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.