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Chapter Five

United States Sugar Legislation
Prior to 1947

B

EGINNING with the tariff on sugar imposed in 1789 and continuing through the sugar quota Acts of 1934, 1937 and 1948, including the 1951 amendments to the 1948 Act, Federal legislation has basically affected the sugar economy of the United States, with varying impact upon the economies of other countries.

Legislation under which the sugar industry of this country now operates is covered in Chapter Six. The current legislation will be more easily understood after an analysis of the earlier laws, since it developed from them.

Early Sugar Tariffs The First Congress of, the United States, convened in New York City, March 4, 1789, enacted a law imposing a tariff on sugar imported into this country. The purpose of this tariff and of subsequent early tariffs was to provide revenue for the United States Government.

Between 1789 and 1860, customs duties supplied from two-thirds to nine-tenths of the Federal Government's total ordinary receipts. As late as 1900, almost half the Federal income was derived from that source, whereas at present customs duties account for less than 1 per cent of receipts.

Since 1900, the original revenue purpose of the sugar tariff has largely disappeared and the principal effects of the tariff have been protection of domestic producers and higher prices to domestic consumers. This policy of high protection of domestically produced sugar led to an expansion of sugar production not only in the domestic beet and mainland cane areas, but also in Hawaii, Puerto Rico and the Philippines; and to limitation of imports of sugar into the United States from Cuba and other foreign countries.

Until 1900, domestic production of cane for the manufacture of sugar was largely confined to Louisiana and supplied only about 10 per cent of the quantity consumed in the United States. Beet sugar production, initiated in the 1860's, accounted in 1900 for about 3 per cent of United

States sugar consumption. The rates of duty imposed on imported sugar since 1883 are shown in Table 13. As Table 14 shows, Hawaiian sugar has been admitted into the United States duty free since 1875, Puerto Rican since 1902, Philippine since 1914, and Virgin Islands since 1917. Reciprocity with Cuba-A treaty of reciprocity with Cuba, which became effective in December, 1903, provides that the United States duty on sugar imported from Cuba shall be at least 20 per cent lower than the duty on sugar imported into the United States from other foreign countries. Since 1903 the duty on Cuban sugar has always been 20 per cent lower than on other imported sugar, except that (1) under later agreements with Cuba the preferential was greater than 20 per cent during the periods September 3, 1934 to September 11, 1939, December 27, 1939 to

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SOURCE: United States Department of Agriculture.

1 The first tariff on sugar was imposed July 4, 1789. The polariscopic test for tariff purposes was not used until 1883.

2 Producers in domestic areas received a bounty of 2¢ per pound on raw sugar.

3 The Act of 1913 provided that sugar should be placed on the free list on May 1, 1916. This provision was repealed April 27, 1916.

TABLE 14

TARIFF TREATMENT OF SUGAR FROM UNITED STATES
OFFSHORE AREAS AND THE PHILIPPINES

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August 5, 1909 (Payne-Aldrich Tariff)
March 1, 1914 (Underwood-Simmons
Tariff)

November 15, 1935 (Philippine

Independence Act of March 24, 1934)

Duties refunded to importers.

Dutiable at 75% of general rate less export duties and taxes from Philippines.

Free of duty up to 300,000 gross tons.1

Sugar admitted free of duty.

Duty-free imports limited to 952,000 tons of which not over 56,000 tons refined.2

April 30, 1946 (Philippine Trade Act)....Duty-free quotas of 952,000 tons, not over 56,000 tons refined, to July 3, 1954.3

March 3, 1917....

VIRGIN ISLANDS

SOURCE: United States Tariff Commission.

Sugar admitted free of duty.

1 Producers of less than 500 gross tons given priority rights in quota. Sugar in excess of quota dutiable at general rate.

2 The Philippine Independence Act also provided for an export tax on sugar entering the United States free of duty beginning in 1942. Export taxes on articles sent to the United States are prohibited by the Philippine Trade Act of 1946.

3 From July 4, 1954 to December 31, 1954 the rate is to be 5 per cent of the lowest charged another country, for calendar year 1955, 10 per cent and increasing 5 per cent each calendar year thereafter until it reaches 100 per cent January 1, 1973.

July 29, 1942, and January 1, 1948 to June 6, 1951; and (2) sugar from the Philippines has remained free of duty since the islands were given their independence July 4, 1946. After July 3, 1954, duty will be imposed on sugar from the Philippines as set forth on page 58.

Tariff Reduced in 1913-The Underwood tariff, enacted in 1913, provided for a 25 per cent reduction in the tariff on all sugar to be effective in March, 1914. It also provided that sugar would be placed on the free list in May, 1916. The 25 per cent reduction-from 1.348 cents to 1.0048 cents per pound on Cuban raw sugar-became effective as scheduled, but the further change to the free list never took place, because the Act was amended prior to May, 1916, keeping the duties on sugar at the rates which became effective in March, 1914.

Tariff Increases Following World War I-In May, 1921, the tariff on raw sugar from Cuba was raised from 1.0048 to 1.60 cents per pound. It was further increased to 1.7648 cents in September, 1922, and to 2.00 cents in June, 1930, with the enactment of the Smoot-Hawley Tariff. The 2.00 cents rate remained in effect until June, 1934, the highest rate ever imposed on sugar from Cuba since the Morril Tariff of 18831890 and the highest ad valorem equivalent in history.

Tariff Reduced and Excise Tax Imposed-In June, 1934, President Roosevelt, by a proclamation issued under the provisions of the Tariff Act of 1930, reduced the duty on Cuban raw sugar from 2 cents to 1.50 cents per pound. However, the Sugar Act of 1934, also known as the Jones-Costigan Act, described below, became effective at the same time the tariff rate was reduced. Under this law, a processing tax of 0.50 cent per pound, raw value, was imposed on all sugar, including that imported from Cuba, whether refined in the United States or imported in refined form. Domestic producers of sugarcane and sugar beets received a cash subsidy from the Government which was larger than the processing tax on the sugar they produced. Producers of sugarcane in Cuba received no subsidy. Because of these tax and subsidy arrangements, the apparent lowering of the duty in June, 1934, did not make it any cheaper for Cuban sugar to enter the United States.

Tariff Changes Under Reciprocal Trade Agreements Act -In September, 1934, the duty on Cuban raw sugar was reduced to 0.90 cent per pound by a provision of a new trade agreement with Cuba. This was the first trade agreement made by the United States under the Reciprocal Trade Agreements Act passed earlier that year.

The duty on Cuban raw sugar remained at 0.90 cent per pound from September, 1934 to January, 1942, except for a period of about three and one-half months in the fall of 1939 when it was increased to the former rate of 1.50 cents per pound because the quotas on sugar provided in the 1937 Sugar Act were suspended by Presidential Proclamation from September to December, 1939. The original trade agreement with Cuba provided that the import duty on sugar should revert to its previous level of 1.50 cents per pound whenever sugar quotas were not in effect.

The tariff on raw sugar from Cuba was reduced from 0.90 cent to 0.75 cent per pound in January, 1942, under the provisions of an amendment to the reciprocal trade agreement with Cuba. A reciprocal trade agreement with Peru providing for a reduction in the full duty on raw sugar from 1.875 cents to 0.9375 cent per pound became effective in July, 1942.

Jones-Costigan Act The Jones-Costigan Act, an amendment to the Agricultural Adjustment Act pertaining to sugar, became law in May, 1934. It provided that the Secretary of Agriculture should determine

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