20 OF TOY CANARIES AND PIRATES

One day in 1957 an examiner in the New York Customs Appraiser’s Stores opened a packing case received from Switzerland. He lifted out a small brass object resembling a canary cage. On a tiny swing in the cage sat an extremely lifelike little bird. When the examiner wound a key in the bottom of the cage, the bird threw back its head, opened its beak, and burst into song. It ruffled its feathers and wagged its tail as it trilled its merry little time.

The examiner called to a colleague nearby and said, “Hey, Joe! Come and look at this one.”

He turned the key and they watched the little bird perform. The examiner said, “Cute, isn’t it?”

“If my wife sees it, she’ll want one,” the other examiner replied. “It certainly is beautifully made. How are you going to classify it?”

There was the rub. What was this tiny cage with the singing bird? Was it a toy, dutiable at 50 per cent of its value? Was it a musical instrument, subject to a duty of 35 per cent? Or was it, as the importer claimed, simply a “manufacture of metal,” subject to a duty of 20 per cent?

The examiner disagreed with the importer. He ruled that the little singing bird with the music box in the bottom of the cage was in fact a musical instrument. This opinion was sustained by the appraiser. The appraiser’s decision was supported by the Collector of Customs.

The importer took the case to court. His attorney called one company witness who testified the imports were designed as ornaments for home decoration. He said they could be used as a nice toy—but they weren’t toys. And he had “never known it to be used in an orchestra.” Therefore it could not be held to be a musical instrument.

After the court heard the testimony and listened to the trilling of the tiny bird in its small brass cage, the court was moved to lyrical language in its decision, saying:

It may be contended that this bird does not emit a continuous melody, and that it is not an instrument upon which a chromatic scale can be played.... Music is the one harmonious science that dispells discord, softens the winds, and makes all nature kin. It has quickened the step for the warrior in the field of battle; has riveted the attention of the savage on the march of his enemy; has stirred the ambitions of men to higher ideals; and caused the beauty of the human heart to speak in friendliness and love....

Indeed, if it was not for sweet music, human life would be so dreary as to be unbearable. It matters not whence it may arise, from the throat of the opera singer or of the bird. From the scintillating trills of the flute or the low notes of the Chinese gong, music is yet the curious and most harmonious succession of sounds conceivable. It is the anesthetic of life.

The instrument in question is a musical one, and the tuneful ear of the Collector was correct in thus classifying it.

The protest is overruled.

The case of the Singing Canary underscores one of the most important functions of the U.S. Customs Bureau—the classifying of millions of imports which arrive in the United States and the determination of their dutiable value. The Customs Appraiser’s Stores—the port depots where the imports are examined—are sometimes a weird world in which things are not what they seem.

Every schoolboy is taught that a whale is a mammal. But when whale steaks reach the Customs examiners, they are classified as “fish cut to portions.” A tomato is a fruit to a botanist. But to every housewife and the Customs examiner it is a vegetable. Botanists classify rhubarb as a vegetable—but in Customs’ language it is a fruit.

Customs examiners are not just being arbitrary and ornery when they make these classifications in defiance of the botanist and the dictionary. The contradictions came about because the U.S. Court of Customs and the U.S. Court of Customs Appeals have made these rulings for the purpose of identifying imports so that a proper rate of duty may be paid upon them.

The courts have said over and over that in the language of commerce and in the everyday language of the streets, a whale must be considered to be a fish because it lives in the sea. Also, they have said the tomato is a vegetable because it is sold and eaten as a vegetable. And rhubarb in the legal world has become a fruit because it is bought and sold as a fruit.

In most cases, the appraisers have no difficulty in establishing the proper rate of duty to be paid on an import because the rate is fixed by law and the import is easily identified. But there are a great many imports not identified in any of the tariff acts or the amendments adopted by Congress, a lack which often creates difficulties, as it did when one importer brought in a shipment of Chinese mah-jongg sets.

The dominolike pieces used in playing the game were made of bone and bamboo. The importer and the government agreed that the material of chief value in the mah-jongg pieces was bone. The importer insisted that the duty should be 20 per cent of the value because the games were “manufactures of bone.” However the Collector classified these sets as “dominoes” and set the duty at 50 per cent. He ruled that the mah-jongg pieces came under the paragraph 341 of the Tariff Act of 1913 which provided for a duty of that rate on “dice, dominoes, draughts, chess men, and billiard, pool, bagatelle balls, and poker chips of ivory, bone or other material.”

This case also found its way into the Customs Court. The government attorneys argued that the mah-jongg pieces should be classed as “dominoes by similitude” even though they were not specifically listed under the acts passed by Congress.

The importer argued through his attorneys that the mah-jongg sets were not specifically named by Congress in any of the classifications established in the various acts and therefore the duty should be applied on the “component material of chief value.”

In this case the ruling went against the government. The court held that the mah-jongg sets were properly classifiable at 20 per cent as manufactures in which bone was the “component material of chief value.”

The appraisers’ staffs make millions of classifications each year on imported items, and there is remarkably little dispute over their decisions. Out of these millions, no more than 700 are disputed and contested in the courts annually.

Sometimes a seemingly obscure and innocuous ruling on a classification will blow up a storm across the country. Such a case developed when an importer brought in from Europe do-it-yourself kits containing parts of a miniature electric train and engine to be assembled by the purchaser.

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.

In the Collector’s office at the Customs House, the broker’s estimates of value and duty are reviewed for any errors. Then the invoice is transmitted to the appraiser’s office, where it is assigned to the expert who will examine this particular merchandise.

The Collector notifies the Customs inspector at the pier that he is to send a 10 per cent sampling of the imported merchandise to the Appraiser’s Stores to be physically examined by the specialist in that field. The specialist examines the samples of merchandise to see that they are correctly identified by the importer. Then he determines whether the broker’s estimates of value and duty are correct.

If the broker entered the merchandise at $100 a unit and the examiner believes that the appraised value should be $125 a unit, then the examiner makes the change. His report is then forwarded to the office of the Collector for final action, and normally the Collector accepts the examiner’s judgment.

The Collector then notifies the broker or the importer of the action that has been taken. The importer and broker may accept the ruling or they may take issue. If they disagree, they may appeal to the United States Customs Court. If either the importer or the government is dissatisfied with the lower court’s decision, an appeal may be taken to the U.S. Court of Customs and Patent Appeals. Usually the decision of the Appeals Court is accepted as being final, but either of the parties may carry the appeal further, to the Supreme Court.

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It seems odd that piracy should be a concern of Customs in the 1960s, as it was in the days of Jean and Pierre Laffite. But piracy still exists in modern dress and is a troublesome problem. The only practical difference between the modern pirates and the cutlass-carrying freebooters of the past is that the pirates’ methods have changed.

There was the case that might be called “The Pirates of Taiwan”—a case which created an incident of international embarrassment between the governments of the United States and Formosa (Taiwan) and a potential threat to the U.S. book publishing industry.

The “pirates” of Taiwan were the owners of small printing shops who engaged in the business of publishing—without the consent of the authors or the original publishers—almost every book of any merit printed in the English language.

With fantastically cheap labor, cheap paper, and a photo-offset printing process, the publishers in Taiwan reproduced such extensive works as the Encyclopaedia Britannica, dictionaries, sets of medical and scientific works, volumes of the classics, standard reference books, best-selling novels and popular non-fiction. The books were carbon copies of the originals, even to the U.S. copyright numbers and the phrase “Manufactured in the United States.” Nothing was changed in the pirating process, not even the typographical errors. From a casual examination, there was nothing to indicate that the books had not been published in Philadelphia, Boston, or New York.

The pirating problem became acute in 1959 when the Chinese publishers arranged contacts with sales agents in the United States, men and women usually located on or near a campus of a university or college. These agents solicited orders primarily from professors and teachers, librarians, researchers, and students. A standard set of the Encyclopaedia Britannica—normally costing about $400—was offered for less than $50. The $35 Columbia Encyclopedia was listed at $7.13. Gray’s Anatomy, a standard work for all medical students and normally costing $17.50, could be purchased for $2.50. Allen Drury’s best-selling novel of political life in Washington, Advise and Consent, cost $5.75 in American bookstores—but was advertised by the Chinese publishers at $1.25.

In some instances, the Chinese publishers obtained lists of likely customers and solicited them by mail. The prospects usually were men, women and organizations with modest incomes who were forced to operate on a very limited budget. And here they were being offered the opportunity to obtain expensive volumes of literary works—which they had long dreamed of owning—for only a fraction of the price being charged throughout the United States.

The books were shipped from Taiwan in individual packages. Even when the packages were opened for inspection by a Customs examiner, there was nothing to arouse suspicion of any irregularity. The first hint which Customs had of fraud was when a complaint was lodged in 1959 by the American Book Publishers Council and the American Textbook Publishers Institute.

The book publishers appealed for help to the State Department, the Customs Bureau, Congress and even to the White House. The sales of pirated books in the United States had become a multi-million-dollar business which threatened to destroy the American book market.

In theory, at least, the publishers could have protected themselves from the sales of pirated books in the United States by registering each title with the Customs Bureau and paying a fee of $75. The registration would have banned any import of a similar title without the publisher’s consent.

Such a procedure would have been prohibitive in its cost because each title produced is regarded by law as a different product. A single publisher might well have had to register as many as 2,000 titles annually to obtain total protection—at a cost of more than $150,000 in fees and incidental expenses. This cost would have been in addition to the $300,000 paid to copyright the works, at $150 per title.

When Customs agents opened an investigation they discovered that in the first half of February, 1960, sales of pirated books at Iowa State University alone totalled more than $1,200. It was obvious that American publishers and authors were literally being robbed of millions of dollars. Not only were the books being mailed to the United States in large quantities, but a great many sales were being made on Formosa to military personnel, to students, and to tourists who could not pass up such a bargain in literature.

Action was taken by Customs to halt the importation of the books through seizure at the ports of entry. Then the U.S. Ambassador to Nationalist China, Everett F. Drumright, took up the problem with Foreign Minister S. K. Huang in Taipei, seeking a ban on the export of the books.

The problem was not one presenting an easy solution because the laws of Taiwan technically tolerated such piracy. Many members of Chiang Kai-shek’s government were not entirely sympathetic to shutting off this lucrative trade which brought dollars into the treasury. There was the fact, too, that lack of any copyright agreement gave Chinese students access to cheap editions of technical books and famous works of literature.

However, an arrangement was worked out on the diplomatic level for a ban on the wholesale export of pirated books from Taiwan. The American publishers agreed to make available certain of their works to Chinese students. This agreement brought a halt to much of the illicit traffic, but the problem of pirated books continues to be troublesome.

Competition for world trade has also brought some sharp practices in which foreign manufacturers copy American-made automobile parts, tools, and other merchandise and then ship them into the United States. The articles are identical in appearance to the American-made product down to such small details as the American manufacturer’s registered trademark. But the price—and quality—are far below the American level.

The piracy in the field of trademarks is a continuing problem for Customs. There are approximately 5,000 trademarks registered with the Customs Bureau, including those registered by foreign firms. And each manufacturer guards his trademark jealously.

Many foreign trademark owners, for the protection of their representatives in this country, will not permit more than one of their trademarked articles to be imported into the United States by a tourist. Many tourists will go abroad and purchase an unusual bargain in a camera, perfume or some other item. They are dismayed when they return to this country to find that Customs will not permit them to keep more than one of the articles.

In these cases, Customs is following the letter of the law in preventing more than one article from being imported bearing the restricted trademark. It is only the trademark which Customs is interested in protecting. If the importer of the articles should obliterate or remove the trademark from the items he is carrying, Customs inspectors would have no objections to allowing them into the country.

The trademark prohibitions sometimes create unique problems. One of these developed when a Mexican cattle raiser shipped a herd of cattle to the Mexican border and was preparing to bring them into the United States at Nogales, Arizona. Before the cattle could cross the border an American cattle raiser rushed to Nogales and demanded that Customs halt the importation of the Mexican cattle. He argued that he was the owner of the cattle brand seared into the hides of the Mexican cattle and that any importation bearing this brand would be a violation of the trademark laws.

An investigation by Customs officers revealed that the American cattle owner was entirely correct. By chance, the Mexican cattle raiser had the same cattle brand as the American rancher. The American’s cattle brand was registered with the Customs Bureau, and his cattle brand was entitled to the same protection given to the trademarks of manufacturers. Eventually, the protesting American and the baffled Mexican got together and the American gave his consent for the importation of the cattle.

One section of the trademark law prohibits the importation of any articles which are marked in a manner to indicate a false country of origin. It also bans imports which are marked with false descriptions. To enforce this section of the law, Customs officers must police millions of imports to weed out the products of foreign manufacturers who engage in some shady and sharp practices.

In recent months there arrived from Japan a large shipment of boys’ baseball bats which were boldly marked with large letters burned into the wood, “American Model.” At the end of the bat in extremely small letters was stamped the word “Japan.” The Customs Service felt that the purchaser of these bats could only assume, by looking at them and seeing “American Model” in large letters, that they had been made in the United States. It ruled that before the bats could be entered, the word “Japan” would have to be stamped onto the bats in close proximity to the words “American Model,” to remove the taint of deception.

Another manufacturer shipped into the country flatware made of iron with a chrome plating. It was marked with the word “stainless,” implying that it was stainless steel. The courts and the Federal Trade Commission have held that the world “stainless,” when used in describing manufactured articles, has a very specific meaning: that the product has a great deal of resistance to normal corrosive elements and to wear and tear that other metals normally do not have. And to describe an article as stainless steel, it must be an alloy of steel mixed with chromium in approved percentages.

To protect the manufacturers of stainless steel products in this country, the Customs Bureau instituted a campaign to halt such sharp practices and to educate foreign manufacturers to the fact that they cannot mark products with the word “stainless” unless they meet the very severe test required for the use of this word. The shipment of cast-iron flatware was refused entry, and inspectors were alerted to guard against any such shenanigans in the future.