839.51/2132

The Secretary of State to the Secretary of the Navy (Daniels)

Sir: I have the honor to acknowledge the receipt of your letter of September 9, 1920, (16870–315:8),6 transmitting a request from the Military Governor of Santo Domingo, in which, with the approval of the Navy Department, he asks that certain instructions be issued to the General Receiver of Dominican Customs, through the Department of State, and the Bureau of Insular Affairs of the War Department, these instructions to be binding upon the General Receiver until all of the bonds of the “Dominican Republic 5% Bond Issue 1918” have been redeemed and paid.

The instructions requested are:

1.
That the General Receiver “to carry out the provisions of Executive Order No. 193, issued by the Military Government” shall deduct monthly from the customs receipts of the Dominican Republic, an amount sufficient to equal the annual sum of $208,060, being one [Page 133]twentieth of the bond issue in question, to cover the amortization provided for in that order and shall deposit the sum with a designated depository provided for in that order: and
2.
That the General Receiver shall make monthly segregations “as required by the terms of Executive Order 272” of the proportional amounts representing 60 per cent of the one-half of the surplus above three million dollars of customs revenues pledged by said order, and shall deposit such amounts with the depository designated in that order.

In reply I regret to be obliged to inform you that, in its opinion, and for the reasons hereinafter indicated, the Department of State would not be justified in complying with the request transmitted in your letter. However, it would seem that the Military Governor might arrange for the amortization of the bond issue in question by application of the funds directed in Article 1 of the Convention of 1907 between the United States and the Dominican Republic,7 “to be paid to the Dominican Government” after the payments specifically required by that Article have been made.

The Executive Order 193,8 referred to in the requested instructions, purports to have been issued in this city August 2, 1918, “by authority of the Government of the United States”, and authorizes the issuance of bonds of the Dominican Republic to pay awards made by the Dominican Claims Commission of 1917. This Order sets forth (Article 8) that “there is hereby pledged, with the consent of the Government of the United States; from the customs revenues of the Dominican Republic, such amounts as may be required for the payment of the stated interest of said bonds; and, to the amortization fund for the redemption and payment of said bonds on the redemption dates hereinbefore provided, the further sum per annum, to be deposited in equal monthly installments, beginning January 1, 1918, or an amount equal to one-twentieth of the total amount of the bond issue.” This Article of the Order further sets forth that “the sums pledged in this paragraph shall constitute an additional charge upon all customs revenues of the Republic collected in accordance with the Convention of February 8, 1917 [1907], between the United States of America and the Dominican Republic, after their application to the first four objects designated in Article One of that Convention and before payment is made to the Dominican Government.”

Article 9 of this Order provides that the General Receiver of Dominican Customs is authorized to make monthly deductions from the customs receipts to cover the amounts referred to in Article 8, and that “such monthly deductions and deposits shall be regularly [Page 134]continued by the General Receiver of Dominican Customs until all the bonds herein provided for shall have been redeemed and paid.”

The Executive Order, No. 272,8 referred to in the requested instructions, purports to have been issued on March 13, 1919, and refers to the said provisions of Executive Order 193. It assumes to charge the customs receipts of the Dominican Republic, in addition to the amount previously charged against them by Section 8 of Order 193, with a sum equal to 60 per cent of half of the excess over and above three million dollars of import and export duties collected by the General Receiver “in any year which would otherwise be collected by the Dominican Government”, and provides that these additional sums shall be invested in the purchase and retirement from circulation, in the manner thereinafter provided, of Dominican bonds dated January 1, 1918. It further authorizes the General Receiver to set aside monthly the proportional sums of the excess in question to be deposited with a trustee designated by the Dominican Government.

In the first place it may be observed with reference to the above mentioned statement as to the issuance of Executive Order 193 “by authority of the Government of the United States” that no reason is perceived why the Government of the United States should authorize the issuance of an Executive Order by the Military Governor of Santo Domingo. In this connection it may be said that it is the understanding of this Department that the Military Government in force in the Dominican Republic should be regarded as administering affairs for the Government of that Republic.

It may be further observed with reference to the Orders in question, that, as indicated by the above references thereto, they apparently attempt to alter the treaty arrangement between the United States and the Dominican Republic as to the disposition of the collections made by the General Receiver. Article 1 of the Convention of 1907 between the two Governments, “providing for the assistance of the United States in the collection and application of the customs revenues of the Dominican Republic” provides that the President of the United States shall appoint a General Receiver of Dominican Customs, who shall collect all the customs duties “until the payment or retirement of any or all bonds issued by the Dominican Government in accordance with the plan and under the limitations as to terms and amounts hereinbefore recited”, and that the General Receiver shall apply the sum so collected as follows: “first, to paying the expenses of the receivership; second, to the payment of interest upon said bonds; third, to the payment of the annual sums provided for amortization of said bonds including [Page 135]interest on all bonds held in sinking fund; fourth, to the purchase and cancellation, or the retirement and cancellation, pursuant to the terms thereof, of any of said bonds as may be directed by the Dominican Government; fifth, the remainder to be paid to the Dominican Government”.

The bonds referred to in said Article 1 of the Convention of 1907 are set forth therein as being an issue of twenty million dollars, payable in fifty years, and it is understood by this Department that bonds bearing date of January 1, 1918, were issued according to the plan of the Convention.

In connection with the foregoing it may be said that of course the Military Government of Santo Domingo could not of itself alter the said provisions of the Convention, and, furthermore, the Executive branch of the Government of the United States apparently could not alone enter into such an arrangement for such alteration. It is, therefore, believed that the apparent attempt of the Dominican Republic to insert an additional object in the treaty for the application of customs revenues is not internationally binding, and that the Government of the United States, therefore, has no duty to see to it that customs revenues are applied for that object.

In relation to the foregoing it may be observed that under said Article 1 of the Convention of 1907, the collection of customs by a Receiver appointed by the President of the United States is apparently to be continued only until the payment or retirement of the bonds referred to in that Convention, which, according to the terms thereof, are redeemable after ten years. It is conceivable, therefore, that all such bonds might be paid or retired prior to the time when all of the 1918 bonds have been redeemed and paid. Should such an event occur, all responsibility upon the United States under the Convention would cease and terminate.

Finally, it is believed that the Government of the United States is without responsibility for the payment and retirement of the 1918 bonds. This bond issue is not contemplated in any Convention between the United States and the Dominican Republic, and the General Receiver of Dominican Customs is given no authority by treaty over funds to be collected for the payment of these bonds. Therefore, the Department of State seems to be entirely lacking in authority to issue instructions to the General Receiver regarding this matter, which would seem to be one to be dealt with wholly by the Government of the Dominican Republic.

I have [etc.]

For the Secretary of State:
Norman H. Davis

Under Secretary