1773 – Tea Act

The origins, implementation and consequences.

1773 – Tea Act

Tea Act definition

The Tea Act, approved by the British Parliament on May 10, 1773, actually placed no new tax on tea and was not designed to increase revenue. It was intended to benefit the East India Company by giving them the exclusive right to sell tea in the colonies, creating a monopoly which the colonists perceived as another means of “taxation without representation”. In addition to granting the monopoly of the American tea market to the East India Company, they were also exempt from paying British duty by directly shipping the commodity to the American colonies.

Interestingly one of the intentions of The Tea Act was to lower the price of tea in the colonies by eliminating the merchant middleman. As the Tea Act allowed the tea to be shipped directly to the colonies the price of tea became 9 pence per pound cheaper even with the 3 pence per pound tax retained from the Townshend Duties. In addition the act allowed the East India Company to choose its distributors or special consignees thus creating opposition among local merchants and shopkeepers.

The table below shows the trend of colonial imports of the commodity from 1761 until 1775. As the Tea Act was passed in 1773 the amount of tea shipped to America increased significantly by 279% and duty collection by 250%. Colonists reactions to the Tea Act Crisis and the Boston Tea Party is reflected in the 1774 collection of duties and imports. There was a 90% decrease on tea imports and duty collection was 74% lower than the previous year. Numbers reached its lowest in 1775 marking the beginning of the American Independence War.

Collection of duties and imports of tea from 1761 to 1775 in the American colonies

Year	Duty collected in £	Tea in Pounds Weight
1761		56,110
1762		161,588
1763		188,785
1764		489,252
1765		518,424
1766		361,001
1767	9,723	480,376
1768		873,744
1769	8,189	229,439
1770	3,413	110,386
1771	4,596	362,257
1772	1,667	264,882
1773	4,170	739,221
1774	987	73,274
1775		22,198
Source: Oliver Dickierson, The Navigation Acts and the American Revolution, p.101 and Historical Statistics of the United States: Earliest Time to Present, vol. 5, "Tea Exported from England"

Note that the figure of £9,723 for 1767 includes revenue for 1767, 1768 and part of 1769. From 1767 to 1771 numbers include imports other than tea but from 1772 to 1774 numbers reflect imports for tea alone.

The East India Company

The British government used the East India Company as a tool to spread its influence in India but in the early 1770s it was at the edge of bankruptcy. Its deteriorating financial situation was partially due to a tax on tea and other goods passed on 1767 as part of the Townshend Revenue Act. High duty taxes in Britain and smuggling of cheaper Dutch tea also affected the company’s financial situation.

The Townshend duties were very unpopular and Americans reacted by boycotting British goods eventually convincing the government in repealing the tax. In 1770, Lord North repealed four of the five duties, however the three pence per pound tax on tea continued to be collected since its repeal could be understood as a retreat from Parliament’s right to tax the colonies. However residents of the colonies continued to boycott the commodity. Under these circumstances a black market for tea flourished and the East India Company saw its stock of tea increase to 18 million lbs in its warehouses. By 1770 sales to the colony decreased to an alarming level due to illegal trade while the Bank of England refused to grant the company more credit.