Specific duties are simple to calculate, easy to collect, do not require a high grade of official skill and leave few loopholes for fraud. The great drawback is that they produce immense inequality of duty from the variation in cost and quality, and that inequality in exactly the wrong direction. That is, a certain number of cents on a pound or yard of cheap material may be very high or even prohibitory, while on expensive material the same may be trivial. Specific duties have an advantage over ad valorem duties in that they can be more suitably applied to raw materials and manufactures of a simple character, where there is uniformity of quality and where few opportunities are pre sented for fraudulent entries of goods. Hence they are applied to customs taxes on cattle, iron and steel products, minerals, flax, hemp, wool, lumber, grain, sugar, spirits, wines and tobacco. Whenever the tariff is revised at tempts are made to extend the list of specific duties and at times even the Democrats have favored such duties as a check to undervalua tion—as in 1857, when President Buchanan expressed dissatisfaction with the exclusive use of the ad valorem rates of the Walker tariff of 1846, since they permitted a large amount of fraud by undervaluation. In order to adjust specific duties to value some tariffs have in corporated a scale of rates, based upon value, which practically amounts to an ad valorem rate. Section 131 of the Payne-Aldrich tariff of 1909 provided a scale of duties on certain kinds of steel products as follows: Valued at cents or less per lb., 7/40 of 1 cent per lb. Valued at to 1.3 cents per lb. 0.3 of 1 cent per lb. Valued at 1.3 to 1.8 cents per lb. 0.5 of 1 cent per lb. Valued at 1.8 to 2.2 cents per lb. 0.6 of 1 cent per lb. Valued at 2.2 to 3.0 centa.per lb. 0.8 of 1 cent per lb. Valued at 3.0 to 4.0 cents per lb. 1.1 of 1 cent per lb. Valued at 4 to 7 cents per lb. 1.2 of 1 cent per lb. Valued at 7 to 10 cents per lb. 1.9 of 1 cent per lb. Valued at 10 to 13 cents per lb. 2.3 of 1 cent per lb. Valued at 13 to 16 cents per lb. 2.7 of 1 cent per lb. Valued at 16 to 24 cents per lb. 4.6 of 1 cent per lb. Valued at 24 to 32 cents per lb. 6 cents per lb. Valued at 32 to 40 cents per lb. 7 cents per lb.
Valued at above 40 cents per lb. 20 per cent ad valorem.
Ad valorem duties, theoretically the fairest of all, are full of practical difficulties as a revenue producer and highly unsatisfactory as a protective system, because such duties are levied according to the value of the imported commodities, instead of the weight, bulk or other unit of measurement of the commodity. In the former line the difficulties of fixing the value, the oppoitunities for fraud and under valuation, the temptation to officials to connive and the expensive skilled officials needed to work it, all stand in the way of its usefulness to the government. The value is usually fixed at the point of export ; but that involves minute knowledge by the official of a vast number of trades and manufactures and the fluctuations of trade conditions; and moreover, the market may have changed materially from the time the duty is assessed to the time the importer pays it, which shifts the burden from the gov ernment to the merchant. Furthermore, the plenary powers assumed by the government to throw all the burden of doubt on the importer, to seize his goods on suspicion and confiscate them on proof satisfactory to itself, but not to him, though partially remediable by the courts, and very likely necessary to secure the govern ment, place the importer in a situation by no means free from peril. And the tedious, costly and vexatious red tape of invoicing and ap praising and satisfaction of legal forms are bad at best, even if necessary; and when reinforced by the zeal of officials anxious to win laurels by harassing importers, and desirous of throw ing difficulties in the way of even legitimate trade, make it impossible for small capitalists to bear the risks. Thus the small merchant is
driven out of the business and the trade con centrates in a few great houses. Under ad valorem rates protection is not assured to home producers since when a decline of prices occurs a corresponding drop of duties takes place, and when he most needs it the producer cannot ob tain protection. The Constitution provides that °no preference shall be given by any regulation of commerce or revenue to the ports of one State over those of another) and hence some argue that ad valorem duties do not conform to this requirement because preferences are in evitable under such duties. Protectionists claim also that frauds through undervaluation are more prevalent under ad valorem rates than under specific duties and therefore the objects of a tariff bill are defeated. The statements of importers, even though made under oath, are not regarded as final evidence of the value of goods imported, which only tends to com plicate the efforts to ascertain correct values, and therefore a complex and expensive system of obtaining information of valuations is neces sary under tariffs containing ad valorem rates only. The Walker tariff of 1846 contained ad valorem rates exclusively and though in some instances the duties were as high as 75 per cent and the average 25 per cent, protectionists refer to this as a free trade tariff because specific duties were excluded. Many specific duties were restored by the Morrill tariff of 1861 and retained for many years, and while an effort was made in the House to restore ad valorem duties in the Gorman-Wilson tariff of 1894; the Democratic protectionists of the Senate pre vented such action. In the Underwood tariff of 1913, however, ad valorem rates were sub stituted for specific rates in numerous instances.
Compound duties is the term applied to the combination of specific and ad valorem duties imposed upon the same article when imported The object of a compound duty may be twofold — to shut out cheap grades of goods by adding a specific duty to the ad valorem duty, thereby increasing the amount of taxation, or to afford compensation by additional protection where a duty is imposed upon the raw materials used in the manufacture of the article. The tariff of 1824 was the first to levy a compound or mixed duty (on certain kinds of glassware) and the tariff of 1828 imposed a duty of four cents per pound on wool and an additional 40 per cent ad valorem. In this way the tariff makers hoped to restrict the importation of the coarser grades of wool and, by handicapping the manufacturer who depended on foreign coarse grades, to place the market under the control of those Americans who manufactured the finer grades. The tariff makers placed the compensatory duty at 12 cents per pound plus an ad valorem rate designed to protect the manufacturing industry, basing their calcula tions on the assumption that a pound of finished cloth required four pounds of imported wool, wherefore the duty should be four times the wool duty of three cents levied by the same act. Some later schedules levying duties on wool retained this same rate of four to one. During the Civil War period the list of commodities on which compound duties were imposed was greatly extended, so as to compensate for taxes levied on internal manufactures of the same nature, the list including iron and steel products, marble, cottons, carpets, cigars, mineral waters, soaps, perfumes, wines and liquors.