SPECIFIC OR AD VALOREM DUTIES.

Whether levied primarily for revenue or for protection, the cottonyarn duties of foreign countries are, with few exceptions, on a specific basis.

American manufacturers and importers are apparently unanimous in their desire for specific rather than ad valorem rates of duty. The manufacturers prefer specific rates as avoiding the possibility of undervaluations. The importers prefer specific rates as enabling them to take orders c. i. f., duty paid, and to be able to calculate in advance the margin of profit, which they can not do with the amount of duty fluctuating according to changes in market price.

ADJUSTMENT OF PROGRESSIVE RATES OF DUTY.

It is almost universally agreed that the yarn count is the logical standard on which to base the adjustment of tariff duties on cotton yarn. In adjusting the rates of duty to follow increases in fineness of count there may be used either group progression or individualcount progression. In any system of group progression there are necessarily inequalities at the points where the rate rises between two adjacent counts. Individual-count progression, though involving more careful ascertainment of the exact count, is the most equitable system.

A study of the principles underlying the adjustment of tariff duties based on differences in costs of production of ring yarns in the United States and of mule yarns in England indicates, as shown in Chapter VI, the advisability of having one rate of progression of duties, preferably as a fraction of a cent per number per pound, on counts up to and including 40s (this marks the usual limit to the employment of short-staple upland cotton), and another and somewhat steeper rate of progression of duties on counts from 41s up to 120s. The domestic production of the extreme fine counts above 120s is limited and mainly consumed in the mills where spun; the imports of such counts, especially if processed by "preparing" or otherwise, are practically noncompetitive. On counts above 120s duties should preferably be stationary or discontinued, for the reason that these yarns, largely noncompetitive, are necessary for the development of the domestic lace and other industries.

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REVIEW OF TARIFF LEGISLATION ON COTTON YARN AND THREAD.

Cotton yarn and thread were not mentioned in the earliest tariff acts but paid duty, ranging from 5 per cent ad valorem in 1789 to 25 per cent ad valorem in 1812, under general provisions.

The first specific mention was in the act of 1816, when "cotton twist, yarn, or thread" were made dutiable at 25 per cent ad valorem, with a proviso that the rate be reduced to 20 per cent ad valorem after three years.

In 1824 a color distinction and differential was introduced by the proviso that unbleached and uncolored yarns valued at less than 60 cents a pound should be deemed valued at 60 cents and that bleached or colored yarns valued at less than 75 cents should be deemed valued at 75 cents a pound. This color provision with its minimum valuations was continued in the acts up to and including 1842. In the latter act a provision for "all other cotton twist, yarn, and thread, on spools or otherwise" was introduced to make the rate on the higher-priced yarns 30 per cent ad valorem as against 25 per cent ad valorem on those valued, as above, at not over 60 and 75 cents a pound, respectively. Incidentally, the reference to spools was the first mention of holders.

In the following tariffs of 1846 and 1857 there was no specific mention of cotton yarn or thread. They were dutiable under the provision for cotton manufactures not otherwise provided for, this being 25 per cent ad valorem in 1846 and 19 per cent ad valorem in 1857.

In 1861 cotton yarn and thread of all descriptions were included under the wording of "spool and other thread of cotton." The duty was 30 per cent ad valorem. In 1862 it was increased to 40 per cent ad valorem.

Up to this time the tariff laws had included cotton yarn and thread under one rate, but the growing development of the sewing-thread industry caused its needs to be recognized separately and since 1862 there has been a more or less clear demarcation attempted between cotton sewing thread and cotton yarn.

Cotton yarn. The rate of 40 per cent ad valorem in the act of 1862 on "other thread of cotton" continued to apply on single yarn. until 1870, but on ply yarn it was changed in 1865 to a compound rate of 4 cents per skein or hank of 840 yards, and 30 per cent ad valorem. Up to this time the duties on cotton yarn had been uniformly ad valorem.

In the acts of 1870, 1872, and 1875, there was employed a system of group values, yarns being divided into those valued at not over 40 cents, from 40 to 60 cents, from 60 to 80 cents, and those over 80 cents a pound, respectively. Compound duties were used, of which the specific portion was progressive.

In 1883 the value basis was retained but instead of four there were eight groups: not over 25 cents, 25 to 40 cents, 40 to 50 cents, 50 to 60 cents, 60 to 70 cents, 70 to 80 cents, 80 cents to $1, and over $1 per pound, respectively. On the first seven groups the progressive rates were specific in cents per pound; on the last group, yarn valued at over $1 a pound, there was levied an ad valorem duty of 50 per cent. With the exception of a slight readjustment of rates on three groups, the act of 1890 was identical with that of 1883.

In 1894 the system of dividing yarns into classes by values was dropped, and in that and subsequent tariffs, whether specific, compound, or ad valorem, the primary basis has been the yarn count. The system of basic and advanced classifications was also inaugurated at that time.

In the act of 1894 the basic classification of gray single yarns was divided, according to yarn count, into three groups. A flat rate of 3 cents per pound was levied on counts up to No. 15; a progressive rate of one-fifth of 1 cent per number per pound on counts above No. 15, up to and including No. 30; and a progressive rate of onefourth of 1 cent per number per pound on counts above No. 30. The advanced classification was composed of yarns "colored, bleached, dyed, combed, or advanced beyond the condition of singles by grouping or twisting two or more single yarns together," and was divided into two groups. The first included all counts up to No. 20, these being made dutiable at a flat rate of 6 cents per pound; all above No. 20 were made dutiable at a progressive rate of three-tenths of a cent per number per pound. The tariff of 1894 was unique in fixing maximum instead of minimum ad valorem rates in connection with the specific rates. The former group valuation system was retained in connection with these maximum provisos. By the application of the maximum provisions duties were limited to 8 cents a pound on yarn valued at not over 25 cents a pound, to 15 cents a pound on yarn valued at more than 25 and not more than 40 cents a pound, and to 45 per cent ad valorem on yarn valued at over 40 cents a pound.

The act of 1897 was identical with that of 1894, except that the maximum provisos were discarded, and that under the advanced classification there was made three divisions instead of two, the middle class consisting of counts from 20s to 80s dutiable at onequarter of a cent per number per pound. The act of 1897 is unique, so far as cotton yarn is concerned, in that it was entirely specific.

The act of 1909 reduced the duties on the basic classification of single gray yarn to 2 cents a pound for counts up to and including No. 15, to one-sixth of a cent per number per pound on counts from No. 15 to No. 30, and to one-fifth of a cent per number per pound on counts above No. 30; however, this was modified by the insertion of a minimum ad valorem catch-all of 15 per cent. The duties on the advanced classification were adjusted so that the 6 cent flat rate applied to counts up to and including No. 24, and the one-quarter cent per number per pound to counts from No. 24 to No. 80, the threetenths of a cent per number per pound was limited to the counts from No. 80 to No. 200, whereas above No. 200 the duty became 60 cents a pound and one-tenth of a cent per number per pound. A new provision was that for cable-laid yarn with a flat rate of fourtenths of a cent per number per pound on the unbleached, and ninetwentieths of a cent per number per pound on the colored, bleached, or dyed. A minimum ad valorem catch-all of 20 per cent was applied to cable-laid yarns and to yarns under the advanced classification. A new provision also was the insertion of a differential for mercerization; this was placed at one-fortieth of a cent per number per pound and was made cumulative.

In the act of 1913 cotton yarns were divided, according to count, into eight classes: Up to No. 9, above No. 9 to No. 19; above No. 19 to No. 39; above No. 39 to No. 49; above No. 49 to No. 59; above No. 59 to No. 79; above No. 79 to No. 99, and above No. 99. The progressive duties on the basic classification, which was made to include ply as well as single gray yarn, range from 5 per cent ad valorem on yarns in the first group, not above No. 9, up to 25 per cent ad valorem on the last group, yarns finer than No. 99. Between groups there is a uniform rise of 21 per cent ad valorem, with the exception of a 5 per cent rise between 39s and 40s. The progressive duties on the advanced classification of "combed, bleached, dyed, mercerized, or colored" are uniformly 2 per cent above those under the basic classification.

Cotton sewing thread. In the case of "spool thread of cotton" there was a change in 1864 from the ad valorem duties, which had theretofore been uniformly imposed, at not more than 40 per cent, to compound duties. The rates then levied were 6 cents per dozen spools for each 100 yards or fraction thereof, together with 30 per cent ad valorem. In 1865 the rate was 6 cents per dozen spools for each 100 yards or fraction thereof, together with 30 per cent in the case of spools of not over 100 yards and 35 per cent in the case of spools containing over 100 yards. The 1865 rates were renewed in the act of 1870, were reduced 10 per cent in 1872, and restored to the former level in 1875.