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The Collection of Taxes on Imports


1. Division of the ports into districts.

2. Mode of compensating the collectors.

3. How they are appointed.

4. Principal places where the revenue is collected.

5. How the work of collecting is done in New York.

6. Duties of the collector.

7. Duties of the naval officer.

8. Same subject.

9. Should the naval office be abolished? 10. Is it superfluous? 11. It lessens fraud.

12. Duties of the surveyor.

13. Duties of the appraisers.

14. Creation of the board of general appraisers.

15. Defects in their method of work.

16. How they can be lessened. 17. The refunding of duties. 18. The process described.

19. Appeals.

20. Force of the decisions of the board of general appraisers.

21. How liquidations are made when decisions are pending.

22. Action after the rendering of a final decision.

23. Frauds in importing.

24. How they are perpetrated.

25. Superiority of the system of specific duties.

26. Theoretically the system is less perfect than the ad valorem system.

27. Too many ports are kept open for the collection of duties.

1. The United States is divided into one hundred and twenty-six districts for the collection of taxes on im ports. The coast of Maine, for example, is divided into twelve districts, New York into ten districts, Pennsylva nia into three districts, and so on. The chief officer of every port is the collector. Besides the collector there is a surveyor and an appraiser. In six ports—Baltimore, Boston, New York, New Orleans, Philadelphia and San Francisco a naval officer assists in the work. These officers are nominated by the President and confirmed by the Senate, and receive as a compensation annual salaries ranging from $12,000 for the collector of New York to $z50 for collectors in the smaller places.

2. Formerly, the mode of compensation was by fees, but this system, as can be readily imagined, gave rise to the grossest abuses. For the old system of compensa tion the present system of fixed compensation has been substituted. The appropriation for this purpose is a per manent one of $5,500,000, besides the fines, penalties and forfeitures connected with the customs and the fees paid into the Treasury by custom officers and from cartage, drayage, labor and services. The amount is too small, and the annual deficiency is appropriated in the deficiency bill.' 3. A word may be added concerning the individuals employed in collecting these revenues. The total num ber is 5,103. Of these 215 are appointed by the President and confirmed by the Senate ; the employment of 4,464 is regulated by the civil service rules.

4. Most of the revenue is collected in a few places. The net receipts for 1899 were $206,128,481; of this amount $136,772,815 were collected at the port of New York. Four other ports at which much larger amounts were collected than any others besides New York were : Philadelphia, $22,344,052; Boston, $15,606,781; San Francisco, $6,570,136; Chicago, $6,405,880.

5. In the principal port of entry, New York, the work of collecting duties is performed by four offices—the collector's, the naval, the appraiser's, and the board of re view. The duties of each office may briefly be described.

6. The collector receives reports and other docu ments relating to the entry of vessels. He also estimates, with the assistance of the naval officer, the duties that are to be collected, receives the money, grants permits for loading and delivering goods and, with the approval of the Secretary of the Treasury, employs the weighers, gaugers, measurers, and inspectors of the ports within his district. He also provides, with the Secretary's ap proval, storehouses, scales, weights and measures need ful for storing and determining the duties that must be paid on goods.

7. The duties of the naval officer are to go over the work of the collector's office and insure its accuracy. It was supposed, when establishing the system, that errors would happen in the calculations, corrupt practices creep into the collection of revenue, as the temptations would be so great, so naval officers were established to revise and watch the work of the collector's office. More spe cifically he receives copies of manifests and entries, esti mates with the collector the amount of duty that must be paid, keeps a separate record of such entries, counter signs permits, clearances, debentures, certificates and other documents granted by the collector, examines the collector's abstract of duties, accounts of receipts, bonds, and expenditures, and certifies to their accuracy.

8. Furthermore, he examines the collector's and as sistant treasurer's accounts quarterly in New York, and oftener if directed by the Secretary of the Treasury. In short, he peforms pactically the same duties as the col lector, except those of receiving money and employing gaugers and other officers, and providing storehouses and scales as above mentioned.

9. While the continuance of such an office in New York is regarded as desirable by those who have made special inquiry into the working of the collecting system, yet they have also recommended no less strongly the abolition of all the other naval offices. And indeed the system is an anomaly, for while no such office exists in Chicago, where eight millions or more of revenue are an nually collected, such an office does exist in Baltimore, where the collections are not one quarter as great.

1o. To many the office would seem to be superfluous. It may be asked, "Why should the work of collecting the revenue be revised by a second officer any more than the work of any other important business outside that of government, the work of a great railway corporation, for example ?" The answer always given is, "Because so much money is received, and the nature of the business is so difficult." There are many questions of a legal character relating to the rates of duty that should be im posed; but these are outside of the work of accounting, and are properly considered in other ways.

II. Again it may be answered that the government has always accounted for all of its receipts and disburse ments at least a second time, and in many cases three or four times, to correct mistakes and to guard against frauds. While many criticisms have often been made against the red-tape methods of the government which existed until 1894, to some extent they operated as checks against fraudulent practices.

12. The duties of the surveyor are numerous. He superintends and directs the inspectors, weighers, gaugers and others, reporting weekly to the collector con cerning absentees ; reports daily in the morning to the collector the details of the previous day's arrivals from foreign ports, names of vessels, from what ports they came and other particulars relating to them. He puts on board of every vessel at least one inspector immediately on its arrival, ascertains the quantities and amounts of distilled liquors imported, examines whether the goods landed correspond with the permits for landing them, and superintends the lading of goods for exportation, of collecting drawbacks, bounties or licenses, and examines and reports whether such goods correspond with the en tries and permits.

13. The appraiser supervises the examination, in spection and appraisement of such merchandise as the collector may direct, and also revises and collects the reports of the assistant appraisers.

14. In 189o, a board of nine general appraisers was appointed, of which three members were to constitute a board of appeals in New York. To this board appeals

from the decision of the collector may be taken. The de cision of the board is final, unless the appeal is taken to a Federal court. Such, in brief, is a description of the duties of the principal officers concerned in collecting duties.

15. In a report by experts appointed in 1895 to ex amine the Executive Departments it was remarked that the basis of collecting duties by the government was the appraisal of merchandise, thereby fixing its dutiable value and giving the collector such information as en abled him to classify it. While every operation in the custom-house was duplicated by the naval officer, there was no check on the work of the appraiser. Indeed, from the nature of the business, it was difficult to establish one. As only some packages of an invoice were selected for appraisal, and the business would be delayed if duplicate appraisals were made, it was almost impossible to super vise the work of an appraiser. It seemed wise to im prove the appraiser's department.

16. How was this to be done ? The experts thought that a branch of the government service might be estab lished, called a board of general examiners. They should be selected for their technical and expert knowledge of merchandise, receive proper compensation for the ability required of them, and be subject to the direction of the Secretary of the Treasury in their removal from one port to another. They should he under the direction of the appraiser and assistant appraisers, but act independently in arriving at their conclusions. Such a board would strengthen the customs service at its weakest point. It was estimated that the increased protection to the gov ernment would more than compensate for the cost.

17. In 189o, a law was passed providing for the re fund in some cases of duties. When the collector is in doubt whether duties ought to be collected or not, the decision is in favor of the government, and if the im porter is dissatisfied, he forthwith takes action to recover the excess or full amount. This is the reason why the government so often fails to collect duties. If the prac tice was not adopted of exacting, or at least securing the duty even in doubtful cases, the government would be a more frequent loser.

18. By the refunding act a merchant or importer can make a complaint within ten days after he has paid the duties required, or within ten days after their assessment and liquidation. When this appeal has been made, the collector transmits it to the board of three general ap praisers, who may be on duty, or to the board of three general appraisers who may be appointed by the Secre tary of the Treasury. They make a reappraisement, and their decision is final, except in cases of appeal taken to the United States Circuit Court within thirty days after the board's decision.

19. "An appeal can be taken to the Supreme Court within thirty days. If allowed by the lower court an ap peal can be taken by the United States whenever the Attorney-General shall apply for it within thirty days after the decision of the lower court?" 20. The decisions of the board of general ap praisers are written in duplicate, and one copy is sent to the collector and another to the Secretary of the Treas ury. If an appeal is not taken therefrom by the collector or the Secretary within thirty clays, liquidations are made in accordance with them. The general appraisers are governed in making their decisions by precedents, so far as they exist.

21. If a decision is pending on a class of goods, the liquidations of entries of other goods of the same char acter are not held back, but are made on the basis deter mined by the collector until a decision is rendered by the board of general appraisers. On the rendering of this, liquidations of all the entries based on the decision of the board are made. Liquidations are not reported to the Secretary of the Treasury except in a general statement made up in the office of the auditor of the custom-house.

22. When a decision is rendered by a court, then a certified statement is sent to Washington, and the deci sion, followed by payment by the Treasury Department, is held as a precedent for decisions in the future by col lectors. No action is taken by him on a judicial decision until it has been promulgated by the Secretary of the Treasury.' 23. Notwithstanding all the precautions adopted by experience for securing the revenues, the remark is very trite that large sums are constantly lost through the ig norance, misconduct and fraud of collecting officers. Duties, like all kinds of taxes, are not paid willingly. Whatever may be the intention of the importer to add the tax to the price of his goods, often he tries to escape the payment of the entire amount, or a portion if possible, consequently the undervaluation of goods is a constant occurrence.

24. Many exposures have been made of the tricks and devices adopted by importers to beat the govern ment. One of the more common is to establish agencies on this side of the water to whom goods are consigned. A low valuation is fixed on the goods imported. If a person desires to buy goods in this country of a foreign house having such an agent here, the purchaser is re spectfully referred to the agent in this country, instead of selling to him directly. The object of this is to prevent sales from which the government can obtain an accurate knowledge concerning their worth. The more perfectly they have succeeded, the greater is their advantage over importers who deal honestly with the government. Con sequently the business is passing more and more into the hands of those who have neither honesty nor pride in conducting it.

25. To make the calculation of duties as sure as pos sible, specific duties have been often imposed and col lected instead of ad valorem ones. The ad valorem sys tem, which consists in levying a duty on the value of things imported, while the most just in theory, opens the door widest to abuses.

26. Theoretically, the system of specific duties is less perfect than the other because calculations cannot be as carefully based on the actual worth of goods. Yet, when specific duties exist, many devices are constantly invented to defraud the government and relieve importers from paying a high rate of duty. The Wilson tariff, enacted in 1893, was based on the ad valorem system ; so was the tariff of 1846. Generally, it is not favored by govern ments that impose duties on imports, because frauds can be more easily perpetrated.

27. Another obvious imperfection in the system is in keeping open custom ports where they are not needed. Successive Secretaries of the Treasury have tried to get authority to close them, but Congress will not act. Never was a more shameless system of wastefulness kept alive, for the cost of it is annually presented in the reports of the government. The following table shows how com placently wasteful Congress can be notwithstanding the efforts of every Secretary of the Treasury for more than twenty years to discontinue them.'

duties, collector, board, system and government