He declined to express an opinion on the proposition to tax "sales at auction of goods imported," with a view to increase the revenue. That form of tax was evidently aimed at foreign manufacturers, and intended to impede consignment of their products to this country. He insisted page XV that the scheme of "home valuation" was impracticable. He advised a continuation of ad valorem rates, guarding them "from abuse by additional precautions against fraudulent invoices." He urged, as one reason for increased rates of duty on imports, the necessity of enlarging the then-existing system of national defence. He estimated that the total amount of annual imports into the country for the years 1842, 1843 and 1844, would be about ninety-three millions of dollars. He advised duties on tea and coffee to be limited to three years. The following extracts from the report of Mr. Forward, made nearly half a century ago, are instructive now, by way of showing his appreciation of the relation between ad valorem and specific rates, and the light in which foreign manufacturers sending their goods to this country on consignment were then regarded:

"With a view to guard the revenue against fraudulent undervaluations which cannot be entirely prevented by the existing scheme of ad valorem duties, specific duties are proposed in nearly all cases when practicable. The operation of the system of specific duties may not be perfectly equal in all cases, in respect to the value of the articles included under it. But this inconvenience is more than compensated by the security of the revenue against evasions, and by the tendency of specific duties to exclude worthless and inferior articles, by which purchasers and consumers are often imposed on.

"In assessing ad valorem duties the foreign value of goods imported has been assumed as a basis of the duty. In ascertaining this value by appraisement, it is attempted to place some new guards on the revenue. But it may be worthy of consideration, whether it would not be advisable to adopt a regulation by which the option should be given to the Collector in cases where supposed undervaluation in the invoices exists, to take the goods for the use of the Government on paying the importer for the same at the value mentioned in the invoice, together with an advance of ten per cent, thereon, and the average of costs and charges on the importation of similar goods.

"A material, and indeed a fundamental consideration, which reconciled a large portion of the country to the compromise act, was the home valuation which it promised. This consideration having failed, all parties are at liberty to project such new scheme for the adjustment of duties on imports as the common interest may demand. But in attempting such adjustment, the spirit of concession and forbearance, which should characterize every measure bearing extensively upon various and sometimes conflicting interests, or speaking perhaps with more propriety, in this instance, of conflicting opinions, ought to be observed. In this respect, and this only, can the great principles which entered into the compromise act be substantially carried out.

"The system of cash duties, although a material condition in the arrangement of the compromise act, must now stand upon its own intrinsic merits. In this view alone it is recommended to Congress. The abolition of custom-house credits is a measure sustained by reasons which appear to the Department to be conclusive. In order to appreciate the advantages of a cash system, it may be well to premise that more than one-half of all the imports from Europe, and a considerable page XVI portion of those from other countries, are on foreign account. In some branches of the import business (silks for instance) American merchants have given place almost entirely to foreigners. The causes which have induced this state of things are various, and may not be equally operative. It is believed, however, that among those causes, our credit system may not have been without some influence. But, waiving all discussion of this point at present, the fact that so large an amount of the import business is now in foreign hands, and that the advantages, if any, of the credit system accrue in a great measure to them, is a consideration not to be disregarded. Another consideration of great weight in this matter is the circumstance that the fluctuations and revulsions so frequently experienced in our great marts of foreign commerce, the effects of which have been as often felt throughout the whole country, are to be ascribed to some extent, to the facilities afforded by our system of custom-house credits. They are, for all practical purposes, a loan of money to the amount of the duties, by the Government to the importing merchant. The credit itself becomes a capital in trade, and serves to stimulate and progressively enlarge that portion of the import business which rests wholly on a fictitious basis.

"It may be true that men of small capital, or without any capital at all, would be benefited by obtaining credit from the Government; but it is not less true that the claim to this extraordinary indulgence, if it exist at all, attaches solely to the American merchant, and belongs in on way to foreigners. It is, moreover, worthy of remark, that in a sound condition of the trade when foreign supplies are really called for by the wants of the country, the means of paying the duties are insured by the prospect of a ready market, or may be obtained upon the credit and responsibility of the importer, in the community where he resides. If he does not possess this credit or responsibility among his neighbors, there appears no very good reason why he should be trusted by the Government. The security which he offers in the one case would be equally attainable in the other.

"The system of credits, established in the infancy of our commerce, when there was but little capital in the country, and the import business was on a footing entirely different from what it now is, might have been productive of real advantage. But the state of things which attended its establishment no longer continues. Capital is sufficiently abundant for supplying the country with foreign products, and much of the trade itself has been shifted from American to foreign hands.

"Among the direct advantages expected to-arise from the cash system is its tendency to check overtrading, and to restrain importations within limits indicated by the wants of the country and the probable amount of its exchangable surplus. It needs 110 labored argument or research to prove that the present embarrassment in all our departments of labor and enterprise have arisen very much from overtrading, nor does it require much discussion to show that the spirit of overtrading and reckless adventure has been favored by the system of custom-house credits."

Under this law a question arose, which was decided by the Supreme Court in Greely vs. Thompson (10 How., 225) to the effect that by the laws of 1842 and 1846 the value of merchandise is to be ascertained as of the time of its procurement, and not as of the time of its exportation. The opinion of the Court was delivered at the December Term, 1850. The importation was of railroad-iron, manufactured in Wales, and made ready for shipment to agents in Boston, on January 24th, 1849. The invoice and bill of lading of the iron were dated February 24th, 1849. The invoice value of the iron was five pounds per ton. That was proved to be the fair market price on January 24th, 1849, when the merchandise was procured and ready for shipment. The Treasury Department instructed the appraisers that the valuation should be as of February 24th, 1849, the date of shipment, and thereupon the appraisers fixed the value at live pounds fifteen shillings per ton, which was more than ten per cent, above the invoice value, and a penal duty was exacted, which was paid under protest and a suit brought to recover the difference, as well as the penal duty. It was also proved on the trial that, during the month that intervened between the procurement and shipment of the iron, one of those extraordinary fluctuations in prices took place by which similar iron rose in value nearly twenty per cent. The Court decided that, according to the laws in force at the time the importation was made, the penalty of twenty per cent, only applied to purchased goods, and did not apply to goods consigned by a manufacturer, and therefore a penalty could not be levied on this importation. In giving these reasons for the decision that the date of procurement, and not the date of exportation, was the time when the appraisers must fix dutiable value, the Court said:

"Indeed, it would seem reasonable, independent of the express language of the acts of Congress, that if uncertainty remained about the true construction of the fifth section of the act of 1823, the proper time for fixing the value of goods should be considered the time they were purchased or procured, because the idea of having the value and charges fixed, and assessing the duty on them, is to tax the importer on the amount, or value, he has expended. And what he has expended cannot be more than he has thus paid: and the invoice itself, often prepared in the interior, days and weeks before the vessel sails, states the price, or value, asthen made up, and not at the time of the bill of lading, when the market value may be higher or lower. We do not find that the value at the time of exportation of goods of the growth or manufacture of the country whence exported, has ever been selected by any act of Congress for purposes of assessing the duty. * * * The value on which to tax the importer is the capital, or price, he has invested in the goods, and which is prima facie the amount paid if purchased, or the amount for which they were procured if not purchased."

1856.—In 1856, Congress not having amended the law levying penal duty, which law had been decided by the Supreme Court as not applicable to merchandise consigned by the manufacturer, my predecessor, Mr. Guthrie, on July 22d, 1856, urged the amendment upon Congress. In his letter of that date he said:

"As the law now stands, therefore, upon the construction which the Courts appear to be trying to give to it, the foreign manufacturer, or producer, is not subject to an additional duty for undervaluation. The importer who purchases in the foreign market and imports into the United States is. The foreign manufacturer, or producer, in any experiments he may choose to try upon the public revenue by undervalued invoices, runs no risk of additional duty, to which his competitor, the American merchant, who purchased the imports abroad, is exposed. This discrimination against the domestic importer in favor of the foreign is as impolitic as it is unjust. Foreign manufacturers, or producers, by establishing partners or agents in this country, importing and entering imports on their own account, and then making sales in pursuance of orders previous or subsequent to the entry, can thus supply our markets with their own products without being subjected to any adequate check against undervaluation. For, while they are not subject to the additional duty in such cases, to which the domestic importer is liable, nor, indeed, to any additional duty, upon the construction of the law which seems to be favored by the Courts, they could be reached only by forfeiture of their goods in cases in which the badge of fraud was so clear that the United States would have no difficulty in showing that fact."