Mr. Plumb to Mr. Seward
Sir: When at Brownsville and Matamoros, in December last, I received verbal information from reliable persons, tending to show that a considerable portion of the business of those places consists in the illicit introduction into the United States of merchandise from Europe, landed at Matamoros, in Mexico, free of duty.
I have also recently noticed in the public journals that the Secretary of the Treasury has found it necessary to instruct the collector at Brownsville to employ an additional number of mounted inspectors, for the prevention of smuggling on the Rio Grande frontier.
With your permission, I beg respectfully to submit to the attention of the department what has for a long time, since my attention has been turned to our commercial relations with Mexico, appeared to me the source of great injury to our legitimate commerce on that frontier, and to suggest how the evil above referred to may, probably, be remedied. The facts are as follows:
Under a certain disposition of the general government of Mexico, made in 1858, the port of Matamoros and a strip or district of territory extending up from the sea-coast along the Rio Grande as far as the limits of the State of Tamaulipas, or so as to include the towns of Reynosa, Camargo, Mier, and Guerrero, was constituted a free district, or zona-libre, as it is called, with the following privileges, viz: All merchandise coming from abroad is allowed to be received and entered at Matamoros without the payment of any duty or charge whatever, except a small municipal tax. This exemption extends not only to all effects consumed in Matamoros and a limited region of a few leagues thereabouts, but also to merchandise placed in store, which may be so held as long as desired. If goods are sent from Matamoros to Reynosa, Oamargo, Mier, and Guerrero, for consumption there, they have had to pay, for the last three years, in Matamoros, before leaving, one-quarter of the regular tariff rates, except groceries, which pay nothing. Goods sent from Matamoros to Monterey pay full tariff rates in Matamoros and the usual one-fifth additional, or contra registro duty, in Monterey. Goods proceeding from Reynosa, Camargo, Mier, and Guerrero to the interior are supposed to pay at those places full tariff rates. All merchandise coming from abroad to Matamoros is entered at the custom-house there with the usual formalities, but the merchant is then allowed to take it to his warehouse and hold it at his pleasure; and it is only on sending it to the points above mentioned in the interior that he is called upon to pay any duty, except the small municipal tax before mentioned.
It results from this singular disposition, that the port of Matamoros is practically [Page 413] erected into a free depot, immediately on our border, where merchandise brought from Europe can be deposited, and where it can be held free of duty until such time as convenient arrangements can be effected or opportunity occurs for its illicit introduction across the narrow Rio Grande into the United States. It is apparent this is not desirable for the interests of the revenue of the United States. At the time when the disposition creating this free zone was made by the Mexican government our tariff was lower than the Mexican tariff, and Brownsville was supplying the Mexican trade. This injured Matamoros, and the influence of that place secured from the general government the adoption of the preceding measure, not only as a means of protecting the business of Mexican towns against foreign competition, but also as a means, indirectly, of rather benefiting the public revenues of Mexico; for the limited consumption of the free zone, which was relieved of duty, would yield much less revenue than it was expected would be saved by putting a stop to the contraband trade then carried on from the United States side of the frontier into Mexico. Now, however, the situation as regards tariff rates has become reversed, and, under our higher tariff, it is no longer an object to land European merchandise in the United States when destined for illicit introduction into Mexico, but it is now an object to land such merchandise in Mexico, when it can be so landed there and held free of duty until opportunity can be found for its illicit introduction into the United States.
The effect upon the Mexican revenues has probably also not been what was anticipated by the general government and urged at the time by the shrewd merchants of Matamoros, for it is questionable if the creation of this free district has not vastly added to the facilities for the fraudulent transmission to the interior of Mexico of vast quantities of merchandise, which, if the tariff had been duly enforced at Matamoros, would there have been compelled to pay the full regular rates of duties.
By the establishment of this free zone, the system on the Rio Grande frontier has become, practically, similar to that so long in operation on the west coast of Mexico. There, for instance, a vessel comes from Europe, laden with merchandise for a market. She appears off Mazatlan. The consignee on shore communicates with her, and, before her entry into port, advises whether the negotiations with the custom-house officials, which in advance of her arrival have been in progress for the introduction of her cargo at a reduction from the regular tariff rates, have been successful or not. If they have, the vessel enters port; if not, she may lie off and on for months, or may proceed to some other point on the coast where the officials may prove more tractable. It is this contraband trade, thus conducted, that has stood in the way of our legitimate commerce with Mexico, and it is a point of exceeding interest to our future commercial relations with that country to ascertain whether there is not some way by which these exceptional advantages may be terminated, and so all shippers to that country, whether of large or small invoices, be placed upon a footing of just and fair equality.
At Matamoros, applying to the United States the same system that has prevailed on the west coast of Mexico, the fraudulent trader has now still greater advantages. There he can land his merchandise, and hold it free of duty in his own warehouse at his pleasure, until he can perfect arrangements for its introduction into the United States; or, failing in that, he has still open before him the Mexican market of the interior, of which he can avail himself whenever he chooses, or whenever, as is very probable, some favorable arrangement can be made with the smaller interior custom-houses for its passage at a reduced rate.
Fortunately, the well-known integrity of the revenue officers of the United States renders the improper introduction of merchandise across the Rio Grande extremely difficult, and restricts such traffic to a limited amount. Still such [Page 414] illicit trade is known to exist, in spite of all precautions; and while the opportunity exists, which is afforded by the existence of Matamoros as a free port, great temptations will continue to be presented, and it is certainly wise to inquire if a remedy cannot be found. I believe it can be found in procuring from the Mexican government a revocation of the disposition which created this free zone. The motives which existed in favor of its creation do not now hold with reference to its longer continuance. The high rates of our tariff and the vigilance and fidelity of our revenue officers render it impossible for merchandise from Europe to be landed now in the United States for the purpose of its illicit introduction thence into Mexico, as was the case in 1858, while there can be no object to the general commerce of Mexico in permitting the free introduction into this zone from the United States of merchandise the product of the United States when the same is not allowed to be so introduced free of duty into other parts of the republic. On the other hand, the interests of all other parts of the Mexican republic are injuriously affected by special privileges conferred upon one portion that are denied to the rest. The commerce of Vera Cruz, for example, has very loudly complained of the opportunity the existence of this free zone has given for the introduction of merchandise from the frontier into a large portion of the interior, by convenient arrangements with the officials of the smaller interior custom-houses that are not practicable in the more rigidly managed custom-house of that port and Tampico.
It is evident that merchandise once landed on Mexican soil and placed in the warehouse of the merchant, as is now the case at Matamoros, whether under the provisions of this free zone or any other arrangement by which the duty is avoided or postponed, is less likely to be as certainly subjected afterwards, in its transit to the interior, to the full payment of duties at some interior point as is that landed, say, at Vera Cruz certain to have there to bear the full burden of the tariff.
There is, therefore, no argument that can now be legitimately urged in favor of the continuance of the special immunity accorded in the creation of this free zone, except the merely local interests of the port of Matamoros and the other towns on the Rio Grande that have been mentioned, and their interests would not now be affected so injuriously as would before have been the case. At the same time, it is certainly for the general interest of the Mexican republic that its customs tariff should bear upon all portions of the national territory alike. I therefore believe that a representation to the Mexican government, at some proper time, by the government of the United States, upon this subject, would be attended with satisfactory results. Such representation would certainly be none the less proper when the jealous regard of the United States for the due protection of its revenue is dictated by the necessity imposed upon it of providing for an enormous debt incurred in our defence of the cause of free institutions, in which republican Mexico is interested equally with ourselves.
It is apparent that when the full Mexican tariff rates shall be again exacted upon all merchandise landed at Matamoros, the inducement to bring European merchandise there for the purpose of its illicit introduction into the United States will entirely cease.
It is further obvious that it would be greatly for the interest of our general commerce with Mexico that the tariff rates of that country should apply to all ports alike, as it would also serve greatly to stimulate and facilitate our trade could the Mexican government be induced to simplify their tariff, and, instead of having, as now, various duties—some collected at interior points—establish one sole and uniform rate, to be imposed and paid solely and once for all at the port of entry.
The almost entire breaking up, by the late intervention, of the former channels of European trade, affords a valuable opportunity for the United States to now secure almost a monopoly of the foreign commerce of Mexico; and if peace, [Page 415] as it may now he hoped, shall he firmly established, that commerce will not only be very largely increased, but, in the effect large returns in silver would have upon our own finances, may become very important. In this view, I have thought it might not be improper for me to take the liberty of submitting these observations to the attention of the department.
I am, sir, with the highest respect, your most obedient servant,
Hon. William H. Seward, Secretary of State, Washington, D. C.