Part 3

What is Customs? Why was it organized? What are its duties? And why is it necessary?

Customs is a slender, dark-haired expert sitting in a small room in New York appraising the value of a treasure in diamonds. It is a chemist in a laboratory checking the quality of a foreign import--and its dutiable value--and arriving at a decision which may mean life or death for an American business in a highly competitive market. It is an inspector at an airport or on a pier examining the luggage of passengers to be sure they have complied with the law.

Customs is a tall man with a wind-burned face lying in the mesquite above the Rio Grande, watching patiently for the smuggler of heroin or marijuana he knows is coming his way. It is a burly man lowering himself into the dark hold of a ship to check the cargo and to search for contraband. It is a man giving an expert appraisal of the antiquity of a tapestry or the authenticity of a painting to be certain an importer is not being defrauded. It is a man checking the contents of a mountain of parcels arriving from overseas.

Customs is a man explaining to a tourist what he can do to save time and avoid trouble in his travels. It is volumes of complex rulings by the courts and laws passed by Congress governing the huge import-export trade. It is a lawyer standing in a courtroom arguing that an import is subject to much higher duties than its importer claims.

In the long years past, Customs was James Madison standing in Congress and urging his fellows to adopt a tariff act quickly in order to save the government from financial ruin. It was a band of men slipping through the bayous in search of Jean Laffite and the mountain of loot he was smuggling into New Orleans.

Customs was a small army of men whose collection of duties symbolized an issue which threatened to touch off a civil war long before Abraham Lincoln entered the White House. More recently it was an angry maid exposing a distinguished judge and Hollywood stars caught in a tangled web of intrigue. It was, unfortunately, also a thief who rocked the country with a scandal, and weak-willed men who could not resist the temptation of an underworld bribe.

The Customs Service is and was a thing of many parts, involving the lives and fortunes of many people. And that is the reason for this story.

2

A TIME OF CRISIS

The problem of tariffs is one with which governments have contended from the beginning of recorded history.

The Old Testament mentions customs duties and indicates that in those ancient times a well-established system of duties existed. In the early chapters of Ezra is to be found the story of Cyrus, a king of Persia, who permitted the captive Israelites to return to Jerusalem from Babylon in order to rebuild the city and their temples. But there were those who opposed the return of the Israelites. The scriptures say these opponents “weakened the hands of the people of Judah, and troubled them in building, and hired counsellors against them, to frustrate their purpose.”

This dispute carried over into the reign of King Artaxerxes, who succeeded Cyrus. Those who opposed the Israelites returning to Jerusalem wrote the king a letter in which they said, “Be it known now unto the King, that, if this city is builded and the walls finished, they will not pay tribute, custom, or toll....” But the king searched the records and found that there was precedent for imposing a tribute or a customs toll. He replied to the letter, “And I decreed, and search hath been made, and it is found that ... there have been mighty kings also over Jerusalem, who have ruled over all the country beyond the river; and tribute, customs, and toll was paid unto them.”

The New Testament indicates that Matthew was a collector of customs at the city of Galilee. It says that Jesus called Matthew from “the receipt of customs.”

The first recorded history of customs being collected in England is found in the code of laws enacted by King Ethelred in 979 A.D. The law read, “Every small vessel arriving at Billingsgate shall pay to the tax gatherer one obolus; if of greater tonnage and mast rigged, one denarius. If a ship shall arrive and anchor there, four denarii shall be paid to the tax gatherer. Vessels laden with timber shall pay one log to the tax gatherer.”

In the Magna Charta is found the following: “Cap. XXX. All Merchants, if they are not openly prohibited before, shall have safe and sure Conduct to depart out of England, to come into England, to tarry in and go through England, as well by land as by water, to sell and buy, without any manner of evil tolts, by the old and rightful customs, except in time of war. xxx”

The collection of customs on the North American continent was first made by the Dutch in 1651 when the governor ordered that all imports from foreign countries entering the harbor at New York should pay a duty. The method of collecting was later outlined in a document which reads as follows:

Instructions for Mr. Cornelius Van Ruyven, collector of the customes in ye City of New York, by order of Colonell Francis Lovelace, governour, May 24, 1668.

You or your clerk are to be daily at ye Custome House from nyne untill twelve at noone. There to receive ye customes both in and out, as the Merchants shall come and enter, ye Merchant is to make foure Bills and sign them with his hand, writing his name on them, and ye same time, when you have signed ye Warrant, or one of ye Bills, you are to demand ye Custome, either in kinde at 10 P Cent inwards or double ye vallue of its first Cost in Holland, in Beaver. And likewise outwards for Peltry you are to receive 10½ P Cent according to ye vallue in Beaver, for Tobacco one half penny for Per pound which is noe more than all Englishmen doe pay. xxx You to tell ye Merchante you are not to give credit. xxx If they do not like your propositions, you are not to pass their Bills. xxx

And Lastly pray lett ye Books be kept all in English and all Factoryes and Papers, that when I have occasion to satisfy myself I may better understand them.

When the city came under British rule in 1664, the system of tariffs set up by the Dutch was continued. Almost one hundred years before the Boston Tea Party and the beginning of the Revolution, there was an uprising in New York against the British collection of customs. Religion played a role in this rebellion, which was touched off when England’s Catholic King James II was succeeded by the Protestant William of Orange and his wife Mary.

When the news of King James’ overthrow reached New York, a Captain Jacob Leisler, who had lived in New York for about thirty years and was a deacon in the Reformed Dutch Church, decided that he would not pay customs duties to a king’s representative who was himself a Catholic. Leisler was in the business of importing liquors and other merchandise into New York. One of his vessels came into the harbor on April 29, 1689, loaded with wine from Europe. Leisler refused to pay the $100 customs duties. He argued that the collector, named Plowman, was a Catholic and was not qualified to receive the customs under the new Protestant regime in Britain. Leister’s stand threw the city and military officials into a dither. There was a hastily called meeting of the counsellors, alderman and military officials in the city to discuss this development. The majority ruling was that the system of collecting duties would continue as it had in the past until other orders were received from William of Orange.

Leisler would have no part of this ruling. He told the assembly he would not pay the tax and he stalked out of the meeting room to discover he was not alone in his opposition to the customs duties. Other merchants saw an opportunity in this situation and joined his side. The result was that Captain Leisler and his friends organized an uprising against Lieutenant Governor Nicholson.

Leisler reached such a position of power that he drove out those in charge of the Customs service and appointed his own man, Peter DeLansy, as a collector. The British finally hanged Captain Leisler for his role in this revolt and in April, 1696, appointed the Earl of Bellomont as Governor General over New York and New England.

The Earl was not a man to brook any nonsense such as the nonpayment of customs to the royal treasury. He restricted the Colonies’ trade with New York and Albany and forbade the shipment of merchandise up the Hudson River unless duties were paid at New York.

The collectors appointed by the Earl of Bellomont had a rather difficult time of it. The merchants of New York were, to be charitable, unreliable when it came to the payment of customs duties. In fact, smuggling was a popular practice. In one instance a cargo of merchandise from the East Indies was ordered seized but the officers who went to make the seizure simply disappeared. Then it was learned that the sheriff himself was hiding the merchandise in his own home.

From the viewpoint of King George III’s counsellors, the actions of the Americans in smuggling and otherwise evading the payment of the customs duties were no less than thievery from the treasury of Great Britain. Such nonsense had to be stopped. And so it was that, after Canada came under British control in 1763, the British adopted a tougher policy toward the Colonies. In 1764 the Parliament passed the Sugar Act, which called for the payment of duties on lumber, food stuffs, molasses and rum brought into the Colonies. This in itself was enough to enrage the American merchants, but then the Sugar Act was followed by the Stamp Act in the same year. This act required revenue stamps to be purchased on all imports. The receipts were to be used to help defer the cost of British troops stationed in the Colonies. In short, the Americans were to pay to have British troops quartered in their towns and cities. When news of the passage of the Stamp Act reached New York, more than 200 merchants gathered for a protest meeting at Burn’s Tavern. They signed an agreement not to import goods from England.

Judge Robert R. Livingston wrote at the time: “England will suffer more by it in one year than the Stamp Act, or any other, could ever recompense. Merchants have resolved to send for no more British manufactures, shopkeepers will buy none, gentlemen will wear none; our own are encouraged, all pride in dress seems to be laid aside, and he that does not appear in homespun, or at least a turned coat, is looked upon with an evil eye.”

The U.S. Customs Service came into being on July 31, 1789, in a time of crisis. It was an organization put together by Congress and President George Washington to save the struggling young central government from financial collapse through the collection of duties on imports.

The formation of Customs thus became the first step to be taken by the original thirteen states toward a practical, working partnership after the adoption of the Constitution. For in agreeing to a uniform tariff, to be collected by the central government through its Customs Service, the states voluntarily gave up an important state’s right which each had guarded jealously--the right to collect and retain its own customs duties.

For this reason, August 5, 1789, is an important though little-known date in history. On this day Captain James Weeks sailed his brigantine, _Persis_, into New York Harbor with a miscellaneous cargo of merchandise from Leghorn, Italy. The cargo was assigned to Mr. William Seton, who paid the Collector of Customs a total of $774.71 in duties--the first payment of duties destined for the Treasury of the United States.

Captain Weeks’ payment was a modest one, but at least it was a prop under the financially shaky young government. And for the next 124 years--until the income tax amendment to the Constitution was adopted in 1913--the Federal government’s primary source of revenue was to be the money collected by Customs on merchandise and materials brought into the United States from abroad.

Until they were bound together by the Constitution, the thirteen states were not a nation. They had fought for more than six years for freedom from political, economic and military domination. They had struggled through incredible hardships, physical and financial. They had won their victory. But they were not a nation.

Throughout the struggle, they were linked together in a loose confederation in which each state was entirely independent of the others. The move toward confederation came on September 5, 1774, when state delegates gathered in Philadelphia to organize the congress known as the Continental Congress. Each state was represented by one delegate, and each delegate had one vote. Peyton Randolph of Virginia was elected president of the Congress--and it is to be noted that he was not referred to officially or unofficially as the President of the United States.

The members of this Congress hammered out the Declaration of Independence and signed it on July 4, 1776. But not until two years later were the Colonies joined together by a formal agreement, the Articles of Confederation and Perpetual Union Between the States. In these Articles the Colonies called themselves the United States of America, but they remained a union of independent states. Having gone to war to free themselves from a strong central government with an autocratic ruler, the Colonies distrusted centralized authority and each was jealous of its sovereignty.

The result was that the central government was reduced to the status of a pleader for money. It had no power to levy taxes directly. It could only appeal to the states to contribute to the expenses of the central government in proportion to the assessed value of their land. As a matter of fact, whenever the central government did ask the states for funds, as likely as not the states simply ignored the request.

In 1781, during the final months of the exhausting revolution and while the outcome still was in doubt, the central government was in need of $9 million for operating expenses. The Congress thought it possible to raise this amount by borrowing $4 million and then asking the states to contribute the additional $5 million. But the states responded to the urgent appeal with only $442,000. North and South Carolina, Georgia and Delaware contributed nothing. At times it seemed that if the British didn’t defeat the Revolution, an empty treasury would.

During and after the American Revolution, the tariff situation was an unholy mess. Each state had its own tariff laws, with the exception of New Jersey, which had none. The states often set up tariff barriers against each other, sometimes for protection and sometimes for reprisal. The dickering amongst them was continual and the maneuvering for advantage fierce.

On one occasion, New York, Connecticut and New Jersey plunged into a three-way fight that to later generations might seem little more than hilarious comedy--but there was nothing comic about it at the time for those involved. It began when the New York legislature reached the conclusion that the Connecticut Yankees and the New Jerseyites were taking too many dollars out of New York City, and giving too little in return.

It was true that Connecticut merchants supplied most of New York’s firewood, for a tidy profit. And the farmers of New Jersey were sending boatloads of chickens, eggs, vegetables and fruit across the river, selling them, and taking back dollars. The imports from Connecticut and New Jersey were running ahead of the exports to these two states by too great a margin--or so the gentlemen in the New York legislature figured. The legislature passed a tariff law which imposed a tax on every stick of Connecticut wood and each New Jersey egg, chicken, duck, goose and cabbage brought into the city. The chicken peddlers from New Jersey had to get clearance papers and pay taxes on each pullet or hen, each basket of eggs and each head of cabbage. Stovewood had to be measured and counted at the Customs House and taxes paid on the spot.

Naturally this state of affairs irked the New Jersey folk, whose legislature promptly looked around for a means of retaliation and, in so doing, spotted the City of New York’s lighthouse standing on Sandy Hook. It was solemnly agreed by a majority that this lighthouse should not stand out there flashing an untaxed warning to ships headed for the New York Harbor. And so the legislature voted to place an $1,800-a-year tax on the lighthouse.

In Connecticut, the merchants were no less aroused than the farmers of New Jersey. It was agreed that a boycott of New York products was justified. Whereupon the merchants formed themselves into an association dedicated to the proposition that no loyal Connecticut merchant would either buy or sell anything in the City of New York. Any member who violated the agreement was subject to a fine.

Again, the British in 1783 decided that only British vessels would be permitted to handle cargoes in the West Indian trade. This proclamation so enraged New Yorkers that they retaliated by laying a double duty on all cargoes arriving in British vessels. New Hampshire, Rhode Island and Massachusetts were equally incensed--and declared that no cargoes could leave their harbors if carried in a British ship.

But these tremors of righteous outrage did not stir the Connecticut Yankees. They saw the situation as holding the promise of fat profits. The ships of Great Britain were invited to use Connecticut ports, duty free. And then Connecticut further enraged its neighbors by imposing a tariff on goods coming into the state from Massachusetts.

Virginia and Maryland also were having their troubles. Virginia owned the lighthouses on both sides of the Chesapeake Bay entrance and demanded fees from every vessel entering the bay. Maryland, on the other hand, claimed the entire width of the Potomac River, citing old land charters to the effect that even if a vessel were tied to the Virginia shore, it still was in Maryland waters.

Connecticut, on the basis of a royal charter of 1662, laid claim to the Wyoming Valley, which Pennsylvania regarded as her own. The two states were on the verge of open war before cool heads prevailed and Pennsylvania’s claim was recognized as the more valid.

With such discord between the states, even in time of war, the winning of the Revolution and the survival of the Union approached the miraculous.

Merchants in Philadelphia and then in Boston decided to follow the lead of the New York merchants. Orders went out to English shippers not to ship more goods to America as long as the Stamp Act was in effect. In this tempest the seeds of revolution were broadcast, and it was a tempest that would not subside until the Colonies had won their freedom from Great Britain.

Despite the jealousies and the conflicts between the Colonies during and after the war, the people realized that only in unity could there be any real hope for survival. This realization moved leaders among the thirteen states to call the Constitutional Convention of 1787. And here it was they hammered out the Constitution which was to become the foundation for the United States of America and a blueprint for freedom.

The Convention met in New York City on May 14, 1787. The delegates chose George Washington as presiding officer of the Convention. The document produced at this convention by no means won the unanimous approval of the representatives from the various states. There were disagreements and reservations to the Constitution. A total of sixty-five qualified delegates were certified by the states to attend the Convention but ten of these did not attend. When the document was completed there were only thirty-nine who actually signed on September 17, 1787. Sixteen failed to sign, and some of those who did sign had reservations. This document was sent by George Washington to Congress, and Congress sent it to the various legislatures for their consideration.

The greatest fear at the time was that a central government would become too powerful. Having thrown off the yoke of one oppressive government, the Colonies wanted no part of another.

Washington reflected these fears when he sent the newly drafted Constitution to Congress. He was sensitive to the fact that the states would have to surrender some rights if they hoped to have an effective central government. In a letter to the president of the Congress, dated September 17, 1787, he said in part:

... It is obviously impractical in the Federal government of these States to secure all rights of independent sovereignty to each, and yet provide for the interest and safety of all. Individuals entering into society must give up a share of liberty to preserve the rest....

The Constitution went into effect on March 4, 1789, and Congress acted with remarkable swiftness on measures which would insure the financial stability of the young government. On April 8, 1789, James Madison arose in the House of Representatives and said:

I take the liberty, Mr. Chairman, at this early state of the business, to introduce to the committee a subject which appears to me to be of the greatest magnitude; a subject, sir, that requires our first attention, and our united exertions....

The deficiency in our treasury has been too notorious to make it necessary for me to animadvert upon that subject. Let us content ourselves with endeavoring to remedy the evil. To do this a national revenue must be obtained; but the system must be such a one, that, while it secures the object of revenue, it shall not be oppressive to our constitutents. Happy it is for us that such a system is within our powers; for I apprehend that both these objects may be obtained from an impost on objects imported to the United States.

After some discussion Madison proposed a resolution to impose a flat fixed duty on rum, liquors, wines, molasses, tea, pepper, sugar, coffee and cocoa, with a percentage tax on all other imported articles, the tax to be based on the value of the imports at their time and place of importation. The resolution also recommended a tonnage tax on all vessels doing business at American ports.

Madison’s resolution touched off a fight between those who favored free trade and those who favored heavy duties to protect the interests of their particular region. There were those who wanted a heavy tonnage tax on vessels so that the American shippers would be given an advantage over foreign vessels. There were those who wanted to protect industries in their own states from the European competition. Congressmen from the agricultural states leaned heavily toward free trade.

Thomas Fitzsimons of Pennsylvania came forward with an amendment to the Madison resolution in which he asked that the duties be placed not only on the imports suggested by Madison but also on beer, ale, porter, beef, pork, butter, candles, cheese, soap, cider, boots, steel, cables, cordage, twine, malt, nails, spikes, tacks, salt, tobacco, snuff, blank books, writing, printing and wrapping paper, pasteboard and cabinet ware, buttons, saddles, gloves, hats, millinery, castings of iron, leather, shoes, slippers, coaches, chariots, carriages, nutmeg, cinnamon, cloves, raisins, figs, currants, and almonds.