1 r I H -F' 12 6 5" I IC ^0-3 H5 IT5 Cornell University Library HF 2651.C803H5 Custom house justice and Haviland china. 3 1924 013 921 840 CUSTOM HOUSB: JUSTICE .•7' AND HAVILAND CHINA r^ Cornell University Library The original of tiiis book is in tine Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://www.archive.org/details/cu31924013921840 CUSTOM HOUSE JUSTICE AND HAVILAND CHINA NEW YORK 1907 The Government having appealed to the Federal Circuit Court from the decision in om: favor of the Board of Gen- eral Appraisers No. 3, we produce for our defense the fol- lowing documents which will enable our customers and friends to judge if this persistent eflPort to stop the importa- tions of an American firm manufacturing abroad is justi- fied or not. We have been asked why this persecution should be specially directed against Haviland & Co. We know of no other reason than that our importations represent 40% of the importations of French china tableware : PAGE 1 Decision of General Appraiser Waite 4 2 Decision of the Board of General Appraisers No. 2 . 7 3 Letter to Treasury Agent Clayton 11 4 Letter to President Roosevelt, dated June 6, 1907 16 5 Letter to President Roosevelt, dated June 10, 1907 20 6 Decision of the Board of General Appraisers No. 3 24 Haviland & Co. October 1, 1907. DECISION OF GENERAL APPRAISER WAITE Memorandum of decision in the matter of the reappraise- ment of certain importations of Limoges china by Havi- land & Co. of New York, being Reappraisements Nos. 43830, 43842, and others hereinafter enumerated, includ- ing what is termed inferior white with scattered spray dec- oration, gold decoration and the same grade of ware with- out decoration: The question is one of fact, to determine the wholesale market price of the ware in the usual wholesale quantities in the principal markets of France at the time of exporta- tion. It appears from the evidence that the importing firm, Haviland & Co. of New York, is one of three partnerships having the same name but separate and distinct existences ; one being at Limoges, France, engaged in the manufacture of China, another situated at Paris, France, bearing the same relation to the manufactory at Limoges that the com- pany in New York bears to the manufactory. The whole output of the manufactory at Limoges is handled by the two other houses, to wit: the one in Paris and the one in New York. It appears that there are some thirty-six manufacturers in and about Limoges, and forty or more concerns that dec- orate china. While some of the manufacturers at Li- moges, of which Haviland & Co. is one, do not freely sell in the open market at Limoges, still there are a number of the manufacturers who do sufficiently to constitute an open 4 and one of the principal markets in France for this class of goods. It is claimed that the standing and reputation of Havi- land & Co. is such that its wares are purchased at a higher price than that of any other manufacturer of like goods in France, and, therefore, the appraisement should be higher. I think the evidence establishes that fact, but it is exceed- ingly difficult to determine how much they should be ad- vanced by reason thereof for appraisement purposes. The testimony establishes the fact that there are other manu- facturers there that sell in the open market in France, and that manufacture wares of equal grade and value intrin- sically; and the testimony is conflicting as to whether or not the Haviland wares are enhanced in value in the market by reason of their reputation and standing. I think they are and am of the opinion that it is fully covered by the ad- vance heretofore made of 5% over the wares of other manu- f actiirers making the same class and grade of goods. The main question to be decided is as to the value of the ware known as the inferior white with scattered spray dec- oration. A good deal of testimony has been taken in this case at an open hearing, which has been as nearly open as possible owing to the method pursued for obtaining testi- mony by the government agents. The advance in these invoices of this class of goods has been made on the basis of a report by certain special agents of the Treasury De- partment, assisted by an agent of the United States Manu- facturing Potters' Association, and is, in my judgment, somewhat discredited owing to the rowndabout and secret method pursued in obtaining it, when compared with the open, frank, and positive testimony given by the importer in this case and the manufacturers, who are men of wide experience and unimpeached reputation and standing in the commercial world. This question was investigated in 1905 in the cases of in- voices 3843 and 4004. At that time prices were fixed upon 5 a large number of the items involved here and In the same class and grade of ware. Since that time the prices fixed have been followed by both the Government and the im- porters, although the importers have protested that the prices fixed at that time were too high. The importers, however, in these cases have followed the reappraisements above referred to and the testimony taken in the case before me satisfied me that the entered value is as high as the wholesale market price in France at the time of exporta- tion. There appears to have been very httle, if any, change in the prices since that time. I therefore sustain the en- tered value in reappraisements 43829/30, 43842, 43870, 43899/901, 43987/89, 44010/12, 44074, 44213/15, 44217, 44027. With reference to the imdecorated white ware it seems the price is arrived at by reason of a deduction of a certain percentage from what is termed the mixed choice, a higher grade of ware, it being contended by the importers that from 20% to 25% difference exists between the two. I think, however, in the case before me of the Haviland ware, 15%, the difference which has been observed by the ap- praiser, is all that exists. I, therefore, sustain the appraised value upon that class of goods, to wit: the merchandise covered by reappraisements 44293/4 and 44276. There are certain other invoices before me which seem to have been acted upon with the list of 1905 referred to as a basis instead of the report of the special agents heretofore mentioned. This has been done with a view of raising the prices therein to the prices fixed under the reappraisements on invoices 3843 and 4004, supra. I sustain the appraised value in those cases, which comprise reappraisements 43243/45 and 43315. Byron S. Waite, U. S. General Appraiser. DECISION OF THE BOARD OF GENERAL APPRAISERS Board No. 2 The question in this case is the market value of Haviland china. The goods are manufactured at Limoges, France, and sold in wholesale quantities in Paris and New York only. Limoges is six hours distant from Paris in the south of France. At Limoges are situated munerous factories of chinaware, as well as Haviland's. At many, in fact most, of these, except Haviland's, chinaware is offered for sale in wholesale quantities. Importers have offered testimony by nmnerous witnesses and, we think, established that china- ware similar in intrinsic value to Haviland's is sold in wholesale quantities in open market at Limoges. It is undisputed that Haviland & Co. of Limoges and Paris are identical, and are practically the same in member- ship as Haviland & Co. of New York. Charles Edward Haviland is the dominant partner in all the firms. The other special partners are all members of the family. Charles Edward Haviland submitted a statement in the record in which he stated : 1. Haviland & Co., Limoges, are manufacturers only, and they sell only to Haviland & Co., Paris, and to Havi- land & Co., New York, and to both at the prices of enclosed printed price-list. 2. Haviland & Co., Paris, buy also from other manu- facturers and decorators, keep a stock in Paris, pay their travelers and expenses, and make their selling prices ex- 7 actly as Haviland & Co., New York, do in the United States. Total expenses of Haviland & Co., Paris, in 1905, 168,- 948.25fcs. Total sales of Haviland & Co., Paris, in 1905, being the total sales of Haviland & Co., china outside of the U. S., 637,161.20. Percentage of Paris expenses in 1905, 168,948.25 637,948.25 26.51%; 26J^% expenses plus 10% profit, 36^4 %, which is the legitimate difference between the net prices of Havi- land 4 Co.j Paris, and those of Haviland <| Co., Limoges. While the last expression does not make clear the basis of the percentage, we assume the Limoges net price is in- tended. We rest our conclusion in these cases upon this state- ment. Evidence of sales at Limoges of other goods, however similar, weighs but little in finding a wholesale market value in France of Haviland's goods when it is admitted and asserted that not a franc of Haviland's goods are sold at Limoges, but that they are sold in wholesale at Paris and only at Paris. To hold that testimony of sales of other goods at Limoges establishes the market value of Havi- land's goods, when it is here admitted in writing that Havi- land's are sold and can only be purchased in Paris at wholesale, for the home market and admittedly only at 36/^% more, would be without warrant. Such evidence is indirect and circumstantial in the presence of positive evi- dence of actual wholesale sales of Haviland's goods. It goes to the intrinsic value of Haviland's goods, but the as- certainment here is as to the actual market value; that is, 8 the price at which they are freely offered to all comers and actually bought and sold in wholesale quantities. That the prices of actual sales at Paris alone establish the wholesale market price of Haviland's goods is made apparent by the definitions given by the Supreme Court of the United States of what is meant by the words "actual market value" in the statute in the case of Cliquofs Cham- pagne ^ 3 Wallace, 125, wherein the court said: "The market value of goods is the price at which the owner of the goods, or the producer, holds them for sale; the price at which they are freely offered in the market to all the world; such prices as dealers in the goods are willing to receive, and pvu-chasers are made to pay, when the goods are bought and sold in the ordi- nary course of trade. You will perceive, therefore, that the actual cost of the goods is not the standard." Note also Muser v. Magone, 155 U. S., 240. Equahty of appraisement demands this. For example, the law insists that the actual market value is that at which the goods are freely bought and sold packed ready for ship- ment. This includes items of advertising for sale, rentals, insurance, interest on investments, agents' expenses, etc., necessary to carrying and selling the goods. If one manu- facturer at Limoges making sales there in a condition ready for shipment, and the other does not sell at Limoges, but simply ships to Paris and there stores, advertises, and sells them, the inequality is apparent. Such manufacturer, if Limoges is taken as his market place, does not add these increments of value which are charged to the Paris house. So we differ from the General Appraiser below and con- clude that Paris is the only home wholesale market place of Haviland's goods, and we must find the home wholesale market price at Paris. Certain catalogues and price-lists are before us. There 9 is a Paris wholesale catalogue of 1906; printed price-lists of the prices at which the goods are invoiced from the Li- moges factory to the New York and to the Paris house; a New York wholesale catalogue; and samples of the goods in question and illustrative samples. Taking Mr. Charles Edward Haviland's statement as a basis of decision, the Paris wholesale price is, on an aver- age, 36%% above the flat price stated in his invoices to the New York house. The entered value, however, at New York, shows the average addition of 10% to these prices, thus making a difference between the Paris price and the New York entered value of 26y2%. The difference, then, between the New York entered prices and the Paris whole- sale prices is 26%%. It, however, is claimed that the Paris sales, which are to all the world by the United States and Canada, are of su- perior qualities and decorations. They are certainly of dif- ferent composition of sets, differing as to coxmtries and markets ; and it is clear to us that the Paris wholesale price is more or less affected by that house being a wholesale and a retail house. There is, of course, a condition existing in Paris, by reason of the fact that the house there conducts sales both in retail and wholesale which has a bearing upon quantities, discoimts and prices ; and a fair allowance must be made for conducting each branch. We think from all of the evidence before us furnished by Mr, Charles Edward Haviland himself, taking into consideration the 10% aver- age advance already made at this port, there should be added here to make proper market value to agree with the wholesale market price in Paris 16>^%, and orders of liqui- dation will accordingly be made. I. F. Fischer, W. B. Howell, Marion- DeVries, 10 LETTER OF MR. CHARLES ED. HAVILAND TO MR. CLAYTON 29 Avenue de Villiers, Pabis, September 21st, 1906. Me. Ralph W. Clayton, Special Treasury Agent. Dear Sir, You asked me if I could give you any information that would enable you to compare the prices at which H. & Co., Limoges, sell in Eiu-ope, with the prices at which they sell to H. & Co., New York. I will try to answer with entire precision : 1st. H. & Co., Limoges, are manufacturers only, and they seU only to H. & Co., Paris, and to H. & Co., New York,— and to both at the prices of enclosed printed price-hst. 2nd. H. & Co., Paris, huy also from other manufacturers and decoratorSj keep a stock in Paris ^ pay their trav- elers and expenses, and make their selling prices — exactly as H. & Co., New York, do in the United States. 11 The following are the exact expenses of H. & Co., Paris, in 1905: Francs. Rent of PaHs Store 32,656.— Interest and Amortizement on fixtures of Paris store, costing 120,000 frs 12,000.— Advertisements and insurance 2,422.15 Travelers and Traveling expenses 33,870. 45 Interest on capital 30,000.— -Sioc/: ire Pam Dec. 31st, 1905: . . . 198,700.60 Bills receivable " " ... 149,487.35 Open accounts due " " ... 135,779.90 Bank Commissions & Exchange— allowances .... 9,557.40 {!%% on 637,161.30) Bad debts in 1905 2,608.65 Commissions to Manager of H. & Co., Paris, who pays the Paris office and store expenses, not counted above • 45,8oo.o0 Total expenses of H. & Co., Paris, in 1905 168,948.25 Total sales of H. & Co. in 1905, being the total sales of H. & Co. china outside of the United States . . .637,161.20 168,948.25 ^„5io/ Percentage of Paris expenses in 1905: . . „_ „^ Qn~ °°'^''' 26y2% expenses plus 10% profit = 36J^%, which is the legitimate difference between the net prices of H. & Co., Paris, and those of H. & Co., Limoges. 3rd. I send you copies of thirty-five invoices of H. & Co., Paris, with the prices of H. & Co., Limoges, in red ink. Packages have been omitted to facilitate the comparison between the prices of H. & Co., Paris, and those of H. & Co., Limoges. Sometimes the orders of the "Louvre" and "Bon Marche" are kept in stock in Paris, and delivered as they want the goods, without charge for packages, freight, stor- age, or cartage. In such cases no discount is made, as the freight, packages, storage, and cartage amount to more than 20%, especially on cheap decors. 12 Enclosed sheet A gives a summary of the invoices, show- ing that the net amount received by H. <| Co.j Paris, from its buyers after deduction of its Paris expenses, is Frs. 13,872.94c. while the net amount received by H. <§ Co., Limoges, from H. ^ Co., Neva York, for the same would be Frs. 15,764.33c.— and this although H. & Co., New York, buy two millions of francs annually and pay cash, while most of the customers of H. & Co., Paris, order but a few hundred francs annually. I also send you a package containing samples of the de- cors of the Paris invoices. These are the only decors sold in Europe that can be compared with the decors ordered by H. & Co., New York. I have not found a single instance of a Paris sale with a line of gold or a stipple gold edge, with or without sprigs. All the richer decorations sold by H. & Co., Paris, are, in every respect, so entirely different from those ordered by H. & Co., New York, that no comparison between them can be made. 4th. Now that you know the inside of our business as well as the outside, you can form an opinion of the fol- lowing facts : In 1898 H. & Co., Limoges, New York, and Paris, used same price-list, which for the conve- nience of Paris and New York had been calculated at 60% above Limoges prices. H. & Co., Limoges, invoiced from this price-list to H. & Co., New York, and to H. & Co., Paris, with 57^% discount. H. & Co., New York, sold from same price-list at so many cents per franc. H. & Co., Paris, sold from same price-list: with 20% discount at wholesale and net at retail. Mr. Griffin, U. S. Commercial Agent at Limoges, got 13 The difference between Limoges prices and Paris " retail prices being 37i%. hold of an invoice of H. & Co., Paris, to one of its cus- tomers, and communicated it to the General Appraisers. Hence, all our invoices to H. & Co., New York, advanced 20% plus penalties. This advance was maintained until Major Williams's report established that duty was to be collected on the Limoges market price, and not on Paris prices. The advance was then dropped but the overvalua- tions and penalties had cost us $80,000. In 1905 the periodical persecution recommenced under a new form, and it continues. It seems that H. & Co., Limoges, know nothing about the prices at which they should sell, and that H. & Co., New York, know nothing about the prices at which they shotdd buy. Of three decors costing the same price, having the same value, bought and sold at same price, one decor is entered at its price, the sec- ond is advanced 10% and the third 20%. I do not speak of the 5% discrimination, which has been abandoned in theory, while in practice it much exceeds the 5%. The result is that H. & Co., New York, have been com- pelled to direct H. & Co., Limoges, to advance their in- voices to avoid penalties, notwithstanding the fact that the net prices of H. & Co., Limoges, to H. & Co., New York, are higher than the net prices of H. & Co., Paris (after deduction of Paris expenses) , to their smallest buy- ers. As there are no judges independent of the Treasury to whom we can appeal, there is for us no other alternative than to submit or give up business. Now honestly, Mr. Clayton, if you were in our place, what would you think of Custom House justice? Yoiu-s truly, Ch. Ed. Haviland. 14 SUMMARY OF INVOICES ANNEXED TO THE FOREGOING LETTER [A] Pakis, Sept. 21st., 1906 Invoices of 1905 (10% dis.) Invoices: Prices of 1906 (20% dis.) Invoices: Prices of H. & Co. Paris Prices of H.&Co. Limoges Prices of H. & Co. Paris Prices of H. & Co. Limoges No. 1 990.- 742.15 No. 20 4,886.— 8,794.— 2 99.- 73.30 21 1,711.20 1,517.60 3 297.— 226.56 22 1,052.65 910.56 4 288.— 220.98 23 8,333.55 2,888.44 5 594.- 439.80 24 86.35 69.23 6 247.90 187.38 25 185.15 152.43 7 192.— 146.60 26 198.45 161.04 8 198.— 146.60 27 171.90 137.66 9 99.- 75.88 28 177.15 153.— 10 221.40 166.40 29 60.15 50.56 11 280.90 207.84 SO 82.35 65.88 12 396.- 293.20 31 86.35 69.23 13 198.— 145.10 82 61.15 52.72 14 373.95 291.46 33 90.95 79.18 15 99.— 73.30 34 1,967.90 1,735.24 16 188.10 191.50 99.- 141.22 144.29 73.30 35 Total 85.55 67.— 17 13,732.— 11,898.67 18 Difference 16^% 19 90.- 70.30 Less expenses of H. & Co. Paris: 26}i% Net 3,638.98 Total 5,142.75 3,865.66 10,093.02 11,898.67 Inv. of 1905 net 3,779.92 3,865.66 1,362.83 " " 1906 " 10,093.02 11,898.67 3,779.92 3,865.66 18,872.94 15,764.33 15 LETTER OF MR. CHARLES ED. HAVILAND TO PRESIDENT ROOSEVELT Pams, June 6th, 1907. Mr. President, I ask your permission to lay our case before you. To take as little as possible of your time, I will make my story as short as I can. Our case is set forth in the three following papers which I enclose : 1st. Decision of General Appraiser Waite dated May 8th, 1907. 2nd. Decision of the Board of General Appraisers dated May 28, 1907.' 3rd. Copy of my letter to Treasury Agent Clayton dated Sept. 21st, 1906, showing that as the Paris expenses of a Paris store must necessarily be added to the manufacturer's wholesale price, such a store could be but a second hand seller. This decision of the Board consisted in the following cut from the Paris edition of the " New York Herald" of May 29th: " New York, Tuesday. — The question of the customs duty on Hav- iland china imported into the United States was decided to-day by the Board of General Appraisers. The ruling is that, taking into considera- tion the ten per cent, average advance in duty already made at this port, there will be added here 16^ per cent, to the present rate of duty to make its proper market value agree with the wholesale market price in Paris." I had no other information when I wrote on June 6th, and I supposed 10 plus 16)4% meant 26}4%. How could I imagine that the Board had found a statement that the difference between Paris and Limoges prices was 36J4%, in a letter 16 I also stated in this letter that the Paris expenses of our Paris store were 265^ %, and I showed that the difference between the prices of the factory and those of the Paris store was 15J^% on sales to dealers, and 37J4% on sales at retail. The comparison of the Board's decision with my letter to Mr. Clayton, shows that the decision of the Board is based on the statement in my letter that the Paris expenses of the Paris store of Haviland & Co. of Limoges were 26^%. The Board decides that these 26>4% expenses of the Paris store owned by Haviland & Co. of Limoges, should be added to the prices that the firm of Haviland & Co. of New York actually pays for its purchases at Limoges — although Haviland & Co. of Limoges and Haviland & Co. of New York are two separate and dis- tinct firms, the former having ten partners or special part- ners and the latter only four. The decision of the Board would have been comprehen- sible although unjust, if it had advanced our Limoges in- voices to the level of the prices of the Paris store, which are 15J4% above the factory's wholesale prices. But that the Board should have advanced oiu" invoices 11% above the prices of our Paris store seems to me entirely unintelligible. The fact that Paris prices are only 15>4 % above Limoges prices, while Paris expenses are 26J^% above Limoges expenses, is certainly a proof that our Limoges prices are high, and I confess my surprise that the Board should have been willing to make use of the frankness and sincerity of my letter to Mr. Clayton to raise them still higher. As Haviland & Co. of New York cannot pay duties on prices above those at which they actually buy their china, and at which their competitors pay their purchases, they can continue to buy from Haviland & Co. of Limoges, only on condition that the latter will cease to sell in Europe. 17 Haviland & Co. of Limoges have, therefore, given up their Paris store, and ceased to sell outside of the United States. The Paris expenses of Haviland & Co. of Limoges no longer existing, duties on these expenses can no longer be charged to Haviland & Co. of New York. Everybody in our trade and in the Custom House knows that Paris is not a wholesale market for china tableware, and this is proved by the fact that no Paris invoice of a •wholesale purchase of such ware has been entered at the Custom House. The only china sold at wholesale in Paris is sold by travelers from Limoges, who stop at an hotel with their trunks of samples and take orders at the Li- moges prices. On the other hand, the Custom House knows that all the invoices of china tableware purchased at wholesale are from Limoges. Limoges is, therefore, the only wholesale market in France for such wares, and it is an open market where thir- ty-six manufacturers and forty-one decorators manufac- ture and decorate for export to all countries as well as for the home trade. In face of these facts the decision of the Board seems to be in contradiction with the law which enacts that all piu"- chases at wholesale should pay duties on the wholesale prices in the markets where the goods are bought and sold at wholesale. As there are no judges to whom we are permitted to appeal from the decision of the Board, we appeal, Mr. President, to your well-known and highly respected sense of justice. I feel very certain that if President Roosevelt knew what means were employed "to encourage the industries of the United States" and to transform a legal duty of 60% into a duty of 80%, the "roundabout and secret methods" denounced by General Appraiser Waite would cease, and the Custom House would be instructed to enter wholesale 18 purchases made at Limoges and shipped from Limoges, at the price at which china is bought and sold in the open mar- ket at Limoges. I am, Mr. President, Most respectfully yours, Charles Edwaed Haviland, for Haviland & Co., Limoges, and for Haviland & Co., New York. P. S. My son and partner, Paul Haviland, resides at New York, 45 Barclay Street, and he can answer any ques- tions you might wish to put to him concerning our conflict with the Custom House. 19 LETTER OF MR. CHARLES ED. HAVILAND TO PRESIDENT ROOSEVELT Paris, June 10th, 1907. Mr. President J Permit me to enclose the text of the Board's decision, which I have received since I had the honor of writing you June 6th. Putting aside the figures quoted by the Board, its deci- sion reads: "Taking Mr. Charles Edward Haviland's statement as a basis of decision, the Paris wholesale price is, on an aver- age . . . per cent, above the flat price stated in his in- voice to the New York house. The entered value, however, at New York shows an average addition of . . . per cent, to these prices, thus making a difference between the Paris price and the New York entered value of . . . per cent. The diference then between the New York entered prices and the Paris wholesale prices is . . . per cent." (The decision adds that for various reasons this latter figure should be lowered 10%.) We accept the text of this decision for our invoices of decor prior to May 31st, and we only ask that in the appli- cation of the Board's decision, the figures quoted in the Board's decision shotdd be verified and corrected when 20 found incorrect. The Board certainly intended to sign its decision: "Errors excepted." (l)The first and most important error is in the follow- ing assertion of the Board: "Taking Mr. Charles Edward Haviland's statement as a basis of decision, the Paris wholesale price is on an average 36/^% above the flat price stated in his invoice to the New York house." If my letter to Mr. Clayton— of which the original is at the Custom House — is referred to, it will first be noticed that it is divided in four sections; the object of section 2 being to establish what is the legitimate difference in price, resulting from the difference in expenses, of a Paris store and of a Limoges factory ; while the object of section 3 is to show what are the actual differences between the prices of H. & Co., Limoges, and those of H. & Co., Paris. The statement referred to in the Board's decision is quoted from section 2, and it reads as follows in my letter: "The percentage of Paris expenses in 1905 were 26/^%. 26J4% expenses plus 10% profit = 36>4%, which is the legitimate difference between the net prices of H. & Co., Paris, and those of H. & Co., Limoges." A legitimate price and a price actually charged are two different things. Section 3 of my letter to Mr. Clayton (which the Board's decision seems to ignore) is exclusively devoted to the com- parison between the actual prices of H. & Co., Limoges, and those of H. & Co., Paris, and it refers for the details of this comparison to thirty-five invoices and to a summary of these thirty-five invoices annexed to my letter. The summary shows the difference between Limoges and Paris net prices on nineteen invoices dated in 1905, and on sixteen invoices dated in 1906: 21 The total net price of H. & Co., Paris for the sixteen ^'• invoices of 1906 is 13,732.— The total net price of H. & Co., Limoges, for the sixteen invoices of 1906 is ll,otJo. Difference 1,834. 1,834. _ ^1 0^ 11,898. ^^^""^ The real difference between Limoges and Paris wholesale prices is then 15*%oo% instead of 36y2%, as asserted in the decision of the Board. (2) An inspection of Haviland & Co.'s invoices at the Custom House will show that the entered value on deco- rated china is 16^% above Limoges prices, instead of 10%, as asserted in the decision of the Board. After correction of these two errors in figures, the de- cision of the Board will read: "Taking Mr. Charles Edward Haviland' s statement as a basis of decision^ the Paris wholesale price is, on an aver- age, 15*/4oo% above the flat price stated in his invoice to the New York house. The entered value, however, at New York, shows an average addition of 16%% to th'ese prices, thus making a difference between the Paris price and the New York entered value of less 1% . The difference then between the New York entered prices and the Paris whole- sale prices is less 1%. " And for various reasons enumerated in the last para- graph of the Board's decision, the Board decides that 10% should be deducted from the invoice calculated as above, to make entered value. ( The advances over Limoges prices should, therefore, be reduced to 5>^%, instead of 16/^%.) As a conclusion to this letter and to my letter of Jime 6th, what we demand, is that in the application of the 22 Board's decision, the figures quoted in the decision of the Board shotJd be verified and corrected when found in- correct. I am, Mr. President, Most respectfully yours, Ch. Ed. Haviland, for Haviland & Co., New York, and for HavUand & Co., Limoges. P. S. As a specimen of Custom House justice, I call the attention of President Roosevelt to the fact that the Board's decision completely ignores the several pages of my letter to Mr. Clayton and the thirty-five invoices com- paring Limoges and Paris prices — and that the Board has found the Paris price in a phrase that does not give the Paris price and that relates to another point. It happens that this phrase ofers a pretext for an increase of 36^^%, while the invoices do not permit over 15y2%. June 11th. — My son Paul writes in a letter received this morning: "The Board states that the average addition on entry of these invoices was 10%, whereas, as a matter of fact, they ranged between S% and 27%, and averaged 16%% on the 22 invoices before them." 23 IN THE MATTER OF PROTEST 262982/24956 OF HAVILAND & CO., AGAINST THE AS- SESSMENT OF DUTY BY THE COLLEC- TOR OF CUSTOMS AT THE PORT OF NEW YORK. Befoee Board No. 3 VALIDITY OF REAPPRAISEMENT 1. Finality of Decision upon Reappraisement by Board of General Appraisers. The action of a Board of General Appraisers in the reappraisement of merchandise is made by Section 13 of the Customs Administrative Act final and conclusive. It is not intended, however, by this section to give such a Board any authority or power to act unlawfully or arbi- trarily. Under our form of government no tribunal can be given power to render a decision in defiance of evidence and contrary to law. The action of a Board of General Appraisers in a reappraisement of mer- chandise is final and conclusive if in all respects that action was in ac- cordance with law; otherwise it is null and void. 2. Same — Jurisdiction of Board of Classification to Inquire into the Action of a Board of Re- appraisement. When the validity of a reappraisement by a Board of three General Appraisers is challenged by proper protest, the Board of General Ap- praisers, as a classification board, sits as a court of first instance. Such a board cannot examine the testimony that was before the reappraise- ment board for the purpose of weighing it or determining its prepon- derance, but only for the purpose of ascertaining and determining whether or not there was any testimony upon which the board based its finding. 3. Same — Home Market Price or Export Price. Query. Is the case of United States v. Passavant, 169 U. S. l6, au- thority for the doctrine that the home market price should always be taken in determining the dutiable value of merchandise } 24 4. Construction of Writing. The construction of a writing is a question of law for the court when- ever there are no collateral facts or extrinsic circumstances appearing from the testimony to explain or influence the meaning of the language used in the writing. Held That the letter of Charles Edward Haviland will not bear the construction placed upon it by the Board of General Appraisers in the reappraisement proceeding in this case, that there is no testimony what- ever in the case relative to the wholesale price of Haviland's china in Paris to justify the finding of the Board, and that said finding and re- appraisement are therefore arbitrary and contrary to law. At the hearing of this case certain testimony offered by the importers was objected to by the Solicitor of Customs, and certain testimony offered by the Government was objected to by the importers' attorneys. The Board ad- mitted all of this testimony, reserving final decision as to its competency, relevancy, and materiality untU it could give a more careful consideration to aU the facts of the case. The Board is of the opinion that the testimony of Paul Haviland and the affidavits of George Haviland offered by the importers, and the testimony of Walter J. McNaier offered by the Government are incompetent, ir- relevant and inmaaterial and the same are therefore ex- cluded. The decision of the Board stated in the following opinion was arrived at without giving consideration to this testimony. Hay, General Appraiser: This protest challenges the validity of the reappraisement of certain chinaware by a Board of three United States General Appraisers, made pursuant to the provisions of Section 13 of the Customs Administrative Act of 1890. The merchandise in question was imported by Haviland & Co. of New York, and ex- ported by Haviland & Co. of Limoges, France. The protest contains sixteen separate specifications or grounds of error. The substance of them all, or at least all that have any merit, is that the Board of General Ap- praisers, in reappraising this merchandise, acted upon an 25 illegal principle, contrary to law, and that its finding of the value of said merchandise was arbitrary and not sup- ported by evidence. The several specifications of the pro- test, so far as the same have any merit, are but argumenta- tive elaborations of these contentions. The undisputed testimony shows that there are three firms or corporations doing business as HavUand & Co., one at Limoges engaged in the manufacture and decora- tion of chinaware, one at Paris, engaged in the wholesale and retail china business, and one at New York, engaged in the wholesale china busiaess, but practically the entire out- put of the factories of Haviland & Co. at Limoges is sold to Haviland & Co. at New York, or Haviland & Co. at Paris, in the proportion of about 80% to New York and 20% to Paris ; that there are at Limoges a large mmiber of other corporations or firms engaged in the manufacture of china very similar to that manufactured by Haviland & Co.; that the firm of HavUand & Co., New York, supplies the trade in the United States and Canada, and the firm of HavUand & Co., Paris, seUs such of HavUand & Co.'s goods as are sold in France and the rest of Europe and also seUs some goods manufactured by other concerns. The Appraiser of The Port, when the merchandise in question was entered, made various advances. An appeal from this action was taken by the importers and the case was heard before a General Appraiser, who granted an open hearing, that is, a hearing at which the testimony was taken in the presence of aU parties in interest, and made his finding, sustaining the entered value. From this de- cision of the General Appraiser an appeal was taken by the collector at the port of New York to a Board of Gen- eral Appraisers, regularly constituted under the provisions of Section 13 of the Customs Administrative Act of 1890. The Board of General Appraisers also granted an open hearing, had before it, by stipidation of parties, a transcript of the record of the testimony taken before the General 26 Appraiser, heard the testimony of certain other witnesses, and made its finding, reversing the action of the General Appraiser and directing an addition of 26l/^% to the flat Limoges price. It is the validity of this action of the Board that is caUed in question in this proceeding. Section 13, mider which this Board proceeded, after pro- viding for the appeal from the decision of a General Ap- praiser to such a Board, reads: "Which board shall examine and decide the case thus submitted, and their decision or that of a majority of them shall be final and conclusive as to the dutiable value of such merchandise against aU parties interested therein." From this language there can be no question but that it was the intention of Congress to make the decision of a properly constituted Board of three General Appraisers absolutely final as to the value of imported merchandise. Passavant v. United States, 148 U. S. 214. It was not, however, by this language intended to give such a board any authority to act unlawfully or arbitrarily. United States V. Passavant, 169 U. S. 16; Erlanger v. United States, T. D. 28236; United States v. Doherty. 27 Fed. Rep. 730. Such authority would be contrary to the very genius of our institutions and probably beyond the power of Con- gress to grant. Under om- form of government arbitrary power is not vested any place. Sovereignty, with its at- tendant functions and powers, reposes only in the people. The fundamental difference between this Government and those of the Old World is that it is a government of law, and not of men. The law alone is supreme. The law is the final expression of the people's will, made through their representatives and interpreted by courts created by law either statutory or fundamental. In interpreting the law the courts caU to their aid the estabhshed principles of 27 the common law, time-tested and developed through cen- turies of Anglo-Saxon progress and growing enlighten- ment. By the law, therefore, every act of every official is tested. The action of the Board of General Appraisers called in question in this case is final and conclusive if, in all respects, that action was in accordance with the law; otherwise it is null and void. This Board sits as the court of first instance to determine that question. The suffi- ciency of the testimony upon which it acted is not a ques- tion upon which we can pass, nor have we the right to examine that record for the purpose of determining whether or not it decided the case according to the weight of the evidence before it. Its action upon that point was final, as it was upon every question of fact involved in the case — not only the value of the merchandise as shown by the testimony, but also the market in which that value should be ascertained, so far as that question is one of fact. We have no authority to examine the testimony at aU, except for the purpose of ascertaining whether or not there was any testimony upon which the Board based its finding. That is, if a Board of General Appraisers should determine that the dutiable value of certain merchandise was a figure which it fixed in the face of testimony, uncon- tradicted and unchallenged, which showed that it was of an entirely difi^erent value, or if it should determine that the value of the merchandise was a certain figure when there was no testimony whatever to establish that fact, its action would be arbitrary, and the law does not delegate to it any such arbitrary powers. The case of Ghilbenkian v. United States^ decided by the United States circuit court of appeals for the second circuit on March 26, 1907 (T. D. 28079), is authority for a position upon the question here under consideration far in advance of that which we see fit to take in this case. In that case there was nothing before the court to show that all of the facts that were before the Board of General Appraisers were present in the record 28 which came up for review upon protest. The hearing before the Board of General Appraisers was not an open one, and it did not appear that every fact that was before the Board which might have influenced its action was be- fore the court; yet the court, in effect, held that the action of the Board was illegal and void, for the reason that it was contrary to the testimony. This language is used by the court in its opinion : "And yet, if the record contains a syllable of proof that any of this wool, or similar wool, was ever bought and sold in Bagdad for 13 cents or 9 cents per pound, or that such difference in value as this can exist in the same lot of wool, we have failed to discover it. ****** The proof estabhshes beyond contradiction or doubt that the value of the wool at Bagdad was less than 12 cents per pound, and it should have been so fixed." This last quotation comes very nearly up to the line of passing upon the testimony, not for the purpose of deter- mining whether or not there was any testimony to sustain the action of the Board of General Appraisers, which is as far as we go in this case, but for the purpose of deter- mining what the testimony did establish. Without pre- suming to criticize this case, we do not feel warranted in the case at bar in going so far as it would support us in going. See also United States v. Passavant, 169 U. S. 16; Erlanger v. United States, T. D. 28079. Ordinarily in cases of this character this question could not arise, for it is well settled by repeated decisions that a General Ap- praiser can not be interrogated as to the reasons upon which he based his conclusion. Muser v. Magone, 155 U. S. 240, and cases cited; Muser v. Magone, 41 Fed. Rep. 879. He is authorized to ascertain the market value by all reasonable ways and means, and his finding, or the finding of a Board, creates a presumption that the 29 value thus found was ascertained by all reasonable ways and means. Hearings before General Appraisers and before Boards of General Appraisers have heretofore usually not been public or open, but, in the progress toward more enlight- ened and fairer methods of administration, such hearings, at least those of great importance, are now more fre- quently open; that is, the testimony is given in the pres- ence of adverse interests, taken down by a shorthand re- porter, and the right of cross-examination allowed. Such was the case in the proceedings now imder consideration. All of the testimony is in the record, and we may examine it for the purpose of determining whether or not there is any testimony which sustains the finding of the Board. That task is very much simphfied in this case by the writ- ten findings made by the Board. The General Appraiser from whose decision the appeal was taken to the Board found Limoges to be the market and determined the wholesale market value of the mer- chandise at Limoges. The Board of General Appraisers expressly states that it differs from the General Appraiser in this and "conclude that Paris is the only home wholesale market place of Haviland's goods," and expressly bases its conclusions as to what the market price of these goods is at Paris upon statements quoted from a letter introduced in evidence in the case, written by Charles Edward Haviland, the head of the three houses. From these facts three ques- tions are presented, the answer to any one of which might be decisive of the case : First. Under the facts in this case, should the home mar- ket price or the export market price be taken as the dutia- ble value of the merchandise? Second. Is there any testimony to show that Paris is the wholesale market place of Haviland's goods? 30 Third. Does the letter of Charles Edward Haviland bear out the conclusions reached by the Board? For many years prior to 1890 it was the practice of the Government in the administration of the customs laws to exact duty upon imported merchandise upon a value based upon the export price, rather than the price at which said merchandise sold in the domestic market {G. A. 1602, T. D. 13181, and cases there cited). After the passage of the Customs Administrative Act of 1890, this policy or practice was changed, and, in the case of United States v. Passavant, 169 U. S. 16, the Supreme Court held by a divided bench that the dutiable value of certain mer- chandise of German manufactiu-e which, when sold in Germany, was reqxiired to pay a domestic tax which was rebated when the merchandise was sold for exportation, was the export price plus the tax. The theory upon which this decision was rendered is stated by the coiu-t as f oUows : "As the tax accrues when the manufacturer sells, his wholesale price includes it, and the pvirchaser who buys these cotton velvets in wholesale quantities in the Ger- man markets pays a price covering the tax, and that is the price for the merchandise when bought and sold in those markets. Doubtless to encourage exportation and the intro- duction of German goods into other markets, the Ger- man Government could remit or ref xmd the tax, pay a bonus, or allow a drawback. And it is found that in respect of these goods when 'purchased in bond, or consigned while in bond, for ex- portation to a foreign country, this duty is remitted by the German Government, and is called "bonification of tax," as distinguished from being refunded as a re- bate.' The use of the word 'bonification' does not change the character of this remission. It is a special advantage extended by government in aid of manufac- tures and trade, having the same effect as a bonus or drawback. To use one of the definitions of drawback, 31 it is *a device resorted to for enabling a commodity af- fected by taxes to be exported and sold in the foreign market on the same terms as if it had not been taxed at aU.' But the laws of this coimtry in the assessment of duties proceed upon the market value in the exporting country and not upon that market value less such re- mission or amelioration as that country chooses to allow in accordance with its own views of public policy." It would seem that we have sometimes carried the mean- ing of this decision beyond the intention of the court which rendered it. There is not to be found in it a clear and dis- tinct adjudication that, wherever the export price is foimd to differ from the home market price of an imported com- modity, the home market price is to be adopted as a basis of value for assessment of duty, and yet we have carried it to that full length. If the merchandise had been sold freely for domestic consumption at one price and to cus- tomers for exportation at another and a different price in the same market, the reasoning which the court has adopted would not in aU instances apply for taking the domestic sales price as the basis of value for duty pm-poses. A more rational construction of Section 19 of the Act of June 10, 1890, is that made by the Treasury Department conjointly with the Department of State in connection with the recent German Reciprocity Agreement. This, as stated by the Secretary of the Treasury in T. D. 28215, is as follows: "Market value as defined by Section 19 of the Cus- toms Administrative Act shall be construed to mean the export price whenever goods, wares, and merchandise are sold wholly for export, or sold in the home market only in limited quantities, by reason of which facts there can not be established a market value based upon the sale of such goods, wares, and merchandise in usual wholesale quantities, packed ready for shipment to the United States." 32 This construction wovild not seem, upon careful reflec- tion, to be in any way in conflict with the principle upon which The United States v. Passavant {supra) was de- cided. It may well be doubted whether the facts in the case at bar under this construction warrant the adoption of the home market price as the dutiable value of the mer- chandise. Eighty per cent, of aU the goods manufactured by Haviland & Co. of Limoges are exported to the United States, and only 20% are sold in France and in all other countries. Of this 20%, so far as the testimony shows, only a small proportion is sold at wholesale; but, as this case probably does not carry the rule which the Board has heretofore beheved to be established by the Passavant case farther than the Board may have heretofore done, we pre- fer to leave the first question unanswered. The letter of Charles Edward Haviland, and perhaps some of the other testimony in the case, shows that some of the Haviland wares are sold at wholesale in Paris, and this we conceive to be some testimony tending to show that Paris is the wholesale market place of such goods. Hav- ing no authority therefore to inquire into the preponder- ance of testimony on this subject under the rules of law which we have laid down for our guidance in the decision of this case, the second question must be answered in the afiirmative. The construction of a writing is a question of law for the court. If there is any conflict created by this letter and the other testimony in the case, it is not for us to either seek to reconcile it or to weigh the testimony to determine where is the preponderance. If there are any collateral facts in the hght of which the letter must be read, if there are any extrinsic circumstances to enter into, explain, or influence the meaning of the language used in the letter, it is not for us to review it for the purpose of determining whether or not the Board drew the correct inferences from the lan- 33 guage of the letter; but if the effect and meaning of this letter are not in any way dependent upon facts and cir- cumstances appearing from the evidence outside of the letter itself, but the conclusion of the Board, as in this case, is based solely upon the language of the letter, then it becomes a question of law as to whether or not that lan- guage bears the interpretation which the Board has placed upon it, and it becomes our duty to examine the letter, not for the purpose of determining its weight or value as tes- timony, not for the purpose of determining the inferences to be drawn from it; but for the piu-pose of determining whether or not the interpretation placed upon its language by the Board is the interpretation which the law places thereon. This rule was admirably stated in a very early case by Chief Justice Marshall in Etting v. United States, 11 Wheat. 59. The language of the syllabus is as fol- lows: "Although it is the province of the court to construe written instruments, yet, where the effect of such in- strument depends, not merely on the construction and meaning of the instruments, but upon the collateral facts in pais, and extrinsic circumstances, the inference of fact to be drawn from them are to be left to the jury." This same doctrine was reiterated by the court in Bar- reda v. Silsbee, 21 How. 146, West v. Smith, 101 U. S. 270, and has in various forms been many times stated by the Supreme Coiu-t. In the case at bar there are no col- lateral facts or extrinsic circumstances to influence or con- trol the inferences of fact to be drawn from the letter itself. It seems to be admitted on all sides that, aside from this letter, all of the evidence tends to show that Limoges was the principal wholesale market for Haviland's china, and that that evidence justifies the finding of the General Ap- praiser that the entered value was correct. The Board, by 84 the express language of its decision, based its conclusions and finding solely upon the Haviland letter, or rather upon certain paragraphs of it, which in that decision it quoted. This letter was written by Mr. Charles Edward Havi- land to Mr. Ralph W- Clayton, a Special Agent of the Treasury Department, then in Paris investigating Mr. Haviland's business for the United States Government. It was accompanied by copies of some thirty-five invoices of goods sold by Haviland & Co. of Paris, and these in- voices were made, by the terms of the letter, a part thereof. The letter must therefore be considered as a whole, inclu- ding the invoices. It was written as a whole, and as a whole introduced in evidence, and there is no principle of law that woiild justify the adoption of any one paragraph of the letter as evidence upon which to base a finding of fact, except that that paragraph should be read and con- strued in connection with the remainder of the letter, and in determining therefore whether the Board placed a right construction upon the language of this letter, we must do it from an examination of it in its entirety. If, from such examination, we find that the letter contains any facts to justify the finding, then there is some evidence to support it, and the third question must be answered in the affirma- tive. If, from this examination, we find that it does not contain such facts, then the third question must be an- swered in the negative. This letter was unquestionably ingeniously prepared, and a careful reading of it discloses that it consists of an argimient that the Limoges prices of Haviland's merchandise are the correct prices upon which to base the values for duty purposes, and of a complaint against the treatment accorded the house of Haviland & Co. by the United States customs authorities. There are, however, certain facts exphcitly stated in the letter. In stating these facts I will not attempt to follow the order of the letter. They are: 35 That Haviland & Co. of Limoges are manufacturers, and sell only to Haviland & Co. of Paris and Haviland & Co. of New York. That Haviland & Co. of Paris is a wholesale and retail estabhshment, handling not only the goods of Haviland & Co. of Limoges, but buying also from other manufac- turers and decorators. A detailed statement of the expense of the store of Haviland & Co. of Paris which aggregates F. 168,948.25. The total amount of sales of Haviland & Co. of Paris for the year 1905, which was F. 637,161.20. That the percentage of expense was 26/^% of the total sales. Copies of thirty-five invoices of actual sales made at wholesale in 1905 and 1906, with the prices at which the merchandise hsted on the said invoices was sold. A statement drawn from these invoices, which shows the aggregate net amount of these invoices, after the deduc- tion of 26>^% (expenses of the Paris house), to be F. 13,872.94. In a parallel colimm upon this statement the Limoges price of like goods is stated, showing the aggre- gate amount to be F. 15,764.33. That there is a difference in the decorations of the goods sold by the Paris house and those sold by the New York house. The remainder of the letter is argxmientative or given over to a recitation of certain facts relative to the alleged treatment accorded the house of Haviland & Co. by the United States customs authorities, about which complaint is made. The thirty-five invoices in question, and the statement in the letter relative thereto, furnish the only evidence which the letter contains of the price at which HavUand's china is sold at wholesale in the city of Paris. This evidence of sales in wholesale quantities shows that the Paris wholesale . 36 price was 15J^ % above the Limoges price. The aggregate price of the merchandise stated in the various invoices under reappraisement by Board Two averaged 16J^% above the Limoges price. The merchandise in question was therefore entered at 1% more than the Paris value of hke merchandise as shown by the invoices in question. There is not to be f ovmd in this letter, nor anywhere else in the testimony that was before the Board, any fact that will disclose what proportion of the sales of Haviland & Co. in the year 1905 or 1906, as shown by this letter, was wholesale and what retail, what proportion was of Havi- land's goods and what proportion was the goods of other manufactvu-ers, other than the invoices in question. The Board, however, in its findings expressly states that it reached its conclusion upon one statement in the Haviland letter, which it quotes as follows : «r» 4. ^T. • . ,««^ T, 168,948.25 Percentage of Pans expenses m 1905, F. ^ 637,161.20 26.51%; 26y2% expenses plus 10% profit, 36J^%, which is the legitimate difference between the net prices of Havi- land & Co., Paris, and those of Haviland & Co., Limoges." The Board, apparently ignoring the fact that the whole tenor of this letter indicates that it is an argument in favor of the correctness of the Limoges prices, read this sentence and construed it as though the word "actual" were sub- stituted for the word "legitimate," thereby giving a mean- ing to the word legitimate which does not belong to it, and which the context of the letter clearly indicates the writer did not intend. Read independent of the rest of the letter, the word legitimate could not be defined to mean actual, and when read, as it must be, in connection with the re- mainder of the letter, it is clear that the word should be given its most common meaning, that is, the legitimate difference therein referred to means the logical difference, or the allowable difference. But giving this word legiti- 37 mate the meaning which the Board must of necessity give it in order to reach the conclusion which it did, still that conclusion must be said to be arbitrary and not based upon facts. Assuming that the letter states that the "actual" difference between the net prices of Haviland & Co. of Paris and those of Haviland & Co., Limoges, is 36/^%, the fact that we are left by the letter with so little data with reference to the amount of the business of the house of Haviland & Co. of Paris that is retaU and the amount that is wholesale, the amount that is of Haviland's goods and the amount that is of other manufacturers' goods, utterly precludes the conclusion based upon any facts dis- closed by this letter that the wholesale market value of Haviland's merchandise in Paris is 36/^% above the Li- moges price. This difficulty the Board seeks to obviate by deducting 10% on account of the fact that the house is both a wholesale and a retail house. This we think entirely arbitrary, and find no warrant whatever in a line or sylla- ble in this letter or in any other evidence that was before the Board. We therefore reach the conclusion that there is not to be found in this letter anywhere any fact to jus- tify the conclusion reached by the Board that the market value of the merchandise in question was 26/^% above the flat Limoges price. The third question must therefore be answered in the negative. Except for the letter, there is no testimony in the case with reference to the wholesale price of Haviland's merchandise in Paris; there is there- fore no evidence whatever upon which the finding of the Board and the reappraisement of the merchandise in ques- tion is based,, and the same is arbitrary and contrary to law. Two other questions of importance are raised and elabo- rately argued by the importer's counsel in their brief: First. That the testimony affirmatively shows that no merchandise hke that in question is sold in Paris for ex- portation to the United States, and that, under Section 19 38 of the Act of June 10, 1890, no market can be considered a practical market unless goods are exported therefrom to the United States. Second. That in adopting the statement made by Charles Edward Haviland in his letter, rather than the testimony of actual sales as the basis upon which to fix the market value, the Board did not arrive at its decision by reasonable ways and means. The latter of these questions is practically disposed of, though not in direct form, in the previous consideration of this case, and as the conclusion we have reached necessarily involves a decision of the case in the importer's favor, we prefer to leave the first of these questions unconsidered. The protest is therefore sustained and the collector di- rected to reliquidate the entry accordingly. Board of U. S. General Appraisers. General Appraiser Waite did not participate in the de- cision of this case. 39