TO REGULATE PRODUCTION AND DISTRIBUTION OF

MARGARINE

TUESDAY, JUNE 6, 1944

UNITED STATES SENATE,

SUBCOMMITTEE OF THE COMMITTEE ON

AGRICULTURE AND FORESTRY,

Washington, D. C.

The subcommittee, consisting of Senators Allen J. Ellender (presiding), Elmer Thomas of Oklahoma, Richard B. Russell, George D. Aiken, and George A. Wilson met, pursuant to notice, at 10 a. m. in the committee room of the Committee on Agriculture and Forestry, 324 Senate Office Building.

The subcommittee had under consideration S. 1744, a bill to provide for the more efficient utilization of the agricultural resources of the Nation during peace and war, and to regulate the production and distribution of margarine.

There were present before the subcommittee:

A. G. Hopkins, 1118 North Hopson Street, Sherman, Tex., representing the National Association of Margarine Manufacturers;

Robert J. Wilson, Washington secretary, National Restaurant Association.

Senator ELLENDER. The committee will be in order. Under date of May 5 Senator Ellison D. Smith, chairman of the Committee on Agriculture and Forestry of the Senate, first appointed the following Members of the Senate to serve as a subcommittee to hold hearings on the bill before us, S. 1744, to wit, myself, Senator Richard B. Russell, and Senator Eugene D. Millikin of Colorado. Later some Senators thought that the committee should be increased to five. Thereupon the chairman appointed, in addition to the Senators just named, Senators Aiken of Vermont and Thomas of Oklahoma. Because of the resignation from the subcommittee of Senator Eugene D. Millikin, under date of May 9, Senator Wilson of Iowa was duly appointed a member of the subcommittee by the chairman of the Committee on Agriculture and Forestry.

At this point in the hearing I desire to place a copy of S. 1744. (The bill S. 1744 follows:)

[S. 1744, 78th Cong., 2d sess.]

A BILL To provide for the more efficient utilization of the agricultural resources of the Nation during peace and war; to regulate the production and distribution of margarine, a product of certain agricultural commodities, in interstate commerce; to remove certain obstructions to the distribution of such product in interstate commerce; and for other purposes

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That this Act may be cited as the "Margarine

Act of 1944."

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LEGISLATIVE FINDING

SEC. 2. Margarine is a wholesome, nutritious, and inexpensive table fat manufactured from agricultural commodities. As such, it is necessary to the proper nourishment of low-income groups, and, during the present war emergency, it is urgently required to correct national nutritional deficiencies. Existing Federal enactments require removal of natural color in margarine oil ingredients and penalize the addition of coloring to margarine in the factory. Consequently, housewives are forced to the wasteful and time-consuming practice of coloring margarine in the home, contrary to the urgent wartime need for conserving food and labor. In addition, certain restrictions in existing Federal legislation limit drastically the utilization of margarine in restaurants, boarding houses, hospitals, and charitable institutions. Moreover, present Federal license fees imposed upon the retailing of margarine limit the retail outlet of the product so that many communities, especially communities of low-income persons in which small grocery stores are normally located, are without opportunity to purchase the commodity. These existing restrictions serve no public purpose. On the contrary, they obstruct the free movement of margarine in interstate commerce to the detriment of the health of the Nation and the urgent requirements of the war food program.

SEC. 3. The Federal Food, Drug, and Cosmetic Act, as amended, is amended by adding to section 201 thereof the following subsection (q):

"(q) For the purposes of this and any other Act, 'margarine' shall be understood to mean the food product usually known as margarine or oleomargarine and defined in section 2300 of the Internal Revenue Code, as amended, as 'oleomargarine,' and such product may be labeled 'margarine' instead of 'oleomargarine.' This product may be made with or without additional coloring matter. Except insofar as it relates to the labeling of such product, nothing in this subsection shall be construed as repealing any part of the Definition and Standard of Identity for Oleomargarine promulgated by the Administrator on June 6, 1941, or as limiting the regulatory authority over margarine conferred upon the Administrator by any other provision of this Act."

SEC. 4. In order to remove or mitigate the restrictions which are in fact regulatory provisions restricting the use of and commerce in margarine, (1) wholesale dealers and retail dealers in margarine shall not, by reason of being such dealers, be required to pay any special tax under section 3200 of the Internal Revenue Code; (2) margarine which is yellow in color shall not be subject to the 10-centsper-pound rate of tax under section 2301 of the Internal Revenue Code; and (3) no person shall be deemed to be a manufacturer of margarine or oleomargarine within the meaning of the provisions of the Internal Revenue Code solely because of adding to or mixing with any margarine any substance which causes such margarine to be yellow in color.

The committee having decided upon a time for the hearings, I as chairman sent to the various departments that might be affected by the bill invitations to either appear in person or file reports with the committee. These letters were dated May 17, and one of them was addressed to Hon. Claude Wickard, Secretary of Agriculture, and under date of May 31 the Secretary addressed to me a letter with attached memorandum which I will place in the record at this point. Senator AIKEN. What is the substance of his letter?

Senator ELLENDER. Simply an explanation of the bill. No recommendations whatever are made.

(The letter from the Secretary of Agriculture dated May 31, 1944, with attached memorandum follows:)

Hon. ALLEN J. ELLENDER,

United States Senate, Washington, D. C.

MAY 31, 1944.

DEAR SENATOR Ellender: This is in reply to your letter of May 17 regarding hearings on S. 1744, the "Margarine Act of 1944." It is our feeling that we can be of the most assistance to your subcommittee by providing you with a factual analysis of the proposed legislation. Consequently, we are herewith submitting

such a statement for your consideration. Since this statement contains our views on this matter, we do not believe it will be necessary for Department representatives to appear before your subcommittee.

Sincerely yours,

CLAUDE R. WICKARD, Secretary.

ECONOMIC EFFECTS OF S. 1744

S. 1744 is a bill to provide for the more effective utilization of the agricultural resources of the Nation during peace and war; to regulate the production and distribution of margarine, a product of certain agricultural commodities, in interstate commerce; to remove certain obstructions to the distribution of such product in interstate commerce; and for other purposes. This bill would exempt colored (yellow) margarine from the 10 cent per pound rate of tax payable by manufacturers on such margarine under the Internal Revenue Code. Apparently the rate of one-fourth cent per pound applicable to margarine generally would not be changed. The bill also would forbid persons to be deemed manufacturers, within the meaning of the provisions of the Internal Revenue Code, solely because of adding color to margarine. Hence it would exempt such persons from the special annual Federal tax of $600 on manufacturers of margarine. The bill would repeal the special annual Federal taxes of $460 and $200 on wholesalers of colored and uncolored margarine, respectively, and $42 and $6 on retailers of colored and uncolored margarine, respectively. Margarine, whether made with or without additional coloring matter, would be permitted to be labeled "margarine" instead of "oleomargarine" for the purposes of the Federal Food, Drug, and Cosmetic Act and any other act.

The manufacturers' excise tax of 10 cents per pound on colored oleomargarine is equivalent to more than 40 percent of the present retail price of oleomargarine and to more than 50 percent of the retail price in pre-war years. The rate of one-quarter cent per pound paid on uncolored oleomargarine, which would not be changed by the bill, represents only about 1 percent of the present United States average retail price of oleomargarine. Annual consumption of colored oleomargarine in the United States in 1940-43 averaged 0.02 pound per capita, compared with 2.9 pounds per capita of uncolored oleomargarine. Repeal of the excise tax on colored oleomargarine probably would make it possible to sell that product at about the same price as uncolored oleomargarine.

The existence of competition between uncolored oleomargarine and butter is indicated by the fact that year-to-year changes in the consumption of butter are usually accompanied by changes in the opposite direction in the consumption of uncolored oleomargarine. No data are available for determining the degree of competition that might exist between butter and colored oleomargarine if prices of the latter were at about the same level as prives of uncolored margarine. From July 1939 to June 1943 the special taxes on wholesalers and retailers of oleomargarine totaled $4,897,000, equivalent to about 0.35 cent per pound on 1,432,000 pounds of oleomargarine handled in that period. This rate of tax would be about 1.5 percent of the present retail price. Repeal of the special taxes on wholesalers and retailers would tend to lower prices of oleomargarine slightly and to increase the number of retail outlets handling oleomargarine.

Preliminary appraisals published by the Bureau of Agricultural Economics in the National Food Situation, April 1944, indicate a supply of about 12.6 pounds of butter per capita for civilians in 1944. This would be about 3.5 pounds per capita under the average annual civilian disappearance in 1940-42. These appraisals also indicate a consumption of approximately 4.2 pounds per capita of oleomargarine by civilians in 1944, about 1.6 pounds more per capita than the 1940-42 average annual consumption.

In a survey of food consumption in nonfarm households in 1 week in the spring of 1942, larger purchases of oleomargarine were reported by families at low income levels than by those at the higher levels. Families with incomes from $500 to $1,000 reported twice as much oleomargarine purchases as families with incomes from $2,000 to $3,000.1

In 1940 and 1941 nearly 90 percent of the fats used in oleomargarine were of domestic origin, consisting chiefly of cottonseed, soybean, and oleo oils. With use of coconut and other imported oils in margarine prohibited during most of

The survey was made by the Bureau of Human Nutrition and Home Economics and the Bureau of Labor Statistics jointly. Families with incomes from zero to $499 annually purchased less oleomargarine than families with incomes from $500 to $1,499 but more than those with incomes of $1,500 or more.

1942 and throughout 1943, the percentage of domestic fats and oils rose to 98 percent in 1942 and 100 percent in 1943.

The following tables show for recent years the relative importance of the principal fats and oils used in the manufacture of oleomargarine and the importance of oleomargarine as an outlet for these fats and oils.

Oleomargarine: Percentage contributed by principal items to the weight of fats and oils used in manufacture, United States, annual 1939-43, January-March 1944

Source: Bureau of Agricultural Economics. Computed rom reports of the Bureau of Internal Revenue.

Production of specified fats and oils in the United States, the quantity used in the manufacture of oleomargarine as a percentage of production, annual 1941-43. January-March 1944

Source: Bureau of Agricultural Economics. Computed from reports of the Bureau of the Census, the Bureau of Internal Revenue, and War Food Administration.

Senator ELLENDER. On May 17 I addressed a letter to Hon. Henry Morgenthau, Secretary of the Treasury, and under date of May 22 I received a reply as follows:

Hon. ALLEN J. ELLENDER,

United States Senate, Washington, D. C.

MAY 22, 1944.

MY DEAR SENATOR: This is in reply to your letter of May 17, 1944. You indicate that hearings will be held, beginning June 6, by a subcommittee of the

Senate Agriculture and Forestry Committee on S. 1744, the Margarine Act of 1944. This Department will be glad to have representatives present in response to your invitation. I should appreciate your advising Mr. Stanley S. Surrey, tax legislative counsel of the Treasury Department, as to the proper time when such representatives should be present.

Sincerely yours,

JOHN L. SULLIVAN, Secretary of the Treasury.

Senator AIKEN. The Treasury Department takes no stand on this bill itself?

Senator ELLENDER. Not yet. I presume that within the course of the hearings, we will invite someone from the Department to make a statement.

Senator AIKEN. From the Internal Revenue Bureau?
Senator ELLENDER. From the Treasury Department.

Then on the same date, May 17, 1944, I addressed a letter to Hon. Paul V. McNutt, Administrator, Federal Security Agency, and in response to that 'etter the Administrator addressed a letter to me. dated June 5, 1944, which I desire to place in the record at this point. (Letter dated June 5, 1944, from the Administrator, Federal Security Agency, follows:)

Hon. ALLEN J. Ellender,

United States Senate, Washington, D. C.

FEDERAL SECURITY AGENCY,
Washington, D. C., June 5, 1944.

DEAR SIR: Thank you for your letter of May 17, 1944, inviting representatives of this Agency to testify at the hearing on S. 1744, the Margarine Act of 1944 to be held on June 6. In view of the relatively limited scope of our official concern with this measure, I am submitting our views in this letter, but will of course ask a representative of the Agency to testify orally if you desire.

This bill would repeal the special tax on wholesale and retail dealers in margarine. It would also repeal the 10-cents-per-pound tax on manufacturers of yellow margarine, and provide that no person would be deemed a manufacturer solely because of mixing yellow coloring matter with white margarine.

The bill would add a new provision to the definitions section of the Federal Food, Drug, and Cosmetic Act to permit the food product defined in section 2300 of the Internal Revenue Code as "oleomargarine" to be labeled "margarine,' whether it is white or yellow. It would also provide that nothing in the subsection should change the definition and standard of identity for oleomargarine promulgated by the Federal Security Administrator on June 6, 1941, except with respect to labeling.

I have no objection to the designation of "oleomargarine" as "margarine," nor to its labeling as such. To incorporate in the Federal Food, Drug, and Cosmetic Act the definition contained in section 2300 of the Internal Revenue Code, however, seems to me likely to cause confusion, since that definition differs materially from the definition and standard promulgated on June 6, 1941. would suggest that section 3 of the bill might be revised to read:

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"SEC. 3. (a) The Federal Food, Drug, and Cosmetic Act, as amended, is amended by adding to section 201 thereof the following subsection (q):

'(q) The name of the product defined in the definition and standard of identity for oleomargarine promulgated by the Administrator on June 6, 1941, as such definition and standard now exists or as it may hereafter be amended, shall be either "oleomargarine" or "margarine."

"(b) For the purposes of any Act of Congress other than the Federal Food, Drug, and Cosmetic Act, 'margarine' shall be understood to mean the food products usually known as margarine or oleomargarine and defined in section 2300 of the Internal Revenue Code, as amended, as 'oleomargarine,' and such product may be labeled 'margarine' instead of 'oleomargarine.' This product may be made with or without additional coloring matter."

We are not officially concerned with the substantive issues involved in the tax on manufacturers or dealers in margarine. We would not, however, object to legislation which would make a nutritious food product more readily available to low-income families.