increased. Auctions facilitated these operations; by selling at auction for cash, or on short term notes which could be discounted at the banks, the amount of the duties thus loaned could be invested in a new voyage, and possibly several such rounds be completed before the first came due.118

UNDERVALUATION OF IMPORTS.

Another means by which the protection to American manufactures was minimized, and which was facilitated by auction. sales, was the system of evaluating imports.119 The plan in use. was to take the invoice valuations, as of the exporting country, and certain flat addenda of 10 or 20%.120 Such additions were, of course, artificial; the foreign cost so augmented was not the domestic cost, for the increment did not equal the difference in value here and abroad. The importer, consignee, or agent, had to make an entry and state under oath that the entry and invoice stated the actual cost of the goods abroad; if the goods were not invoiced at their actual cost at the place of exportation, with the design of evading any part of the duties, the goods, or the value of them, was forfeited; and if the collector suspected that the goods were invoiced at less than this true cost, he might retain them until an appraisement was made and the duties set according to the appraised value. But in practice this privilege of home appraisal was, for numerous reasons,121 not effective, and the systematic evasion of duties by undervaluation was rank.

"Even when the foreign manufacturer entered his goods at their cost to him, the price was about 16% lower than the prices of similar goods entered by American importers."122 The foreign. merchants could always lay in their goods on better terms than

118 Niles, 18: 300. The Mercantile Society of New York therefore stood for prohibitive taxes on sales at auction without any reduction in the term of customs credits. Annals of Congress, 16th Congress, 2d session, p. 1650.

119 For complete statement of details of methods of collecting revenues, see Annals of Congress, 15th Congress, Ist session, p. 35 ff.

120 Niles, 19: 157.

121 The reasons are given in Annals of Congress, 15th Congress, 1st session, pp. 44-6.

122

Bolles, I, 391; Proceedings, General, Harrisburg Convention, 1827,

PP. 47-51.

American houses having no connection abroad; if sent by the foreign manufacturer himself, the cost price could be quite arbitrarily set for he could consider only the cost of his materials and omit his own labor and industry and his profits and, as the prices realized in the American market bore no necessary relation to the invoice price, he was tempted to invoice the goods at the lowest price which he thought he could get by the custom house.123

But more unscrupulous evasions were practiced, too. As the valuation upon which duties were to be paid were determined in most cases by the person who was to pay the duty, the temptation was strong to undervalue, and evasions were more common after the passage of each law raising the tariff rates. Various devices were used to make fictitious entries.124 The foreign merchant who bought his goods from manufacturers would do so as opportunities were favorable, and often in different parcels, at different places, from several persons, at different prices; obviously when he prepared his own invoice he could set arbitrary prices, for it was quite impossible to trace the true costs.125 If necessary, fictitious sales between principal and agents or partners or friendly traders might be used to create semblance of a true price.126 The goods might be consigned to an American or foreign agent who had no knowledge of the foreign cost. of the goods, except the invoice as sent to him, and who could without perjury enter the goods and take the custom house oath. The danger of conviction for perjury in swearing that a fictitious invoice was true was small any way, for the testimony requisite to maintain a criminal prosecution could very seldom be obtained in this country and the agent or consignee only swore that the invoice produced was the true and only invoice sent to him.

123 Annals of Congress, 15th Congress, Ist session, p. 38; Niles, 27: 290; Bolles, I, 391. It was alleged that two invoices were sometimes used, one with undervaluations to enter by, and another with true valuations to sell by; the true invoice was often sent to a third person, who was agent of the consignor of the goods and who was instructed and authorized to demand the goods from the consignee who made the entry.

124 See a series of instances in "Remarks upon the Auction System," pp. 12-18.

125 Annals of Congress, 15th Congress, 1st session, p. 36-8.

These evasions were much more common in importations on foreign account than on American account. The great reason for this was the greater facilities offered by the agency system. It is likely that the foreign agent also did not feel the direct responsibility for moral rectitude which he would feel in his own country. The agent was also concealed behind the auctioneer, and the rapidity with which the latter transacted business rendered it difficult to detect frauds that would be exploited against the regular trader.127 The auctioneer might or might not be privy to such frauds."

128

The goods which were subject to ad valorem duties were mostly manufactures; the principal articles paying specific duties were iron, hemp, sugar, tea, coffee, wine, spirits, spices, molasses and salt. The evasions of duties by undervaluations applied, of course, only to the former group. Before 1815 the revenues yielded by the specific duty group exceeded those from the ad valorem group; but after 1815 this proportion "was not only suddenly but greatly reversed" and the common explanation. was that the possibility of evading duties and thus lowering the bar to importation stimulated relatively the importation of the ad valorem group.129

In the tariff act of 1832 Congress provided for the home valuation of imports, but this provision was not to go into effect for ten years, and meanwhile it was repealed, and has never since been passed.

OBJECTIONS TO THE AUCTIONS.

Many of the objections to auctions have been stated above. These and others will be summarized here.130

(a) Auctions tended to defeat the American protective policy. They facilitated dumping by foreign manufacturers, made customs credits more advantageous to importers, and abetted the evasion of duties by undervaluation.

127

(b) Auctions hurt certain vested interests, particularly the

Niles, 27: 290; 35: 137.

129 Niles, 34: 259.

120 See argument, Annals of Congress, 15th Congress, 1st session, p. 51. There were many other factors working to this end.

150 See general statements in Niles, 34: 174; 27: 258; New York Assembly Document 53, Vol. 4: 287.

American importing merchants and jobbers, and disturbed the accustomed channels of trade, and diverted a large part of foreign commerce to foreign agents and consignees resident in America.

(c) The auctioneer was less responsible than the merchant and retailer for dishonest practices and frauds, such as short lengths, deficient numbers, defective materials, etc. 131

(d) Auctions tended to concentrate a considerable proportion of the trade in a few hands and draw away the customers of merchants and retailers, and were therefore attacked as "monopolistic." But it was a perverted use of the term, for the ear-marks of monopoly are limitation of supply, higher prices, discriminations, and excessive profits, none of which characterized the auctions. Indeed they tended to make trade more competitive, to break the hold of jobbers and retailers on their customers, and to give open publicity to prices and profits. The concentration of auction sales at fewer places was to the convenience of buyers and very likely intensified competition among buyers. Auction sales made it possible for small local and interior retailers to get a start whom the jobbers refused or hesitated to encourage. The complaint against auctions was that against big business and plutocracy; they were held to be "unjust, by giving to a few, that which ought to be distributed among the mercantile community generally. A single auction house does as much business as would support fifty respectable firms in private trade, each consisting of two partners, maintaining two families, and two or three clerks. The evident tendency of this monopoly is to crush the middle ranks, and to divide the society into the very rich and the poor."132 Evidently the case is exaggerated and the economic doctrine questionable. The only basis for charge of monopoly was that the auctioneers were under license by the State and their number limited and no other persons were allowed to sell in this way133; but as there were every year some auctioneer licenses not taken it is evident that New York was

131 For instances showing the impossibility of holding the auctioneer responsible, see "Remarks upon the Auction System," pp. 27-31, 36-42. For a direct denial of such responsibility and for a strong statement of the auctioneers' honesty and honor, see the "Auctioneers' Memorial" in Annals of Congress, 16th Congress, 2d session, p. 1521.

132 Niles, 34: 258; 19: 130-131; 18: 301.

not suffering from the restriction on the number of auctioneers.134 Nor were good evidences of monopoly the common charges that certain goods could be found only at auctions, that some stores refused to sell certain goods by private treaty but only through auctions where higher prices might be gotten, and that buyers at auction had frequently to buy more than they wanted.135

(e) In proportion to the amounts of goods imported and sold, the agents, consignees and auctioneers did not hire as many houses, stores and clerks and did not, therefore, contribute as much to the public coffers as the generality of resident merchants, jobbers and retailers. So they were alleged to hurt the city and escape their due burden of public expenditure.136 But, on the other hand, the revenue derived by the State of New York from auction taxes constituted one of the principal items in the canal fund—“a revenue which grew out of a business which drew merchants or purchasers from all parts of our widely extended country, which tended directly to enhance the value of houses, stores and lots, multiply the business of the shipper, importer and jobber, and which has filled our city with palaces, and made our merchant princes."137

(f) Auctions tended to concentrate the whole trade of the country in a few large cities, to the extinction of all other wholesale markets. The importers of such places as Richmond, Petersburg, Charleston, Savannah, Augusta, disappeared within a few years.138 Goods bought at auction in seaboard cities were carried by itinerant dealers to interior towns and offered for sale at auction day after day and night after night in some rooms adjoining the local retail stores; such operations tended to disrupt and destroy the local retail trade.139 Some of these interior auctioneers were resident and maintained purchasing agents at the seaboard city.140

134 N. Y. Senate Document 44, (1832), Vol. I, p. 8.

66

185 Remarks upon the Auction System," 34.

180 N. Y. Assembly Journal, 1829, p. 391.

137 Hunt's, 10: 157; New York, Senate Journal, 1823, p. 1035.

139 N. Y. Assembly Document 12 (1832) Vol. I, contains memorial from Ogdensburgh. Rochester petitioned the State Legislature in 1831, but the fact that the total auction taxes paid by that city in 1831 were only $80 is evidence that the evils alleged were exaggerated. N. Y. Assembly Document 151.

140 N. Y. Assembly Document (1831) 151.