partment of the Treasury. * *The sovereign power of taxation is the source from whence the most widespread wrongs, oppressions, and ruin of the people flow in all governments. The safeguard against abuse of the taxing power of government intended by our Constitution, is in confiding that power to the Congress. It would ill become the executive department to take money from the pockets of the people by implication and constructive enlargement of the acts of the legislature. When the Congress, in the exercise of their power of taxation, have not spoken expressly and clearly; when the words of the law leave room for rational doubt as to a higher or lower rate of taxation, the decision of the executive officers should be in favor of the lower rate. In so doing, the executive action is certainly within the limit prescribed by the law. To take the highest rate of taxation, in such dubious cases, would be hazarding a supplement to the legislative will, and an inroad into the region of the legislative department. Such a mode of construction by the executive department would not be lenient and remedial, but onerous and penal."

I hope I may be permitted, by way of preface and explanation of my views in respect to tariff revision, to set forth, as briefly and clearly as I can, what, in my appreciation, is the real condition of the existing tariff system, and the causes, or circumstances, which have brought it to that condition. If there is an evil therein to be remedied, a logical method of procedure will be to ascertain definitely what the evil is, and how it has come into existence. My own estimate of the evil, and its causes, may be at fault, and if so, that fault will naturally infect my suggestions of a remedy, and my criticism of a remedy proposed by others.

SIMPLICITY OF TARIFF LAWS FROM 1789 TO 1818.

The levy and collection of duties on imports has come to be extremely artificial and technical. It was not so in the beginning. By all the earlier Collection Laws, and down to 1818, the invoice to be presented on an entry was to contain "the prime net cost," at the place of exportation, meaning thereby the actual price paid in money, and not the market value if the two were unlike. There was no special provision for an invoice of merchandise obtained by gift, or in part by money and in part by gift, or for merchandise consigned hither by a manufacturer. Up to 1818 the punishment for an intent, and an attempt, to evade the payment of duty known to be legally chargeable, was confiscation for either one of three defined offences. One was the presentation of an invoice which intentionally did not display the actual cost. Another was the intentional entry of packages by a false denomination, or description, in order to defraud the revenue. The third was the concealment of any merchandise on a vessel, or elsewhere, (such as not putting it on the manifest,) in order to evade payment of duties, or the

V

landing withont a permit, which was the offence of smuggling. It should also be kept in mind that up to 1818 the Collectors of Customs levied ad valorem rates on the invoice value unless they had reason to suspect a fraud in the invoice. There was no appraising staff. When an invoice value was suspected, two merchants were selected to appraise the merchandise. From then till now, there have been, side by side, two classes of tariff legislation; one class prescribing the rates to be levied, and one class providing the machinery for enforcing and levying the rates. The work of enacting a law of the first class was entered upon in 1789, on the motion of Madison, even before the President had been inaugurated, so empty was the new treasury. In the resolution introduced by him, proposing a temporary system of imposts, the rates seem to be about equally divided between specific and ad valorem. In the law as finally enacted some twenty of the specifications were specific rates and fifteen ad valorem rates. The debate which arose thereon in the House foreshadowed, and indeed developed, the conflict of economic and constitutional opinions, which has been so prominent in more recent politics, excepting only the question of constitutional power in Congress to levy duties on imports for the sole purpose of protecting, or aiding, a particular industry which appears not then to have been seriously mooted. The argument, that smugglers marked the line beyond which rates could not be carried, was earnestly pressed. In this early day trauds on the revenue by false invoices, and by undervaluations on appraisements, had not been developed into the cunning art that it has since become. In 1790, the rates were revised and increased, but preserving, so far as can now be ascertained, much the same relation between specific and ad valorem. Gerry, Sedgwick and Ames renewed a presentation of the danger from smugglers, which Sherman characterized "as an insulting imputation on the American mercantile character," and warned his colleagues to take care lest, by suggesting the probability of smuggling, they encouraged it. As a safeguard, however, the Collection Act was re-enforced by new and more stringent provisions. In 1797 the Federal treasury needed an additional sum of $1,229,000 a year. The average rate then levied on all imports was 16 per cent. A resolution passed the House to raise the money by a direct tax on lands, houses and slaves, but a bill to that end was finally defeated, and on the suggestion of one of my predecessors in this Department, Mr. Wolcott, additional rates on imports were levied, preserving about the same relation, as I infer, between specific and ad valorem. In 1801, one of the most illustrious of my predecessors, Mr. Gallatin, said to Congress:

"Without any view to an increase of revenue, but in order to guard as far as possible against the value of goods being underrated in the invoices, it would be eligible to lay specific duties on all such articles, now paying duties ad valorem, as may be susceptible of that alteration." From this date of 1801 to the tariff law of April 27, 1816, there was no legislation which can pertinently illustrate for us to-day the proper relation of specific to ad valorem rates, or what shall be done now to prevent revenue frauds. Down to 1807 the growth of American manufactures was very slow. Our capital was richly rewarded on the sea, and there it remained. But in that year two new and powerful influences supervened, which were the violation of our neutral rights by the armed belligerents, England and France, and the commercial restrictions inflicted on ourselves. Those causes largely expelled our capital from the sea and kept out foreign fabrics. Manufactures naturally started with a bound. It was the era of Berlin and Milan Decrees, of Orders in Council, of Embargo, of Non-Intervention Acts, and finally of war for "Free Trade and Sailors' Rights."

The results of the war, the condition of the country, and the reception of large quantities of the accumulated products of British manufacture sold at auction prices in our cities, called into being the decidedly protective tariffs of 1824 and 1828, and increased the use of ad valorem rates. Then came the tariff of 1832, the "compromise" of 1833, the protective tariff of 1842, the revenue ad valorem tariffs of 1846 and 1857, and, finally, the civil war legislation on the tariff which began in 1861 and has continued till to-day. What the relation was between specific and ad valorem rates in the tariff laws of 1816, 1818, 1824, 1828 and 1832 can be seen at a glance by consulting a comparative tabular statement transmitted to the House of Representatives by my predecessor, Mr. McLane, on February 8, 1833.

LAWS REGULATING THE COLLECTION OF DUTIES.

From April 27, 1816, down to the outbreak of war in 1861, there were eleven prominent enactments levying rates of duty, approved respectively, on April 20, 1818, April 18, 1820, May 22, 1824, May 19, 1828, May 20, 1830, July 14, 1832, March 2, 1833, September 11, 1841, August 30, 1842, July 30, 1846, and March 3, 1856.

There were, during the same period, eleven or more enactments regulating the collection of duties, some of them punishing frauds, approved, respectively, March 3, 1817, April 20, 1818, March 1, 1823, May 19, 1828, May 28, 1830, July 14, 1832, August 30, 1842, July 30, 1846, August 6, 1846, March 3, 1851, and March 3, 1857.

1818.-After the enactment of the tariff law of April 27, 1816, which levied ad valorem rates that were exceedingly low in comparison with

those levied to-day, the House of Representatives, on February 28, 1817, directed the Secretary of the Treasury to report to Congress at their next session "such measures as may be necessary for the more effectual execution of the laws for the collection "of the duties on imported goods, wares and merchandise." Under this law of 1816 only fifteen per cent. ad valorem was levied on linen and silk bindings, on blankets, bleached linens, bunting, burlaps, cambric linen and cambric handkerchiefs, and cashmere shawls; only twenty per cent. was levied on manufactures of copper, on cutlery, glassware, all manufactures of hemp, woollen, worsted or cotton hosiery, all manufactures of iron, and screws; only twenty-five per cent. on carpets and carpeting, manufactures of cotton of all descriptions, flannels, and manufactures of wool; and only thirty per cent. on brushes of all kinds, cabinet-wares, carriages, ready-made clothing of all kinds, hats and bonnets, and all manufactures of leather. On January 18, 1818, my very able and distinguished predecessor, Mr. Crawford, made an elaborate report, which was printed in Executive Document No. 58, First Session, Fifteenth Congress. Immediately after the resolution of the House had been sent to him he addressed on May 7, 1817, a circular letter to collectors of customs, saying to them that a general impression appeared to prevail that frauds of a glaring nature were frequently committed upon the revenue, especially in importations upon consignments, and requesting them to communicate to him every circumstance tending to show the evasion of the provisions of the existing laws, accompanied by suggestions of ways and means to repress the evil. The Secretary in his report informs Congress that the Collectors of Customs "made no communication upon the subject;" but, in spite of what he describes as "the tacit evidence that the provisions of the Collection Laws are not materially defective," he nevertheless states that in his opinion, "notwithstanding the result of these experiments, there is just reason to believe that frauds to a considerable extent have been and are now committed upon the revenue in the importation of articles upon consignments paying ad valorem duties." Mr. Crawford then proceeds in this report to make declarations to Congress in respect to evasions of the customs law, which well describe the conditions under which importations are, by so many intelligent observers, believed to be made in the present year of 1886. He says:

"The practice of shipping merchandise from Europe to the United States on account of the foreign shipper has greatly increased since the - late peace. The immediate cause of this increase may be probably found in the general distress which at, and since that epoch, pervaded universally the manufacturing establishments, from whence our supply

of foreign merchandise has been principally derived. The manufacturers unable to dispose of the products of their labor in their accustomed markets, assumed the character of exporting merchants, and shipped their merchandise directly to the United States, where it has been sold by their agents or consignees. In adopting this course, not only the fair profit of the manufacturer and exporting merchant is concentrated in the hands of the latter, but also the loss which the revenue sustains by invoicing the merchandise at the actual cost of the raw material and the price of the labor employed in its manufacture. Should any part of this profit not be realized, from the circumstances of the merchandise being sold in a glutted market, or from any other cause, the articles reached the hands of the consumer at a rate lower than it could be sold by the fair American importer. In either event the honest American merchant is driven from the competition, and in the latter, the domestic manufacture is deprived of the protection which was intended to be secured by the legislature.

"But, independent of this evasion of the revenue laws, which, by those who practice it, may be deemed consistent with the principles of morality, a practice of a less equivocal character is known to exist in importations, made by foreign merchants upon consignment. There is abundant reason to believe, that it is now customary in importations of this nature, to send with the merchandise, an invoice considerably below the actual cost, by which the entry is made and the duties secured. Another invoice at, or above, the actual cost, is forwarded to a different person, with instructions to take and sell the goods by such invoice. In this manner the person who enters the goods remains ignorant of the fraud to which he has been innocently made a party, and the fraudulent importer escapes with impunity. The facility with which frauds may be practiced by permitting entries to be made by persons who know nothing of the correctness of the invoices by which the duties are to be ascertained, so strongly invites to the substitution of false, for true invoices, that the practice must necessarily become universal, if suitable checks are not devised against it.

"It is also ascertained that resident merchants have in some instances connected themselves with foreign mercantile houses, which are in the habit of purchasing cloths of every description in their rudest state of manufacture, which are in their hands brought to the highest state of perfection by dyeing, dressing, or bleaching, according to the kind of cloth purchased. Such articles are invoiced at the price given for them in their unfinished state of manufacture, and upon those invoices the duties are estimated. Connections of this kind will necessarily increase, and eventually embrace the whole catalogue of articles paying ad valorem duties, unless checks calculated to repress the evil, are promptly devised and applied.

"The practice of entering goods without invoice is another mode now frequently resorted to, for the purpose of evading the payment of the duties which are legally demandable upon them. In these cases, and indeed in all cases, where the collector shall suspect that the invoices are fraudulent, the resort to appraisement authorized by law is generally found to be in favor of the importer, and against the Government. This may, in some measure, be attributable to the defect of the existing provisions upon that subject, but the universal experience of every department. of the Government proves the danger there is of submitting any question to the decision of persons acting as arbitrators between the United