Page 350 - Merchants and Mandarins China Trade Era

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In 1791 Secretary of the Treasury Alexander Hamilton

recommended further benefits for the American China trade.

Hamilton's warehouse system, approved by Congress, allowed

American merchants to defer the payment of custom duties on

teas until their sale. The merchants could store the teas

in bonded warehouses up to two years with impunity. If the

teas were re-exported within one year of importation, the

government would nullify all American custom duties levied

on them. This drawback system applied to all articles im­

7
ported in American bottoms. The tariff policy of the Ameri­
can government encouraged all foreign trade, but it stimulated

the China trade especially. Teas, the primary American import

from Canton, became a profitable commodity in mercantile en­
terprise.

Utilization of the warehouse and drawback systems

allowed merchants enough latitude to sell their teas in the

most profitable market at the highest price. While they

stored one season's cargoes of teas in anticipation of their

sale, the merchants could speculate on another season's trade

at Canton. Consequently, this system of trade engendered a

heavy dependence on the use of credit, often at the expense

7
Samuel Eliot Morrison, A Maritirne History of Massachu­
setts ( Boston & New York, 1925), pp. 165-66. Morrison states
that Elias Haskett Derby petitioned Congress for the warehouse
system. With Hamilton's simultaneous support, the measure
passed. Tyler Dennett, At�ericamin Eastern Asia: A Critical
Study of the Policy of the United States with reference to China,
)
Japan and Korea in the 19th Century (New York, 1941 , p. 8.