Papers Relating to the Foreign Relations of the United States, For the Year 1887, Transmitted to Congress, With a Message of the President, June 26, 1888

No. 430.
Mr. Bayard to Mr. Manning.

Department of State,
Washington, February 10, 1887.

No. 47.]

Sir: I inclose for your information, in connection with previous correspondence, a copy of a letter from Messrs. Alexandre & Sons, dated New York, the 18th ultimo, with its accompaniments, relative to the rebate of 2 per cent. of customs duties said to be granted by the Government of Mexico on the goods imported at Progreso and Vera Cruz in vessels of the Spanish Transatlantic Company. Messrs. Alexandre & Sons contend that this action of Mexico is a manifest discrimination against American vessels, and ruinous to their carrying trade.

These papers afford the Department an insight of the situation, but at the same time all doubts are not dispelled as to the interpretation placed upon the contract with Mexico, which gives rise to the present complaint. Therefore a particular reference to two articles of the contract, viz, 3 and 9, to ascertain their relationship to each other becomes necessary.

Article 3 reads as follows:

In order to promote the commerce of the Mexican Republic, the Spanish Transatlantic Company shall pay at the custom-house of Vera Cruz and that of Progreso, for importers, 2 per cent. of the customs duties payable on their goods, this amount being deducted from the subsidy to be received by the company through said custom-houses.

Article 9 says:

The Government shall grant a subsidy of $5,000, in Mexican silver, to the Spanish Transatlantic Company for each round trip by its vessels between Havana, Progreso, and Vera Cruz, in connection with its lines; it shall also grant to the company 2 per cent. of the customs duties payable on the goods carried by its steamers, provided that such duties amount for the trip to the sum of at least $50,000.

The question to be considered is, does Article 3 amount to an unconditional bounty of 2 per cent. of the duties in favor of importers by the Spanish transatlantic line, in addition to the subsidy of 2 per cent. granted by Article 9, under its expressed condition, to the company; or is the company to pay “for importers” the duty of 2 per cent., as required by Article 3, out of the $5,000 subsidy in any event on each round trip and in case the trips do not yield at least $50,000 of customs duties, so that the additional 2 per cent. granted by Article 9 can be claimed, is the line to receive its $5,000, less the deduction of 2-per cent. paid “for importers?”

In order that the Department may be in a position to treat the question understandingly, it is desired that you address yourself to Mr. Mariscal, in continuation of your previous inquiries, and especially in view of this instruction and the information now before you, and ask to be given the official interpretation placed upon the concession to the Spanish transatlantic line by the Mexican Government, as well as any other facts which will enable the Department to arrive at a correct and just conclusion, and which he may be willing to furnish.

One other point may illustrate the confusion that appears to surround the subject. Does the 2 per cent. of customs duties which Article 3 says the steamship company shall pay “for importers” apply to importers in Mexico? Ordinarily this would seem to be the correct interpretation, but according to a letter from Messrs. G. Amsinck & Co., transmitted hither by Messrs. Alexandre & Sons, the shippers of goods from this country enjoy the privilege for importers, when forwarding their merchandise by the Spanish Transatlantic Company’s vessels. The phrase “shall pay for importers” (pagara por los importadores) is vague. If the company is to pay under any circumstances g per cent. for the benefit of the importers and run its chance of reimbursement, if the duties collected on a single cargo exceed $50,000, it is not easy to evolve the idea of a subsidy to the company for which Mr. Mariscal contends. A bounty to importers appears to be involved, and this would imply a discrimination, as to the goods, not within the usual limits of a maritime subsidy and at variance with international comity.

I am, etc.,

T. F. Bayard.

[Inclosure 1 in No. 47.]

Messrs. Alexandre & Sons to Mr. Bayard.

New York, January 18, 1887.

Sir: We are in receipt of your favor of 28th ultimo, from which we withdrew translation of Mr. Mariscal’s reply of 11th ultimo to Mr. Manning’s letter of 6th ultimo on the subject of the 2 per cent. rebate of duties granted by the Mexican Government on goods imported into the ports of Progreso and Vera Cruz.

We note your remarks that in your opinion the facts, so far as presented to you, do not present the appearance that the rebate in customs is in favor of the importers of dutiable goods. To this we beg to differ, as the extracts of the contract of the Spanish line with the Mexican Government, and the letters of some of our principal exporters here to Mexico (which we sent you on November 18) show conclusively that such rebate is enjoyed by dutiable goods imported by said Spanish line.

The Mexican Government may call this rebate what it pleases, or, as they do, “in the form of a subvention,” but we think the practical deduction is that the rebate is clearly a discrimination against American vessels and railways, easily proven already by shippers refusing to ship by our American steamers on account of enjoying 2 per cent. less duties on their goods by the Spanish line.

We imagine your Department can obtain through the American minister at Mexico an official copy of the contract, but to expedite this matter, we beg to hand you in closed here with copy of the contract, as taken by us from the Diario Official of Mexico (which please preserve and, if possible, return to us, as it is the only copy we have).

Every week we see a continual increase in the business of the Spanish line, and consequently the same decrease in ours. If this continues much longer, we see no alternative but that we will be forced to suspend our line to Mexico.

As a strong proof of our assertions, and the manifest injury to American vessels, we beg to hand you letter of 17th instant from those very important merchants in this city Messrs. G, Amsinck & Co., who advise us that they can not ship goods to Vera Cruz by our line on account of the discriminating duty of 2 per cent. enjoyed by the Spanish line.

As therein stated, you will notice that oh December 22 last, by our steamer City of Puebla, we engaged from them a lot of 16 cases calicoes, and to secure it we carried it at 50 per cent. less freight than the rate charged by the Spanish line; and yet you will notice by the claim sent in by them that even that was $13,30 more than what the goods would have cost them if sent by Spanish line, showing that American vessels must take off 78 per cent. of what Spanish line obtains. Now, if this is not discrimination we fail to see it. With all these facts at hand we think we have a right to ask if this state of affairs is to continue, We suggest that we may have an interview with you at your convenience.

Your early reply will oblige,

Yours, truly,

F. Alexandre & Sons.

[Inclosure 2 in No. 47.]

Messrs. Amsinck & Co. to Messrs. Alexandre & Sons.

New York, January 17, 1887.

Gentlemen: We beg to hand you the inclosed memorandum, received from the consignee of the sixteen cases dry goods shipped by us to Vera Cruz per City of Puebla, on December 22, whereby you will see that despite your concession of 50 per cent. on the rate of freight to meet the 2 per cent. rebate on the duties granted by the Mexican Government on goods shipped by the Spanish flag, there is yet a charge of $13.30 made to us, for which we expect you to hand us your check, the said rebate on the duties amounting to 75 per cent. the amount of the freight, instead of the 50 per cent. you allowed us on the supposition that it would suffice to counterbalance it. As our instructions are to ship by the flag that obtains the reduction of 2 per cent. on the duties, we are obliged, to our regret, to discontinue shipping to Mexico by your line, unless you reduce your rates of freight to about one-fourth the amount charged by the Spanish line, the 2 per cent. rebate on the duties by the latter amounting to fully 75 per cent. of the freight charges.

Yours, truly,

G. Amsinck & Co.

[Inclosure 3 in No. 47.—Translation.]

Debit note. Messrs. G. Amsinck & Co., in account with Frou Co.

Difference in the shipping of sixteen cases prints:
	Freight per Spanish line		$56.23
	Freight per American line		28.56
		Difference value, New York	27.67
	Exchange, 28 per cent		7.55
		Mexican value	35.22
Duties:
	30,603 yards, 24/25=17,141 ms., at 15 cents		2,612.10
	Duties of flag, 2 per cent		52.24
	Mexican value		35.22
		Difference Mexican value	17.02
	Value in New York, at 28 per cent		13.30

Mexico, January 5, 1887.

[Inclosure 4 in No. 47.]

Department of Public Works, First Section.

Contract concluded between the Citizen-General Carlos Pacheco, secretary of public works, colonization, industry, and commerce of the United States of Mexico, representing the Executive of the Union, and the Spanish Transatlantic Company, represented by Mr. Carlos Calderon, for the establishment of lines of steamers between the United States of Mexico, the United States of America, and Europe.

obligations of the company.

Article 1. The Spanish Transatlantic Company binds itself to cause those of its steamers which sail from Europe to Havana to make regular trips to Vera Cruz, stopping at Progreso, three times a month, thus putting the Mexican Republic in direct communication with all the j)orts of the five parts of the world where its different lines now touch, its first trip from Europe to be made during the first ten days of October next, and its first trip from the United States during the first ten days of November next, or sooner if the company shall prefer.

Art. 2. The company binds itself to establish a line from Havana to New York, making sure connection with steamers coming from Europe, so that connection may be made between New York, Progreso, and Vera Cruz, as also with the other ports, three trips to be made each month.

Art. 3. In order to promote the commerce of the Mexican Republic, the Spanish Transatlantic Company shall pay at the custom-house at Vera Cruz and that of Progreso, for importers, 2 per cent. of the customs duties payable on their goods, this amount being deducted from the subsidy to be received by the company through said custom-houses.

Art. 4. Public and official communications sent by the Mexican Republic, and communications of the same character addressed to the governmental authorities of the Republic, from any port in which the mail steamers of the Spanish Transatlantic Company may stop, shall be carried by them without their receiving any compensation for this service while the filling of the mail-bags and the distribution of their contents shall be under their charge.

(A) The captains of these mail steamers shall collect the correspondence of the respective post-offices, shall keep it in the form in which they receive it, and shall deliver it at the post-office to which it is addressed. They shall take charge of registered correspondence in their own name, signing a receipt therefor at the sending office, and delivering it in the port of its destination with the same formality.

(B) When the Government shall see fit, it shall send its correspondence to Havana and New York by a special messenger, the company binding itself to provide him with quarters in the first cabin, without receiving any compensation therefor, it being understood that the cabin assigned to him shall possess all the conveniences required by the service, that he shall have it all to himself, and that he shall have his meals at the same table with the officers, both at sea and on land.

Art. 5. The company shall give lodging and board, both at sea and in port, at the officers’ table, to an apprentice to the Mexican merchant service, on all the mail steamers of their different lines, until, in the opinion of the proper captain, each one of them is able to pass an examination as third mate tor navigation in all waters.

(A) These apprentices shall be in all respects subject to the special regulations for those of their class, of the company, copies of which shall be sent to the supreme Government for its information.

(B) The company shall also have charge of the instruction of these apprentices, the Mexican Government being obliged to pay nothing more than the salary allowed them for performing their other duties.

Art. 6. While the, present contract is in force, the rates for carrying freight and passengers shall be as follows:

(A) The maximum rate between New York, Havana, Progreso, and Vera Cruz shall be 10 per cent. less than those now charged by the line of F. Alexandre & Sons, which have been approved by the Federal Government.

(B) For other lines the maximum shall be that of the last rates established by the Mexican Transatlantic Company, but those of the Spanish Transatlantic Company shall be charged if they are more favorable.

(C) On domestic products that are exported a reduction shall be made in the freight of 30 per cent. below the rates for importation mentioned in the foregoing paragraph.

(D) On minerals and marble, when exported, there shall be a reduction in freight of 30 per cent. below the same rates for importation.

(E) On domestic goods exported in the extra vessels mentioned in paragraph A, Article 9, a reduction in freight shall be made of 40 per cent. below the same import rates.

(F) On minerals and marble exported in the same vessels, there shall be a reduction of 50 per cent. below the same rates for importation.

(G) When the Government permits the steamers of this line to carry Mexican goods from Vera Cruz to the peninsula of Yucatan, such goods shall be considered as exports, as regards the payment of freight.

(H) Public functionaries and civil and military officers, when traveling on official business, shall pay, by the New York line, one-third of the price of the passage according to the table of rates, and by the other lines of the company one-half-of the price of passage according to the same table.

(I) For troops conveyed by the company from Vera Cruz to Yucatan, and vice versa, the Government shall pay one-fourth less than it now pays to the line of F. Alexandre & Sons.

(J) On freight belonging to the Federal Government, one-third of the schedule rates shall be paid on all the company’s lines.

Art. 7. Orders relative to the goods referred to in the last three paragraphs shall be issued by the proper governmental department to the company’s agent at this capital.

Art. 8. The company shall, at stated times, furnish information to the Government concerning its rates, and whenever any change shall be made therein, it being understood that when an increase in the rates is made, without exceeding in any case the exceptions made in paragraphs A and B, of Article 5, of this contract, such increase shall not take effect in less than two months after it has been publicly announced.

obligations of the government.

Art. 9. The Government shall grant a subsidy of $5,000 in Mexican silver to the Spanish Transatlantic Company, for each round trip made by its vessels between Havana, Progreso, and Vera Cruz, in connection with its lines; it shall also grant to the company 2 per cent. of the customs duties payable on the goods carried by its steamers, provided that such duties amount for the trip to the sum of at least $50,000.

(A) Such extra vessels as the company may see fit to send to Progreso and Vera Cruz shall receive as a subsidy only the 2 per cent. mentioned in the concluding portion of the foregoing article, and they shall be obliged to carry exports of all kinds, according to the provisions of paragraphs E and F of the fifth article of this contract, provided that the duties payable on the goods imported by these vessels amount to the sum of at least $25,000.

(B) All these steamers, together with such as the company may use for transportation of coal, shall be exempt, in the ports of the Republic in which they may touch, from the established duties, excepting pilotage.

(C) The subsidy, together with the official freights and pasages, shall be liquidated and paid every month by the custom-house at Vera Cruz to the agent of the company.

If in any month the balance in its favor shall not be paid to it, it shall have the right to carry merchandise on its own account, and the duties payable thereon shall be credited to it.

Art. 10. If the company shall desire to establish a dock-yard for building and repairing vessels, it shall apply to the war department for its approval; and when that approval is granted, the said department shall cede to it, on the coast, public lands suitable for such dock-yard. In this case the company shall furnish a list of the articles which it needs for the construction of the said dock-yard, so that the treasury department, and that of public works, after making such restrictions and limitations as they may think proper, may permit the free importation of said articles.

If it shall not establish the dock-yard the company shall pay the usual duties on the goods that it shall have imported for that purpose.

Art. 11. Vessels belonging to the nation shall be repaired at the dock-yard mentioned in the foregoing article at cost prices.

Art. 12. Whenever the aforesaid company may think proper to keep a pontoon anchored in the port of Vera Cruz, as a place of deposit for Mexican articles of export useful for the needs of the company’s steamers, and also as a place of deposit for coal, it shall be freely allowed to do so by the Government, and the treasury department shall issue such orders as it may think proper for the protection of the revenue, which orders shall be faithfully obeyed by the company.

fines.

Art. 14. In case of the failure of any vessel to make one of its regular trips, the company shall lose the subsidy which it would otherwise receive for such trip. It shall, moreover, be liable to a fine of $1,000.

(A) A delay of more than three and less than six days in reaching Vera Cruz shall render the company liable to a fine of $100 per day, and if the delay amounts to more than six and less than ten days, the company shall lose one-half the subsidy.

(B) These lines shall always be deducted from the subsidies payable by the custom-house at Vera Cruz, and shall be imposed by the proper governmental department only.

(C) Cases of vis major, when proper proof thereof is furnished, shall be excepted.

duration of the contract.

Art. 15. This contract shall last for five years, but if no formal notice of a desire for the cessation of its effects be given before the expiration of the fourth year it shall be understood to be extended for five years longer, and thus successively for periods of five years unless formal notice of a desire for the cessation of its effects be given before the expiration of the fourth year of each period.

security.

Art. 16. On the first day of October next, or sooner, if the company shall prefer, the latter shall make in the general treasury of the Federation a deposit of $50,000, in recognized bonds of the public debt, which amount it shall forfeit for the benefit of the nation in any of the cases entailing forfeiture hereinafter provided for.

transfer of this concession.

Art. 17. This contract shall not be transferred to any company or individual without the previous approval of the Government of Mexico.

Art. 18. If the transfer shall be made to any foreign Government or to any agent of such Government, such transfer shall be wholly null and void, in addition to which the company shall forfeit any sums that it may be entitled to collect from the Government; it shall also forfeit its dock-yard, its pontoon, any goods that it may have in the Republic, and its depository.

cases entailing forfeiture.

Art. 19. This contract shall be forfeited—

(A) If trips by the European line shall not be commenced during the first ten days of October next.

(B) If trips by the United States line shall not be commenced during the first ten days of November next.

(C) If three consecutive trips shall not be made in a month, or nine, not consecutive, in a year, between the ports of Havana and Vera Cruz, and likewise from New York to Havana.

(D) In case of the transfer of this contract to a company or individual without the previous consent of the Government.

Art. 20. The forfeiture shall be declared by the Executive after an audience with the company, to which a term of two months shall be granted, to enable it to state such grounds as it may have in its favor, before the declaration of the forfeiture.

Art. 21. Fortuitous cases, or those of vis major and quarantine, of which proper proof is presented, shall be excepted.

sundry clauses.

Art. 22. The Spanish Transatlantic Company shall be duly represented at this capital by an attorney.

Art. 23. Differences growing out of a failure to abide by the clauses of this contract, on the part of either of the contracting parties, shall be decided by the courts of the Republic.

provisional articles.

One-half of the expense of the stamps required by this contract shall be defrayed by each of the contracting parties.

City of Mexico, August 21, 1886.

Carlos Pactieco,
(Flourish.)

For the Spanish Transatlantic Company:

Carlos Calderon,
(Flourish.)