Men's Sewed Straw Hats Report of the United Stated Tariff Commission to the President of the United States (1926) — United States Tariff Commission

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UNITED STATES TARIFF COMMISSION
WASHINGTON

MEN'S SEWED STRAW HATS

REPORT
OF THE
UNITED STATES TARIFF COMMISSION
TO THE
PRESIDENT OF THE UNITED STATES

INVESTIGATION OF THE COSTS OF PRODUCTION OF
MEN'S SEWED STRAW HATS IN THE UNITED
STATES AND IN THE PRINCIPAL
COMPETING FOREIGN
COUNTRIES

WITH APPENDIX
PROCLAMATION BY THE PRESIDENT

WASHINGTON
GOVERNMENT PRINTING OFFICE
1926

UNITED STATES TARIFF COMMISSION

Office: Eighth and E Streets NW., Washington, D. C.

COMMISSIONERS

THOMAS O. MARVIN, Chairman.
ALFRED P. DENNIS, Vice Chairman.
EDWARD P. COSTIGAN.
HENRY H. GLASSIE.
A. H. BALDWIN.
EDGAR B. BROSSARD.

JOHN F. BETHUNE, Secretary.

ADDITIONAL COPIES
OF THIS PUBLICATION MAY BE PROCURED FROM
THE SUPERINTENDENT OF DOCUMENTS
GOVERNMENT PRINTING OFFICE
WASHINGTON, D. C.
AT
5 CENTS PER COPY

Page Introductory: Reference to files 1 Rates of duty 1 History of investigation 1 Scope of investigation 2

Information obtained in the investigation: Domestic production 2 Kinds of hats produced 3 Organization 3 Labor conditions 3 Imports 4 Effect of imports 6 Principal competing country 7 Foreign production-- Types of hats produced 8 Organization 8 Working hours and wages 8 Costs of production-- Methods of obtaining cost data 9 Description of cost items-- Material 9 Labor 9 Overhead 9 Selling expense-- (a) Domestic 9 (b) Foreign 9 Tables showing cost comparisons 10 Competitive conditions-- Transportation and marketing costs 11

Formal statement of conclusions 11 Summary of conclusions 13

Separate statement of Commissioner Costigan, in part concurring and in part dissenting, in the investigation of men's sewed straw hats: Both higher and lower duties indicated by the commission's cost figures 15 Determining the dividing line for tariff purposes between higher and lower priced hats 15 Some omissions from and doubtful features in the commission's report 16 Representativeness of samples 16 Importers' selling expenses omitted 17 Deficiencies in comparative overhead data 18

Appendix: Proclamation by the President 21

LETTER OF TRANSMITTAL

JULY 17, 1925.

The PRESIDENT,
The White House,
Washington, D. C.

MY DEAR MR. PRESIDENT: Herewith I have the honor to transmit the report of the Tariff Commission in the investigation, for the purposes of section 315 of the tariff act of 1922, of the costs of production in the United States and in the principal competing foreign country of men's sewed straw hats. Included in the report is a "Separate statement of Commissioner Costigan, in part concurring and in part dissenting, in the investigation of men's sewed straw hats."

Respectfully,

THOMAS O. MARVIN,
Chairman.

UNITED STATES TARIFF COMMISSION
WASHINGTON

MEN'S SEWED STRAW HATS

JULY 17, 1925.

To the President:

The United States Tariff Commission respectfully submits the following report upon an investigation of the differences in costs of production of men's sewed straw hats in the United States and in competing foreign countries, for the purposes of section 315 of Title III of the tariff act of 1922.

INTRODUCTORY

Reference to files.--The basic documents in connection with the investigation on men's sewed straw hats are in the files of the Tariff Commission and are available to the President. They include the transcripts of the public hearings and the original cost schedules and other data. These include confidential data, the disclosure of which is forbidden by section 708 of the revenue act of 1916:

SEC. 708. It shall be unlawful for any member of the United States Tariff Commission, or for any employee, agent, or clerk of said commission, or any other officer or employee of the United States, to divulge, or to make known in any manner whatever not provided for by law, to any person, the trade secrets or processes of any person, firm, copartnership, corporation, or association embraced in any examination or investigation conducted by said commission, or by order of said commission, or by order of any member thereof. * * *

Rates of duty:

Act of 1922--Not blocked or trimmed } 60 per cent. } Par. 1406. Blocked or trimmed } }

Act of 1913--Not blocked or trimmed } 25 per cent. } Par. 335. Blocked or trimmed } 40 per cent. }

Act of 1909--Not trimmed } 35 per cent. } Par. 422. Trimmed } 50 per cent. }

History of the investigation.--On May 29, 1924, the commission ordered an investigation of men's sewed straw hats for the purposes of section 315 of Title III of the tariff act of 1922, and on the same date ordered a preliminary hearing for June 12, 1924.

An application was received from the National Association of Men's Straw Hat Manufacturers of America requesting an investigation looking toward an increase in the rate of duty on men's sewed straw hats, now dutiable at 60 per cent ad valorem under paragraph 1406 of the tariff act of 1922.

The domestic field work was carried on during the period August to October, 1924, and the foreign work in Italy and England during the period October, 1924, to February, 1925. After due notice, as prescribed by law, public hearings were held in the offices of the commission on June 12, 1924, and on May 4, 1925. The latter hearing was continued on May 14, 15, and 16, 1925. Oral argument was waived and the date for filing briefs was set for June 6, 1925.

Scope of the investigation.--Costs of production were obtained for hats sold in the straw hat season of 1924 by companies whose fiscal years ended at or about June 30, 1924. This period was the latest for which cost data could be obtained at the time the investigation was made.

Domestic costs were obtained from 19 concerns in Maryland, New York, Connecticut, and Massachusetts. The total production of these concerns amounted to 718,265 dozen hats. Of this number, 553,253 dozen were men's sewed straw hats. The 19 concerns produce approximately 85 per cent of the men's sewed straw hats in the United States and include makers of cheap, medium, and high-priced hats. They include nonmembers as well as members of the national association.

Costs were obtained in Italy from five concerns and in England from three concerns exporting men's sewed straw hats to the United States.

Both domestic and foreign straw hat factories are characterized by lack of standardization in production. Variations exist in the quality of the hats manufactured by different establishments, because of variations in the type and quality of the braid, in the quality of the trimming materials, such as leather sweat and silk bands, and in the amount of hand labor employed in the finishing processes. Because of these variations, it was considered inadvisable to compare the average costs of production of all hats of the domestic concerns with the average of all foreign hats. Evidence submitted at the preliminary hearing and data in the possession of the commission indicated that competition between domestic and foreign straw hats centered chiefly on three types, split sennits of 13/15 millimeter braid, improved sennits of 16/18 millimeter braid, and flatfoot sennits of 16/18 millimeter braid. The commission's cost comparisons were therefore confined to hats of these specifications.

INFORMATION OBTAINED IN THE INVESTIGATION

From the commission's investigation of men's sewed straw hats, conducted as indicated above, the following information has been obtained:

DOMESTIC PRODUCTION

The manufacture of men's straw hats has been conducted on a commercial scale in the United States for upward of 50 years. The industry is centered in and around New York City, in a number of cities in Massachusetts and Connecticut, and in Baltimore, Md. Statistics of production of men's sewed straw hats are not available, since the census of manufactures does not distinguish between men's and women's hats nor between sewed hats and woven hats. Domestic manufacturers estimate that the value of the men's straw hats produced in 1914 was $12,000,000, or about 45 per cent of the total production of all straw hats. In 1920 the value of the total production of men's straw hats was estimated at $20,000,000, of which about $12,000,000 was men's sewed hats. At the preliminary hearing it was estimated that the average annual production of men's sewed straw hats in recent years amounted to 800,000 dozen. There are about 40 manufacturers of men's sewed straw hats in the United States. The majority are well established firms.

The production of men's sewed straw hats for the season 1923-24 of 19 factories for which costs were obtained was 553,253 dozen. The factories may be classified as follows:

TABLE 1.--Domestic straw-hat factories grouped according to annual production

Kinds of hats produced.--There are two general types of men's straw hats produced by the domestic manufacturers:

(1) Woven hats, such as panamas, etc. The bodies of these hats are imported in the rough and are shaped, finished, and trimmed in this country.

(2) Sewed hats. All of the operations necessary in the manufacture of a sewed straw hat, with the exception of plaiting the braids, are performed in the United States. This investigation relates to sewed hats only.

Organization of production.--The manufacture of straw hats is essentially a factory business and with few exceptions each concern carries on all of the major operations connected with the production of hats in a single establishment. Plaiting of straw braid is a separate industry, the domestic hat manufacturers being dependent upon foreign sources for their supply of braids. The bleaching of straw braids is performed by some of the hat manufacturers in their own establishments; others have the bleaching done by outside concerns which specialize in this class of work. Some firms make the tips (the inside linings of the hats) in their own establishments; others buy the complete tip, or have certain operations, such as printing or stamping, performed by outside shops.

Labor conditions.--The hours of labor of employees in domestic straw hat factories in 1923-24 varied from 42 to 54 weekly. Wages are based both on piece and time work. Time wages ranged from $15 to $40 per week, according to the character of the work performed.

The production of straw hats is to some extent seasonal. Orders are received in the late summer for delivery in the following spring. Production on these orders begins in September and the factories are usually busiest in the early months of the year. The summer is a slack season and factories operate with reduced labor force or close altogether for several weeks. The following table shows the monthly variations in the total number of employees of 18 domestic factories in the season 1923-24:

TABLE 2.--Employees in 18 domestic straw-hat factories, season of 1923-24

---------------+-----------++----------------+----------- | Number of || | Number of Month | employees || Month | employees ---------------+-----------++----------------+----------- 1923 | || 1924 | July | 1,116 || January | 3,331 August | 1,775 || February | 3,371 September | 2,542 || March | 3,403 October | 2,765 || April | 3,380 November | 3,221 || May | 3,117 December | 3,291 || June | 1,871 ---------------+-----------++----------------+-----------

IMPORTS

The quantities and values of sewed straw hats imported into the United States were not separately shown in official statistics prior to the tariff act of 1922, in which sewed straw hats were given a separate classification.

Table 3 shows the imports for consumption of sewed straw hats from the principal countries of origin, by months, for the calendar years 1923 and 1924. Total imports increased from 93,309 dozen in 1923, valued at $779,989, to 164,041 dozen in 1924, valued at $1,179,929, a gain of approximately 75 per cent in quantity and 50 per cent in value.

TABLE 3.--Imports for consumption of men's sewed straw hats[1] from Italy, England, Germany, and other countries, by months, calendar years 1923 and 1924

(Source: Foreign Commerce and Navigation of the United States)

-------------+----------+----------+----------+----------+------------ | Italy | England | Germany | Other | Total | | | | countries| | | | | [2] | +----------+----------+----------+----------+------------ Month | 1923 | 1923 | 1923 | 1923 | 1923 -------------+----------+----------+----------+----------+------------ | Number | Number | Number | Number | Number January | 51,225 | 9,734 | 2,460 | 26,606 | 90,025 February | 53,644 | 9,235 | 8 | 4,756 | 67,643 March | 54,102 | 55,920 | 7,420 | 51,305 | 168,747 April | 66,552 | 46,222 | 1,931 | 84,684 | 199,389 May | 78,602 | 68,989 | 80 | 31,888 | 179,559 June | 38,658 | 42,776 | 1,960 | 4,414 | 87,808 July | 23,049 | 6,717 | 848 | 11,685 | 42,299 August | 1,796 | 1,250 | 1,504 | 1,041 | 5,591 September | 120 | 960 | 1,272 | 102 | 2,474 October | 53,129 | 396 | 3,411 | 331 | 57,267 November | 77,962 | 2,718 | 8,929 | 7,524 | 97,133 December | 78,372 | 1,647 | 21,334 | 20,415 | 121,768 +----------+----------+----------+----------+------------ Total number | 577,211 | 246,584 | 51,157 | 244,751 | 1,119,703 Dozen | 48,101 | 20,549 | 4,263 | 20,396 | 93,309 +==========+==========+==========+==========+============ | | | | | Total Value | $289,215 | $256,769 | $32,503 | $201,502 | $779,989 | | | | | Average | | | | | value per | | | | | dozen | $6.01 | $12.50 | $7.62 | $9.88 | $8.36 +==========+==========+==========+==========+============ Per cent | | | | | of hats | | | | | imported | | | | | from each | | | | | country | 51.50 | 22.00 | 4.60 | 21.90 | 100.0 -------------+----------+----------+----------+----------+------------

-------------+----------+----------+----------+----------+------------ | Italy | England | Germany | Other | Total | | | | countries| | | | | [2] | +----------+----------+----------+----------+------------ Month | 1924 | 1924 | 1924 | 1924 | 1924 -------------+----------+----------+----------+----------+------------ | Number | Number | Number | Number | Number January | 35,754 | 50,087 | 19,829 | 34,754 | 140,424 February | 114,644 | 35,024 | 25,372 | 57,429 | 232,469 March | 97,899 | 46,435 | 50,126 | 40,669 | 235,129 April | 192,007 | 119,031 | 85,421 | 49,935 | 446,394 May | 113,593 | 54,874 | 85,884 | 34,047 | 288,398 June | 59,840 | 37,208 | 6,873 | 14,769 | 118,690 July | 22,505 | 1,533 | 720 | 41,367 | 66,125 August | 4,000 | 820 | 2,795 | 41,689 | 49,304 September | 427 | 706 | 7,377 | 10,550 | 19,060 October | 37,809 | 318 | 4,541 | 34,528 | 77,196 November | 82,313 | 2,640 | 959 | 44,471 | 130,383 December | 100,353 | 4,723 | 5,332 | 54,516 | 164,924 +----------+----------+----------+----------+------------ Total number | 861,144 | 353,399 | 295,229 | 458,724 | 1,968,496 Dozen | 71,762 | 29,450 | 24,602 | 38,227 | 164,041 +----------+----------+----------+----------+------------ | | | | | Total Value | $427,706 | $282,402 | $180,054 | $289,767 | $1,179,929 | | | | | Average | | | | | value per | | | | | dozen | $5.96 | $9.59 | $7.32 | $7.57 | $7.19 +==========+==========+==========+==========+============ Per cent | | | | | of hats | | | | | imported | | | | | from each | | | | | country | 43.75 | 17.95 | 15.00 | 23.30 | 100.00 -------------+----------+----------+----------+----------+------------ [1: Including men's, women's, and children's.] [2: Including withdrawals from warehouse.]

A comparison of the imports for the first four months of 1925 with those for the corresponding period in 1924 is shown in Table 4. A significant feature of this table is the increase in imports from Italy and the decrease of imports from both the United Kingdom and Germany. It should be noted also that the average foreign[a] value per dozen of Italian hats decreased while the average foreign[a] value of hats imported from England and other countries increased.

[Footnote a: Values upon which duties were assessed as computed from data given in Foreign Commerce and Navigation of the United States.]

TABLE 4.--Imports for consumption of men's sewed straw hats[1] from Italy, United Kingdom, Germany, and other countries, by months, January-April, inclusive, 1924 and 1925.

(Source: Foreign Commerce and Navigation of the United States)

------------+----------+----------+----------+-----------+----------- | Italy | United | Germany | Other | Total | | Kingdom | | countries | | | | | [2] | +----------+----------+----------+-----------+----------- Month | 1924 | 1924 | 1924 | 1924 | 1924 ------------+----------+----------+----------+-----------+----------- | Number | Number | Number | Number | Number January | 35,754 | 50,087 | 19,829 | 34,754 | 140,424 February | 114,644 | 35,024 | 25,372 | 57,429 | 232,469 March | 97,899 | 46,435 | 50,126 | 40,669 | 235,129 April | 192,007 | 119,031 | 85,421 | 49,935 | 446,394 +----------+----------+----------+-----------+----------- Total number| 440,304 | 250,577 | 180,748 | 182,787 | 1,054,416 Dozen | 36,692 | 20,882 | 15,062 | 15,232 | 87,868 +==========+==========+==========+===========+=========== | | | | | Total value | $228,452 | $201,291 | $102,366 | $123,775 | $655,884 | | | | | Average | | | | | value | | | | | per dozen | 6.23 | 9.64 | 6.80 | 8.13 | 7.46 +==========+==========+==========+===========+=========== Per cent | | | | | of hats | | | | | imported | | | | | from each | | | | | country | 41.76 | 23.76 | 17.14 | 17.34 | 100.00 ------------+----------+----------+----------+-----------+-----------

------------+----------+----------+----------+-----------+----------- | Italy | United | Germany | Other | Total | | Kingdom | | countries | | | | | [2] | +----------+----------+----------+-----------+----------- Month | 1925 | 1925 | 1925 | 1925 | 1925 ------------+----------+----------+----------+-----------+----------- | Number | Number | Number | Number | Number January | 212,292 | 8,995 | 12,070 | 6,104 | 239,461 February | 189,736 | 31,776 | 7,697 | 22,580 | 251,789 March | 207,218 | 61,755 | 3,828 | 24,482 | 297,283 April | 260,145 | 45,711 | 40,479 | 10,545 | 356,880 +----------+----------+----------+-----------+----------- Total number| 869,391 | 148,237 | 64,074 | 63,711 | 1,145,413 Dozen | 72,449 | 12,353 | 5,340 | 5,309 | 95,451 +==========+==========+==========+===========+=========== | | | | | Total value | $395,298 | $161,422 | $40,923 | $78,222 | $675,865 | | | | | Average | | | | | value | | | | | per dozen | 5.46 | 13.07 | 7.66 | 14.73 | 7.08 +==========+==========+==========+===========+=========== Per cent | | | | | of hats | | | | | imported | | | | | from each | | | | | country | 75.90 | 12.94 | 5.60 | 5.56 | 100.00 ------------+----------+----------+----------+-----------+----------- [1: Including men's, women's, and children's.] [2: Including withdrawals from warehouse.]

TABLE 5.--Imports at the port of New York of men's sewed straw hats from Italy[1] classified according to foreign value, including packing January-June, 1924

[In dozens] ----------------+-------------------------+------------------------- | Sennits[2] | Fancies[3] Value +-------+---------+-------+-------+---------+------- |Trimmed|Untrimmed| Total |Trimmed|Untrimmed| Total ----------------+-------+---------+-------+-------+---------+------- $2.99 and less | | 18 | 18 | | 60 | 60 $3.00-$3.49 | 6 | 38 | 44 | | 219 | 219 $3.50-$3.99 | 255 | 23 | 278 | 1 | 250 | 251 $4.00-$4.49 | 2,518 | 28 | 2,546 | 196 | 2,909 | 3,105 $4.50-$4.99 | 1,617 | 24 | 1,641 | 61 | 477 | 538 $5.00-$5.49 | 1,671 | 4 | 1,675 | 427 | 711 | 1,138 $5.50-$5.99 | 1,687 | 1 | 1,688 | 608 | 89 | 697 $6.00-$6.49 | 1,313 | | 1,313 | 2,831 | 182 | 3,013 $6.50-$6.99 | 2,657 | 1 | 2,658 | 2,537 | 33 | 2,570 $7.00-$7.49 | 740 | | 740 | 996 | 15 | 1,011 $7.50-$7.99 | 255 | | 255 | 939 | 3 | 942 $8.00-$8.49 | 147 | | 147 | 470 | 6 | 476 $8.50-$8.99 | 165 | | 165 | 261 | 5 | 266 $9.00-$9.49 | 10 | | 10 | 165 | 1 | 166 $9.50-$9.99 | 30 | | 30 | 107 | | 107 $10.00-$10.49 | 39 | | 39 | 56 | 1 | 57 $10.50-$10.99 | 46 | | 46 | 34 | | 34 $11.00 and over | 63 | 3 | 66 | 10 | 12 | 22 +-------+---------+-------+-------+---------+------- Total |13,219 | 140 |13,359 | 9,699 | 4,973 |14,672 ----------------+-------+---------+-------+-------+---------+-------

[In dozens] ----------------+-------------------------+------------------------- | Miscellaneous[4] | Grand total Value +-------+---------+-------+-------+---------+------- |Trimmed|Untrimmed| Total |Trimmed|Untrimmed| Total ----------------+-------+---------+-------+-------+---------+------- $2.99 and less | | | | | 78 | 78 $3.00-$3.49 | 50 | | 50 | 56 | 257 | 313 $3.50-$3.99 | 570 | | 570 | 826 | 273 | 1,099 $4.00-$4.49 | 622 | | 622 | 3,336 | 2,937 | 6,273 $4.50-$4.99 | 680 | | 680 | 2,358 | 501 | 2,859 $5.00-$5.49 | 1,715 | | 1,715 | 3,813 | 715 | 4,528 $5.50-$5.99 | 1,095 | 58 | 1,153 | 3,390 | 148 | 3,538 $6.00-$6.49 | 1,826 | 10 | 1,836 | 5,970 | 192 | 6,162 $6.50-$6.99 | 879 | 1 | 880 | 6,073 | 35 | 6,108 $7.00-$7.49 | 433 | | 433 | 2,169 | 15 | 2,184 $7.50-$7.99 | 346 | 17 | 363 | 1,540 | 20 | 1,560 $8.00-$8.49 | 598 | | 598 | 1,215 | 6 | 1,221 $8.50-$8.99 | 231 | | 231 | 657 | 5 | 662 $9.00-$9.49 | 420 | | 420 | 595 | 1 | 596 $9.50-$9.99 | 46 | | 46 | 183 | | 183 $10.00-$10.49 | 203 | | 203 | 298 | 1 | 299 $10.50-$10.99 | 56 | | 56 | 136 | | 136 $11.00 and over | 527 | 1 | 528 | 600 | 16 | 616 +-------+---------+-------+-------+---------+------- Total |10,297 | 87 |10,384 |33,215 | 5,200 |38,415 ----------------+-------+---------+-------+-------+---------+------- [1: Taken from original invoices. Fractional dozen omitted in this table.] [2: Split, improved, and flatfoot.] [3: Fancy straw and sennit, fancy.] [4: Including hats the type of which is not specified in the invoice. Probably many sennits and fancies.]

In Table 5, imports of Italian hats at the port of New York in the six months January-June, 1924, have been classified according to foreign values shown on consular invoices. There is a marked concentration of imports in the value groups between $4 and $7 per dozen. About 90 per cent of all the sennit hats and 80 per cent of the total importations had foreign values of less than $7 per dozen.

TABLE 6.--Percentage of men's sewed straw hats imported at the port of New York from Italy with a foreign value less than that specified, January-June, 1924

--------------+------------+------------+------------------+----------- Foreign value | Sennits[1] | Fancies[2] | Miscellaneous[3] | Total less than-- | | | | --------------+------------+------------+------------------+----------- | Per cent | Per cent | Per cent | Per cent $9.50 | 98.6 | 98.5 | 92.0 | 96.8 $9.00 | 98.6 | 97.4 | 87.9 | 95.2 $8.50 | 97.3 | 95.6 | 85.7 | 93.5 $8.00 | 91.2 | 92.3 | 79.9 | 90.3 $7.50 | 94.3 | 85.9 | 76.4 | 86.3 $7.00 | 88.8 | 79.0 | 72.3 | 80.6 $6.50 | 68.9 | 61.5 | 63.8 | 64.7 $6.00 | 9.1 | 40.9 | 46.1 | 48.6 $5.50 | 46.4 | 36.2 | 35.0 | 39.4 $5.00 | 33.9 | 28.4 | 18.5 | 27.6 $4.50 | 21.6 | 24.8 | 12.0 | 20.2 --------------+------------+------------+------------------+----------- [1: Split, improved, and flatfoot.] [2: Fancy straw and sennit, fancy.] [3: Including hats the type of which is not specified in the invoice.]

The imports at the port of New York of hats from England are classified in Table 7. It is evident that the bulk of the English importations are not competitive with Italian hats. Only 28 per cent of the imports from England had a foreign value of less than $7 per dozen.

TABLE 7.--Imports at the port of New York of men's sewed straw hats from England,[1] classified according to foreign value, including packing, January-June, 1924

------------------+---------
Foreign value | Dozen
------------------+---------
$6.50-$6.99 | 2,631
$7.00-$7.49 | ...
$7.50-$7.99 | ...
$8.00-$8.49 | ...
$8.50-$8.99 | 3,340
$9.00-$9.49 | 1,260
$9.50-$9.99 | 1,044
$10.00-$10.49 | 98
$10.50-$10.99 | ...
$11.00 and up | 948
| =====
Total | 9,521
------------------+---------
[1: These data cover 9,521 dozen hats out of a total of approximately
10,730 dozen imported from England, or 89 per cent. They represent
the larger invoices (several over 1,000 dozen) and hence are not
so evenly distributed as are the Italian hats.]

Effect of imports.--The effect of the increasing imports of straw hats on the production and sales of domestic firms was discussed at the public hearings before the Tariff Commission. Evidence was introduced showing that the production of 19 factories decreased from 468,424 dozen in the eight months August, 1923, to March, 1924, to 391,189 dozen in the corresponding months of 1924-25. Seventeen firms showed decreased production and two firms reported increases. Meanwhile imports of foreign hats increased from 74,355 dozen to 102,450 dozen. Imports from Italy increased from 38,000 dozen to 70,000; imports from England decreased from 12,000 dozen to 9,000. Representatives of several domestic firms stated that their losses of business were directly attributable to inability to meet prices quoted by importers of Italian hats.[1]

[Footnote 1: See Transcript of Public Hearings, May 16, 1925, pp. 408, 420.]

Representatives of the importers, on the other hand, called attention to the increasing competition of small firms in and around New York City with larger and longer established firms located principally in Baltimore. Some of the new firms operate on small capital and specialize in cheap hats which are directly competitive with the cheapest Italian hats. Others produce a somewhat better hat, such as is sold by chain stores. The rate of business failure among the newer firms is unusually high. Although the membership of the group of producers of cheap hats is fluctuating, its total output of hats each year is a factor in the competitive situation.

A relatively new development in the distribution of straw hats is the chain stores. Sales of such stores, estimated at 150,000 to 200,000 dozen straw hats yearly, include Italian and English hats but are principally of domestic manufacture. In some cases a chain-store organization has established factories and thus has instituted direct competition with manufacturing firms already established. Chain stores also have furnished capital to small manufacturers, contracting for the bulk of their output. Thus the change in marketing methods has a bearing on the failure of the older establishments to keep pace in the volume of their sales with the national expansion in straw hat consumption.

PRINCIPAL COMPETING COUNTRY

Table 3, on page 4, shows that in the calendar year 1923 imports of sewed straw hats from Italy amounted to 48,101 dozen, or 51 per cent of total imports. The average value per dozen of these Italian hats was $6.01. During this same period imports from England amounted to 20,549 dozen or 22 per cent of total imports, at an average value of $12.50 per dozen.

During the calendar year 1924 imports from Italy amounted to 71,762 dozen, or 44 per cent of the total, at an average value of $5.96 per dozen. Imports from England were 29,450 dozen, or approximately 18 per cent of the total, at an average value of $9.59. Total imports increased from 93,309 dozen in 1923, valued at $779,989, to 164,041 dozen in 1924, valued at $1,179,929, a quantitative gain of approximately 75 per cent.

The latest available import data covering the months of January-April, 1925, are shown in Table 4, on page 5. For these four months imports from Italy amounted to 72,449 dozen, or about 76 per cent of the total, and the average value of Italian hats imported declined from $6.23 per dozen, on the comparable four months' period in 1924, to $5.46 per dozen in 1925. Imports from the United Kingdom for this same period were 12,353 dozen, or about 13 per cent of the total, and it should be noted that the average value increased from $9.64 to $13.07 per dozen.

Italy, is, therefore, for the purposes of section 315, the principal competing country.

FOREIGN PRODUCTION

The center of production in Italy is Signa, near Florence. It was estimated (1924) that 1,500 persons were employed in the Signa district in establishments producing men's straw hats. The employees were about evenly divided between men and women.

In England the principal centers of straw-hat production are St. Albans and Luton, towns near London. No estimate was obtained of the number of factories in operation, the volume of production, or the number of persons employed. The English manufacturers of men's straw hats in 1923-24 were suffering a business depression, and some of them were changing over to the manufacture of women's hats.

Types of hats produced in foreign factories.--Neither the English nor the Italian factories producing men's straw hats confine their business exclusively to men's sewed straw hats. Some of them also block and trim woven-hat bodies, such as panamas; some make women's and children's hats, and others produce, or deal in, felt hats. Nor is production of sewed straw hats confined to those made of sennit braids; hats are made of other braids as well.

Organization of foreign production.--The sennit braids used in the Italian straw hats exported to the United States are not made in Italy but are of Japanese origin, as are also the sennit braids used in the sewed straw hats made in the United States and in England.[2]

[Footnote 2: Milan and fancy braids are plaited by Italian women in their homes, but this industry is not to be confused with the manufacture of sewed hats, the subject of this investigation.]

In general, the foreign straw-hat factories do not bleach straw braids in their own establishments. In Italy, however, one concern not only bleached its own braids but also bleached braids for other straw-hat manufacturers.

With respect to hats, some of the unfinished bodies, usually leghorns, are made by women in their homes. But men's sewed straw hats, the subject of this investigation, are produced in factories or in small workshops. The latter generally operate on a contract basis for the larger manufacturers or shippers. The workshops which own their own equipment are organized to produce from 25 to 200 dozen sewed hats per week. In the making of the shell or body of the hat the contractors are paid on the basis of the number delivered to and accepted by the principal. The contractors furnish their own sewing cotton, gelatin, and other materials, except braid, used in making the shells or bodies of the hats. The trimming of straw hats is also to some extent performed on a contract basis.

The establishments visited in England generally perform all the operations of making and trimming hats in their own establishments, although at times "outworkers" are employed.

Working hours and wages.--The labor employed in the manufacture of sewed straw hats is well organized in both Italy and England. The rates of wages and hours of labor, both of factory workers and of employees of contractors, are determined by collective bargaining. A minimum wage scale for both pieceworkers and timeworkers became effective in Italy October 27, 1924. The labor of women and children in Italy is limited to 48 hours per week (decree of March 15, 1923). The employment of children under 12 years of age in shops and factories is prohibited.

COSTS OF PRODUCTION

Methods of obtaining cost data.--Costs of the domestic Italian and English hats were obtained by representatives of the commission. In the United States they were given access to the books and records of the manufacturers. Domestic costs of materials, labor, and overhead are based on actual records.

In both Italy and England representatives of the commission were given access to manufacturers' books showing estimates of their costs. The estimates of material and labor costs were verified from original records. Estimates of general administrative and factory expense were expressed as percentages of the combined cost of labor and materials or of sales. Access to records from which the latter estimates could be verified was not permitted.

DESCRIPTION OF COST ITEMS

Material.--Material includes costs of braid, of bleaching, and of trimming materials and sundries, and also the cartons in which the hats are packed.

Labor.--The amount charged to the individual hat for labor includes all labor costs connected with its manufacture. The amount of direct labor on each hat was first determined. The indirect labor charge for each hat was determined by applying to its direct labor charge the percentage which total indirect labor for the factory bore to the total direct labor.

Overhead.--In each domestic factory the total overhead charges were obtained and the ratio of these charges to the total direct labor cost of the respective factory was computed. This ratio, expressed as a percentage of direct labor, was applied to the direct labor cost of individual hats to determine the overhead charge to be apportioned to each hat.

SELLING EXPENSE

(a) Domestic.--The ratio of total selling expense in each factory to total manufacturing cost (material, labor, and overhead) was first determined. This ratio (expressed as a percentage of total manufacturing cost) applied to the manufacturing cost of the selected hat determined its proper share of the total selling expense. Firms organized to deal directly with retailers uniformly had higher selling expenses than those whose products were marketed chiefly through jobbers. The average selling expense of the selected hats was $1.64 per dozen, or 10.8 per cent of the average manufacturing cost. In selling expense is included the charge for cases and other packing material.

(b) Foreign.--Costs of selling hats to importers in the United States are included in the general overhead expenses reported by foreign companies, but are an inconsiderable item when compared with manufacturing costs. No expenses of the offices maintained in this country by foreign manufacturers have been included.

TABLES SHOWING COST COMPARISONS

In Table 8 are shown the costs of domestic and Italian men's sewed straw hats, irrespective of the type of braid used in their manufacture. In Table 9 are shown similar cost data for domestic and English hats. In both tables costs are shown with and without transportation charges on foreign hats, and ad valorem rates of duty necessary to equalize differences in foreign and domestic costs have been computed.

TABLE 8.--Rates of duty necessary to equalize differences in costs of production of men's sewed straw hats in the United States and in Italy, the principal competing country

TABLE 9.--Rates of duty necessary to equalize differences in costs of production of men's sewed straw hats in the United States and in England

COMPETITIVE CONDITIONS

Styles for men's straw hats are set about one year in advance. Sample hats are manufactured in May and June and orders are taken by manufacturers in July, August, and September for hats to be delivered the following spring. This custom of the trade makes it possible for foreign manufacturers to copy and offer in competition the same styles as those made by American manufacturers. Imported hats have a wide range of styles and prices, including not only sewed hats of sennit braid but also those of fancy braids, and woven body hats such as leghorns. Domestic hats also comprise a wide range of styles and prices. Within this range there is a more or less definitely limited field in which imports compete directly with domestic merchandise.

TRANSPORTATION AND MARKETING COSTS

Before the Italian or English hats enter into competition in the domestic wholesale market with hats of domestic manufacture expenses for transportation, marine insurance, and consular fees must be incurred. In the season 1923-24 the charges specified amounted to approximately $1.10 per dozen for Italian hats and $1.35 per dozen for English hats.[3] Such expenses are set forth in the lower half of Tables 8 and 9.

[Footnote 3: Computed from consular invoices for hats imported at the port of New York in the six months, January-June, 1924.]

The methods of marketing foreign and domestic hats are similar, but because of minor differences in terms of sale, etc., it was not found practicable to institute a mathematical comparison of selling costs. Some domestic firms deal only with jobbers, others only with retailers. A few of the largest firms sell to both jobbers and retailers. When the manufacturer dispenses with the services of jobbers his selling costs are, of course, increased. Foreign straw hats are distributed principally by importing jobbers. Such firms are usually engaged also in the marketing of domestic hats and in some instances are manufacturers or have financial interests in domestic factories. Foreign factories occasionally deal directly with large retailers in this country. In such cases it is usual for the retailer's representative to travel abroad to inspect samples and place orders. One large Italian factory maintains a New York office through which it deals directly with domestic retailers.

FORMAL STATEMENT OF CONCLUSIONS

(1) Italy is the principal competing country. While Commissioners Costigan and Dennis agree with this conclusion, they are also of opinion that, with respect to hats valued at more than $9.50 per dozen in the country of exportation, Great Britain is shown to be the principal competing country.

(2) The average cost of production in the United States, as shown by the cost data for the season 1923-24, of men's sewed straw hats sold to jobbers for $10.55 to $16.52 per unit of one dozen is $12.74. The average cost of production, not including transportation costs, of imported men's sewed straw hats whose landed costs, duty paid, range from $8.51 to $13.10 per dozen, and which are like or similar to the domestic hats above described, is $5.98 per dozen. The difference in said costs of production, transportation costs not included, is $6.76 per dozen. The cost of production of the imported hats, including transportation costs from the foreign factory to the dock at New York, is $7.08 per dozen, and the difference in said costs is $5.66 per dozen.

(3) The average selling price of such imported men's sewed straw hats, in the country of exportation, as shown by said cost data, is $6.42 per dozen. The American selling price, as defined in subdivision (f) of section 402 of the tariff act of 1922, of similar competitive articles manufactured or produced in the United States, is $13.28 per dozen.

(4) If transportation costs be not included, the differences in costs of production in the United States and in said principal competing country are greater than the amount of the present duty of 60 per cent ad valorem increased by the total maximum increase authorized under section 315, subdivision (a), of said act, and said differences in costs of production in the United States and in said principal competing country can not be equalized by proceeding under the provisions of said subdivision (a); that is to say, by increasing to the extent of 50 per cent the existing ad valorem duty applied to the value of the imported article in the country of exportation.

(5) If transportation costs be included, the rate of duty shown by the differences in costs of production, necessary to equalize said differences, upon men's sewed straw hats valued at $9.50 or less per dozen in the country of exportation, is a rate of 88 per cent ad valorem based on the valued in the country of exportation, as defined in section 402 of said act.

(6) If transportation costs be not included, the rate of duty shown by the differences in said costs of production, necessary to equalize said differences, upon men's sewed straw hats valued at $9.50 or less per dozen in the country of exportation, is a rate of 50 per cent ad valorem based upon the American selling price, as defined in said section 402, of similar competitive articles manufactured or produced in the United States.

(7) The average cost of production in the United States, as shown by the cost data for the season 1923-24, of men's sewed straw hats sold to jobbers for $16.74 to $22.50 per unit of one dozen is $16.06. The average cost of production, not including transportation costs, of imported men's sewed straw hats whose landed costs, duty paid, range from $15.64 to $18.60 per dozen, and which are like or similar to the domestic hats above described, is $9.32 per dozen. The difference in said costs of production, transportation costs not included, is $6.74 per dozen. The cost of production of the imported hats, including transportation costs, is $10.67 per dozen, and the difference in said costs is $5.39 per dozen.

(8) The average selling price of such imported men's sewed straw hats, in the country of exportation, as shown by said cost data, is $9.73 per dozen.

(9) If transportation costs be included, the rate of duty shown by the differences in costs of production necessary to equalize said differences upon men's sewed straw hats valued at more than $9.50 per dozen in the country of exportation is a rate of 55 per cent ad valorem based upon the value of such hats in the country of exportation.

(10) If transportation costs be not included, the rate of duty shown by the differences in costs of production necessary to equalize said differences upon men's sewed straw hats valued at more than $9.50 per dozen in the country of exportation is, according to a mathematical calculation, 69 per cent ad valorem based upon the value of such hats in the country of exportation. Commissioners Marvin, Glassie, and Baldwin are, however, of the opinion that the existing rate of 60 per cent ad valorem substantially equalizes differences in costs of production in respect of hats valued above $9.50 per dozen in the country of exportation.

SUMMARY OF CONCLUSIONS

On the basis of the facts presented the commission agrees that the data indicate an increase in tariff rates, if the differences in costs of production are to be equalized between lower-priced grades of foreign hats and comparable products of American factories. In respect of such hats, Italy is the principal competing country.

The commission further agrees that foreign hats sold in the United States on a basis of quality rather than price are the higher-priced hats which at this time are not keenly competitive with the products of the American industry. With respect to such higher-priced hats, Commissioners Costigan and Dennis are of opinion that Great Britain is shown to be the principal competing county, and that under the law the data indicate that the duty should be reduced.

The commission agrees that $9.50 per dozen, foreign valuation, represents a fair breaking point for customs purposes between lower-grade hats competing on a price basis and hats of superior material and workmanship competing on a quality basis.

Under section 315 of the tariff act of 1922 there is an undetermined legal question with respect to including transportation expense in estimating foreign production costs. Commissioners Costigan, Dennis, and Baldwin agree that under subdivision (c) of section 315 a fair estimate of foreign costs should include the expense of transporting the foreign product to the principal competitive market or markets in this country. For hats whose foreign value is not in excess of $9.50 per dozen the rate of 88 per cent ad valorem is indicated as the correct duty for equalizing costs, with transportation included.

Chairman Marvin and Commissioner Glassie agree that under the law costs of production do not include transportation costs on either side. If transportation costs be not included in the foreign costs of production shown by this investigation, the rate indicated by the cost data would be 105 per cent on foreign valuation. This rate being in excess of the maximum permissible under subdivision (a) of section 315, resort must be had under subdivision (b) of section 315 to the American selling price basis of valuation in order to equalize the differences in production costs. For hats whose foreign valuation is not in excess of $9.50 per dozen the rate of duty thus indicated by the cost difference is 50 per cent on the American selling price.

MEN'S SEWED STRAW HATS

UNITED STATES TARIFF COMMISSION

COMMISSIONERS

CONTENTS

LETTER OF TRANSMITTAL

JULY 17, 1925.

MEN'S SEWED STRAW HATS

JULY 17, 1925.

INTRODUCTORY

INFORMATION OBTAINED IN THE INVESTIGATION

DOMESTIC PRODUCTION

IMPORTS

PRINCIPAL COMPETING COUNTRY

FOREIGN PRODUCTION

COSTS OF PRODUCTION

DESCRIPTION OF COST ITEMS

SELLING EXPENSE

TABLES SHOWING COST COMPARISONS

COMPETITIVE CONDITIONS

TRANSPORTATION AND MARKETING COSTS

FORMAL STATEMENT OF CONCLUSIONS

SUMMARY OF CONCLUSIONS