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 smug-gling, 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

this situation as well as I do, and he knows that I know it. We have been pushed around from pillar to post over the Treasury Department on this matter with a lot of continuing excuses.

The CHAIRMAN. I do not think it is proper for you to lecture Mr. Hester or for Mr. Hester to lecture you.

Mr. COOPER. It is my impression that Mr. Hester was merely correcting the statement made.

Mr. BARNES. Mr. Hester's statement now is incorrect.

Mr. COOPER. I am not arguing that point with you. I have a right to make the statement I have made, and it does not need any reply from you.

The CHAIRMAN. So far as the chair is advised, there are no further wintesses, and this closes the hearings on this bill. The committee will go into executive session.

(Thereupon the committee proceeded to the consideration of executive business, after which it adjourned.)

ADDENDA

Statement of HON. HARRY B. Coffee, a Member of Congress FROM THE STATE OF NEBRASKA

Mr. Chairman and members of the committee, I have just 10 words I hope you will incorporate as an amendment to H. R. 6738 now under consideration.

The amendment I propose is embodied in H. R. 6806 and provides that "Paragraph 703 of the Tariff Act of 1930 is amended by inserting after the word 'preserve' the following: '(except any of the foregoing packed in air-tight containers)'.' The purpose of this amendment is to curb the importation of canned hams coming from Poland at the rate of over 1,000,000 pounds per week. This is the equivalent of the hams from 60,000 hogs per week.

Paragraph 703 provides a tariff of 3/4 cents per pound on bacon, hams, and shoulders and other pork prepared or preserved. Canned hams are at present classified under this paragraph. By the adoption of my amendment these canned hams would be eliminated from the provisions of paragraph 703 and then paragraph 706 would automatically apply which provides a tariff of 6 cents per pound but not less than 20 percent ad valorem on meats, fresh, chilled, frozen, prepared, or preserved, not specially provided for.

Canned beef comes in under the provisions of paragraph 706 in a large and increasing volume. Ham is the most expensive part of the hog and there can be no justification for such a low tariff on canned hams which is relatively a new product on the market. These imports are a serious threat to the livestock industry, not only to the hog producer but to the cattle industry with which pork competes.

We have before our Agricultural Committee at the present time a general farm bill in which there is a provision for control of production on corn. I submit there can be no justification for the control of production on corn so long as this loophole is open in our tariff wall allowing unlimited imports of hams at less than a 10 percent ad valorem tariff. The following tariff schedule on certain animal products indicates the inequality of protection on pork products:

Secretary Wallace in a letter to me under date of May 15 on this matter stated as follows:

"It must be admitted that the rate of duty applied on canned meats under section 706 is out of line with the duty of 34 cents a pound on canned ham, in

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view of the fact that canned ham is a higher valued product. From this point of view there is a justification for an amendment to paragraph 703 such as you propose.

While hogs are selling at a fair price, the producers have been losing money because of the high feed cost. It is the future hog market that must be protected. The following table shows imports of hams from 12 nations into New York City, which averaged more than a million pounds for each of the 4 weeks of March:

Usually live hogs are from 50 cents to $1 per hundred higher in the East than they are in the Corn Belt. This year they are actually lower in the East for on March 15 the average price paid to farmers in Nebraska was $9.40 per hundred pounds while the average price paid to farmers in North Carolina was $9.20. In the year 1936 the North Carolina price averaged 40 cents above those in Nebraska and in the year 1935 they averaged 50 cents higher. Thus we see the present influence of these imports.

In 1936 over 75 percent of the canned hams exported from Poland came to the United States. Poland has for several years used various means of subsidizing the exports of surplus hams and rye. The ingenious method used would make it difficult to invoke the law providing for countervailing duties for the amount of the subsidy.

To safeguard the domestic livestock industry, I hope you will embody this amendment in the bill you have now under consideration providing for certain administrative changes in the Tariff Act of 1930.

B