CHAPTER IV.

THE INTERNAL FORM OF THE TARIFF.

(2) FREE GOODS AND PROHIBITED GOODS.

ASSIMILATION AND MIXED GOODS.

§ 1. WHEN goods cross the customs frontier of a country, two different views may be entertained as to their liability to pay duty. It may be held that in principle all goods whatsoever are liable to pay customs duties (unless specifically exempted), whether these goods have been expressly mentioned or not; whilst, on the other hand, it may be laid down that only goods expressly mentioned in the tariff, and those only, shall be liable to pay customs duty, whilst the rest are free without further question. It is in this way, that there is created the problem of the "non-enumerated goods" with which the first part of this chapter will be occupied.

§ 2. The first of these principles obviously springs from an attitude of mind specifically Protectionist, and we shall call it the Principle of Inclusion; the second from an attitude which cannot be classed as "free trade," though it has some analogies therewith; it may be termed the Principle of Exemption. But the bare setting forth of these two principles does not give one any clue to the treatment to which non-enumerated goods are in detail subject under the principle of inclusion, nor to the form in which the principle is enunciated in the tariff or customs law itself.

The form in which the principle is enunciated can take two main shapes (1) The governing principle is formally expressed, with or without instructions as to the technical treatment to be applied, in the preliminary articles of the tariff or in the customs law as distinct from the tariff.

(2) The non-enumerated commodities may be treated

as a unity and classified under an appropriate class head in the body of the tariff itself.1

It will be obvious on reflection that these modes of expression are not incompatible with one another. A formal indication of the principle may be followed in the body of the tariff itself by a more detailed exposition of the treatment. Where the principle of exemption is followed, the formal statement of the principle is, of course, sufficient in itself, and no further statement is necessary (though the interpretation even here may be a very difficult matter). In the other case a formal a formal statement always requires further

elucidation.

The following scheme shows the possibilities of the case :—

L

Statement in body of tariff.

Only the last link in the chain is really necessary.

We may conclude this aspect of the matter with a few illustrations. The two principles enumerated can be drawn from the laws of Switzerland and Holland respectively. In Holland, the law of August 15, 1862, lays down—

"Art. 1. Under the name of import duty a duty shall be levied upon the under-mentioned articles when imported for home consumption. The import duty is set forth in the annexed tariff.

"Art. 2. No duty is levied upon goods not mentioned in Article I unless these goods can, according to their nature. or destination, be classed under one of the headings of the tariff." In Switzerland, on the other hand, the opposite principle prevails. By the federal customs law of June 25, 1893, Chapter I., Article I.

"All goods imported or exported from Switzerland are,

1 There is a third method which consists in classifying the non-enumerated goods within the classes to which they belong by affinity-i.e., differentiating them ab initio. But this can be regarded as a particular case of the general principle just mentioned. See below, § 7.

2 Kelly, p. 397; cf. Art. 3 of the German Vereinszollgesetz of 1869.

3" Die schweizerische Zollgesetzgebung, Textausgabe von Blumenstein and Gassmann," Zurich, 1918, p. 9.

with the exceptions laid down in this law, liable to duty at the rates laid down in the tariff law.

"The importation is free.

"(a) Of all objects which are designated as free in the tariff from time to time (jeweiligen), or made so in consequence of treaties with foreign powers."

In France, again,1 the principle enunciated by the law of 6-22 August, 1791, still holds good-viz., that the only goods exempt from duty are those which the law specifically mentions.

In point of fact the majority of modern tariffs are based on the principle of inclusion, as inspection will speedily reveal. Reference may be made to Italy, Art. 2 of Preliminary Dispositions of Tariff; Argentine, Art. 15 of Chap. IV., Law No. 4,933,3; Chile, Tariff of 1916, Art. 2; Canada, Tariff of 1907, Tariff No. 711; 5 South Africa, Tariff of 1914, Class VI., No. 193; U.S.A., Tariff of 1913, Class IV., No. 386. It will be noted that in some cases the principle is incorporated in the preliminaries to the tariff, in other cases it is included in the body of the tariff.

7

§ 3. Provided the principle is somewhere laid down, it seems to make very little difference whether it is formally expressed, or formally expressed with further directions, or expressed in the body of the tariff only without more ado. The point of convenience, however, carries some weight even in a matter of this sort. In France, for instance, the historical principle of treatment seems to have been questioned owing to lack of definite expression, as we learn from Pallain's lucid treatment of the matter. This is, of course, a different matter to the interpretation of the rule, whatever it may be, by a court of law. For the student of customs institutions and for the inquirer into tariff regulations such a preliminary statement ↓ is, of course, a great safeguard against fruitless waste of time.

1 Pallain I., § 76.

2 Kelly, p. 449.

3 F.T.C. Report, p. 107.

4 F.T.C. Report, p. 149.

5 Statutes of Canada, 1907.

6 Act No. 26 of 1914.

7 In the 1909 tariff this was No. 481. The present rate will be found, Kelly, p. 817.

Pallain I., § 76, et seq. The principle is formulated by the law of 6-22 August, 1791, that the only goods exempt from duty are those which the law specifically

mentions.

§ 4. What are the merits of either principle, looked at from the technical standpoint? Let us first of all remember the great difficulties that must be experienced in completing and enumerating all the possible varieties of goods that pass across the frontiers in view of the great complexity of modern commerce. A rule that only enumerated goods should be liable to duty, if strictly interpreted, fails to strike at least three important categories of products (1) Substitutes, (2) absolutely new commodities, and, in certain cases at any rate, (3) commodities entered in a trade-name or category which bears no resemblance to those in the tariff, or the resemblance to which is disputed. It will be in most people's recollection that the courts had, in this country, great difficulty in defining the trade meaning of "sardine." 1 In some cases where the question at issue is the determination under which rate a particular commodity is to go, the exact description or use of which is in dispute, the problem is one of correct classification, but where no unenumerated clause exists and the commodity would escape the duty if it cannot be clearly shown to belong to the group of taxable articles, the problem is appropriate to our present enquiry. The case of new commodities explains itself; but the problem raised by substitutes is really no more difficult. The substitute may be a new commodity not previously known, or which, previously known, has not been mentioned in the tariff. To exclude it in either event would mean that the taxed commodity is not bought, and that the sale of the untaxed would rise.

§ 5. A strong case may, therefore, be made out for specific treatment of unenumerated articles. Is it possible to make out an equally strong case for the other principle?

It may be urged in the first place that certain administrative advantages are secured by the principle of limited protection or exemption. It leads to more careful definition and enumeration in the tariff, for the penalty for ambiguity is the freedom of the article. Secondly, it may be urged that the principle of treating new commodities as if the trade

:

1 Cf. the following F.T.N., No. 23, pp. 64-65, Australia :—“ An order issued by the Department of Trade and Customs, under date 9th July, 13, 1916, state that the term ' sardine' is not a generic expression which can be lawfully applied to any small fish prepared and packed in oil in tins, but can lawfully be applied only to the immature pilchard. In the case of canned fish imported into Australia on and after March 1st, 1917, the word 'sardine' may be used only as above indicated."

in them were fully established is undesirable on general grounds, since it has yet to be shown what specific principle of rating. ought to be applicable to them. The case of substitutes is really similar (in those cases-namely, where, in consequence of newness, it has not been enumerated). Thirdly, it may be said that the general public is entitled to know what the duties are which it is called upon to pay, and the rule that unenumerated commodities should be liable throws far too much power in the hands of the bureaucracy, since what' ever method of treatment is applied, a wide margin of uncertainty must necessarily exist.

§ 6. It must be carefully kept in mind that though views as to the proper fiscal policy to be pursued naturally affect the judgment as to the proper policy in this particular respect, yet that problem is one which is nearly independent of general principles altogether. It is a problem which arises within the limits of the general principle of protection, rather than an issue between the two schools of thought. When either the principle of customs duties for revenue purposes only, or the principle of protection for rigidly limited industries only is adhered to, the problem obviously does not arise in its broad form at all, although even here there are marginal cases-i.e., doubts as to unenumerated commodities of the kind specificially taxed. The full force of the difficulty is only felt when the principle of protection in general is already accepted, and when the extreme complexity of modern commerce and the tendency to the specialisation of tariffs have to be adjusted to one another.

§ 7. So long as broad distinctions only were being drawn, extreme preciseness of definition was not perhaps essential. But at this point the question is forced on one, what is really meant by an unenumerated commodity? It is clearly a negative conception, but what is its precise connotation? Now a glance at any modern tariff will show that there are really three kinds of "unenumerated" commodities; the treatment of the second and third of which alone present any broad difficulty of treatment.

There are commodities not specifically mentioned, but so explicitly associated with a definite sub-group or tariff unity that its treatment, once its nature is known, offers no difficulty.

(2) There are commodities not specifically enumerated but associated in the tariff with a general class heading.