The Pacific Northwest Forum
Volume VIII, Number 2-3, Pages 21-27
Ingeborg Paulus is an Associate Professor of History at Western Washington University. She is a native of Germany and has been active in Canadian studies. This article reflects her interest in international affairs and in the history of the Northwest.
Smuggling on the Pacific Northwest Coast is an enterprise as old as the levying of taxes. Our area, like any other fronted by a border or an ocean, has seen its share of smuggling activities over the years. They are not ceasing, just changing in character as time goes by. Have you ever wondered what happens to the merchandise that is occasionally seized from smugglers? This article will describe the process involved in disposing of smuggled goods.
Every person arriving at a port of entry from a foreign country, including Canada, must pass through the United States Customs and Immigration Service, and every foreign article imported for commercial purposes must be cleared through Customs before it can be sold. Seattle is a port of entry for much merchandise including goods from the Pacific Rim countries, and also for tourists coming from places all over the world.
At the Seattle airport, customs officials clear thousands of travelers each day, and at the Seattle seaport, millions of dollars worth of articles are cleared each month. Seattle Customs also seize goods both at the airport and at the seaport from tourists and ship personnel. At the airport Customs daily seize, among other undeclared or forbidden goods, watches, jewelry, cameras, and items of clothing from unsuccessful smugglers. This represents only about ten percent of the goods smuggled through Customs, but despite this relatively small number of seizures, the number of items taken from travelers and auctioned off each year is considerable.
How do Customs find the unsuccessfully smuggled items? Let me give you an example. A few years ago I observed a flight arriving from Australia via Hong Kong. During a routine inspection a customs officer was questioning a physician about the price of two rings he had bought in Hong Kong. According to the price list of Hong Kong goods available to Customs, these two rings were severely undervalued on the customs declaration completed by the traveler. Customs, however, are willing to "give benefit of doubt"; hence the agent was prodding the man for the declaration of the full amount paid. Since the man would not alter his story, the officer, "having reasonable cause" to suspect that the rings were undervalued, checked the man's wallet for bills. There he found an invoice for a third ring, totally undeclared. The customs official asked to see the ring. The man said that he had given it away. On this cue, the officer searched the man's baggage until he found the third ring, and seizing all three rings, he told the traveler to complete the requisite forms, forfeiting his rings to Customs, unless he paid the assessed duty and an assessed penalty. Since the assessed penalty may be as high as the original price of the rings, travelers often forfeit the opportunity to reclaim their goods. These goods, in this case, the three rings, then automatically become part of the goods to be disposed of by Customs at their annual Customs auctions.
Another route for imported goods to end up at a Customs auction is by abandonment. For instance, and importer has bought certain goods for sale in a volatile market. He may find that his broker and Customs disagree on the rate of duty to be paid. Yet he cannot claim his goods until he has paid the full amount of duty assessed at the time of entry. Although he can lodge a complaint, if the complaint cannot be adjusted at the local level, it may take years for it to be settled, and meanwhile the importer has no goods unless he pays the assessed duty and possible storage charges. He may abandon the goods right away rather than incur heavy costs which he may not be able to recoup.
Other factors leading to abandonment may be late arrival of certain seasonal merchandise; a softening of a particular market between the order of some goods and their actual arrival makes a sale unprofitable; or currency fluctuations may make the goods too expensive. If the importer then, in addition to the various market factors, still has to pay a high rate of duty, he may not be able to achieve a profit. Rather than paying a high rate of duty and be stuck with unsaleable merchandise, the importer abandons the merchandise to Customs. The goods are then auctioned off to recover the costs of handling and storage and any internal revenue tax, if applicable. These importers, as well as our ring smuggler, may try to regain their articles at the auction at a cheaper cost than had they paid the duty, and their chances are good because most articles, and especially jewelry, sell for less than their appraised domestic value.
The sale of seized and unclaimed merchandise takes place once a year at the Treasury Department warehouse in Seattle on Alaskan Way South. Long before would-be-buyers appear at the warehouse, Customs have been busy appraising, cataloging and arranging the hundreds of items that are to go on sale during the two days set aside for the regular Customs auction. The catalog is available on request some days before the auction, and prospective buyers may inspect the goods on the day previous to the auction. The catalog also enables the experienced "auction-regulars" to gauge the amount of money needed, possible haulage and storage arrangements, as well as the approximate time certain articles may go on sale.
Each lot is sold to the highest bidder on an "As isWhere is" basis; therefore, those seriously interested in acquiring merchandise had better inspect the lots thoroughly. Catalog descriptions are no substitute for the "let the buyer beware" philosophy of customs which is expressly stated in the catalog: "The Government does not guarantee either the quality, quantity or the value of any merchandise listed in this catalog and no allowances will be made for any deficiency after sale." To aid the buyers of these government goods, the catalog, along with the description of the listed merchandise, lists the approximate value of the goods as representing the probable retail value. The admonition, "This figure does not represent the selling price," however, warns the purchaser to be careful.
Often Customs auctions both in Canada and the United States are geared to get the Christmas trade. But, if the warehouse is full, auctions also take place at other times of the year. Customs have subscriptions lists which are used to notify their auction-regulars well in advance of a coming auction. These auction-regulars are dealers who buy merchandise at Customs auctions all along the Pacific Coast from San Diego to Vancouver. They buy for their second-hand good stores, salvage stores, discount stores or for other sales outlets. Each prospective buyer is armed with a catalog and a bidding card, containing his bidding number which must be purchased in advance of the sale and registered in his name. No card, no sale. This discourages non-buyers from frivolous bidding. The price of the card is, however, deducted from an eventual purchase. Each buyer must also arrange for sufficient ready cash or other immediately negotiable funds as Customs policy is for "immediate payment" and "same day removal." Hence auction-regulars in business often arrive with at least one truck and must have the ability to make arrangements for further haulage or at least temporary storage.
Auction-regulars are generally men, often middle-aged, with slight beer-bellies, dressed in casual clothes. Only an occasional woman auction-regular is in attendance, and sometimes the wives of the regulars are also there. Together with single-item buyers and spectators, it is a motley crowd that assembles at opening time at the Customs warehouse. But all during the day there is a lot of coming and going.
About 150 folding chairs provide seating, but well over 250 bidding cards may be in circulation during any one day. Since they generally know each other, the auction-regulars hold conversation, buy one another coffee in the adjacent building, cooperated on large lots which they split up, and bid for each other during temporary absences. But not everyone cooperates; after all, auction-regulars are in a competitive business. One seasoned auction-regular, in the salvage business for over 25 years, told me: "I never nickel and dime. I assess the merchandise for what I think it is worth to me and then immediately jump up my bidding to a figure just below the one I want to offer. Usually I get rid of my competition very quickly." This salvage business operator, like many others, makes the circuit regularly between California and Washington. Except for the odd miscalculation, he does well on his buys, and thinks that Customs auctions are good places to buy quality goods for reasonable prices.
The general auction set-up is quite simple. Folding chairs, arranged in a part of the large warehouse, face a set of three tables, with the middle one slightly raised. Here the auctioneer describes the merchandise and takes the bid while another officer holds it up for all to see, or points to it if it is too large to lift. The merchandise to be auctioned off is displayed on the two side tables. As each lot is sold, it is replaced by other goods on display on yet another table removed from the general bidding tables. Here goods can be inspected some fifteen minutes before they go on sale. Customs officials readily answer all kinds of questions about the goods, assist with jewelry inspection, and volunteer as much information on the items as they have. Except for the occasional general coffee and lunch breaks, the bidding is continuous with about three officers "taking the gavel." There are at least two record keepers, and with the handlers of the goods, the money receivers and others in attendance, there are at least 12 customs officers busy at any one time during the day taking care of customers.
The Customs auctions I attended in Seattle were cordial affairs. An auctioneer named Charlie, who is obviously an old hand at Customs auctions, contributed much to the fun. He proceeded quickly but appeared sometimes to cut off bidding prematurely for favored clients. However, he provided just the kind of relief necessary to make a cold November or February day in the great cold warehouse bearable. A shipment containing some shocking pink ladies' panties was announced as follows: "Ladies and gentlemen, don't ask us how we got them." The description of another item, a carton of brightly colored men's shorts, was accompanied by: "Aren't they smashing!" Occasionally, comic relief was also provided by the crowd. The display of 20 carved ivory snuff bottles drew a voice from the background: "Just what I always wanted." All these remarks were followed by chuckles or hearty laughter. During Charlie's turn as auctioneer, the warehouse had a carnival atmosphereand the crowd loved it.
I may add that this is quite different from a Canadian Customs auction in Vancouver, B.C. Here the goods are auctioned off by professional auctioneers and not by customs officers as in Seattle. The atmosphere is quite professional and formal as the auctioneer tries to achieve the maximum price possible. Comparing Vancouver and Seattle Customs auctioneers' relations with the auction-regular I got the impression that the Seattle officials were much more accommodating than the Vancouver ones. Once the minimum amount needed to cover U.S. Customs handling and storage fees and internal revenue tax, where applicable, was reached, the auctioneers did not seem to care whether or not they made money for Customs. On the contrary, they seemed to want to ensure that their regular customers got good bargains rather than that the Treasury made some money. In Vancouver, the whole auction was geared to achieve maximum profit. There were also many more "drop-ins" from the nearby businesses for single item purchases; mostly men, though, clad in conservative business suits. The auction-regulars, however, were also in attendance in Vancouver.
What kind of merchandise goes on sale at Customs auctions? Literally, anything from soup (canned) to nuts (and bolts); from appraiser's samples to dock plunder; from running shoes to mink coats; from plastic flowers to carved ivory figurines; from bicycles to automobiles; from soap to perfume; from bundles of lumber to heavy-duty machinery parts. In short, anything that can be carried by tourists, can be used as a means of transportation or in daily commercial life. In 1975, the lowest "approximate domestic value" was $1 for "1 case of Rock Core Sample," while the highest value was for $11,280 for "65 Ctn ShoesMen's Shoes w/ Vinyl Soles, 60 dozen, Various Sizes; Men's Shoes, Leather, Various Sizes, 5 dozen." (The most expensive item, 204 cartons of plastic baskets valued at $47, 280 was withdrawn from the sale that year). In 1979, the lowest "list" value was $2 for "2 Crtn Packing Cases," while the most expensive one was for over $38,000 for "160 Crtn Plastic Toys, 1,280 Dz."
In 1979 there were many more expensive lots (between $10,000 and $20,000) to be auctioned off than during 1975. But in both years a number of very expensive items were withdrawn from the sale; indicating that the importer probable had finally paid the duty and the storage charges just before the items were to be sold. Customs warehouse charges were considerably lower than those in regular warehouses, which probably encouraged some owners to claim their goods at the last moment.
Let me cite you a few more prices so that you can get an idea of the variety of goods on display for sale at a customs auction. In 1975, the most expensive valuation for wearing apparel was $1,400 for "1 Red Fox Fur Coat"; in 1979, it was $2,900 for "1 Lady's Full Length Ranch Mink coat with Suede." The most expensive piece of jewelry in 1975 was "1 Pearl Necklace with Clasp" valued at $400; in 1979, it was "1 Women's Diamond Ring, 1.95 ct" valued at $9,000!
There is no doubt that inflation has made goods at Customs auctions also more expensive from year to year. Perhaps an item, present at each Customs auction, called "Appraiser's samples" is a fair measure of inflation. These are samples taken by customs appraisers in order to help settle disputed tariff valuations. However, by the time the dispute has been settled, the shipment has often been cleared and the samples are disposed of by Customs to cover handling costs. These cartons of appraiser's samples are very popular items. In 1979, out of the roughly 700 lots to be auctioned off, 55 were appraiser's samples interspersed at more or less regular internals among the other goods. In 1975, appraiser's samples fetched anywhere between $35 and $40; in 1979, they were valued at $35 and realized anywhere between $40 and $50. Among the few items that were bid above the listed approximate price; appraiser's samples consistently fetched a higher price than that listed. One of the customs officers told me that these samples used to be very good buys, but he really thought they were now bid up too high by amateurs who got carried away after they had seen some of the items held up by the auctioneer's helper.
Some of the things auctioned off have interesting histories. Generally, the Customs Service auctions off cars seized locally for carrying contraband drugs in small amounts. The fine is assessed against the car, not the driver, and the cars are disposed of to recover the assessed fine if it has not been paid by the driver. However, the cars auctioned off in Seattle generally have been part of federal court cases and have been kept as evidence until the cases have been settled in court. One car, listed as follows: "1 1969 Mercedes Model 280SE Sedan...WHERE IS, AS IS. Needs Gas Tank and Some Reassembly. $1,500," sold for $3,050 and the dealer who bought it was pleased with the price, although the inside of the car looked a ghastly mess because it had been ripped apart. The car had a German Customs number. It had been shipped to Seattle from overseas in 1972; it contained about 300 lbs. of hashish which was detected through a routine procedure by customs dogs especially trained to sniff out drugs. (The same bidder who bought the Mercedes also bought a 1965 Buick Riviera for $460, originally listed at $600. It had also been used for drug transportation.)
One seizure included "eight large Hibachi Pots and Stands," valued at $70 each, but generally realizing between $80 and $90. This same seizure also included 18 individual lots of original wares valued at about $5,600, but fetching considerably less. The smuggler was the first mate of the ship from which the goods had been seized. He attracted the attention of customs officers because of his lavish spending habits. He was put under surveillance for drug smuggling but was found to be smuggling goods from the Orient, including jade, ivory, jewelry, and furniture in addition to the Hibachi pots and stands.
The first mate was one of the unsuccessful smugglers, but many others succeed. According to Timothy Green, a British journalist, who has written books on smuggling gold and other high-priced items, smuggling for the professional smuggler is a profitable operation. Of course, all of us have heard about the tourist returning from overseas and boasting a bit about his/her smuggling "success." But these items are "peanuts" when compared to professional smuggling operation. I would guess that most of the 1-item lots of jewelry, cameras, clothing, etc., auctioned off at the Seattle Customs auction came from "unsuccessful tourist would-be smugglers," and not from professional smugglers. A study of border crossers between the Blaine, Washington, and Douglas, British Columbia border points showed that not quite one-half of our sample of American and Canadian border crossers did take "undeclared goods" across the border; but from what we could find out, these were generally small items or inexpensive items. Of course, there are always some exceptions even among ordinary border crossers, but by and large "undervaluation" is more common among border crossers than the smuggling of expensive items.
Customs operations provide a sizeable income for the United States; but the sale of government goods does not. Customs auctions are "profitable" for the shrewd buyers of the more popular tourist items and are generally very profitable for the auction-regular businessman. Although their risks may be higher than those for the buyers of single items, auction-regulars generally do wellotherwise they wouldn't attend Customs auctions.
For the curious spectator a Customs auction provides good entertainment. Rapid-fire transactions based on the shouting of quick descriptions and repeat numbers may at first be bewildering, but once the novice has caught on the whole procedure begins to make sense. The speed with which goods are moved and removed is quite astonishing. For customs officers, who may not bid on goods, an auction also provides a relief from their ordinary routine activities of protecting the revenue and processing tourist. Customs auctions in Seattle are cordial affairs and a good place to make observations on human nature.
(1)See Roland L. DeLorme, "Policing the Pacific Frontier: The United States Bureau of Customs in the Northern Pacific, 1849-1899." The Pacific Northwest Forum, V-VI (Fall-Winter) 1980-81; 54-67, for an account of changing smuggling activities on the Pacific Northwest Coast.
(2)Timothy Green, The Smugglers, New York, Walker & Co., 1969.
(3)Ingeborg Paulus and Carl Simpson, "Opportunity, Benefit, and Subjective Disposition: Determinants of Nonprofessional Smuggling," Pacific Sociological Review, July 24, 1981, 299-327.