1848 Great Qing Charcoal Burners

Chapter 355 Hankou Customs
After the banquet ended and Peng Gang returned to his residence, Peng Yi truthfully reported to Peng Gang what had happened in Hankou.

"Hankou was originally a commercial customs post, and now it is also involved in foreign trade. The temporary appointment of the Hankou Tax Bureau to supervise foreign trade was just a stopgap measure," Peng Gang said after listening to Peng Yi's explanation.

"Although Remy spoke with some emotion and was rather impulsive, what he said was true. If the business experience in Hankou is not as good as in Shanghai, why would they go to the trouble of coming to Hankou to do business with us?"

“The people we train ourselves are still the best. This time, all the ones who got into trouble were the garrison soldiers from Bitan under Chen Xingwang’s command,” Peng Yi said with regret.

"Chen Xingwang is capable and trustworthy, but it's a pity that his subordinates are all incompetent."

“His men are incompetent, so we can take this opportunity to transfer some people from the Administrative Academy to fill the vacancies in the Hankou Tax Bureau.” As he spoke, Peng Gang turned his head to look at Liu Sijin, the Palace Attendant, beside him.

"Tell Wang Dalei, the magistrate of Hanyang, that the minor official from the Hankou Tax Bureau involved should be dealt with. The tea merchants who bribed him have damaged the reputation of the entire Hankou commercial port, and they should not be let off lightly. Tell him to inform the Hankou Tea Guild to expel all the tea merchants involved from the guild and prohibit them from doing business in Hankou in the future. All the assets of the tea merchants involved in Hankou should be confiscated as a warning to others."

The bribery by the tea merchants has damaged the commercial reputation of the entire Hankou. The wooden tea boxes used for export all bear the name of Hankou. If this batch of tea mixed with inferior products were to be shipped to Paris for sale, the consequences and impact would be even worse.

"So, will the trade with foreigners continue to be temporarily handled by the Hankou Tax Bureau, or will a separate department be established specifically for this matter?" Peng Yi asked.

"I have my own plan for this matter. It's getting late, you should get some rest." Feeling increasingly tired, Peng Gang got up and headed to his bedroom.

The following day, in an effort to salvage his reputation, Peng Gang instructed Peng Yi to recall all the tea already delivered to French trading companies, including Liming Trading Company, and to re-screen, repack, and re-deliver the tea. He also provided an additional seventy boxes of high-quality black tea as compensation to Liming Trading Company.

The French trading company had many complaints about the Hankou tea merchants colluding with the Hankou tax bureau to pass off inferior tea as superior tea, and was worried that in addition to the seven boxes of problematic tea that the Liming Trading Company had randomly selected, other tea that had already been loaded onto the ship also had problems.

The North Palace officials agreed to recall all the tea already delivered to the French trading company, repack them, and completely dispel the French trading company's concerns.

After dealing with the matter, Peng Gang specially summoned Smith, the assistant of Jin Nengheng, the head of Russell & Co.

Smith had previously worked as an inspector and assistant auditor at Boston Customs, and Peng Gang wanted to learn about the organizational structure and operation of U.S. Customs from Smith.

Before the introduction of income tax in 1861, customs duties were the federal government's primary source of revenue (accounting for over 80%-90%). The federal government's tax revenue sources were relatively singular, and the effective operation of the customs system was directly related to the nation's fiscal health.

Therefore, the Customs Service has always been the most important tax collection department of the U.S. federal government, directly responsible for and supervised by the Treasury Department, and its highest leader is the Secretary of the Treasury.

These were the things Peng Gang knew. As for the organizational structure and specific operation of the U.S. Customs Service, Peng Gang's understanding was relatively limited.

"Greetings, Your Highness the Northern King." Upon arriving at the main hall of the Northern King's residence, Smith removed his hat, bowed to Peng Gang, and said.

“Mr. Smith, please don’t stand on ceremony. I’ve invited you here today not to discuss business with Russell & Co., but to learn more about the operations of your country’s, the United States’, Customs Service. I hope you will be kind enough to share your knowledge.” Peng Gang gestured for Smith to sit down.

Smith was flattered and quickly bowed, saying, "Your Highness is too kind. It is my honor to serve you. May I ask what you would like to know?"

Peng Gang leaned forward slightly, his gaze focused: "What is the internal organizational structure of a customs office in a major U.S. port like Boston? Who is the top person in charge, and what specific departments and positions are there below, with each having its own responsibilities?"

Smith thought for a moment and replied in slightly accented but fairly fluent Chinese: “Your Highness, taking the Boston Customs as an example, the highest-ranking officer is the Customs Tax Collector, who is directly appointed by the President and is responsible to the Treasury Department.”

The core departments under the Customs Duty Officer are mainly the following three: First, the Inspection and Valuation Department, which is responsible for inspecting the quantity and quality of imported goods and determining their value and classification according to the Customs Law.

Secondly, the auditing department is responsible for reviewing all customs declarations and tax receipts to ensure the accuracy of accounts and prevent tax evasion.

Thirdly, there is the inspection department, which has dedicated anti-smuggling vessels and agents to combat smuggling activities; in addition, there is the document department responsible for document registration and file management, as well as the port authority responsible for managing port berths and lighthouse signals.

In addition, there are maritime inspectors, who are primarily responsible for matters related to ships and crew, such as recording all ship arrivals and departures, ensuring ship navigation, safety, and crew manning comply with U.S. law, and having the authority to handle seafarer matters, including detaining absconding crew members. They are also known as port officials.

The importance of maritime inspectors varies from port to port. In ports with thriving shipping industries, such as New York, Boston, Charleston, and New Orleans, the position carries significant power and is often appointed by the president. In smaller customs districts with less international merchant shipping traffic, the status of maritime inspectors is much lower.

The last important official in customs is the auditor, and I used to be an assistant to the auditor at Boston Customs.

The auditor is independent of the tax collectors and is responsible for internal financial oversight and record keeping within the customs service, ensuring the accuracy of the accounts submitted by the tax collectors to the Ministry of Finance.

Customs tax collectors, maritime inspectors, and auditors are known as the "Big Three" of customs officials in the eyes of the American public.

Peng Gang pressed further: "What is the specific procedure for a cargo ship entering the port? What does the captain need to submit? And how do customs officers handle it?"

“The process is very clear,” Smith explained in detail.

"After the ship arrives at the port, the captain must first submit a manifest to the customs, listing all the cargo on board. The consignee must submit a detailed customs declaration within the specified time, specifying the description, quantity, value, country of origin, etc. of the goods."

The inspector will conduct random or full inspections of the goods based on risk assessment and verify them against the customs declaration.

The auditor then calculates the taxes payable based on the verified customs declaration and the applicable tariff. After payment, customs issues a release order, and the goods can be taken away. All steps must be documented in writing for audit purposes.

Peng Gang then asked Smith about the American Customs and Border Protection officers: "How does your Customs select and manage these officials? How do you ensure they are not bribed by businessmen and remain loyal to their duties?"

Smith admitted, “It’s a challenge, Your Highness. Apart from customs tax collectors, other customs officers are federal government employees, paid by the national treasury rather than tax revenue, which to some extent reduces their incentive to collude with businessmen for profit. At the same time, there are strict disciplinary requirements and internal audit oversight. Of course.”

At this point, Smith shrugged and continued, "While corruption is still difficult to completely eradicate, our country has always been designed with the principle of doing our best to prevent it. Moreover, professional training is very important; for example, inspectors need to be able to identify various commodities, and auditors need to be proficient in accounting."

Smith is a fairly honest guy; Peng Gang has inquired about Smith's past.

Smith was born into an ordinary blacksmith family in rural Massachusetts. When he joined Russell & Co. as an assistant to Jin Nengheng, he casually invested in the company and became a minor shareholder.

Smith acquired most of the capital he used to invest in Russell & Co. while working at the Boston Customs.

At that time, the appointment and dismissal of American Customs tax collectors was, to put it bluntly, a politically motivated position for the distribution of spoils.

Typically, this is a presidential reward given to party members who have made significant contributions during the presidential campaign. Customs officers' income primarily comes from commissions and fees based on the total amount of customs duties collected, rather than a fixed salary. Therefore, customs officers in major ports are extremely well-paid, and all of their income is legal.

Therefore, after each election, the U.S. Customs Service undergoes a reshuffle, and because the income of customs tax collectors is linked to the total amount of customs duties, each tax collector has a strong incentive to manage the customs service well.

In general, the American Customs Service before the Civil War was a complex and politicized bureaucratic system under the leadership of the Treasury Department, based at various ports, and centered around a trio of president-appointed officials (tax collectors, maritime inspectors, and auditors), which combined functions of taxation, shipping management, financial supervision, and even public health.

Although the U.S. Customs Service's system of appointing its head is not perfect and corruption is a serious problem.

However, compared to the backward and chaotic customs system of the Qing Dynasty, it is undoubtedly a more mature, efficient, and modern customs system that is more in line with the logic of national governance, and can be selectively learned from.

“Mr. Smith, your presentation was very clear, and I benefited greatly from it,” Peng Gang nodded and said.

Smith was a smart man and understood that Peng Gang wouldn't ask him about customs for no reason. He keenly sensed that Peng Gang wanted to establish a customs office in Hankou and said, "Does Your Highness intend to establish a customs office in Hankou? If Your Highness does, I am willing to do my best to help Your Highness."

Peng Gang did not need foreigners to help with taxation, nor did he want foreigners to get involved in taxation. At most, he would hire Smith as a customs consultant.

“I appreciate Mr. Smith’s kindness,” Peng Gang said with a smile.

After Smith left, Peng Gang spent several days drafting the regulations for the Hankou Customs and then summoned Liu Qixian.

With the northern examination concluded, Liu Qixian, the deputy examiner, was now free to take a break.

Liu Qixian was capable and efficient. Although he did not serve as the prefect of De'an for long, he had already built up a good reputation in De'an Prefecture.

At this critical time when manpower is needed, and since Liu Qixian is capable and competent, Peng Gang has no reason to let Liu Qixian remain idle, and has decided to formally appoint Liu Qixian to a position.

After Liu Qixian paid his respects to Peng Gang at the West Flower Hall, Peng Gang ordered his attendants to offer Liu Qixian a seat.

Peng Gang said in a calm tone, "I have long heard that Binghuai was an outstanding official who pacified the local area during his tenure in De'an."

"Thank you for the seat, Your Highness." Liu Qi thanked Peng Gang for the seat, sat down halfway on the embroidered stool, smiled bitterly, and said.

"As a defeated official, I dare not accept Your Highness's undeserved praise. I am deeply grateful that Your Highness has not abandoned me and allowed me to serve in my place despite my punishment."

Peng Gang didn't waste time with pleasantries and went straight to the point: "I've invited you here today because I have an important task to entrust to you. I intend to establish a customs house in Hankou and would like to invite you to serve as its first director."

"Customs?" Liu Qixian was slightly taken aback, then understood. This must be an agency similar to the Maritime Trade Office or the Guangdong Customs or the Yangtze River Customs, in charge of foreign trade and collecting shipping taxes. Now that Hankou had been opened as a treaty port, Peng Gang did indeed have such a need.

Liu Qixian originally thought that Peng Gang would let him continue to serve as a prefect, after all, Yang Xun and Pang Gongzhao had served Peng Gang as county magistrates, and Peng Gang had also made them serve as county magistrates.

Although Peng Gang's assignment to him was somewhat unexpected, Liu Qixian understood the importance of Hankou and foreign trade to the Northern Palace. The fact that Peng Gang entrusted the Hankou Customs to him showed that Peng Gang did not look down on Liu Qixian's status as a demoted official and still gave him enough trust.

Liu Qixian immediately cupped his hands and said, "Your Highness's trust is deeply appreciated. I will certainly do my best to manage the affairs of the Hankou Maritime Trade Office, strictly inspect goods, collect ship fees and taxes, and live up to Your Highness's expectations."

Upon hearing this, Peng Gang slowly shook his head, a meaningful smile appearing on his face: "The position I want you to hold is neither the Maritime Trade Commissioner of the Song and Ming Dynasties, nor the Customs Superintendent under the old Qing Dynasty system. This Customs is not that Customs."

The customs superintendent was the chief official of the Manchu Qing customs. The superintendents of the various Manchu Qing customs, especially the Guangdong customs, were mostly bondservants from the Upper Three Banners of the Imperial Household Department.

So that the huge customs revenue could go directly into the Imperial Household Department and become the private property of the Aisin Gioro imperial family, the Guangdong Customs was known as the Emperor's Southern Treasury.

A hint of doubt flashed in Liu Qixian's eyes. Wasn't he the Commissioner of Maritime Trade and the Superintendent of Customs? Then what was the job of the Director of Hankou Customs?
Peng Gang meticulously analyzed: "The old system had too many drawbacks. The functions of the Maritime Trade Office and the old Qing Dynasty customs were narrow, focusing mainly on tax collection and official trade. The management was extensive and did not benefit the overall national economy much."

The Hankou Customs I propose to establish will have tax collection as only one of its functions. More importantly, it will be responsible for collecting trade data, enforcing uniform tariff rates, investigating smuggling, maintaining market order, managing the entry and exit of ships, and ensuring the safety and cleanliness of the port.

Furthermore, under the old Qing system, the authority over customs was unclear. Customs supervisors were mostly appointed by the Imperial Household Department or concurrently held by local governors and prefects, considered lucrative positions prone to corruption and inefficiency. The newly established Hankou Customs, however, is a vertically managed agency directly under Wuchang, independent of the local administrative system. The customs chief is directly responsible to me, implementing the unified tariff policies and trade regulations formulated by my central government.

Upon hearing this, Liu Qixian was shocked.

Vertical management, reporting directly to the Northern King, signified not only Peng Gang's immense trust in him but also immense responsibility and independent power. This differed from the previous customs supervision model, which involved local officials concurrently overseeing or being managed by servants.

Therefore, it seems that the authority of the Hankou Customs Director was no less than that of the former Prefect of De'an Prefecture.

Peng Gang added, “The old customs tax calculation relied heavily on valuation, which was too arbitrary and prone to corruption. The Hankou Customs will hire Smith from Russell & Co. as an advisor to introduce a brand-new auditing system and establish unified standards and statistical methods for cargo classification and valuation. All import and export goods must be declared truthfully and in detail, and procedures will be handled based on documents. Everything will be regulated and traceable.”

Liu Qixian took a deep breath, stood up and straightened his robes, and bowed deeply to Peng Gang: "Your Highness has entrusted me with this important task. I, Qixian, will do my utmost to formulate regulations and manage the Hankou Customs well for Your Highness. I will never fail Your Highness's trust today!"
However, one tree cannot make a forest. If Qi Xian goes to Hankou alone, he will likely be unable to accomplish the task His Highness has entrusted to him, even with the mere signboard of the Hankou Customs.

When Liu Qixian served as the prefect of De'an Prefecture, his advisors either returned to their hometowns or were recruited by Peng Gang and sent to other posts. Liu Qixian now has no staff of his own and is just a commander without troops.

Peng Gang knew that Liu Qixian was waiting for Peng Gang to ask for permission to select some scholars from those who had passed the imperial examinations in the north to go to Hankou with him and set up the Hankou Customs.

"You were the deputy examiner for this Northern Examination, so you didn't accept many students?" Peng Gang asked unhurriedly.

“Those are all His Highness’s students,” Liu Qixian said.

"Stop with the empty talk," Peng Gang said.

"I will allow you to select ten people from among the candidates who ranked 20th or below in the second class of the imperial examinations, and they will accompany you to Hankou. I will also send five more officials to Hankou to be in charge of auditing the Hankou Customs, which will relieve some of your pressure."

Peng Gang allowed Liu Qixian, the current head of Hankou Customs, to recommend him for both the positions of Customs Tax Collection Officer and Port Authority Supervisor. However, Peng Gang would no longer allow Liu Qixian autonomy in the position of Auditor.

After much deliberation, it was decided that Liu Sijin would lead four officials to Hankou Customs to be in charge of its auditing work.

(End of this chapter)