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 Customs Bonded Manufacturing Warehouses 



Bonded manufacturing warehouses, operating under supervision of the U. 

 Bureau of Customs, manfacture cigars exclusively from imported Cuban leaf on 

 which duty payment is deferred until the cigars are ready for shipment. Upon 

 payment of both the duty on the component leaf and the Federal excise tax, t 

 finished cigars are then shipped for domestic consumption. In fiscal 

 there were 5 customs -bonded manufacturing warehouses that produced a total of 

 about 2^0 million cigars. Three of the five firms were located in Tampa, Fla., 

 one in New Jersey, and one in Pennsylvania. However, one firm has shifted to 

 the domestic factory category. Although for this reason the combined 

 the bonded warehouses is expected to show a decline in 196l, the total output 

 of clear Havana cigars would not necessarily drop since there is an offsett_ 

 increase in the output of this type of cigar from the domestic factory group. 



The bonded warehouse group produce "clear Havana" cigars — those consist- 

 ing entirely of Cuban tobacco. These cigars are in the higher price ranges. 

 In i960, for example, almost two-fifths of them retailed at over 20 cents ec 

 and more than a fourth retailed at 15.1 to 20 cents each; approximately another 

 fourth fell in the 8.1 to 15 cents class, and less than a tenth sold at a price 

 of 8 cents or less each. By contrast, three-fifths of the cigars produced in 

 domestic factories sold at 8 cents or less each. 



Shipment s from Puerto Rico 



In Puerto Rico, there were over 200 cigar-making establishments in 195^ • 

 The number dropped to 98 by 1958 and to about 75 in 1959* The vast majority of 

 these are small establishments producing mostly for local consumption. Cigars 

 shipped to the United States are predominantly from the branch factories of a 

 large U. S. firm. Two plants of this firm were in operation in i960, and a 

 third was added early in 1961. When this new plant is in full production, the 

 combined capacity of the three factories reportedly will be around a half-bil- 

 lion cigars annually. 



Factories operating in Puerto Rico are not subject to supervision by the 

 Internal Revenue Service, but cigars shipped from there to the United States 

 are subject to the Federal excise tax. The taxes collected on these ah 

 are eventually paid into the Treasury of Puerto Rico in accordance with the In- 

 ternalRevenue Code of 195^. For some years before 19 60, nearly all of the ciga 

 shipped from Puerto Rico to the mainland fell in the 3.1 to 15 cents price class 

 In i960, however, the proportion in this class dropped to a little under ar- 

 cent, while about 30 percent of the shipments were in the k.l t cents cla 



Since 1953, shipments of cigars from Puerto Rico to the United 

 have risen substantially, and it is likely that the increase will 

 From only 9 million cigars in 1953> shipments rose steadily to near 

 lion in i960, and a substantial further increase is occurrJ 



Imports 



Before the war (1935-39 average), over 190 mill: 

 annually into the United States, the predominant share comic 



