The income tax collected throughout the struggle—and until the law expired in 1872—helped carry the nation through its money crisis. Then the collection of duties by the Customs Service once more became the country’s primary source of revenue.
But during most of the war and for many years afterward, the venerable Customs Service’s cloak of respectability was at best a tattered and stained garment. It had become, particularly in New York City, the symbol of the political spoils system which had been encouraged by that partisan old fighter, Andrew Jackson.
The office of the Collector of Customs at the Port of New York had become a prize second only in political prestige and influence to a Cabinet appointment. The man receiving this office was in a position to dole out lucrative jobs to hundreds of the party faithful, to collect tribute for his party’s campaign chest, and to use his influence in shaping the affairs of his city, county and state. To a lesser degree, the same situation existed across the country.
Under such blatantly political management, it was hardly surprising that the Customs Service in New York should become the target of bitter charges of graft and corruption. The charges became so loud and persistent in 1863 that the administration ordered an investigation into the management of the New York Customs House.
A report from the Treasury’s solicitor said in part: “As to the accessibility of many of those employed in the Customhouse to corrupt influences, the evidence is conclusive and startling.... The statements herewith submitted seem to justify the belief that the entire body of subordinate officers, in and about the Customhouse, in one way or another, are in habitual receipt of emoluments from importers or their agents.... It is shown that a bond clerk, with a salary of $1,000 per annum, enters upon a term of eight years with nothing, and leaves it with a fortune of $30,000....”
Until Congress slammed the door on such practices in a reform move generated in the 1870s, Customs officers were legally permitted to receive half of any fines and forfeitures resulting from the seizure of imports which had been undervalued or underweighed by an importer, even though the methods of determining dutiable value were complicated and subject to dispute.
However, the law encouraged collectors, appraisers and inspectors to seek out discrepancies in values and weights and to give themselves the benefit of any doubt. In one case, the great Phelps, Dodge & Co., metal importers, was charged with an attempt to evade duties by undervaluing a shipment worth $1,750,000.
The company’s attorneys argued in vain that there had been no attempt to defraud the government; that if a mistake had been made it was an honest error, and that even with the benefit of a doubt, the most that the government could fairly claim in unpaid duties was $1,600.
With the entire shipment subject to forfeiture, the company finally agreed to settle for $271,017.23—50 per cent of which was divided among the Customs officers. Records of the time showed that one of the Customs officials who received an award of $56,120 was Chester A. Arthur, who later would become President of the United States.
Arthur was active for years in Republican politics in New York City, working his way up through the ranks until he became a member of the New York State Republican Executive Committee. He was rewarded for his labors in 1871 with an appointment as Collector of Customs in New York City.