Upon the completion of the modifications suggested at Washington and their return to Manila further public hearings were had after due notice, and other modifications were made in view of new information acquired at the public hearings. The new modifications were submitted to you by cable and approved. On the 17th day of September, 1901, the new tariff law was enacted, to become effective on the 15th day of November, 1901, with the important proviso that during the first sixty days after the law becomes effective importers of goods en route to Manila at the time the law becomes effective might elect to pay under the new tariff or the old. That the new tariff will furnish needed relief to business men and consumers here is certain; that its effect will be for a time to reduce the revenue is probable; but it is hoped that ultimately consumption will be so increased when the islands become entirely pacified and the people acquire new wants that the revenue may be at least as much as under the existing tariff.

In the consideration of the final modification of the tariff bill, after its return from Washington, the commission have had the benefit of the assistance and suggestions of Mr. W. Morgan Shuster, appointed collector of customs for the archipelago, and Mr. Charles A. Conant, elsewhere referred to in this report. Both these gentlemen met representative business men in San Francisco, and there received suggestions as to changes that ought to be made in the tariff, and were thus enabled to give to the commission valuable information. Their aid has been greatly appreciated.

CUSTOMS ADMINISTRATIVE BILL.

A customs administrative bill, which has been prepared under your direction, will be enacted as soon as possible after consideration by the commission, and after submitting to you such modifications, if any, therein as may seem to the commission expedient, in view of their own local knowledge and of the suggestions that may be received from discussion here.

THE CUSTOMS SERVICE.

At the time of the arrival of the commission in the islands the collector of customs of the islands and of the chief port was Col. William F. Spurgin, who had been detailed for that purpose by the military governor. The deputy collector was Col. George R. Colton. Colonel Spurgin having been relieved on account of ill health, he was succeeded by Gen. James F. Smith, U. S. V., on the 8th day of October, 1900, who continued to perform the duties of the office until June 30, 1901, when he was released from military service and appointed as one of the judges of the supreme court of the Philippine Islands. The duties of collector were performed by Colonel Colton, deputy collector, as acting collector, until September 17, 1901, at which time the new collector, Mr. W. Morgan Shuster, assumed the duties of his office. Very full details as to the whole customs service of the islands, both

under the Spanish régime and under American authority, are contained in the annual report of the collector of customs of the islands and of the chief port for the fiscal year ending June 30, 1901, a copy of which is hereto annexed, which report was made to the military governor. This copy contains tabulated statistical data and additional statistical exhibits completed to include June 30, 1901, the original report made to the military governor not covering the entire fiscal year. We annex, also, a supplement to said report, dated September 16, 1901, furnished by Deputy and Acting Collector George R. Colton, which is marked "Appendix Y."

These exhibits show that during the period of American occupancy the volume of business has been about four times as great as during normal conditions under Spanish control, notwithstanding the disturbed conditions which have existed during the greater portion of the period of American occupancy so far as customs receipts can show the amount of business transacted; but substantially the same results are also shown by considering the number of vessels cleared and entered, tonnage of vessels, and the value of property imported and exported. It appears that merchandise has been imported from forty different countries during and since 1898. Hongkong headed the list in 1898, 1899, and 1900, but mainly because of the fact that under existing rules a large quantity of merchandise coming from the United States, England, and the Chinese Empire, amounting to probably 70 per cent of the total imports, was credited to Hongkong, having been shipped to Philippine ports from, and invoiced at, Hongkong. The collector states that this merchandise should have been credited to other countries approximately as follows:

United States

England...
Chinese Empire.

Per cent.

25

25

20

Under the new system of crediting merchandise to the countries of origin, adopted in 1901, Hongkong has dropped to the eighth place in the list. Notwithstanding the insurrection, exports have almost kept pace with imports, exports amounting to $65,345,052 and imports to $69,469,600, United States currency. Of imports, cotton goods stand at the head of the list, with a value of $17,839,366; rice following, with a value of $9,368,825, beer and other liquors forming the next most important item, of the value of $3,572,088. The report of the collector indicates that Manila leads San Francisco and New Orleans in customs receipts during the fiscal year ending June 30, 1901. That report contains thirty-three exhibits, analyzing and classifying the whole work of the customs department from the beginning of American occupancy down to the close of the last fiscal year. The exhibits are so complete and exhaustive that it would be impracticable and of little value here to summarize them. They make a remarkable showing of the increase in the general business of the islands under Ameri

can sovereignty, and furnish ground for believing that much greater progress will be made when the islands are entirely pacified and the work of developing the country under progressive methods shall be fairly under way.

INTERNAL REVENUE.

At the beginning of the fiscal year 1901 the organization provided for the bureau of internal revenue under General Orders No. 54, M. G. O., April 15, 1900, had not been extended throughout the archipelago; but there had been appointed 84 officers and 150 clerks in 79 different offices, collecting revenue in nearly all of the garrisoned towns. The organization was further extended, until in January, 1901, there were about 125 officers detailed and 175 clerks employed in 120 offices. From that time until the present date the number of officers and offices has been decreased, but the territory covered has been practically increased. This result has been produced by the appointment of provincial treasurers as acting collectors of internal revenue, who collect throughout their respective provinces. The change here noted is in accordance with section 9 of act No. 83, which provides that the provincial treasurer "shall act as collector of internal revenue for the province, and as such shall report to the collector of internal revenue for the islands and shall make such settlements and deposits as are now required by law." Regulations respecting these taxes and the disposition of the funds collected are provided in section 9 of act No. 133.

The collections throughout the islands show a material increase over the collections for the previous year on account of the extension of the field covered and also the increase of business at the trade centers. This is particularly true of the city of Manila, where the collections for the past fiscal year show a total increase of over 28 per cent.

At this date, October 1, 1901, owing to the organization of provinces, only the following internal-revenue officers remain on duty, collecting revenues in the districts set opposite their respective names:

The work of collecting internal revenue in the city of Manila was turned over to the city assessor and collector on August 7, in accordance with the terms of the Manila charter. Since that time the acting collector of internal revenue has been furnishing stamps to the various provincial treasurers and revenue officers, and has been receiving collections for forestry payments in the city of Manila and administering the revenue offices in the unorganized provinces. As these duties are in connection with the work of the city assessor and collector, no expense is entailed on the insular government.

It is impracticable, owing to the nonreceipt of reports from all provincial collectors, to give exact figures, but the following statement shows the approximate collections from the different departments up to October 1, with the approximate cost of collection and percentage of expense to collections throughout the islands:

Statement of collections and expenses of internal-revenue department from July 1, 1900, to October 1, 1901 (United States currency).

[This statement does not include sale of certificates by registration officers nor disbursements by disbursing quartermaster for civil bureaus for this department.]

The internal-revenue work in the Department of Northern Luzon, under the able supervision of Maj. C. D. Cowles, Seventeenth United States Infantry, prior to the appointment of provincial treasurers was more nearly complete than that in any other department. This was due, first, to the ability and industry of Major Cowles and, second, to the pacific condition of the territory in question. Collections were made in 225 towns for almost the entire period indicated. The only territory not covered was the provinces of Bontoc, Infanta, and the island of Polillo, and this territory, if completely covered, would not yield enough revenue to pay the expenses of collection. Officers detailed in this bureau were, wherever possible, relieved from other duties and were assisted by local, district, and department commanders wherever such assistance was called for.

The reports from collecting officers were complete and timely, and showed efforts to carry out fully the intent of the laws and orders relating to the collection of internal revenue. On October 1 there were no revenue officers remaining on duty in the Department of Northern

Luzon, the supervisor being relieved and the office at Solano, Nueva Viscaya, being closed by order of the department commander.

Owing to the conditions which existed in the Department of Southern Luzon it was impossible to complete an organization which could successfully carry on the collection of internal revenue throughout the department. Capt. A. L. Parmenter, Twenty-first United States Infantry, department supervisor, faithfully endeavored to perfect the organization, but, owing to his numerous duties, was not able to give his entire attention to the work. The unpacified condition of the inhabitants and the constant change of officers which was necessitated by the withdrawal of volunteer regiments, the changes of stations of other troops, and the lack of officers for detail for this work proved injurious to the organization.

The reports, which are incomplete, show the revenue collected in 135 towns throughout the department. Local and district commanders in this department interfered in several instances with the work of the officers endeavoring to collect revenue and at the same time perform other duties by increasing such other duties to such an extent that the officers were unable to attend to their revenue work, and thus the taxes were uncollected, reports were not submitted, and the officer himself was relieved or his station changed with practically nothing done. Many officers in being relieved carried away the entire records of their offices, including the orders and instructions relating to the work, and many considered their internal-revenue work as not of sufficient importance to call for exertion, and this in the face of the fact that in some instances within the limits of their collection districts insurgent revenue collectors were collecting revenue for the furtherance of the insurrection. At this date the supervisor of internal revenue for this department has been relieved from duty, and the only revenue office remaining is that of the district of Laguna, that being the only province having no provincial treasurer.

The internal-revenue work in the Department of the Visayas was retarded by the changes of supervisors during the year, officers being relieved as soon as they had sufficient experience to supervise the work. The organization in the island of Panay was good, and the collections there made show zeal on the part of the officers detailed. The island of Negros, having its own government under the provisions of General Orders, No. 30, M. G. O., July 22, 1899, was not called upon to furnish revenue for the General Government except from the issue of certificates of registration and the sale of internal-revenue stamps. Capt. F. C. Prescott, Forty-third Infantry, U. S. V., had about perfected the organization in the islands of Leyte and Cebu when these provinces passed under the provisions of the provincial code.

The supervisor of internal revenue for this department was relieved