make these classifications in defiance of the botanist and the
dictionary. The contradictions came about because the U.S. Court of
Customs and the U.S. Court of Customs Appeals have made these rulings
for the purpose of identifying imports so that a proper rate of duty
may be paid upon them.
The courts have said over and over that in the language of commerce and
in the everyday language of the streets, a whale must be considered to
be a fish because it lives in the sea. Also, they have said the tomato
is a vegetable because it is sold and eaten as a vegetable. And rhubarb
in the legal world has become a fruit because it is bought and sold as
a fruit.
In most cases, the appraisers have no difficulty in establishing the
proper rate of duty to be paid on an import because the rate is fixed
by law and the import is easily identified. But there are a great many
imports not identified in any of the tariff acts or the amendments
adopted by Congress, a lack which often creates difficulties, as it did
when one importer brought in a shipment of Chinese mah-jongg sets.
The dominolike pieces used in playing the game were made of bone and
bamboo. The importer and the government agreed that the material of
chief value in the mah-jongg pieces was bone. The importer insisted
that the duty should be 20 per cent of the value because the games were
“manufactures of bone.” However the Collector classified these sets as
“dominoes” and set the duty at 50 per cent. He ruled that the mah-jongg
pieces came under the paragraph 341 of the Tariff Act of 1913 which
provided for a duty of that rate on “dice, dominoes, draughts, chess
men, and billiard, pool, bagatelle balls, and poker chips of ivory,
bone or other material.”
This case also found its way into the Customs Court. The government
attorneys argued that the mah-jongg pieces should be classed as
“dominoes by similitude” even though they were not specifically listed
under the acts passed by Congress.
The importer argued through his attorneys that the mah-jongg sets
were not specifically named by Congress in any of the classifications
established in the various acts and therefore the duty should be
applied on the “component material of chief value.”
In this case the ruling went against the government. The court held
that the mah-jongg sets were properly classifiable at 20 per cent as
manufactures in which bone was the “component material of chief value.”
The appraisers’ staffs make millions of classifications each year on
imported items, and there is remarkably little dispute over their
decisions. Out of these millions, no more than 700 are disputed and
contested in the courts annually.
Sometimes a seemingly obscure and innocuous ruling on a classification
will blow up a storm across the country. Such a case developed when an
importer brought in from Europe do-it-yourself kits containing parts of
a miniature electric train and engine to be assembled by the purchaser.
The locomotives, freight cars, cabooses, passenger cars, track, and
other equipment were precision-made scale models of larger railroad
equipment. They were all made to a standard “HO” scale of 3.5
millimeters to one foot. The trains were designed to run at the scale
speed, which meant that at maximum speed they would travel 60 feet a
minute. At that speed, they would simulate the operation of a full-size
train.
All of the equipment was manufactured according to the strictest
standards set up by the National Model Railroad Association. This
Association has been described as “an organization of adult model
railroad hobbyists founded in 1935 to make and promulgate standards
for wheels, flanges, rails, switches, and other working parts of
model railroads, with the purpose of achieving interchangeability of
equipment from different manufacturers.”
The examiner who inspected the imported miniatures classified them as
“toys”--and as such subject to duty of 50 per cent of their value. In
the Tariff Act of 1930, Congress had described a toy as “an article
chiefly used for the amusement of children, whether or not also
suitable for physical exercise or for mental development.”
The ruling brought a pained cry from miniature railroad hobbyists
across the country.
Toys, indeed! The hobbyists were outraged that this import should be
put in the same category with playthings and that anyone should have
the affrontery to think that such railroad equipment--even though
Lilliputian in size--could be put together, and operated, by a mere
child.
When the Collector at the Port of New York supported the ruling of the
appraiser that the miniature railroad equipment should be classed as
toys, the ruling was appealed to the U.S. Court of Customs. And when
the case came to trial the importer had behind him ranks of witnesses
from all walks of life ready to dispute the government’s description
of the equipment: dentists, technical consultants, salesmen in various
lines of business, doctors, lawyers, editors, publishers, and writers.
One after another, the witnesses took the witness chair to deride
this nonsense that the miniature trains were made “for the amusement
of children.” They gave technical testimony on the operation of these
miniatures to prove that no child could be trusted with them and in
fact could not operate them.
To prove this point one witness testified, “It requires a knowledge of
electricity and requires a thorough understanding of how the trains
operate. For example, our accessories all operate on alternating
current; our trains run on direct current. It is necessary to know the
two types of current which our power-packs provide to connect up the
wires correctly. In the case of the alternating current, they have two
leads; one would be a common terminal, connecting all the different
accessories and switches, and another would be a specific one which
would go to each individual switch.... The locomotive can also be
operated from an overhead wire with pantographs they have located on
the roof. This makes it possible to operate two trains on the same
track under independent control. To do this, it is necessary to set
up a catenary system, which is an overhead wire system, such as the
Pennsylvania and New Haven Railroad use in this area. This, naturally,
requires wiring.”
The importer insisted that the miniatures should not be classified as
toys but should be classified as electrical equipment subject to a
lower rate of duty.
Under this barrage of expert testimony from adults who play with small
trains, the court overruled the Collector. The court held that the
model railroad sets were not “toys,” because they were used chiefly by
adults or by grown-up children and that they “do not come within the
legal meaning of the word toy.”
In years past, Customs officials tried to establish a detailed
classification system in which the examiner could refer to a given page
in a book and quickly come up with the answer as to classification and
duty of any item. But the system broke down under the weight of a vast
number of new products arriving on the market. Discussing this effort
a Customs Bureau official said: “On tariff classification, a number
of people, who call up and ask for rates, think there is a detailed,
logical breakdown and that we just thumb through a book and come up
with an answer. To someone who hasn’t worked with classification, that
seems like the way to do it. That is the way the old-timers used to
try to classify. They used to try to set up categories with a place
for everything, and everything in its place. But every time anyone set
up one of these classification systems, along would come some new item
which didn’t fit anywhere. So the present tendency in classification
systems is to set up a specific category for the more important items,
and then to set up what might be called a basket category to catch
everything else.”
The impossibility of achieving an easy index for classifying imports
was illustrated in recent years when a machine arrived from Europe
described by the importer as “printing machinery.”
The machine had the equivalent of a type font but, instead of type,
the font contained pictures of type on a transparent plate. The
type-setter, using a keyboard similar to that on a linotype machine,
punched out sentences on a roll of perforated tape. Then the tape was
fed into the machine, and as each perforation passed an electronic
control, a transparent plate bearing the image of a letter dropped into
place to be photographed by a high-speed camera. In this way a full
sentence was formed with photographed characters. This process was
continued, letter by letter, until a column of “type” was set up on a
film. Then the film was developed and, by a photoengraving process, was
reproduced on a metal plate ready for printing on paper. In all the
process there was no actual type used.
Customs was baffled by this one. Was the machine to be classed as
photographic equipment, printing equipment or as typesetting machinery?
It did not set type. It did not actually print. And it was more than
a mere camera. The Bureau decided this was a case in which the court
should hear all the arguments and make a decision--and a decision has
yet to be made.
When Congress passed the 1930 Tariff Act there were roughly 700
categories of imports. Since that time--with the adoption of the
Reciprocal Trade Agreement Act--the number of categories has been
increased by the thousands. Most of the increases were in categories
created to help foreign countries expand their trade in the United
States. The duty on a comparatively few imports has been revised
upward as a measure of protecting some of the American industries from
lower-cost foreign competition. In the vast majority of cases the
revisions have been downward, following the trend toward removing
tariff barriers by international agreement.
In arriving at the dutiable value of an import, Customs officials are
bound by the Tariff Act, which lays down the rules under which they
calculate the true value of an article. This system of appraisal is
complex and varies from category to category. Congress has proclaimed
that duty on certain items shall be fixed on the foreign value--that
is, the selling price in the country of production. Some items are
appraised on their export value--the price which the exporter pays
for them. Others are valued on their United States value, which means
the price at which the exporter sells them in the United States. Some
appraisals are based on cost of production.
Duties based on the American selling price are designed solely to
protect certain American industries from foreign competition. Among
the leading industries receiving this protection are the rubber
and coal-tar dye industries. For example, an importer may be able
to purchase a pound of coal-tar dye in Switzerland for $2. But if
that dye is competitive with a dye of a similar shade produced in
the United States, then the import will be appraised at $5 a pound,
notwithstanding the fact that the importer paid the Swiss manufacturer
only $2 a pound for the product.
However, most appraisements are made on the basis of export value, the
price charged by the manufacturer or the seller in the foreign country.
The imports brought to the Appraiser’s Stores for examination form a
cross section of the commercial treasures of the world and they are
unbelievably varied. The examiners--trained by years of study and
on-the-job experience--have become experts in appraising the quality
and the value of a staggering number of imports. Whether the import
is wool, cotton, silk, sugar, hog bristles, furs, diamonds, ore,
chemicals, exotic foods, or an antique table, there is someone with a
background of knowledge on the subject.
One of the largest single sources of Customs revenue continues over
the years to be duties collected on raw wool which has not yet
been processed for manufacturing. The wool examiner is one of the
most highly trained of the specialists within the Bureau. He must
be--because the Tariff Act of 1930 requires him to be able to identify
by type thirty different wools from all parts of the world, in
addition to being able to determine whether a shipment of hair is from
the Angora rabbit, the Cashmere goat, the Bactrian camel of Central
Asia, or the llama and vicuna of South America.
The Bureau has found that the only way to obtain these specialists
is to recruit young men who are interested in this field of work,
and to train them under the guidance of experienced examiners. The
recruits must spend hours with books outside their regular work hours,
in addition to attending technical training schools and visiting
manufacturing and processing plants throughout the United States.
As far as the Tariff Act is concerned, the term “wool” includes not
only the fleece from sheep, but the fiber from other animals. This is
why the examiner must be able to distinguish Cashmere goat hair from
the hair of the Angora goat raised in the southwestern part of the
United States; and to learn the subtle differences between two grades
of coarse hairs as well as the variations between the finest of fleeces.
Wool is graded by numbers, starting with 36 for the coarsest and moving
through the 70s to the very finest. A miscalculation in the grading can
deprive the Treasury of revenues--or cause an injustice to an importer.
For years, examinations of wool were conducted on the piers by taking
samples from the ends of the highly compressed bales, which were
covered with burlap and bound by steel bands. The examiner had no way
of knowing--except to have a bale of fleece opened--whether or not the
outer fleece concealed a higher grade of wool in the center of the
bale. In some isolated cases, examiners found that a coarse grade of
carpet wool concealed extremely high-grade wool. Contraband such as
narcotics also was found hidden inside suspect bales.
Perhaps of even greater importance, the examiner had no reliable method
of determining the amount of dirt, vegetable fiber, grease and other
foreign matter contained throughout the bale--and the duties were
supposed to be assessed only on the “clean content” of the wool.
This haphazard method of examination drew the fire of Congress in 1930.
To correct the situation, the Customs Bureau established the post of
Wool Administrator in New York City. It was his job to coordinate
the examinations throughout the country and to establish more uniform
practices. Daniel J. Kelly was named Administrator, with three
assistants--Morris Shuster in Philadelphia, Al Kelleher in Boston and
John Walker in New York.
The Bureau assigned to Chief Chemist Louis Tanner of the Boston
laboratory the job of finding a method to determine the “clean content”
of wool shipments. He developed a special boring tool which enabled
examiners to take samples, or cores, of wool from inside the bales,
and to judge the uniformity of the fiber in an entire bale without
disturbing the bindings. This method proved so simple and effective
that it has been adopted by the commercial trade and by government
agencies in other countries throughout the world.
Imports of all kinds and types reach the Appraiser’s Stores in this
manner: When merchandise is ready for export from a foreign country
to the United States, the exporter prepares a special customs invoice
describing the merchandise and giving its value. This invoice is sent
to the American importer. When the importer is notified that the
merchandise has arrived at a port of entry, he turns over the invoice
to his customs broker. The broker calculates the estimated rate of
duty, then proceeds to the Customs House. There he makes what is called
a formal entry of the merchandise, filing the information he has
received from the exporter and paying the duty.
In the Collector’s office at the Customs House, the broker’s estimates
of value and duty are reviewed for any errors. Then the invoice is
transmitted to the appraiser’s office, where it is assigned to the
expert who will examine this particular merchandise.
The Collector notifies the Customs inspector at the pier that he is
to send a 10 per cent sampling of the imported merchandise to the
Appraiser’s Stores to be physically examined by the specialist in that
field. The specialist examines the samples of merchandise to see that
they are correctly identified by the importer. Then he determines
whether the broker’s estimates of value and duty are correct.
If the broker entered the merchandise at $100 a unit and the examiner
believes that the appraised value should be $125 a unit, then the
examiner makes the change. His report is then forwarded to the office
of the Collector for final action, and normally the Collector accepts
the examiner’s judgment.
The Collector then notifies the broker or the importer of the action
that has been taken. The importer and broker may accept the ruling or
they may take issue. If they disagree, they may appeal to the United
States Customs Court. If either the importer or the government is
dissatisfied with the lower court’s decision, an appeal may be taken to
the U.S. Court of Customs and Patent Appeals. Usually the decision of
the Appeals Court is accepted as being final, but either of the parties
may carry the appeal further, to the Supreme Court.
* * * * *
It seems odd that piracy should be a concern of Customs in the 1960s,
as it was in the days of Jean and Pierre Laffite. But piracy still
exists in modern dress and is a troublesome problem. The only practical
difference between the modern pirates and the cutlass-carrying
freebooters of the past is that the pirates’ methods have changed.
There was the case that might be called “The Pirates of Taiwan”--a case
which created an incident of international embarrassment between the
governments of the United States and Formosa (Taiwan) and a potential
threat to the U.S. book publishing industry.
The “pirates” of Taiwan were the owners of small printing shops who
engaged in the business of publishing--without the consent of the
authors or the original publishers--almost every book of any merit
printed in the English language.
With fantastically cheap labor, cheap paper, and a photo-offset
printing process, the publishers in Taiwan reproduced such extensive
works as the _Encyclopaedia Britannica_, dictionaries, sets of medical
and scientific works, volumes of the classics, standard reference
books, best-selling novels and popular non-fiction. The books were
carbon copies of the originals, even to the U.S. copyright numbers and
the phrase “Manufactured in the United States.” Nothing was changed in
the pirating process, not even the typographical errors. From a casual
examination, there was nothing to indicate that the books had not been
published in Philadelphia, Boston, or New York.
The pirating problem became acute in 1959 when the Chinese publishers
arranged contacts with sales agents in the United States, men
and women usually located on or near a campus of a university or
college. These agents solicited orders primarily from professors
and teachers, librarians, researchers, and students. A standard set
of the _Encyclopaedia Britannica_--normally costing about $400--was
offered for less than $50. The $35 _Columbia Encyclopedia_ was listed
at $7.13. _Gray’s Anatomy_, a standard work for all medical students
and normally costing $17.50, could be purchased for $2.50. Allen
Drury’s best-selling novel of political life in Washington, _Advise and
Consent_, cost $5.75 in American bookstores--but was advertised by the
Chinese publishers at $1.25.
In some instances, the Chinese publishers obtained lists of likely
customers and solicited them by mail. The prospects usually were
men, women and organizations with modest incomes who were forced to
operate on a very limited budget. And here they were being offered the
opportunity to obtain expensive volumes of literary works--which they
had long dreamed of owning--for only a fraction of the price being
charged throughout the United States.
The books were shipped from Taiwan in individual packages. Even when
the packages were opened for inspection by a Customs examiner, there
was nothing to arouse suspicion of any irregularity. The first hint
which Customs had of fraud was when a complaint was lodged in 1959
by the American Book Publishers Council and the American Textbook
Publishers Institute.
The book publishers appealed for help to the State Department, the
Customs Bureau, Congress and even to the White House. The sales of
pirated books in the United States had become a multi-million-dollar
business which threatened to destroy the American book market.
In theory, at least, the publishers could have protected themselves
from the sales of pirated books in the United States by registering
each title with the Customs Bureau and paying a fee of $75. The
registration would have banned any import of a similar title without
the publisher’s consent.
Such a procedure would have been prohibitive in its cost because each
title produced is regarded by law as a different product. A single
publisher might well have had to register as many as 2,000 titles
annually to obtain total protection--at a cost of more than $150,000 in
fees and incidental expenses. This cost would have been in addition to
the $300,000 paid to copyright the works, at $150 per title.
When Customs agents opened an investigation they discovered that in
the first half of February, 1960, sales of pirated books at Iowa
State University alone totalled more than $1,200. It was obvious that
American publishers and authors were literally being robbed of millions
of dollars. Not only were the books being mailed to the United States
in large quantities, but a great many sales were being made on Formosa
to military personnel, to students, and to tourists who could not pass
up such a bargain in literature.
Action was taken by Customs to halt the importation of the books
through seizure at the ports of entry. Then the U.S. Ambassador to
Nationalist China, Everett F. Drumright, took up the problem with
Foreign Minister S. K. Huang in Taipei, seeking a ban on the export of
the books.
The problem was not one presenting an easy solution because the laws
of Taiwan technically tolerated such piracy. Many members of Chiang
Kai-shek’s government were not entirely sympathetic to shutting off
this lucrative trade which brought dollars into the treasury. There
was the fact, too, that lack of any copyright agreement gave Chinese
students access to cheap editions of technical books and famous works
of literature.
However, an arrangement was worked out on the diplomatic level for a
ban on the wholesale export of pirated books from Taiwan. The American
publishers agreed to make available certain of their works to Chinese
students. This agreement brought a halt to much of the illicit traffic,
but the problem of pirated books continues to be troublesome.
Competition for world trade has also brought some sharp practices in
which foreign manufacturers copy American-made automobile parts, tools,
and other merchandise and then ship them into the United States. The
articles are identical in appearance to the American-made product
down to such small details as the American manufacturer’s registered
trademark. But the price--and quality--are far below the American
level.
The piracy in the field of trademarks is a continuing problem for
Customs. There are approximately 5,000 trademarks registered with the
Customs Bureau, including those registered by foreign firms. And each
manufacturer guards his trademark jealously.
Many foreign trademark owners, for the protection of their
representatives in this country, will not permit more than one of
their trademarked articles to be imported into the United States by a
tourist. Many tourists will go abroad and purchase an unusual bargain
in a camera, perfume or some other item. They are dismayed when they
return to this country to find that Customs will not permit them to
keep more than one of the articles.