Mr. Wallace to Mr. Frelinghuysen .

Sir: I have the honor to inclose herewith a copy of a note received from the Porte upon the subject of the new regulations pertaining to the importation of alcohol. The paper is accompanied with the report referred to therein as from the administration of the six contributions, of which a translation is also herewith inclosed.

In the same connection I have the further honor of submitting for your consideration a copy of the reply which I thought best to make to the note above mentioned.

Hoping that it will also meet your approval, I am, &c.,

[Inclosure 1—Translation.]

Assim Pasha to Mr. Wallace .

Mr. Minister Resident: I received the note you did me the honor to address to me on the 17th of November last, numbered 85, in relation to a claim of Messrs. Reggio & Belhomme, merchants and American citizens established in Smyrna.

The administration of the six indirect contributions, to which I have communicated this note, has sent me in reply a document, copy of which is herewith inclosed. The explanations it contains will convince you that the claim in question starts from a misunderstanding, and that it is based on an erroneous interpretation of the new regulation on alcohol intended for the manufacture of brandies.

Accept, Mr. Minister Resident, &c.,

[Appendix to inclosure 1—Translation—memorandum.]

It results from the statement of the note of the United States legation, dated November 17, 1881, communicated to the administration of the six contributions by the ministry of foreign affairs, that the claim of Messrs. Reggio & Belhomme is started from a misunderstanding and is based on an erroneous interpretation of the new regulations relating to alcohol used for the manufacture of mastic (rakki).

Article 14 of this regulation does not bear any attempt to the provisions of article 5 of the treaty of commerce of the 13th (25th) of February, 1862. It has not in any [Page 500] way in view the alcohol which is not intended for the manufacture of mastic. The alcohol as long as it is not transformed in mastic pays solely the custom duties, remaining, however, under the formalities which permit the administration to ascertain of its final use.

Article 14 has in view really the foreign alcohols intended for the manufacture of mastic.

The taxes of the manufacture of mastic are in existence since an immemorial time. Before the promulgation of the law of 1861, that tax was of 20 per cent.; the law of 1861 reduced it to 10 per cent. An imperial irade of the 18th of August, 1878, has increased that tax of half as much for alcoholic drinks as for tobacco, and so brought them to 15 per cent. It is in virtue of that irade, confirmed on the 8th of September, 1881, that the tax of 32 paras, mentioned in article 14 of the new regulation, became 48 paras per oke.

The new regulation of July 22, 1881, instead of aggravating the situation of the manufacturers who used to pay up to that time 60 paras per oke, gives them the benefit of a notable reduction, viz, 12 paras per oke, provided that the alcohol intended to be turned into mastic pays in advance, and on the moment of its importation, the tax of manufacture. This facility of payment in advance has been granted on the request of the manufacturers of Constantinople, who were desirous to franchise, themselves from every formality and inspection in the storing of their importations of alcohol, and were demanding a reduction of tax.

Messrs. Reggio & Belhomme then had certainly the faculty of getting their barrels of alcohol by simply paying the custom duties of 8 per cent. and by submitting to the provisions imposed by the administration, in order to be able to follow the goods as to collect the tax of 60 paras by whomsoever it shall be due, in case that alcohol should be employed for the manufacture of mastic.

It is more than evident that the merchants who import alcohol for the manufacture of mastic (and nearly all importations have that object in view) have every interest to pay in advance the manufacturing tax, for this very reason, that the manufacturers who finally bear the tax get the benefit of 12 paras per oke. Anyhow, that payment in advance is not indispensable.

Besides it would be well to add that the administration reimburses to whomsoever the taxes already collected in advance on any quantity of alcohol finally to other use than the manufacture of mastic, such as to the use of apothecaries, &c.

As to the amount of 64 paras per oke, claimed by the direction at Smyrna, and interpreted at the end of the aforesaid note, as a penalty inflicted on Messrs. Reggio & Belhomme, it is far from having that character. It comes out as follows:

Custom duties (collected by the custom-house) 16
Manufacturing tax in advance 32
50 per cent. on the amount of tax collected by the imperial iradi 16
Total 64

These explanations will bring the United States legation to the conviction—

That in the subject in question there is not any violation of article 5 of the treaty of 1882.
That the American alcohol imported by Messrs. Reggio & Belhomme has not been subjected to any arbitrary taxation, and that the regulation of the 22d of July, 1881, does not impose any new tax.

[Inclosure 2.]

Mr. Wallace to Assim Pasha .

Excellency: I have the honor to acknowledge the receipt of your communication of the 31st December, ultimo, in reply to mine of the preceding 17th November, relative to the new regulations touching the importation of American alcohols. A report upon the same subject from the administration of the six contributions, considerately inclosed for my more definite information, was also received.

While your excellency is pleased to declare the action of the custom officers at Smyrna a mistake attributable to a wrong construction of Article XIV of the new regulations, your note fails to inform me that any corrective instructions have been sent to such officers. I am constrained, consequently, to ask you to be good enough to favor me with a copy of such instructions as have been sent to them. Only by such means can I ascertain how far and in what manner the requests which I had the honor to submit to you in my note of the 17th November have been complied with.

[Page 501]

As to the project disclosed on the report of the administration of the six contributions, I am convinced that the assent of my government can never be had to it under cover of a regulation to facilitate the collection of a tax on mastic manufactured in Turkey. It is really a scheme to facilitate the collection of a duty on alcohol in excess of 18 paras the oke. Indeed, excellency, to reduce the matter to the utmost simplicity, you will excuse me for remarking that the abrogation of a treaty provision like that which fixes the duty on American alcohol, and which in such positive language protects both the importer of the article and the purchaser from him against a duty in excess of the fixed rate, to be acceptable to my government, must have some better ground than the making business easy for distillers of rakki in Constantinople.

Under present circumstances it will continue to be my duty to persist in the protest and request addressed to you in my note of the 17th November.

I avail myself, &c.,