Tariff Crimes

U.S. Duties and Tariffs

In industrializing countries such as the United States so-called protectionist policies, in which high tariffs were purposely applied to foster industry and garner revenue, were extensive. Soon after the American Revolution, individual states such as Pennsylvania and Massachusetts levied duties to protect their infant textile industries. These duties were codified in the first federal Tariff Act of 1789 which also established the U.S. Customs Service. In addition, this pioneering piece of legislation provided for tariffs for hemp, nails, glass, and iron manufactures. In this period, revenue from tariffs was the principal source of government finances for the struggling American government. Even as American industry began to dominate in many sectors on an international scale from the 1880s to the 1920s, the U.S. government maintained an extensive tariff system although there were ongoing efforts to establish free trade agreements with Canada. Tariffs were regarded as an important step in the process of economic modernization and national identity. In this context, attempts by smugglers and merchants to skirt tariffs were common and widespread.

During the 1920s and 1930s when alcohol was prohibited, the U.S. concluded a number of bilateral treaties to allow the Customs service to board private vessels. This may have had some deterrent effect on cross-border crimes on a number of products. Yet alcohol smuggling itself skyrocketed during Prohibition, especially between Canada and the United States.

The high tariffs enacted by the United States in the context of the Great Depression of the 1930s, such as the Smoot-Hawley Tariff Act, helped export the economic crisis to the rest of the world as well as to provide economic incentives for smuggling and tariff avoidance. With incomes rapidly declining, however, the market for both legal and illegal goods during the Depression contracted.

Gatt and Nafta

After the World War II, the General Agreement on Tariffs and Trade (GATT) was established as an international body to monitor merchandise trade and foster reductions in trade restrictions. While there was some progress toward liberalization of trade, especially between developed capitalist countries, many nations continued to use tariffs as a means to develop their own industry and earn much-needed finances for government coffers. More recently, the North American Free Trade Agreement between Canada, Mexico and the United States (NAFTA, 1991) and the European Economic Union (EU, 1961) have restricted opportunities for trade crimes as tariffs have been lowered across the board.

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