No. 525.
Mr. Wallace to Mr. Frelinghuysen.

No. 159.]

Sir: The new minister of foreign affairs, Aarifi Pasha, seems disposed to take up the business left him by his predecessors, and give it attention.

I have now the honor to transmit to you a communication from him relative to the excessive tax levied and collected by the customs officials at Smyrna on American alcohols. A translation is also inclosed.

The document, as you will observe, is a repetition of points heretofore made by the Sublime Porte. There is no denial that the tax levied is in excess of the treaty provision. In fact, there is no allusion to the treaty whatever. In view of that circumstance, I have drawn a reply to the minister, to be sent to him to-morrow.* * * I hope my paper will meet your approval.

I have, &c.,

[Inclosure 1 in No. 159.—Translation.]

Aarifi Pasha to Mr. Wallace.

Mr. Envoy: I read the two notes that your excellency kindly addressed to the imperial ministry on the 11th of January and the 18th of March last, Nos. 97 and 74, relative to the collection by the custom-house authorities at Smyrna of a tax of 48 paras on each oke of alcohol.

Permit me to observe, Mr. Envoy, that in the matter there is no question of an increase of the importation duties, but of a tax on the manufacturing of alcoholic drinks; a tax which, although payable by the manufacturers, is instead paid by the merchant of his own will and in his own interest, without his being compelled to do so. The custom-house allows alcohol which has paid the 8 per cent, duties to pass free, with the difference that if the merchant is disposed to substitute himself for the manufacturer and pay the manufacturing tax of 60 paras per oke, a benefaction of 12 paras per oke is accorded him on this tax. There is a combination which, while it facilitates the collection of the tax, furnishes a considerable advantage to the merchant. By paying 48 paras per oke, he becomes the owner of merchandise the value of which has increased to 60 paras, and which he can sell at 60 paras higher to the manufacturers, who also find their advantage in procuring the article free of taxation and of any fiscal formalities.

In presenting these considerations to the enlightened appreciation of your excellency, I have no doubt you will acknowledge that the measure in question cannot give any ground for legitimate complaints.

Accept, &c.,

[Page 820]
[Inclosure 2 in No. 159.]

Mr. Wallace to Aarifi Pasha.

Highness: Taking notice of the communication you were pleased to address to me, dated of the 19th instant, I beg you will permit me to make another effort to show why its proposals cannot receive my assent. This is done because it does not appear in your paper that the Porte has finally decided to repulse the demands I had the honor to present in my note of March 18 last, to which your attention is again earnestly entreated.

It is not possible for me to admit that the question under consideration is of a tax on the manufacture of certain alcoholic drinks; on the contrary, the complaint is that the importers of American alcohol at Smyrna are charged and required to pay an excessive duty upon the article, and that complaint is the question. Your highness does not deny the truth of the complaint. Neither can I admit the statement next following in your highness’s note, that the importers of American alcohol willingly pay the tax which the Porte has seen fit to impose upon drinks (mastic) manufactured in part of the alcohol. If you will be so good as to call for the first paper upon the subject from this legation, No. 85, November 17, 1881, you will see the contention was based upon complaints officially preferred by the United States consul at Smyrna, speaking for certain merchants of that city. In fact, so strongly am I impressed with a doubt of your highness having seen that first paper, that at the risk of making this communication unnecessarily long I presume to extract therefrom the following statement of facts, which, it is well to remember, has been accepted as correct by one of your distinguished predecessors:

“Messrs. Reggio and Belhomme, merchants of Smyrna, are representatives of Messrs. Laforme and Frothingham, of Boston, United States of America. In course of their business the latter consigned seventy-seven barrels of alcohol to the former. Upon arrival of the goods at Smyrna, the direction of the indirect contributions refused to deliver them for the purpose of sale on the market for a reason theretofore unheard of and clearly unwarranted. Messrs. Reggio and Belhomme tendered payment of the usual duty of 16 paras the oke, which was the amount fixed by the agreed tariff upon alcohol under the treaty of commerce between Turkey and the United States. The direction declined the tender, and demanded a supplementary duty of 48 paras the oke, giving as a reason that they were acting in accordance with a new regulation for the sale of spirits prepared in Constantinople.

“Messrs. Reggio and Belhom-ne at first resisted the demand, but were at length driven to payment at the rate of 64 paras the oke. They made the payment under protest, reserving the right to claim damages then accrued and such as might thereafter accrue.”

This, I am convinced, will relieve your highness of the impression that the question and the demands incident to it rest upon the voluntary motion of this legation. And when I add that the protest of Messrs. Reggio and Belhomme yet remains in force, and is yet applicable to every para paid by them in excess of the fixed duty, I am sure your highness will spare me a repetition of the argument that the importers pay the excessive duty of their own free will, because they find it to their advantage to do so.

Your highness adverts, as a last point, to a somewhat nice summing up of the advantages the importer finds by paying the excess required of him under the new regulations. You say that, by paying 48 paras the oke, he becomes the owner of merchandise worth 60 paras the oke, and which he can sell that much higher to the manufacturer (of mastic). One cannot help admiring the zeal with which the direction of the six contributions figure out such a handsome profit for foreigners at the expense of His Majesty’s subjects.

Governments are seldom liberal to such a degree. Permit me to say I see the meaning of the resort. In Turkey the manufacturers of mastic are in some particulars not unlike the manufacturers of whisky in my country; both find their profits enormous; both have the same genius for evading payment of the taxes assessed upon their goods. Moreover, the two Governments have been alike exercised to find ways the cheapest and most effective to secure their dues. Your officials, in casting about them, discovered that mastic could not be made to suit the taste of consumers without alcohol. This happy suggestion led to the further thoughts that alcohol was of foreign manufacture and could be made to do service while passing through the custom-house; it was only needful to charge the article with an extra duty sufficient to cover what the mastic manufacturer would otherwise have to pay. If the manufacturer grumbled, he could be quieted with the assertion that it was a good thing for him, since he received his alcohol “free of taxation and without vexatious fiscal formalities.” If the importer grumbled, he had only to be shown that by paying 48 paras the oke, [Page 821]presto! he became the owner of goods marketable at 60 paras the oke; and your highness, shall I add, if perchance he was still dissatisfied, there was little or no difference, for most of such importations are American. These were the inspirations, I have no doubt, which lured the direction of the six contributions to adopt the new regulations, and charge the customs officers at Smyrna with their enforcement. Their main idea undoubtedly was to “facilitate the collection of the tax on the manufacturing of alcoholic drinks,” and such is your highnesses motive. In expressing it I but adopt your language.

In treating of your highness’s argument I am in candor bound to admit it the duty of every servant of a Government to obtain for it every advantage possible. That it would be an advantage if the collection of the tax imposed on the manufacturers of mastic could be facilitated in the way proposed by the new regulations must also be admitted; and I take pleasure in asserting that not one of the powers in good relation with His Imperial Majesty and the Sublime Porte has a disposition to help make the administration of their affairs easy beyond mine. Together with these avowals, however, you must permit me to remark that there is a point in efforts of the kind you are attempting which ought to be the limit of the effort, and that is the point where right ends and wrong begins. I beg to be allowed to show now that you have reached that limit in this business.

On this score it is permissible to say that the most observable thing in your highness’s paper is the absence of reference to the treaty of 1862. You have not indulged in the slightest allusion to that instrument. If you kindly look back to the pertinent dispatches from this legation to the Porte you cannot fail to discover that it is the ground they go upon—my basis of argument, protest, entreaty and demand. Your predecessors, in their replies, passed the instrument without mention. Might I comment on their course in this particular, without being offensive, it would be to express the opinion that they were perfectly conscious of the impossibility of reconciling the treaty and the action of the direction of the six contributions, and wisely sought attainment of their end by ignorance of the former. Is it too much to suggest that, knowing the hearty good-will I bear the Ottoman Government, they may have imagined it possible to induce me to join them in a quiet modification of so much of the agreed tariff as relates to the goods under consideration? If such should be your highness’s idea, you are proceeding upon a misjudgment. I could not agree to such a step. The President could not agree to it. An essential to the validity of our treaties with foreign powers is their ratification’by the national Senate, and, once ratified and exchanged, they are not less unalterable without the concurrent action of that body. Once in force, the President is bound by his oath to execute them in letter and spirit. In the estimation of my countrymen there is but one higher law than a treaty.

With this explanation you will permit me to ask if the treaty of 1862 between your country and mine fixed a duty collectible upon American alcohols? If so, at what rate? There should be no difficulty in determining the questions. The fixed rate is 16 paras the oke; and to collections at that rate I have the honor to insist upon the direction of the six contributions being remanded. Whether the provision works good or ill to, the importers I am convinced it is the law, and also that the interests of both Governments will be best served by a strict adherence to it as long as the treaty lasts.

I may add that this subject has been brought to the attention of my Government, and that, in fair compliance with the instructions it has seen fit to send me, it will be my duty to present to the Sublime Porte a statement of the money drawn from importers of American alcohol under the new regulations of the direction of the six contributions, and demand payment of the same as damages sustained.

Considering also the long time this matter has been pending, and referring to the spirit of my instructions, your highness will have the goodness to permit me, in conclusion, to advise you that an answer to this communication is looked for which shall be conclusive of the intentions of the Sublime Porte one way or the other.

I avail, &c.,