Mr. Hay to Mr. Merry.

No. 256.]

Sir: Only recently has the Department been placed in full possession of the evidence showing the circumstances of the payment of customs duties to the revolutionary authorities under General Reyes by the American merchants mentioned in the agreement1 between yourself and Mr. Sanson of April 29 ultimo. The evidence submitted to the Department, consisting in part of the sworn statements of said merchants, seems to establish the following facts:

The bona fide neutrality of said merchants preceding and during the revolutionary movement led by General Reyes, and their absolute freedom from complicity in that movement.
That the merchants paid none of the current customs duties during the period of February 3 to 23 last, but only certain bonds or notes which had matured and which had been given for duties on goods imported during the months of December, 1898, and January, 1899, and that those bonds when paid were in the hands of Mr. A. Salter, who had been appointed by the titular government and continued by General Reyes as treasurer at Bluefields.
That those customs bonds or notes bore a penalty of 5 per cent per month if not paid when due; that they were in the possession of said treasurer, who demanded their payment, and under fear of incurring this penalty and under threats by General Reyes that unless the merchants paid the same they would not be allowed to receive importations, they were constrained to make said payments involuntarily and at the risk of serious injury and loss if they refused.
That General Reyes was in full control and exercise of all the military and civil offices, functions, and agencies of government in the Bluefields district during that period, which seems to be proven demonstratively by the fact that prior to February 3 General Estrada had been appointed by the titular government the successor in office to General Reyes as governor intendente of the district of Zelaya and inspector-general of the Atlantic coast of Nicaragua, and had come to Bluefields to assume his official functions; that he was unable to do so by reason of the supreme control of General Reyes in the Bluefields district, in consequence of which General Estrada sought and received asylum and protection in the American consulate during the entire [Page 804] period of February 2 to February 25, until after the surrender of General Reyes and the collapse of the revolutionary movement.

Under the circumstances stated which have been shown to exist, the Government of the United States feels that it would be an act of international injustice for the Nicaraguan Government to exact the repayment of the customs bonds or notes thus paid by said merchants and which are in their possession. You are therefore instructed to request of the Nicaraguan Government its assent to the refunding to said merchants of the moneys which were deposited by them in the hands of the British consul to be held pending the consideration and solution of the question by the two Governments. You will furnish to the minister of foreign affairs a copy of this instruction, should he request it.

I am, etc.,

John Hay.