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ADDRESSES
DELIVERED AT
THE CHAMBER OF COMMERCE BEFORE THE COMMISSION TO
INVESTIGATE THE NEW YORK CUSTOM HOUSE.
Published bt the New York Chamber of Commerce.
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SEYMOUR DURST
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ADDRESSES
OF THE
SPECIAL COMMITTEE
OF THE CHAMBER OF COMMERCE OF THE STATE OF NEW YORK,
ON
Customs Revenue Reform,
DELIVERED JUNE 4, 1877,
AT THE ROOMS OP THE
CHAMBER OF COMMERCE OF THE STATE OF NEW YORK.
BEFORE THE COMMISSION APPOINTED TO INVESTIGATE
THE NEW YORK CUSTOM HOUSE.
NEW YORK:
PRESS OF THE CHAMBER OF COMMERCE.
1877.
- f{U>
Digitized by the Internet Archive
in 2014
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INDEX TO ADDRESSES.
PAGE
Eaton, Sherburne Blake, 5
Bobbins, Daniel C, 31
Barbour, Thomas, 39
Schultz, Jackson S., 48
MEMORANDUM.
The Commission appointed by the Secretary of the Treasury to
investigate the Custom House at the port of New York, consist-
ing of Honorable John Jay, Mr. Lawrence Turnure, and Mr. Joseph
H. Robinson, met on the fourth day of June, eighteen hundred
and seventy-seven, at the rooms of the Chamber of Commerce of
the State of New York, in the city of New York, for the purpose
of being addressed by the Special Committee on Customs Revenue
Reform of the Chamber of Commerce. This committee, consist-
ing of Mr. Jackson S. Schultz, Mr. Thomas Barbour, and Mr.
Daniel C. Robbins, together with their counsel, Mr. Sherburne
Blake Eaton, appeared before the Commission, and delivered the
following addresses.
ADDRESSES.
ADDRESS OF MR. SHERBURNE BLAKE EATON.
Me. Chairman and Gentlemen of the Commission :
I appear before you in behalf of the Committee on Customs
Revenue Reform of the Chamber of Commerce of the State of
New York. You have most generously consented to give one
day to the members of that Committee, to enable them to for-
mally present their views with reference to certain proposed changes
and reforms in existing Customs laws and Treasury regulations,
and in the methods of administering them. Your courtesy in
granting this hearing, after you have already given the general
subject prolonged and thorough investigation, is sincerely appre-
ciated.
At the outset of my remarks, I desire to express to you the
thanks of the Committee, and of the importers of New York whom
the Committee represent, for the services you have rendered to
them, and to the importing interests of the country, in your pres-
ent investigation. My recent professional duties have brought
me into direct intercourse with a very large number of our local
importers, and I but give language to their sentiments, when I say
that they all feel towards you a sense of personal gratitude for the
laborious, thorough, and impartial manner m which you are con-
ducting your work.
The Committee on Revenue Reform of the Chamber of Com-
merce consists of three members — Mr. Jackson S. Schultz, Mr.
Thomas Barbour, and Mr. Daniel C. Robbins. This Committee
was appointed at a general meeting of the Chamber of Commerce
held on the 5th day of October, 1876. The resolutions under
which the Committee was appointed provide that the members of
6
the Committee shall bring to the attention of Congress, at its
next session, the importance of such modifications of the laws and
regulations under which our revenue laws are enforced, as will
make them intelligible to both merchants and government officials.
The resolutions further provide that to more effectively promote
the latter object, the Committee shall be empowered to co-operate
with such committees as may be appointed by like bodies in the
cities of Boston, Philadelphia, and Baltimore.
A similar committee was appointed by the Chamber of Com-
merce nearly four years ago, when our local importing interests
were burdened with the evils of the moiety system, and of the law
authorizing the seizure of books and papers. Two members of the
present Committee were connected with that committee, and I
had the good fortune to occupy the same relations as counsel to
the latter, as I now occupy toward the present Committee. The
committee of 1873 was accorded lengthy hearings by both branches
of Congress, in which hearings we were assisted by delegations
from the Boards of Trade of Boston, Philadelphia, and Baltimore,
and the legislation then asked for at the hands of Congress, was
promptly and abundantly given in the law known as the Moiety
Act of June 22d, 1874. The success of the movement made at
that time created a belief in the minds of the importers that their
proper redress, when wrongs and irregularities became greater
than they could bear, was to appeal directly to Congress.
After the present Committee had commenced its work, your
Commission was appointed. To what extent you may be disposed,
and may be able, to assist us we do not know ; but we believe
that so far as you can help our cause, you will most willingly do
so, and we further believe that your opinions and recommenda-
tions will have great influence with the Treasury Department.
We therefore appear before you to state the result of our work, so
far as it has been completed up to the present time, and to name
in detail what modifications in existing laws and regulations our
Committee have already decided upon asking.
I feel that the modifications about to be proposed to you are
entitled to peculiar weight, from the fact that we know that they
represent the wants and convictions of a very large number of
our leading merchants. Our plan has been to place ourselves in
direct communication with the principal importers of the city,
and to submit to them in writing, for their criticism, such changes
as are proposed, and to recommend only have such changes as re-
ceived nearly unanimous approval. Nearly two hundred merchants,
embracing most of the leading firms in every branch of business,
7
have responded to these letters, and have expressed in writing
usually in detail, and at considerable length, their views touching
these proposed changes. These letters have formed the basis of
the modifications which I am about to present to you, and I will
indicate, as I speak of the various proposed changes, the propor-
tionate number of merchants approving and disapproving of each
proposed reform.
The machinery for the collection of duties on imports consists
of three parts : two of statutory law, and one of Treasury regula-
tions. The two of statute law are, first, the rates and amounts of
duties to be levied, and, second, the methods which Congress em-
powers the Executive to use in collecting those duties. The third
part consists of detailed rules and instructions of the Treasury
Department, consisting of a great variety of forms and regulations,
which emanate from the Secretary of the Treasury, and have the
sanction of statutory law. The laws regarding the rates and
amounts of duties, this Committee does not propose to touch.
For their present purpose, they accept as a fixed fact, that the
amounts of duties realized from certain commodities, are not to
be interfered with, and they limit themselves to the single task of
trying to simplify, quicken, and cheapen the methods of collect-
ing those duties.
I. The Abolition of the JVaval Office.
The first change suggested by the Committee is the abolition of
the Naval Office. This department of the Custom House is an
expense to the government and an annoyance to the importer,
and the only reason for continuing it is, that it affords a check
upon the Collector. The ground taken by our Committee is, that,
with competent subordinates in the Collector's Office, no check is
necessary, further than that furnished by the Treasury Depart-
ment.
The duties of the Naval Officer are set forth in Section 2626 of
the Revised Statutes. The duties of the Collector are set forth
in Section 2621. These two officers, so far as the duty of the
Naval Officer extends, perform identically the same work. The
Collector receives manifests and entries, the Naval Officer receives
duplicates of them ; the Collector estimates duties, the Naval Offi-
cer estimates the same duties ; the one records these estimates, the
other also records them ; the one signs permits, the other counter-
signs the same permits ; the one collects money, the other checks
that collection ; the one disburses money, the disbursement is
8
checked by the other ; the one prepares stated accounts and re-
ports, the other examines and certifies these accounts and reports.
Whatever the Naval Officer does, the Collector does. The office
of the former, so far as it goes, is an exact duplicate of that of
the latter, and if by any calamity either should cease to exist,
every thing connected with it, to the last detail, could be supplied
from the other.
Let me illustrate the transactions of the Naval Office by recit-
ing the steps taken in connection with an entry of merchandise at
our local Custom House. When an importer wishes to make an
entry, he himself first examines the invoice and the bill of lading,
and prepares two entry papers. These four papers— to wit, the
invoice, the bill of lading and the two entry papers, the importer
then hands to the Entry Clerk in the Collector's office. That offi-
cer, after examining the papers, hands them back, together with
the permit, to the importer. He then takes his four papers and
the permit to the Naval Officer, by whom the four papers are sub-
jected to another examination, and by whom the permit is coun-
tersigned. This makes three examinations of the four papers :
First, by the importer, whose interest and safety is in accuracy
and honesty ; second, by the Entry Clerk, representing the Collec-
tor ; and, third, by the Naval Officer. The next step taken by the
importer is to go to the Deputy Collector to make oath to his
entry, and, after that, he goes to the Cashier's office to pay the
duties. The Cashier, upon payment of the duties, gives to the im-
porter the permit, the other papers being retained in the Custom
House. The importer, next and finally, goes to the Deputy Collector
to have the permit signed, and that signature completes the entry.
The two entry papers find their way, one to the files of the Col-
lector's office, and the other to the files of the Naval office. The
Collector and Naval Officer both open itemized accounts, each on
his own books, with all the merchandise contained in the entry ;
and each of these two officials spreads upon his own records all
the details connected with the entry, to wit, the description and
value of the merchandise, the rate of duty, the amount of duty,
the final liquidation, and the disposition of the money realized
from the duties.
The importers ask that this irksome and complicated system of
making entries may be simplified, at least to the extent of abolish-
ing the Naval Office ; and the tax-payers ask that the expense of
such an elaborate scheme for correcting errors and mistakes may
be saved.
If the theory is a good one, that there should be duplicate offices
9
wherever large transactions are carried on, why is not such a the-
ory adopted by individuals and corporations, or by the government
with reference to other offices besides a few of the principal Cus-
tom Houses? I believe that, beginning with the office of the
Secretary of the Treasury and ending with that of the most petty
disbursing officer, no similar reduplication can be found. Certainly
none exists in the organizations of private enterprise. If the gov-
ernment proposes to insist on this cumbersome system of checks,
why not apply it to all offices, and why not have not only dupli-
cate offices, but triplicates as well? There is an absurdity
involved in the mere statement of such a proposition.
There are no Naval Offices at most of the ports of entry, the
number of such offices being confined to a few of the leading
ports. I see no reason why a Naval Officer is necessary at
one port and not necessary at another, unless it be that the
transactions in the one case largely exceed in gross amount
the transactions in the other. That reason seems inadequate. If
a clerk in a small Custom House can do his work without making
mistakes, a clerk in a large Custom House can do the same ; and
we believe that the multitude of clerks in the Collector's Office, if
picked solely on merit, can make their classifications and compu-
tations without requiring another and independent department to
do their work over after them. There can be no doubt that, with
reference to at least a part of the work performed by the Naval
Office, namely, the recasting of the Collector's items of disbn la-
ments, the check of the Naval Office is useless, both in theory and
in practice. We believe that the rest of the work performed by that
department is not worth to the Government the expense required
to sustain it, to say nothing of the annoyance to merchants.
It is therefore proposed to abolish the Naval Office altogether.
The opinions of the merchants, so far as any are expressed in
their letters to the Committee, touching this proposal to abolish
the Naval Office, stand as follows : seventy out of eighty-four in
favor of the proposed abolition.
II. Oaths to Entries to be made before Notaries and Commissioners.
The next proposed change is that oaths to entries may be made
before any Notary Public or United States Commissioner. This
change is suggested simply for the convenience of the merchant.
The present law, which is found in section 2841 of the Revised
Statutes, necessitates the personal attendance of the principal at
the Custom House, which, in a city of large distances, is often a
10
matter of great inconvenience, and causes a loss of time at the
most valuable part of the day. Moreover, importers are frequently
delayed, after they have reached the Custom House, while waiting
to be sworn.
As the oath is now administered, and as it probably always
will be administered, the taking of the oath is but the merest form.
There are no surroundings at the Custom House adequate to give
gravity to the occasion, but, on the contrary, the necessity for
rapid work and the vast number of oaths administered during
business hours unite to deprive the act of all solemnity.
This proposed change finds substantially unanimous approval
in the letters received, by the Committee, while eight firms, includ-
ing three of the heaviest importing houses in the city, favor
the total abolition of all oaths on entries, on the ground that,
wherever taken, they are apt to be an empty form, that no one
was ever punished for taking a false oath on an entry, that they
tend to bring the solemnity of taking oaths into contempt, and
that they are generally abolished by other nations. One other
firm, one of the oldest and wealthiest in the city, suggests that
oaths be entirely abolished, and that there be a provision of law
whereby the signature to such documents as now require oaths
shall carry with it all the force and be invested with all the penal-
ties now attaching to an oath.
If oaths are to be continued, let the convenience of the importer
be consulted by allowing him to appear before any official compe-
tent to administer oaths to be used in the courts of the State or
of the United States. There can be no injury to the government,
beyond the loss of the petty fees.
ZZZ The Abolition of Triplicate Invoices.
The Committee suggest the abolition of the present system of
triplicate invoices as provided for in section 2853 of the Revised
Statutes.
This system of triplicate invoices was originated by the Act of
March 3d, 1863, prior to which time, triplicate invoices had never
been required. The system was meant to be an improvement on
the Act of March 1st, 1823, which necessitated simply the produc-
tion by the importer of a single invoice.
Triplicate invoices are a source of expense, because, under ex-
isting laws, at least four copies must be made — three for the gov.
eminent, and one for the merchant himself ; and each copy must
be written out by itself, no press copies being allowed. Triplicates
11
are also a source of delay in shipping goods. This is emphatically
true under the existing custom of ordering goods by cable, on the
eve of the sailing of a particular steamer, when there is often not
time enough to multiply invoices, in offices employing but a limited
clerical force. Merchants complain that the secrets of their busi-
ness are often exposed, the one of the triplicates filed for preser-
vation in the Consular Office, being usually accessible to rivals in
business.
IV. The Abolition of Consular Certificates.
Triplicate invoices and consular certificates, being parts of the
same system, should be treated together. The Committee pro-
pose the abolition of triplicate invoices, also of the foreign decla-
ration to accompany one of the triplicates, also of the consular
certificate, all provided for in sections 2853 to 2855 of the Re-
vised Statutes.
Consular certificates on all invoices were not required prior to
the Act of July 14th, 1862. That Act was repealed by the Act of
March 3d, 1863, which originated the system of triplicate invoices.
The theory of this system is perhaps a good one. It is that a
consul becomes an agent of the government to collect information
relating to imports, and to collect samples of all goods shipped to
the United States, and that he will make himself an authority
upon market values, and will so familiarize himself with the prices
of goods, by a comparison of invoices and otherwise, as to make
himself a skilled instrument in detecting and preventing frauds.
It is generally admitted that this system, however good in theory,
is practically a failure. Consuls do not become experts in value,
nor do they regularly collect and forward samples, nor are they
efficient instruments in discovering frauds ; even the revenue
officials themselves paying but little attention to the statements of
consuls, and rarely giving to their certificates any consideration.
It is not too much to say that every importer can from his own
experience furnish instances showing the ignorance and inefficiency
of consuls touching the revenue laws and their administration, the
letters received by the Committee containing numerous illustra-
tions of this kind.
Two complaints are made against this system — to wit : the ex-
pense to the merchant, and the delay. The expense is now a larger
item than it was formerly when there were less facilities for order-
ing goods, and when invoices were less frequent and of larger
amounts. The statute, section 2851, authorizes a fee of $2.50 for
12
a certificate, and that amount is usually increased by another dol-
lar, by local usages.
Delays, however, are a more serious complaint. Before mer-
chandise can be shipped, three invoices must be made out for the
consul, and his certificate must be obtained. If for any reason he
is absent from his post, or if his office hours are either very short
or are not strictly observed, the merchant may lose the opportu-
nity of making his shipment on a certain day. The telegraph has
revolutionized the system of doing business within the last few
years. Instead of large importations made at the beginning of
each season, frequent and small orders are now sent by cable,
often with reference to the sailing of particular steamers. Into
the merchant's calculations as to whether his goods will be shipped,
there enters, under the present system of triplicates and consular
certificates, the uncertain quantity of the length of time that may
be required to pass his invoices through the consulate.
The power to detain invoices is another serious objection to the
present system. It is given to consuls by section 2862 of the Re-
vised Statutes. This discretionary power is sometimes abused,
causing expense and vexatious delays to merchants, without any
adequate benefit to the revenue.
Our Committee recommend that the entire system of triplicates,
declarations, and certificates be abolished, and that the substantial
provisions of the Act of 1823 be revived. Under that Act, entry
was made on an invoice verified by the owner of the goods, such
verification being made in this country if the owner was here, or
before a foreign consul if the owner was abroad. The substantial
requirement Avas simply this : that entry should be made on a
sworn invoice verified by the actual owner of the goods, wherever
he might be.
Ninety-seven merchants have expressed their views in writing
on the proposition to abolish this system, ninety-two being in
favor of the proposed abolition, and five being opposed to it.
V. The Payment of Duties in Certified Gold Checks.
The next modification is that duties may be made payable in
certified gold checks. Under the existing custom the merchant
takes to the Custom House the gold itself to pay the duty. This is
both inconvenient and dangerous. If he intrusts his money to a
Custom-House broker, he takes the chance of the broker's dishon-
esty. Some means should be devised to avoid the necessity of
paying the money in specie. One importer suggests that the
13
United States Treasurer might be authorized to receive gold from
the merchants, and to issue against it certificates of deposit payable
to the order of the Collector. Another merchant suggests that
the Collector might designate certain banks, the certified gold
checks on which would be taken for duties. Still another mer-
chant suggests that certified gold checks might be taken subject
to the discretion of the Collector, thus leaving him free to protect
the government in times of financial panic.
In this connection it should be remembered that for many years
the government not only took checks in payment of duties, but
also took promissory notes running on long time.
Our Committee believe that some improvement should be made
in this matter, and have concluded to recommend the payment in
certified gold checks, a proposition which meets with nearly the
unanimous approval of importers.
VI. Entries to be passed Same Day the Papers are left at the
Custom House.
We propose that a Treasury regulation shall be made requir-
ing entries to be passed the same day they are left at the Custom
House. This proposition meets with the unanimous approval of
the merchants ; many of the importers, however, in expressing in
their letters their views on this point, state that they have no
cause for complaint in this regard, their entries having been gen-
erally passed promptly.
VII. A Change from Ad Valorem to SpecAfic Duties.
The Committee recommend a change so far as practicable from
ad valorem to specific duties. No recommendation proposed by
the Committee has excited so much interest among the importers
as this. There seems to be a unanimous feeling in favor of some
change to specific duties, the only difference of opinion being as
to how far such a change is practicable. Many merchants com-
plain that their lines of business are entirely ruined by the frauds
perpetrated under ad valorem duties, and that a change to specific
duties is a question of life and death with them.
The principles lying at the bottom of such a change are too vast
to be discussed in this connection, the scope of my remarks requir-
ing me simply to state such reasons as have induced the Com-
mittee to make the recommendation.
The reasons for this proposed change are as follows : first, the
14
Committee believe that the same amount of revenue can be col-
lected under specific duties as under ad valorem duties, and that
such revenue can be collected at much less expense ; second,
undervaluation will be prevented, and thus one of the great sources
of fraud will be cut off ; again, specific duties will compel the
payment of like duties on like goods at all the different custom
houses ; lastly, there will be no possible premium on dishonesty,
in making out invoices, and the honest merchant will no longer be
compelled to pay higher rates of duties than the dishonest mer-
chant. It is generally conceded that, unless ad valorem duties are
abolished, especially on goods paying high rates of duty, honest
merchants will be driven from business.
The vote of the merchants on this proposition, as appears by the
letters received from them by the Committee, is as follows :
one hundred and sixteen in favor of the proposed change to specific
duties, and five against such change.
Many importers who have written us letters decline to ex-
press any opinion whatever on this point, owing, they say,
to lack of special knowledge. The opinions of the five firms vot-
ing against the change to specific duties are as follows : Two firms
object to specific duties on the ground that they are not practica-
ble in their lines of business; two other firms, including one of
the heaviest importing houses in the city, advocate a total aboli-
tion of mixed duties, but think that ad valorem duties, with
competent appraisers, are preferable to specific duties ; while
the opinion of the other importer is that, with honest and effi-
cient officials, ad valorem duties are more simple and easy of ad-
ministration.
VIII. The Government to Retain in its Discretion the Whole or
Any Part of an Invoice for not more than Ten Days.
The next suggestion of the Committee is that the government
shall take physical possession of the entire invoice upon its
arrival, and shall keep the whole of the same, or as much of the
same as it may choose, for a period of ten days, during which time
it shall examine and appraise the goods ; and shall, at the expira-
tion of the ten days, deliver the entire shipment to the merchant,
together with his bill for duties. The object of this change is to
prevent delays in examining and appraising goods, to compel
officials to do their duty promptly, by giving them only a fixed
time within which to perform it, and to enable the importer to
know with absolute certainty just when he will get his goods, so
15
that lie may make sales with confidence as to his ability to deliver
what is sold.
The present system exists under sections 2789, 2899, and 2901
of the Revised Statutes. The principal objection to this proposed
change will probably be found under the provisions of section
2789. That section provides that whenever an entry of merchan-
dise is imperfect for want of invoices, bills of lading, or for any
other cause, the Collector shall take the merchandise, and detain
it in his own custody. It sometimes happens that unavoidable
delays occur in making entries, and in such cases, it may be said,
it would be impossible for the Collector to deliver the merchan-
dise within ten days. Our answer to that objection is that in such
cases the Collector shall take samples of the goods, and shall re-
quire a bond for double the amount of the invoice, and shall then,
within the limitation of ten days, deliver the goods to the
importer.
This plan meets with very general approval, and is in substance
confirmed by most of the merchants who have sent us written
communications, those favoring the change being in the proportion
of thirteen in favor, to one against, seventy-nine voting for the
change and six against it.
IX. Completion of Liquidation of Entry within Thirty Days.
Complaints are frequent touching delays in final liquidations of
entries. One merchant has sent us a memorandum of his recent
experience, where an entry was not liquidated until five years
after it was made. This is an extreme case, but delays of many
months, indeed of one year, are common. Where such delays
occur, merchants never know when they are through paying duties
on an importation, and can never tell how they stand with reference
to any one transaction. There seems to be no good reason why
the government should not be compelled by statute to complete
its liquidation, and to render a final bill for duties to the merchant,
within a limited time, which should not be longer than thirty
days. It may here be remarked with reference to all limitations
of time, both in this immediate connection and elsewhere, that
under the present facilities for doing business, more can be accom-
plished by the merchant within a certain number of days than
could have been accomplished in the same number of days when
most of the existing laws were enacted, and that consequently
limitations of time should be shortened.
16
The expressions of opinion by merchants, in their letters, on this
proposed change, are unanimous in favor of the completion of liqui-
dation of entries within thirty days.
X. The Abolition of Petty Fees, including Fees for Permits and
Entries.
A number of petty fees are now collected which realize but
little revenue to the government, and are a source of delay and
annoyance to the importer. The Committee suggest that all of
such fees be abolished, and that all of section 2654 of the Revised
Statutes, beginning with the sixth item and ending with the
eleventh, be repealed.
This proposed change meets with the unanimous approval of the
merchants.
XI. Duties should always be assessed on Market Value.
The next suggestion of the Committee is that duties should
always be assessed on market value at period of exportation, re-
gardless of cost. This suggestion is made with reference to ad
valorem duties, and, like some other suggestions now made by the
Committee, would have no force if all duties should be made
specific. It is difficult to discuss this point within the brief time
allotted to me. I shall therefore content myself with a brief state-
ment of the existing law, and of the necessity for the proposed
change.
The present law is contained in sections 2845 and 2900 of the
Revised Statutes. Under that law, duty is now assessed on mar-
ket value if it is higher than invoice price, but on invoice price if
the same is higher than market value. That is to say, the
importer may not be safe in paying duty on what his goods cost
him. If the goods shall have advanced in the foreign market,
after his purchase and before he makes shipment, he must pay
duty on such advanced value ; but if the goods shall have de-
clined in the same time, so that market value is less than cost
price, he must then pay duty on the cost. This rule works only
one way : if the market value advances, the government gains by
it, but if the market value declines, the merchant loses by it.
The inequality and hardship of this provision is manifest. The
rule works entirely in favor of the small buyer who purchases at
the date of shipment, and entirely against the large buyer who
gives his orders far in advance, and who may find, from a decline
17
in market value, that the duties on his goods are far in excess of
those paid by his competitor.
This inequality in the law has frequently operated as a trap to
catch innocent merchants. The laws for making false entries are
very severe, causing the forfeiture of entire invoices where entries
do not state the exact facts in the ease. Thus some technical
knowledge of the customs laws is needed, to know that under
some circumstances, a merchant subjects himself to a heavy penalty
when he enters his goods at actual cost, and pays duties in
good faith on the sum which he has actually paid for them. Such
a law is unreasonable, and the only way to secure importers from
the penalties of evading it is to repeal the law altogether.
This proposed change has received lengthy discussion in many
of the letters received by the Committee, and meets with unani-
mous approval.
•
XII. The Custom House should be kept open from Nine to Four.
Your Commission has anticipated our Committee in its next
suggestion, which is that the Custom House shall be kept open
from nine to four. I need hardly say that this recommendation
meets with the unanimous approval of our correspondents.
Several, however, suggest that the hour for closing should be ex-
tended until five o'clock.
XIII. The Reduction of Charges at General Order Stores, also
for Cartage.
The Committee believe that the charges for storage at general-
order stores, and the charges for cartage, should be reduced.
We have received from merchants a number of complaints. One
importer states that where his goods have been in the hands of the
storekeeper for only a single hour, he has been charged for a
month's storage ; and he states that such is the rule and custom.
Another importer suggests that there should be no charge for less
than three days, and that charges should be scaled on the basis of
a separate charge for every third of a month. Several letters
contain the statement that when goods are landed, they are in-
tentionally rushed from the vessel, before the merchant has
reasonable opportunity to make his entry and pay his duties, in
order that storage charges may accrue.
The charges for cartage are generally believed to be excessive,
2
18
and out of proportion to the charges of private cartmen for similar
services.
As an evidence of the necessity for a reduction in these charges,
I am able to state, that every merchant who has sent us his
opinion on the matter, thinks that reductions should be made.
XIV. The Prompt Filing of Weighers' and Gangers' Returns.
The Committee further recommend a rigid enforcement of the
regulation providing for the prompt filing of weighers' and gan-
gers' returns. There is frequent complaint of delays in this matter.
Merchants state that they are often unable to ship their goods by
vessels upon which freight has been taken, owing to the delay
in getting their returns. One of the leading firms in the city
complains that they often have to wait from three to four weeks,
for the liquidation of specific duties, owing to the delay in the
filing of the weighers' returns.
This proposition meets with the unanimous endorsement of our
correspondents.
XV. The Total Abolition of Damage Allowances.
The next recommendation of the Committee is that damage
allowances be abolished, and that all laws providing therefor be
repealed. I am authorized to state that on this proposed change
the Committee entertain doubts, but that, for present purposes,,
they embrace it among their other suggestions.
It appears that in some lines of trade gross frauds are perpe-
trated under the provisions of the law for damage allowances,
dishonest merchants obtaining excessive credits for fictitious
damages, and thereby underselling their honest competitors. On
the other hand, it is said, it would be the grossest injustice to compel
payment of full duties on partially worthless goods, and that such
an injustice outweighs the probable frauds perpetrated.
There are strong reasons both for and against this recommenda-
tion. Merchants themselves are nearly equally divided upon it.
In this matter, dealers are peculiarly influenced by the nature of
the business in which they are themselves engaged, although, with
reference to one branch of business, we find two leading houses
advocating with earnestness the opposite sides of the proposed
change.
It has been suggested to the Committee that importers can insure
against loss of duty on account of damage. The possibility of in-
19
suring against such loss is disputed with reference to some
branches of trade ; but it is safe to assume, that if damage allow-
ances are abolished, some means will be devised whereby sub-
stantial insurance can be obtained. This question, however, will be
more fully discussed before you by the Chairman of our Committee.
Most of the merchants who have sent letters to the Committee
have expressed opinions on this proposed change. These opinions
are about equally divided on the question of the total repeal of all
damage allowances.
XVI. The Reduction of Penal Bonds from Double the Value oj
the Goods to Once the Value of the Goods.
The Committee recommend that penal bonds be reduced from
double the value of the goods to once the value of the goods.
The present law on this matter is found in section 2899 . of the
Revised Statutes. The Committee believe that the government
will be amply secured by a bond for the reduced amount, and that
merchants, especially those of small means, will be materially
benefited by such reduction.
XVII. No Charge whatever to the Importer for Cartage or Other
Expenses on Goods entered for Consumption.
The next recommendation of the Committee is that there should
be no charge whatever to the importer for cartage or other ex-
penses, where goods are entered for consumption. This recom-
mendation is made on the principle that when the merchant gives
his goods to the government, asking the government to tell him
how much duties he has to pay, and to then give him back his
goods upon his paying the same, the government shall bear the
entire expense of getting at the amount of duties, and shall make
no charge whatever to the merchant except for the duties them-
selves.
This proposed change is approved by all the merchants who
have expressed their opinions to the Committee on the same, with
a single exception. This one firm thinks that merchants should
not object to paying charges, provided the charges are reduced
to a reasonable amount for the service rendered.
XVIII. The Law for discharging Export Bonds should be
Simplified.
The Committee recommend that the existing laws for the dis-
charge of export bonds should be amended. The present law is
found in sections 3044 and 3045 of the Revised Statutes. Under
this law the export bond cannot be discharged, except on the fol-
lowing conditions : first, a certificate of the consignee at the
foreign port must be produced ; second, a certificate under the
hand and seal of the consul must be produced ; third, these two
certificates just named must be confirmed by the oath of the
master of the vessel ; and fourth, these two certificates must also
be confirmed by the oath of the mate of the vessel. There are
also cumbersome provisions for supplying certificates and oaths in
exceptional cases.
The Committee recommend that this elaborate system shall be
simplified, and, although they have not fully agreed upon the
exact nature of the amendments, they nevertheless suggest, for
present purposes, that the oath of the master and the mate be
abolished.
This matter meets with the unanimous approval of the mer-
chants.
Grt'ttrr Fur tilth:* for tJt>- TTit/idrtnctt?, by the Buyer, of
Goods purchased ichile in Bond,
The Committee suggest an increase of facilities for the with-
drawal, by the buyer, of goods purchased while in bonded ware-
house.
The present law is found in sections 2970 and 2971 of the Re-
vised Statutes, and in article 617 of the Treasury Regulations.
Under the present law, the purchaser of goods in bond finds great
difficulty in making a withdrawal of a fractional part of his pur-
chase. Furthermore, existing laws and regulations do not allow
the transfer on the books of the Custom House of bonded goods
purchased from the person who originally made the entry. It is
true a withdrawal entry is provided for by form number 125 of
the Treasury Regulations, whereby the importer can authorize
the person to whom he has sold the goods, to withdraw the same ;
but this withdrawal entry might not prevent the importer from
subsequently withdrawing the goods himself, upon paying the
duties, and thereby defrauding the party to whom the goods have
been sold.
The Committee propose that a certificate be issued by the Col-
lector when goods have been deposited in bonded warehouse, and
that the holder of such certificate, and none other, shall be allowed
to withdraw the goods. When such a certificate is issued, the
21
Collector can close the account on his books with the original
entry, and can open a new account with the certificate.
Under such a certificate, goods could be withdrawn by a pur-
chaser from an importer, in such quantity as the purchaser himself
might choose, in the same manner as they can now be withdrawn
by the original importer. Another advantage of such a certificate
would be that it would afford reliable security upon which ad-
vances might safely be made on goods in bond. It is doubtful
whether, under the existing system, a person making advances on
goods in bond, and simply holding a withdrawal entry, has abso-
lute security ; and whether dishonesty or insolvency on the part
of the importer, might not defeat the title of the person making
the advances.
Such merchants as have expressed an opinion to the Committee
on this point, are unanimously in favor of this suggestion.
JlJl. The Government should pay Interest and Costs on Judg-
ments, the same as other Defendants.
Our next recommendation is that when judgments are recovered
against the Collector for duties paid under protest, the govern-
ment should pay interest and costs, the same as other defendants.
Whenever judgment is recovered by an importer against the
Collector, it means that more money has been taken for duties
than was due, and that the Collector must refund the same ; and
if the Collector has acted under the instructions of the Secretary
of the Treasury in making the collection, the United States, under
a special statute, are liable for the amount of the judgment. It
has heretofore been the custom to satisfy such judgments,
together with interest and costs, from either the standing customs
appropriation, or out of any money in the Treasury not otherwise
appropriated. The present ^Secretary of the Treasury, however,
has decided that, under his interpretation of existing laws, he has
no power to pay interest and costs on judgments obtained against
the government, except from a special appropriation by Congress.
He claims that he can only repay, from the regular appropriation,
the amount of the duties exacted.
The Committee propose that the room for doubt regarding the
meaning of the law shall be removed by a positive enactment, and
they recommend that Sections 989 and 3012^ of the Revised Stat-
utes be amended to conform with this proposed change.
This recommendation meets with the general approval of our
correspondents.
22
JCJTI. One of the Bonds now required where Goods are entered
for Inland Transportation should be Abolished.
The next recommendation of the Committee is that where goods
are entered for inland transportation, one of the two bonds now
required should be abolished.
The existing law is contained in Sections 2992 and 2993 of the
Revised Statutes. These sections provide that where goods are
destined for an inland port of entry, a bond of transportation shall
be given in a penal sum of at least double the invoice value of the
merchandise, with the duties added ; and, also, that before the
merchandise shall be delivered to the common carrier, such carrier
shall also execute a bond to the United States. It is suggested
that the bond of the common carrier is sufficient, and that the
bond of the importer should be abolished, for the reason that the
government is amply secured against the loss of the goods by the
bond of the carrier, and that any possible loss which may occur
can be satisfied out of that bond.
This proposition has called forth a wide range of discussion
touching the present system of inland ports of entry, and I take
this occasion to say that a very general and a very sincere conviction
prevails in the minds of our local importers that interior ports of
entry should be abandoned. I omit, however, any discussion of this
point, and any citation of opinions submitted by the merchants to
the Committee, for the reason that they are not within the scope of
our inquiry.
All the merchants who have expressed opinions on this proposed
change agree in recommending it.
XXII. Entry Papers shoidd be taken Entire Charge of by the
Custom House.
The Committee advise that when entries are made at the Cus-
tom House, all the papers used in making the entries should
be taken entire charge of by customs officials, from the time
of presentation to the time of payment of duty or the granting
of a permit for bonding. Under the present custom, merchants
must attend in person, or through their clerks or brokers, and
must carry their papers from one desk to another until the entries
are completed. The various steps incidental to an entry under
the existing system, have been already recited by me at the begin-
ning of my address, when I discussed the proposed abolition of
the Naval Office.
23
The Committee propose that when an entry is handed in, it shall
be taken charge of by officials, and the merchant shall have noth-
ing further to do with it until it is handed back to him for pay-
ment of duties or for procuring the permit for bonding. This
change will save annoyance and expense to the merchant, will
simplify the making of an entry, and will prevent confusion and
possible favoritism in making entries at the Custom House.
The expressions of opinion of the merchants on this point are
nearly unanimous in favor of it.
XXIII. The Equalization of Appraisements at the Different Ports.
The last proposed change in existing laws which the Committee
have submitted in writing to the merchants for their criticism, is
the equalization of appraisements at the different ports. The
Committee recommend that a system be perfected whereby ap-
praisements at the different ports may be equalized, so that like
goods shall pay like duties at all Custom Houses.
There are over one hundred Custom Houses in the Uni-
ted States, where duties are receivable. The inequality of ap-
praisements growing out of so many collection districts, espe-
cially under our complex and intricate tariff, are numerous, and
are a most serious injury to trade.
I have recently had a case in my own practice, where one of
our leading importers introduced a certain kind of goods, through
the New York Custom House, at a certain dutiable value, while
his competitor and near neighbor imported similar goods, through
another Custom House, on a dutiable value of less than one half
of the value assessed at the Xew York Custom House. These
goods were subject to mixed duties. The dutiable value was fixed
by the New York Custom House at sixty per centum, while the
dutiable value at the other port was fixed at fifty per centum. It
thus happened that similar goods were sold by two neighboring im-
porters in this city, the duties on which in the case of one im-
porter were more than double the duties in the case of the other
importer. Owing to the inability of the importer paying the
higher rates of duty to compete with his rival, the firm found
itself at the end of the season with a large stock of goods on
hand, while, as a matter of fact, the rival had sold his entire
stock.
Another importer complains to the Committee that the duties
assessed on a certain class of goods, imported through an interior
Custom House, are just one half the duties on the same goods im-
u
ported through the New York Custom House ; iu consequence of
this difference, his sales in a particular localit y are entirely cut off.
Another importer states that a certain importation, introduced
through an interior Custom House, was entered as subject to a
certain rate of duty, but that the appraiser reduced the rate of duty
one third, stating to the importer that he was in error in assessing
himself at the higher rate of duty. Similar goods imported through
the New York Custom House, have always paid, and still pay, the
higher rate of duty.
These illustrations can be multiplied almost indefinitely, and I
have no hesitation in saying thai every kind of business in the
city can furnish instances similar to those T have given. Moreover,
it is fair to assume that for every such case that comes to light,
there are a large number which are never known.
These inequalities at different ports do not necessarily imply
fraud and inefficiency. The tariff is so complex that there is often
room for honest doubt as to what duties should be assessed ;
moreover, the practical and inherent difficulties of classifying mer-
chandise present questions upon which two honest and skilled
appraisers at the same port frequently differ.
It is most probable that correct duties are assessed at that
port where the importations are largest, and where there is
the best organized corps of appraisers ; and it is also prob-
able that at the ports where the importations are small, and
where there may be but a single appraiser for all kinds of
goods, correct duties are not assessed. The skill and experi-
ence acquired at this port, where a large preponderance of
the entire duties of the country is collected, should be felt
through the smaller ports. What the merchants demand, and
what the Committee recommend, is an adequate system to correct
these evils and to equalize appraisement at different ports ; a
system that shall be at once simple, thorough, and rapid, speed
in rectifying evils of this kind being especially important.
This subject has received full discussion in the letters received
by the Committee from importers, and the latter unite unanimously
in recommending such a system as we have proposed.
This last recommendation completes the entire number of pro-
posed changes which have been submitted by the Committee to
the importers for their criticism. Since these twenty-three proposed
changes wei;e submitted, the Committee have agreed upon recom-
mending certain others, but, from want of time, they have not
been able to ascertain the general sentiment of the importing
25
community, by means of letters or otherwise, in regard to them.
I am, however, directed to lay before you these additional sug-
gestions, and to state that, in the opinion of the Committee, these
changes would be approved by all importers if submitted to them.
XXIV. The Abolition of the Fee of Ten Dollars on Reappraise-
ments.
The Committee suggest that the present local custom, whenever a
reappraisement is claimed, of charging a fee of ten dollars to the
party taking the appeal, shall be abolished. This custom seems
to be peculiar to the New York Custom House. The only pro-
vision of the law on the matter is found in section 2725 of the
Revised Statutes, which is enlarged upon in article 429 of the
Treasury Regulations. Under this law, the Merchant Appraiser is
entitled to a compensation of five dollars per diem while actually
employed. The custom has grown up in this city of exacting a
fee of ten dollars in advance of reappraisement and at the time
the reappraisement is claimed, without reference to whether the
Merchant Appraiser is actually employed or not. The Committee
regard this fee as an extortion.
XXV. Let Reappraised Goods be Bonded.
The Committee further recommend that when an invoice is
advanced by the Appraiser, and a reappraisement is claimed by
the importer, he should be allowed to take his goods upon execut-
ing a bond, and upon furnishing satisfactory samples of the con-
tents of the packages to the appraiser.
The enormous power of an appraiser to order in goods, and to de-
tain them, should be restricted. The most irreparable injury is
done to commerce under the exercise of this power. Under the
existing laws the entire shipment is detained until both the ap-
praisement and the re-appraisement are completed, and such deten-
tion sometimes covers many months. A large number of importers
complain of the terrible abuses that have grown up under this
provision of law. It is not infrequent that losses of enor-
mous sums are inflicted upon merchants by these arbitrary deten-
tions. The case of one of our Committee, Mr. Thomas Barbour,
of the firm of Barbour Brothers, should be enough to utterly con-
demn the present system. There are other cases, though usually
of less magnitude, where, as in that of Mr. Barbour, the Appraiser
was shown to be in the wrong in detaining the goods, and where,
♦
26
upon the re-appraisement, the original invoice prices were fully
sustained. There is no reason why, when goods are to be re-
appraised, a satisfactory bond should not be taken to take the
place of the goods, and why the goods should not then be surren-
dered to the merchant.
XXVI. Increased Despatch in reappraising Merchandise.
Complaints are made on every hand of delay in reappraising
merchandise. Under the present law, which requires the govern-
ment to detain the entire invoice subject to reappraisement, the
process of reappraisement should be concluded with the utmost
despatch.
This is a question of administration, and is particularly recom-
mended to the consideration of this Commission.
XXVII. No Duty shoidd be charged on Goods stolen or otherwise
lost while in Bo?ided Warehouse.
The present law for the abatement or refund of duties on goods
injured or destroyed while in bonded warehouse is contained in
Section 2984 of the Revised Statutes. The relief contained in
that law is limited, however, to such injury or destruction as may
occur by means of accidental fire or other casualty. Under
existing laws, merchandise which may be stolen or lost while in
bonded warehouse, is still subject to duty. One of our leading
importers was recently obliged to pay duties to the amount of
nearly twenty thousand dollars on goods stolen from bonded
warehouse. This is a hardship that should be corrected. The
Committee recommend that the existing law should be so changed,
that, under proper restrictions, merchandise either stolen or lost
while in bond, shall be relieved from duty.
XXVIII. Goods procured otherwise than by Purchase should be
invoiced at actual Market Value at Period of Exportation.
The existing system of invoices and entries divides imported
merchandise into two classes — first, purchased goods, and, second,
consigned goods. This classification pervades all the laws, regu-
lations, and forms for making out invoices, together with the
declarations to invoices, the consular certificates, and the oaths on
entries.
When the owner of imported merchandise has acquired his
27
goods by actual purchase — that is, in the ordinary mode of bar-
gain and sale, he is called, in the parlance of customs officials, the
ii purchaser," and his property is called " purchased goods." When
the owner of imported merchandise has acquired the same not by
purchase — that is to say, not in the ordinary mode of bargain and
sale — or when he has himself manufactured the goods, and is still
the owner of the same, in whole or in part, he is called the " man-
ufacturer," and his merchandise is called " manufactured goods,"
or " consigned goods."
It is impossible to understand the laws and forms for oaths and
entries, without thoroughly understanding the theory of this clas-
sification. It was inaugurated by the Act of April 20th, 1818, and
was afterwards more fully developed by the Act of March 1st, 1823.
The earliest and, in my judgment, the best statement of the
reasons for establishing the system is to be found in the report of
Secretary Crawford, dated January 17th, 1818, American State
Papers, Finance, vol. 3.
In my discussion of the eleventh recommendation of the Com-
mittee — that the dutiable value of purchased goods should always
be the market value at the period of exportation — I pointed out
this provision of law, to wit, that goods are assessed, and should be
entered, not at invoice or cost price, but at market value at time of
shipment, provided such invoice or cost price is less than such
market value. A similar provision of law exists with regard to
manufactured or consigned goods. The law requires an invoice for
such goods to be made out and to be verified, although the goods
have not been purchased, and although, because the goods have
not been acquired by purchase, it is difficult to fix upon an invoice
price. The Act of March 1st, 1823, re-enacted in section 2845 of
the Revised Statutes, and the Act of March 3d, 1863, re-enacted in
section 2854 of the Revised Statutes, direct what shall be such
invoice price. The provision of those sections is this : that mer-
chandise obtained in any other manner than by purchase shall be
invoiced at the actual market value thereof, at the time and place
when and where the same is procured and manufactured. It will
therefore be observed that an invoice of goods acquired other-
wise than by purchase, must contain these two things — first,
market value at the time, and, second, market value at the place,
of procurement of manufacture. These two things are essential
to an invoice of manufactured or consigned goods.
Having thus seen how invoices of consigned goods are made, let
us now inquire how entries of the same are made. I have already
explained that entries of purchased goods must be made not neces-
28
aarily at the cost or invoice price of the goods, but at the actual
market value at the period of exportation, if the same is more
than invoice price. Manufactured or consigned goods must be
entered on the same basis. A person making an entry of such
goods must enter them at invoice price if it is more than market
value, but at market value if it is more than invoice price ; and
the market value referred to is the market value of the mer-
chandise—first, at the period of exportation to the United States,
and, second, in the principal markets of the country from which
tlic merchandise is imported.
Can any thing be more complex than such a system for invoicing
and entering goods ? Observe that the law provides two things
with reference to the invoice, namely : first, the market value at
the time of procurement or manufacture, and, second, the market
value at the place of such procurement or manufacture : whereas
the law provides two other things, usually quite different, with
reference to the entry, namely : first, the market vaiue at the
period of exportation, and, second, the market value at such period
in the principal markets of the country of exportation.
1 venture the assertion that not one invoice in one hundred is
made out conformably to this law. I have had a somewhat ex-
tended professional experience in this branch of cases, and I have
never yet found a manufacturer who invoiced his goods at the
market value at the date of production, provided the date of
production and the date of shipment are not identical; nor
have I ever found a manufacturer who knew that the law
required them s<» to he invoiced. It is true that the dec-
laration provided for by section 2854' of the Revised Stat-
utes, recites the provisions of law in this regard, and it may
be said the consignor has only to read that declaration to
know how to make out a correct invoice. The answer to that is
this : that declarations are notoriously incorrect in phraseology,
touching their conformity to the requirements of law ; that
consuls themselves, before whom the declarations are taken, are
notoriously ignorant of the relation of a declaration to the system
of invoices and entries, as well as of the general provisions of law
providing for the same, and often either insist, through ignorance,
on the wrong form of declaration being taken, or make light of
all declarations, telling declarants that the phraseology of the
declaration is of no consequence ; and that the making of a de-
claration, like the taking of an oath on an entry, has grown to be
an utterly meaningless and empty form.
I have recently had a case in my own office, wherein it appeared
*
29
that an old and highly-respected consul at one of the European
ports, had compelled my client to make false declarations, such as
were not according to the facts, notwithstanding a written protest
filed with the consul, and notwithstanding the fact that the
taking of the false declaration worked a technical forfeiture
of every invoice. In justification of my client, I took the depo-
sition of the consul, wherein lie stated that he had supposed that
the declaration he had insisted upon was the proper one under the
law, that he had always required from every body the same form
of declaration upon like facts, and that his interpretation of the
law prevailed at all consulates in the part of Europe where his
consulate was located.
The facts with reference to the matter now under discussion are
these : that when goods procured otherwise than by purchase are
not shipped to the United States until some lapse after manufac-
ture, it is, as a practical question, often impossible to ascertain
market value at the remote date of manufacture" ; that this is
especially true of goods not originally intended for the United
States, and with reference to which, therefore, no record of market
value may have been kept ; that actually it is the common custom
to invoice this class of goods at market value at date of shipment,
and not, as the law requires, at date of manufacture or procure-
ment ; and that, inasmuch as this existing custom is more natural,
simple, and equitable than the existing law, the law should be
changed to suit the custom, rather than attempt to make the cus-
tom suit the law.
The Committee therefore recommend' that existing laws be so
changed that goods procured otherwise than by purchase shall be
invoiced at market value at date of shipment. Should this change
be made, the invoice price and the dutiable value will be identical.
XXIJZ. Greater Prudence should be exercised in disturbing Hates
of Duty when once fixed by the Treasury Department.
Questions of statutory construction often arise touching the
rates of duty payable on particular kinds of merchandise. These
questions, arising usually from obscure or ambiguous phraseology
in the statutes, are ultimately decided by the Treasury Department
at Washington, and it often happens that the officials of the
Treasury Department change their minds regarding their own de-
cisions.
When these decisions are made, they are enforced immediately,
and the merchant who has possibly contracted for large sales, the
30
price being based upon a certain rate of duty, finds himself obliged
to pay an increased rate of duty, owing to a sudden and unex-
pected change of decision. The losses to merchants that have
been occasioned by such vacillations on the part of the Treasury
Department are enormous. I know of a single instance where
more than fifty thousand dollars were lost by one firm in this city,
on one contract, the loss having been occasioned by a change of
opinion on the part of the Department, as to the rate of duty, after
it had once formally fixed and announced the proper rate. No
less than four different decisions, I am credibly informed, have
been made at Washington in one season on one kind of goods.
The Committee suggest that greater prudence be exercised in
disturbing rates of duty after they have been once fixed on appeal
to the Treasury Department. Where the Department finds itself
in error, and in consequence feels obliged to change the rate of
duty, such proposed increase should be widely published, and
should not go into effect until a sufficient time has elapsed to
enable importers to adjust themselves to the change.
Our Committee further suggest, that where doubt exists touch-
ing rates of duty, the benefit of the doubt should, as a rule, be
given to the importer. Duties should never be imposed upon
doubtful interpretations. If he who could, and ought to have ex-
plained himself clearly and fully, has not done so, it is the worse
for him. This is a maxim as old as Roman law.
I have now laid before the Commission all the suggestions and
all the proposed changes that our Committee have at present to
offer.
Most of our recommendations are matters of statutory law, and
will therefore require the attention of Congress. Some of them
are questions of administration, and can be dealt with by the
Executive. We respectfully and sincerely urge that all of our
recommendations, both those that relate to the Statutes and
those that relate to the Treasury Regulations, may have your care-
ful consideration and your most earnest support.
31
ADDRESS OF MR. DAXIEL C. ROBBIXS.
Gentlemen : I shall address you to-day with special reference
to the proposed reforms in the customs service which have been
presented by my predecessor, Mr. Eaton, as counsel for the Com-
mittee of the Chamber of Commerce on Revenue Reform, present-
ing in contrast the customs regulations of Europe with those of our
country, that you may realize how moderate are all the reforms
we seek.
Revenue Reform.
Reform in the application of taxes as customs duties has been
much considered in our country, but reform in customs regula-
tions, to promote economy in the collection of customs, and to
facilitate the transaction of mercantile business, has received as
yet but little attention.
Customs regulations are so closely connected with the subject
of the tariff that the general understanding has been that ques-
tions pertaining to taxation must be settled first, as more impor-
tant ; and whenever improvements have been sought, they have
been deferred by a general impression that the conditions, which
pertain to this subject are very different with us from those which
exist elsewhere. Our revenue requirements are supposed to be
greater than those of most countries, and, on account of the fact
that the cost of labor is usually higher with us than in Europe,
high protective duties are required; and, as high duties are incen-
tives to fraud, it is believed that regulations which have proved
quite sufficient for other countries are quite inadequate for us.
As a prominent example, take the subject of specific duties :
Specific duties have so taken the place of ad valorem rates in
Europe that they may be said to be universal. The few ad-
valorems which do exist in the principal European tariffs remain
apparently only as oversights or neglects, because ad valorem cal-
culations must precede the imposition of specific rates ; and yet
when a prominent customs official was recently asked if he be-
lieved the application of specific duties upon all goods to be pos-
sible, he gave, in accordance with the general impression, a nega-
tive answer — a surprising reply when we consider that all past
experience is in favor of specific rates. Our largest importers,
who are familiar with the most complicated manufactures, declare
this matter to be the principal necessity in all tariff reform, with-
32
out which, to use the language of many of our largest and most
intelligent importers, all efforts for the promotion of revenue re-
form will prove to be wasted efforts, because it is the general con-
viction, that, notwithstanding all the vigilance of Customs
officials, not much over 60 per cent of the dues which belong to
the government from ad valorem goods are collected, and that,
unless a change is made from ad valorem to specific rates, all
respectable importers will be obliged to discontinue business ;
that we shall have, in time, in the respectable business of the
importer, — a pursuit involving the employment of large capital
and much intelligence, with attendant character — the same national
experience, that we have had in the attempt to collect excessive
duties on spirits, the importation of foreign merchandise, like the
distillation of spirits, will pass out of the hands of men of character.
If specific duties were universal in our tariff, as in the British
list, which comprises only forty enumerations of articles and varie-
ties of articles ; or, if they were almost universal, as in most of
the European tariffs ; or, even general, as in France, whose cus-
toms list is much more complicated than any, because it is through-
out studiously protective and includes more differential rates than
any other tariff in existence, — the collection of customs would be
much simplified, and most of the checks and safeguards, which
are now deemed necessary, although they involve expense and
hindrance in the transaction of business, could be dispensed with.
Customs regulations in Great Britain are formal like our own, but,
as compared with ours, are very liberal in their requirements ; and
the British list of duties, which are all specific, is the most simple
of all. The French tariff list is very complicated, but customs
regulations in France are very simple. All that is required at the
hands of the importer is to furnish the government with a descrip-
tive list of the goods imported and proof of ownership, which the
government receives and takes upon itself the examination of the
goods and the making out of a bill of duties, which the importer
pays and receives an order for his merchandise. Neither invoices
nor bills of lading are indispensable, nor are oaths or bonds re-
quired ; and there are no fees or charges, except in the use of
stamped paper, costing two sous per sheet.
Custom- House Entries in Great Britain.
In Great Britain all that is required is to submit a formal entry,
as prescribed by law, which must contain the particulars corre-
sponding with the description of the goods and packages given in
33
the report of the ship, with a memorandum of the duties which
may be payable upon the goods mentioned in such entry, which,
when paid, is to be signed by the Collector or his deputy, and
transmitted to the proper authority, who will deliver the goods.
Neither invoices nor bills of lading are essential, but these, with
other papers, can be demanded by the government, if fraud is sus-
pected. Customs fees are numerous, as with us, but the charge
for these is moderate. Neither bonds nor oaths are required ; but
when goods are incorrectly described to the prejudice of the
crown, they are forfeited with a penalty of £100.
Warehousing Entries in Great Britain.
When goods are intended to be warehoused, without payment
of duty on the first entry thereof, the importer or his agent has
to deliver to the Collector a bill of entry of such goods, contain-
ing the same particulars as before described, together with the
name and description of the warehouse and of the person in whose
name the goods are to be warehoused ; and this entry, when
signed by the proper officer, is the warrant for landing and ware-
housing the goods, after which the same or any part thereof may,
upon further entry, be delivered for home use or for exportation,
as may be desired.
Landing Regulations in Great Britain.
All goods must be landed within fourteen days, exclusive of holi-
days and Sundays. Goods may be conveyed to the Queen's ware-
house, to remain there for the remainder of the fourteen days
allowed after arrival of ship under charge for removal, or they
may remain in warehouse three clear days free from rent, to
afford parties a sufficient time to examine and clear the same.
Export Bonds in Great Britain.
Bonds are given, when warehoused goods are exported, for double
the amount of duty, with one surety, as with us, that such goods
shall be duly shipped, exported, and landed at the place for
which they are entered outwards, or otherwise and satisfactorily
accounted for, such bond note, when duly signed, being the
export entry for such goods.
34
Customs Regulations in Great Britain and in the United States
compared.
Customs regulations, as they exist in Great Britain and in our
United States, have much resemblance in form, but they are quite
dissimilar in penalties and requirements. In entering goods in Great
Britain, there is no demand for importer's invoice unless fraud is
suspected. Oaths are not required, and no bonds are given, as with
us, for double the amount of the invoice, in two separate sureties
each. In exporting warehoused goods, a bond is given with a single
surety for double the amount of duties, as with us, but the re-
quirements in regard to landing certificates are very liberal, and
do not involve the expense of consular supervision or any special
act on the part of the master or the mate of the vessel, or the
consignee, the language of the British act being discretionary, as,
" The goods shall be landed and the export shall be satisfactorily
accounted for."
Expense of Collection of Customs.
The expense of collecting the customs in 1875, according to
figures furnished by the statistical department at Washington,
was 4^- per cent. The total revenue from customs was $157,167,-
722.35, and the expense of collecting was $7,028,521.80 — an ex-
traordinary amount, when we consider that no capital is involved
or charge for rent or insurance on stock or other important
outgoes which pertain to mercantile transactions.
The expense of collecting the customs in Great Britain in 1874
was £1,022,534, or about five millions of dollars ; but Great
Britain imported, in 1874, 1819 millions, and she exported 1524
millions. Our imports in 1874 were 642 millions, and our exports
were 575 millions, or about one third those of Great Britain.
The expense of collecting customs in our United States should not
exceed two per cent.
Considerable prominence has been given recently to the fact that
the percentage of expense on the collection of customs is less in the
United States than in Great Britain, but it should be borne in
mind that, when a nation undertakes the collection of customs from
imports, it must take cognizance of all imports, and hence the
higher the average rate of duty the lower will be the average ex-
pense of collections. Now the average duty on all imports in
Great Britain is less than six per cent, while the average in our
35
United States is about 30 per cent, and it will be readily under-
stood that an advance of this present average to 50 per cent would
not increase the expense of collection to much extent, because
very nearly as much clerical work is required for the present
average, as would be required for the advanced rate. Further,
customs regulations in Great Britain, as compared with ours, for
entering and warehousing and exporting goods are very liberal.
The customs service of Great Britain assists the merchant in
every way it can, while ours purposely obstructs and hinders, as
will be explained hereafter.
The British Tariff.
The customs list of Great Britain has been so reduced within
the past forty years that at present it is very limited.
All kinds of sugars were placed on the free list in 1874 — an im-
portant article for revenue that had yielded the government over
fourteen millions of dollars annually.
The revenue from sugar and molasses in the United States in
1876 was $41,899,559.52, out of a total income from customs of
$145,178,602.75, or about 30 per cent of the total income from
customs.
The imperial list of Great Britain for 1876 contains forty enume-
rations of articles and varieties of articles, of which fifteen enumera-
tions are wholly for revenue and twenty-live are mainly protective
duties, the last being imposed to overcome internal revenue and
excise regulations, whereby the manufacturer is placed at a dis-
advantage.
The fifteen revenue enumerations comprise in fact but ten dis-
tinct articles, and should currants, figs, plums, prunes and raisins
be classed as fruits, the revenue may be properly said to be derived
from six commodities.
The present revenue from customs in Great Britain is about 1 00
millions of dollars, from which it may be noted that the British
Islands, with a population of 35 millions, derive nearly as much
revenue from customs on ten commodities as our United States,
with a population of 40 millions, receive from over 2500 articles-
excluding sugar and molasses.
Taxation in Great Britain is applied as far as possible to waste
of all kinds, and luxuries, as food and, drinks ; and great care is
taken that implements and machinery shall be free. The greatest
care is .taken ii> the, encouragement, of industry of all kinds,
and to promote the permanent investment of wealth; TJiere
36
are three prominent aims in the application of taxes in Great
Britain. Industry of all kinds is encouraged, or never dis-
couraged ; waste of all kinds is discouraged ; and the preservation
of wealth is sought in the promotion of permanent investments.
The Tariff of the United States.
Our present customs list is almost entirely the work of legisla-
tion since 1861. Previous to the war of the rebellion, the reve-
nue requirements of the government were limited, and the de-
mands of the protection interest had been limited by the celebrated
compromise measures of 1832, whereby all protective duties were
to be gradually reduced, during a period of ten years, to a maxi-
mum of twenty per cent.
In 1861 the average of customs on all imports was 12.08 per
cent, from which date, with increasing duties through successive
acts, it reached in 1868 a maximum of 44.25 per cent on all im-
ports ; since which date (1868), by reductions in duties and in-
crease in the list of free goods, the average on imports has been
reduced to about 29 per cent.
The total imports in 1875 were $547,050,117.90, and the aggre-
gate of all duties was $154,554,982.55, or an average of 40.62 per
cent on dutiable goods, and about 29 per cent on the total sum
imported.
Our tariff contains thirteen schedules, embracing 1505 dutiable
articles, which are either distinctly specified or included in general
or special classifications, to which must be added nearly 100O
articles which are not enumerated, but which, under the geneual
provisions of sections 2499 and 2516, would be assigned as dutiable
commodities, making in all over 2500 dutiable enumerations.
The free list contains an enumeration of over 600 articles.
Of the 1505 articles which are specified as dutiable, 823 pay ad
valorem rates ranging from 10 to 75 per cent, 541 pay specific
rates, and 144 are subject to compound rates. ■»
Of the articles comprised under sections 2499 and 2516, in num-
ber nearly 1000, the proportion of ad valorem, specific and com-
pound rates cannot be ascertained.
Customs duties in our tariff are discordant, the same article pay-
ing different rates of duty under different designations, with much
obscurity, whereby litigation is constantly provoked. Our tariff
list is frequently spoken of as a very complicated one ; it is more
properly an incomplete and obscure and very badly-designed tariff,
while its list of duties is much less complicated than that of France-
37
Our tariff list is a confused medley, without any classification
of articles, except a sort of alphabetical arrangement, in which sub-
stantive and adjective words take precedence by turns, with no
regard for the needs of business or any general policy that can be
discerned. It is the product of hasty and partial legislation,
made in the interest of particular individuals or special industries
from time to time, and it is in all respects, as a work of art, or as
the product of a people, whose boast has been their commercial
enterprise, discreditable.
We want a better revenue system, because our present Ameri-
can system, or, more properly, want of system, is the worst extant.
It is the most expensive of any ; it cost the government last year
4-j- per cent to collect the customs, when, if the tariff were simplified,
and the same economy introduced into public that is usual in pri-
vate affairs, it could be collected for less than 2 per cent ; worse
than the Zollverein of Germany, which was a compromise arrange-
ment of low specific duties upon almost all goods within a limit of
ten per cent, and specially adapted to the condition of the German
states, when it was proposed by Prussia in 1818 ; worse than the
French tariff, which is a carefully-classified customs list, and studi-
ously protective, although it imposes low duties on raw materials,
and thereby strikes at the very root of the protective policy ;
worse than the British customs list, which has been called a free-
trade tariff, although it contains more protective than revenue
duties, it being, in fact, the only list that is consistently protective,
while it is sagacious in revenue.
Better customs regulations are much needed, that economy in
the collection of the revenue may be promoted, and that trade
may be less hindered and burdened with charges.
Consular certificates are unknown in European commerce, and
they are only required in a very few unimportant states, as :
Necessity of Revenue Reform.
Hawaiian Islands, at a cost of
Mexico, " "
$7 00 gold.
4 00 "
Nicaragua,
Paraguay,
Peru,
" %\ 50 to 4 00
2 00
2 00
4 00
a
Venezuela,
38
They are not required in Brazil, Costa Rica, Chili, Ecuador,
Guatemala, Honduras, Salvador, or elsewhere, so far as known.
With telegraphic communications, and steam and rail transpor-
tation with most countries, the tendency of commerce is to very-
frequent transactions in smaller amounts, and hence, besides the
hindrance and delay in duplicate and triplicate invoices, the cost
of consular certificates has become a much more important item
of expense than formerly, the cost of consular certificates being
as follows :
In Great Britain 13s. 10d. = $3 39 gold.
" France 13 francs = 2 60 "
" Germany 10.90marks = 2 62 "
" Austria 155. 6(1 = 3 80 "
" Turkey 1 4s. = 3 43 "
Our customs regulations should be completely reformed, like
those of France, or they should be modified, like those of Great
Britain, to meet the requirements of the times, which are very
different from those of 1789, when the first tariff was instituted.
Our customs regulations should be reformed, because it is a
remarkable fact that while those of other nations have become
more and more liberal to meet the requirements of commerce,
those of our country have grown more and more exacting with
each advance of duties.
The interests of commerce in our country in connection with
this subject have been wholly ignored : how to collect the pound
of flesh appears to haA^e been the only thing considered.
When Alexander Hamilton proposed our first tariff act in 1789,
he suggested a maximum of ten per cent on imports, because he
believed a higher rate would prevent imports, and " strangle
commerce," or provoke smuggling.
That an average of over 44 per cent on all imports could be
successfully collected in 1868 is one of the most surprising per-
formances in our national career.
39
ADDRESS OF MR. THOMAS BARBOUR.
Gentlemen of the Commission, and Members of the Chamber
of Commerce : Many points which I should desire to bring to your
notice have been already covered by the very able and compre-
hensive arguments submitted by our counsel, Mr. Eaton, and by
my respected colleague, Mr. Robbins, and will be comprehensibly
dealt with by my esteemed friend, Mr. Jackson S. Schultz, with
whom I have had the honor of co-operating to put before this
honorable Commission, representing the government, details of so
much importance that they cannot fail to enlist the attention of the
entire mercantile community. I shall endeavor to embody in my
statement some questions which our committee have been satisfied
to leave to me to bring before you. I am able to substantiate by
facts and figures, and by the experience of our own firm, many
gross wrongs and outrages which we have submitted to, owing to
the acts of the government officials, perpetrated under the protec-
tion of the law ; and I am of the opinion that a plain statement of
the facts, which we now lay before your honorable Commission, will
constitute the strongest argument against the abuse of the powers
now vested in the appraisers' department, and which are likely at
any moment to be used against any importing merchant of New
York.
I beg to submit a detailed statement, showing 181 cases of our
regular thread importations, representing an invoice value of
£9444 6s. 6d. sterling, on w r hich we paid into the United
States Treasury the sum of about $20,000, gold, for the privilege
of bringing said property into our possession.
Memorandum of Linen Threads imported by Barbour Brothers
and held in Public Stores pending Beappraisement, April, 1876.
Marks and
No.
Description.
Steamer.
Duties Paid.
Goods
Delivered.
D 4 A 16/29
3 S 7/11
D 4 A 30/37
38/48
E 6 A 1/2
3/5
6/10
11/18
14 cases threads
5 "
8 "
11 "
2 "
3 "
5 "
8 "
Fgypt
City of Berlin. . ..
Celtic
City of Richmond
April 26,1876
" 27, " ■
May 2, "
" 10, "
" 15, "
" 22, "
" 29, "
June 12, "
Sept. 28, 1876
" 23, "
" 26, "
" 26, "
" 26, "
" 26, "
" 26, "
" 26, "
40
Marks and
No.
F e A 1/6
7/12
13/45
46/65
66/89
90/93
G T A 1/11
12/32
Description.
6 cases threads
6 "
33 "
20 "
24 "
4 "
11 "
21 "
Steamer.
Duties Paid.
Goods
Delivered.
Britannic
Abyssinia
Germanic
State of Penn.. ..
Celtic
Scythia
Britannic
State of Indiana. .
July
June 20, 1876
29, "
5, "
" 6, "
" 10, "
" 12, "
" 25, "
Aug. 2, "
Sept. 26, 1876
" 26,
" 28,
" 28,
" 28,
" 26,
" 28,
" 28,
Total — 181 cases ; value, £9444 65. 6d. Duties paid on above,
$20,000, gold.
These goods, on which we had paid duty, were detained in the
appraisers' department from April 26th, 1876, to September 28th
of the same year, a period extending over five months, involving
great inconveniences and losses to our firm, and a serious em-
barrassment to our regular business. The goods were of the
same staple description which has characterized our importations
for over a quarter of a century ; and we can in no way account for
the questions raised by the appraisers, except by attributing them
to their utter ignorance of the subject at issue. We need hardly
add that the government receded from every position in which
these incompetent officials had placed it ; and that we were never
called upon, in the end, to pay one cent to obtain possession of
the merchandise so long and so unjustly retained by the gov-
ernment of the United States.
I also present to you, gentlemen, statements and letters from
merchants of the highest standing in this community, — merchants
who have been in business for over half a century, whose names
and reputation are dearer and more sacred to them than any mere
question of dollars and cents.
I have one statement here which shows where 279 cases of !im-
ported goods, belonging to one firm, were detained and ordered
into the custody of the United States for examination, and kept
back for months, involving an actual outlay of $611.12 for
storage, labor, etc.; and also a statement of 72 cases imported by
the same firm. On both of these transactions the government
insisted, after great and vexatious delays, on collecting the paltry
sum of $6.63. The direct loss to the importer, from the delay
and detention of such a large amount of goods, can only be
calculated by thousands of dollars ; not taking into consideration
the feelings of an honorable firm, bearing a name of unques-
tioned integrity in this community, when charged with fraud.
41
I will, with your kind permission, read to you a letter addressed
to me, which may further enlighten your honorable Commis-
sion in regard to facts which I bring before you prominently.
This letter represents numbers of others in my possession which
your time will not permit me to more than allude to.
" New York, April 30, 1877.
" Thomas Barbour, Esq.
" Dear Sir : In reply to your request to name such just griev-
ances in Custom-House administration as have come under our
observation, we beg to say that we consider the powers with
which the Collector is clothed under section 2899 of the Revised
Tariff, and which in practice are exercised by the assistant appraiser,
oppressive, arbitrary, and dangerous when exercised by an incom-
petent assistant appraiser ; and we believe that the checks upon an
incompetent or corrupt official of this grade are not adequate to
prevent gross wrongs upon merchants.
"We submit that it would not be impossible to so jealously
guard, by law, the powers granted by this section, as to secure the
revenue and yet protect the rights of citizens.
" The assistant appraisers exercise the power of calling into store
within ten days after an appraisement, all the goods of any invoice.
This is a necessary power to which no merchant could object, if
limited to the time when the goods are under appraisement,
and if the time allowed for appraisement were limited by law to
a fixed period. But the appraisers can delay appraisement at
their pleasure or caprice, so that they have power over all a mer-
chant's importations for such time as they please.
" We trust that your committee will suggest that the appraisers
be compelled by law to pass upon invoices within ten days ; and
that, when a merchant's bond is good, some check should be put
upon their power to harass him by ordering large blocks of mer-
chandise to the public stores after that time ; and especially
where the assistant appraisers know that they have gone direct
from the ship's wharf, in the regular course of business, to other
cities for consumption.
"We do not doubt that your attention will also be given to the
unfairness of a rule which makes the liquidation of an entry a
final settlement as against the government, but not as against the
merchant.
" As surviving partners of the firm of John & Hugh Auchincloss,
we have had some experience of the trouble and expense which
follow the arbitrary exercise of the powers and rules above cited,
42
testimony concerning which will be given before the Committee
on Tariff Reform, if we are invited to attend.
" Yours respectfully,
" Auchixcloss Brothers."
I greatly regret that the time and opportunity afforded me are
insufficient to present the facts known to me, representing numer-
ous wrongs which many of my importing friends have submitted
to. And I would here state that it is simply, in my opinion, a
sense of fear entertained by the importing merchants, which pre-
vents them from coming forward and stating the many indigni-
ties and outrages which they have patiently borne at the hands
of these irresponsible United States officials, for the last ten years.
I have documents, too voluminous to embody in the statement
which I am now permitted to make, showing the wilful and
malicious delays to our regular business, extending over a long
period of time. In no instance did we fail to establish the entire
correctness of our invoices as presented to the government of the
United States, and on which we paid the legal duties.
At the present time we are relieved from the unpleasant
delays and annoyances of the past. We might perhaps better
illustrate to what extent we were annoyed, by reading, with your
kind permission, a letter addressed to an assistant appraiser of the
Fourth Division, Port of New York, which will explain partially
to what extent our business was stopped. The letter is as
follows :
"New York, 134 Church street,/
November 1, 1876. f
" Mr. William Day, Assistant Appraiser, Fourth Division, Port
of New York.
" Sir : It has come to our knowledge that you have overstepped
your duty, in our opinion, in still further endeavoring to delay our
shipments of linen threads to this port against some half a dozen
decisions in our favor heretofore given on the same point. Should
you further go out of your line of duty to the United States Gov-
ernment, we shall take active measures to enlighten you on your
business as an appraiser, towards us as importers of linen thread,
and we do not think we shall appeal to the Secretary of the Treas-
ury in vain.
" Yours respectfully,
" Barbour Brothers."
43
To this letter Mr. Day had not the courtesy to honor us with a
reply.
I will say that in the development by my firm of our new flax-
thread industry in the city of Paterson, employing, as we do, a
large number of work-people, and involving a very large outlay
of capital, we have had very serious impediments thrown in our
way. It might be inferred that a law such as is stated in the
seventh section of the Act of Congress of the 8th of February,
1875, was meant to provide for the importation, free of duty, of
machinery adapted for the manufacture of flax fabrics, and that
the intention of Congress in passing such a law, was to encourage
the investment of capital in that direction, in the United States.
The law to which I refer is as follows :
" All machinery not now manufactured in the United States,
adapted exclusively to manufactures from the fibre of the ramie,
jute, or flax, may be admitted into the United States free of duty
for two years from the first of July, eighteen hundred and
seventy-five."
Relying on the provisions of this law, we have recently brought
over flax machinery of great value, intending to use the same at
our new factory at Paterson. Upon the arrival of this machinery
we addressed the following letter to the Treasury Department :
" 134 Church street, New York, >
April 19, 1877. f
" To the Honorable John Sherman, Secretary of the Treasury,
Washington, D. C.
"Sir : By Act of Congress, 8th February, 1875 (Sec. 7), it is
provided :
" ' That all machinery, not now manufactured in the United
States, adapted exclusively to manufactures from the fibre of the
ramie, jute, or flax, may be admitted into the United States free
of duty for two years from the first day of July, 1875.'
" We are at present importing machinery, manufactured
specially for our new mills in Paterson, N. J., and we respectfully
request that you will give such instructions to the Collector of
the Port of New York as will enable us to obtain our property in
accordance with law, and without unnecessary delay.
" We had the honor of the highest awards at the Centennial
Exhibition, and the additional distinction of being singled out
by the French Commissioners as first in the manufacture of linen
44
threads. A copy of their report we take the liberty of sending
you by this mail.
" We remain, sir, respectfully yours,
" (Signed) Barbour Brothers."
To that letter we received an answer from the Treasury Depart-
ment, dated April 21st, 187V. With your permission I will read
the reply.
"Treasury Department, Washington, D. C, )
April 21, 1877. f
"Messrs. Barbour Brothers, 134 Church street, Xew York.
" Gentlemen : The Department is in receipt of your letter of
the 19th instant, in which you state that you are at present im-
porting machinery manufactured especially for your new mills,
in Paterson, X. J., which you claim is free of duty under the
Act of February 8th, 1875, which exempts from duty all machinery
not now manufactured in the United States, adapted exclusively
to manufac tures from the fibre of the ramie, jute, or flax, and
you request the Department to give such instructions to the
Collector of Customs at New York as will enable you to obtain
this machinery in accordance with law, and without unnecessary
delay.
"In reply, you are informed that the Collector has general in-
structions governing importations of such goods, and that the
question whether they are free of duty or not, cannot be deter-
mined until after examination thereof by the appraiser.
" It is presumed that the Collector will give all facilities for as
early a delivery of the goods as is practicable, and it is not per-
ceived that any instructions in the premises are necessary. Your
application should therefore be made to the Collector.
" Respectfully,
" (Signed) H. F. French,
" Assistant Secretary."
This reply informed us, as you perceive, that the Collector
of this port had general instructions governing the importation
of such machinery, and, pursuant to that information, I at once ad-
dressed the following letter, dated April 23d, 1877, to the Col-
lector of the Port of Xew York :
45
" 134 Church street, New York 1
April 23, 1877. ' \
" Gex. C. A. Arthur, Collector of the Port, New York.
(\ C&B |
" Sir : In the matter of ten cases of machinery \\^sT/ 2 / 4 — 3
cases, A 1/7 — 7 cases j ex SS. Bothnia, said machinery being
adapted exclusively to the manufacture of flax, we claim entry,
free of duty, under Act 8th February, 1875, section 7.
" The packages are large and heavy, and we request you will
have the goodness to order examination at our mills at Paterson,
giving us the necessary permit for their removal.
" We had written on this subject to the Secretary of the
Treasury, who in a letter received to-day, copy of which we
inclose, refers us to you as having all necessary powers in the
premises. Yours respectfully,
" (Signed) Barbour Brothers."
To that letter the Collector of this port made, two days later,
the following reply :
" Custom House, New York City, )
Collector's Office, April 25, 1877. \
" Gentlemen : I am in receipt of your letter of the 23d instant,
and in reply have to state that the machinery referred to may be
examined at your mills at Paterson, after entry and payment of
duty, and after payment of travelling expenses of the examiner.
" Very respectfully,
" (Signed) C. A. Arthur,
" Collector:'
" Messrs. Barbour Brothers,
" 134 Church street, New York, N. Y."
This letter from the Collector of the Port contains the decision
of the Custom-House authorities on our application to pass our
flax machinery free of duty, as provided for in the statute. The
Collector refused to pass our machinery without the payment of
duties, and notified us that the machinery would be delivered
only on the payment of a duty the rate of which is from about
40 to 60 per centum. *
We are unwilling to pay that duty, having imported the
46
machinery in the belief that it is duty free under the law I have
just referred to ; and our machinery is now held by the Collector,
who refuses to deliver it to us except on payment of the duty.
Our only resource is to pay the duty, which would amount to a
very large sum, and then sue the Collector to recover it, — which
would not only be expensive, but would lock up a large amount
•of capital .pending the decision.
In our own case we have been compelled to pay duties on
flax machinery, and, through the delays and lengthened de
tentions of the Custom-House officials, we have been under the
necessity of shipping the same machinery back to our factories
in Great Britain, thus being compelled to delay the project of
running the machinery in our mills in Paterson, besides losing
the duty paid to the United States Government. This we have
done in consequence of the raw material or merchandise necessary
for the working of such machinery being unduly detained for a
lengthened period in the custody of the United States.
We have patiently resisted, for a period extending over five
years, positions assumed by the ignorant officials interfering with
our importing business ; and in no one instance have we failed to
establish the fact that we were right, as a firm, and that the gov-
ernment of the United States was, through its officials, in gross
error.
It may not be generally known, however, that, no matter how
great the injury inflicted on the merchant or importer, he has
no redress against either the erring official or the government of
the United States. It will thus be seen with what safety an ap-
praiser or an assistant appraiser can exercise and bring to bear,
either through ignorance, caprice, or malice, the whole power of
the United States to suspend the importing business of an hon-
orable merchant for a period of time sufficient to virtually ruin
his business.
To me it is incomprehensible how such a state of things can be
permitted to exist in a free country. Such tyranny would not be
attempted in the most despotic governments of Europe, as is per-
petrated daily in the city of New York under the cloak of law.
Since the appointment of this Committee of the Chamber of
Commerce, I have made it my special business to confer person-
ally with many of the importing merchants of this city. I can
hardly in words express to your Committee the indignation with
which they repudiate the stigma of fraud which temporarily
might be affixed to their names by these irresponsible and fre-
quently ignorant officials of the government.
47
I do not think I make any but a fair statement when I say
that the importing merchants of this metropolis, in comparison
with the merchants of any commercial city of the civilized
world, stand second to none in honor and integrity. And there
are no people who are more jealous of their reputation and good
name, which deservedly belongs to this community; I mean the
importing merchants of America, and more especially my fellow-
merchants of the city of New York.
In conclusion, I ask this honorable Commission to recom-
mend to the United States Government, that the agents, clothed
with such extraordinary powers of oppression, should also be sub-
jected to some responsibility ; and that the official should be made
to suffer for acts arising out of his gross ignorance, malice, or
stupidity.
Before resuming my seat, permit me to return my sincere
thanks, in behalf of our Committee, and also on my own behalf,
for your courtesy in granting us this lengthened hearing ; and I
assure you that the result of this day's proceedings will be looked
for with deep interest by the merchants of New York.
• ■ i . ■ n
.J«9i«jrt&70g arfj to B&i&fSo Uwiou-gi '{lia&up
48
ADDRESS OF MR. JACKSON S. SCHULTZ.
Mr. Schultz addressed the Commission substantially as follows:
Mr. Chairman and Gextlemex of the Commission :
After what you have heard from our counsel, stated so com-
pactly, and also from my two associates, I doubt not that you will
think the subject well-nigh exhausted. But it is difficult for a
merchant to be long engaged in an inquiry involving so much
that interests his profession without becoming imbued with a
spirit very much akin to that which my friend Barbour just now
manifested, and which you will excuse in me, I am sure, when you
hear how fully I sympathize with him in* his persecutions.
I do not know what limit you place upon your inquiry. I un-
derstand, however, the object of your Commission to be similar to
that contemplated by our appointment — namely, to ascertain the
difficulties that beset the collection of the revenue, and, if there
are any errors in the administration of the Custom-House service,
to point them out, to the end that they may be corrected.
It has occurred to me that by your more recent instructions,
which your chairman has just read, from the Secretary of the
Treasury, possibly you may feel yourselves authorized to go a step
further, and to inquire with us what there is in the tariff laws or
regulations inconsistent with an economical collection of our rev-
enue.
Xeither your Commission nor our Committee propose to attack
the principles of our present tariff. We do not discuss or inquire
into the fact whether the present tariff is protective to our manu-
factures or otherwise. But, in the language of the resolution by
which our Committee is instructed, we are to inquire into the
" administration of the customs service, and present such informa-
tion as we may acquire to Congress at its next session."
With these ends in view almost any consideration which our
experience may suggest will be in order.
The first subject I bring to your attention is included in the 6th
and 22d propositions discussed briefly by our counsel — namely,
" Entries to betaken in charge by the Custom-Mouse officials, and to
be passed the same dayP
At the present time, and under our present system, we give em-
ployment to about one hundred and fifty brokers' firms, which I
estimate will employ on an average at least four persons each.
This will give us an aggregate of six hundred persons whose sole
duty it is to facilitate the passage of entries.
These persons are a direct tax upon the commerce of the coun-
try, and of all the non-producing and worthless classes, this one
49
is, in my judgment, the most so, and must be dropped out of our
commercial system ; and I beg you to consider how this economic
service can be accomplished.
The Custom-IIouse broker is a man without business experience
or professional knowledge of any kind. From the very nature* of
his calling, he becomes technical in his construction of laws and
regulations, if, indeed, he is ever required to think at all ; but as
his business is the merest routine, he soon learns to " fall into
line" and " hand up his invoices," from ten to twelve, and then ad-
journ to lunch, returning for two hours in the afternoon to fill the
corridors and passages of the Custom House.
Suppose a merchant has an invoice of merchandise unknown to
our present classification, involving questions of value which
neither tariff laws nor Treasury Regulations have contemplated ;
who can so intelligently explain these intricacies as the merchant
himself ? and is it not most desirable, both on account of the cus-
toms officials and their intelligent exercise of duty, that they should
have just the kind of information that the owner or consignee,
and he alone, can give ? Why should the exigency of this service
compel merchants to absent themselves from so important a ser-
vice both to themselves and the government ? The Deputy Col-
lectors should impart the technical knowledge of our tariff laws
to the merchant, while the merchant could in many instances
impart practical information to the Deputy Collector.
To be a little more explicit, let me indicate the practical opera-
tion of the system of entering goods we think you should com-
mend.
The Deputy Collectors should occupy an open space, such as the
enclosed space in the present rotunda of the Custom House.
A merchant approaches one of these Deputies and hands him an
invoice enclosed in an unsealed envelope ; on the outside of this
envelope is found the name of the ship, the general nature of the
merchandise, with the name of the consignee, date, etc.
The Deputy Collector opens the envelope hastily, casts his eye
over its contents, and notices, first, the place from which the
merchandise comes ; second, that it is in the currency of that coun-
try ; third, that the invoice has all the charges, such as boxes,
cartons, inland freight, commissions, etc.; fourth, that the proper
consular certificate is attached ; fifth, that the requisite number of
duplicate copies are present. When satisfied on all these points,
he takes the oath of the merchant or consignee in the usual form,
and dismisses him with the remark that he may call at the cashiers
desk at a given hour to receive a computation of his duties, when
he may pay his gold and receive his order for his goods.
4
50
This process of entering goods at the Custom House need not
delay the merchant more than ten minutes, and that time will be
ample, besides, for any explanation which either party may desire
to make or give.
Contrast this direct method with our present system of circum-
locution, the objections to which are, first, that it causes delays,
occupying the time of the merchant quite as long to employ and
explain to the broker as it would to go direct to the Deputy Col-
lector under the system here recommended ; second, that the con-
fusion and annoyances incident to the pressing of large numbers
of brokers, each trying to gain the attention of the clerk, is well
calculated to distract his mind and prevent that calm and quiet
so important when intricate calculations are being made ; and
third, while one desk or department is overworked, another may
be without employment for long periods of time.
There is really nothing new in this recommendation ; for I am
informed that several Collectors have had this plan of passing en-
tries under consideration, and have only been deterred by the
humane thought that so many brokers would be thrown out of
employment. But it is no experiment, since the French Custom
House is managed much in this way.
You will observe that I have not stated what is notorious : that
much deception and even frauds are often committed by brokers.
So common have these become that the present Collector has told
you that he is exercising a control over them. Several cases have
been related to me where goods have been passed at one duty by
the broker, and collected by them of the owner at another. In
one case goods were passed free by the Custom House, and the
broker collected the duty. Often they impose charges which are
not contemplated by law and are not exacted by regulation.
But as it is against the whole system of brokerage in the pas-
sage of invoices that we object, it is of no moment that such
abuses should be pointed out.
There will always be a certain amount of legitimate brokerage
business done, as, for instance, for consignees living out of the
city, or men who require bonds that they cannot themselves pro-
cure. But this is legitimate brokerage agency, which facilitates
commerce and will be maintained under any system.
Mr. Tukntube asked whether this change required Congressional
action.
Mb. Schultz replied that he thought not. He thought that we
need not go any farther than the Collector, certainly not farther
than the Secretary of the Treasury.
51
Mr. Schultz continued : I may as well say now what has not yet
appeared in any of the statements. We propose to frame a law
which shall take the place of all existing laws and Treasury Regu-
lations, and while doing this we have thought it best to include
in the law much that under other circumstances we should leave
to the regulation of the Treasurer. We want to close up forever
all chance for misunderstanding, and it is to that end that we are
laboring.
The Chairman. — You understand the last instructions. They
are : " In regard to complaints received by the Commission re-
specting the customs-revenue laws, and made with a view to their
revision and improvement, you will please report such suggestions
respecting the revision and improvement of the customs-revenue
laws as may, after careful investigation, meet with their united
approval."
Mr. Schultz. — Those instructions seem ample to cover the
ground entirely ; and we are very glad that it is so, because it
will lighten our work. But we will insist upon an entirely new
law, so that no lawyer can hereafter rise and quote an ordinance
of the last century. We want to bring up our law to 1877, and
to have that law so plain in its provisions that any merchant can
understand it.
The next proposition is the " The abolition oj the Naval Office"
What are the analogies in this case ? How do merchants and
bankers transact their business ? We have high authority for the
suggestion that hereafter this test is to be applied to all public
business.
I assert that the Naval Office is a duplication of the Collector's
office, and but little more.
A recent pamphlet issued in the interest and in defence of that
department would have us believe that this office is an auditing
bureau, and is indispensable to the proper administration k of the
general duties of collecting the revenue, and its author insists
that it was a great mistake to call it the Naval Office. He seems
to attach great importance to this misnomer. No doubt this in-
genious author has in his researches come across the true origin
of the department, and sees in that origin no justification for its
continuance.
This compilation or history of the Naval Office, by Mr. Silas W.
Burt, should be placed in the archives of the New York Historical
Society, so that our future historian may know that in 1877 we did
have such an office connected with our customs-revenue service.
But let us attend to the analogies of this office.
52
Do merchants have two general offices, in the books of which
they keep duplicate accounts ? Do not merchants think one set
of books, accurately kept, quite enough for one business ? Does
any bank or trust company, however large, ever keep duplicate
ledgers ? Does a bank keep assistant first tellers to recount the
money paid out over its counter ? — and yet, if anywhere, dupli-
cation of service would seem here to be justified. But no doubt
the bank reasons that one responsible officer is better than two
irresponsible ones.
Until some instance can be found in mercantile or banking ex-
perience where duplication of accounts is required, I shall assume
that there can be found no analogy outside of the present customs
service.
Merchants, banks, and trust companies do have general book-
keepers, and sometimes auditors, but they overlook only the one
set of books ; and this excellent precaution is followed in the Cus-
tom House, and is quite independent of the Naval Office.
We are told that, as a matter of experience, the Naval Office does
find many errors in the accounts that come to it from the Col-
lector's office. No doubt this is true ; it is just what we might
expect from a divided responsibility.
I think it was Mr. Beck, from Kentucky — then Representative,
now Senator — who said, " Out in his country they have a senti-
ment like this : 1 Never allow the first gatherer of wheat to be in-
terested in the second rake.' "
Let two men reduce sterling to dollars, and they will seldom
agree to a cent, even after many times trying ; and as this Naval-
Office report only assures *us of a large number of mistakes, and
does not give the aggregate, we may assume that this is unimpor-
tant.
The Chairman. — They state that the balance of errors in favor
of the government is a million and a half.
Me. Schultz. — That statement has not been published. What
does the Collector say to this statement ? I should like to have
him on the stand, and ask him why he has retained men in office
who were so incompetent. If there is no explanation to these vast
errors, then I shall be prepared to think worse of the Custom
House proper than ever before.
The Naval Office has about seventy-five men employed, costing
for salaries, in the aggregate, about one hundred and fifty thou-
sand dollars — not to include incidentals, such as stationery, etc.
Now, gentlemen, you have recommended in your preliminary
report a reduction of the force twenty per cent, but you have
53
omitted this fungus lot altogether. This will add nearly ten per
cent additional.
In the new system which I hope will be the outgrowth of the
present inquiry there should be no Naval Department.
Let us now consider the importance and proper duties of the ap-
praisers ; and I will include in the duties of this department that
of personal baggage, and also the Debenture Bureau.
The duties of the appraisers' office would indicate knowledge of
merchandise. Each officer, to perform his duty properly, must
have had experience in the values and sale of goods; and, better
yet, if possible they should have knowledge of the cost and pro-
cesses of manufacture.
Now I by no means join in the general idea that all our ap-
praisers are incompetent — mere politicans ; for I know many of
them to be quite competent. But this I do say : that too little
attention is paid to the assignment of men to such departments as
will give them a chance to be of the most service ; and I do say
that they are inadequately paid. When we consider the vast
power and responsibility exercised by these men, and the great
temptations to which they are subjected, we have no hesitation in
saying that they have too much strain for their pay.
I remember to have heard the late Mr. A. T. Stewart say that
in his judgment ten thousand dollars per year would not be too
much to pay appraisers in those departments where the German,
French, and Swiss goods were appraised, and he was no doubt
right.
It does not follow, as some seem to suppose, that all appraisers
should have these large salaries, but only such as have special ex-
pert knowledge and tastes, and are so circumstanced as to be able
to know not only the intrinsic value of goods but the added value
of " fashion" and " taste."
Under the system which our Committee will recommend, the
appraisers' department will be greatly magnified in importance.
Indeed, it will be the principal department in fact as it is now in
theory. Guarded by proper appeals, which under our present
system are known as " merchant appraisements," but under the
new system will be courts of arbitration in which the merchant
or consignee will have at least a single voice, we may assume that
the appraisers' department of this port will meet with fewer hin-
drances than now, and that its decisions will be respected in every
port and Custom House in the country.
Our counsel has told you that our plan contemplates that the
Custom House shall actually take possession of the goods, and
hold them until they have made the necessary examination. But
54
I shall be told that our present system permits this. So it does
But the practical working of the system only takes one case out
of each lot, or, where the packages are numerous, one case in ten,
and in the hurry of business seasons even this limited examination
is not always insisted upon ; and it is this looseness in conducting
the examination that induces fraud. If every importer knew that
every case and package was to pass under the observation of a
vigilant examiner, there would be no attempt at deception.
The objections to this more thorough examination are two :
first, it is too expensive for the government ; and second, it is ob-
jectionable on the ground of delay to the merchant.
In regard to the first, I have this to say : that careful inquiries
satisfy me that from orre to one and a half per cent would take the
entire package merchandise arriving at this port, convey the
same to a suitable warehouse from the ship, unpack, replace, and
deliver the merchandise to the consignee, and do it on an average
of five days, never in any instance to be over ten days. Now, as
the average tariff duties laid on merchandise are over forty per
cent, could not the government well afford to pay this one and a
half per cent, particularly as we are assured by competent author-
ity that under our present system we are not collecting over sixty
per cent of the forty odd per cent to which we are entitled ?
But the consignee objects to the delay. At present he has ten
per cent of his invoice detained often thirty days, and is restrained
in the disposal of even the goods he gets for two years ; for they
may at any time during two years be ordered back for reappraise-
ment. Of course this is not usual or possible, and yet the liability
follows the goods for all that time. It is very common to have
the goods delivered ordered back twenty and thirty days after
they have been delivered from the ship, and this is possible and
often enforced.
Now the practical question which the importers will be called
upon to decide is this : How long a delay will they consent to
suffer in the delivery of their goods, in lieu of the present system,
provided the examination and delivery is to be final ? Will they
submit to five days ? Will they, as an extreme period, wait ten ?
An expert in' the business of handling merchandise has given
the opinion that at least ten per cent of the merchandise could be
delivered each day following the landing.
Now let us suppose that the appraisers' department is prepared
to perform its duty of examination as promptly as the laborers
and counters are ready to expose the goods. Then on each day
following the discharge of the ship, the consignee will receive one
tenth of his goods where the amount were large ; and where there
.55
were single packages, they could be delivered on the same day of
arrival at public store.
This expeditious plan would contemplate a -public store for each
line of steamers, and each ship's cargo would be fully delivered
before the arrival of the succeeding ship of the same line.
If it is said that, by detentions on the voyage, two ships of the
same line maybe discharging at the same time, I say in answer that
additional force will overcome any such temporary disturbance.
" Where there is a will there is a way," says the proverb, and
our Custom-House authorities should learn from its spirit.
Of course I am only providing for steamships ; sailing vessels
with general cargoes could be provided for as now, by a single in-
spector for each ship.
The feature of this plan to which I call your attention is that
each cargo, as delivered, goes to public store and is delivered in
the order received and as fast as examined
If a merchant like A. T. Stewart can receive 200 cases of foreign
goods on Saturday, and with his limited facilities unpack and dis-
tribute them in four times that number of packages all over the
country by Monday night, then surely the task I have assigned
to the Custom-House authorities can be accomplished with the
adequate force at their command.
This appraisers' department should always have charge of the
personal baggage, as also the goods shipped abroad subject to de-
benture or drawback, for reasons too obvious to question. In this
department is all the expert knowledge of values pos>essed by the
Custom House, and without this practical knowledge the value of
personal baggage or goods manufactured and shipped abroad sub-
ject to reclaim of duty, or goods shipped in bond, so far as the
latter is presented for identification, must pass under the observa-
tion of the appraisers' department.
Let me say a distinctive word about personal fciyuage, because
it is a subject of scandal to our nation. I was about to say that
no American who goes abroad is innocent. Certainly the excep-
tions are few. Both men and women turn smugglers, unconscious,
seemingly, of the crime they commit. They seem to think noth-
ing of it. They even laugh about it, and boast of it to their friends.
There is a serious moral wrong in this whole matter which we
must sooner or later consider. It is a great wrong to the import-
ing merchant ; it is a still greater wrong to the government ; and
the defiant practice demoralizes the whole community and makes
them careless of legal restraint.
The purchases abroad by passengers are not confined, as many
suppose, to the personal wants of the passenger or his immediate
56
family, but other persons, and even other families, send for articles
of dress which they were better not to have.
The means resorted to by botli males and females to conceal
their illicit traffic is most ingenious. I have known females to con-
ceal watches in old shoes and laces in soiled linen. Nor are these
practices confined to people of the world, who make no pretensions
to scrupulous lives ; but I have known ministers of the Gospel and
their wives to conceal and pass goods that were dutiable. The
most remarkable case that ever came to my knowledge was re-
lated by a detective of the Treasury, who once traced a valuable
shawl that had been smuggled to the wife of a United States
judge in one of our Eastern States, and the shawl was recovered.
On a recent return voyaVe from Europe there were four members
of Congress, but they did not pay all their duties.
Say what we svill, think as we may, there is something about
this tax-collecting tariff imposition which all mankind in all coun-
tries evade when they can, and think it no sin or wrong. If we
are to collect duties from personal baggage, we must adopt some
other and more stringent method than any now devised. And,
after all, that is what most interests your Commission.
This is my suggestion : that each passenger be allowed one
trunk or package, after examination, to be landed with him on
arrival, and all others to be sent to the public store for future ex-
amination, and make no discriminating exceptions in this case
more than in passing ordinary dutiable goods in cases. The effect
of this order would at once be to reduce the amount of baggage
to one or two trunks for each passenger.
The proposition to abolish triplicate invoices and consular certifi-
cates is more fully accomjjlished by abandoning our whole consu-
lar system. This would seem to me the more direct way of ac-
complishing the reform we desire. It would cut that dog's tail
off behind his ears.
In view of the tax which this system imposes upon commerce,
and with the knowledge that it is so often made to oppress and
embarrass the merchants, I had come to the conclusion that the
only way out of the difficulty was to recommend a discontinuance
of the whole system. But then I reflected that in the early his-
tory of our government the consular system was made useful, and
even is now serviceable to Americans travelling abroad ; and par-
ticularly when I meet with the following extract from the Phila-
delphia Ledger^ seemingly by authority of our new Secretary of
State, I confess that I begin to see a new use for consulates abroad :
" Secretary E\ arts proposes to reorganize the consular system
after the plan adopted by Great Britain. In appointing consuls
57
it is proposed to secure men having a knowledge of commerce and
manufactures, selecting commercial men for commercial districts,
and for manufacturing districts men acquainted with the special
manufactures of the districts to which they may be assigned. The
consuls will be instructed to carefully note the progress made in
manufactures, send samples of all textile fabrics, and report in
detail the process and cost of all manufactures, in order that
American manufacturers may be fully informed upon this subject
and be prepared to introduce such of them as may prove profit-
able to American industry and enterprise. At the commercial
districts the consuls will be required to make themselves familiar
with the local exports and imports, the destination of the former
and consumption of the latter, and report from time to time what
commodities of American production might be added to American
export with profit to American commerce. This system, if pro-
perly carried out, would be of great advantage to our home in-
dustries, and by keeping American manufacturers and merchants
fully informed as to the character and demands of foreign markets,
would enable them to add largely to the variety and valuation of
American exports."
If Ave carefully consider the opportunities of our consuls abroad
to examine the merchandise about which and of which they cer-
tify, we shall give to their certificates just about as much conse-
quence as our customs authorities do — and that is none at all.
They never see the cases, much less the goods they contain ; and
except the information obtained from the bills of lading or the
forwarding certificate, they cannot even know the number of cases ;
and but for their most obliging and accommodating nature (for
which they are amply paid), they would be a most serious hin-
drance to the prosecution of foreign commerce. They have ex-
tensive powers to detain goods, to send for and require samples ;
but this they seldom do, for if the samples were before them, they
would not add to their knowledge. For such purposes as contem-
plated in the extract just quoted consuls abroad may serve a
most important purpose ; but for the purposes for which they are
now used their office is worse than a sinecure.
If, as seems probable, commerce and commercial men are to
receive recognition in the future, particularly when the foreign in-
terests of our government are to be promoted and our manufac-
turing interests extended, then we shall hail the efficient co-opera-
tion of our consuls and ministers abroad as aids, and not hin-
drances as now. But whatever may be the future of our consular
service, the system of triplicate invoices and consular certificates
should be abolished.
58
No Charges should be made on Goods entered for Consumption.
A suggestion which dropped from one of your Commission has
emboldened me to insist that when goods are held for examina-
tion for the accommodation of the government, all expenses in-
curred while so held should be paid by the party accommodated ;
if, on the other hand, the importer desires for his accommodation
that the goods should go to public store, then he should pay.
This statement keeps in mind the recognized equities between
merchants ; and there can be no reason why the merchant who is
both willing and anxious to receive and pay the duties on his
goods, while the government for its own convenience and better
security chooses to hold them and cart them to a public store —
there is, I insist, no reason why the merchant should pay for this
service. Please remember that the government does recog-
nize this principle in all " bulk cargoes." They do not insist on
carting " sugars," " hides," " iron," and the like, to public store,
but " examine," " weigh," and " deliver" on the dock. If the
nature of the cargo is such that the government cannot examine
it on the vessel or dock to determine the amount of interest it has
in the same, then I insist they must pay all expenses up to the
point of the delivery and ascertainment of such interest.
1 ask that Damage Allowance be discontinued.
It has been stated by our counsel that the merchants in their
letters to the Committee are about equally divided on this point.
That the subject is not free from difficulty must be conceded. It
is only when we are trying to balance the merits and demerits of
damage allowances that we are led to the conclusion that, on the
whole, it is better for the importer to get his remedy against the
consignor, ship, or insurance company, rather than to "seek it
through the Custom House.
I think if it can be shown that damage can be insured against, as
in the case of " damages of the sea," then in that case, where the
insurance companies pay on the " home value," that the importer
should not have any damage allowance ; and to the extent he does
get such allowance, he makes money by the damage allowance
over and above what he would make on sound goods, and the en-
forcement of such an interest is against public policy.
If the damage is latent, or comes from inherent defects in the
goods themselves — as, for instance, gloves are packed " damp,"
and when they arrive are " spotted " — the claim should be against
the manufacturer or shipper, If there is bad stowage on ship-
59
board — as, for instance, where oil is placed on dry goods and the
oil leaks through — in this case the vessel is liable. If, by stress
of weather, a portion of the cargo is thrown overboard, then the
remainder pays a " general average." If salt water gets in the hold
and damages the cargo, the insurance companies then pay. So
that, you see, a case can hardly be conceived in which the risk can-
not be covered.
But there is one other view which will no doubt weigh with
some men. Manufacturers who claim that the tariff is intended
to protect them might insist that although goods are damaged,
they do enter into consumption and competition with their product,
and should therefore be fully taxed. But this can only have force
as to such goods that are partially damaged. But if we take the
general class of textile fabrics, it is probably true that " damage
allowances" do more to bring them into competition with home-
made goods than any other cause.
It is the common complaint of cloth dealers that they are un-
dersold, and the market disturbed by damage allowances. If
damage allowances could be always adjusted upon strictly equi-
table principles and impartially, then less objection would be made.
But that such is not the belief of merchants generally I think
will be conceded ; and if we could take the vote on the question, we
should find arrayed on the one side or the other the men whose in-
terests are served or injured.
Take, to illustrate, the plate-glass importers. During our
moiety controversy we learned much of their views on this sub-
ject. It is understood that plate-glass men were among the first
to advocate and promote damage allowances. The tariff on
their goods varies from 3 cents to 50 cents per square foot, and the
damage comes from breakage. If large plates are broken up into
small ones, the difference in duty, if no damage allowance is
made, would really render it profitable to throw the invoice over-
board. In this respect glass is something like fruits : if damage
arises, it is total, particularly if full duties are paid. But there
are some houses that have the happy faculty of getting about 32
per cent damage allowance on all the glass they import, and
there are others who get only five or six per cent on the average.
This class don't happen to break so much ; but they say that
they cannot compete with those more fortunate men whom the
Custom House certifies as being unfortunate.
These goods cannot be opened on the dock, nor safely in the
public stores. The cases are usually sent to the warehouses of the
consignee, and are opened, cases standing against the walls of his
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store ; and the appraisers go to these stores on their way clown in
the morning and give a damage certificate, and it is no doubt
usually a pretty liberal one. The houses which fail to get such
allowances complain that these allowances are too liberal, and
that it interferes with the regularity of the trade. Such was the
feeling in 1874, and I have no reason to doubt that the same feel-
ing continues.
Cargoes of coffee and other merchandise are sold subject to
damage allowances. And it seems generally understood that
some parties can get these allowances when they are denied to
others, or get them to a more liberal extent.
It is not necessary for my purpose to show that these damage
allowances are unjustly given or withheld. It is only necessary
for me to show that they give rise to much dissatisfaction in
trade and cause great bitterness of feeling among merchants.
When a man is called upon by his single judgment to determine
the amount of damage on goods paying 60 to 100 per cent duty,
he is more than a man if he can for a long time escape suspicion
of partiality.
But you ask, What is the practical remedy? In addition to the
suggestions already made, I would either allow the goods to be
reshipped or destroyed. Either of these extreme remedies might
illustrate the folly of our whole system of tariffs ; but it would be
far better to submit to this loss and waste than to inflict on the
importer, as now often happens, the payment of duties on goods
that are hardly worth the amount paid.
Equalizing Duties at different Ports.
It would be a rash suggestion to propose to restrict the entry
of foreign goods to the few principal seaports, like Boston, New
York, Philadelphia, Baltimore, Xew Orleans, etc.
At present we have more than a hundred Custom Houses in the
interior, and their proper and effective management for the col-
lection of duties is simply impossible. Many of them have
but a single appraiser, and no one man, however gifted, can know
the cost or market value of a single line of goods. But why ob-
ject to their discontinuance ? The members of Congress from the in-
terior will not allow these interior Custom Houses to be abandoned,
and hence Our system must be adjusted to meet this anomalous
condition of things. But for this fact, a most unerring system of
appraisement could be arranged on the basis of home valuation,
with such a system of forfeitures and penalties as is established
in Great Britain — namely, when difference of opinion arises be-
61
tween the importer and the government official as to the true
value, the government has its remedy by adding a small per-
centage and taking the goods for the account of the government.
Such a system could be inaugurated here, but for the fact that in
the great majority of Custom Houses in the country we have no
means of knowing either cost price or market value of goods. .
But, to return from this digression, we must have better provi-
sion for the equalizing of values at the different ports.
The significant case which was related by our counsel as occur-
ring in his own practice and within his own knowledge I am
assured is not uncommon. It should be remembered that the
transportation to and from the interior Custom House would only
be one or two per cent on the value. Now if twenty or even ten
per cent can be saved in duties by the process, you can understand
that the temptation is too strong to be resisted.
A case occurred a few years ago in my own business which fitly
illustrates the importance of equalization of duties at different Cus-
tom Houses. A competing house in Boston was receiving from par-
ties in Liverpool a grease known as English sod oil. For a time the
article passed as grease in both Boston and New York, at grease
duty of 10 per cent; but as our Custom House had imported from
New Jersey a man for their appraiser, he in his zeal advanced
the rate to 20 per cent, under the plea that this sod oil was a man-
ufactured oil. For many years I had been used by the Custom
House as an expert in regard to this class of oils (oils suitable for
the finishing of leather), but all at once I had lost my knowledge,
and, as I was an interested party, of course I could not very well
impress myself upon the department, and I had to submit and
allow the grease to be called manufactured oil. Meantime, how-
ever, the Boston Custom House continued to pass the article as
grease, at a duty of 10 per cent.
This alternative was presented to me : I might take an appeal
to Washington and run the risk of getting beaten, and, in case I
did, drive my friend from Boston out of the trade and deprive my
correspondent in Liverpool of the American trade in sod oil, or, by
quietly submitting, allow both to continue a lucrative business, so
long as the Boston appraisers would continue to allow this article
at a duty of 10 per cent.
This trade did go round New York and my firm for two years
or more, but finally one of the equalizing agents found his way
to Boston, and the classification was changed there, as it had been
in New York, and then we were both put out of the trade. Then
I felt myself at liberty to take an appeal, and did so on a lot
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of sod oil which I caused to be sent on purpose. This appeal was
successful, and at both New York and Boston, ever since, both the
sod oil of England and the de gras of France have come in as the
residuum of oil, or grease, at 10 per cent duty.
I call to mind this experience to show the wrong the stupid
judgment of an appraiser occasioned to the trade of a single house
by dissipating and diverting a trade which we have never been
able to fully regain.
This is by no means an exceptional case. There are many errors
of classification now running between different Custom Houses well
known to merchants, but, from feelings of self-interest or reluc-
tance to turn informers, they remain quiet, as we did, and submit
to the wrong.
It seems not inappropriate, in this connection, that I call your
attention in an especial manner to the large responsibility of a
class of public officers who, like the damage appraisers, have oppor
tunities to make or unmake the fortunes of merchants.
Omitting weighers and gangers, about whom you have heard so
much, let me call your attention to " samplers," and only one
kind of them — namely, those who sample sugar.
One of your Commission is better informed on this subject
than any other person present, and could, if he would, give you in
private a most interesting chapter on the processes of collecting
duties on sugar. But as he may feel too delicate to expose the
secrets of his heart, I shall venture to hint at least at some of the
weak spots in this sugar trade, particularly as recently new com-
plications have arisen — complications that are likely to overturn
the whole system on which we have been proceeding during the
past years.
We estimate the duty on sugar by the " Dutch standard " of
color. When the sampler brings in his samples, they are compared
with these colors, and the duty assessed is from one and a half to
four cents per pound.
It must be apparent to you that it is of much consequence to
the owner whether he pays the lowest or highest of these duties,
and it is not unnatural to suppose that he will do all that an hon-
est man can to bring out as favorable a result as possible.
All or nearly all depends on the sampler. He can make the
duty cost in the aggregate on the cargo eight thousand or twenty
thousand dollars. Is not this sampler, then, a much more impor-
tant man than the Collector ? The Collector is a man with com-
paratively limited power, and you have an appeal from his deci-
sions if you think him wrong ; but the sampler, if wrong, is never
63
likely to have his decision appealed from. If he is too favorable
for the government, he is reasoned with and asked to resample ;
but if he is too favorable for the importer, there is no government
interest which interferes.
How are these samples taken that are to decide the issue be-
tween eight and twenty thousand dollars ? After boring, the tryer
is shoved in each hogshead. Now, whether the tryer is directed
upwards or downwards in the cask will often make a difference of
one half a cent on the pound duty on the whole cargo.
But besides this facility to favor, there are many others which
may be practised. Unequal quantities may be taken from differ-
ent casks, so that when they are mixed and blended the average
color may be influenced one or two shades.
Let me suppose that the shippers or owners of sugar in a foreign
country come to understand that one house better than another
can procure these favorable reports through this sampling pro-
cess ; what would be their course in future shipments ? Would it
not be to send consignments to those houses which gave the best
aggregate return ?
I know how delicate this subject is. I know how many delicate
interests are involved in these hints, and yet I know they will be
keenly appreciated by all importers and dealers in sugars.
The remedy is in a change of the whole system. The " Dutch
standard " must be sent back to Holland. With their proverbial
honesty it may be suited to discriminate the value of sugars,
but our people have outgrown it.
It has come to light that within a year they have commenced to
color artificially the crude or raw sugars which come from some of
our largest sugar-producing markets. This coloring matter is not
detrimental to the saccharine value of the sugar, and does not
weigh, and is readily removed in the process of refining. This
new invention, if nothing before had done so, demonstrates that the
standard by color must be abandoned.
As a very large proportion of our duties is collected on sugars,
I judge that your Commission will deem it your duty to take into
consideration this difficult but important subject.
Here some moralist says, " If merchants are the high-toned and
honorable class they are represented, why will they be thus tempted
and also tempt others ?" My answer is that government should
make it possible for a conscientious and honorable merchant to
live by obeying the law, and not, as now, so largely make it the
interest of men to evade or directly set the law at defiance. The
64
only alternative in this matter is that the duties on sugar should
be made specific.
There is always a standing conspiracy to deplete the public
Treasury.
There are usually about four thousand suits pending ; most
of these are nominally against the Collector for the repayment of
overpaid or wrongfully-paid duties. Nine tenths of this litiga-
tion is the direct consequence of our ambiguous revenue laws,
which brokers, experts, and lawyers avail themselves of to de-
plete the Treasury.
The most notorious of these cases are known as the Ribbon
and the Fruit cases, which occurred within a few years, the
shock from which we have hardly recovered from yet. Mr. Chair-
man, your associate, Mr. Robinson, will inform you of the nature
of these cases. Their history and disastrous results to the public
Treasury (and I would like to say public morals) would occupy
too much of your time to consider just now. But these com-
binations are continually forming, not on so large a scale as in
those two notable cases, but just as disastrous in their aggregated
result each year.
It is safe to say of the vast sums paid back by the government
for overpaid or wrongfully-paid duties, not more than one half
reach the parties in interest.
The demoralization of the department clerks and other officials
in Washington, in arriving at conclusions in these important cases,
is well understood and conceded. When hundreds of thousands,
and even millions, are to be divided as the result of such deci-
sions, it is not surprising that officials, high and low, who are in
any way connected with them should be brought under suspicion.
Occasionally cases arise of such large proportions as to raise them
out of the dull local routine of petty larceny. Such a case is
now being prepared, and when the time comes for " cracking" the
Treasury, we shall be shocked, as we were about two years ago
in the two cases named.
In 1875 our government made a treaty with the Hawaiian
Islands to admit their sugar, being the growth of those islands,
free of duty ; but we are charging all other governments from
one and a half to four cents per pound on sugar. The question
now arises, Can we charge governments with which we have treaties
which contain " the most favored nation clause" these high duties,
while we admit the sugars from the Sandwich Islands free under
the treaty just mentioned ?
I should say no. At all events, there is doubt enough on the
65
subject to induce all importers of sugar from Spain, Brazil,
and other sugar-producing countries to pay their duties under
protest ; and when the proper time comes for making up a case in
which there shall be "millions," then we shall hear of another
steal, which in amount will far exceed the Ribbon and Fruit cases
combined.
If you go so far in your inquiry as to ascertain the influ-
ence of treaty stipulations upon the revenue of our country, you
will have a most interesting field of inquiry in the workings of the
French tariff as it affects us and them. You w ill see how im-
possible it is to frame tariffs ignoring these treaty stipulations.
We have no " favored nation clause" in our treaty with France,
and that nation has in many ways attempted to discriminate against
us in her tariff.
Let me give you a single instance, and you will see how ineffect-
ual it is ; and it must always be so with attempts to override the
laws of trade and commerce, which are based on the laws of God.
The French tariff attempts to discriminate in favor of Great
Britain and against the United States in the article of leather.
The effect is that, inasmuch as Great Britain admits our leather
free, we supply Great Britain, and she in turn supplies France. It
only makes a discrimination against us of one or two commissions,
which are paid by the French people who consume leather. How
long will it be before the Sandwich Islands will have a large im-
port trade of sugar which we will have to distinguish from their
home growth ? At the present moment, although the treaty has
not been in operation two years, we hear that importations of
crude sugar into the United States from the Sandwich Islands have
been challenged, and are now the subject of litigation.
I beg of you, gentlemen, to look into this subject, and by your
timely suggestions to nip in the bud these deep-laid schemes to
deplete the Treasury.
But what shall be done with the litigation now T pending ? Most
of the four thousand suits now pending could be settled by trying
about ten or fifteen of them ; for the principles involved in at
least two thousand of the suits would be the same as in these few
cases.
The merchants, so far as they have any interest, would most
gladly join in any effort to facilitate these settlements. But, alas !
the lawyers who represent by far the larger proportion of the
claims are in no hurry ; they seek delay until other and corre-
sponding cases can be secured to their office. Being thus controlled,
no man can say when we shall come to the end of this litigation.
5
06
My suggestion is this : That Congress a1 its next session shall
be asked to pass an act taking all these revenue eases from the
calendar of the present courts and refer them to a single judge,
or, better yet, to a legal commission, whose duty it shall be to ad-
judicate and determine them in the most summary manner.
The next point to which I call your attention is what 1
shall call a want of accommodation — absi znce of a disposition to
adjust f bonds and oat/ts, hold the goods until the duly is
/'l. This is tlie grand panacea for half the ills we sutler.
When, fifty years ago, it was the custom of the government to
accept the time notes and bonds of merchants in lieu of gold
duties, :is ;tt present, there was sonic excuse for the distrust exer-
cised. At that early day the notes held by the government were
a first lieu upon the merchant's property ; hut now all that prior-
ity is rendered unnecessary by the requirement of the payment of
cash duties befon any <>t' th> : /<»> classification and value, what need is there t<< ask
the consignee to swear about a matter that lie cannot know as
much about as the parties in actual possession « >f the goods'/ We
may be told that these bonds are required to secure the balance
due on final liquidation. But forty years' experience shows that
less than one per cent will pay all such short payments.
77/f Government must be heldresponsibi< /'<>/■ tl,, Arts <>f Its own
Agents.
By far the larger number of errors and omissions in the invoices
of the importers arise from omissions in charges, such as com-
missions. " inland freight," "boxes," " cartons," etc.
These omissions should be detected by the examiners and other
officials of the government, and exposed at the time of entry, so
that if the merchant has omitted them from ignorance, his remiss-
ness may be corrected ; and if from design, then he should be
made to feel that his unfaithfulness is detected.
Let me particularize, so that we may see just the extent to which
the Custom-House official should be held responsible for these
omissions or errors, which, when allowed to pass, are so fatal to
the integrity of the invoice.
Let me suppose that the invoice is one of silks from Lyons, in
France. The clerk who examines this invoice knows that by law an
arbitrary commission must be added to all invoices, whether such
commission is actually paid or not. He knows that, from the nature
IS
of the goods, silks must be packed in boxes which cost money.
He knows that to- bring boxes from Lyons to Havre, being the
last port of exportation, " inland carriage" must be paid. He
knows that this transaction is made in France, and therefore the
invoice must be made out in the currency of that country — namely,
in francs. He knows that a consular certificate must be attached.
Now if any one of these conditions are omitted, it is his duty
to notice the omission, and yet he seldom does this. If he does
it at all, it is to give notice to some vigilant detective, who is to
earn the commendation and pay of the Treasury Department for
exposing the " rascally importer in his attempts to cheat the gov-
ernment."
If the appraisers' department allows goods to pass under a
wrong classification, that department and not the importer should
be held responsible. If, after a full exposure of the goods by sam-
ples, undervaluations are alleged even in this case, the govern-
ment should be estopped from making reclaim after final liqui-
dation.
It is the duty of the government to have competent expert ac-
countants and expert appraisers. But if they should not have
such, by defective methods of appointment, they have no right to
hold the merchant for their remissness. Much complaint is made
by importers that incompetent appraisers, to make good their
own want of knowledge, exhibit invoices to their competitors in
trade. This is a wrong which the government has no right to
commit. If their appraisers of themselves have not the requisite
knowledge, then the government should suffer.
What would a merchant in one of our Western cities think of a
process which exposed not only the price but the description of
goods which they brought to their customers, and told their com-
petitors, besides, from whom they made their purchases ? And yet,
under our incompetent system of appraisement, these exposures are
constantly liable to be made of the business transactions of our
importers.
Whatever weakness or imperfection inheres in our system of
revenue service should not, as now, be charged solely to the ac-
count of our merchants, but should be divided at least with those
who control the administration of the service. Until such re-
sponsibility and comity can be established there must be the
same friction and estrangement which at present exist. The
efforts of your Commission, if properly directed, must tend to
bring about a better state of feeling between the merchant and
his government.