Mr. Hengelmüller to Mr. Gresham .

Mr. Secretary of State: I have the honor to inform your excellency that I have received instructions from my Government to enter a protest against the discriminating duty on sugar from Austria-Hungary which was imposed by the new customs tariff of August 28, 1894.

This discriminating usage, according to which sugar on which a bounty is paid in Austria-Hungary, and which is exported to the United States, is obliged to pay a duty of one-tenth of a cent per pound, is entirely at variance with Article III of the treaty concluded in the year 1829 between Austria-Hungary and the United States, which treaty stipulates that goods imported into the United States from Austria-Hungary shall be subjected to no discrimination in respect to duties.

I also take the liberty to refer to the notes exchanged between this Imperial and Royal Legation and the Department of State of May 2 and 3, 1892, which form a new basis of the commercial relations existing between Austria-Hungary and the United States, and on which the proclamation of President Harrison of May 26, 1892, was based.

In that exchange of notes Austria-Hungary declared that it was prepared to grant the same reductions of duties that were granted to other countries, and that were included in the most-favored-nation clause, to similar North American products, on the supposition that a continuance of the exemption from duties mentioned in section 3 of the North American customs tariff of October 10, 1890, would be guaranteed, especially to sugar imported into the United States from Austria-Hungary.

The importation of sugar from Austria-Hungary into the United States is now subjected not only to the duties established in Schedule E, No. 182½, of the new tariff of August 28, 1894, but is also subjected to an addition of one-tenth of a cent per pound, which is levied on the sugar of countries that allow an export bounty on this article.

The high Imperial and Royal Government can not deny that a public bounty is paid in Austria-Hungary on the exportation of sugar. Yet the same export bounty was paid in the year 1892, when the aforesaid arrangement was made. It clearly appears, moreover, from the system of sugar taxation which is in force in Austria Hungary, that the export bounty is now allowed simply as a measure which has been forced upon the country, exceptionally, and owing to the state of affairs in the competing States.

The granting of export bounties is, furthermore, a domestic concern [Page 7] of the State that grants them, and therefore gives no right to other countries to impose additional duties, which would render illusory the most-favored-nation principle, on which our relations with North America have been based since 1829.

The Imperial and Royal Government is consequently compelled to enter a decided protest against that provision of the new North American customs tariff which establishes a discriminating usage for Austro-Hungarian sugar.

Austria-Hungary is conscious of having kept the promise made in that exchange of notes with regard to the usage to be granted to North American products on their importation into Austria-Hungary. The Imperial and Royal Government therefore feels authorized, in view of the friendly relations existing between it and the United States, to expect that the latter country, even if it thinks that it can not, for reasons connected with its customs policy, any longer continue the exemption from duty on raw sugar which was guaranteed in 1892, will nevertheless cease to refuse to this article, when imported from Austria-Hungary, the same usage that it grants to the productions of the most favored nation.

The result of a continuance of the existing state of things would be that the Imperial and Royal Government would be obliged to act independently as regards the usage to be granted to North American productions when imported into Austria-Hungary. We should be all the more compelled so to act, inasmuch as, according to another provision of the new North American tariff law, sugar from States allowing export bounties may, on certain conditions, and provided that such States comply with certain formalities to be specified by the Secretary of the Treasury, be exempted from paying the additional duty; and it is consequently possible for countries that secretly allow bounties, and the levying of whose taxes is controlled with difficulty, to secure exemption from the additional duty, while the sugar of countries that openly meet the bounty question, and whose action is altogether aboveboard, is excluded from competition in the North American market.

Trusting that your excellency will not refuse to consider the foregoing statements, and that you will use your kind mediation to the end that the Federal Government may take such action as will meet the wishes of the Imperial and Royal Austro-Hungarian Government, I take the liberty to request that I may be informed, with as little delay as possible, concerning the view taken of this communication by the Federal Government.

Accept, etc.,