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ANTISMUGGLING ACT

May 11, 1935.—Committed to the Committee of the Whole House on the state

of the Union and ordered to be printed

Mr. Doughton, from the Committee on Ways and Means, submitted

the following

REPORT

(To accompany H. R. 7980]

The Committee on Ways and Means, to whom was referred the bill (H. R. 7980) to protect the revenue of the United States and provide measures for the more effective enforcement of the laws respecting the revenue, to prevent smuggling, to authorize customs-enforcement areas, and for other purposes, having had the same under consideration, report it back to the House without amendment and recommend that the bill do pass.

NECESSITY AND PURPOSE OF THE BILL

Evidence was presented to your committee at the hearings that a loss of revenue of millions of dollars annually is being occasioned since the repeal of the eighteenth amendment by the increased activity of smugglers in evading our revenue laws. This activity can be curbed by adequate remedial legislation. The bill is designed to accomplish this result by extending (within the limits authorized by international law) our customs jurisdiction, by providing more effective means of enforcing laws relating to smuggling, and, generally, by making smuggling unprofitable. The bill will not disburb our existing international relations, but rather is designed to clarify our position, and to strengthen the understanding between foreign nations and ourselves in dealing with smuggling; nor will it interfere with legitimate commerce.

The Secretary of the Treasury personally appeared before your committee and testified to the necessity of enacting this bill if rapidly increasing post-repeal smuggling activity and consequent frauds upon the revenue of the United States are to be checked.

Prior to prohibition this country was not troubled much with smuggling. During the 14 years of prohibition the business of smuggling liquor into the United States from all parts of the world developed to very serious and troublesome proportions.

It was generally expected that with the repeal of prohibition liquorsmuggling operations and frauds on our revenue would be materially reduced. For a time after repeal such proved to be the case, but, commencing with the spring of 1934, liquor smugglers again appeared along our coasts, and their operations have now increased to alarming proportions. Thus, in March 1934, only two smuggling vessels were observed off the coast, but by February of this year this number had increased to 22. Thirty-nine foreign vessels are presently known to the Coast Guard to be regularly engaged in the illicit-liquor traffic. Inasmuch as these vessels are hovering beyond our customs waters, they are not subject to seizure under existing laws, and hence they carry on their smuggling operations almost with impunity.

Alcohol constitutes almost the entire cargo of these vessels. This is due to several things. It is very cheap. It can be produced abroad at costs ranging from 20 to 50 cents a gallon. It is highly concentrated. Two and one-half gallons of whisky can be made from a gallon of alcohol. It enjoys a large price differential due to the customs duties and internal-revenue taxes, which amount to $13.30 on a gallon of 1909 proof.

A summary of the movements of known alcohol smugglers for the last 4 months of 1934 indicates an outward movement from the principal ports of supply to the coast of the United States of over threequarters of a million gallons of alcohol. At this rate there would be an annual movement of over 2 million gallons. The annual internalrevenue loss on this amount of alcohol, at $3.80 per gallon, would be almost $9,000,000; the loss in customs duties, at $9.50 per gallon, would be over $21,000,000, making a total loss of over $30,000,000.

The practical difficulties in checking smuggling can hardly be exaggerated. Our 10,000-mile coastline with the many opportunities it affords for concealment, our comparatively small Coast Guard force of about 10,000 men, the seamanship and daring of the rumrunners, and the highly efficient and well-financed smuggling organizations that have grown up since the advent of prohibition, are all prime factors in making the smuggling problem one difficult of solution. Another, and not the least important factor, is the inadequacy of existing antismuggling legislation. The ineffective legislative weapons at present at our disposal for this work have time and time again permitted the escape from punishment of vessels which were violating every principle behind our customs-enforcement laws, vessels, in fact, which had never earned an honest dollar in their entire seagoing lives, but had been designed, built, and used exclusively for smuggling into the United States.

The more serious defects in the existing provisions of the revenue laws from the viewpoint of effective enforcement are

1. The statutory authority of the customs officials is not coextensive, so far as the area of enforcement is concerned, with the privileges conferred upon the authorities of the United States by the several treaties for the prevention of the smuggling of intoxicating liquors.

2. Existing statutes do not provide an effective basis for seeking international cooperation in the suppression of the illicit liquor traffic.

ANTISMUGGLING ACT

May 11, 1935.-Committed to the Committee of the Whole House on the state

of the Union and ordered to be printed

Mr. Doughton, from the Committee on Ways and Means, submitted

the following

REPORT

[To accompany H. R. 7980)

The Committee on Ways and Means, to whom was referred the bill (H. R. 7980) to protect the revenue of the United States and provide measures for the more effective enforcement of the laws respecting the revenue, to prevent smuggling, to authorize customs-enforcement areas, and for other purposes, having had the same under consideration, report it back to the House without amendment and recommend that the bill do pass.

NECESSITY AND PURPOSE OF THE BILL

Evidence was presented to your committee at the hearings that a loss of revenue of millions of dollars annually is being occasioned since the repeal of the eighteenth amendment by the increased activity of smugglers in evading our revenue laws. This activity can be curbed by adequate remedial legislation. The bill is designed to accomplish this result by extending (within the limits authorized by international law) our customs jurisdiction, by providing more effective means of enforcing laws relating to smuggling, and, generally, by making smuggling unprofitable. The bill will not disburb our existing international relations, but rather is designed to clarify our position, and to strengthen the understanding between foreign nations and ourselves in dealing with smuggling; nor will it interfere with legitimate commerce.

The Secretary of the Treasury personally appeared before your committee and testified to the necessity of enacting this bill if rapidly increasing post-repeal smuggling activity and consequent frauds upon the revenue of the United States are to be checked.

Prior to prohibition this country was not troubled much with smuggling. During the 14 years of prohibition the business of 6 For effective administrative control over boats of less than 500 net tons which are the boats used for illicit importation from foreign countries and for similar control over small contact boats which bring the contraband from hovering vessels; and

7. For changes in rules of proof in forfeiture proceedings to enable effective handling of such cases.

At the present time the customs control of the United States does not extend beyond the 12-mile limit, and consequently smuggling vessels hover beyond that limit with impunity. In fact, although this country has liquor treaties with Great Britain and 15 other nations authorizing us to seize their vessels within 1 hour's sailing distance of our shores, we are unable to do so when such vessels are beyond the 12-mile limit although within 1 hour's sailing distance of our shores. This is because our courts have held that the treaties are not selfexecuting in the sense that they extend the jurisdiction of any of our laws. The courts hold that even when such treaties are in force our laws do not extend beyond the 12-mile limit, but that the foreign country has, by treaty, merely agreed not to object if we exercise customs control over its vessels within 1 hour's sailing distance of our shores, measured either by the speed of the mother smuggling vessel or her contact boats, whichever may be the speedier.

Since our laws do not extend beyond the 12-mile limit, our customs and Coast Guard officers are unable to go beyond that limit, as respects these treaty vessels. Hence, if the “1 hour's sailing distance" of a treaty vessel is more than 12 miles, she can carry on unrestrained smuggling operations beyond the 12-mile limit. The effect of the bill is to include the waters beyond the 12-mile limit within which we are permitted by such treaties to board and examine vessels as a part of our customs waters for the purpose of enforcing our laws on the vessels of the treaty nations. Thus the jurisdictional gap between the limit of control which the treaties permit us to exercise and the limit to which our laws extend by their terms is filled by this bill in the case of such vessels.

Extending to a distance of 3 miles from the shore, generally speaking, is a zone known as "territorial waters" within which the jurisdiction of a nation is as absolute and complete, to all intents and purposes, as if the land extended out to that point. Beyond territorial waters, however, is a wider zone known as "jurisdictional waters" within which nations exercise a limited jurisdiction. The United States has, by statute, since 1790, exercised customs control over foreign and domestic vessels within 12 miles of its shores. Numerous other nations exercise customs control over both foreign and domestic vessels to a varying but considerable distance beyond the 3-mile limit. In fact, Great Britain, at a time when her coasts were harassed by smugglers to an extent comparable to the smuggling problem now confronting this country, exercised customs control over foreign vessels as far as 300 miles outward from its shores. Such legislation is predicated upon the rule of international law stated by Chief Justice Marshall in Church v. Hubbart (2 Cranch 187), that a nation may exercise jurisdiction such distance beyond the 3-mile limit as may be reasonable and necessary to secure its revenue or for national protection. The bill permits the extension of our customs control to foreign vessels which are beyond the 12-mile limit. This may be done only if a customs-enforcement area is established there. The estabe lishment of a customs-enforcement area cannot, however, affect vessels of foreign nations with which we have liquor treaties in violation of those treaties.

Since section 1 of the bill establishes customs-enforcement areas only after a finding of fact by the President that smuggling vessels are actually present in such areas and, by reason of their presence, menace or are likely to menace the revenue of the United States, etc., and since the bill makes applicable in such areas only a limited number of laws and since only such of those laws may be enforced in such areas upon such vessels as the President finds and declares to be necessary to secure the revenue of the United States, etc., it is evident that the extension of our customs control provided in section 1 meets the test of reasonableness required under international law.

EXPLANATION OF THE BILL

TITLE I

This title contains new provisions of law.

Section 1: This section provides for the establishment of customsenforcement areas outside the 12-mile limit, whenever the President finds and declares that smuggling vessels are hovering beyond that limit and that by virtue of their presence there, they are menacing or are likely to menace the revenue or interfere with the legitimate commerce of the United States. Within such customs-enforcement areas, officers of the customs are authorized to enforce any applicable law to such extent and under such circumstances as the President finds and declares to be necessary to secure the revenue of the United States, etc. The effect of this section, however, is not to extend any law of the United States to a customs-enforcement area, but only to permit the President upon the finding and declaration referred to above, to control the enforcement, in areas where smuggling vessels are actually present, of the laws which by act of Congress are already applicable in such areas.

This section, at the same time, specifically preserves as a fundamental principle of the bill the rights of foreign vessels under the various hour sailing distance liquor treaties. Except by special arrangement with the treaty nation concerned, no treaty vessel can be seized under any provision of the bill beyond treaty limits. That is to say, customs control cannot be exercised over a treaty vessel in a customs-enforcement area if the vessel is beyond 1 hour's sailing distance of the shore, except by express consent of the treaty nation concerned. It is believed that this provision will stimulate and serve as a basis for special executive agreements with treaty nations with respect to individual vessels, which will permit enforcement of our laws from time to time against notorious, foreign smuggling vessels, sailing under the protection of treaty flags, at places and under circumstances not covered generally by the particular treaty.

Section 2 (a) subjects to fine of not more than $5,000, or to imprisonment of not more than 2 years, or to both, any person owning whole or in part any vessel of the United States or controlling it directly or indirectly who permits such vessel to be employed in smuggling merchandise into any foreign country, if such foreign country provides any penalty for violation of the customs revenue laws of

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