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Report on Defects in the Existing Laws of Revenue, 22 April 1790

Report on Defects in the Existing Laws of Revenue

Treasury Department April 22nd. 1790.
[Communicated on April 23, 1790]1

[To the Speaker of the House of Representatives]

In obedience to the Order of the House of Representatives of the 19th Day of January last2

The Secretary of the Treasury respectfully submits the following Report.

First. As to theAct imposing duties on good wares and merchandizes imported into the United States.”3

1. Section I. The duties specified in this act, according to this section, took effect throughout the United States from and after the first day of August last. But as the Act for the collection of those duties did not pass till the last of July,4 it was of course impossible, that the officers for carrying it into execution, could be appointed, commissioned, and ready to enter upon the execution of their offices, at the day fixed for the commencement of the duties. The Custom-Houses in the several States were not organised till at different periods from the fifth of August to sometime in September; and in the intervals several importations took place. In some instances duties were paid under the State Laws; in others none were paid.

The Secretary conceiving it to be a clear point, that the duties imposed by the first mentioned Act, accrued, as debts to the United States, on all goods imported after the day specified for their commencement, and that the regulations prescribed by the Collection-Law were to be considered merely as auxiliary guards for securing their due payment, did not think himself at liberty, on grounds of convenience or inconvenience, to wave the claim for them. He has therefore caused it to be made, and has given directions with a view to a legal decision of the question.

But it is worthy of consideration by the legislature, whether it be adviseable to pursue, or relinquish it. The payment of the duties in this situation, has been generally unlooked for, and in most cases must be preceded by a legal determination. The enforcement of the claim would therefore be likely to be thought rigorous; and, in some instances, might be injurious. Where Merchants may have sold without reference in the price to the duty; where Factors or Agents may have settled accounts with, and paid over the proceeds of goods to their Principals, especially if transient persons; where duties have been paid under the State establishments; in these and other cases, there might ensue, Loss or embarassment. There must also be difficulty in ascertaining the sums which ought to be paid.

2. The distinctions between distilled spirits are conceived not to be sufficiently diversified, or accurate. This has been remarked, and a remedy proposed, in the plan submitted to the House for the support of public Credit.5

3. There is no general rate prescribed for estimating the draught and tare of those articles, which pay duty by weight. The consequence is, that different allowances are made at different places, according to former usage; and too much is left to discretion.

4. Unwrought Steel is rated at fifty six cents for 112 lbs; which upon an average of the cost is less than five per Cent ad valorem. As an enumerated article, it is presumed to have been the intention of the legislature, to rate it higher than five per Cent, especially as a higher rate would be in favour of the manufacture of it among ourselves, in which considerable progress has been made, particularly in the State of Pennsylvania.

5. The information received by the Secretary induces him to consider as questionable, the policy of the duty on Pickled fish, in its present extent. It is represented, that almost the whole of what is brought from Nova Scotia to Massachusetts, is re-exported; and this chiefly to foreign countries. And that while it forms a considerable article in an intercourse between those places, beneficial to Massachusetts, it contributes to the augmentation of her exports.

If this be true, it is difficult to discern any advantage in the duty. To the revenue, there will be rather loss than profit; as the expence incident to the collection and to the process of the drawback, will, probably, exceed the amount of the duty on the small quantity internally consumed, even taking into the calculation, the one per Cent retained as an indemnification for that expence. In a commercial light, as far as it has any operation, it seems to be rather an unfavourable one. The process of paying and drawing back, is not without inconveniencies, and the unrefunded residue, is a tax on the export-trade in that article from which, for the reason assigned, no benefit arises to the public: While the encouragement which it was the object of this regulation to give to the fisheries, loses in a great measure its effect, by reason of the drawback. And it is suggested by intelligent men, that an injurious competition in the branch of the fisheries, to which the duty is applicable, is little to be apprehended.

The Secretary, however, does not conceive himself to be possessed with sufficient accuracy of all the facts necessary to a right judgment on this point, to be willing to hazard a decisive opinion. He therefore only means to state the circumstances communicated to him; in expectation, that the Representatives from the part of the Union more immediately affected, will be able, by further lights to guide the opinion of the House to a proper conclusion.

6. A discrimination is made by this section in favour of Teas brought from China or India, in American bottoms. The fifth Section allows a discount of ten per Cent on all the duties imposed by this Act on goods, wares and merchandizes imported in American bottoms. A question arises, whether this discount ought to obtain in respect to the abovementioned Teas. The Secretary presumes, that the better construction is against the allowance, though within the letter of the provision; but an explanation is, perhaps, requisite to obviate controversy.

7. All goods, wares and merchandize, except Teas brought from China or India otherwise than in American bottoms, are made liable to a duty of twelve and a half per Cent ad valorem. But in the clause immediately succeeding all China ware is rated only at ten per Cent ad valorem. A doubt suggests itself, whether this article be excepted out of the preceding provision; or be itself subject to an implied exception in favour of the full operation of that provision.

It is suggested, that the encouragement intended to our East-India trade by the duty of twelve and a half per Cent on India goods brought from China in foreign bottoms, will be counteracted by the want of a greater duty than is now laid on the same goods brought from Europe; as competition is more to be apprehended through that channel, than from direct importations, in foreign bottoms, from India. While the Secretary deems it proper to bring this suggestion into the view of the House, he forbears giving an opinion as to the weight it ought to have. He perceives various advantages in a direct commerce with the East Indies, and is hitherto inclined to believe it merits the patronage of the Government; but the tendency of it not yet sufficiently developed to his judgment, to leave him wholly without reserve as to the extent of the encouragement which ought to be given.

8. Commodities of our own growth or manufacture carried to a foreign port and brought back again to the United States, are, by this Act, liable to duty. This tendency of this to discourage commercial enterprise recommends the expediency of an exemption upon due proof of identity.

9. The Sea stores of Vessels, the furniture, cloathing and professional apparatus of persons arriving in this Country from abroad, seem equally liable to duties with goods brought by way of merchandize. They have been in several instances exacted; but the payment is usually accompanied with remonstrance and dis-content. If it was not the intent of the Legislature to include such articles, an explanation is necessary. Various considerations plead for exempting them under proper limitations.

10. Section II. From this section it has been doubted, whether there be at present any duty on hemp. And it has been inferred from the debates, to have been the intention of the Legislature to exempt it, till after the first of december 1790; but the construction of the Act is different. There is a duty on Cotton as well as Hemp, to take place at a future day. But Cotton in the mean time is expressly excepted out of the five per Cent duty, which impliedly excludes hemp from the like exception. As the Act now stands, it will be a question, when the duty of sixty Cents per hundred weight takes place, whether it be in addition to or in lieu of the present duty.

11. Section III. Provision is here made for a drawback of the duties on goods exported within twelve months, with an exception of certain kinds of distilled spirits, and a deduction of one per Cent.

But there is no provision for entries for exportation; whence it happens, that a Vessel arriving from a foreign port, with part of her cargo destined for the United States, and other part for some other Country, is obliged to pay or secure the payment of the duties on her whole Cargo, and in strictness even to land such articles as require weighing, gauging, or measuring, in order to the ascertaining of the duties. This is complained of as a hardship, and as contrary to the prevailing usage of commercial nations. The Secretary is of opinion, that the complaint is well founded; and that it is adviseable, that entries for exportation with proper precautions and restrictions, should be authorised. The interests of the revenue can, with advantage, be consulted no further than they are consistent with the necessary freedom and facility of commercial intercourse.

The allowance of drawbacks does not obviate the subject of complaint. The necessity of advancing the money, or procuring security for the amount of the duties; the necessity of landing those articles, which require to be weighed, measured or gauged (which must in the first instance be submitted to); are material inconveniencies: And the process for obtaining drawbacks is attended with difficulty, casualty and trouble. There must be a bond given not to reland the goods; and this bond must be cancelled by certain proofs, which may not, in all cases, be obtainable, but which are, nevertheless, made a prerequisite to the payment of the drawbacks: Nor can that payment at any rate be had, till after the expiration of six months: So that even where security is given for the amount of the duties, it must often happen, that they become payable before parties can be prepared to demand the drawback; And the one per Cent retained, is, in every case, a certain loss. These circumstances, to transient persons especially, operate as a grievance.

Secondly. As to the Act imposing duties on Tonnage6

12. The duties mentioned in this Act are upon all ships or Vessels entered in the United States.

The entry therefore is the circumstance, which regulates the payment of the duty.

But a doubt has arisen, whether the duty ought to be deemed to accrue on every entry, or only on entries from foreign countries.

The construction which has been adopted, is, that it accrues on every entry, whether from abroad, or in one part of the United States from another.

One reason for this construction results from the second Section; which provides, that Vessels built and owned in the United States, whilst employed in the Coasting trade or fisheries, shall not pay Tonnage more than once a year. If the duty were confined to entries from abroad only, it could not arise at all on vessels employed in the coasting trade, whilst so employed; in which case this provision would be wholly nugatory. The last clause of the twenty third section of the “Act for registering and clearing Vessels regulating the coasting trade, and for other purposes,”7 looks also to the same construction; strongly implying the payment of tonnage generally between district and district, and enlarging the rate in a particular case.

Yet the third section of the Act now under consideration has been supposed to have a different aspect, as it subjects all vessels except those built within, and owned by citizens of the United States, employed in transporting our own commodities coastwise, to a tonnage of fifty cents at each entry: whence it has been inferred, that in other cases the duty is not payable at each entry; because, by the first section Vessels wholly foreign pay fifty cents, whether employed in the coasting trade or not. But this inference loses its force, when it is observed, that there are other descriptions of vessels, in respect to which it serves to increase the rates specified in the first section, in favour of the exclusive privilege, to transport our own commodities coastwise; intended to be secured to Vessels built within and owned by citizens of the United States. This suggests an use for the clause, which is reconcileable with the provision in the second section.

The provisions of this act however appear to be varied by the “Act for registering and clearing vessels, regulating the coasting trade, and for other purposes,” in these particulars: The latter extends the privileges in the coasting trade, which by the former, seem to be confined to Vessels of the built of the United States, to all Vessels which are registered or enrolled; provided they obtain licenses for the purpose. It also extends the duty of fifty cents, to the transportation of foreign (as well as domestic) commodities, from district to district, by any vessel of the burthen of twenty tons and upwards, which has not a Register or Enrollment, and a license to trade.

Hence if even a registered vessel having no license, proceed from one district with part of an outward bound cargo to another district, in order to procure the remainder, and happen to take in a freight at the first place for the last, which amounts to a “trading between the districts,” she is subject, on her entry in the last, to foreign tonnage.

The propriety of this construction has been questioned; but a consideration of the general spirit of the coasting act; which aims at guarding the revenue against evasion, by the precautions annexed to the granting of licenses; and an accurate attention to the words of the last clause of the twenty third section of that Act, seem to leave no room for a different construction. These words are “And if any vessel of the burthen of twenty tons or upwards, not having a certificate of registry or enrollment, and a license, shall be found trading between different districts, or be employed in the Bank or Whale fisheries, every such ship or vessel shall be subject to the same tonnage and fees, as foreign ships or vessels.”

This provision for want of having been understood in the proper sense, has, in a variety of instances, borne hard upon Individuals; who have omitted to procure licenses, and whose vessels have been on that account subjected to foreign tonnage. It is submitted to the consideration of the House, whether restitution of the sums paid, through misapprehension of a new law, would not be equitable in itself & calculated to give a favourable impression of the liberality of the government.

Perhaps indeed the expediency of the regulation itself, merits reconsideration. The necessity of paying tonnage at all, in going from one district to another, has been a subject of complaint. And it is certain, that it has in many cases, a burthensome operation. It would appear to the Secretary, upon the whole, eligible, that upon entries from district to district, tonnage should in no case be demanded, except where a freight had been taken in at one district for another; and that even there, in respect to vessels registered but not licensed, half tonnage only should be paid.

Thirdly. As to theAct to regulate the collection of the duties imposed by law on the tonnage of ships or vessels and on goods wares and merchandizes imported into the United States.8

Sections I. II. III. & IV. The arrangement of the districts, the privileges granted to some ports, the restrictions upon others, have been represented in a few instances as requiring alteration. The Secretary is inclined to think, that some of the representations made to him will deserve attention; but as he presumes, that the course of the business will lead to the appointment of a special Committee to prepare a bill for amending the laws under consideration, there are reasons, which, with the permission of the House, would induce him to reserve a more particular communication on this part of the subject for that Committee.

14. Section V. This Section contemplates a provision of boats for securing the collection of the revenue; but no authority to provide them, is any where given. Information from several quarters, proves the necessity of having them; nor can they, in the opinion of the Secretary, fail to contribute, in a material degree, to the security of the revenue; much more than will compensate for the expence of the establishment; the utility of which will increase in proportion as the public exigencies may require an augmentation of the duties. An objection has been made to the measure as betraying an improper distrust of the Merchants; but that objection can have no weight, when it is considered, that it would be equally applicable to all the precautions comprehended in the existing system; all which proceed on a supposition too well founded to be doubted, that there are persons concerned in trade, in every country, who will, if they can, evade the public dues, for their private benefit. Justice to the body of the Merchants of the United States, demands an acknowlegment, that they have very generally manifested a disposition to conform to the national laws, which does them honor, and authorises confidence in their probity. But every considerate member of that body, knows, that this confidence admits of exceptions, and that it is essentially the interest of the greater number, that every possible guard should be set on the fraudulent few; which does not in fact tend to the embarassment of trade.

The following is submitted as a proper establishment for this purpose.

That there be ten boats: two, for the coasts, bays and harbours of Massachusetts and New Hampshire; one, for the Sound between Long-Island and Connecticut; one, for the Bay of New York; one, for the Bay of Delaware; two, for the Bay of Chesapeak; (these of course to ply along the neighboring coasts); one, for the coasts, bays and harbours of North Carolina; one, for the Coasts, bays and harbours of South Carolina; and one, for the Coasts, bays & harbours of Georgia.

Boats of from thirty six to forty feet keel, will answer the purpose, each having one Captain, one Lieutenant and six mariners, and armed with swivels. The first cost of one of these boats, completely equipped, may be computed at One thousand dollars.

The following is an estimate of the annual expence

10 Captains @ 40. dollars per month 4,800
10 Lieutenants @ 25. ditto per ditto 3.000
60 seamen @ 8. ditto per ditto 5.760
Provision 3.000
Wear and Tear  2.000
Dollars 18.560

The utility of an establishment of this nature must depend on the exertion, vigilance and fidelity of those, to whom the charge of the boats shall be confided. If these are not respectable characters, they will rather serve to screen, than detect fraud. To procure such, a liberal compensation must be given, and in addition to this, it will, in the opinion of the Secretary, be adviseable, that they be commissioned as Officers of the Navy. This will not only induce fit men the more readily to engage, but will attach them to their duty by a nicer sense of honor.

15. Section VI. Collectors are here authorised, in case of necessary absence, sickness or inability, to appoint deputies. It is represented that inconveniencies have arisen from the want of the like power in the Naval officers and surveyors.

16. Section VII. Provision is here made for the case of the disability or death of the Collector; but not of the Naval Officer or Surveyor. A similar provision with respect to them appears to be not less requisite.

17. Section X. The provision of this Section seems to extend too far. It is conceived, that it ought to be confined to vessels owned wholly or in part by Citizens of the United States; as it is not supposeable, that those of other nations can be acquainted with a regulation so intirely local in its nature, or be prepared to comply with it. There is also want of a penalty to enforce its observance.

This regulation has been represented as inconvenient and useless; but the Secretary does not view it in this light. It is probable, that it will contribute to the security of the revenue, by rendering more difficult those collusions between Masters and Owners, which often take place after the arrival of Vessels upon the Coast, or within port.

18. Section XI. Masters of Vessels within forty eight hours after their arrival in any port of the United States, are to make report. It is not explained, whether they are not at liberty in the mean time, to proceed elsewhere. The construction of the officers of the Customs, in several instances, has been in favour of such liberty. But this construction does not appear to the Secretary well founded. He conceives, that the duties become payable by the act of importation, even previous to entry, and that the forty eight hours are only allowed as a reasonable time for the Master to prepare his report; after which he is to be subject to a penalty for not doing it. An explanation however may prevent disputes.

It is also submitted, whether Masters ought not to be required within twelve hours after their arrival to announce it at the Custom house, and to complete their report within twenty four, with an exception for Sundays. It is of moment, that vessels arriving, should be brought as speedily as possible, under the notice of the proper officers, and that their situation should be ascertained as early as practicable. More Time than is necessary for disclosing it with proper accuracy can be of no real use, and gives greater opportunity for concerting frauds.

In the oath here prescribed for Masters of Vessels, there is no view to those casualties, which may cause the cargo to be diminished at Sea. There ought to be room for making the proper exceptions, according to the circumstances. And it would be useful to make it a part of the oath, that any goods afterwards discovered on board shall be reported; as in the case of Importers or Consignees.

19. Section XII. It is here declared, that no goods shall be unladen, but in open day. It would be more safe as well as more certain to fix particular hours for the purpose according to different seasons of the year. And it is submitted, whether all lading as well as unlading of goods at other hours, unless by special license from the officers of the Customs ought not to be forbidden. If in addition to this, Masters of vessels were required to give previous notice to the Officers assigned to their respective vessels, of the times when deliveries are intended to begin, it would afford an increase of security.

This Section contains various penalties on persons concerned in unlading and removing goods, without the requisite permits. It would be a most powerful check upon fraud, if every master of a vessel concerned in one, should, on conviction, be dis-qualified under competent penalties, from having, at any time after, the command or charge of a vessel within the United States. There are however objections of weight to such a provision.

20. Section XIII. The effect of this Section is to oblige the payment, or securing of the duties, on all the goods brought in any Vessel, at the port at which she first arrives; though part of them be destined for another, either within the United States, or elsewhere. This regulation is a subject of complaint. Its inconvenience becomes the more apparent, when it is considered, that all the goods intended for another port, must first be landed (and certain articles measured, weighed or gauged) and afterwards reshipped. The trouble, expence and delay of such a process, are serious obstructions to trade. Balancing its commercial inconveniencies with the additional security which it may afford to the revenue, the Secretary is of opinion, that an alteration is adviseable. It should be incumbent upon the Master of the Ship, to make report at the first port, of the whole Cargo on board upon oath, distinguishing the particular goods intended for each port, and also to make oath, at every subsequent port of the particulars of the goods landed at any preceding one, & of the persons to and for whom they were delivered; producing also certificates from the proper officers of the whole quantity of the goods originally entered, and of so much as may have been regularly landed. A power of securing with proper fastenings the hatches and other communications with the holds of ships; providing for accident and necessity, and even, if judged requisite, to put an inspector on board, in going from one port to another, ought to be superadded.

No person but the Owner or consignee of goods can make the entry here required. This, from the absence of parties is sometimes inconvenient. It is the practice of countries, whose regulations are not deficient in strictness, to allow an agent of the party to make entry in his absence. And though this may widen the door for evasion; there are nevertheless strong arguments derived from convenience in its favour. Penalties proportionably severe may be inflicted upon fraud committed by any such Agent; and the permission may be confined to the case of persons absent at the time of the arrival of the Vessel, in which the goods may have been brought.

The oath here directed to be taken by importers is not always in their power. There may be no Invoice nor any other accurate account of the quantity, quality, or cost of articles. A qualification, in this respect, is indispensable. Entries, without specifying particulars must, of necessity, be admitted; parties swearing, that they have received no account of them, and that they are unknown. An eye is had to this in the sixteenth Section, but something is wanting to reconcile the two sections, and define a more accurate course of proceding in the case.

21. Section XV. Inspectors are to be put on board vessels, who are to remain on board until they are discharged. This implies during the night as well the day; which, if practiced in every case, would multiply the number of Inspectors to a very expensive extent. A power of securing the hatches and other communications with the holds of vessels during the night would give greater security, where inspectors were kept constantly on board, and would, in many instances, obviate the necessity of doing it.

The unlading of a Vessel is here limited to fifteen working days, after she begins to unload. But the commencement of the business may be postponed as long as the parties interested think fit. If there should be considerable delay, either an inspector must remain on board the whole time, in which case the expence may exhaust the duty, or there must be great opportunity for fraud. It seems proper, either to fix an ultimate limit for unloading, to be computed from the time of arrival, or of the Master’s report, or a period, after which the expence of an inspector shall be borne by the party. The first appears to the Secretary most adviseable. And he conceives, that twenty working days, after the Master’s report, would suffice.

22. Section XIX. The payment or securing of the duties, is here made a preliminary to their being landed. This, in a strict sense, is impracticable; as certain articles must first be landed, weighed, gauged or measured, before the duties can be ascertained. The object however of the provision is proper, and it must be construed to admit a gross estimate of the sum in the first instance, subject to after revision. It would, however, be desireable, that a discretion of this sort should be expressed. The Collector, together with the Naval Officer, where there is one, or alone where there is none, may be authorised to determine the amount of the duties to be paid, by an estimate of the same, according to the best of their or his judgment; and the Collector may be empowered in case of an over estimate, either to return the excess, if the money has been paid, or to endorse a credit for it on the bond.

A discount of ten per Cent is here allowed for prompt payment, on the excess of any sum of duties beyond fifty dollars. The policy of this discount is questionable. Experience shews, that in most of the States, transient persons chiefly avail themselves of it, who would in most cases pay the money without the discount, to avoid the inconvenience of suretyship.

But if even the discount ought to be continued, the rate seems to be too high. It exceeds the rate of interest, at which the Government may borrow, more than is an equivalent for the insurance of the risk of non payment. Seven per Cent would, in the judgment of the Secretary, be the extent of a proper allowance. The confining the discount to the excess beyond fifty dollars, counteracts the provision, wherever that excess is not considerable.

It is provided by the last clause of this section, that no person whose bond is unsatisfied, after it becomes due, shall have a future credit with “the Collector,” until it shall be discharged. The words the Collector” have been supposed to confine the non-allowance of Credit, to the particular Collector to whom the bond was given; in which sense a further credit might be had in another district; which would considerably lessen the utility of the regulation. The removal of this ambiguity, so as to render the exclusion general, may add to the efficacy of the provision.

23. Section XXIX. The compensations to the officers established by this section, require revision: They are in many instances inadequate; in some disproportionate. Resignations in consequence of it have taken place, and others are suspended on the expectation of a favourable alteration during the present session. It is certain, that competent allowances are essential to the idea of having the service performed by characters worthy of trust. And how much the security of the Revenue depends on this, is evident. There are many ports, where the officers receive next to nothing for their services. It were superfluous to comment on the inexpediency of such a state of things.

The Secretary, for the sake of brevity, begs leave to reserve the details on this head, for the Committee before alluded to.

24. It has been inferred from this Section, that the Collector and Naval officer are necessarily to transact their business in separate apartments. This (if it be the design of the provision from which the inference is drawn) was, probably, founded upon the idea, that the separation would lessen the danger of collusion between those officers. But it does not seem likely, that a circumstance of this sort, could have much effect in that way; while the separation leaves a good deal more in the power of the Collector, and renders the Naval Officer far less a check upon him, than if he were made an immediate witness to his transactions. The Secretary is of opinion, that it would be preferable to require them to act in conjunction and in the presence of each other; among other things jointly administering and certifying all oaths required to be taken at the Custom houses.

Section XXX. This section provides for the receipt of the duties in gold and silver coin only. The Secretary has considered this provision, as having for object the exclusion of payments in the paper emissions of particular states, and the securing the immediate or ultimate collection of the duties in specie; as intended to prohibit to individuals, the right of paying in any thing except Gold or Silver Coin, but not to hinder the treasury from making such arrangements, as its exigencies, the speedy command of the public resources and the convenience of the community might dictate; those arrangements being compatible with the eventual receipt of the duties in specie. For instance, The Secretary did not imagine, that the provision ought to be so understood, as to prevent, if necessary, an anticipation of the duties by treasury drafts, receivable at the several custom houses. And if it ought not to be understood in this sense, it appeared to him, that the principle of a different construction would extend to the permitting the receipt of the notes of public banks, issued on a specie fund. Unless it can be supposed that the exchanging of specie, after it has been received for bank notes to be remitted to the Treasury is also interdicted, it seems difficult to conclude, that the receipt of them, in the first instance, is forbidden.

Such were the reflections of the Secretary with regard to the authority to permit bank notes to be taken in payment of the duties. The expediency of doing it, appeared to him still less questionable. The extension of their circulation by the measure, is calculated to increase both the ability and the inclination of the banks to aid the government. It also accelerates the command of the product of the revenues for the public service, and it facilitates the payment of the duties. It has the first effect, because the course of business occasions the notes to be sent beforehand to distant places; and being ready on the spot either for payment or exchange, the first post, after the duties become payable or are received, conveys them to the treasury. The substitution of Treasury drafts, anticipating the duties, could hardly be made without some sacrifice on the part of the public. As they would be drawn upon time, and upon the expectation of funds to be collected and of course contingent, it is not probable, that they would obtain a ready sale, but at a discount, or upon long credit. As they would also be more or less liable to accident, from the failure of expected payments, there would be, continually, a degree of hazard to public credit. And to other considerations it may be added, that the practice of anticipations of this kind is in its nature so capable of abuse as to render it an ineligible instrument of administration, in ordinary cases, and fit only for times of necessity.

If the idea of anticipation should be excluded, then the relying wholly upon Treasury drafts would be productive of considerable delay. The knowlege that funds were in hand, must precede the issuing of them. Here would of course be some loss of time. And as the moment of demand, created by the course of business, would frequently elapse, there would as frequently be a further loss of time in waiting for a new demand. In such intervals, the public service would suffer, the specie would be locked up, and circulation checked.

Bank notes being a convenient species of money, whatever increases their circulation, increases the quantity of current money. Hence the payment of duties is doubly promoted by their aid; they at once add to the quantity of medium, and serve to prevent the stagnation of specie.

The tendency of the measure to lessen the necessity of drawing specie from distant places to the seat of government, results from the foregoing considerations. The slow operation of treasury drafts, would frequently involve a necessity of bringing on specie, to answer the exigencies of the government; the avoiding of which, as much as possible, in the particular situation of this country, need not be insisted upon.

But convinced as the Secretary is of the usefulness of the regulation; yet, considering the nature of the clause, upon which these remarks arise, he thought it his duty to bring the subject under the eye of the House. The measure is understood by all concerned to be temporary.

Indeed whenever a national bank shall be instituted, some new disposition of the thing will be a matter of course.

25. Sections XXXI, and XXXII. The provision in these sections respecting drawbacks, seems to require revision in several particulars.

The benefit of it is intended for any person by whom the goods may be exported, whether that person be the importer of them or another, and yet the oath to be taken by the exporter, is of such a nature as must be very difficult to any but the Importer. It declares that the goods are in quantity, quality and value, according to the inward entry of them, which entry was duly made at the time of importation: a fact, which it is evident, can rarely be known to any but the person who made that entry. This must therefore occasion, either difficulty in obtaining the drawback, or a kind of constructive swearing inconsistent with that scrupulous strictness, which ought ever to accompany an oath, and on which the security they are intended to afford must depend. To obviate both, it seems necessary to direct, that proof of the fact shall be made to the satisfaction of the Collector, by the oaths or affirmations of all the parties through whose hands the goods may have passed; in which case each can be examined, as far as his knowlege can be presumed to extend.

There is no rule prescribed for regulating the sum in which bond shall be taken; whence there is perhaps too much left to the discretion of the officers. And the cancelling of the bond is made to depend, among other things, upon the oath or affirmation of the Master and Mate of the Vessel, in which the goods are exported, attesting their delivery: a requisite which it may not always be possible to fulfil. The Master or Mate may die, or may quit the vessel, from different causes, without complying with it. These circumstances seem to require some other modifications. The Secretary has had an eye to them in the draft of the bill accompanying his report of the ninth of January last,9 to which he begs leave respectfully to refer.

26. Section XL. This Section provides, that no goods, wares or merchandize of foreign growth or manufacture subject of the payment of duties, shall be brought into the United States otherwise than by Sea, and in ships or vessels of not less than thirty tons burthen, with an exception as to the district of Louisville, and another as to Vessels at the time of the passing of the act on their Voyage.

It is a matter which merits particular consideration, whether there ought not also to be an exception, in regard to the most easterly district of the State of Massachusetts. The situation of that district is in different views peculiar; so as, perhaps, to render it adviseable rather to endeavour to regulate, than to prevent the introduction of foreign articles in smaller vessels. The information received on this point will also, with the leave of the House, be reserved for the Committee before referred to.

Fourthly. As to the “Act for registering and clearing Vessels, regulating the Coasting trade, and for other purposes.10

Many of the provisions of this Act are objected to; particularly those parts, which relate to the Coasting trade and fisheries; and yet it must be confessed, that the proper remedies or alterations are neither obvious nor easy. The more the matter is examined, the more difficult it appears, to reconcile the convenience of those branches of trade, with due precautions for the security of the Revenue.

Section II. The Idea of this section, is, that every vessel shall be registered by the Collector of the district to which she belongs. This regulation is a proper one, as a knowlege of the persons, on whose oaths or affirmations the registeries are to be founded by the officer making them, is a security against imposition. But this provision seems to be contravened by that of the seventh Section; as will be noted hereafter.

27. Section III This section directs the mode of ascertaining the tonnage of “all ships or vessels.” It is however a question whether it means only those which are to be registered, in order to their registry, or extends to others, in order to computing the tonnage duty. The latter construction has been preferred for the sake of equality and uniformity.

The mode of admeasurement prescribed has been complained of as unfavourable to certain kinds of vessels, and as tending to enlarge the tonnage beyond the standard of other countries.

28. Section VI. Objections are made to the form of the oath prescribed by this Section. The party is to swear, positively, to the place where the vessel was built (which in a great number of cases cannot, with propriety, be done); and also to the citizenship, not only of himself, but of the other owners, and of the Master (which, in many cases, must be equally difficult).

Inconveniencies are experienced from the want of a rule for determining who are citizens. The consequence of it is, that every man is left to his own opinion of what constitutes one; and it is represented, that there are instances, in which persons of reputation, supposing that residence only conferred the character, have been ready to take the oath prescribed.

A designation of the several descriptions of persons entitled to the privileges of citizens under this act, requiring that the particular one under which each falls, should be inserted in his oath, would be the most effectual guard against error or imposition. If this should be thought to be attended with too many difficulties from our peculiar situation, it may at least be proper to annex some adequate pecuniary penalty to the obtaining of Registers by persons not citizens; and to oblige all who apply, to specify in their oaths, by what title they are citizens, that is, whether by nativity, naturalization, or otherwise, which by bringing into view the situation of each person, would serve as a useful check.

In these observations it is taken for granted, that as the Law now stands, the oath of the party is the sole guide to the officers of the Customs; that they have not any discretion in the case; and that a power in them to judge of the qualifications of individuals, in so important a respect, could not, with propriety, be established.

29. Section VII. The second section, as already remarked, directs, that Vessels be registered in the districts to which they belong. This admits their registry, whereever they may be, provided the oath required be taken before the Collectors of the districts to which they belong. It is conceived, that an adherence to the principle of the second section throughout, would conduce to security. And it is therefore, submitted, whether, instead of the provision in this section, it would not be adviseable to provide, that when a vessel being in a district, other than that to which she belongs, has occasion to be registered, she shall be surveyed, under the direction of the proper officer of the Port, where she may happen to be, and registered by the Collector of the district to which she may belong, upon a certificate of the officer by whom such survey shall have been made.

30. Section XI. The declaring the instrument of transfer void, unless the Register be recited in it, involves an embarassing question, as to the property of the vessel; and does not seem necessary to the object in view; the subsequent part of the Section, which annuls the privileges of an American bottom, without such recital, answering, alone, the purpose of the provision.

31. Section XII. If in the oath on which the registry is founded it be necessary to declare, that the Master is a Citizen; it would seem equally necessary, that on a change of Master, there should be a like attestation of his citizenship, previous to the indorsement herein directed to be made: As, otherwise, a Citizen may be the Master one day; a foreigner, the next.

Section XIII. There would be less room for imposition, if, instead of allowing the Collector of the Port, where the vessel might be, to grant a new register, he were authorized merely to take the oath prescribed, in order to its transmission to the Collector of the district, where he might belong, making it the duty of the latter to issue the new Register.

32. Section XXII. This Section commences the regulations respecting vessels employed in the Coasting trade and fisheries. The proviso of it exempts all licensed Vessels under twenty tons from clearing and entering, and in its consequences removes them almost wholly from the inspection of the officers of the Customs. The tendency of this to facilitate smuggling, is obvious; as these vessels are precisely of that kind which would be most naturally employed in clandestinely unlading on the coast, those which arrive from abroad. The bond required in order to a license, is a very slender restraint; not only from the smallness of the penalty, but from the little danger of discovery: And the oath is still less effectual, because the Master who is to take it, may at any time be changed before the application for a new license. This oath too is exceptionable on other accounts. The anticipation of a future and distant oath, may be too apt to give way to the allurements of immediate interest; and if a breach of the law have been committed, when it is to be taken, it is hardly to be expected, that there will be a strict adherence to truth, at the price of incurring both disgrace and loss.

It would be perhaps more effectual and less exceptionable, if instead of this oath, one should be required previous to the granting of any license to a fishing or coasting vessel, from the owner or owners of such vessel, that she shall not, during the time for which it is to be granted, be employed with his or their permission, consent, sufferance, privity, or connivance, in any way whereby the payment of the duties imposed by Law on articles imported into the United States, may be evaded.

But it seems indispensible towards guarding against the frauds which may be committed by coasters, that they should be obliged at every port or place where there is an officer of the customs, to report themselves and their lading on their arrival and previous to their departure. For this purpose, the office hours ought to be so regulated and extended, as to afford the greatest possible accommodation, and avoid occasions of delay. With this precaution, and taking care that the fees are moderate, it is presumeable, that coasters may be subjected to a pretty exact inspection, without injuriously impeding their business.

While they ought, in the opinion of the Secretary, to be thus subjected to a strict supervision, at places where there are Officers, it appears to him proper, that they should be exempted from the obligation either of entering or clearing, when at places where there are none. The necessity of journeys to distant offices, frequently across rivers and bays, and at the expence of the loss of favourable winds, occasions in some parts of the Union serious obstructions to the coasting trade. As connected with this idea, it would tend to the security of the Revenue, if a disscretion were allowed to appoint inspectors at places, which are not ports of general entry or delivery, for the purpose of entering, clearing, and overseeing Coasters.

33. Section XXIII. In the remarks on the Act imposing duties on Tonnage, the construction which has obtained upon the last clause of this section has been stated together with the hardships, which have ensued to Individuals from misapprehension of it.

A different modification of the provision has also been suggested. Among other reasons to be assigned for it, is this; that, by obliging all registered Vessels to take out licenses, it unnecessarily increases the number of vessels intitled to the privileges of coasters. In the opinion of the Secretary, these ought to be confined to such as are ordinarily employed in the coasting and fishing trade; to effect which, it may be proper, that previous to the granting of any license, an oath or affirmation should be made, that the Vessel for which it is required, is bona fide intended to be employed as a coasting or fishing vessel, during the period for which it is to be granted; or the greater part of it; and even to annex a penalty to the taking out a license for any vessel, which shall not be so employed. This, in respect to fishing vessels, seems peculiarly necessary; as it is easy to see that on the pretext of that employment, licenses may be perverted from their real purpose, to that of a mere cover for illicit practices.

There is no provision for the case of a change of property within the year, for which a license may be granted, which sometimes occasions sureties to be bound for parties, they did not contemplate. This, and the repetition of the tonnage duty, which is a consequence of it, is regarded as an inconvenience, requiring to be remedied by a provision for the granting new licenses when such changes happen, upon new security, for the remainder of the year.

34. Sections XXVII and XXVIII. As there are no particular penalties annexed to a noncompliance with the requisites of these sections; it has of course been found in some instances, difficult to enforce their execution. And though it is presumed, that such noncompliance would be a good probable cause of seizure Yet if in the event of a trial it turned out in one case, that there were no foreign goods, nor ardent spirits exceeding four hundred gallons on board; and in the other, that a manifest and permit had been obtained, and that no goods were on board but such as they specified, no penalty could be inflicted. And a vexatious litigation between the Officer and the party, might be the only fruit of the seizure.

It is inferred from the last of these Sections, that a Coaster whose ultimate destination is for a place, where a Collector or Surveyor resides, having on board goods for any intermediate place, is not at liberty to land those goods at such intermediate place, till after a permit for landing shall have been obtained at the place of destination; which is complained of as a grievance, and certainly is attended in many cases with considerable inconvenience. A relaxation in this respect, may be adviseable. And to guard as much as possible against any ill effects from it, it may be expedient, that whenever a Coaster arrives at a port where a Collector or Surveyor resides, it should be incumbent upon the Master of her, to make a report in writing and upon oath, stating the goods on board at the time of her departure from the last port left by her, at which a Collector or Surveyor resided, and which may have been afterwards taken in or delivered prior to her arrival at the place of report. In this case, to avoid a too great multiplication of oaths, the oaths required by the 25th & 26th sections maybe dispensed with; though it will be still useful, that the manifests should be exhibited and certified.

35. Section XXXI. The Secretary considering it as an essential rule, that emoluments of office should not be extended by construction or inference beyond the letter of the provision, lest a door should be opened to improper exactions; has instructed the Officers of the Customs to govern themselves by a literal interpretation of the several clauses of this section; the consequence of which, however, is, that equal services are unequally recompensed.

This chiefly arises from that clause, which allows a fee of sixty cents.

“For every entry of inward Cargo directed to be made in conformity with this Act, and for receiving of and qualifying to every manifest of vessels licensed to trade as aforesaid.”

The entry and the receiving and qualifying to a manifest being joined together by the word and are understood as one service, to which a fee of sixty cents is attached; so that when only either of the two things is performed, and not the other, no fee is taken.

Hence there is no allowance for swearing the Master to his Manifest, and granting a certificate of its having been done, according to the twenty fifth and twenty sixth sections of this act, because it is not accompanied in either case, with an inward entry. Twenty Cents for the permit to proceed to the place of destination is the only fee understood to be demandable, for the services specified in these sections.

The sixty cents are deemed applicable only to the services enjoined by the twenty seventh section.

A revision of this Section will, upon accurate examination be found eligible for other reasons; which for the sake of brevity are omitted.

The foregoing are the principal remarks which occur on the provisions of the several acts, on which the Secretary has been directed to report. These acts have fulfilled their objects in all respects as well as could reasonably have been expected from the first essay on so difficult a subject. It was foreseen that experience would suggest the propriety of corrections in the system; and it is equally to be inferred, that further experiment will manifest the expediency of further correction. The work must be progressive; since it can only be by successive improvements, that it can be brought to the degree of perfection, of which it is susceptible.

As connected with the difficulties that have occurred in the execution of the Laws, which are the subject of this report, the Secretary begs leave, in the last place, to mention the want of an officer in each state or other considerable subdivision of the United States, having the general superintendance of all the officers of the Revenue within such state or subdivision.

Among the inconveniencies attending it, is a great difficulty in drawing from the more remote ports, the monies, which are there collected. As the course of business creates little or no demand at the seat of Government or in its vicinity for drafts upon such places, negotiations in this way are either very dilatory or impracticable; neither does the circulation of bank-paper, from the same cause, extend to them. This embarassment would be remedied by having one person in each state, or in a district of the United States, of convenient extent, charged with the receipt of all the monies arising within it, and, placed in point of residence, where there was the greatest intercourse with the seat of Government. This would greatly facilitate negociations between the Treasury, and distant parts of the Union, and would contribute to lessening the necessity for the transportation of specie.

But there are other reasons of, perhaps, still greater weight for the measure. It is, in the opinion of the Secretary, essential to a due supervision of the conduct of the particular officers engaged in the collection of the revenues, and to the purposes of exact and impartial information, as to the operation of the Laws which relate to them. It is impossible, that the first end can be answered by any attention or vigilance of an Individual or Individuals at the Head of the Treasury. Distance, and the multiplicity of avocations, are conclusive bars. And however it may appear at first sight, that the second end may be attainable from the communications of those particular Officers; yet when it is considered, how apt their representations will be to receive a tint from the personal interests of the individuals and the local interests of districts, it must be perceived, that there cannot always be sufficient reliance upon them, and that variances between them will not unfrequently serve rather to distract, than to inform the judgment. Greater impartiality, and, of course, better information may be expected from an officer, who, standing in the same relation to a larger district, composed of several smaller districts, will be more likely to be free from the influence, either of personal interests or local predilections in reference to the parts.

The Secretary begs leave, with the utmost deference, to say, that he considers an arrangement of this kind as of real importance to the public service and to the efficacious discharge of the trust reposed in him.

All which is humbly submitted

Alexander Hamilton
Secy of the Treasury

DS, RG 233, Original Reports of the Secretary of the Treasury, 1790–1791, National Archives.

1Journal of the House, I description begins Journal of the House of Representatives of the United States (Washington, 1826). description ends , 198.

2The House ordered

“That the Secretary of the Treasury be directed to report to this House such information as he may have obtained respecting any difficulties which may have occured in the execution of the several laws for collecting duties on goods, wares, and merchandises, and on tonnage, and for regulating the coasting trade, together with his opinion thereupon.” (Journal of the House, I description begins Journal of the House of Representatives of the United States (Washington, 1826). description ends , 143.)

31 Stat. description begins The Public Statutes at Large of the United States of America (Boston, 1845). description ends 24–27 (July 4, 1789).

4“An Act to regulate the Collection of the Duties imposed by law on the tonnage of ships or vessels, and on goods, wares and merchandises imported into the United States” (1 Stat. description begins The Public Statutes at Large of the United States of America (Boston, 1845). description ends 29–49 [July 31, 1789]).

61 Stat. description begins The Public Statutes at Large of the United States of America (Boston, 1845). description ends 27–28 (July 20, 1789).

71 Stat. description begins The Public Statutes at Large of the United States of America (Boston, 1845). description ends 55–56 (September 1, 1789).

81 Stat. description begins The Public Statutes at Large of the United States of America (Boston, 1845). description ends 29–49 (July 31, 1789).

101 Stat. description begins The Public Statutes at Large of the United States of America (Boston, 1845). description ends 55–65 (September 1, 1789).

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