Vice Chairman_.
EDWARD P. COSTIGAN.
HENRY H. GLASSIE.
A. H. BALDWIN.
EDGAR B. BROSSARD.
JOHN F. BETHUNE, _Secretary_.
ADDITIONAL COPIES
OF THIS PUBLICATION MAY BE PROCURED FROM
THE SUPERINTENDENT OF DOCUMENTS
GOVERNMENT PRINTING OFFICE
WASHINGTON, D. C.
AT
5 CENTS PER COPY
CONTENTS
Page
Introductory:
Reference to files 1
Rates of duty 1
History of investigation 1
Scope of investigation 2
Information obtained in the investigation:
Domestic production 2
Kinds of hats produced 3
Organization 3
Labor conditions 3
Imports 4
Effect of imports 6
Principal competing country 7
Foreign production--
Types of hats produced 8
Organization 8
Working hours and wages 8
Costs of production--
Methods of obtaining cost data 9
Description of cost items--
Material 9
Labor 9
Overhead 9
Selling expense--
(_a_) Domestic 9
(_b_) Foreign 9
Tables showing cost comparisons 10
Competitive conditions--
Transportation and marketing costs 11
Formal statement of conclusions 11
Summary of conclusions 13
Separate statement of Commissioner Costigan, in part concurring
and in part dissenting, in the investigation of men's sewed
straw hats:
Both higher and lower duties indicated by the commission's
cost figures 15
Determining the dividing line for tariff purposes between
higher and lower priced hats 15
Some omissions from and doubtful features in the
commission's report 16
Representativeness of samples 16
Importers' selling expenses omitted 17
Deficiencies in comparative overhead data 18
Appendix:
Proclamation by the President 21
LETTER OF TRANSMITTAL
JULY 17, 1925.
The PRESIDENT,
_The White House_,
_Washington, D. C._
MY DEAR MR. PRESIDENT: Herewith I have the honor to transmit the report
of the Tariff Commission in the investigation, for the purposes of
section 315 of the tariff act of 1922, of the costs of production in the
United States and in the principal competing foreign country of men's
sewed straw hats. Included in the report is a "Separate statement of
Commissioner Costigan, in part concurring and in part dissenting, in the
investigation of men's sewed straw hats."
Respectfully,
THOMAS O. MARVIN,
_Chairman_.
UNITED STATES TARIFF COMMISSION
WASHINGTON
MEN'S SEWED STRAW HATS
JULY 17, 1925.
_To the President_:
The United States Tariff Commission respectfully submits the following
report upon an investigation of the differences in costs of production
of men's sewed straw hats in the United States and in competing foreign
countries, for the purposes of section 315 of Title III of the tariff
act of 1922.
INTRODUCTORY
_Reference to files._--The basic documents in connection with the
investigation on men's sewed straw hats are in the files of the Tariff
Commission and are available to the President. They include the
transcripts of the public hearings and the original cost schedules and
other data. These include confidential data, the disclosure of which is
forbidden by section 708 of the revenue act of 1916:
SEC. 708. It shall be unlawful for any member of the United
States Tariff Commission, or for any employee, agent, or clerk of
said commission, or any other officer or employee of the United
States, to divulge, or to make known in any manner whatever not
provided for by law, to any person, the trade secrets or processes
of any person, firm, copartnership, corporation, or association
embraced in any examination or investigation conducted by said
commission, or by order of said commission, or by order of any
member thereof. * * *
_Rates of duty:_
Act of 1922--Not blocked or trimmed } 60 per cent. } Par. 1406.
Blocked or trimmed } }
Act of 1913--Not blocked or trimmed } 25 per cent. } Par. 335.
Blocked or trimmed } 40 per cent. }
Act of 1909--Not trimmed } 35 per cent. } Par. 422.
Trimmed } 50 per cent. }
_History of the investigation._--On May 29, 1924, the commission ordered
an investigation of men's sewed straw hats for the purposes of section
315 of Title III of the tariff act of 1922, and on the same date ordered
a preliminary hearing for June 12, 1924.
An application was received from the National Association of Men's Straw
Hat Manufacturers of America requesting an investigation looking toward
an increase in the rate of duty on men's sewed straw hats, now dutiable
at 60 per cent ad valorem under paragraph 1406 of the tariff act of 1922.
The domestic field work was carried on during the period August to
October, 1924, and the foreign work in Italy and England during the
period October, 1924, to February, 1925. After due notice, as prescribed
by law, public hearings were held in the offices of the commission on
June 12, 1924, and on May 4, 1925. The latter hearing was continued on
May 14, 15, and 16, 1925. Oral argument was waived and the date for
filing briefs was set for June 6, 1925.
_Scope of the investigation._--Costs of production were obtained for
hats sold in the straw hat season of 1924 by companies whose fiscal
years ended at or about June 30, 1924. This period was the latest for
which cost data could be obtained at the time the investigation was
made.
Domestic costs were obtained from 19 concerns in Maryland, New York,
Connecticut, and Massachusetts. The total production of these concerns
amounted to 718,265 dozen hats. Of this number, 553,253 dozen were men's
sewed straw hats. The 19 concerns produce approximately 85 per cent of
the men's sewed straw hats in the United States and include makers of
cheap, medium, and high-priced hats. They include nonmembers as well as
members of the national association.
Costs were obtained in Italy from five concerns and in England from
three concerns exporting men's sewed straw hats to the United States.
Both domestic and foreign straw hat factories are characterized by lack
of standardization in production. Variations exist in the quality of
the hats manufactured by different establishments, because of variations
in the type and quality of the braid, in the quality of the trimming
materials, such as leather sweat and silk bands, and in the amount
of hand labor employed in the finishing processes. Because of these
variations, it was considered inadvisable to compare the average costs
of production of all hats of the domestic concerns with the average of
all foreign hats. Evidence submitted at the preliminary hearing and data
in the possession of the commission indicated that competition between
domestic and foreign straw hats centered chiefly on three types, split
sennits of 13/15 millimeter braid, improved sennits of 16/18 millimeter
braid, and flatfoot sennits of 16/18 millimeter braid. The commission's
cost comparisons were therefore confined to hats of these
specifications.
INFORMATION OBTAINED IN THE INVESTIGATION
From the commission's investigation of men's sewed straw hats, conducted
as indicated above, the following information has been obtained:
DOMESTIC PRODUCTION
The manufacture of men's straw hats has been conducted on a commercial
scale in the United States for upward of 50 years. The industry is
centered in and around New York City, in a number of cities in
Massachusetts and Connecticut, and in Baltimore, Md. Statistics of
production of men's sewed straw hats are not available, since the census
of manufactures does not distinguish between men's and women's hats nor
between sewed hats and woven hats. Domestic manufacturers estimate that
the value of the men's straw hats produced in 1914 was $12,000,000, or
about 45 per cent of the total production of all straw hats. In 1920
the value of the total production of men's straw hats was estimated at
$20,000,000, of which about $12,000,000 was men's sewed hats. At the
preliminary hearing it was estimated that the average annual production
of men's sewed straw hats in recent years amounted to 800,000 dozen.
There are about 40 manufacturers of men's sewed straw hats in the United
States. The majority are well established firms.
The production of men's sewed straw hats for the season 1923-24 of 19
factories for which costs were obtained was 553,253 dozen. The factories
may be classified as follows:
TABLE 1.--_Domestic straw-hat factories grouped according to annual
production_
------------------------------------+--------+------------+----------
| Number | Production | Per cent
| | | of total
------------------------------------+--------+------------+----------
| | _Dozen_ |
Group I. Factories with annual | | |
production of | | |
50,000 dozen and over | 4 | 265,767 | 48.0
Group II. Factories with annual | | |
production of | | |
25,000-49,000 dozen | 4 | 122,936 | 22.2
Group III. Factories with annual | | |
production of less | | |
than 25,000 dozen | 11 | 164,550 | 29.8
+--------+------------+----------
Total production | | 553,253 | 100.0
------------------------------------+--------+------------+----------
_Kinds of hats produced._--There are two general types of men's straw
hats produced by the domestic manufacturers:
(1) Woven hats, such as panamas, etc. The bodies of these hats are
imported in the rough and are shaped, finished, and trimmed in this
country.
(2) Sewed hats. All of the operations necessary in the manufacture
of a sewed straw hat, with the exception of plaiting the braids, are
performed in the United States. This investigation relates to sewed
hats only.
_Organization of production._--The manufacture of straw hats is
essentially a factory business and with few exceptions each concern
carries on all of the major operations connected with the production of
hats in a single establishment. Plaiting of straw braid is a separate
industry, the domestic hat manufacturers being dependent upon foreign
sources for their supply of braids. The bleaching of straw braids is
performed by some of the hat manufacturers in their own establishments;
others have the bleaching done by outside concerns which specialize in
this class of work. Some firms make the tips (the inside linings of the
hats) in their own establishments; others buy the complete tip, or have
certain operations, such as printing or stamping, performed by outside
shops.
_Labor conditions._--The hours of labor of employees in domestic straw
hat factories in 1923-24 varied from 42 to 54 weekly. Wages are based
both on piece and time work. Time wages ranged from $15 to $40 per week,
according to the character of the work performed.
The production of straw hats is to some extent seasonal. Orders are
received in the late summer for delivery in the following spring.
Production on these orders begins in September and the factories are
usually busiest in the early months of the year. The summer is a
slack season and factories operate with reduced labor force or close
altogether for several weeks. The following table shows the monthly
variations in the total number of employees of 18 domestic factories
in the season 1923-24:
TABLE 2.--_Employees in 18 domestic straw-hat factories, season of
1923-24_
---------------+-----------++----------------+-----------
| Number of || | Number of
Month | employees || Month | employees
---------------+-----------++----------------+-----------
1923 | || 1924 |
July | 1,116 || January | 3,331
August | 1,775 || February | 3,371
September | 2,542 || March | 3,403
October | 2,765 || April | 3,380
November | 3,221 || May | 3,117
December | 3,291 || June | 1,871
---------------+-----------++----------------+-----------
IMPORTS
The quantities and values of sewed straw hats imported into the United
States were not separately shown in official statistics prior to the
tariff act of 1922, in which sewed straw hats were given a separate
classification.
Table 3 shows the imports for consumption of sewed straw hats from the
principal countries of origin, by months, for the calendar years 1923
and 1924. Total imports increased from 93,309 dozen in 1923, valued at
$779,989, to 164,041 dozen in 1924, valued at $1,179,929, a gain of
approximately 75 per cent in quantity and 50 per cent in value.
TABLE 3.--_Imports for consumption of men's sewed straw hats[1] from
Italy, England, Germany, and other countries, by months, calendar years
1923 and 1924_
(Source: Foreign Commerce and Navigation of the United States)
-------------+----------+----------+----------+----------+------------
| Italy | England | Germany | Other | Total
| | | | countries|
| | | | [2] |
+----------+----------+----------+----------+------------
Month | 1923 | 1923 | 1923 | 1923 | 1923
-------------+----------+----------+----------+----------+------------
| _Number_ | _Number_ | _Number_ | _Number_ | _Number_
January | 51,225 | 9,734 | 2,460 | 26,606 | 90,025
February | 53,644 | 9,235 | 8 | 4,756 | 67,643
March | 54,102 | 55,920 | 7,420 | 51,305 | 168,747
April | 66,552 | 46,222 | 1,931 | 84,684 | 199,389
May | 78,602 | 68,989 | 80 | 31,888 | 179,559
June | 38,658 | 42,776 | 1,960 | 4,414 | 87,808
July | 23,049 | 6,717 | 848 | 11,685 | 42,299
August | 1,796 | 1,250 | 1,504 | 1,041 | 5,591
September | 120 | 960 | 1,272 | 102 | 2,474
October | 53,129 | 396 | 3,411 | 331 | 57,267
November | 77,962 | 2,718 | 8,929 | 7,524 | 97,133
December | 78,372 | 1,647 | 21,334 | 20,415 | 121,768
+----------+----------+----------+----------+------------
Total number | 577,211 | 246,584 | 51,157 | 244,751 | 1,119,703
Dozen | 48,101 | 20,549 | 4,263 | 20,396 | 93,309
+==========+==========+==========+==========+============
| | | | |
Total Value | $289,215 | $256,769 | $32,503 | $201,502 | $779,989
| | | | |
Average | | | | |
value per | | | | |
dozen | $6.01 | $12.50 | $7.62 | $9.88 | $8.36
+==========+==========+==========+==========+============
Per cent | | | | |
of hats | | | | |
imported | | | | |
from each | | | | |
country | 51.50 | 22.00 | 4.60 | 21.90 | 100.0
-------------+----------+----------+----------+----------+------------
-------------+----------+----------+----------+----------+------------
| Italy | England | Germany | Other | Total
| | | | countries|
| | | | [2] |
+----------+----------+----------+----------+------------
Month | 1924 | 1924 | 1924 | 1924 | 1924
-------------+----------+----------+----------+----------+------------
| _Number_ | _Number_ | _Number_ | _Number_ | _Number_
January | 35,754 | 50,087 | 19,829 | 34,754 | 140,424
February | 114,644 | 35,024 | 25,372 | 57,429 | 232,469
March | 97,899 | 46,435 | 50,126 | 40,669 | 235,129
April | 192,007 | 119,031 | 85,421 | 49,935 | 446,394
May | 113,593 | 54,874 | 85,884 | 34,047 | 288,398
June | 59,840 | 37,208 | 6,873 | 14,769 | 118,690
July | 22,505 | 1,533 | 720 | 41,367 | 66,125
August | 4,000 | 820 | 2,795 | 41,689 | 49,304
September | 427 | 706 | 7,377 | 10,550 | 19,060
October | 37,809 | 318 | 4,541 | 34,528 | 77,196
November | 82,313 | 2,640 | 959 | 44,471 | 130,383
December | 100,353 | 4,723 | 5,332 | 54,516 | 164,924
+----------+----------+----------+----------+------------
Total number | 861,144 | 353,399 | 295,229 | 458,724 | 1,968,496
Dozen | 71,762 | 29,450 | 24,602 | 38,227 | 164,041
+----------+----------+----------+----------+------------
| | | | |
Total Value | $427,706 | $282,402 | $180,054 | $289,767 | $1,179,929
| | | | |
Average | | | | |
value per | | | | |
dozen | $5.96 | $9.59 | $7.32 | $7.57 | $7.19
+==========+==========+==========+==========+============
Per cent | | | | |
of hats | | | | |
imported | | | | |
from each | | | | |
country | 43.75 | 17.95 | 15.00 | 23.30 | 100.00
-------------+----------+----------+----------+----------+------------
[1: Including men's, women's, and children's.]
[2: Including withdrawals from warehouse.]
A comparison of the imports for the first four months of 1925 with those
for the corresponding period in 1924 is shown in Table 4. A significant
feature of this table is the increase in imports from Italy and the
decrease of imports from both the United Kingdom and Germany. It should
be noted also that the average foreign[a] value per dozen of Italian
hats decreased while the average foreign[a] value of hats imported from
England and other countries increased.
[Footnote a: Values upon which duties were assessed as computed from
data given in Foreign Commerce and Navigation of the United States.]
TABLE 4.--_Imports for consumption of men's sewed straw hats[1] from
Italy, United Kingdom, Germany, and other countries, by months,
January-April, inclusive, 1924 and 1925._
(Source: Foreign Commerce and Navigation of the United States)
------------+----------+----------+----------+-----------+-----------
| Italy | United | Germany | Other | Total
| | Kingdom | | countries |
| | | | [2] |
+----------+----------+----------+-----------+-----------
Month | 1924 | 1924 | 1924 | 1924 | 1924
------------+----------+----------+----------+-----------+-----------
| _Number_ | _Number_ | _Number_ | _Number_ | _Number_
January | 35,754 | 50,087 | 19,829 | 34,754 | 140,424
February | 114,644 | 35,024 | 25,372 | 57,429 | 232,469
March | 97,899 | 46,435 | 50,126 | 40,669 | 235,129
April | 192,007 | 119,031 | 85,421 | 49,935 | 446,394
+----------+----------+----------+-----------+-----------
Total number| 440,304 | 250,577 | 180,748 | 182,787 | 1,054,416
Dozen | 36,692 | 20,882 | 15,062 | 15,232 | 87,868
+==========+==========+==========+===========+===========
| | | | |
Total value | $228,452 | $201,291 | $102,366 | $123,775 | $655,884
| | | | |
Average | | | | |
value | | | | |
per dozen | 6.23 | 9.64 | 6.80 | 8.13 | 7.46
+==========+==========+==========+===========+===========
Per cent | | | | |
of hats | | | | |
imported | | | | |
from each | | | | |
country | 41.76 | 23.76 | 17.14 | 17.34 | 100.00
------------+----------+----------+----------+-----------+-----------
------------+----------+----------+----------+-----------+-----------
| Italy | United | Germany | Other | Total
| | Kingdom | | countries |
| | | | [2] |
+----------+----------+----------+-----------+-----------
Month | 1925 | 1925 | 1925 | 1925 | 1925
------------+----------+----------+----------+-----------+-----------
| _Number_ | _Number_ | _Number_ | _Number_ | _Number_
January | 212,292 | 8,995 | 12,070 | 6,104 | 239,461
February | 189,736 | 31,776 | 7,697 | 22,580 | 251,789
March | 207,218 | 61,755 | 3,828 | 24,482 | 297,283
April | 260,145 | 45,711 | 40,479 | 10,545 | 356,880
+----------+----------+----------+-----------+-----------
Total number| 869,391 | 148,237 | 64,074 | 63,711 | 1,145,413
Dozen | 72,449 | 12,353 | 5,340 | 5,309 | 95,451
+==========+==========+==========+===========+===========
| | | | |
Total value | $395,298 | $161,422 | $40,923 | $78,222 | $675,865
| | | | |
Average | | | | |
value | | | | |
per dozen | 5.46 | 13.07 | 7.66 | 14.73 | 7.08
+==========+==========+==========+===========+===========
Per cent | | | | |
of hats | | | | |
imported | | | | |
from each | | | | |
country | 75.90 | 12.94 | 5.60 | 5.56 | 100.00
------------+----------+----------+----------+-----------+-----------
[1: Including men's, women's, and children's.]
[2: Including withdrawals from warehouse.]
TABLE 5.--_Imports at the port of New York of men's sewed straw hats
from Italy[1] classified according to foreign value, including packing
January-June, 1924_
[In dozens]
----------------+-------------------------+-------------------------
| Sennits[2] | Fancies[3]
Value +-------+---------+-------+-------+---------+-------
|Trimmed|Untrimmed| Total |Trimmed|Untrimmed| Total
----------------+-------+---------+-------+-------+---------+-------
$2.99 and less | | 18 | 18 | | 60 | 60
$3.00-$3.49 | 6 | 38 | 44 | | 219 | 219
$3.50-$3.99 | 255 | 23 | 278 | 1 | 250 | 251
$4.00-$4.49 | 2,518 | 28 | 2,546 | 196 | 2,909 | 3,105
$4.50-$4.99 | 1,617 | 24 | 1,641 | 61 | 477 | 538
$5.00-$5.49 | 1,671 | 4 | 1,675 | 427 | 711 | 1,138
$5.50-$5.99 | 1,687 | 1 | 1,688 | 608 | 89 | 697
$6.00-$6.49 | 1,313 | | 1,313 | 2,831 | 182 | 3,013
$6.50-$6.99 | 2,657 | 1 | 2,658 | 2,537 | 33 | 2,570
$7.00-$7.49 | 740 | | 740 | 996 | 15 | 1,011
$7.50-$7.99 | 255 | | 255 | 939 | 3 | 942
$8.00-$8.49 | 147 | | 147 | 470 | 6 | 476
$8.50-$8.99 | 165 | | 165 | 261 | 5 | 266
$9.00-$9.49 | 10 | | 10 | 165 | 1 | 166
$9.50-$9.99 | 30 | | 30 | 107 | | 107
$10.00-$10.49 | 39 | | 39 | 56 | 1 | 57
$10.50-$10.99 | 46 | | 46 | 34 | | 34
$11.00 and over | 63 | 3 | 66 | 10 | 12 | 22
+-------+---------+-------+-------+---------+-------
Total |13,219 | 140 |13,359 | 9,699 | 4,973 |14,672
----------------+-------+---------+-------+-------+---------+-------
[In dozens]
----------------+-------------------------+-------------------------
| Miscellaneous[4] | Grand total
Value +-------+---------+-------+-------+---------+-------
|Trimmed|Untrimmed| Total |Trimmed|Untrimmed| Total
----------------+-------+---------+-------+-------+---------+-------
$2.99 and less | | | | | 78 | 78
$3.00-$3.49 | 50 | | 50 | 56 | 257 | 313
$3.50-$3.99 | 570 | | 570 | 826 | 273 | 1,099
$4.00-$4.49 | 622 | | 622 | 3,336 | 2,937 | 6,273
$4.50-$4.99 | 680 | | 680 | 2,358 | 501 | 2,859
$5.00-$5.49 | 1,715 | | 1,715 | 3,813 | 715 | 4,528
$5.50-$5.99 | 1,095 | 58 | 1,153 | 3,390 | 148 | 3,538
$6.00-$6.49 | 1,826 | 10 | 1,836 | 5,970 | 192 | 6,162
$6.50-$6.99 | 879 | 1 | 880 | 6,073 | 35 | 6,108
$7.00-$7.49 | 433 | | 433 | 2,169 | 15 | 2,184
$7.50-$7.99 | 346 | 17 | 363 | 1,540 | 20 | 1,560
$8.00-$8.49 | 598 | | 598 | 1,215 | 6 | 1,221
$8.50-$8.99 | 231 | | 231 | 657 | 5 | 662
$9.00-$9.49 | 420 | | 420 | 595 | 1 | 596
$9.50-$9.99 | 46 | | 46 | 183 | | 183
$10.00-$10.49 | 203 | | 203 | 298 | 1 | 299
$10.50-$10.99 | 56 | | 56 | 136 | | 136
$11.00 and over | 527 | 1 | 528 | 600 | 16 | 616
+-------+---------+-------+-------+---------+-------
Total |10,297 | 87 |10,384 |33,215 | 5,200 |38,415
----------------+-------+---------+-------+-------+---------+-------
[1: Taken from original invoices. Fractional dozen omitted in this
table.]
[2: Split, improved, and flatfoot.]
[3: Fancy straw and sennit, fancy.]
[4: Including hats the type of which is not specified in the invoice.
Probably many sennits and fancies.]
In Table 5, imports of Italian hats at the port of New York in the six
months January-June, 1924, have been classified according to foreign
values shown on consular invoices. There is a marked concentration of
imports in the value groups between $4 and $7 per dozen. About 90 per
cent of all the sennit hats and 80 per cent of the total importations
had foreign values of less than $7 per dozen.
TABLE 6.--_Percentage of men's sewed straw hats imported at the port
of New York from Italy with a foreign value less than that specified,
January-June_, 1924
--------------+------------+------------+------------------+-----------
Foreign value | Sennits[1] | Fancies[2] | Miscellaneous[3] | Total
less than-- | | | |
--------------+------------+------------+------------------+-----------
| _Per cent_ | _Per cent_ | _Per cent_ | _Per cent_
$9.50 | 98.6 | 98.5 | 92.0 | 96.8
$9.00 | 98.6 | 97.4 | 87.9 | 95.2
$8.50 | 97.3 | 95.6 | 85.7 | 93.5
$8.00 | 91.2 | 92.3 | 79.9 | 90.3
$7.50 | 94.3 | 85.9 | 76.4 | 86.3
$7.00 | 88.8 | 79.0 | 72.3 | 80.6
$6.50 | 68.9 | 61.5 | 63.8 | 64.7
$6.00 | 9.1 | 40.9 | 46.1 | 48.6
$5.50 | 46.4 | 36.2 | 35.0 | 39.4
$5.00 | 33.9 | 28.4 | 18.5 | 27.6
$4.50 | 21.6 | 24.8 | 12.0 | 20.2
--------------+------------+------------+------------------+-----------
[1: Split, improved, and flatfoot.]
[2: Fancy straw and sennit, fancy.]
[3: Including hats the type of which is not specified in the invoice.]
The imports at the port of New York of hats from England are classified
in Table 7. It is evident that the bulk of the English importations are
not competitive with Italian hats. Only 28 per cent of the imports from
England had a foreign value of less than $7 per dozen.
TABLE 7.--_Imports at the port of New York of men's sewed straw hats
from England,[1] classified according to foreign value, including
packing, January-June_, 1924
------------------+---------
Foreign value | Dozen
------------------+---------
$6.50-$6.99 | 2,631
$7.00-$7.49 | ...
$7.50-$7.99 | ...
$8.00-$8.49 | ...
$8.50-$8.99 | 3,340
$9.00-$9.49 | 1,260
$9.50-$9.99 | 1,044
$10.00-$10.49 | 98
$10.50-$10.99 | ...
$11.00 and up | 948
| =====
Total | 9,521
------------------+---------
[1: These data cover 9,521 dozen hats out of a total of approximately
10,730 dozen imported from England, or 89 per cent. They represent
the larger invoices (several over 1,000 dozen) and hence are not
so evenly distributed as are the Italian hats.]
_Effect of imports._--The effect of the increasing imports of straw
hats on the production and sales of domestic firms was discussed at the
public hearings before the Tariff Commission. Evidence was introduced
showing that the production of 19 factories decreased from 468,424 dozen
in the eight months August, 1923, to March, 1924, to 391,189 dozen in
the corresponding months of 1924-25. Seventeen firms showed decreased
production and two firms reported increases. Meanwhile imports of
foreign hats increased from 74,355 dozen to 102,450 dozen. Imports
from Italy increased from 38,000 dozen to 70,000; imports from England
decreased from 12,000 dozen to 9,000. Representatives of several
domestic firms stated that their losses of business were directly
attributable to inability to meet prices quoted by importers of Italian
hats.[1]
[Footnote 1: See Transcript of Public Hearings, May 16, 1925, pp. 408,
420.]
Representatives of the importers, on the other hand, called attention
to the increasing competition of small firms in and around New York
City with larger and longer established firms located principally in
Baltimore. Some of the new firms operate on small capital and specialize
in cheap hats which are directly competitive with the cheapest Italian
hats. Others produce a somewhat better hat, such as is sold by chain
stores. The rate of business failure among the newer firms is unusually
high. Although the membership of the group of producers of cheap hats
is fluctuating, its total output of hats each year is a factor in the
competitive situation.
A relatively new development in the distribution of straw hats is the
chain stores. Sales of such stores, estimated at 150,000 to 200,000
dozen straw hats yearly, include Italian and English hats but are
principally of domestic manufacture. In some cases a chain-store
organization has established factories and thus has instituted direct
competition with manufacturing firms already established. Chain stores
also have furnished capital to small manufacturers, contracting for the
bulk of their output. Thus the change in marketing methods has a bearing
on the failure of the older establishments to keep pace in the volume of
their sales with the national expansion in straw hat consumption.
PRINCIPAL COMPETING COUNTRY
Table 3, on page 4, shows that in the calendar year 1923 imports of
sewed straw hats from Italy amounted to 48,101 dozen, or 51 per cent
of total imports. The average value per dozen of these Italian hats was
$6.01. During this same period imports from England amounted to 20,549
dozen or 22 per cent of total imports, at an average value of $12.50
per dozen.
During the calendar year 1924 imports from Italy amounted to 71,762
dozen, or 44 per cent of the total, at an average value of $5.96 per
dozen. Imports from England were 29,450 dozen, or approximately 18 per
cent of the total, at an average value of $9.59. Total imports increased
from 93,309 dozen in 1923, valued at $779,989, to 164,041 dozen in 1924,
valued at $1,179,929, a quantitative gain of approximately 75 per cent.
The latest available import data covering the months of January-April,
1925, are shown in Table 4, on page 5. For these four months imports
from Italy amounted to 72,449 dozen, or about 76 per cent of the total,
and the average value of Italian hats imported declined from $6.23 per
dozen, on the comparable four months' period in 1924, to $5.46 per dozen
in 1925. Imports from the United Kingdom for this same period were
12,353 dozen, or about 13 per cent of the total, and it should be noted
that the average value increased from $9.64 to $13.07 per dozen.
Italy, is, therefore, for the purposes of section 315, the principal
competing country.
FOREIGN PRODUCTION
The center of production in Italy is Signa, near Florence. It was
estimated (1924) that 1,500 persons were employed in the Signa district
in establishments producing men's straw hats. The employees were about
evenly divided between men and women.
In England the principal centers of straw-hat production are St. Albans
and Luton, towns near London. No estimate was obtained of the number
of factories in operation, the volume of production, or the number of
persons employed. The English manufacturers of men's straw hats in
1923-24 were suffering a business depression, and some of them were
changing over to the manufacture of women's hats.
_Types of hats produced in foreign factories._--Neither the English nor
the Italian factories producing men's straw hats confine their business
exclusively to men's sewed straw hats. Some of them also block and trim
woven-hat bodies, such as panamas; some make women's and children's
hats, and others produce, or deal in, felt hats. Nor is production of
sewed straw hats confined to those made of sennit braids; hats are made
of other braids as well.
_Organization of foreign production._--The sennit braids used in the
Italian straw hats exported to the United States are not made in Italy
but are of Japanese origin, as are also the sennit braids used in the
sewed straw hats made in the United States and in England.[2]
[Footnote 2: Milan and fancy braids are plaited by Italian women
in their homes, but this industry is not to be confused with the
manufacture of sewed hats, the subject of this investigation.]
In general, the foreign straw-hat factories do not bleach straw braids
in their own establishments. In Italy, however, one concern not only
bleached its own braids but also bleached braids for other straw-hat
manufacturers.
With respect to hats, some of the unfinished bodies, usually leghorns,
are made by women in their homes. But men's sewed straw hats, the
subject of this investigation, are produced in factories or in small
workshops. The latter generally operate on a contract basis for the
larger manufacturers or shippers. The workshops which own their own
equipment are organized to produce from 25 to 200 dozen sewed hats per
week. In the making of the shell or body of the hat the contractors
are paid on the basis of the number delivered to and accepted by the
principal. The contractors furnish their own sewing cotton, gelatin,
and other materials, except braid, used in making the shells or bodies
of the hats. The trimming of straw hats is also to some extent performed
on a contract basis.
The establishments visited in England generally perform all the
operations of making and trimming hats in their own establishments,
although at times "outworkers" are employed.
_Working hours and wages._--The labor employed in the manufacture of
sewed straw hats is well organized in both Italy and England. The rates
of wages and hours of labor, both of factory workers and of employees
of contractors, are determined by collective bargaining. A minimum wage
scale for both pieceworkers and timeworkers became effective in Italy
October 27, 1924. The labor of women and children in Italy is limited to
48 hours per week (decree of March 15, 1923). The employment of children
under 12 years of age in shops and factories is prohibited.
COSTS OF PRODUCTION
_Methods of obtaining cost data._--Costs of the domestic Italian and
English hats were obtained by representatives of the commission. In the
United States they were given access to the books and records of the
manufacturers. Domestic costs of materials, labor, and overhead are
based on actual records.
In both Italy and England representatives of the commission were given
access to manufacturers' books showing estimates of their costs. The
estimates of material and labor costs were verified from original
records. Estimates of general administrative and factory expense were
expressed as percentages of the combined cost of labor and materials or
of sales. Access to records from which the latter estimates could be
verified was not permitted.
DESCRIPTION OF COST ITEMS
_Material._--Material includes costs of braid, of bleaching, and of
trimming materials and sundries, and also the cartons in which the hats
are packed.
_Labor._--The amount charged to the individual hat for labor includes
all labor costs connected with its manufacture. The amount of direct
labor on each hat was first determined. The indirect labor charge for
each hat was determined by applying to its direct labor charge the
percentage which total indirect labor for the factory bore to the total
direct labor.
_Overhead._--In each domestic factory the total overhead charges were
obtained and the ratio of these charges to the total direct labor cost
of the respective factory was computed. This ratio, expressed as a
percentage of direct labor, was applied to the direct labor cost of
individual hats to determine the overhead charge to be apportioned to
each hat.
SELLING EXPENSE
(_a_) _Domestic._--The ratio of total selling expense in each factory
to total manufacturing cost (material, labor, and overhead) was first
determined. This ratio (expressed as a percentage of total manufacturing
cost) applied to the manufacturing cost of the selected hat determined
its proper share of the total selling expense. Firms organized to deal
directly with retailers uniformly had higher selling expenses than those
whose products were marketed chiefly through jobbers. The average
selling expense of the selected hats was $1.64 per dozen, or 10.8 per
cent of the average manufacturing cost. In selling expense is included
the charge for cases and other packing material.
(_b_) _Foreign._--Costs of selling hats to importers in the United
States are included in the general overhead expenses reported by
foreign companies, but are an inconsiderable item when compared with
manufacturing costs. No expenses of the offices maintained in this
country by foreign manufacturers have been included.
TABLES SHOWING COST COMPARISONS
In Table 8 are shown the costs of domestic and Italian men's sewed straw
hats, irrespective of the type of braid used in their manufacture. In
Table 9 are shown similar cost data for domestic and English hats. In
both tables costs are shown with and without transportation charges on
foreign hats, and ad valorem rates of duty necessary to equalize
differences in foreign and domestic costs have been computed.
TABLE 8.--_Rates of duty necessary to equalize differences in costs of
production of men's sewed straw hats in the United States and in Italy,
the principal competing country_
-------------------------------------------+-------------+------------
Item | Domestic[1] | Italian[2]
-------------------------------------------+-------------+------------
(_a_) Cost (transportation not included): | _Per dozen_ | _Per dozen_
Material cost | $6.44 | $4.35
Labor | 4.60 | .87
Overhead | 1.70 | .76
+-------------+------------
Total manufacturing cost | 12.74 | 5.98
+=============+============
Difference | | 6.76
Foreign valuation[3] | | 6.42
American selling price[4] | 13.28 |
| |
Ad valorem duty necessary to equalize | |
on basis of-- | | _Per cent_
Foreign valuation | | 105
American selling price | | 51
+=============+============
| |
(_b_) Cost (transportation on Italian | |
hats to New York included): | | _Per dozen_
Total manufacturing cost | 12.74 | $5.98
Transportation to New York--Inland | |
freight, ocean freight, marine | |
insurance, consular fee | | 1.10
+-------------+------------
Cost, including transportation to | |
New York for Italian hats | 12.74 | 7.08
Difference | | 5.66
Foreign valuation[3] | | 6.42
| |
Ad valorem duty necessary to equalize | |
on basis of-- | | _Per cent_
Foreign valuation | | 88
-------------------------------------------+-------------+------------
[1: Average costs of 15 domestic hats selling to jobbers at $10.55 to
$15.52.]
[2: Average cost of 15 Italian hats whose imported cost plus duty
ranged from $8.51 to $13.10.]
[3: Average of wholesale selling prices reported by foreign
manufacturers.]
[4: Average of wholesale selling prices to jobbers reported by domestic
manufacturers.]
TABLE 9.--_Rates of duty necessary to equalize differences in costs
of production of men's sewed straw hats in the United States and in
England_
-------------------------------------------+-------------+------------
Item | Domestic[1] | English[2]
-------------------------------------------+-------------+------------
(_a_) Cost (transportation not included): | _Per dozen_ | _Per dozen_
Material cost | $8.34 | $5.47
Labor | 5.85 | 1.84
Overhead | 1.87 | 2.01
+-------------+------------
Total manufacturing cost | 16.06 | 9.32
+=============+============
Difference | | 6.74
Foreign valuation[3] | | 9.73
Ad valorem duty necessary to equalize | |
on basis of-- | | _Per cent_
Foreign valuation | | 69
+=============+============
(_b_) Cost (transportation on English hats | |
to New York included): | | _Per dozen_
Total manufacturing cost | 16.06 | $9.32
Transportation to New York--Inland | |
freight, ocean freight, marine | |
insurance, consular fee | | 1.35
+-------------+------------
Cost, including transportation to New | |
York for English hats | 16.06 | 10.67
Difference | | 5.39
Foreign valuation[3] | | 9.73
| |
Ad valorem duty necessary to equalize | |
on basis of-- | | _Per cent_
Foreign valuation | | 55
-------------------------------------------+-------------+------------
[1: Average costs of eight domestic hats selling to jobbers at $16.74
to $22.50.]
[2: Average costs of eight English hats whose landed costs duty paid
ranged from $15.64 to $18.60.]
[3: Average of selling prices reported by foreign manufacturers.]
COMPETITIVE CONDITIONS
Styles for men's straw hats are set about one year in advance.
Sample hats are manufactured in May and June and orders are taken by
manufacturers in July, August, and September for hats to be delivered
the following spring. This custom of the trade makes it possible for
foreign manufacturers to copy and offer in competition the same styles
as those made by American manufacturers. Imported hats have a wide range
of styles and prices, including not only sewed hats of sennit braid
but also those of fancy braids, and woven body hats such as leghorns.
Domestic hats also comprise a wide range of styles and prices. Within
this range there is a more or less definitely limited field in which
imports compete directly with domestic merchandise.
TRANSPORTATION AND MARKETING COSTS
Before the Italian or English hats enter into competition in the
domestic wholesale market with hats of domestic manufacture expenses for
transportation, marine insurance, and consular fees must be incurred. In
the season 1923-24 the charges specified amounted to approximately $1.10
per dozen for Italian hats and $1.35 per dozen for English hats.[3] Such
expenses are set forth in the lower half of Tables 8 and 9.
[Footnote 3: Computed from consular invoices for hats imported at the
port of New York in the six months, January-June, 1924.]
The methods of marketing foreign and domestic hats are similar, but
because of minor differences in terms of sale, etc., it was not found
practicable to institute a mathematical comparison of selling costs.
Some domestic firms deal only with jobbers, others only with retailers.
A few of the largest firms sell to both jobbers and retailers. When
the manufacturer dispenses with the services of jobbers his selling
costs are, of course, increased. Foreign straw hats are distributed
principally by importing jobbers. Such firms are usually engaged also in
the marketing of domestic hats and in some instances are manufacturers
or have financial interests in domestic factories. Foreign factories
occasionally deal directly with large retailers in this country. In such
cases it is usual for the retailer's representative to travel abroad to
inspect samples and place orders. One large Italian factory maintains a
New York office through which it deals directly with domestic retailers.
FORMAL STATEMENT OF CONCLUSIONS
(1) Italy is the principal competing country. While Commissioners
Costigan and Dennis agree with this conclusion, they are also of opinion
that, with respect to hats valued at more than $9.50 per dozen in the
country of exportation, Great Britain is shown to be the principal
competing country.
(2) The average cost of production in the United States, as shown by
the cost data for the season 1923-24, of men's sewed straw hats sold
to jobbers for $10.55 to $16.52 per unit of one dozen is $12.74. The
average cost of production, not including transportation costs, of
imported men's sewed straw hats whose landed costs, duty paid, range from
$8.51 to $13.10 per dozen, and which are like or similar to the domestic
hats above described, is $5.98 per dozen. The difference in said costs
of production, transportation costs not included, is $6.76 per dozen.
The cost of production of the imported hats, including transportation
costs from the foreign factory to the dock at New York, is $7.08 per
dozen, and the difference in said costs is $5.66 per dozen.
(3) The average selling price of such imported men's sewed straw hats,
in the country of exportation, as shown by said cost data, is $6.42 per
dozen. The American selling price, as defined in subdivision (_f_) of
section 402 of the tariff act of 1922, of similar competitive articles
manufactured or produced in the United States, is $13.28 per dozen.
(4) If transportation costs be not included, the differences in costs
of production in the United States and in said principal competing
country are greater than the amount of the present duty of 60 per cent
ad valorem increased by the total maximum increase authorized under
section 315, subdivision (_a_), of said act, and said differences in
costs of production in the United States and in said principal competing
country can not be equalized by proceeding under the provisions of said
subdivision (_a_); that is to say, by increasing to the extent of 50 per
cent the existing ad valorem duty applied to the value of the imported
article in the country of exportation.
(5) If transportation costs be included, the rate of duty shown
by the differences in costs of production, necessary to equalize said
differences, upon men's sewed straw hats valued at $9.50 or less per
dozen in the country of exportation, is a rate of 88 per cent ad valorem
based on the valued in the country of exportation, as defined in section
402 of said act.
(6) If transportation costs be not included, the rate of duty shown by
the differences in said costs of production, necessary to equalize said
differences, upon men's sewed straw hats valued at $9.50 or less per
dozen in the country of exportation, is a rate of 50 per cent ad valorem
based upon the American selling price, as defined in said section 402,
of similar competitive articles manufactured or produced in the United
States.
(7) The average cost of production in the United States, as shown by
the cost data for the season 1923-24, of men's sewed straw hats sold
to jobbers for $16.74 to $22.50 per unit of one dozen is $16.06. The
average cost of production, not including transportation costs, of
imported men's sewed straw hats whose landed costs, duty paid, range
from $15.64 to $18.60 per dozen, and which are like or similar to the
domestic hats above described, is $9.32 per dozen. The difference in
said costs of production, transportation costs not included, is $6.74
per dozen. The cost of production of the imported hats, including
transportation costs, is $10.67 per dozen, and the difference in said
costs is $5.39 per dozen.
(8) The average selling price of such imported men's sewed straw hats,
in the country of exportation, as shown by said cost data, is $9.73 per
dozen.
(9) If transportation costs be included, the rate of duty shown
by the differences in costs of production necessary to equalize said
differences upon men's sewed straw hats valued at more than $9.50
per dozen in the country of exportation is a rate of 55 per cent ad
valorem based upon the value of such hats in the country of exportation.
(10) If transportation costs be not included, the rate of duty shown
by the differences in costs of production necessary to equalize said
differences upon men's sewed straw hats valued at more than $9.50 per
dozen in the country of exportation is, according to a mathematical
calculation, 69 per cent ad valorem based upon the value of such hats
in the country of exportation. Commissioners Marvin, Glassie, and
Baldwin are, however, of the opinion that the existing rate of 60
per cent ad valorem substantially equalizes differences in costs of
production in respect of hats valued above $9.50 per dozen in the
country of exportation.
SUMMARY OF CONCLUSIONS
On the basis of the facts presented the commission agrees that the data
indicate an increase in tariff rates, if the differences in costs of
production are to be equalized between lower-priced grades of foreign
hats and comparable products of American factories. In respect of such
hats, Italy is the principal competing country.
The commission further agrees that foreign hats sold in the United
States on a basis of quality rather than price are the higher-priced
hats which at this time are not keenly competitive with the products
of the American industry. With respect to such higher-priced hats,
Commissioners Costigan and Dennis are of opinion that Great Britain is
shown to be the principal competing county, and that under the law the
data indicate that the duty should be reduced.
The commission agrees that $9.50 per dozen, foreign valuation,
represents a fair breaking point for customs purposes between
lower-grade hats competing on a price basis and hats of superior
material and workmanship competing on a quality basis.
Under section 315 of the tariff act of 1922 there is an undetermined
legal question with respect to including transportation expense in
estimating foreign production costs. Commissioners Costigan, Dennis, and
Baldwin agree that under subdivision (c) of section 315 a fair estimate
of foreign costs should include the expense of transporting the foreign
product to the principal competitive market or markets in this country.
For hats whose foreign value is not in excess of $9.50 per dozen the
rate of 88 per cent ad valorem is indicated as the correct duty for
equalizing costs, with transportation included.
Chairman Marvin and Commissioner Glassie agree that under the law costs
of production do not include transportation costs on either side. If
transportation costs be not included in the foreign costs of production
shown by this investigation, the rate indicated by the cost data would
be 105 per cent on foreign valuation. This rate being in excess of the
maximum permissible under subdivision (a) of section 315, resort must be
had under subdivision (b) of section 315 to the American selling price
basis of valuation in order to equalize the differences in production
costs. For hats whose foreign valuation is not in excess of $9.50 per
dozen the rate of duty thus indicated by the cost difference is 50 per
cent on the American selling price.
As to hats with a foreign valuation above $9.50 per dozen, if foreign
transportation be included, the present duty of 60 per cent on the
basis of foreign valuation is in excess of the difference in cost of
production and the rate of duty indicated is 55 per cent on the basis of
foreign valuation. If foreign transportation be not included, the rate
of duty indicated is 69 per cent on the basis of foreign valuation.
The figures are shown in detail in Table 9, on page 10.
In the accompanying report the above conclusions will be found more
formally stated for the purposes of a proclamation.
Respectfully submitted.
THOMAS O. MARVIN,
_Chairman_.
EDWARD P. COSTIGAN,
HENRY H. GLASSIE,
ALFRED P. DENNIS,
A. H. BALDWIN,
_Commissioners_.
SEPARATE STATEMENT OF COMMISSIONER COSTIGAN, IN PART CONCURRING AND
IN PART DISSENTING, IN THE INVESTIGATION OF MEN'S SEWED STRAW HATS
While I concur with my associates in transmitting the commission's data
in the investigation of men's sewed straw hats, a differentiation of
views must be expressed with respect to certain conclusions which may be
drawn from such data.
_Both higher and lower duties indicated by the commission's cost
figures._--Under the provisions of section 315 of the tariff act of
1922, the information secured by the commission and summarized in this
report points not only to an increased duty on lower-priced hats but
also to a decreased duty on higher-priced hats. It is submitted that
no satisfactory reason can be assigned under the present record for
failing to recommend such a simultaneous upward and downward change in
the present rate of duty by the use of the provisions for flexibility in
the tariff act of 1922. Under the controlling statute all commissioners
are agreed that a clear distinction exists between the bulk of the
lower-priced hats coming from Italy and the lesser but considerable
quantity of higher-priced hats imported from Great Britain. This feature
of the commission's summarized data is particularly presented in Tables
5, 6, and 7, in which are shown the sources, volume, and foreign values
of imported hats. Table 8 presents American and Italian costs of
lower-priced hats; Table 9, cost data for higher-priced hats in the
United States and Great Britain. Table 8 indicates that, in lieu of the
present duty of 60 per cent on foreign value, a duty of 88 per cent on
foreign value is required to equalize the costs incurred with respect
to the lower-priced hats; and Table 9, that a duty of 55 per cent on
foreign value will suffice to equalize such costs in the case of the
higher-priced hats. In other words, the record establishes the need, if
competitive costs are to be equalized under section 315, for creating
two classes of men's sewed straw hats, with a different principal
competing country and a separate rate of duty for each class. Under the
circumstances, to confine the findings of the commission to an increased
duty on lower-priced hats is, in one important particular, to fall short
of the statutory responsibility undertaken when the commission ordered
an investigation of the adequacy of the present 60 per cent ad valorem
duty as a measure of equalized costs in the United States and foreign
countries. A partial conclusion from the commission's data, where, as
here, a comprehensive conclusion is clearly warranted, would appear
to be discriminatory and fail to fulfill the scientific and impartial
purposes of the provisions of section 315.
_Determining the dividing line for tariff purposes between higher and
lower priced hats._--The above tables sufficiently demonstrate that the
great bulk of men's sewed straw hats, imported at the port of New York
during the period of investigation, came from Italy and had a foreign
value of $7 or less per dozen, and much the larger part of the
higher-priced hats came from England and had a foreign value of $8.50
or more per dozen. The separation into classes of lower and higher
priced hats, with different duties for each class tends to result in
an overstatement of the values of the lower-priced imports in order to
obtain the benefit of the lower duty on high-priced imports. There is
also a tendency of the higher-priced imports to increase in volume. To
meet the changed situation a higher "breaking point" than the $7 value
is desirable. For example, with a 90 per cent duty, a hat whose foreign
value is $7 per dozen would cost, landed, duty and transportation paid,
$14.40. If the rate of 60 per cent remain on hats in the higher bracket,
as certain commissioners suggest that it continue to do, instead of the
$7 hat it might be profitable to import a hat worth $8.25 per dozen,
which would enter, duty paid and transportation included, for $14.30.
Adopting and applying the same method to hats having an invoice value
of $7.50 or less per dozen, a breaking point of approximately $9.10
would make it unprofitable to bring in higher-priced hats in order to
obtain the benefit of a 55 per cent rate of duty. A breaking point of
approximately $9.50 would therefore appear to be safely calculated to
prevent overvaluation with respect to the great bulk of low-priced men's
sewed straw hats now being imported.
_Some omissions from and doubtful features in the commission's
report._--Although from the point of view of equalizing foreign and
domestic costs under the provisions of section 315, the data of the
commission on their face point to an increase from 60 to 88 per cent ad
valorem, complete frankness compels the statement that the conclusion
arrived at is not free from difficulties; that the record is not
unequivocal; and that a strong case might be made for not advancing
the duty to the full extent thus indicated. Since the application
of the cost-of-production standard under section 315 is still in its
experimental stages, it may promote accuracy and help to bring about
scientific amendments of the present law to illustrate in this
investigation the possible danger of using the commission's figures
to fortify different and inconsistent conclusions. The data obtained
by the commission in the straw-hat investigation are unsatisfactory
in the following particulars:
_Representativeness of samples._--In selecting hats assumed to be
representative of American production, it was found impracticable
to determine the respective percentages of production of cheap,
medium-priced, and high-priced hats. In consequence there is some
reason to believe that the limited figures secured with respect to cheap
American hats has tended to exaggerate American costs beyond what an
exactly representative selection would have shown. Figures were secured
for only a few producers of cheap American hats, and while it is
impossible to say what weight should be given to such cheap American
production, expert opinion is not wanting in support of the view that
because of the method of sampling employed, American costs as a whole
have been unduly elevated for comparison with Italian costs. While it is
too late to make any exact mathematical adjustment on this account, it
is only fair to urge distinct caution in accepting at their face value
and following to their inexorable conclusions the comparisons based on
the domestic and foreign data.
Probably the most important principle of sampling employed by the
commission's agents when confronted with the problem of selecting for
cost comparison a few types of hats from the many manufactured was
the choice of those types of hats with respect to which the domestic
industry has been suffering the keenest competition. It must be clear
that the selection of such hats tended to show the widest cost
divergence for the two countries, since it was to be expected that the
severest competition would have been experienced when the relatively
higher-cost hats of the United States met the relatively lower-cost hats
of Italy. Nor could it be said that such hats as were chosen were the
only "similar competitive articles," since the foreign manufacturers
can and do produce all types and styles sold in the United States. The
fact that the American industry earned approximately 10 per cent on its
invested capital (even after the payment of large salaries) must be
chiefly explained by the profits earned on hats with respect to which
there was no such acute competition. Obviously such more profitable hats
strengthened the domestic industry's competitive resistance.
_Importers' selling expenses omitted._--Through inadvertence, but
none the less unfortunately, the selling expenses of importers were
not obtained by the commission. There was considerable testimony at
the commission's public hearing to the effect that a relatively heavy
burden rests on such importers in selling such straw hats in the United
States. (See Transcript of Public Hearing, pp. 110-116.) The American
manufacturers' costs of marketing their hats to the jobbers were secured
by the commission's representatives, but the selling expenses of
importers of foreign hats (without which Italian hats could not reach
American jobbers) were not secured: thus, the complete picture of the
competitive cost situation is not presented in the commission's report.
The significance of this omission is considerable. Under the provisions
of subdivision (c) of section 315 the statutory mandate to consider much
"advantages and disadvantages in competition" is unavoidable, and, while
it is probably not reasonable to reject the commission's findings as a
whole because of this record defect, some allowance would be reasonable
falling short of the extreme conclusions to which the data would
otherwise point.
In answer to the argument that the domestic industry has so well
withstood the competition offered by what seem to be extremely low-cost
Italian hats, it has been urged that the Italian producers are far
from their market and that jobbers prefer a source of supply more
conveniently at hand. This statement involves the admission of a
competitive disadvantage suffered by the foreign producer, which is
clearly not capable of being measured. However, the one statistically
measurable marketing disadvantage of the foreign producer, referred to,
was unfortunately neglected when the commission's data were assembled.
As has been suggested, costs secured, though not used, for the American
producer included his expense of placing his hats in condition ready for
delivery to the jobber, but only those Italian costs were obtained which
with transportation added bring the product to the docks at New York.
Importers must incur the expense of handling and reselling before the
product is ready for the jobbers. In so far as such importers perform
the jobbers' functions, the objections stated may not be valid, but any
importers' costs of reselling to jobbers should undoubtedly have been
collected and considered.
It may further be noted that some American manufacturers actually sell
their hats to retailers. Such domestic selling expenses were secured by
the commission on its schedules, and there is reason to believe that
certain overhead items in the assembled costs are probably larger than
they would otherwise be because of the imperfect allocation of selling
and manufacturing expenses.
_Deficiencies in comparative overhead data._--More striking in some
respects than the failure to secure importers' selling expenses is the
contrast exhibited in the commission's report between overhead expenses
in the United States and abroad. The foreign overhead expenses are mere
estimates, since the commission's representatives were refused access
to the original books and records by practically every foreign firm.
It accordingly became necessary to resort to estimates based on flat
percentages of prime costs or sales price. These were in fact submitted
by Italian manufacturers and used by the commission's representatives.
It now develops that these percentages have never been analyzed or
justified. Indeed, there is no definite record of what expense items
were included or neglected in such percentages. The overhead expenses
in the United States include very considerable salaries paid to officers
of the domestic manufacturing concerns, and the question is presented
whether, as some accountants maintain, such salaries should not be
charged exclusively to selling rather than manufacturing expenses, since
such officers usually pay more attention to the selling end of the
business. In the commission's records it appears that about 85 per cent
of the total officers' salaries was charged to manufacturing and about
15 per cent to selling. The importance in cost investigations of
scrutinizing high salaries should be evident, as they might easily be,
although, in this instance it is not suggested that they have been, used
to conceal profits. It is worthy of note that the average salaries
allowed by the commission's representatives in the domestic costs of all
the hats manufactured amounted to 69 cents per dozen--nearly as much as
the entire average Italian overhead charge. It is to be remembered, as
already stated, that this average amount does not include the additional
item allowed in the selling expense for officers' salaries. It is of
interest to note, further, that the American firms which complain most
of Italian competition showed the largest salary accounts. One firm,
in fact, had a salary expense, included in manufacturing cost, of more
than $1 per dozen hats. Nevertheless, even after the payment of such
salaries, it has been shown that the industry as a whole earned
approximately 10 per cent on the invested capital during the period
covered by the commission's investigation.
It would be obviously difficult to determine what salaries should
reasonably be allowed, but, in view of such a showing, it might be
argued with force that, as has been done in other investigations when
data unsatisfactory for a fair comparison have been secured, such
data on both sides should be excluded from the final calculation. To
illustrate, the commission in the present investigation has eliminated
the item of interest here and in Italy, since adequate data for the
Italian industry were unobtainable. If this principle were followed
in the matter of overhead, a conclusion might reasonably be based on
the comparison of material and labor costs here and in Italy plus
transportation from Italy to our principal market or markets.
To illustrate the possibility, already mentioned, of diverse conclusions
from the commission's record, the difference between the material and
labor costs here and in Italy, with transportation included, is shown in
the following table:
------------------------------------------------+--------+--------
|Domestic|Italian
------------------------------------------------+--------+--------
Material costs | $6.44 | $4.35
Labor | 4.60 | .87
+--------+--------
Total | 11.04 | 5.22
+--------+--------
Difference | $5.82
Transportation to New York | 1.10
+-----------------
Final difference | 4.72
+=================
Foreign selling value | 6.42
+=================
| _Per cent_
Ad valorem duty required to equalize |
on basis of foreign selling value | 74
Present duty | 60
------------------------------------------------+-----------------
The failure to consider interest on investment in the overhead
introduces another difficulty of some importance. If rents actually paid
are included in costs, equality of treatment demands that interest on
capital invested in plants owned, and therefore not rented, should be
considered. In the costs of 14 of the American companies investigated
the rent charge amounted to $0.29 per dozen for all styles of hats. It
appears that there is no information to show that any one of the Italian
companies covered rented its factory; therefore, the failure to include
interest on the capital invested in the Italian factories may have
overestimated the relative strength of Italian competition. The failure
to include interest on invested capital in the Italian costs might
justify the exclusion of the rent item from the American overhead costs.
It will, of course, be argued that to disregard all overhead costs in
both the foreign and domestic figures in the way suggested would fail
to measure the domestic disadvantage arising from relatively higher
overhead expenses. There are, however, two considerations, discussed in
detail in this statement, which tend to compensate for any inaccuracy
which the above findings might imply. They are (1) the method of
sampling employed by the commission; and (2) the failure to consider
certain of the Italian industries' marketing expenses.
_Conclusions._--The principal significance of the foregoing discussion
is to be found in the conclusion that, in recommending under the law an
increase in the present rate of duty on lower-priced hats from 60 to 88
per cent on foreign value, the statute is being liberally construed from
the point of view of the domestic industry, in the effort to arrive at
an equalization of costs in the United States and abroad. Regardless of
the legal question as to whether transportation should or should not be
included, any higher duty on any of the hats investigated than 88 per
cent on foreign value--particularly so high a duty as 105 per cent, or
the equivalent 50 per cent on American selling price, which has been
suggested by certain commissioners--involves such a grave departure from
the economic purposes sought to be promoted by section 315 as to make it
highly desirable that the present investigation be reopened before any
such increase in duty is proclaimed.
Reviewing, therefore, the whole record in this investigation and
dismissing, though not without hesitation, the foregoing argument in
favor of a lower rate of duty than 88 per cent, foreign value, on the
lower-priced hats, it is submitted that under the law the data collected
by the commission in this investigation warrant formal findings of fact
to the following effect:
1. The classification for men's sewed straw hats in paragraph 1406 of
the tariff act of 1922 should be changed to provide separate rates of
duty for imported hats of different foreign values.
2. The present rate of duty should be increased to 88 per cent on
imported hats having a foreign value of less than $9.50 per dozen.
3. The present rate of duty should be decreased to 55 per cent on
imported hats having a foreign value of $9.50 or more per dozen.
EDWARD P. COSTIGAN,
_Commissioner_.
JULY 15, 1925.
APPENDIX
A PROCLAMATION
BY THE PRESIDENT OF THE UNITED STATES OF AMERICA
INCREASING THE RATE OF DUTY ON MEN'S SEWED STRAW HATS
Whereas in and by section 315 (a) of Title III of the act of Congress
approved September 21, 1922, entitled "An act to provide revenue, to
regulate commerce with foreign countries, to encourage the industries
of the United States, and for other purposes," it is, among other
things, provided that whenever the President, upon investigation of the
differences in costs of production of articles wholly or in part the
growth or product of the United States and of like or similar articles
wholly or in part the growth or product of competing foreign countries,
shall find it thereby shown that the duties fixed in this act do not
equalize the said differences in costs of production in the United
States and the principal competing country he shall, by such
investigation, ascertain said differences and determine and proclaim the
changes in classifications or increases or decreases in rates of duty
provided in said act shown by said ascertained differences in such costs
of production necessary to equalize the same;
Whereas in and by section 315 (c) of said act it is further provided
that in ascertaining the differences in costs of production, under the
provisions of subdivisions (a) and (b) of said section, the President,
in so far as he finds it practicable, shall take into consideration
(1) the differences in conditions in production, including wages, costs
of material, and other items in costs of production of such or similar
articles in the United States and in competing foreign countries;
(2) the differences in the wholesale selling prices of domestic and
foreign articles in the principal markets of the United States;
(3) advantages granted to a foreign producer by a foreign government,
or by a person, partnership, corporation, or association in a foreign
country; and (4) any other advantages or disadvantages in competition;
Whereas, under and by virtue of said section of said act, the United
States Tariff Commission has made an investigation to assist the
President in ascertaining the differences in costs of production of
and of all other facts and conditions enumerated in said section with
respect to the articles included within the class or kind of articles
provided for in paragraph 1406 of Title I of said tariff act of 1922,
namely, men's straw hats, whether wholly or partly manufactured, not
blocked or blocked, not trimmed or trimmed, if sewed, being wholly or
in part the growth or product of the United States, and of and with
respect to like or similar articles wholly or in part the growth or
product of competing foreign countries;
Whereas in the course of said investigation hearings were held, of which
reasonable public notice was given and at which parties interested were
given reasonable opportunity to be present, to produce evidence, and to
be heard;
Whereas the President upon said investigation of said differences
in costs of production of men's straw hats, whether wholly or partly
manufactured, not blocked or blocked, not trimmed or trimmed, if sewed,
wholly or in part the growth or product of the United States and of like
or similar articles wholly or in part the growth or product of competing
foreign countries, has thereby found--
That no change in the existing rate of duty is required to equalize
differences in costs of production in the United States and in the
principal competing country, with respect to men's straw hats, whether
wholly or partly manufactured, not blocked or blocked, not trimmed or
trimmed, if sewed, valued at more than $9.50 per dozen;
That the principal competing country for men's straw hats, whether
wholly or partly manufactured, not blocked or blocked, not trimmed or
trimmed, if sewed, valued at $9.50 or less per dozen, is Italy;
And that the duty fixed in said title and act does nor equalize the
differences in costs of production in the United States and in said
principal competing country, namely, Italy, in respect of such men's
straw hats, whether wholly or partly manufactured, not blocked or
blocked, not trimmed or trimmed, if sewed, valued at $9.50 or less per
dozen, and has ascertained and determined the increased rate of duty
necessary to equalize the same.
Now, therefore, I, Calvin Coolidge, President of the United States of
America, do hereby determine and proclaim that the increase in the rate
of duty provided in said act upon men's straw hats, whether wholly or
partly manufactured, not blocked or blocked, not trimmed or trimmed,
if sewed, valued at $9.50 or less per dozen, shown by said ascertained
differences in said costs of production necessary to equalize the same
is as follows:
An increase in said duty on men's straw hats, whether wholly or partly
manufactured, not blocked or blocked, not trimmed or trimmed, if sewed,
valued at $9.50 or less per dozen from 60 per cent ad valorem to 88 per
cent ad valorem.
In witness whereof, I have hereunto set my hand and caused the seal of
the United States to be affixed.
Done at the city of Washington this twelfth day of February, in the
year of our Lord one thousand nine hundred and twenty-six, and of
the Independence of the United States of America the one hundred and
fiftieth.
[SEAL.]
CALVIN COOLIDGE.
By the President:
FRANK B. KELLOGG,
_Secretary of State_.
[Transcriber's Note: Original tables presenting data for the years 1923
and 1924 in adjacent columns under each country header have been broken
into two parts; one for each year, with headers and rows duplicated.]
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