I. Introduction: Forgotten Moments in Early Federal Governance

Taxation, not liberty, presented the most pressing problem for the American founders in 1787. For no factor better illuminated the Articles of Confederation's fundamental flaws than the Continental Congress's inability to raise a revenue sufficient to make required payments on the union's sizable war debts. The growing commitment among nationalist-oriented reformers in 1787 to cure the federal revenue problem goes a long way toward explaining the framing and ratification of the US Constitution (Brown Reference Brown1993).

The broad taxation powers in Article I of the Constitution—including, emphatically, the power “to collect”—together with creation of independent executive and judiciary branches with jurisdiction over tax collection, solved the revenue problem as a constitutional matter. The task of actual revenue administration, however, fell to the first federal government.

Not surprisingly, the First Congress made taxation its first and foremost order of business, passing a number of substantial revenue bills by the summer's end in 1789. And, judging from the recorded monetary returns over the next decade, the customs collection regime established by the infant federal government experienced impressive successes virtually from the outset. Revenue grew strongly and steadily throughout the 1790s and dwarfed what the states had collected after the Revolution (Edling and Kaplanoff Reference Edling and Kaplanoff2004, 739). Within five years after ratification, the federal government had not only pulled itself back from the edge of disaster, but had acquired fiscal legitimacy. By decade's end, the Federalists had established a respectable fiscal-military state on the European model (Edling Reference Edling2008).

A question of considerable legal-historical significance therefore arises: Just how did the early federal government execute this reversal of financial fortune? How, moreover, did it manage to secure such impressive revenue receipts from a people accustomed to hardly any taxation at all, who looked with suspicion on any taxation measure intended simply to collect revenue for the state, many of whom had during the 1780s successfully waged tax rebellions in their respective states?

Until recently, the historical literature on the early federal government lacked considered, thoroughly researched answers. In that portion of the historiography concerned directly with early federal revenue collection, meanwhile, the overwhelming focus on the whiskey excise and its repercussions has produced a woefully incomplete picture. For neither the whiskey tax nor any of the other abortive internal tax experiments conducted by the Federalists prior to 1800 can account for anything but a very small part of the federal government's revenue-related intrusions into the society in the early years, and an even smaller portion of its receipts.

The administrative function of the early federal government that best explains why it succeeded where its predecessors had failed in the area of revenue collection lay in a single sphere of action whose early history may seem humdrum when compared to the Whiskey Rebellion: the collection of customs duties in the ports. Receipts from these duties accounted for well over 90 percent of the revenue generated by the new nation in the decades after ratification (Wallis Reference Wallis and Carter2006). Alone they could have sufficiently funded the government's operations, paid down the debt, and bolstered the nation's credit. Without their effectual collection, the infant union would have doubtless collapsed before 1800.

To be sure, the Federalists' emphasis on customs duties over excises and direct taxes reflected concessions to the revolutionary heritage. Generally, it relied on a narrow construction of Article I's substantive scope that mollified the American anti-tax contingent. It seized on a distinction between “internal” and “external” taxes that held immense significance for revolutionary-era Americans (Slaughter Reference Slaughter1984). Above all, import duties held the virtue of minimal intrusiveness. They directly touched but only a small subset of Americans (merchants) and the merchants themselves could, under normal market conditions, pass a portion of the duties along to purchasers.

With these things said, however, we must take care not to underestimate the depth of the administrative problem the Federalists faced in 1789 as the First Congress assembled itself. Historically, collecting customs duties in the American commercial context had presented special challenges. Crown administrators had failed time and again to collect customs duties in the colonies (Barrow Reference Barrow1967). For the short time they existed, the temporary customs regimes established by the states after the Revolution performed no better. No real wonder. The eastern seaboard included nearly two-thousand miles of coastline. A multitude of rivers, inlets, and small ports gave designing merchants many ways to escape detection under the old regime. The mercantile community itself presented equally serious difficulties. “The habit of smuggling pervades our country,” observed Fisher Ames during the First Congress. “We were taught it when it was considered rather as meritorious than criminal” (Gales Reference Gales1834, 299). How, then, did the first federal government rise to the challenge of tax collection in the ports where its predecessors had failed?

Fundamental as it seems, the question has gone almost totally ignored by historians, legal scholars, and political scientists. The publication of Gautham Rao's National Duties: Custom Houses and the Making of the American State (2016) presages an end to the neglect and serves as the historiographical occasion for this essay. Rao's readable volume includes extensive consideration of previously neglected customs-related documents in dozens of archives across the country and reveals a fascinating hidden history of early federal governance in the ports.

First and foremost, Rao finds that even as supervisory federal administrators in the Treasury Department, such as Alexander Hamilton, seemed at times to endorse strict and vigilant enforcement of the revenue laws, a different legal world existed in the early custom houses themselves. Limitations in communications gave the early collectors a broad practical scope of action nearly exempt from oversight, which they employed from the outset to promote commerce and to accommodate the merchants. “[O]ver and over” in “subtle negotiations,” Rao observes, the officials “interpreted laws generously toward merchants, limited enforcement of purportedly intrusive legislation, and looked the other way when confronted with illicit waterfront activities” (12–13). If they did not do so, they “inevitably faced abuse, intimidation, shaming campaigns, tax avoidance, riots, and lawsuits from angry merchants.” Treasury's occasional interventions in custom house conflicts, meanwhile, did not rebuke the collectors' actions so much as encourage them to “take seriously the opinions of the commercial community within which they resided” (13).

To this point, Rao's line of argument builds on Frederick Dalzell's excellent PhD dissertation (Reference Dalzell1993), to which Rao and others have cited with approval (see Rao Reference Rao2016, 85, 95; Edling Reference Edling2008, 210; Mashaw Reference Mashaw2012, 297). National Duties, however, distinguishes itself from and improves on Dalzell's scholarship by looking both backward and forward to understand what happened during the formative period. Thus, in discussing why early Federalist customs officials adopted an accommodative approach, Rao looks to the imperial paradigm of “negotiated authority” that shaped eighteenth-century customs administration under the Navigation Acts (Rao 13, 93; see also Greene Reference Greene1986; Bilder Reference Bilder2004). The empire rested on a rough division of authority between England and the Americans. Prior to the Revolution, the relationship endured and even flourished, in large part because London negotiated rather than imposed authority over the colonists. Loose customs enforcement practices instantiated this approach, and those same practices, Rao maintains, “structured the rise of the new federal government” (195). Early federal customs officials for the most part “replicated [eighteenth-century] imperial governance” (13).

Looking forward from the early national period, Rao shows that the accommodationist practices born out of the imperial period and carried on in the American ports in the 1790s persisted well into the nineteenth century. His discussion of the embargo fiasco ascribes the failure of Jefferson's embargos, which relied heavily on enforcement efforts in the ports, to the accommodative paradigm's continued strength and vitality. Later chapters demonstrate, however, that events in the years after the War of 1812 conspired to unravel it. A combination of increased governmental oversight arising out of customs bond scandals of 1819, a new zeal for protectionism that underlay the “American System,” and the overt politicization of customs appointments led to the dismantling of discretion in the custom houses in the 1840s, and to the beginning of the end of the imperial paradigm in American customs governance. In response to perceived abuses, the Jacksonians tightened the appraisement process for goods subject to ad valorem duties; created a Solicitor General with superintending authority over the district attorneys in custom bond prosecutions; and phased out the credit system in favor of government warehousing of bonded goods. By the time Jackson left office, Rao writes, “the necessity of segregating the inner workings of the state from the operations of the marketplace had become clear … there would be no turning back” (196).

Rao's analysis expands on a number of very live and fruitful lines in the prevailing historical scholarship, including the early history of the federal administrative state and the origins of capitalism. National Duties also touches on abiding questions regarding the historical impact of the American Revolution on American law and society (Mann Reference Mann1993; Knapp Reference Knapp2013). In particular, Rao's arguments suggest a substantial measure of socio-legal continuity in the ports in the decades after Independence, rather than dramatic change or counterrevolution. This includes, contrary to many historians' assessments, a theme of substantial continuity in the transition from the Federalists to the Jeffersonians.

Most significant for our purposes, National Duties contributes to a growing literature that places eighteenth-century American political and constitutional developments in the larger context of the Atlantic world and that explains the early development of the American federal political system with reference to the English imperial model (Greene Reference Greene1986; Bilder Reference Bilder2004; Hulsebosch Reference Hulsebosch2005). Too many histories of the American founding have failed to appreciate the pre-Revolutionary imperial constitution's explanatory power. In and after 1787, Americans looked with fondness and reverence on much of the pre-Revolutionary experience. It served as their only real model for a functional “federal” union. It helps explain why, at the Federal Convention, Madison and others supported the congressional negative over the state legislatures (the negative represented a republicanized version of the Privy Council negative on the colonial legislatures), and how they reconciled this sweeping undefined negative with state sovereignty and the libertarian heritage (they intended it to function less as a command than as negotiating leverage) (see Hobson Reference Hobson1979; Greene Reference Greene1986). During ratification, it helps explain why the Federalists opposed a written bill of rights, for rigid articulations of rights had contributed to the empire's destruction (see Greene Reference Greene1986). In the decades after ratification, it helps explain why both the Federalists and, even more so, the Jeffersonians confined the federal government's operations to an exceedingly narrow sphere, and exercised significant restraint in the enforcement of the federal criminal jurisdiction.

And, as Rao has now shown, the imperial experience helps explain the manner in which early federal customs collectors went about their business. With one major difference in outcome, however, that Rao acknowledges: judging from the federal government's revenue receipts, the federal custom houses created by the Collection Acts enjoyed impressive success in the 1790s. From 1792 to 1795, federal officials in the major ports collected nearly six times as much as their state counterparts had in the period from 1785–1788 (Edling and Kaplanoff Reference Edling and Kaplanoff2004, 739). Over the course of this decade, annual customs revenues steadily increased and by decade's end had grown nearly fourfold.

The question I pursue in this essay concerns less the importance or accuracy of Rao's observations regarding imperial continuity and mercantile accommodation than their explanatory power. Some factor other than administrative continuity must explain the different administrative results obtained by the English and early American custom houses. What is it? Why ultimately did the American custom houses succeed in administering a comprehensive program of import duties where their imperial predecessors had failed to collect even narrowly tailored ones?

This essay develops an answer that suggests a story somewhat different from Rao's. My goal, however, is to build on Rao's achievement, not supplant or undermine it. The insights in National Duties shall serve as central points of reference and inspiration throughout.

Section II examines eighteenth-century customs house governance prior to Independence. The analysis suggests that imperial customs collection foundered in the American colonies primarily due to legal and administrative inadequacy. The heart of the essay, Section III, presents an independent analysis of what, if anything, changed with the creation and implementation of the first federal customs system in 1789 that might explain the different outcomes in American customs collection across the eighteenth-century and beyond. My answer highlights an integral component of the new system not accorded substantial attention in National Duties—the new federal courts. I argue that the court system created by the Judiciary Act of 1789 for the customs officials' use helped set in motion an administrative paradigm shift, from empire to law, that best explains why the American system succeeded where London and the states had failed.

II. Empire, Taxation, and the Degradation of Law

England's Glorious Revolution in 1689 represented a triumph for English liberties insofar as it confirmed principles established by the revolutionary parliamentarians, substantially narrowed the king's domestic power, and made Parliament supreme. The event, however, also ushered in a period of state and empire building unlike any other in English history, with significant consequences for the North American colonies (Brewer Reference Brewer1989). As a cultural and commercial matter, the colonists became more involved in the growing empire and in their Englishness during the first half of the eighteenth century (McConville Reference McConville2006). As a political and magisterial matter, however, they insisted on and received substantial local control (see Lovejoy Reference Lovejoy1972).

Historians have long observed that from the Glorious Revolution (1689) to the middle of the eighteenth century, enforcement of the various Navigation Acts in the American colonies remained lax and inconsistent (Barrow Reference Barrow1967; Henretta Reference Henretta1972; Greene Reference Greene1986; see also Bilder Reference Bilder2004). Rao endorses this view. In this era of “salutary neglect,” he elaborates, Hanoverian administrators in fact believed that accommodating the merchants, and permitting some measure of smuggling, “strengthened the bonds of empire” (Rao Reference Rao2016, 21). Yet to understand these practices as “corruption” or “regulatory capture” in the modern sense, Rao observes, rests on a normative commitment to separating the state from the market that did not exist in the eighteenth century. Rather, classical political economy contemplated the state “tap[ping] into the merchant capital,” which in turn required “incorporating merchants and their capital into the fold of the state” (11). Empire required commerce. Commerce sustained the empire. Official submission to the market's “irresistible pull” and “undeniable power” lay at the heart of the imperial paradigm of customs governance (47). Colonial customs officials thus felt compelled to “negotiate” their authority with the merchants rather than to impose it.

The American Revolution disrupted the system that had been in place since the Glorious Revolution. After the French and Indian War (1754–1763), London began to increase its tax and customs enforcement in the American ports. Parliament established a new brigade of salaried customs officials for the colonies and, ultimately, armed forces to support them. Existing customs officials used to accommodating the merchants now took a stricter line. Although he acknowledges the colonists' oft-discussed constitutional arguments, Rao sees the “problem of the unaccommodating customs officials” as central to the American Revolution (43). American merchants stood up to revolt against a collections system that they believed did not pay due respect to the forces of commerce and rhythms of the market. “Their tool of choice was the mob,” but they also employed “lawsuits” and “social pressure” (19).

The merchants' patriotic resistance in the period leading up to the Revolution, however, only went so far. Many in the commercial community did not agree with the non-importation efforts in the 1760s and 1770s. The merchants' commitment to commerce over law thus “complicated” revolutionary-era attempts to channel commerce toward revolutionary political ends (47). Yet for the Federalists in and after 1787, the whole revolutionary experience provided a “cautionary tale about how not to govern an empire” (22). Which is to say, in setting up the American system, experience suggested it safer to revert to the looser practices that marked the first half of the eighteenth century than to take the harder-line approach that London did in the 1760s.

Rao's analysis of the imperial period cites to a wealth of rich secondary materials and to various records and correspondence. Still, these chapters in National Duties do not give detailed attention to the actual imperial legal and administrative framework that evolved in the seventy years after the Glorious Revolution. The analysis therefore does not specifically address whether the legal framework permitted or required accommodation. Did the officials act at variance with the formal legal framework, or consistent with it? Does the answer change over the eighteenth century? Rao's analysis tends to assume that an administrative choice existed and that officials in London and, in some measure the colonies, chose to elevate politico-economic concerns over administrative ones. But did a real choice exist for those officials in the colonial ports? Certainly, smuggling and evasion of the laws occurred. Did the colonial officials permit it to happen notwithstanding the prevailing administrative framework, or did it happen, in some measure, because of the prevailing administrative framework? Finally, the connection that Rao draws between the imperial and early national periods tends to equate the respective purposes of, on the one hand, the eighteenth-century British administrators vis-à-vis the American colonial ports and, on the other, early federal administrators in the American context. Does the analogy hold? How, if at all, did the American system differ from its imperial predecessor? Elucidating these matters requires a stronger focus on the earlier period from both legal and administrative perspectives.

In the latter half of the seventeenth century, during a period of deep political turmoil and transformation, Parliament passed a series of Navigation Acts with specific geopolitical and economic purposes: to protect English shipping, to establish a closed system of trade within the British empire, and thereby to elevate the empire to a position of world hegemony (Dickerson Reference Dickerson1951; Barrow Reference Barrow1967; Hoon Reference Hoon1968; Harper Reference Harper1973). Toward these ends, the acts prohibited the English colonies from trading enumerated commodities with any nation outside of the empire. In terms of enforcement, the Act of 1660 established the initial framework. It required that the royal navy seize any foreign vessels trading in forbidden waters and incentivized citizens to report violations by offering them one-third of proceeds from any resulting seizures. The Act included two additional enforcement measures: (1) English purchasers of foreign ships had to register the vessels with customs officers; and (2) merchants dealing in enumerated commodities had to post bond, with adequate security, to comply with the Acts. Obligations imposed on the merchants under the Acts ran immediately to the colonial governor, who in turn received implicit enforcement powers. The Crown, however, appointed the main collection officials.

For decades, the American officials proceeded with considerable handicaps relative to their English counterparts. Not until the Act of 1696, for example, did Parliament extend to the colonial officers privileges and enforcement powers already possessed by English officials, such as rights against harassment (“molestation”), rights to general search warrants, and rights to forceful entry in cases where officials suspected fraud. By 1710, Parliament had divided the eastern seaboard into a handful of formal administrative districts, each with an appointed collector and, in a few cases, a surveyor and/or searcher. Naval officers and, as noted, colonial governors also participated in customs administration (Barrow Reference Barrow1967).

It would appear that the American merchants obeyed the Navigation Acts' prohibitions on trade outside the empire and that this involved no great sacrifice on their part (Dickerson Reference Dickerson1951). By contrast, many on the American side resisted the export duties on the coastal trade enacted in 1673, as well as the outright prohibitions on trading certain goods that Parliament began enacting in the early eighteenth century. Administrators in London early recognized that efforts to enforce these laws remained woefully inadequate, that many merchants easily skirted the thinly staffed colonial customs operations, and that the collectors and merchants often conspired to evade the laws. Too far away to exercise direct oversight over the American officials, the Board of Trade charged an itinerant surveyor general with the task and, to a lesser degree, the governor and naval office, the latter of which London subsequently attempted to remove from local influence by Crown, rather than gubernatorial, appointment.

None of these measures sufficed. To begin, the abiding issue of divided authority in the empire greatly crippled colonial enforcement of the Navigation Acts (Barrow Reference Barrow1967). The local courts and legislatures proved incorrigible in their resistance to Crown administrators. Rather than come down hard on the colonies, however, in time London determined to let well enough alone, in part because, whether or not they obeyed the Navigation Acts, the American colonies produced a net benefit to imperial commerce (Rao Reference Rao2016, 29–30). So began a considered policy noted by Rao of ignoring non-enforcement of the Navigation Acts in the American colonies, or “salutary neglect,” that extended through the 1750s (Henretta Reference Henretta1972).

As Rao also observes, however, for a brief moment in the 1730s it appeared that the imperial policy of inattention might come to an end. A substantial sugar trade between the American colonies and the French West Indies had arisen and British administrators concluded that it had resulted in dramatic reductions in receipts from the 4.5 percent export duties applicable to sugars produced in the British West Indies. For the purpose of encouraging the Americans to trade with the British sugar islands and thereby increase receipts from the 4.5% duty, Parliament passed the Molasses Act of 1733 (Rao Reference Rao2016, 32–33).

Seen from the perspective of the American customs regime in the 1790s, one distinguishing feature of the imperial system prior to passage of the Molasses Act of 1733 was that it did not impose any customs duties at all on the American colonists, the only exception being a relatively small export duty on certain enumerated items exported from one English colony to another. Imposing a sizable duty on all foreign sugar imports into the colonies, the Molasses Act thus represented a true innovation.

Yet if the Act looked novel and somewhat daunting on paper, historians who have examined its administration in the colonies agree that it was not enforced and that it generated hardly any revenue. American merchants evaded the sugar duty with impunity (see, e.g., Dickerson Reference Dickerson1951; Barrow Reference Barrow1967; Hoon Reference Hoon1968).

Rao explains the pitiful enforcement efforts with reference to the great influence the merchants had over governance in the colonial customs houses and, in turn, the supreme importance of commerce to the British empire. However, beyond these thematic assertions, and beyond citations to evidence suggesting collusive behavior between the customs officials and the merchants, Rao does not consider why the Molasses Act in particular—which, as the first (and, as it happened, only) import duty imposed on the colonies prior to the 1760s and therefore an important basis for comparison with the later American regime, should hold considerable historical significance for Rao—went all but unenforced in the colonies.

A number of factors explain the non-enforcement. The first lay in the sheer amount of the duty. Parliament intended it as prohibitive and by all appearances the Americans also considered it so. The Act, for all intents and purposes, banned the dutiable commerce. For merchants unable or unwilling to purchase the British West Indies sugar, this doubtless increased the incentive to smuggle or engage in other subversive dealings.

And how did they get away with it? British naval vessels offered very little if any enforcement assistance. Even more significant, the Molasses Act introduced not a single new customs official to the American colonies and no new material supplies. The existing staffing remained quite inadequate to the purposes. From Newfoundland to sugar islands, only forty-two permanent officials staffed about forty customs districts. Only a few had a boat or tidewaiter. Without any real oversight, they worked irregular hours. For fraud detection, the collection system, if one could call it that, relied almost exclusively on private informants, not the officials themselves (Barrow Reference Barrow1967, 72, 136, 144).

When the handful of officials in the ports did make contact with the merchants, the officials let many violations go unreported, whether by accepting false papers, entering foreign sugar as imperial product, or dramatically reducing the duty—often in exchange for some form of bribe. Why did they do so? And how did they get away with it? Certainly, the intrusion of an informal deputy system, by which various colonial collectors deputized their positions to unbonded and usually unqualified individuals often involved in the very illicit commerce they purported to regulate, played a role (Barrow Reference Barrow1967, 140). So, too, did inadequate compensation. Although the collectors had small salaries, they needed transaction fees to make a living. Yet the legislatures passed laws dramatically reducing the allowable fees—a trend that greatly offended the Board of Trade. The inadequate fees, together with the merchants' willingness to line the officials' pockets to avoid the sizable sugar duty, made it difficult for most of the collectors to resist “composing” a private settlement (Barrow Reference Barrow1967, 144). Besides the occasional visit from an ineffectual surveyor general, moreover, the officials, whether or not deputized, faced virtually no administrative oversight. The Board of Trade remained at too far a distance to detect or do anything. Ultimately, under local popular control, the governors and legislatures did more to undermine regular collection efforts than to support them—and the Crown-appointed naval officers felt content to receive their salaries without rocking the boat.Footnote ¹

Perhaps most important, enforcement of the Molasses Act failed in the colonies because the collectors had no reliable way to punish violations and therefore no way to deter misconduct. By the Act of 1696, the Crown had established a few admiralty courts for these purposes (Ubbelohde Reference Ubbelohde1960, 5–7; Snell Reference Snell2007, 145). Yet inconveniences attended their use since the admiralty tribunals usually convened at distant locales and proceeded without juries. The admiralty jurisdiction, moreover, did not extend to all revenue offenses and the local common law courts often issued writs of prohibition and the like to block admiralty proceedings involving locals (Ubbelohde Reference Ubbelohde1960, 12–22; Barrow Reference Barrow1967, 154; Hoon Reference Hoon1968, 286). That the costs of prosecution fell on the official personally in the first instance discouraged officials from pursuing legal action (Hoon Reference Hoon1968, 286). Local control over the common law jurisdiction (including loyal colonial juries), meanwhile, meant that officials pressing collection suits at common law could rarely expect a fair recovery (Ubbelohde Reference Ubbelohde1960, 21). Officials who pressed too hard in this connection often found themselves countersued or sued in other courts, as well as harassed and molested by resentful merchants and mobs on the waterfront (Hoon Reference Hoon1968, 275; Snell Reference Snell2007, 151; Rao Reference Rao2016, 19). Even if a prosecution resulted in judgment for the collector, just how would the collector enforce it? Here again, local political control over sheriffs and other enforcement officials rendered the task very difficult (Harrington Reference Harrington1995, 598–600).

In short, the collectors countenanced (and sometimes benefited from) violations of the Molasses Act not because of a commitment to mercantile imperialism over strict observance of the law, but because they had no real choice given the inadequacy of the administrative machinery and incentive structure. Nor can the policy of “salutary neglect” fully explain why London did not respond to the problems in the colonies because American importation of foreign sugar did not have any directly “salutary” commercial effects from the empire's perspective but, instead, deleterious ones. A more important reason for the imperial neglect lay in London's focus on fighting never-ending imperial wars (with American help), which, even as some trading with the enemy did occasionally occur in the colonies, made colonial customs administration virtually irrelevant.

The bribery and other various “extras” tendered as part of a given collector's settlements with the merchants resembled official corruption in the modern sense: official receipt of money in exchange for relaxations in enforcement. To say that the empire somehow depended on this corruption in a meaningful way is another thing. David Hume's essays had hinted at the salutary effects of some official corruption. Whether the collectors or the merchants viewed these practices as legitimate Rao does not say. Certainly, imperial authorities never deemed the practices legitimate in the colonies. The massive debts taken on in the French and Indian War only heightened awareness of its deleterious effects. The changes in policy that followed produced the American Revolution.

Parliament passed no further customs duties until the Revolution. Yet the legislative act that started the Revolution, the Sugar Act of 1764, actually reduced by half the sugar duty that had applied under the Molasses Act. London here intended to turn a prohibitively high duty into a collectible one. Four factors explain the intensified American response to the Sugar Act and to the other major customs reforms included in the Townshend Acts in 1767–1768. First, the Sugar Act marked an innovation insofar as Parliament intended it as a revenue-raising measure, rather than a commercial regulation. While Parliament ultimately repealed the Sugar Act, it later enacted the so-called Townshend duties in 1767 for the same purpose. This assertion of jurisdiction raised important constitutional questions debated at length by politically minded colonists (Morgan Reference Morgan1953).

The remaining factors explaining the American response, however, concerned the enforcement issue in particular. First, the Sugar Act extended the admiralty jurisdiction to cover all revenue-related offenses, and established a Crown-appointed supreme admiralty court in Halifax, Nova Scotia. A few years later, Parliament established three additional such courts in Boston, Philadelphia, and Charleston (Ubbelohde Reference Ubbelohde1960, 128–47). Second, the Act granted broad immunities to damages suits in the state courts by merchants enforceable in the new admiralty courts. Finally, and most importantly, it overhauled and augmented the hitherto inadequate customs staff. In the long years of neglect, the office of surveyor general (or comptroller) had disappeared. As part of its new more aggressive enforcement policy, London added twenty-five comptrollers in the period from 1764–1766, numerous other officials, and, for the first time, issued strict instructions to the existing collectors and naval officers (Barrow Reference Barrow1967, 186). A distinct change in approach in favor of greater enforcement ensued. In addition to giving the comptrollers salaries, Parliament purported to establish an equitable floor on the fees paid to comptrollers that the state legislatures could not reduce. The year 1767 saw London establishing an American Board of Customs Commissioners in Boston to oversee the collection operations.

As Rao notes, the American merchants greeted the new officials with disdain, resistance, and harassment, in part because their introduction violated customary norms, in part because it violated constitutional norms. The Americans' efforts to frustrate London's administrative innovations met with some success for a time. Parliament repealed the Sugar and Stamp Acts. At the same time, as Rao astutely notes, many American merchants had vested interests in continuing commercial relations with Britain. Thus, when patriots went so far as to introduce non-importation and other embargo measures, the mercantile community divided. In some circles, revolutionary political ideology and commerce stood at odds (Rao Reference Rao2016, 45–47). The tipping point, however, came with the last major customs law of the imperial period, the Tea Act of 1773—intended at once to raise revenue, save the foundering British East India Tea Company, put an end to Dutch tea importations, and establish precedent for even greater taxation in the colonies. The Act's passage elicited a unanimous call for resistance among merchants, farmers, and professionals alike (Breen Reference Breen2004).

Surely, as Rao observes, the Revolution provided a cautionary tale for the Federalists establishing the first federal customs system in and after 1789. London's inability to enforce the revolutionary-era taxes and duties by ordinary magisterial means led, over the course of the 1760s and early 1770s, to a dramatic increase in the standing British military presence in the colonies, particularly in New England. Rather than quelling the colonial dissent, however, this reawakened bitter memories from the colonial wars concerning the presence of regulars in the colonies and inspired the colonists to elaborate on an ideology against standing armies that would have lasting historical and constitutional significance (Reid Reference Reid1981; Leach Reference Leach1986). All this contributed to a commitment among the Federalists of 1787 to avoid military coercion at all costs in the enforcement of the first national customs regime.

III. Creating the First Federal Customs System

Like all wars, the Revolutionary War required money and both the states and the Continental Congress took on sizable debts in the process. As the Revolution wound down in the early 1780s, the states scrambled to begin implementing their own revenue systems. Their taxation programs prioritized direct taxes on persons and property. By mid-decade, the state governments had proven themselves either unable or unwilling to collect direct specie taxes in the face of rural resistance (Brown Reference Brown1993).

Toward the end of the Revolution, most of the coastal states enacted customs duties and made some attempts to collect them. Powerful memories of the events and controversies surrounding British customs collection during the imperial struggle, however, seem to have prevented emphasis on vigorous collection and led to the reinstitution of the lax and informal customs collection practices that existed prior to the Revolution (Gales Reference Gales1834, 299; Goss Reference Goss1897, 10–23; White Reference White1948, 461; Hamilton Reference Hamilton1961, 5:459). Gaping regulatory holes left most of the coastline vulnerable to undetected importation. The collectors rarely employed the state courts to put pressure on offenders and delinquents. Even law-abiding merchants struggled to keep up with all the different states' rates and regulations. New Jersey collected no duties at all (Maclay Reference Maclay and Maclay1890, 46). Disagreements concerning the mode of collection ultimately prevented the Continental Congress from amending the articles to provide for a federal impost (Dalzell Reference Dalzell1993).

IV. Conclusion: From Empire to Law

If the creation and administration of the first federal customs houses borrowed from past experience, it also marked a movement toward greater enforcement and administration. The Americans succeeded where London, the states, and the Continental Congress had failed precisely because they turned away from a paradigm of empire and accommodation, and toward a paradigm of law and administration. In all events, the early period saw the federal government taking and holding much more administrative ground in the ports than it ceded.

The Americans, to be sure, invented an accommodative mechanism not provided for under the imperial laws—the future-payment customs bond—and the early federal collectors exercised some discretion as to when and whether to sue on delinquent bonds. If economic realities counseled some measure of accommodation as to the timing of payment, however, rarely if ever did the early port officials accommodate the merchants on the requirement of payment itself. Nor does the evidence suggest they accommodated the merchants when it came to securing the revenue against fraud.

The First Congress, the Treasury Department, and the early American port officials sought to accomplish essentially the same goal that the British had sought to accomplish after the French and Indian War: to raise revenue through customs duties for the purpose of funding the central government's debt and building its credit. But why did the first federal government under the Constitution succeed where the British failed? Or, put another way, why did the merchants of the 1760s and 1770s start a revolution over revenue-raising import duties, while the merchants of the 1790s routinely complied?

Certainly, the federal import duties themselves possessed greater perceived constitutional legitimacy than the earlier measures. The American merchants could no longer cry “taxation without representation” (Dalzell Reference Dalzell1993). Government-bond-holding merchants also stood to benefit directly from an adequate revenue. Perhaps, also, accommodations as to the timing of payment through future-payment customs bonds helped ensure that the merchants would, at last, pay the assessed duties (Rao Reference Rao2016, 94).

Most importantly, however, the Americans established a collections regime that, even as it may seem modest by modern standards, far exceeded anything that had ever preceded it in terms of administrative system and capacity. As we have seen, the Federalists innovated in a number of areas here. Yet if one had to select a single innovation that best explains the American successes relative to their British forebears, it would be the creation of the federal courts.

The British could never establish independent courts in the American colonies. Even after London increased the number of colonial officials in the 1760s, its primary weakness in the area of enforcement lay, as always, in the colonists' control over the local legal institutions and, increasingly, the colonists' unwillingness to submit to the jurisdiction of the juryless vice-admiralty courts. The late 1760s saw Parliament and British administrators adopting a new way to respond to the problem: standing military force. Yet instead of imposing order on the colonies, enforcing the colonial customs laws by military coercion only elicited further American outrage and resistance—and, ultimately, a military reprisal.

Herein lay the American Revolution's real lesson. British employment of military coercion to enforce taxation policy during the imperial crisis provided Americans with an example of how not to govern. Against this background, the Federalists of 1787 began with a commitment to avoiding military coercion in revenue enforcement. Yet they did not, as Rao suggests, pursue a paradigm of accommodation in its stead. They pursued coercion by other means. In the first instance, this entailed the various fraud enforcement mechanisms employed independently by officials in the ports—what Hamilton called the “coercion of the magistracy” (Madison et al. Reference Madison, Hamilton, Jay and Kramnick1987, 149). To recover statutory penalties and unpaid customs bonds, and to consummate forfeitures and seizures, however, the First Congress required that the collectors obtain court orders in federal district courts established primarily for this purpose. In the employment of coercion by other means in the ports, all roads led ultimately to what the North Carolinian Federalist lawyer William R. Davie called “coercion through the judiciary” (Elliot Reference Elliot1891, 4:155).

Revenue cases completely dominated the district courts' dockets in the early 1790s. No other category of cases even compares (Henderson Reference Henderson1971, 55–56).Footnote ²⁵ The early collectors and federal attorneys prosecuted virtually all the provable revenue violations concerning the requirement (vs. timing) of payment that came under their jurisdiction. Yet of what precisely did “coercion through the judiciary” consist? The judiciary exerted coercion through writs of process, issued by the court but in the president's name, commanding the US Marshal to execute certain instructions. Under the Process Act of 1790, the first federal courts incorporated state writ processes but possessed greater coercive enforcement powers at the execution stage and, due to the Judiciary Act's institutional merger of law and equity, had a broader range of writs at their disposal than any of the English courts alone did. The writ forms in the early federal district courts' files in revenue matters and otherwise within the familiarity of eighteenth-century Americans, included summons (order for defendant to appear), capias ad respondendum (seizure of a defendant's body to secure a first appearance in court), venire facias (compelling appearance of jurors or witnesses), scire facias (compelling a person to come before the court and show cause), capias ad satisfaciendum (seizure of the defendant's body to secure payment of a judgment), fieri facias (levy on goods and chattels to satisfy a judgment), and elegit (seizure of personalty or realty to compel payment of judgment). In equity and admiralty, subpoenas and arrest warrants, respectively, served the purpose of compelling appearances.

Probably because it conforms to modern conceptions of judicial power, constitutional scholars more often describe the federal judiciary in its original conception as the federal government's monitor than its administrative arm—not as an administrator of governmental power, let alone an instrumentality of state coercion, but as the guardian of individual rights against government power. To the extent historically minded scholars have attempted to place the judiciary within the administrative context, they have reinforced this understanding by focusing primarily on the development of what we now call administrative law—that is, judicial review of federal administrators (Mashaw Reference Mashaw2012, 65–79). The approach obscures the Federalists' most frequently stated rationale for the Article III judicial power, reiterated over and again during the Federal Convention and ratification debates, and given concrete expression in the early 1790s, particularly in the district courts. The “controlling power of the Judiciary of the United States,” declared one Federalist lawyer, existed for one reason above all others: “to enforce obedience to the [law]” (Elliot Reference Elliot1891, 4:157). The proposition well describes the judiciary's role within the revenue system in the 1790s.Footnote ²⁶

The question therefore becomes: Why did the early American merchants generally submit to the federal courts but not the imperial courts? The availability of juries to soften the Collection Act's rigors in the final judgment may very well help explain the difference, as does the relative constitutional legitimacy of the federal courts and local familiarity with most collectors. Long experiences with and historical acceptance of local legal processes and institutions (including lawyers, judges, common law writs, and local juries), however, seem to possess the greatest explanatory power here. For although the Judiciary Act did make some innovations in the direction of greater judicial enforcement power, it and its sister legislation also drew largely on the same practices and processes that the American common law courts had employed for well over a century.

Rao advances a narrative of imperial continuation and decline to describe the federal customs system's first half-century. By contrast, the foregoing observations suggest a narrative of legal invention and evolution. The Jacksonians did refine the appraisement process for goods subject to ad valorem duties; create a Solicitor General with superintending authority over the district attorneys in bond prosecutions; and phase out the credit system in favor of government warehousing of bonded goods. None of these reforms, however, signaled the decline of the imperial paradigm because the Federalists had already abandoned it in 1789. Nor, on closer inspection, did any of the Jacksonian reforms substantially change the existing administrative system and structure.

The tighter appraisal requirements responded to the problem of “fictitious” invoices that Hamilton had flagged as early as 1790 but that had, in the perception of more than a few politicians, become considerably more severe in the inundation of imports that followed the War of 1812. The antebellum legislative developments built upon appraisal provisions in the Collection Acts of 1789 (34), 1790 (154), and 1799 (666). Congress created the Solicitor General, moreover, less to narrow the collectors' discretion than the district attorneys' discretion. Congress had long before transferred jurisdiction over bond prosecutions to the US district attorneys. Creating a Solicitor General simply added another official to the existing hierarchical structure, much like the creation of the Comptroller of Finance in the 1790s. The Treasurer and Comptroller continued to wield ultimate authority over the collectors, the Solicitor, and district attorneys (Butler Reference Butler and Hall1837, 247–52).

Finally, the Jacksonian efforts to phase out the credit system did not flow from criticisms of the port officials' discretion. Overproduction in Britain after the last Napoleonic war and the economic bubble that followed saw merchants starting to abuse the credit system in ways over which the American collectors had no control, creating vast speculative bubbles that contributed to the Panic of 1819. Jacksonian reformers squarely blamed the credit system. They sought and ultimately succeeded in implementing a warehousing alternative, thereby preventing the merchants from trading in bonded goods prior to payment of duties and, in theory, nipping speculative credit bubbles at their foundations (Philadelphia Chamber of Commerce 1828).Footnote ²⁷

If the customs system that existed on the eve of the Civil War differed from the original framework established by the Federalists in the 1790s, the difference lay in degree not kind. The society, to be sure, had changed. The fundamental structure of the customs collection system, however, had remained substantially the same (Goss Reference Goss1897, 28). The Federalists, the early port officials, and federal courts—not the Jacksonians—steered American customs collection away from the old imperial model and toward a new model predicated on homegrown legal institutions. To pursue their own reforms, the Jacksonians stepped onto the shoulders of their forebears.