tariff act, and prior to January 1, 1911. The amount of duties which will be refunded by the enactment of this bill, as stated by the Treasury Department, together with other facts in the case, are shown in the following communication from the Secretary of the Treasury: Hon. O. W. UNDERWOOD, TREASURY Department, Chairman Ways and Means Committee, House of Representatives. SIR: I have the honor to acknowledge the receipt of your letter of the 9th instant transmitting a copy of H. R. 12813 authorizing the refund of duties collected on parts or accessories of lace-making and other machines imported prior to January 1, 1911, and requesting me to advise you, for the information of the Committee on Ways and Means, whether in my opinion there are other similar machines to those named in the bill on which the duties should be refunded; and, if so, to name the machines and to state the amount or amounts which would be involved. In reply I have to advise you that in a letter dated August 21, 1911, addressed to the chairman of the Committee on Ways and Means, I suggested that the bill was intended to relieve importers who paid duty upon accessories and parts of lace-making machines without filing protests against the collector's decision, as well as importers whose protests were overruled by the Board of United States General Appraisers, and I stated that the department perceived no objections to refunding the duties collected upon the accessories and parts of such machines. The accessories and parts of other machines which seem to fall within the spirit of this bill are parts of embroidery machines and accessories thereof, as well as machines used in preparing flax for weaving, and I have to advise you that reports have been received from collectors at the ports through which this merchandise was imported, and the following table shows the various amounts collected and not refunded at the ports mentioned: Parts and accessories of embroidery machines: New York.. Parts and accessories of Gothrough lace-making machines: $5,400.00 495.00 12, 102.30 2,967.30 2, 505.50 5, 162.85 Boston..... Machinery used exclusively for preparing flax fiber for weaving: Boston... 4, 779.58 28, 012. 53 5,048. 23 Total....... 33, 060.76 The amounts in the above table represent the total which would probably be refunded if the bill were enacted into law, although these figures can not be taken as absolutely correct. I suggest, however, that the bill be amended to read as follows: "A BILL To refund duties collected on lace-making and other machines and parts or accessories thereeof Imported subsequently to August fifth, nineteen hundred and nine, and prior to January first, nineteen hundred and eleven. "Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That the Secretary of the Treasury is hereby authorized and directed to pay out of any money in the Treasury not otherwise appropriated all duties collected and not refunded upon all embroidery machines, Lever and Gothrough lace-making machines, machines used only for the weaving of linen cloth from flax and flax fiber (including preparatory machines), and also all parts or accessories of any of said machines, if imported subsequently to August fifth, nineteen hundred and nine, and prior to January first, nineteen hundred and eleven." LIMITS OF PORT OF ENTRY OF GALVESTON, TEX., TO INCLUDE PORT BOLIVAR. JULY 15, 1912.-Committed to the Committee of the Whole House on the state of the Union and ordered to be printed. Mr. HUGHES of New Jersey, from the Committee on Ways and Means, submitted the following REPORT. [To accompany H. R. 22199.] The Committee on Ways and Means, to whom was referred the bill (H. R. 22199) to establish a subport of entry and delivery at Port Bolivar, in the State of Texas, having had the same under consideration, report it back to the House with an amendment in the nature of a substitute, and recommend that the bill as amended do pass. The letter of the Secretary of the Treasury regarding this measure is hereto attached and made a part of this report. Hon. O. W. UNDERWOOD, TREASURY Department, Chairman Committee on Ways and Means, House of Representatives. SIR: Referring to your letter of the 16th ultimo, inclosing a copy of House bill 22199, providing for the establishment of Port Bolivar, Tex., as a subport of entry and delivery within the customs-collection district of Galveston, Tex., I have the honor to advise you that the matter has been carefully considered and that it does not appear that there is any necessity for the proposed action. Vessels that touch at Port Bolivar are chartered for Galveston, and if they are foreign they frequently shift from Galveston to Port Bolivar for the purpose of loading a cargo, consisting almost entirely of lumber. Port Bolivar is so near to Galveston that customs business arising by reason of the shifting of these vessels to that place may be readily attended to by officers detailed from the port of Galveston, with much less expense to the Government than that incident to the maintenance of a subport of entry at Bolivar, and this would be true even though the volume of customs business at that place should increase very considerably over that anticipated in the near future. I would suggest, therefore, that instead of establishing Bolivar as a subport of entry and delivery legislation be enacted extending the limits of the port of Galveston so as to include Port Bolivar, which would be accomplished by the enactment of a bill to read as follows: "Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That the limits of the port of entry of Galveston, Texas, be, and the same are hereby, extended to include Port Bolivar, in that State." Respectfully, CIGARS FURNISHED EMPLOYEES BY MANUFACTURERS. JULY 15, 1912.-Committed to the Committee of the Whole House on the state of the Union and ordered to be printed. Mr. PETERS, from the Committee on Ways and Means, submitted the following REPORT. [To accompany H. R. 25741.] The Committee on Ways and Means, to whom was referred the bill (H. R. 25741) amending section 3392 of the Revised Statutes of the United States, as amended by section 32 of the act of August 5, 1909, having had the same under consideration, report it back to the House without amendment and recommend that the bill do pass. The committee held hearings on the several tobacco bills referred to it looking to the exemption from taxation cigars furnished their employees by manufacturers. Testimony was given at these hearings by the Commissioner of Internal Revenue, who opposes the enactment of H. R. 25741, and by representatives of the cigar makers' union and of the Federation of Labor, favoring the enactment of the measure. The internal-revenue laws recognize no exemptions in taxing the output of cigar manufactories, but it appears that from the earliest period of this industry a custom has existed among the manufacturers of allowing their employees to make for their own personal use cigars to the extent of 21 a week, or an average of about 3 cigars for each day of the week. This custom seems to have originated and been kept up largely from the necessity of testing tobacco for cigar purposes and permitting apprentice work in the making of cigars. The custom is of such long standing that the disruption of it is considered by the manufacturers and employees of cigar-making establishments to work a great hardship on them. the testimony taken by the committee it was stated by one of the witnesses that In During the Civil War, nor during the Spanish War, the Government did not curtail our smokers. It might have been said that the Government needed the revenue. If the number of cigar makers is figured at 100,000, if we had really that number, and if 40 per cent of them were women, and 10 per cent of the men did not smoke, and you deducted that 50 per cent and allowed the other 50 per cent 21 smokers a week, the amount that would be collected as revenue would not amount to a great deal. We have had those 3 smokers a day, and half a dozen on Saturday, or 21 smokers a week, since the cigar industry has existed in our country and since the present revenue laws were on our statute books. No collector has ever tried or suggested that the manufacturer should not allow us these smokers. H R-62-2-vol 5-7 The viewpoint of the department with regard to this measure is set forth in the following communication: TREASURY DEPARTMENT, OFFICE OF THE SECRETARY, The CHAIRMAN COMMITTEE ON WAYS AND MEANS, House of Representatives. SIR: I am in receipt of your letter of the 4th instant, inclosing copies of H. R. 15623 and H. R. 17253, "To exempt from internal-revenue tax cigars supplied employees by the manufacturers thereof," and requesting that you be given the benefit of any suggestions as to the advisability of enacting either of these measures into law. The two bills are similar, differing only in that the first one provides "that the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury, be, and he is hereby, authorized to promulgate rules and regulations for the determination of the maximum number of cigars to be consumed by said employees," while the second bill fixes the number, not to exceed 21 cigars per week per employee. These bills have been introduced as a result of the rulings of the Commissioner of Internal Revenue in Treasury Decisions Nos. 1723 and 1725 (copies herewith), that cigars and cigarettes known as "smokers" given to or taken by employees are taxable. Under section 3394 of the Revised Statutes it has always been held that the tax on cigars and cigarettes accrues upon their removal from the bonded premises of the manufacturer. This construction is supported by section 3397, Revised Statutes. Therefore, the view taken that cigars and cigarettes removed from the bonded premises of the manufacturers by employees are taxable is admittedly correct. The tax status of "smokers" consumed on the factory premises, however, is not so defined, and the question is expected to be settled in a friendly suit to be instituted in the courts, as stated in Treasury Decision 1744 (copy also herewith). The department is opposed to any bill which alters the provisions of sections 3394 and 3397 of the Revised Statutes so as to exempt from tax cigars removed from the bonded factory premises by employees; it is also opposed to any exemption of tax on cigars supplied to employees generally, and does not believe that any number should be fixed for their personal use and consumption free of tax. No objection, however, would be offered to the bills submitted amended so as to read that: "On and after the passage of this act no manufacturer of cigars shall be taxed for cigars consumed on the factory premises by the cigar makers employed in the actual fabrication or production of cigars, and the manufacturers themselves; but no manufacturer, when notified to show cause against assessment for apparent deficiency in his accounts, shall set up any defense claiming relief on the ground of cigars consumed upon which no tax is required, as herein provided. "SEC. 2. That section 3394 of the Revised Statutes of the United States be amended according to the provisions of this act." Respectfully, FRANKLIN MacVeagh, Secretary. [NOTE.-The Treasury Decisions cited in above letter appear as Appendix A.) The purpose of this bill (H. R. 25741) is to legalize that which until recently has been an unbroken custom from time immemorable of manufacturers of cigars to allow their employees to make for their own use a certain number of cigars per week, which cigars to be free from internal-revenue taxes. The merits of the measure relate to the testing of tobacco for use in cigar making, the training of apprentices in the manufacture of cigars and the testing of the actual wrapping and making of the cigars themselves. No criticism appears to have even been made of this practice on the part of the department until the recent decision of the Commissioner of Internal Revenue. While the committee appreciates the objections to the measure presented so clearly by the commissioner, yet the committee feels that the amount of tax involved is so small that in exempting the cigars mentioned in the bill the effect on the revenue will be imperceptible. The objection to the enactment of this bill on the ground that it would encourage the violation of the revenue laws seems to be prop |