EXHIBIT No. 163 Quebracho extract, solid (63 percent tannin 1): New York prices, ex-dock, duty paid, in specified months, 1920-43 Source: 1920-28 drug and chemical markets; 1929-43 Oil Paint and Drug Reporter. EXHIBIT No. 164 QUEBRACHO EXTRACT (Memorandum Prepared for the Subcommittee on War Mobilization of the Senate Committee on Military Affairs, by the United States Tariff Commission, Washington, D. C.) 1943 TARIFF ACT OF 1930-PARAGRAPH 38 Extracts, dyeing and tanning: * ** quebracho, * and combinations and mixtures of the foregoing articles in this paragraph, 15 per centum ad valorem: Provided, That no article containing alcohol shall be classified for duty under this paragraph. INTERIM CHANGE IN TARIFF STATUS By the terms of the trade agreement with Argentina, effective November 15, 1941, the rate was reduced to 71⁄2 percent ad valorem. COMPARISON OF TARIFF STATUS Act of 1930, paragraph 38-15 percent. DESCRIPTION AND USES Quebracho extract, one of the world's most important tanning materials, is made from the heartwood of Schinopsis lorentzii, the true quebracho commonly known as quebracho colorado or red quebracho, and Schinopsis balansae commonly known as quebracho macho. The quebracho colorado variety is the more important source of the tanning extract of commerce. The quebracho trees grow only in South America and are commercially exploited in northern Argentina, Paraguay, Brazil, and Uruguay. Quebracho extract is employed principally for tanning hides and skins. Minor uses, which account for a very small percentage of the total quebracho imported, are as a mud conditioner to minimize caving in during the drilling of deep wells by the petroleum industry, as a flotation agent in lead-ore concentration, in cement manufacture, as a dry color, in the manufacture of toners for printing ink, in water treatment, and in gasoline rectifying. In the preparation of quebracho extract only the heartwood containing 20 to 27 percent tannin is used; the sapwood, containing 3 to 5 percent tannin, and the bark, containing 6 to 8 percent tannin, are not utilized. Tanning extracts prepared from quebracho wood may be liquid, solid, or, to a limited extent, powdered. Quebracho extracts will not ferment and are noted for their quick tanning properties and high tannin content. The liquid extracts contain about 35 percent tannin and are produced either directly from the wood, or from the solid extract by a comparatively simple process of solution in water and treatment with a bisulphite. The former is known as fresh liquid quebracho extract and the latter as dissolved solid extract. Certain tanners claim that the "fresh" liquid quebracho extract has advantages over the "dissolved" solid extract in that the former has better color, contains less red, and, for heavy leather tanning, contains a higher percentage of nontans, which are advantageously utilized for filling the voids in the leather. The solid extracts are divided into two broad classes: Ordinary extract soluble in hot water and containing 63 percent tannin and treated extract soluble in cold water and containing 64 percent tannin. The powdered extract, which contains 64 percent tannin, is produced in small amounts. The wood yields a relatively high proportion of tannins of "reds" which are not easily soluble. Without treatment, these appear in the ordinary extracts as from 6 to 10 percent of insolubles. By chemical treatment, usually with a bisulphite, they are dissolved and made available for tanning. Extracts so processed are known as "treated," "sulphited," "clarified," or "solubilized," and contain from practically none to less than 2 percent of insolubles. The small tanners and others using small amounts of extract find it unprofitable to install the necessary equipment for dissolving the solid extract and treating with a bisulphite and therefore buy the liquid extract. Quebracho extract finds extensive and wide application in the tanning of all types of vegetable-tanned leathers. About 90 percent of the consumption is in the tanning of heavy leathers, including military leathers, such as sole, belting, and harness. Practically every established heavy-leather tannage in this country includes a substantial proportion of quebracho in the blend of tanning materials. Quebracho is also adapted to the tanning of light leathers, and bag, case, patent, and upholstery leathers. UNITED STATES PRODUCTION, IMPORTS, EXPORTS, AND CONSUMPTION Table 1 shows estimated United States production of solid extract from imported wood and the imports of solid quebracho extract, for specified years, since 1929. The ratio of production from imported wood to imports was about 15 percent in 1935 and 22 percent in 1938 as compared with about 4 percent in 1941. War conditions have restricted imports of logs and the only plant producing extract shut down in the latter part of 1942. There is a large domestic production of liquid extract made by dissolving the imported solid extract. Comparable data on value of production and imports are not available. Data in table 2 show that in the period 1933-41, the value of imports ranged from 2.5 million dollars in 1933 to 8.0 million dollars in 1941. In the same period, the quantity imported ranged from 85.2 million pounds in 1938 to 213.0 million pounds in 1941. Imports in 1942 were somewhat larger than in 1941. The average unit value increased steadily from 2.1 cents per pound in 1933 to 3.7 cents in 1941. TABLE 1.-Quebracho extract (solid)-Comparison of United States production specified years, 1925-41 1 Estimated from importations of wood, on the ratio of 3.50 pounds of wood to 1.00 pound of extract. Source: Compiled from official statistics of the U. S. Department of Commerce. TABLE 2.-Quebracho extract (solid): United States imports for consumption in specified years, 1925 to 1941 1 Rate reduced in trade agreement with Argentina, effective Nov. 15, 1941. Source: Compiled from official statistics of the U. S. Department of Commerce. Argentina is by far the principal source of United States imports of quebracho extract. (See table 3.) Those credited to Argentina include an unknown amount of extract originating in Paraguay. Information is not available to show the respective amounts originating in each country. It is known, however, that exports of extract from Paraguay to all countries (including Argentina) averaged about 88,000,000 pounds annually during the period 1936-41. TABLE 3.-Quebracho extract (solid): United States imports for consumption by principal sources in specified years, 1929 to 1941 Source: Compiled from official statistics of the U. 8. Department of Commerce. Exports of quebracho from the United States have always been small and have consisted of (1) liquid extract made either from imported logs or from imported solid extract, and (2) reexports of imported extract. Exports under the first category were not reported separately but are known to be small. Reexports of foreign merchandise have always been small and have gone chiefly to Canada. Reexports were valued at less than $500 in each of the years 1937 and 1938; they increased from about $1,000 in 1939 to $48,000 in 1941. A comparison by gross quantity and by tannin content of apparent consumption of quebracho and of all vegetable and synthetic tanning materials is shown in table 8. On a tannin basis, quebracho accounted for approximately 69 percent of imports and 46 percent of apparent consumption of all vegetable and synthetic tanning materials during 1937-41. In 1942 about 72 percent of all imported tannin was obtained from quebracho and during 1943 probably as much as 84 percent will be acquired from this source. Quebracho extract imported as such, amounted to about 92 percent of all quebracho imports (in terms of tannin content). TABLE 4.-Tanning materials-vegetable and synthetic: Comparison of United States imports and apparent consumption of all vegetable and synthetic tanning material and quebracho, average, 1937-41 1 Includes quebracho, mangrove, wattle, valonia, gambier, divi-divi, sumac, hemlock, and other crude materials and extracts. Source: Maximum Foreign Supply Survey-Tanning Materials, U. S. Tariff Commission, Mar. 23, 1942 ORGANIZATION OF THE DOMESTIC INDUSTRY In 1942, the Tannin Corporation, with a plant at Wilmington, Del., was the only domestic producer of liquid quebracho extract from imported logs. In the latter part of 1942, this plant was closed and plans were made to dismantle it. There are five producers of liquid quebracho extract from imported solid extracts, namely, the Tannin Corporation, Leon Monnier, Newark Tanning Extract Co., American Extract Co., and Tannade Co. Plants are located at Peabody, Mass.; Newark, N. J.; Port Allegany, Pa.; and Chicago, Ill. Most of these companies produce a general line of tanning extracts and natural dyes from domestic and imported raw materials. In addition, the larger tanneries dissolve and clarify imported solid extract at the point of consumption. The Tannin Corporation is owned by the St. Helen's Holding, Ltd., a subsidiary of the Forestal Land, Timber & Railways Co., Ltd., London-the principal producers of quebracho extract in South America and of wattle extract in South Africa. This firm is probably the largest producer and distributor of liquid and solid quebracho extracts. International Products Co., the only American-owned organization operating quebracho extract plants in South America, formerly operated a plant on Staten Island to dissolve imported solid extract. DOMESTIC PRICES Quotations for solid quebracho extract, 64 percent clarified, in the New York spot market, averaged 5% cents per pound (ex-dock, plus duty) during 1928-30, declined to 3% cents in 1931 and to 2% cents in late 1932. In 1939, quotations were steady at 44 cents until November, when increased transportation costs caused an increase to 44 cents. In January 1941, quotations advanced to 5% cents, due principally to increased shipping costs. In July 1941, quotations declined to 5 cents, remained at that figure until April 1943, when they advanced to 5% cents. Current quotations for solid extract, 63 percent, are 4 cents per pound (ex-dock, plus duty). This price is based on an ocean freight rate of $12 per ton and insurance of $1 per ton. Actual rates at the present time are $21.60 for freight and $3.75 for insurance, making the actual price 5% cents per pound. Liquid extract, 35 percent tannin, in tanks, was quoted at 2 cents per pound in 1932-33. The 1939 quotation was 2 cents until late in the year, when it increased to 32 cents. In January 1941, the quotation advanced to 34 cents and was further increased during May-September to 54 cents as the result of higher transportation costs. In November, quotations for the liquid extract were withdrawn and the dissolved solid extract of 35-percent tannin content was offered in its place at 4 cents. FOREIGN PRODUCTION The quebracho tree of South America is commercially exploited on a large scale in northern Argentina and the Province of Chaco, Paraguay. These countries account for approximately 98 percent of the world's output of quebracho wood and extract. In recent years the quebracho tree has also been exploited in Brazil and Uruguay. The extract industry is highly organized and has assumed a monopolistic character within the past 30 years. There are about 22 companies producing quebracho extract, 18 are in Argentina and 4 in Paraguay. The four Paraguayan manufacturers, three of which are owned by Argentina interests and the other by United States interests, have sales offices in Buenos Aires and their over-all production and sales program have been based on close cooperation with the Argentine competitors. At present the industry's estimated annual capacity in Argentina and Paraguay is about 500,000 metric tons of dry extract, compared with a capacity of 380,000 metric tons by 24 companies in 1926. Estimated production in Argentina and Paraguay increased from an average of about 250,000 metric tons annaually to about 310,000 metric tons for the period April 13, 1942, to April 27, 1943, of which Argentina produced 240,000 tons and Paraguay 70,000 tons. Of the present output, over one-third is by one British-owned company, about onethird by the next 7 largest companies, and the remainder by the 14 smaller companies. Much of the quebracho forest lands is owned by the larger extract companies, and many of the plants, especially in eastern Chaco were constructed with European capital and supervision. It is estimated that possibly $50,000,000 have been invested in the industry in Argentina alone. INTERNATIONAL TRADE A relatively small proportion (about 10 percent) of the quebracho extract produced in Argentina and Paraguay is consumed in these countries. Practically all of the output of Paraguay until recently was exported through Argentina; consequently, Argentine export statistics of quebracho extract are indicative of the production of the two countries. Exports of quebracho extract from Argentina are shown in table 6 and those from Paraguay in table 7. 84949-44-pt. 9— -5 |