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 Ameri

can 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 unable 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.

There appears to be but one effectual remedy for these difficulties, and that is the substitution of specific for ad-valorem duties, both as to silks and gloves.

In this connection attention is called to a provision of the British customs laws, in existence at the time when ad-valorem duties were collected in Great Britain, under which merchandise alleged to be undervalued was taken possession of by the customs officers, and the value as stated in the invoice, with 5 per cent. addition, was paid to the importer as a full equivalent for his goods. A law of this kind on our statute-books would have a wholesome effect upon foreign manufacturers.

CHARGES AND COMMISSION CASES.

An examination of the claims known as the charges and commission cases was begun during the year, and is not yet completed. Facts were developed, however, prior to the close of the last session of Congress, sufficient to show that a great number of these claims were based upon fraudulent protests; and upon being advised of these facts the Committee on Appropriations declined to make the necessary appropriations to pay ten of the claims which were at that time adjusted, amounting to $42,201 71. An appropriation of $350 only was made to pay the amount of one claim, which was found to be based upon a genuine protest. It is estimated by the officers who have examined these claims that the sum of $800,000 has been paid since 1866, to authorized attorneys of importers in cases upon which no legal protests had been made. The papers in five hundred and fifty-three of the six hundred and fifty suits still pending have been examined, and of that

number five hundred and thirty-three are pronounced invalid, for want of legal protests. To state the exact amount involved in these cases would necessitate the computation of the duties paid on the charges and commissions, and the interest thereon, in each invoice and entry. This can only be done by the employment of a large clerical force. An estimate based upon the average amount paid upon the cases heretofore settled, however, indicates that the saving to the Government by the investigation of these cases will be more than a million of dollars.

SUGAR FRAUDS.

Investigations of alleged frauds in the importation and exportation of sugar, begun before the close of the fiscal year, are still in progress. Such frauds are believed to have been perpetrated-1st, by artificial coloring to reduce the rate of duty; 2d, by false weights; 3d, by improper sampling and classification; and 4th, by fraudulent claims for drawback on adulterated sugars.

Several cargoes of sugar alleged to be artificially colored have been seized and suits for their condemnation are still pending.

Very respectfully,

Hon. JOHN SHERMAN,

Secretary of the Treasury.

A. K. TINGLE, Supervising Special Agent.

PAPERS

ACCOMPANYING

REPORT OF THE SECRETARY OF THE TREASURY.

REPORT OF THE COMMISSIONER OF INTERNAL REVENUE.

TREASURY DEPARTMENT,

OFFICE OF INTERNAL REVENUE,

Washington, November 25, 1878.

SIR: I have the honor to submit the report of the Bureau of Internal Revenue for the fiscal year ended June 30, 1878, accompanied by additional facts and figures bringing down the operations of this branch of the public service as nearly as possible to the present date. It affords me gratification to note that the heavy falling off in the receipts from internal revenue taxation which marked the closing months of the past fiscal year has ceased, and that the receipts for the current fiscal year have thus far shown an increase.

I am glad to be able to report that in a majority of the States the internal revenue laws have been enforced without serious difficulty or obstruction. There has been a commendable spirit exhibited on the part of manufacturers and dealers to observe the law, and it is believed that the tax on distilled spirits is now being collected with fewer frauds and less loss to the government than at any time since the establishment of the internal revenue system. Collectors and their subordinate officers have manifested praiseworthy zeal in the enforcement of the laws, and are entitled to the commendation of the government for their integrity and fidelity to duty. In the majority of districts prosecutions for violations of the internal revenue laws have been reduced to a minimum, in consequence of the steady enforcement of the laws and a state of public opinion favorable to their observance and enforcement. In other districts, however, it has been found necessary greatly to multiply prosecutions for violations of internal revenue laws and to institute vigorous and systematic efforts for the suppression of frauds.

RESISTANCE TO LAW.

It is with extreme regret I find it my duty to report the great difficulties that have been and still are encountered in many of the Southern States in the enforcement of the laws. In the mountain regions of West Virginia, Virginia, Kentucky, Tennessee, North Carolina, South Carolina, Georgia, and Alabama, and in some portions of Missouri, Arkansas, and Texas, the illicit manufacture of spirits has been carried on for a number of years, and I am satisfied that the annual loss to the goverument from this source has been very nearly if not quite equal to the annual appropriation for the collection of the internal revenue tax throughout the whole country. In the regions of country named there are known to exist about five thousand copper stills, many of which at certain times are lawfully used in the production of brandy from apples and peaches,

but I am convinced that a large portion of these stills have been and are used in the illicit manufacture of spirits. Part of the spirits thus produced has been consumed in the immediate neighborhood; the balance has been distributed and sold throughout the adjacent districts. This nefarious business has been carried on, as a rule, by a determined set of men, who in their various neighborhoods league together for defense against the officers of the law, and at a given signal are ready to come together with arms in their hands to drive the officers of internal revenue out of the country..

As illustrating the extraordinary resistance which the officers have had on some occasions to encounter I refer to occurrences in Overton County, Tennessee, in August last, where a posse of eleven internal revenue officers, who had stopped at a farmer's house for the night, were attacked by a band of armed illicit distillers, who kept up a constant fusillade during the whole night, and whose force was augmented during the following day till it numbered nearly two hundred men. The officers took shelter in a log house, which served them as a fort, returning the fire as best they could, and were there besieged for forty-two hours, three of their party being shot-one through the body, one through the arm, and one in the face. I directed a strong force to go to their relief, but in the mean time, through the intervention of citizens, the besieged officers were permitted to retire, taking their wounded with them, and without surrendering their arms.

So formidable has been the resistance to the enforcement of the laws that in the districts of fifth Virginia, sixth North Carolina, South Carolina, second and fifth Tennessee, second West Virginia, Arkansas, and Kentucky, I have found it necessary to supply the collectors with breechloading carbines. In these districts, and also in the States of Georgia, Alabama, Mississippi, in the fourth district of North Carolina, and in the second and fifth districts of Missouri, I have authorized the organization of posses ranging from five to sixty in number, to aid in making seizures and arrests, the object being to have a force sufficiently strong to deter resistance if possible, and, if need be, to overcome it.

SYMPATHY OF CITIZENS AND STATE OFFICERS WITH VIOLATORS OF LAW.

In some of the districts where illicit distilling was carried on to any great extent leading citizens were either directly interested in the business, or else were in active sympathy with the distillers, and the offcers of the law have usually received but little aid or encouragement from the people in their efforts for the collection of the revenue and the arrest and punishment of offenders. This state of things has been extremely discouraging, and added to it is the fact that in some cases State officers, including judges on the bench, have sided with the illicit distillers and have encouraged the use of the State courts for the prosecution of the officers of the United States upon all sorts of charges, with the evident purpose of obstructing the enforcement of the laws of the United States. The illicit distillers have on numerous occasions fired upon our officers. A table in another part of this report shows in detail the loss in killed and wounded that the service has sustained since my last report. I regret to have to record the fact that when the officers of the United States have been shot down from ambuscade, in cold blood, as a rule no efforts have been made on the part of the State officers to arrest the murderers; but in cases where the officers of the United States have been engaged in the enforcement of the laws, and have unfortunately come in conflict with the violators of the law, and homicides have