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Congress refined the revenue cutters' role in customs operations with the passage of the Act of March 2, 1799, known as the Customs Administration Act. In particular, Congress determined "the cutters and boats employed in the service of the revenue shall be distinguished from other vessels by "an ensign and pendant, with such marks thereon as shall be prescribed and directed by the President of the United States." Additionally, the Act permitted commanders of revenue vessels to fire at other vessels failing to respond "after such pendant and ensign shall be hoisted and a gun fired by such revenue cutter as a signal." By this act the Revenue Marine (later called the Revenue Cutter Service) ensign served as the seagoing equivalent of a policeman's badge, the distinctive sign of the vessel's law enforcement authority.
The job of designing the distinguishing ensign eventually fell upon Oliver Wolcott, who had replaced Alexander Hamilton as Secretary of the Treasury in 1795. On June 1, 1799, Wolcott submitted his design to President John Adams for approval. Wolcott's proposal featured an ensign of sixteen stripes, alternating red and white, representing the number of states that had joined the Union by 1799, with the Union to be the Arms of the United States in dark blue on a white field. It is significant that Wolcott turned the arrangement of the stripes ninety degrees to vertical to differentiate the new revenue cutter ensign from the U.S. Flag, to denote civilian authority under the Treasury Department, rather than military authority under the War Department.
"They [the officers] will always keep in mind that their Countrymen are Freemen and as such are impatient of everything that bears that least mark of a domineering Spirit."
Under the "Buck Act" 4 U.S.C.S. sections 105-110, the federal government has created a "Federal area" within the boundaries of all the states. This area is similar to any territory that the federal government acquires through purchase or conquest, thereby imposing federal territorial law upon those in this "Federal area." Under federal territorial law as evidenced by the Executive Branch's yellow fringed merchant law flag (see Federal Courts for an explanation) flying in schools, offices and all courtrooms.