The Constitution of the United States went into effect on March 4, 1789 and four months later the U.S. Customs Bureau was one of the first federal agencies to be formed.
The Tariff Act authorized the collection of duties on imported goods. Congress provided the power to "... lay and collect taxes, duties, imposts and excises, pay the debts and provide for the common defense and general welfare of the United States." and also "To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes." Tariffs between states is prohibited by the U.S. Constitution, and all domestically made products can be imported or shipped to another state tax-free.
As a newly developing nation, the import of goods from other lands and countries was vital to the growth of the country, but wanted to protect the growing industries within the country from cheaper imports. However, one of the first problems for the new nation was its massive debt load. The simple collection of duties on imported goods was seen as a critical component of the survival of the United States.
First Tariff on Imported Goods into the United States
The Customs Bureau monitored the the established ports of entry and customs districts. Shortly after the first Office of Customs was opened Captain James Weeks sailed into New York with miscellaneous goods from Italy and was accessed a duty of $774.41. As the country developed and debts grew, certain goods were given lower excise taxes including whiskey, rum, tobacco and refined sugar. A long list of goods was developed with different customs rates and some even on a "free" of tariff list. These import tax schedules became a heavy load on Congress to manage and enforce.
For the next century, tariffs avaeraging about 20% of foreign imports financed the government. Tariffs accounted for nearly 95% of federal revenue at one time until the Federal Income Tax began after 1913. The new revenues from the income tax made tariffs a smaller percentage of economic impact.
As customs administration developed, several divisions were consolidated in 1927 to form the Bureau of Customs. The division administered in the Treasury Department and the Special Agency Service were combined. Since the 1940's, foreign trade policies have focused more on reciprocal tariffs and low rates rather than a significant source of Federal funds.
In 1973, the Customs Bureau was renamed the U.S. Customs Service and then U.S. Customs was replaced with the current Bureau of Customs and Border Protection in 2003.
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Photo credit:National Archives