administrative provisions of the Tariff Act of 1930", and then the all-inclusive phrase, "and for other purposes.

I cannot see why there is any objection, or any question as to the germaneness of this proposition, especially as section 1101 is here, which carries a direct rate, a rate recommended by the Treasury Department. And, of course, there are many provisions of the bill that will affect rates indirectly.

As soon as you get into classification you get into rates. You find yourself involved in rates when you begin to discuss classification. Mr. LooмIs. My brief is short, Mr. Chairman, and I will be very glad to file it.

The CHAIRMAN. Mr. Hester, have you any further testimony to present to the committee?

Mr. HESTER. No, sir.

The CHAIRMAN. I understand that Mr. Kendig desires to make a statement to the committee.

Will you give the reporter your name and address and state in what capacity you appear?

STATEMENT OF C. M. KENDIG, TREASURER, HAMILTON WATCH CO., LANCASTER, PA.

Mr. KENDIG. Mr. Chairman, my name is C. M. Kendig; I am treasurer of the Hamilton Watch Co., Lancaster, Pa.

The CHAIRMAN. Do you appear in support of the bill or in opposition to it?

Mr. KENDIG. We could suggest several changes in the bill.

The attorney for our industry is present and will be able to give you facts and figures, which I will not deal with.

Mr. Chairman, we have been bothered with the smuggling business since 1930. It has been on the increase because since that time watches have been made smaller and smaller. This is a story which this committee has heard before. Watches have been made so small that 20 of them could be put into a match box which is carried in your pocket.

Congress has considered this problem favorably. A former measure passed the House and the Senate unanimously, only to be vetoed by the President because he said the Treasury Department was studying the problem and it was hoped that a more effective method could be devised than the one provided for in the bill.

At the hearing Mr. Hester said "The Treasury has already reported to Chairman Doughton of the Ways and Means Committee, and made a formal report in favor of the bill."

While Assistant Secretary Gibbons, in a letter to you, Mr. Chairman, said:

It is the considered judgment of this Department that the provisions of H. R. 8921 will provide an effective deterrent to the watch-smuggling traffic which in recent years has assumed such vast proportions and has constituted a menace to the domestic manufacturers and legitimate importers, and the customs revenue of the United States.

At that time the bill included a licensing provision. In the layman's language it was stopped in the Senate because it was found to interfere with the reciprocal treaties then being considered with Switzerland.

So, from a layman's standpoint, we are impressed with what appears to be a lack of cooperation, the Treasury Department representatives

coming here before your very committee approving this measure, and the State Department going around some other way and saying "We do not want this passed", so it is not passed.

Now, Mr. Chairman, this bill requires the sale of these smuggled watches.

Mr. McCORMACK. The House passed the bill?

Mr. KENDIG. The House passed the bill and the Senate passed it, but the first bill was vetoed, and the second bill was stopped.

Mr. MCCORMACK. H. R. 8921 was passed by the House?

Mr. KENDIG. Yes. We are operating under a bill, as Mr. Hester says, from 1790 to date, and Congress has consistently required all forfeited merchandise to be sold at public auction.

May I refresh your memory as I did mine, in that connection. I think the capital of the Nation was at Philadelphia. It was before you had a Ways and Means Committee that this bill was passed, simultaneously with the appointment of Alexander Hamilton, the first Secretary of the Treasury, and Thomas Jefferson, the first Secretary of State.

What is disappointing to me is this. Here are these young gentlemen from the Treasury Department, and the younger generation are not inclined to stick as much to tradition.

Why should we continue to operate under a bill passed in 1790, which may have applied back there at that time, for instance, in Philadelphia, when today watches are smaller and smuggling is increasing.

I am not going to give you any facts. I have appeared before the committee before and there have always been questions asked. I am going to confine myself to the principle.

General Johnson said this is unfair competition by the Government itself.

Mr. McCORMACK. You are talking about the sale by the Government of smuggled watches?

Mr. KENDIG. Exactly.

Mr. McCORMACK. What would you like to have in this bill? Would you like to have a provision that watches smuggled and confiscated should not be sold by the Government in competition

Mr. KENDIG. With the American industry as well as the importing industry.

It is a type of unfair competition to sell things for $2 or $3 that the retail jeweler can offer for $5, that we cannot make and sell for less than $30, and the importing industry can sell for $15 or $25.

During the first administration they held up these watches because it was unfair competition. Now they are selling them

Mr. McCORMACK (interposing). Have they been selling them lately?

Mr. KENDIG. Every 2 weeks.

Mr. McCORMACK. The Government has?

Mr. KENDIG. The Government has.

Mr. McCORMACK. Recently?

Mr. KENDIG. I think Mr. Barnes has a transcript of all the sales. Mr. BARNES. In March and April 1937.

Mr. McCORMACK I thought we had held that up. I am surprised

to hear that.

Mr. TREADWAY. Do I understand that, contrary to existing law, smuggling has been carried on?

Mr. McCORMACK. Smuggling is contrary to law.

Mr. TREADWAY. What was the statement that Mr. Barnes made in reference to March and April?

Mr. McCORMACK. The Government has sold smuggled watches? Mr. TREADWAY. He said the Government had been selling smuggled watches.

Mr. KENDIG. The Government is now selling smuggled watches. Mr. TREADWAY. That is entirely contrary to the intent of the bill that the House passed, although it is not on the statute books. We have shown our intent so far as this matter is concerned.

The CHAIRMAN. If there are no further witnesses, we will close the hearing.

STATEMENT OF ALBERT MCC. BARNES, NEW YORK, N. Y.

Mr. BARNES. Mr. Chairman, I would like to make a couple of suggestions to the committee.

Mr. McCORMACK. Suppose you make your statement short.

Mr. BARNES. In section 24 of the Doughton bill now before the committee there is a provision for an amendment, suggested, I presume, by the Treasury Department, to amend section 607 of the Tariff Act of 1930 by striking out the words "forfeit and sell the same" and inserting the words "forfeit and sell or otherwise dispose of the same according to law."

It seems to me, if a proviso is added to that suggested amendment containing substantially the provisions of House Joint Resolution 322, which was the subject of action by this committee, by the House, and by the Senate-but the bill was vetoed by the President-that it - would accomplish the result which this committee has in the past been so helpful in attempting to achieve.

That last bill was vetoed by the President with this statement [reading]:

This bill is disapproved by the urgent solication of the Treasury Department. The whole subject of the disposition of smuggled merchandise is being studied, with the hope that a better method than the one effected by this bill can be evolved.

Up to date no substitute for that bill has been evolved in the Treasury Department and no suggestions have come from the Treasury Department as to a method of eliminating this unfortunate competition by the Government.

On February 16, 20, and 26, March 12 and 26, and April 9 and 23, there was sold at public auction some 4,655 seized movements. They were sold at an average price of $3.91 per movement.

Investigations which have been conducted in connection with the marketing of smuggled watches justify us in making the statement, and that investigation was conducted in 66 retail establishments in New York at four different periods during the last 3 years, and we have found that 12 names in one period and 17 names in another used on smuggled watches, and as demonstrated in court in the trial of the seizure cases, have been marketed by these 66 stores in New York, We offered this bill, as you will remember, as a deterrent to the marketing of smuggled merchandise, believing if you cut off the possibility of disposing of them at such a profit you would kill smuggling, and there would no longer be an incentive.

It was suggested by the Treasury Department and the State Department that they were going to take care of the situation in the trade agreement with Switzerland. But the result you can give in a sentence. The trade agreement with Switzerland has moved in the wrong direction ever since that trade agreement was made.

Under the trade agreement with Switzerland, as I say, it has moved in the wrong direction.

Switzerland has bought less than she bought before, in percentage, and she has exported to the United States more than she exported to us before. Those figures, from the Department of Commerce records, are available.

The result of that as applied to the watch industry is this. Fifty percent of the American market was held by Swiss-made watches in the years prior to and including 1934. The most recent figures, those for 1936, show that 2,220,200 new watch movements were imported from Switzerland, and 1,377,478 were produced in the United States, showing that by percentage, the impact on the American market has increased since the Swiss trade agreement from 50 percent of our market taken by the Swiss to 67 percent.

These sales of seized smuggled watches offer annual recurring incursions into the stability of both the American market, that is, the domestic market, and the market for the others.

Mr. McCORMACK. We know all that you have stated. This committee has been very friendly with your position in this situation, and it has that clearly in mind.

Mr. BARNES. I ask that the committee amend section 24 by adding to it a proviso requiring the destruction of seized smuggled watches. Mr. McCORMACK. That is along the line of the bill I introduced. Mr. BARNES. No, sir; the bill you introduced made no provision for the payment of a moiety to the people who disclose information about smugglers.

It is suggested by the Treasury Department that if Congress sees fit to abolish the sale of these watches they should provide at the same time a fund out of which these informers may be paid. I heartily agree with that, but I do not agree with the Treasury reason for failing to present this bill, or to support this bill, that is, that the industry should not have protection at the expense of the people of the United States.

I say it is equivalent, exactly equivalent, to a citizen coming here and asking for police protection under the laws that exist, which have been made by this Congress, not having to pay any money for that protection.

I ask that this be given consideration, because it is a matter which involves a serious loss of legitimate revenue to the Government. The $50,000 a year that this might cost in the way of moiety means practically half a million dollars in legitimate revenue.

This is another Yankee trading proposition, but this time it is in favor of the Yankees.

Mr. TREADWAY. Have you the date of the veto message?

Mr. BARNES. Yes, sir.

Mr. TREADWAY. I think it might be well to give us that date.

Mr. BARNES. It was either June 27 or June 28, 1934.

Mr. TREADWAY. Then Mr. McCormack introduced this destruction bill later than that?

Mr. BARNES. Yes, sir; there was another bill we had introduced after that that went through the House but did not pass the Senate. Mr. TREADWAY. I want to get this straight. The veto was of a bill distinctly covering the point you are now making, namely the desire to secure the destruction of competitive goods caught in smuggling.

Mr. BARNES. Exactly, except as to the appropriation for the moiety.

Mr. TREADWAY. There is a little conflict, I think, between your statement and that of the preceding witness who said that the bill was passed, if I recall, correctly, with the entire approval of the Treasury Department.

Was not that statement made a moment ago, or words to that effect?

Mr. BARNES. It might have been made, but I do not think it is correct, because the President vetoed it.

Mr. TREADWAY. Did you not make that statement, Mr. Kendig? Mr. KENDIG. The first bill was passed unanimously by the House and the Senate and vetoed. The second bill was passed by the House and stopped in the Senate because of the reciprocal treaty with Switzerland.

Mr. TREADWAY. Did you not say it was passed with the favorable consideration of the Treasury Department?

Mr. KENDIG. The second bill was recommended by the Treasury. Mr. TREADWAY. Not the first one?

Mr. KENDIG. Not the first one.

Mr. TREADWAY. The first one was vetoed. The second one, to all intents and purposes accomplishing the same purposes, was recommended by the Treasury?

Mr. KENDIG. Yes, sir.

Mr. TREADWAY. But the veto message of the first bill, according to Mr. Barnes' testimony, was based on the request of the Treasury Department to veto it?

Mr. BARNES. That is right. They were speaking of two different bills.

Mr. TREADWAY. For the same purpose?

Mr. BARNES. Yes, sir.

Mr. HESTER. I am a little bit surprised that the witnesses have not explained to you that the second bill you are talking about here did not cover the same subject matter that the first bill covered.

Mr. Treadway, on cross examination of these gentlemen, has developed the fact that the Treasury Department approved the second bill. That is true, but these gentlemen have left you with the impression that the second bill included the same subject matter. The first bill provided for the destruction of watches. The second bill contained some marking provisions and provided for the licensing of importers, but had no provisions with respect to the destruction of watches.

I simply rise in defense of the Treasury Department because these gentlemen did not explain that to you.

The CHAIRMAN. That illustrates the danger of witnesses testifying about matters on which they are not fully informed.

Mr. BARNES. I did not give any such testimony that Mr. Hester speaks of, not at all. I did not give any such testimony. He knows