trade and friendly relations between the various countries of the Western Hemisphere.

At the meeting of the International High Commission at Buenos Aires, April 3 to 13, 1916, the following resolution was unanimously adopted:

Resolved, That it is highly advantageous that a Pan American Financial Conference of the character of that held in Washington in 1915 meet every two years; that the next Pan American Financial Conference take place in 1917 in Washington, the exact date to be agreed upon subsequently among the various Governments on the initiative of the central executive council of the International High Commission; that the ministers of finance of all the countries of the American Continent be urged to attend in view of the fact that the financial questions there to be discussed constitute the most important problems of these conferences, and in view also of the fact that the presence of these ministers is conducive to the more effective carrying out of the resolutions adopted.

The selection of Washington as the place for the meeting of the Pan American Financial Conference in 1917 was renewed evidence of the good will and friendship of Latin America for the United States. It is proposed that this conference shall consist, as before, of the ministers of finance of the various countries and two other members to be appointed by their respective Governments. I earnestly hope that the Congress will extend again the hospitality of the United States to the Latin-American nations by appropriating for the conference of 1917 an amount equal to that appropriated for the financial conference of 1915, namely, $50,000, for the purpose of entertaining our Latin-American guests on that occasion. I can not overstate the value of these conferences in bringing about a better understanding and promoting in this practical manner friendly relations and enlarging trade and commerce with our southern neighbors.

CUSTOMS.

For the fiscal year ending June 30, 1916, the receipts from customs amounted to $213,185,845.63, an increase over the aggregate receipts for the preceding fiscal year of $3,399,173.42. The imports for this fiscal year amounted to $2,197,883,510, which is an increase over the preceding fiscal year of approximately $484,000,000. The value of the exports for this period was $4,333,658,865, an increase in exports over the previous year of $2,768,589,340.

The conditions which led to the abrupt falling off in customs duties of the previous year still continue. The European conflict has involved the nations of continental Europe from which come a large part of the dutiable imports and for this reason the customs receipts have been substantially curtailed. Before the breaking out of the European war the amount of the collections indicated clearly that under normal conditions the present tariff will produce all the

revenue which it was estimated to produce at the time it was drawn, and since the war the receipts under the tariff bill have been all that could be expected under the present conditions.

In some directions the activities of the Customs Service, on account of the falling off of dutiable imports, have decreased as compared with the conditions prior to the war. While the amount of revenue collected has decreased, both imports and exports have increased in volume. Both this increased commerce and the maintenance of the neutrality of the United States have brought additional responsibilities to the service.

The increase in drawback has also added to the work of the department. In the past year there was paid in drawback upon the exportation of goods manufactured in whole or in part from imported dutiable materials the sum of $15,370,945. This is an increase of over 100 per cent of the amount paid during the fiscal year 1915, when the amount of drawback was $7,403,686. This increase in the amount of drawback paid follows from the increase in the industrial activities of the country, the increase in value of the imports being in great part due to the increased importations of raw materials for manufacture in the export trade.

The expense of collecting the revenue from customs for the fiscal year 1916 amounted to $9,813,085, notwithstanding the increase in the activities of the Customs Service and the added work incident to the enforcement of the seamen's act. This indicates an actual saving as compared with the previous year of $117,176, a decrease from the expenses of conducting the service in 1914 of $628,093, and in 1913 of $1,118,319. This decrease in cost was made possible by improved methods and by the installation of modern devices of performing office work. The expenditures for the purchase of such improved devices in this year prevented a further reduction in operating cost. The total number of employees during the fiscal year has decreased from 7,079 to 6,881. The average compensation of the employees during the same period has increased $26 per capita, from $1,311 to $1,337. The department has adopted the policy of not dismissing efficient employees solely because their services were not needed. To avoid dismissals the force has been shifted, in order that decreases in the force might be effected through vacancies which would occur by death, resignation, or removal. Discrepancies have existed in compensation paid for the same service in different parts of the country, and it is the policy of the department to try as much as possible to standardize the compensation paid in the various districts, with due regard to the local conditions. Increases in compensation during the year amounted to $175,000, distributed to deserving employees throughout the Customs Service, which amounted to a net increase per capita of $26. Despite this increase there was a net decrease in operation during the year of $117,176.

The Customs Service maintains an efficiency board for advice and assistance to the department in working out its problems. During the past year this board has visited 11 customs districts and has made recommendations to customs officers in those districts to standardize and increase the efficiency of the service. When these recommendations are made operative in full, it is expected that substantial economies will be effected.

The system for the exchange of information relating to the value and classification of imported merchandise, through what is known. as the "classification and valuation reports" (C. V. R.), has been greatly improved. This is accomplished by having the various appraising officers forward daily to the appraiser at the port of New York data taken by them from invoices, price lists, and catalogues received, accompanied by samples when practicable. These reports are compared with each other and with the records and data at the port of New York, and information is sent out to the various appraisers of changes in market prices and advances in values. Any transactions indicating fraudulent undervaluations are made the subject of special investigation. This has resulted in securing an almost perfect uniformity in the valuations and classifications of the same merchandise at the various ports and furnishes added means for the detection of fraudulent undervaluations.

The customs regulations have been revised for the first time since 1908, and the new volume has been issued as "Customs Regulations of 1915." The entire work was performed by employees in the Customs Service, detailed for that purpose, without any extra cost to the Government. This has saved the special appropriation which, in the past, has been made by the Congress to revise these regulations. The Division of Special Agents has been consolidated with the Division of Customs. This consolidation accomplished a direct saving in operating expenses of $11,020 per annum. Experience of nine months under the new system has demonstrated that the work formerly done in both divisions can be performed more efficiently and with better cooperation under one head.

The annual meeting of customs officers was held in October, 1915. These conferences permit discussion of problems of the Customs Service, resulting in better understanding among the employees and in bringing forth many valuable suggestions for the improvement of the service. At the last conference the following resolutions were adopted:

(1) That section 3 of the act of February 13, 1911, be so amended as to permit bonds to be taken in a penal sum less than $50,000 for the issuance of special licenses and permits for the immediate unlading of vessels at night.

Such bonds are required by statute to be given in the sum of $50,000, whether the vessel be large or small and whether the cargo be of great or little value. Experience has shown that the possibility of incurring a liability on these bonds is remote, and it would be in the interest of commerce to permit the bonds to be taken in such an amount as would protect the Government, which would in almost every instance be less than $50,000.

(2) That section 2857, Revised Statutes, be repealed. This section in effect requires an importer to give a bond for the production of a triplicate invoice in the event that, through a change of the destination of the merchandise, a triplicate invoice is not received at the time of entry, although the importer may be possessed of the duplicate invoice. In such cases, the triplicate invoice has been forwarded by the consul before whom it was certified to the port of destination named in the invoice. Under the regulations, when such merchandise is entered at another port, the triplicate invoice is secured from the collector of customs at the original port of destination. The statute requires the giving of unnecessary bonds by importers, and both they and the customs officers should be relieved from this red tape.

(3) That the act of June 10, 1880 (21 Stat., 173), relating to the forwarding of merchandise under entry for immediate transportation from the port of arrival to the port of destination, be so amended as to permit such entries to be taken at any time within one year after arrival, instead of limiting the time to 10 days after the unlading of the merchandise. The conference was unanimously of the opinion that there is no good reason for placing such a 10-day limit upon the time within which merchandise may be so forwarded. The act of June 10, 1880, is inapplicable to present conditions in many respects, and its thorough revision is recommended in the interest of commerce and for the purpose of eliminating unnecessarily cumbersome procedure in the customhouse.

(4) That sections 3038, 3039, and 3048, Revised Statutes, be repealed. These statutes prescribe the manner of the payment of drawback upon the exportation of merchandise. Under the procedure provided, a "debenture certificate" is first issued; that certificate may be surrendered at the end of 30 days and a check given by the customs officer in payment thereof. What purpose was ever served by the procedure is problematical. At the present time no purpose appears to be served other than requiring double work in the issuance of the debenture certificate and the subsequent issuance of a check for the same transaction.

My annual report for the year 1915 contains a recommendation for an amendment of sections 2899 and 2901, Revised Statutes, and the repeal of sections 1790, 2693, 2775, 2777, and 2782. I recommend the adoption of the resolutions passed at the collectors' conference

in 1915 and renew the recommendations made in my annual report for 1915.

INTERNAL REVENUE.

The receipts of the Bureau of Internal Revenue for the fiscal year ended June 30, 1916, based on collectors' reports, amounted to $512,723,287.77, the greatest in the history of the department, showing an increase of $97,042,263.91 over the previous year. This unprecedented amount was collected at the low cost of $7,199,163.32, or 1.4 per cent.

Every source but one from which a large amount of internalrevenue taxes is collected shows decided gains over the previous year. Taxes from distilled spirits increased $13,385,692.80; from manufactured tobacco, snuff, cigars, and cigarettes, $7,853,337.28; from the corporation income tax, $17,828,189.17; and from the individual income tax, $26,897,432.54. The receipts from the tax on fermented liquors (exclusive of the additional tax of 50 cents a barrel imposed under the act of October 22, 1914), however, register a decrease of $1,155,327.35, this being the only source from which a large amount of revenue is received that shows a loss. The increase in the income tax, individual and corporation, from $80,201,758.86 in 1915, to $124,937,252.61, a difference of $44,735,493.75, or over 55 per cent, indicates a high degree of prosperity generally distributed, and is the most striking feature of the year's collections. The net increase in ordinary internal-revenue receipts of $52,306,770.16 results to the extent of $32,209,175.84 from taxes collected under the so-called emergency revenue act, which became a law on October 22, 1914, was extended by joint resolution on December 17, 1915, and was consequently in effect all of 1916 and only part of 1915.

During the last three years a vigorous campaign has been carried on against frauds on the revenue. Frauds running back many years have been uncovered, many of the guilty parties have been prosecuted and convicted and millions of dollars have been turned into the Treasury. The amount of revenue which the United States Government has lost, as revealed by the investigations conducted by the department during the past three years, makes transactions of the "Whisky Ring" look like petty larceny. Frauds amounting to more than $50,000,000 have been uncovered and $22,509,576 has been recovered by the Government on account of such frauds and on account of back taxes that have been evaded. This is $2,700,000 greater than the entire cost of the Internal Revenue Service for these three years.

Narcotic law.

On June 30, 1916, the Harrison narcotic law had been in effect. 16 months, and the operation of the law has given the department

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