The rapid expansion of Ingersoll's Bureau of Narcotics and Dangerous Drugs into the field of international narcotics control cut directly into the territory of the Bureau of Customs, in the Treasury Department. Until Attorney General Mitchell declared new guidelines in 1969, which expanded the Justice Department's role in narcotics control and gave Ingersoll's bureau preeminence in foreign (as well as domestic) narcotics intelligence and operations, Customs had a major responsibility for tracking foreign shipments of narcotics, as well as other contraband, so that they could be intercepted at the borders. Rossides interpreted these new guidelines as Mitchell's initial move in a "grand plan [to] centralize all the government's law enforcement activities—IRS included—in his Justice Department." When Mitchell first broached this idea of consolidating law-enforcement agencies, at a cabinet meeting in 1969, Rossides was concerned that this could upset the "separation of powers and checks and balances" in government and, he noted in a subsequent memorandum, raise "the spectre of a national police force." At a less theoretical level, Rossides was also concerned that the stationing of BNDD agents overseas would limit his ambitions for expanding the Bureau of Customs.

He thus began a quiet but effective campaign in Congress and the press (through surreptitiously authored leaks) asserting that the Mitchell guidelines would both seriously undercut the antismuggling role of Customs and wreak irreparable confusion in the entire program to curtail narcotics. He argued in a memorandum, "The Department of Justice, and its Bureau of Narcotics, are supposed to enforce Federal law within the United States, not usurp the job of Customs in intercepting contraband shipments from abroad." Even from a practical point of view, it made no sense to Rossides for the BNDD, which had neither experience in foreign relations nor bilingual agents, to conduct overseas investigations and intelligence gathering which formerly had been conducted by Customs. "We certainly would not tolerate foreign agents working cases in the United States," he wrote in the same memorandum. Instead of "Americanizing the narcotics problem by sending American narcs abroad," Rossides suggested an interagency approach which would involve the Department of State, the CIA, Customs, and the BNDD. He eventually won the support of Secretary of State William Rogers, who agreed it would be "ludicrous [to send] a policeman in the Bureau of Narcotics to negotiate opium production with the President of Turkey." Mitchell, however, remained adamant, insisting that "all law enforcement functions be located in the Department of Justice."

Rossides remained equally determined to win a role for Customs in the heroin crusade, which, even at this early date, seemed to Rossides to be "the main area of action" in the Nixon administration. He had appointed in 1969 two hard-driving and ambitious former prosecutors, both of whom were very well acquainted with the Rockefeller crusade in New York State, to assist him in developing the Treasury Department's antinarcotics program—Myles J. Ambrose and G. Gordon Liddy. Ambrose, a charming New York lawyer, had devoted his career almost exclusively to law enforcement and politics—twin pursuits that are not always completely separable—working his way up from an assistant U.S. prosecutor in the Southern District of New York, to a commissioner on New York's Waterfront Commission. After working behind the scenes in President Nixon's 1968 election campaign, but not being offered an appointment as U.S. attorney (his first preference), he accepted the offer from Rossides to be the commissioner of Customs—and, at forty-three, he was the youngest person ever to hold that position. Despite some doubts about his extreme politics, Rossides acceded to a White House request and appointed Liddy as his special assistant for law enforcement, with special responsibility for coordinating the Treasury Department's narcotics program.

Continuing the head-on confrontation with the BNDD, Rossides and Ambrose actively campaigned in Congress for additional funds to modernize Customs' attack on the narcotics problem. Ambrose was particularly effective when he argued that the Bureau of Customs had the "same size force as in Calvin Coolidge's days," and still had not received modern equipment. Congressman Thomas Steed, a Democrat from Oklahoma and an admirer of Rossides, championed Customs' cause in the House Appropriations Committee. Consequently, between 1969 and 1970 Customs' budget for narcotics interdiction was quadrupled. The new resources were invested in a computerized system, known as CADPIN, for collating intelligence on narcotics traffic throughout the world; helicopters and other interception equipment (including heroin-detecting dogs); and an expanded force of agents to pursue international smuggling investigations.

With Ambrose pressing in his public speeches and press releases for the interagency approach to narcotics, and Customs receiving increased appropriations for its international investigations, Ingersoll found that the BNDD and Customs were still on a collision course. Rather than acting as the supportive agency in narcotics matters, as it was required to be by the 1969 Mitchell guidelines, Customs was becoming increasingly expansive in its antinarcotics policy, and often not even informing the BNDD of its arrest plans. In a number of cases Customs officers arrested BNDD informers who were attempting to make a "buy" of heroin from a Customs informer, and vice versa. Through Mitchell, Ingersoll appealed to the White House to settle the issue once and for all.

On February 5, 1970, President Nixon, accepting Mitchell's counsel, issued a memorandum which designated the Bureau of Narcotics and Dangerous Drugs as the agency with prime responsibility for controlling narcotics smuggling anywhere in the world, and Customs was thus to give BNDD preeminence in narcotics control. There was to be no further increase in the number of Customs investigators overseas, and any jurisdictional disputes between the two agencies were to be resolved by Mitchell, who was Ingersoll's main supporter. Clearly Ingersoll had won a battle, at least in his struggle to expand his agency.

Rossides, though blocked in the international arena, decided to move into an entirely new area of narcotics control: tax auditing and collection. After several discussions with Mitchell and J. Edgar Hoover, it became clear to him that the FBI and the Department of Justice's strike forces, which had been established to pursue organized crime, had not been involved at all in the suppression of the domestic narcotics business. When he suggested at a meeting of Department of Justice officials in 1970 that the FBI and the strike forces might be redeployed against heroin traffickers, he received only an icy stare from the FBI executives, and the matter was not further discussed. Rossides realized, however, that the Internal Revenue Service, which came under his purview in the Treasury Department, was in a unique position to fill this gap and pursue the major domestic traffickers in heroin. The instrument would be the net-worth audit, a procedure by which IRS accountants, rather than examining the books and records of a suspect, reconstruct his total expenditures by examining his standard of living and comparing it with his reported income. By subjecting suspected narcotics wholesalers to such audits, Rossides believed it would be possible for the IRS immediately to freeze their assets with "jeopardy judgments" without waiting for trials, and thereby to paralyze their business.

In early 1971 Rossides proposed to John Connally, who had just been appointed secretary of the treasury, that the IRS organize a pilot project in Baltimore for scrutinizing the assets and returns of narcotics suspects. Connally, a man of action, replied, "Don't bother with the test program. Go national." In the next few days Connally won the approval of the director of the federal budget, Roy Ash, for two hundred additional IRS agents who would be employed in the antinarcotics program (the necessary appropriation was eventually forthcoming from Congress). Rossides implemented the plan by establishing a target-selection committee which included representatives from BNDD, Customs, and the IRS intelligence unit. All federal and local law-enforcement agencies were requested to pass on to the committee the dossiers of suspects. The committee would then evaluate each case and pass back to the IRS those cases selected for a complete tax investigation and net-worth audit. Initially, executives at the IRS objected to the agency's being used for any purpose other than tax collections. They argued that the use of an outside committee to select targets for IRS investigations was fraught with the potential for political abuse, and that it would establish a dangerous precedent. Rossides agreed in principle, but believed that narcotics control was crucial to the nation, and convinced the reluctant IRS officials that he could effectively insulate the target-selection committee from the influence of any other agency, including the White House.

The Narcotics Trafficker Program, as the IRS campaign was officially called, proved to be an immediate success. In its first year of operation IRS agents levied tax penalties of more than $100 million against individuals suspected of being in the narcotics business by local, state, and federal law-enforcement agencies. In many cases, as soon as a suspect was arrested on any charge, an IRS inspector immediately filed a jeopardy assessment based on what he estimated very roughly the suspect might have earned from the sale of narcotics. If the suspect could not instantly pay the assessment, the IRS would confiscate all his property and savings (some $25 million was thus confiscated in the program's first year of operation). Even if the charges were subsequently dropped against the suspect, the IRS did not necessarily restore the seized property. In one case, for example, a National Airlines stewardess suspected of dealing in drugs was arrested in Miami for speeding. The police found a bottle in her possession containing four pills. The IRS immediately filed a $25,549 lien against her, and confiscated her jewelry and savings. Although the charges were dropped against the stewardess (the pills were prescribed by her doctor), and neither the police nor the IRS was able to produce any evidence that she was involved in the narcotics business, under the existing tax law she was unable to have the $25,549 tax assessment dismissed. In a very real sense the IRS was converted into a highly unorthodox arm of narcotics-law enforcement to strike at the "Achilles' heel of the drug business," as Rossides put it.
The success, and unrestrained effectiveness, of the IRS did not escape the notice of the White House. Egil Krogh and the White House staff pressed Rossides for a "more coordinated approach" in which the Treasury Department's enforcement units would be "aligned with White House policy."

Krogh repeatedly warned Rossides that "we are at war," and that the president "would not tolerate bureaucratic maneuvering" in an area as important as narcotics. But the stubborn assistant secretary of the treasury steadfastly refused to allow the White House to have any control over the operations of the IRS and Customs, even to the point of denying information to Krogh's staff. "My job was to protect the autonomy of the Treasury Department's law enforcement agencies," he explained subsequently. "If Krogh or Ehrlichman wanted to run them, they would first have to get Connally to fire me." And that was not a feasible alternative. As relations between the White House staff and Rossides deteriorated, Krogh turned to Rossides's staff for assistance. Myles Ambrose, impressed with Krogh's "efficiency in cutting through bureaucratic red tape" and, more important, his proximity to the center of power in the White House, became increasingly attracted to the White House group. Gordon Liddy, who was, according to Rossides, "looking to head a law enforcement agency," became an active ally of Krogh's. (He was actually proposed in 1970 by the White House for the directorship of the Alcohol, Tobacco and Firearms control division of the Treasury, but was rejected by senior Treasury officials.)

Not only was Liddy dealing behind Rossides's back with Krogh, but he was openly flouting the established policy of the Treasury Department on a whole range of issues, including gun control. "The situation was intolerable," Rossides explained. "Liddy was acting as if he had independent authority from the President." In the spring of 1971 the deputy undersecretary of the treasury, CharIs R. Walker, decided that Liddy could no longer be retained in the Treasury Department; he was given time to find a new job, though. Krogh vigorously protested the firing of Liddy, but to no avail—Rossides, Walker, and Connally all stood firmly by the decision. After Liddy resigned in July, 1971, Rossides, with powerful support in Congress, intensified the effort to establish "an autonomous role for the Treasury in the war against heroin," even if it meant continued skirmishes with Attorney General Mitchell, Ingersoll's BNDD, and the White House.