Motion Picture News (Jan-Feb 1922)

January 14, 1922 49 7 Saul Rogers Explains Stand Against Proposed 30% Ad Valorem Duty Brief Filed with Senators Shows Dangers from Foreign Retaliation AS was reported in the January 7th issue of Motion Picture News, the Senate Finance Committee held a hearing in Washington on December 27th in connection with the proposed increased duties in the Fordney Tariff bill. At this hearing several speakers representing the theatrical and motion picture industries were heard, including Saul E. Rogers, chairman of the Tariff and Taxation Committee of the National Association of the Motion Picture Industry, who argued against the proposed 30 per cent ad valorem duty on foreign-made motionpictures imported into this country. Mr. Rogers filed with the Senate Finance Committee a brief embodying his arguments against the proposed 30 per cent ad valorem duty. The seven principal reasons for his recommendation that the present specific duty be maintained and the proposed ad valorem duty be rejected were summarized in last week’s account of the Senate hearing in Motion Picture News (Page 382). In the following are submitted the more important paragraphs of Mr. Rogers’ brief not already included in the News’ report of January 7th : “ If the 30 per cent tariff becomes law there is no doubt that the foreign nations will retaliate by imposing equally high or higher ad valorem duties against the American product, and they will be careful to base their tariff on American valuation in order to make the tariff yield as high as possible. Bearing in mind the fact that the American film producers have practically a monopoly in the motion pictures exhibited in foreign countries, a tariff barrier raised against the American product would mean the loss of millions of dollars to this industry. The American control of the foreign market with respect to motion picture films is approximately the following : “ Great Britain, approximately 85 per cent of the films exhibited ; Australia, 90 per cent of the films exhibited ; South America, 95 per cent of the films exhibited ; Continental Europe, 85 per cent of the films exhibited, and the Far East, 80 per cent of the films exhibited. “ At present the American market affords us an opportunity to amortize the cost of production plus a small profit, and our foreign business is practically all profit. If we are confronted with a retaliatory tariff abroad this industry will he compelled, in order to enter the foreign market under favorable conditions to either organize producing companies abroad and carry on a material part of our production abroad as foreign companies, which would throw thousands of people out of employment in this country, or the •other alternative would be for 11s to cur tail the cost of production in this country very materially in order to obtain the amortization of production and a reasonable profit in this country, knowing that we will be compelled to speculate in the foreign market for a profit. In the latter event, curtailment of salaries and discharge of a considerable number of employees throughout the entire industry will be necessary and labor employed in this industry will naturally suffer. If material curtailment in the expense of production is necessitated by such a measure it will mean that the high standard at present maintained in American production will of necessity be lowered and the present superior standard of American production, recognized throughout the world, will immediately fall, and our foreign competitors will then be in a position to easily control the entire market and force American productions into a minor position. If, on the other hand, the standard is to be maintained and we are compelled to obtain amortization of production and a profit out of the American market, it can be readily realized that the American consumer would be compelled to pay a considerably higher price for American productions. “ The fear of retaliation by the foreign countries is well founded, as will appear from the mass of press clippings which have been gathered from foreign newspapers and foreign trade periodicals, which have been submitted to this committee. “ The imposition of an ad valorem duty, however high, will not keep the foreign product out of this country, nor will the present 30 per cent ad valorem duty equalize the difference in production cost between that of the foreign market and that of the American market. If the argument of the agitators for this tariff is to be believed, then it must be presumed that a motion picture production can be made abroad for approximately one-fifth or onethird of the cost of production in this country. If that be true, then it would take a tariff of between 300 per cent and 500 per cent ad valorem, based on the foreign market cost of production, to equalize it, and it would require a duty of 100 per cent ad valorem American valuation to likewise equalize it. A 30 per cent ad valorem duty would not act as a deterrent because, if a foreign concern produced a motion picture production with merit and with the possibility of fair earnings in this country, the matter of an ad valorem duty of 50 per cent or 60 per cent will not deter the foreign producer from introducing the film into this country. It will merely mean that the profit of the importer will be somewhat diminished, but eventually a fair and reasonable profit will be made. This is particularly true in view of the fact that he is not compelled to bring his entire product or entire production into this country. He merely causes the negative film to be imported, pay his duty thereon on the basis of a fair appraisement, and then causes as many positive prints to be made from this negative as he deems necessary in order to exploit it in this country. “ From the point of view of revenue the duty will not cause any appreciable yield to the Government. This can be readily comprehended from the fact that the negative only of the production is brought into this country. However, if the duty were levied on the basis of American valuation, the appraiser would of necessity be compelled to make a fair allocation of its value at the ratio which the total value in the entire world bears to the United States. Thus the duty levied would not be on the basis of the entire value of the production, but only on the fair value of the United States rights as compared with the rights in the rest of the world. In the past two years approximately 350 foreign productions have been imported, and of that number not quite a dozen were found suitable to be released and exhibited to the American public. “ It is a matter of common knowledge among reputable importers in this country that large quantities of foreign films are lying in the Custom House in New York unreclaimed because the importers will not even pay the two or three cents per linear foot specific duty to release these films, and that periodically sales are held at the Customs House of foreign films for non-payment of duties, and that these films so sold bring insignificant prices. It is also a matter of common knowledge that hundreds of foreign films are lying idle in the vaults of importers because they know that they are unfit for release in this country, and that these films are being sent to reclamation plants to obtain the little physical salvage that is in them in the way of scrap film, and the silver that can be reclaimed from the films. “ The motion picture industry at present is in a stagnant condition. A number of large companies have closed their studios. Others have suspended business, and some companies have gone into the hands of receivers. Production has been cut down to between 35 and 40 per cent of normal, and the in lustry requires assistance and acceleration and a world market in order to return to normal. A tariff at this time would be nothing short of a calamity because it would absolutelv destroy our foreign market.”