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act of 1799, in respect to the storage of goods, if I am
not mistaken, remained in force. I also desire to say that
I have not overlooked the partial provision in the act of
1832, requiring duties on woollens to be paid in cash, or,
if stored, exacting interest on the duties.

The introduction of cash payments for duties, though I



112 SPEECHES IN THE SENATE.

believe it is generally conceded to have operated favorably as
far as the Government is concerned, so much so that few,
if any, are desirous of disturbing it, at least by reinstating
the old system of credits, bears heavily on the mercantile
interest in comparison with the latter. The forbearance
of payment by the Government was, in practice, equivalent
to a cash capital for the merchant to the amount of the
duties during the time for which the credit or forbearance
of payment was granted. It was, unquestionably, a valu-
able mercantile facility for those who had the benefit of it,
and the discretion to employ it judiciously. But it had its
public inconveniences, and it was very properly abolished.
It was, however, foreseen and foretold at the time the
change was made, that great hardship would be likely to
result from it, unless provision was made for storing goods
for a limited period, and forbearing during that period to
exact the payment of the duties. But it is a singular fact,
and one which is not easily to be accounted for on any prin-
ciple of public utility or convenience, that, when the extraor-
dinary and violent transition took place from credits to cash
payments, the maximum time during which nierchandise was
allowed to remain in store, before a sale to realize the du-
ties, instead of being enlarged, as one would suppose it
should have been, or at least continued as it then existed,
was actually reduced, as has been seen, from nine months
to one third of that period, and for most merchandise to a
still shorter time. The change took place, too, at the very
moment when the rates of duty were enormously increased
on a large class of imports from twenty per cent., the
maximum under the Compromise act of 1833. The strin-
gent measure of cash payment was rendered more stringent
by a simultaneous increase of the rates of duty, and by
depriving the importer, to a great extent, of the facility of
placing his goods in store, if the importation should find
him unprepared to pay the duties in cash. This privilege,
which, under the system of credits, was of no great prac-



THE WAREHOUSE SYSTEM. 113

tical benefit in extensive operations, would, under the system
of cash payments, have been a facility of considerable value
to importers of moderate means, and would have enabled
them to contend, in a limited field at least, with large cap-
italists, who, if general opinion be true, have now engrossed,
in a great measure, the business of importation, and will
continue to do so, under existing laws, from their ability to
furnish readily the means of meeting the payment of duties
in cash on large cargoes. Still, if the time allowed for mer-
chandise to remain in store under the act of 1799 had not
been diminished, it would have been too limited to accom-
plish all the objects anticipated from a warehousing system,
especially so far as such a system may lead to the storage
of goods for exportation.

I will now state wherein the bill before the Senate pro-
poses to amend existing laws, pointing out as I proceed
in what respects it will change the practical operation of
the present system ; and I shall conclude by a brief sum-
mary of the advantages expected to result from it. I have
already said that the bill is, with the exception of a few
amendments, a transcript of the 12th and 13th sections of
the act of 30th August, 1842; and in stating and explaining
the amendments, I shall cover all the ground which is new.

The first amendment proposed is, to allow goods to
remain in store for a period not less than two, nor more
than three years, as Congress may determine, instead of
sixty and ninety days, with the privilege of withdrawing
them at any time during that period on the payment of
duties and charges. This amendment embraces two new
provisions: 1st, an extension of the time during which
goods are permitted to remain in store; and, 2d, a remis-
sion of the interest now exacted on the duties from the date
of the entry to the time of withdrawing from the public
stores the merchandise on which they are charged. These
provisions are so distinct in character that it will be neces-
sary to consider them separately.

15



Il4f SPEECHES IN THE SENATE.

1. As to the extension of time. — The Senate will per-
ceive that the number of years during' which the hill pro-
poses to allow goods to remain in store is left in blank.
I will, at a proper time, move to fill the blank with three
years, though I am not authorized to say that I shall be
sustained in this motion by the judgment of the committee.
There are, in my view of the subject, some strong consid-
erations in favor of selecting that period of time. It is the
period fixed by the British system, which has been in suc-
cessful operation for more than forty years ; and it may be
reasonably supposed that, after so full a trial, it has been
selected from considerations of its convenience for commer-
cial purposes. But it is not for this reason alone. The term
of three years is the period during which imported goods
may, under existing laws, be entered for exportation with
the privilege of drawback ; and the term thus fixed in one
case would seem to indicate a proper limitation in the other ;
especially as storing goods for exportation will, in all proba-
bility, become a very important and extensive branch of
business, if this bill should become a law. Should the Sen-
ate be of the opinion that the term of three years is too
long, and that a shorter period is dictated by any urgent
considerations of public convenience or utility, I can only
say that I shall submit cheerfully to its better judgment,
but with the strong hope that a less time than two years
will not be thought of, as I am fully persuaded that it is
the least which would be sufficient to accomplish effectually
the objects in view. Commercial and financial reactions are
not supposed ordinarily to run their course in much less
time ; and if that period is allowed for goods to remain
in store, the owner will be able to avoid the inconvenience
and loss on the one hand of reexporting them unnecessarily,
and, on the other, the sacrifice of throwing them upon the
domestic market when the demand is limited, or the abil-
ity to purchase impaired by derangements in the pecuniary
or mercantile transactions of the country.



THE WAREHOUSE SYSTEM. 115

Q. As to the remission of the interest. — Interest is now
exacted on the duties from the date of the entry of the
merchandise on which they are charged to the time when
tlie duties are paid. The proposed amendment proceeds
upon tlie principle of requiring- the owner or importer of
foreign merchandise to pay the impost when the merchandise
is wanted for consumption. If he pays the duties on the
entry, and is compelled to keep the goods on hand because
he cannot sell them advantageously or without loss, the gov-
ernment has the use of the money paid for the duties,
though the merchandise has not been used for the benefit
of the owner, while the latter is also paying or losing in-
terest on the amount of the duties he has advanced to the
government. In like manner, if a merchant imports goods,
pays duties on the entry, and is compelled to keep the
goods on hand, they become constantly enhanced in cost,
not only by an accumulation of interest on the purchase-
money, but of interest on the duties. Cases of this descrip-
tion are undoubtedly of frequent occurrence ; and I advert
to them for the purpose of showing the injustice, the illib-
erality, not only of exacting the payment of duties before
the merchandise on which they are chargeable is required
for consumption, or before the importer can make any ad-
vantageous use of it, but of exacting interest on the duties
also. The government, by so doing, derives a profit from
the merchant without any corresponding benefit to the latter.
Under the system of credits, coeval with the foundation of
the government, the merchant was allowed to take his goods
into his own possession, by giving security for the payment
of the duties, without interest, at a future day ; and during
the period allowed for the credit to run he could always
dispose at least of a sufficient amount of the goods to meet
the payment of his bonds. It was, as I have already said,
a most valuable pecuniary facility to the mercantile commu-
nity, though having an inherent tendency to run into excess,
and to stimulate and extend injuriously the operations of



116 SPEECHES IN THE SENATE.

business. The remission of interest on the duties, from the
entry of goods to the time when the duties are paid, does
not, strictly speaking, extend a facility to the importer or
merchant. It merely abstains from imposing a burden, —
from exacting what is unreasonable and unjust, — a profit
to the government without any corresponding advantage
to him. It allows him to take his goods from the public
stores when he wants them, by paying the charges of stor-
age, &c., and the duties, without exacting interest on the
latter for the period the goods have been in store. The
principle seems so obviously just that I will not pursue the
argument further.

It may be proper to add, however, that the system of
cash payments proceeds upon the principle of requiring
the importer to pay the duties when the merchandise goes
into his possession ; and this is the only material point in
which it differs from the old system of credits. The non-
exaction of interest on the duties does not affect this prin-
ciple. Imported goods, as long as they are deposited in
store, are a security to the government for the payment
of the duties chargeable on them. The payment of the im-
post is exacted when the goods are withdrawn, and go into
the importer's possession; and thus the great principle on
which the system of cash payments proceeds is preserved
inviolate.

The observations I have made are confined to the policy
of extending the period of time during which goods are
allowed to remain in the public stores, without calling for
the payment of duties, and of allowing them to be with-
drawn for consumption, or domestic use, on paying the
charges and the duties without interest. These points em-
brace the whole of the first proposed amendment.

I proceed now to the second amendment, which is to
allow goods at any time during the period limited for keep-
ing them in store to be taken out for reexportation on the
payment of all charges. This amendment is a substitute for



THE WAREHOUSE SYSTEM. HJ

that part of the existing revenue system which exacts two
and a half per cent, on the amount of the duties paid by the
owner of the merchandise when he imports it, and refunded
to liim when it is reexported. The government, in other
words, in refunding the duties to the importer, retains two
and a half per cent, of the amount for its own use. The
amount retained was originally one per cent., as may be seen
by a reference to section thirty-one of the act of 31st July,

1789, and section fifty-seven of the act of the 4th August,

1790. An addition of one quarter per cent, was made by
the act of March 19, 1798, as a substitute for certain stamp-
duties on debentures, which were repealed by the same act ;
and by the act of 30th May, 1800, an addition of two and a
half per cent, was made for the same purpose ; so that the
amount retained was at one time three and three quarters
per cent. But these provisions were all superseded by the
tariff" act of 1816, which reduced the deduction to two and
a half per cent. In 1829 all deduction was abandoned;
and from that time until 1842, the whole amount of the
duties paid on the importation of foreign merchandise was
refunded on its exportation. But now, by the 15th section
of the act of SOth August, 1842, the amount of the deduc-
tion is fixed at two and a half per cent., except in the
reexportation of foreign refined sugars, in which case the
amount retained is ten per cent, on the duties paid. The
amount thus deducted by the United States in paying back
the duties received on foreign merchandise in case of its
reexportation was originally, as is perceived, very small (but
one per cent.); and the two second acts to which I have
referred — adding two per cent, and three quarters to the
amount as a substitute for stamp-duties on debentures —
show that the object was to indemnify the government for
the inconvenience and expense to which it was subjected.
But the object is directly or indirectly shown by all the early
laws as well as the early reports in respect to the revenue
system.



118 SPEECHES IN THE SENATE.

Under existing laws there is no very perceptible want of
equity in this exaction, for the reason that it does not take
the form of a direct payment to the government. But
under the proposed bill, and with the extension of the
period allowed for keeping goods in store, the exaction of
a payment equal to the same proportion of the amount of
duties chargeable on them in all cases, without reference to
the time during which the goods have been stored, would be
illiberal and impolitic. The exaction was not designed as a
source of revenue to the government, much less as a dis-
couragement to the reexportation of imported goods. Its
purpose was what I have stated, to indemnify the govern-
ment for the inconvenience and expense of administering the
system of debentures. Under any other view of the subject
it could only be considered as an unreasonable imposition on
commerce, and especially that branch of commerce in which
the country is so deeply concerned — the carrying trade.

The bill under consideration proposes to lay aside this
exaction entirely, returning to the more liberal provisions of
former laws ; and, as a substitute for it, to require only the
payment of the actual charges and expenses incurred while
the goods are stored. By this j)rovision, the interest of the
government will be fully protected, and the charges paid by
the importer will bear a just proportion to the time he has
enjoyed the benefit of the legal provision under which his
goods have been held in store. Under the proposed system,
the exaction, if it were continued, would become a mere
premium paid to the government for the privilege of export-
ing foreign merchandise for which there was no demand at
home.

If the exaction were, as it now is, in the shape of a deduc-
tion by the government from duties actually paid, its true
character would be less apparent than when the exaction
takes the form of an actual payment by the importer on an
estimated amount of duties which the government has never
received. The last case would always occur under the pro-



THE WAREHOUSE SYSTEM. Hg

posed system, if it should be adopted, as the goods would lie
in store without any payment of duties; and, in case of reex-
portation, it would be necessary to assume as a basis the
amount of the duties which the merchandise would have
paid if it had been entered for domestic consumption, and to
exact from the owner the payment of a given proportion of
that amount as a charge for the privilege of reexporting it.
Such a charge is deemed an illiberal imposition on com-
merce ; and the bill therefore proposes to allow merchan-
dise, during the time it is permitted to remain in store, to be
withdrawn for exportation, under the existing legal provis-
ions in respect to drawbacks, upon a payment of actual
expenses, including the customary charge for storage.

The third amendment is one on which only a single
remark is necessary. The 12th section of the act of 1842
provides for a sale of such quantities of the goods deposited
in store as shall be necessary to pay the duties, and directs
the goods unsold to be restored ; and if unclaimed for nine
months, they are liable to be sold for storage, under section
thirteen of the same act, after the expiration of that period.
The proposed amendment, for obvious reasons, contemplates
one sale of all the goods at the expiration of the period
allowed for keeping them in store, and adopts the require-
ments of section thirteen in respect to the formalities of the
sale, and the payment of the surplus of the proceeds into the
treasury of the United States for the use of the owner.
The propriety of making a final disposition by sale of all
goods which have been stored for the term of two or three
years, in case this period shall be fixed, is too manifest to
need illustration.

Another provision, which is entirely new, requires a pass-
ing notice. Perishable goods are required to be sold forth-
with, as under existing laws ; but with them are classed, for
the purpose of an immediate sale, gunpowder, fire-crackers,
and explosive substances. The danger in large cities from
the accunmlation of such substances, especially when depos-



120 SPEECHES IN THE SENATE.

ited in the same stores with property of great value, is
of such a nature as to demand some effectual preventive.
They are not imported in large quantities; and there will be
noindividual hardship, in the few instances in which a com-
pulsory sale is likely to take place, at all comparable with
the risk which would be incurred by the public in admitting
them to the benefit of the warehouse system.

I believe I have now stated the general provisions of the
proposed bill, and pointed out the amendments it makes in
existing laws. They may be briefly summed up thus : —

1. Merchandise may be deposited, and remain in store two
or three years, instead of sixty or ninety days, before selling
it for the purpose of realizing the duties.

2. Merchandise may be withdrawn from store, at any
time during the two or three years, for domestic use or
consumption, on the payment of charges and duties, without
exacting interest on the latter from the date of the entry.

8. Merchandise may be entered for exportation at any
time during the two or three years, on the payment of actual
charges and expenses.

These are the leading provisions of the bill. It has been
a ruling consideration in framing it to divest it of all com-
plexity. It has been thought proper to put it in the most
simple form possible, and to rely mainly for carrying into
effect the new provisions it contains on regulations to be
framed by the Treasury Department. These may be accom-
modated to unforeseen circumstances, and exigencies may
thus be met which might be without a remedy for a time, if
all the details of the plan were at the outset to be regulated
by legal enactments. The Secretary of the Treasury is,
therefore, authorized to make such regulations, not inconsist-
ent with the laws of the United States, as may be necessary
to give full effect to the provisions of the act. As the plan
is tried, and its defects or its benefits become fully disclosed,
the details may be all placed upon the permanent footing of
legal regulation. It is believed that the course suggested



THE WAREHOUSE SYSTEM. 121

will be deemed reconcilable with the most scrupulous con-
siderations of prudence, when it is remembered that there is
little in the plan which is absolutely new, or which may not
be accomplished by a mere extension or a broader apphcation
of existing provisions of law.

I shall now detain the Senate but a moment, in stating
some of the principal benefits anticipated from the changes
proposed in the existing revenue system.

The first and greatest benefit to the commercial interest is
the relief it will afford from the present system of exacting
the payment of duties in cash, on the completion of the entry
of merchandise. In one sense it may be contended, when
compared with the present system, that it is an extension of
a credit to the importer for the duties until he can effect a
sale of his goods. Strictly speaking, it is but abstaining
from an unreasonable exaction ; and it is divested of all risk
to the public, as the goods will never be permitted to go into
the possession of the owner until the duties are paid. It
will relieve him from the great hardship, which is common
under the present system, of being forced to sell a portion
of his goods, and sometimes in an overstocked market, for
the purpose of raising the money to pay the duties. It will
enable him to pay the duties as he has the opportunity of
disposing of his goods for consumption, instead of being
compelled to borrow money, or sell his merchandise at a loss,
to raise it ; and it will enable men of moderate means to
enter into competition with large capitalists, who, as I have
already said, monopolize to a great extent the business of
importation, through their ability to command money to
meet the payment of duties in cash. The proposed change
is entirely consistent with the principle and the object of cash
payments ; and by preventing forced sales of goods to raise
money for the payment of duties, it will often avoid an over-
stock of the domestic market with foreign merchandise, to
the prejudice of the importer, by compelling him to sacrifice
his property, and of the producer of domestic goods of like

16



122 SPEECHES IN THE SENATE.

character, by depressing prices. If we consider also that it
will be likely to enlarge the circle of competition in the busi-
ness of importation, — not to augment the aggregate amount
of imports for consumption, but to divide it among a greater
number of persons, — it will not be difficult to perceive that
the mercantile interest must be greatly benefited by the
change.

The second benefit, though perhaps not second in impor-
tance, to be anticipated from the proposed measure, is the
stimulus it will be likely to give to the carrying trade, by
making our ports of entry entrepots for the productions of
all countries. Under the present system, if imported mer-
chandise is entered for exportation, the duties are not
refunded until after the exportation has actually taken place.
Thus, if an importer, having brought merchandise into the
country for the domestic market, and having paid the duties,
finds at the end of one, two, or three years no demand for
it at home, and is compelled to reexport it, he will have lost
during that period the use of the money he has paid for the
duties, and he is taxed in addition two and a half per cent,
on the whole amount so paid as a ])remium to the govern-
ment for the privilege of sending his goods to a foreign
market. No better scheme could be devised either to glut
the domestic market by forcing the importer to throw his
merchandise into it at any price it will command, or, on the
other, to discourage navigation by taxing the reexportation
of foreign merchandise which is not wanted at home.
Under the proposed plan, foreign merchandise will be
allowed to be freely deposited in store, and to be reex-
ported as freely, with no other imposition than the pay-
ment of actual expenses of storage, &c. One of the certain
consequences of such a system must be to accumulate in
our maritime toA\ais a variety of the products of other
countries, where our vessels can make up assorted cargoes
for foreign markets. This facility has led to the deposit
in British ports of merchandise designed for reshipment to



THE WAREHOUSE SYSTEM. I03

the southern portions of this continent, and, indeed, to all
quarters of the globe. The value of foreign merchandise
deposited in the warehouses of Great Britain is estimated
at two hundred and fifty millions of dollars. The proposed
plan would have the same result here, if like effects are to
be expected from like causes. The deposit of even a con-
siderable portion of such a quantity in value, made up, as
much of it doubtless would be, of goods suitable to the
South American and Pacific markets, could not fail to
benefit and extend our navigating interest, — one of the
most valuable in peace, and the most important of all others
to so commercial a community as the United States as a
means of defence in war. That our carrying trade would
be vastly increased ; that shipbuilding would be stimulated;
that many foreign markets would be supplied, wholly or in
part, by us with merchandise now furnished from the ware-
houses of Europe ; that the industry of our seaports would
be put in greater activity ; that the commercial transactions
of the country would be facilitated ; and that a healthier



Online LibraryJohn A. (John Adams) DixSpeeches and occasional addresses (Volume 1) → online text (page 11 of 40)