Part 65

The locomotives, freight cars, cabooses, passenger cars, track, and other equipment were precision-made scale models of larger railroad equipment. They were all made to a standard “HO” scale of 3.5 millimeters to one foot. The trains were designed to run at the scale speed, which meant that at maximum speed they would travel 60 feet a minute. At that speed, they would simulate the operation of a full-size train.

All of the equipment was manufactured according to the strictest standards set up by the National Model Railroad Association. This Association has been described as “an organization of adult model railroad hobbyists founded in 1935 to make and promulgate standards for wheels, flanges, rails, switches, and other working parts of model railroads, with the purpose of achieving interchangeability of equipment from different manufacturers.”

The examiner who inspected the imported miniatures classified them as “toys”--and as such subject to duty of 50 per cent of their value. In the Tariff Act of 1930, Congress had described a toy as “an article chiefly used for the amusement of children, whether or not also suitable for physical exercise or for mental development.”

The ruling brought a pained cry from miniature railroad hobbyists across the country.

Toys, indeed! The hobbyists were outraged that this import should be put in the same category with playthings and that anyone should have the affrontery to think that such railroad equipment--even though Lilliputian in size--could be put together, and operated, by a mere child.

When the Collector at the Port of New York supported the ruling of the appraiser that the miniature railroad equipment should be classed as toys, the ruling was appealed to the U.S. Court of Customs. And when the case came to trial the importer had behind him ranks of witnesses from all walks of life ready to dispute the government’s description of the equipment: dentists, technical consultants, salesmen in various lines of business, doctors, lawyers, editors, publishers, and writers.

One after another, the witnesses took the witness chair to deride this nonsense that the miniature trains were made “for the amusement of children.” They gave technical testimony on the operation of these miniatures to prove that no child could be trusted with them and in fact could not operate them.

To prove this point one witness testified, “It requires a knowledge of electricity and requires a thorough understanding of how the trains operate. For example, our accessories all operate on alternating current; our trains run on direct current. It is necessary to know the two types of current which our power-packs provide to connect up the wires correctly. In the case of the alternating current, they have two leads; one would be a common terminal, connecting all the different accessories and switches, and another would be a specific one which would go to each individual switch.... The locomotive can also be operated from an overhead wire with pantographs they have located on the roof. This makes it possible to operate two trains on the same track under independent control. To do this, it is necessary to set up a catenary system, which is an overhead wire system, such as the Pennsylvania and New Haven Railroad use in this area. This, naturally, requires wiring.”

The importer insisted that the miniatures should not be classified as toys but should be classified as electrical equipment subject to a lower rate of duty.

Under this barrage of expert testimony from adults who play with small trains, the court overruled the Collector. The court held that the model railroad sets were not “toys,” because they were used chiefly by adults or by grown-up children and that they “do not come within the legal meaning of the word toy.”

In years past, Customs officials tried to establish a detailed classification system in which the examiner could refer to a given page in a book and quickly come up with the answer as to classification and duty of any item. But the system broke down under the weight of a vast number of new products arriving on the market. Discussing this effort a Customs Bureau official said: “On tariff classification, a number of people, who call up and ask for rates, think there is a detailed, logical breakdown and that we just thumb through a book and come up with an answer. To someone who hasn’t worked with classification, that seems like the way to do it. That is the way the old-timers used to try to classify. They used to try to set up categories with a place for everything, and everything in its place. But every time anyone set up one of these classification systems, along would come some new item which didn’t fit anywhere. So the present tendency in classification systems is to set up a specific category for the more important items, and then to set up what might be called a basket category to catch everything else.”

The impossibility of achieving an easy index for classifying imports was illustrated in recent years when a machine arrived from Europe described by the importer as “printing machinery.”

The machine had the equivalent of a type font but, instead of type, the font contained pictures of type on a transparent plate. The type-setter, using a keyboard similar to that on a linotype machine, punched out sentences on a roll of perforated tape. Then the tape was fed into the machine, and as each perforation passed an electronic control, a transparent plate bearing the image of a letter dropped into place to be photographed by a high-speed camera. In this way a full sentence was formed with photographed characters. This process was continued, letter by letter, until a column of “type” was set up on a film. Then the film was developed and, by a photoengraving process, was reproduced on a metal plate ready for printing on paper. In all the process there was no actual type used.

Customs was baffled by this one. Was the machine to be classed as photographic equipment, printing equipment or as typesetting machinery? It did not set type. It did not actually print. And it was more than a mere camera. The Bureau decided this was a case in which the court should hear all the arguments and make a decision--and a decision has yet to be made.

When Congress passed the 1930 Tariff Act there were roughly 700 categories of imports. Since that time--with the adoption of the Reciprocal Trade Agreement Act--the number of categories has been increased by the thousands. Most of the increases were in categories created to help foreign countries expand their trade in the United States. The duty on a comparatively few imports has been revised upward as a measure of protecting some of the American industries from lower-cost foreign competition. In the vast majority of cases the revisions have been downward, following the trend toward removing tariff barriers by international agreement.

In arriving at the dutiable value of an import, Customs officials are bound by the Tariff Act, which lays down the rules under which they calculate the true value of an article. This system of appraisal is complex and varies from category to category. Congress has proclaimed that duty on certain items shall be fixed on the foreign value--that is, the selling price in the country of production. Some items are appraised on their export value--the price which the exporter pays for them. Others are valued on their United States value, which means the price at which the exporter sells them in the United States. Some appraisals are based on cost of production.

Duties based on the American selling price are designed solely to protect certain American industries from foreign competition. Among the leading industries receiving this protection are the rubber and coal-tar dye industries. For example, an importer may be able to purchase a pound of coal-tar dye in Switzerland for $2. But if that dye is competitive with a dye of a similar shade produced in the United States, then the import will be appraised at $5 a pound, notwithstanding the fact that the importer paid the Swiss manufacturer only $2 a pound for the product.

However, most appraisements are made on the basis of export value, the price charged by the manufacturer or the seller in the foreign country.

The imports brought to the Appraiser’s Stores for examination form a cross section of the commercial treasures of the world and they are unbelievably varied. The examiners--trained by years of study and on-the-job experience--have become experts in appraising the quality and the value of a staggering number of imports. Whether the import is wool, cotton, silk, sugar, hog bristles, furs, diamonds, ore, chemicals, exotic foods, or an antique table, there is someone with a background of knowledge on the subject.

One of the largest single sources of Customs revenue continues over the years to be duties collected on raw wool which has not yet been processed for manufacturing. The wool examiner is one of the most highly trained of the specialists within the Bureau. He must be--because the Tariff Act of 1930 requires him to be able to identify by type thirty different wools from all parts of the world, in addition to being able to determine whether a shipment of hair is from the Angora rabbit, the Cashmere goat, the Bactrian camel of Central Asia, or the llama and vicuna of South America.

The Bureau has found that the only way to obtain these specialists is to recruit young men who are interested in this field of work, and to train them under the guidance of experienced examiners. The recruits must spend hours with books outside their regular work hours, in addition to attending technical training schools and visiting manufacturing and processing plants throughout the United States.

As far as the Tariff Act is concerned, the term “wool” includes not only the fleece from sheep, but the fiber from other animals. This is why the examiner must be able to distinguish Cashmere goat hair from the hair of the Angora goat raised in the southwestern part of the United States; and to learn the subtle differences between two grades of coarse hairs as well as the variations between the finest of fleeces.

Wool is graded by numbers, starting with 36 for the coarsest and moving through the 70s to the very finest. A miscalculation in the grading can deprive the Treasury of revenues--or cause an injustice to an importer.

For years, examinations of wool were conducted on the piers by taking samples from the ends of the highly compressed bales, which were covered with burlap and bound by steel bands. The examiner had no way of knowing--except to have a bale of fleece opened--whether or not the outer fleece concealed a higher grade of wool in the center of the bale. In some isolated cases, examiners found that a coarse grade of carpet wool concealed extremely high-grade wool. Contraband such as narcotics also was found hidden inside suspect bales.

Perhaps of even greater importance, the examiner had no reliable method of determining the amount of dirt, vegetable fiber, grease and other foreign matter contained throughout the bale--and the duties were supposed to be assessed only on the “clean content” of the wool.

This haphazard method of examination drew the fire of Congress in 1930. To correct the situation, the Customs Bureau established the post of Wool Administrator in New York City. It was his job to coordinate the examinations throughout the country and to establish more uniform practices. Daniel J. Kelly was named Administrator, with three assistants--Morris Shuster in Philadelphia, Al Kelleher in Boston and John Walker in New York.

The Bureau assigned to Chief Chemist Louis Tanner of the Boston laboratory the job of finding a method to determine the “clean content” of wool shipments. He developed a special boring tool which enabled examiners to take samples, or cores, of wool from inside the bales, and to judge the uniformity of the fiber in an entire bale without disturbing the bindings. This method proved so simple and effective that it has been adopted by the commercial trade and by government agencies in other countries throughout the world.

Imports of all kinds and types reach the Appraiser’s Stores in this manner: When merchandise is ready for export from a foreign country to the United States, the exporter prepares a special customs invoice describing the merchandise and giving its value. This invoice is sent to the American importer. When the importer is notified that the merchandise has arrived at a port of entry, he turns over the invoice to his customs broker. The broker calculates the estimated rate of duty, then proceeds to the Customs House. There he makes what is called a formal entry of the merchandise, filing the information he has received from the exporter and paying the duty.