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. 468.
Mr. Manning to Mr. Bayard.
Mexico, May 14, 1887. (Received May 24.)
Sir: I have the honor to transmit herewith a translation of Mr. Mariscal’s reply to my several notes concerning the complaint of Messrs. F. Alexandre & Sons regarding the rebate of duties accorded to the Spanish Transatlantic Mail Steam-ship Company. You will see that the Government of Mexico justifies its action, denies that Messrs. Alexandre have any just cause of complaint, and, in effect, though not in terms, refuses to give any relief.
Copy of the note will follow soon. I did not wish to delay this.
I am, etc.,
Mr. Mariscal to Mr. Manning.
Mexico, May 11, 1887.
Mr. Minister: Referring to your excellency’s notes, dated December 6, February 19, and April 12 and 19, relative to the complaint of Messrs. F. Alexandre & Sons concerning the rebate of duties accorded the Spanish Transatlantic Company, I have the honor to inclose, in copy, the report of the department of public works, and the opinion of two respectable Mexican lawyers upon the case.
I should add that when the concession in question was made to the said company several complaints arose, though informally, from nations which had in their respective treaties with Mexico the most-favored-nation clause. The explanation then sufficed that the exemption was granted to a private company in lieu of subvention, and not to the flag of Spain, thus quieting said complaints.
As your excellency knows, Mexico is not held by express conditions to treat the United States as a most favored nation, for there is no general treaty in force between our countries. Though Mexico yields that treatment to the United States de facto, and perforce of peculiarly friendly reasons, it is evident that, under international usage, the complaint of Messrs. Alexandre & Sons has even less foundation than a similar complaint on the part of English or German companies.
I call your excellency’s attention to the just statement contained in the report of the department of public works to the exact tenor that Messrs. Alexandre & Sons, who, for fifteen years, were, subventioned by the Government of Mexico, should be the last to ignore Mexico’s right to concede the advantages and privileges it may consider necessary to the promotion and progress of its maritime commerce.
I embrace this opportunity, etc.
The following report has been sent from the first section of this department:
Mr. Secretary: Hon. Messrs. Alfredo Chavero and Emilio Velasco have furnished the statement requested of them, by your direction, relative to the note sent by the minister of the United States of America to the department of foreign affairs, and referred by the latter to the department of public works, touching the contract made with the Spanish Transatlantic Company. The said attorneys treat the question under two headings:
- First. The interpretation of the third and ninth articles of the contract; and
- Second. The nature of the rights acquired by the Spanish Transatlantic Company. These were apparently the only two points which should be treated in view of the note referred to them for my information. But, as the American legation had previously sent two notes, under dates of April 15 and 23 last, relative to the same matter, this section, in compliance with your instruction, proceeds to report generally thereon.
While the said notes refer to the injury which the American merchant marine might suffer under the enforcement of the contract made with the Spanish Transatlantic Company, mention is made in all of them of the complaints of the firm of Alexandre & Sons, the last note even detailing that the said firm has suffered, during the first quarter of the present year, a reduction in its freights of $21,957. This is much to be regretted, but the Government is unable to remedy it, because other companies, among them the Spanish Transatlantic, had greater facilities, and charge a lower rate of freight. If it is due to the subvention enjoyed by the last-named company, that is no reason why the former should complain, for it is an indisputable right of the Government to subvention the companies it selects as most subservient to the good of the country, and that right the firm of Alexandre & Sons should b& the last to question, for it received from the Mexican Government for more than fifteen years a subvention. During that period no other line could be therefore established. Neither was it imagined during that long period that the merchant marine of any nation was injured, nor did the firm of Alexandre, now a claimant, then consider that other lines might have their freight receipts lessened. This section can not therefore see any reason why what was considered good for so many years, when in favor of the firm of Alexandre, should be bad now when in favor of the Spanish Transatlantic Company, especially as the services rendered by the latter company are greater and more important than those then rendered by the former.
[Page 725]Now, merging fully into the question itself, which is that of the 2 per cent. rebate accorded to the Spanish Transatlantic Company, he who subscribes states that after September 30 of last year the agents of the English and German steamship companies repaired to this department sustaining the right they claimed to hold to receive, in common with the Spanish Transatlantic Company, the rebate of 2 per cent. referred to. This section passed upon the matter by entirely refusing to entertain the proposition, and so reported to the department of foreign affairs on October 27 of that same year. This report was indorsed by the said department. As the same matter is now under discussion, the undersigned is of the belief that he should call the attention of the department of foreign affairs to that report, a copy of which he can furnish thereto. In the light of that report he answered the notes from the legation of the United States, at the same time inclosing copy of the statement of the attorneys, Chavero and Velasco.
Transmitting a certified copy of the documents mentioned, I have the honor to do so in order that all this data may serve to assist you in reaching the conclusions your eminent judgment may dictate upon the particulars.
Liberty and constitution.
Chief Clerk.
Mr. Secretary: The department of foreign affairs sent to you the note it received from the minister of the United States of America touching the complaint of Messrs. F. Alexandre & Sons, to the end that you should communicate thereto the information and data to which the said minister referred.
This complaint concerns the contract made with the Spanish Transatlantic Steamship Company. Messrs. Alexandre & Sons base their complaint upon the fact that the Mexican Government grants a rebate of 2 percent.’ of customs duties on merchandise imported in those steamers. In view of the relation between the third and the ninth articles of the contract the minister of the United States also believes that the articles are susceptible of distinct interpretations, and he desires to be informed as to what is the true interpretation placed thereon by the Government of the Republic.
Two questions should therefore be considered:
- First. The interpretation of the third and ninth articles of the contract; and
- Second. The nature of the rights acquired by the Spanish Transatlantic Company. Under the ninth article the Government of the Republic engages to subsidize the company with the sum of $5,000 for each round trip, and with 2 per cent. of the customs duties accruing upon merchandise carried in its steamers, provided, always, that those duties amount to at least $50,000 for the trip. The subsidy is thus dual in its character. A certain sum is payable per trip, and the 2 per cent. is additional; that is to say, one amount is definite and defined, another is indefinite and undefined, the latter subject to the value of the merchandise which may be imported and payable only in case the merchandise imported produces customs duties aggregating over $50,000.
According to the third article, the company binds itself to pay for the importers 2 per cent. of the duties upon their merchandise, deducting this sum from the subvention it should collect in the custom-houses of Progreso and Vera Cruz.
The obligation of the company to pay a part of the duties and its right to a subvention arise from the third and the ninth articles. The contract provides for compensation within the sums which the Government and the company mutually owe each other; and the forms and effects of compensation can be explained under the various hypotheses of the contract.
If the merchandise imported in the trip be charged at the custom-house with duties falling short of $50,000 the company is credited with $5,000, but not with the 2 per cent. The company, however, is obliged to pay 2 per cent. of the customs duties, which 2 per cent. is deducted from the $5,000 payable for the trip by the Government.
If the merchandise imported on the trip nets customs duties exceeding $50,000, the company receives $5,000 and the 2 per cent. besides. From the total amount of these two accounts is to be deducted the 2 per cents, to the payment of which the company is pledged, the latter then receiving the balance due to it.
Upon the examination of the effects of the third and ninth articles it is seen that a subvention being granted to the Spanish Transatlantic Company, the guaranty of payment has been sought in the collection of the customs duties, and that the company having assumed the payment for importers of 2 per cent. on the merchandise [Page 726] imported in its vessels is itself at liberty to charge the importers the sums it may pay for them.
The tenor of articles third and ninth being determined, it is expedient to characterize the contract with the Spanish Transatlantic Company as follows:
Articles third and ninth form part of a whole in which reciprocal rights and obligations figure. So the privileges accorded to the said company under those articles are not acquired gratis, but are in payment of services the company binds itself to render, services in the postal department, by the carrying of the mail, in the transportation of merchandise for the reduced tariff, especially in the exportation of national products, and, finally, in other services specified in the contract.
Messrs. Alexandre & Sons have considered as inimical to their interests the concessions granted to the Spanish Transatlantic Company. Probably the detriment to which they allude arises, in their judgment, from the difficulties they encounter in entering into competition with a subsidized company.
The third article of the contract could be suppressed without entailing any inconvenience. It contains simply a guaranty, that is to say, an accessory obligation, the suppression of which in nowise would affect the main obligations of the contract. Under the ninth article the Transatlantic Company would always have the right, by way of subvention, to $5,000 per trip in addition to the 2 per cent. of customs duties on the merchandise imported in their vessels. In the event of the suppression of the third article this subvention would be received directly from the Mexican treasury, and its form would suggest no objectionable features whatever, and would allow the said company to offer in transportation, under a different method from that which at present obtains in their steamers, similar privileges to those it grants to-day. The hopelessness of competition by nonsubsidized steamers is due not to the form in which a subvention is clothed, but to the nature of that subvention, which will at all times allow the steamship line enjoying it to conduct the business of transportation under conditions more favorable than the rest. A proof of this is furnished in the case of the line of Alexandre & Sons, a line which, during the fifteen years in which it was subsidized by the Mexican Government, rendered difficult any competition in transportation on the part of other lines which other companies were desirous of establishing.
We should not conclude this opinion without thanking you for the honor and confidence you were thus pleased to show us in consulting us. liberty and constitution.
- Aleredo Chavero.
- Emilio Velasco
To the Secretary of Public Works, present.