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.
Madison argued that his proposal was only a temporary one and that
as far as possible the trade should be free. He said, “If my general
principle is a good one, the term commerce ought to be free, and labor
and industry left at large to find its proper object, the only thing
which remains will be to discover the exceptions which did not come
within the rule that I have laid down....”
It was Madison’s belief that the cheapness of land in the United
States, compared with the cost of land in other nations, gave this
country a great advantage in agricultural trade. He said that so far as
manufacturing was concerned, “Other countries may and do rival us.” But
then he added, “We may be said to have a monopoly in agriculture; the
possession of the soil, and the lowness of its price, give us as much a
monopoly in this case, as any other nation or other parts of the world
have in the monopoly in any article whatever; but with this advantage
to us, that it cannot be shared nor injured by rivalship.”
Nevertheless, while favoring free trade, Madison conceded that if
America did leave her ports entirely free then the country would
suffer. He said, “If America was to leave her ports perfectly free, and
make no discrimination between vessels owned by her citizens and those
owned by foreigners, while other nations make this discrimination,
it is obvious that such policy would go to exclude American shipping
altogether from foreign ports, and she would be materially affected in
one of the most important interests.”
Despite sharp and often bitter differences, the young Congress was
aware that sectional interests were secondary to the absolute necessity
for action in collecting revenue. Within a short time it had put
together the first Tariff Act. It was titled “An Act for laying a duty
on goods, wares and merchandise imported into the United States.” And
on July 4, the thirteenth anniversary of the signing of the Declaration
of Independence, President Washington signed into law the act which was
the second to be passed by the Congress.
Then Congress quickly set up the machinery for the collection of the
tariff. This was done in the Fifth Act, “To regulate the collection
of the duties....” The bill was sent to President Washington for his
signature on July 31, which fell on Friday. On the following Monday the
President sent to the Senate a list of about one hundred appointments
to Customs offices. The Senate advised and consented to about half this
list but on the following day gave the President an unexpected jolt.
The Senate, without warning, refused to consent to the appointment of
Colonel Benjamin Fishbourn to be Naval Officer (auditor) at the Port
of Savannah. Fishbourn had served with distinction in Washington’s
command during the Revolution and apparently had a spotless reputation
in civilian life.
Washington did not make a fight over Fishbourn’s rejection even though
the Senate action no doubt seemed to him to be a petty and totally
unwarranted assertion of veto power. He did send a message to the
Senate which called to mind later clashes between Chief Executives and
Congress, pointing out that at least the Senate might have done him the
courtesy of inquiring into his reasons for appointing Fishbourn.
Perhaps under different circumstances Washington would not have
been so mild in his reaction to the Senate veto. But the need to
establish an organization for collecting revenue was imperative, and
Washington perhaps felt this was no time for a fight over executive
and legislative prerogatives. The most pressing need was unity in the
government.
And so was the Customs Service created to help bring financial
stability to the nation at a critical time. Despite all the trials and
difficulties, the Customs Service collected more than $2 million for
the Treasury in its first year of operation.
3
A PRESIDENT IS BAMBOOZLED
There was little cause for gaiety in any part of the nation in the
summer of 1808. Gloom hung over the country and particularly over
Washington, where even the new capital building had not been completed
and the problems of getting the young government firmly established
sometimes seemed insurmountable.
The reason for the gloom was the worsening relations between the United
States and Great Britain and the threat of American involvement in the
brawling affairs of Europe, where the British were at war with the
French.
In a desperate move to avoid being drawn into the conflict, President
Thomas Jefferson had called the previous year for an embargo on all
overseas shipping. He felt such drastic action necessary because
British warships had been seizing American vessels headed for France.
Even worse, the British had been forcing American sailors from the
ships on the high seas and impressing them into British naval service
by the hundreds.
Under these circumstances, Jefferson decided it would be better to
withdraw American shipping from the seas and deny American supplies to
the combatants, rather than risk plunging the nation into another war.
His proposed embargo had been fought over bitterly in Congress. But in
December, 1807, the Embargo Act had been passed and shipping had come
to a halt. Even trade with Canada would be stopped with the enforcement
of a land embargo--except for the commerce carried on by smugglers
defying Federal Customs officers.