conditions relative to the return of merchandise, the settlement of disputed claims, etc., as an inducement for purchasing in large quantities.

COMPETITIVE STATUS OF IMPORTS

In addition to the size of the market and its ability to absorb the goods, the competitive status between the imported product and a similar domestic product should be investigated. The majority of consumers may have acquired the habit of purchasing the competing domestic product as a result of a Nation-wide advertising campaign which has firmly established it in the consumer mind. Large-quantity imports may, therefore, be unwise and the market could be more effectively entered by starting on a smaller scale and gradually building up a demand for the goods which it is desired to import. Where the purchasing power of the domestic market is temporarily depressed, the importer, by reason of large-quantity buying, may be able to sell at prices low enough to attract purchasers from well-established but higher-priced domestic items. Local prejudices against the country of origin of the imported goods, on the other hand, are strong enough at times to cause a material decrease in the demand for such goods.

GEOGRAPHICAL DISTRIBUTION OF THE DOMESTIC MARKET

In considering these factors of price, quality, and quantity, it should be remembered that market conditions in the United States are highly diversified geographically. Thus, a market analysis of New York State would not apply to a Southern State where the consumer purchasing power is smaller and the demand for quality merchandise is not so great. The importer must be aware of these varying conditions and base his purchasing accordingly. He should also take into consideration the effect on the market of the tastes and traditions of large numbers of foreign-born people and persons of foreign descent who have settled in certain sections of the country.

IMPORTS AND TRANSPORTATION COSTS

The high cost of transportation in the United States may make importing desirable and profitable. On low-value products of a bulky nature, the cost of railroad transportation from Middle Western points to the Atlantic seaboard is often as much as, if not more than, the value of the product itself at the point of shipment. The ocean rates from Europe to New York or other Atlantic ports on similar goods are frequently less than the railroad rates from Chicago to New York. Thus, other things being equal, while it may be impossible to compete with the domestic goods in the Chicago area, a profitable market for the imported goods may exist in the New York area, or on the west coast or the Gulf of Mexico.

CONSIDERATIONS AS TO THE SOURCES OF FOREIGN SUPPLY

For most lines of imported products there is more than one source of foreign supply. Frequently, these sources compete actively with one another in the same importing market. Although the foreign exporters may be competing on a price or quality basis, there are other

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important factors which the importer should consider in the selection of a foreign source of supply.

The administrative costs arising from the necessity of making new foreign contacts, as a result of originally choosing a foreign source with a limited capacity, may often be avoided if an investigation (and proper selection) is made of the capacities of the various foreign suppliers before deciding upon a definite, permanent source.

IMPORTS AND RECIPROCAL TRADE AGREEMENTS

A knowledge of treaties with other countries in which are included the so-called "most-favored-nation" clauses are indispensable to the importer. If the country from which he is importing has a "mostfavored status" of the unconditional type, he is reasonably protected against a lowering of import duties and other restrictions in favor of third countries. This is particularly important at a time when governments are making reciprocity trade agreements with one another in an effort to remove trade barriers affecting selected groups of commodities. Should the country wherein the importer has established a source of supply not be included in the "most-favored-nation" group, a lowering of the United States tariff on the imported product in favor of a third country might possibly force the importer to find entirely new sources of supply at much expense to himself.

DUMPING LAWS

The practice of "dumping" foreign goods on the United States market should also be given consideration. "Dumping" is defined by act of Congress, H. R. 2435, as the sale or purchase in the United States of foreign-made goods below their fair market value in the exporting country or, in the absence of such value, below the foreign cost of production. The Secretary of the Treasury is authorized to levy a special "dumping duty" on such imports in an amount equal to the difference between the invoice price and such fair market value or cost of production as the case may require. Importers following this practice are likely to suffer losses as a result of this penalty and should make sure that their imports are not subject to the antidumping provisions of the tariff law.

WAR RISK IN IMPORTING

The possibility of a foreign country becoming engaged in war is ever present. Upon the declaration of war usually one of the first things to take place is the impounding of all funds and credits by the belligerent nations. For this reason, when economic upheavals and other influences signify that the continuance of peace is uncertain, importers should be warned against the maintenance of large balances either in foreign banks or in foreign currencies. Importers should also consider the effect of war on the capacity of the foreign source to continue to meet domestic demands. In wartimes, most nations require their entire production of all goods for home consumption. In addition to this, the belligerent country may be so effectively blockaded by the enemy that all trade with that country must be abandoned.

CURRENCY DEVALUATION AND IMPORTS

Another factor, of which we have a recent example, is government legislation in connection with the valuation of the currency. The United States Government is empowered under the Constitution to fix the value of money. In 1933 when the United States dollar was devalued to 59 cents, its value in terms of foreign currencies naturally decreased in much the same proportion. Thus, it took more dollars to purchase a pound sterling or a 100-franc note. Importers were, therefore, placed in a disadvantageous position except on those contracts which had been entered into on the basis of dollar exchange. Even so, in such event, their foreign suppliers received less than they had anticipated, and new import purchases, after that date, required a reconsideration of the price factor because of the increased cost in dollars of the foreign exchange used to buy the goods abroad.

EXCHANGE STABILIZATION AND IMPORTS

Governments may also establish funds for the purpose of manipulating or stabilizing foreign-exchange rates. This method of exchange control, which involves large-scale purchases and sales operations in foreign exchange by the government, is often resorted to when, because of abandonment of the monetary standard or of weakened government credit, exchange rates are fluctuating so widely and are so uncertain that importers and exporters are afraid to make commitments, thereby demoralizing foreign trade. Importers should closely follow such developments and their possible effects upon the landed cost of imported merchandise.