APPENDIX. REPORT OF THE DIVISION OF SPECIAL AGENTS. TREASURY DEPARTMENT, Division of Special Agents, November 12, 1878. SIR: I have the honor to submit the following report of the transactions of the Division of Special Agents for the fiscal year ended June 30, 1878: Value of seizures reported by special agents... Amount involved in suits instituted upon information of special agents..... Amount recovered by suit or otherwise Saving by reduction in drawbacks on sugar as recom mended by special agents...... Estimated saving in charges and commission cases. Arrests and criminal prosecutions instituted.. $108, 854 95 809, 994 53 38, 984 70 70,963 38 64, 781 90 304,515 82 .1, 000, 000 00 55 The number of agents authorized and employed during the year was twenty: Per diem compensation. Travelling expenses.. Total cost..... $58, 400 00 18, 124 86 76, 524 86 A system of examining custom-houses upon an unusually thorough basis was inaugurated during the year. Printed instructions for such examinations were issued to the agents, in which were embodied a series of questions, to answer which required a careful inspection of the books, accounts, &c., of each district. Under these instructions there were sixty-seven customs districts examined. Eight cases of defalcation by customs officers were discovered, amounting in all to $22,662 29. Of this amount, $4,754 83 has been paid, $15,340 75 is in suit on official bonds of collectors, and $2,566 71 has been charged to collectors by the accounting officers. At the beginning of the fiscal year the supervision of the transportation of dutiable merchandise in bond, and of bonded warehouses, and correspondence connected therewith, was assigned to this division. During the year eighty-seven bonds for warehouses were approved, and one hundred and twenty-three warehouses discontinued, leaving in force, on June 30, 1878, three hundred and forty-eight bonds, covering four hundred and ninety-eight buildings, forty-four yards, and ten elevators; in all of which bonded goods are stored. There were twenty-two bonds of common-carriers approved, and eighteen discontinued, leaving one hundred and twenty-five bonded routes (of which twenty-seven are for the transportation of unappraised goods) in operation June 30, last. These routes are bonded by railroad, steamboat, and canal companies, and, in a few instances, by single individuals. The number of packages of unappraised merchandise transported from ports of first arrival to ports of destination, under immediate transportation bonds, during the year, was 304,706, on which the invoice value was $7,861,239, and the estimated duties $4,044,162 18. By means of monthly reports from the ports of importation and of destination, supervision is exercised over the goods forwarded under immediate-transportation bonds, and all missing packages traced and discrepancies reconciled. From the monthly reports of collectors of customs, showing the amount of business transacted, the receipts from all sources, and the cost of collection, a statement has been prepared, from which it appears that the saving during the last fiscal year, in the cost of collecting the revenue, over that of the year previous, was $778,492 25. It is also shown by this statement that, in a large number of districts, the cost of collection forms a large percentage of the amount collected, while in thirty-three districts the cost exceeds the receipts. In many of these districts, which were established in 1799, when all commerce was carried on in sailing-vessels, there are now no importations of foreign merchandise whatever, and the duties of the collectors are confined to routine matters pertaining to the coastwise trade. It is respectfully suggested, that if the Secretary of the Treasury were authorized by law to consolidate two or more customs districts, whenever in his judgment the public interests so require, the Department would be able to materially increase the efficiency of the service and lessen expenses without endangering the revenue. UNDERVALUATIONS. It has been estimated by many persons, well-informed in respect to customs matters, that the loss to the revenue by undervaluations, since the repeal of the moiety acts, would reach as high as $25,000,000 per There can be no doubt that many millions are lost every year on this account. In some classes of merchandise, American merchants annum. have been compelled by reason of undervaluations to stop importing on their own account, and to buy their goods from commission merchants, who receive the merchandise on consignment from manufacturers in Europe. It has been argued that the increase of importations by consignment in this country is the result of progress in business, and is simply following the course of European trade; and that the fact that merchandise of a particular character is imported into the United States on consignment only, and is never purchased in Europe by an American dealer, is no indication that such merchandise is undervalued. To this, it may be answered that goods of the same character and quality as those sent to the United States on consignment only are freely sold at the places of manufacture in Europe to other markets than the United States, and would be purchased by importers in this country, having resident buyers in the European markets, if it were possible for them to buy the goods at the market rates, and import and sell them in competition with consigned goods without loss. This cannot be done so long as consigned goods are allowed to be entered at the values fixed by the manufacturers in Europe, who send them to their regular agents in this country for sale. Special efforts have been made by this division to ascertain the true market value of certain lines of goods which are imported by consignment only, and these efforts have been partially successful. Owing to the provisions of the act of June 22, 1874, under which it is necessary to prove an intent on the part of the importers to defraud the revenue before forfeiture of merchandise seized for undervaluation can be obtained, the Government is practically barred from any remedy in the courts for frauds by the undervaluation of consigned goods. The invoices of this character are made by the manufacturers, whose agents in the United States, making the entry and oath as to value according to their best knowledge and belief, (their knowledge of such value being ostensibly derived from the invoices only,) need not, necessarily, be familiar with the actual foreign-market value of the goods. In all cases where reliable information has been obtained respecting market values the facts have been laid before the appraisers, who, when they found the evidence of a character to warrant it, have made proper advances upon the invoices, and where such advances are above 10 per cent., and therefore involve an additional duty of 20 per cent., it has been the almost invariable practice of the importers to demand a reappraisement. In many of these reappraisements, the advances made by the appraisers have been sustained. In a recent instance, where, upon information furnished by this division, an advance of 35 per cent. was made upon a consigned invoice of silks, such advance was sustained upon a reappraisement, the head of one of the largest American dry-goods firms being the merchant appraiser. A subsequent invoice of the same class of goods was voluntarily advanced by the consignee 25 per cent. upon entry, and this advance was afterwards increased by the appraiser to equal the value fixed upon the reappraisement referred to, without appeal or protest on the part of the consignee. The evasion of full payment of duties by undervaluations of certain standard goods, notably silks, velvets, laces, and fine kid gloves, has not only been a subject of comment among merchants, but has for the past four years, with the exception of a few invoices of gloves imported at Philadelphia, prevented direct importations of such goods by American merchants. With respect to silks, it is very difficult to obtain conclusive evidence of value, because the element of weighting by the dyer is an uncertain, and to all except the manufacturer of the particular goods which may be under examination, an unknown quantity. The best experts are nable to give a confident opinion within 10 per cent. of the relative values of two pieces of silk. The determination by reappraisement of the true market value of certain importations is rendered difficult by the prevailing practice among agents of foreign manufacturers of acting as expert witnesses for one another. It also not unfrequently happens that the merchant member of the reappraising board is connected, directly or indirectly, with some one of the foreign agencies referred to. Another obstacle in the way of obtaining accurate information on this subject, is the reticence of merchants. Compelled, by reason of the existing monopoly of the trade in silks and gloves, to have business relations with the agents of foreign manufacturers, it is readily seen that a due regard for their own interests is sufficient to prevent that assistance in exposing and suppressing the evil of undervaluations which could and would under other circumstances, no doubt, be rendered to the Government. The disposition on the part of European manufacturers and tradesmen, particularly on the Continent, to evade the American tariff, has grown so wide-spread that even retail dealers, milliners, dress-makers, and other trades-people are in the habit of tendering to American tourists, as an inducement to them to purchase goods, false invoices to enable such tourists, upon their return home, to evade a portion of the legal duty. Although the fact of the existence of a system of deliberate undervaluations is known to every well-informed merchant in the country, the difficulties attending the production of such convincing proof in specific cases as will justify proper advances on appraisement are almost insuperable. The appraising officers may be sustained in one or two, or a dozen, reappraisements, but, sooner or later, through the persistent and continued efforts of the commission agents, the invoices of foreign manufacturers again become the basis for assessment of duty. By thus undervaluing their invoices the manufacturers are really enabled to fix the duty to be paid, without regard to the rate prescribed by law. Take, for instance, the importations of kid gloves. A merchant in Philadelphia bought an invoice of kid gloves, of the first quality, at 54 francs per dozen, from a manufacturer in Europe who had not established an agency in the United States. These gloves were entered at the custom-house in Philadelphia, at that price, and the duties upon them were paid. At the same time, gloves equal in quality to those above mentioned, and manufactured in the same town in France, were invoiced and entered at the custom-house, New York, at 42 francs per dozen. In the one case the merchant pays the Government, after deducting the usual discounts, $4.79 per dozen, or 50 per cent. ad valorem, while in the other the manufacturer, through his agent, pays $3.72 per dozen, or 38 per cent. ad valorem, assuming that the sales to the Philadelphia merchant were made at the true market value. In his charge to the jury in the Sherry-wine case, 2d Benedict, page 249, Judge Blatchford illustrates this condition of affairs as follows: "Every ad-valorem system of revenue must be made, as far as possible, uniform in its operation, or it will be oppressive and unjust. Merchandise, as a matter of course, will be shipped to this country by the man who manufactures it, and like merchandise will be shipped here by the man who purchases it. If the manufacturer is allowed to invoice his merchandise at what it costs him to make it, and the purchaser is compelled to invoice his goods at what it costs him to buy them, inasmuch as the purchaser must pay for the goods, not only what it costs the manufacturer to make them, but the profit of the manufacturer in addition, an unfair discrimination is made against the purchaser, enabling the manufacturer to undersell him in the market here, and, in the end, surely drive him out. This is a principle which is easy to be understood, and commends itself to the good sense of every man. Hence the rule referred to, and which finds expression in the language which I have cited from the act of 1863. In the case of a purchaser of goods, the cost to him to buy the goods abroad is assumed, as a general rule, by the law to indicate the actual market value of what he buys, it being presumed that he buys at the ordinary actual market value; and to put the purchaser upon the same footing with the manufacturer, to make an unjust discrimination against the purchaser, and in favor of the manufacturer, and to enable the Government to collect substantially the same amount of duty, at the same |