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As a further protection against undervaluations it was pro-. vided that in addition to the oath required of the owner, importer, consignee or agent on the entry of any goods, wares or merchandise, such owner, consignee, agent or importer should declare on oath, when goods were entered subject to an ad valorem duty, that the invoice produced by him "exhibits the true value of such goods, wares or merchandise in their actual state of manufacture, at the place from which the same were imported." In case of consignment if the person authorized to receive them did not appear to make this oath, the goods were to be stored at the owner's risk in the public warehouse. And if the oath was not made or produced within four months, the goods were to be subject to appraisement.

It was also provided (§ 8) that goods imported and belonging to a person residing, at the time being, outside of the United States, should not be admitted to entry unless the invoice of the goods was verified in the manner prescribed (in the 5th section) before the consul of the United States at the port from which the goods were shipped, or before a consul of the United States in the country in which that port was situ ated.2 He should further declare on oath as to whether he was in any way interested in the profits of their manufacture, and if so that the prices charged in the invoice represented the current value at the place of manufacture and such as he "would have received if the same had been there sold in the usual course of trade."

By this law the value of goods subject to ad valorem rates was to be estimated by including all charges except commissions, outside packages and insurance. As an additional precaution against fraud in the invoice, the collector was required to cause at least one package of every invoice and one package at least out of every fifty packages to be opened and examined. If this package was found not to correspond with, or to be

1 That required by the law of 1799.

? If there were no consul in the country, the oath could be taken before a notary public or other officer authorized to administer oaths.

falsely charged in, the invoice, full examination of all goods contained in the invoice was to be made. If any package were found to contain goods not described in the invoice, the whole of that package was to be forfeited and an appraisement of all the goods was to be taken, as prescribed in section eleven. Undoubtedly, as has often been claimed, frauds of some magnitude have been successfully perpetrated by collusion in the designation of the packages to be examined, as required by this section and its subsequent modifications. But as no good remedy except the cumbersome and expensive one of examining all goods and packages has so far been proposed, and as this only demands for its honest enforcement that the officers be reasonably honest, we must really charge the frauds not to defective regulations but to dishonest service. It may be as well to state what we must always keep in mind in dealing with any method of tax collection; namely: that, while avoiding the introduction of undue temptations in any form and restricting as far as possible all opportunities for collusion, we must proceed on the assumption that the public servants are honorable. It is utterly and plainly impossible to do any work well with rotten machinery.

During the years from 1818 to 1823, and more particularly in 1820, there arose in connection with the proposed increase in protective duties an active agitation for "reforms" and changes in the administration of customs revenue. Resolutions were introduced in Congress in December, 1819, for the abolition of drawbacks, and bills were framed providing for a considerable shortening of what seem to us the unreasonably long credits then allowed on importations. But the proposals met with such a storm of opposition and with such an overwhelming mass of arguments for the retention of the old system that nothing came of them, and the matter rested for ten years.2 Connected with this was the more successful outcry against the so-called "auction system."

1 Cf. supra, pp. 27 and 31, and infra, p. 84.

2 See article in North American Review, Vol. XII., p. 60.

2. The Auction System.

Whether the auction system was really a serious affliction to American merchants, we cannot strictly say. It would seem that there would have been many other ways open for the accomplishment of the same results, had there been no such thing as the "auction system." But rightly or wrongly the merchants, oppressed by the hard times and " low prices" of that period, seeking for some cause or some unfortunate institution on which to vent their spite, pounced upon this system, bitterly attacked it and made it the scape-goat of all their misfortunes. It was really a combination of circumstances that made it prominent. But it was the loose methods

of the custom house, and the inadequate protection against fraudulent undervaluation, together with the high duties of the tariff of 1816 that rendered it oppressive; or we should rather say that it was these latter facts which formed the true oppression to the honest American importer, and not the much abused "system" which happened to be the final and most conspicuous, although really most innocent, part of a line of fraud that ran back through the custom house and had its impulse in the dull times and over-production in Europe.

The stagnation in business in the years immediately following the last Napoleonic war was marked. The extravagant hopes of great commercial activity upon the renewal of the long-suspended trade relations, and the re-opening of the continental markets, caused an immense production of goods in 1 1Cf. Essay on the Warehousing System and the Government Credits, published by the Philadelphia Board of Trade, 1828, p. 18.

The auction system was very widespread and was prominent for many years. But as a cause for tariff evasion it may be easily overestimated. Indeed we have practically the same system of consignment to-day without any general use of the auction room. In this connection undue prominence is given the auction system by some writers. Bolles, in his "Financial History of the United States," finding a temptingly large literature on the subject, has utilized it to fill a considerable part of the space which he devotes to the discussion of customs collection. It is perhaps unnecessary to warn the reader against placing implicit confidence in Mr. Bolles' work.

England, which impoverished Europe was unable to purchase. The great accumulated stocks of British manufacturers, in most cases produced on credit, necessitated the forcing of a market somewhere and at any price. Facilities were found for this, it is claimed, ready at hand in the auction system so prevalent at that time.

Foreigners would ship in their goods, the auctioneer giving the custom-house bonds, since it was necessary that these bonds be given by a citizen of the United States. As the goods were greatly undervalued in the invoice, and were immediately sold for what they would bring, there was very little expense in the transaction.1 Opposition raged for years against the system, and New York finally levied a tax upon auction sales.2

Of course the only remedy for these frauds was found in the deterrent legislation which commenced in 1818, and which was further perfected by the Act of March 1, 1823. This drew a plain distinction between goods purchased abroad to be imported by the purchaser, and those not actually acquired by bargain or sale, but imported by the manufacturer.

This legislation set out at length the forms of entry and the oaths to be administered by the collector. They were all very full and explicit, and apparently left no room for quibbling or deceit without perjury.

Ist. The consignee, importer or agent, was to swear in substance that the invoice presented was the only one received, expected or known to exist; that it was unaltered; that nothing was concealed to the disadvantage of the United States; that on receipt of any other invoice it would be made known to the collector; and that to the best of his knowledge and belief the invoice produced exhibited the actual cost or the fair

1 The total receipts from such sales between 1810 and 1828 are estimated at $225,000,000.

2

2 See Remarks on the Auction System as practiced in New York (N. Y., 1828.). Memorial presented to Congress by the citizens of Philadelphia, Feb., 1817, and Memorial from the State of Delaware; in the Addresses of the Philadelphia Society for the Promotion of Industry, pp. 265 and 274.

market value of the said goods, etc., "at the time or times and place or places where procured or purchased," and no other or different" discount, bounty or drawback, but such as has been actually allowed on the same."

2d. The owner's and purchaser's oath was very much the same as the foregoing with the added clause, that the invoice contained a "just and faithful account of the actual cost of said goods, and of all charges thereon, including charges of purchasing, carriage, bleaching, dyeing, dressing, finishing, putting up and packing."

3d. The manufacturer's and owner's oath was the same as the second, except that in place of the words "actual cost," are substituted: "a just and true valuation of the goods at their fair market value."

Section seven repeated in slightly changed form the requirement' of authentication by a United States consul or commercial agent or a public officer. In case of the absence of such authentication, the goods were to be deemed suspected and liable to the same additions and penalties as in case of fraudulent invoices.

Practically the same regulations as to appraisement were retained, but with the addition (§ 18) that in all cases where the owner, consignee, importer or agent was dissatisfied with the appraisement it would be lawful for him to employ, at his own expense, two respectable resident merchants who, after being duly qualified, should act with the two official appraisers as a board of appraisement, and should report the value of the goods if they agreed therein and, if not, the circumstances of their disagreement, to the collector. If the importer were still dissatisfied he might appeal the case to the Secretary of the Treasury who was fully empowered to decide thereon. One-half the excess of duties, caused by adding fifty per cent. in case the reappraisement raised the invoice more than twenty-five per cent., was to be divided, according to the

1§ 8, see supra, p. 35.

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