Papers relating to the foreign relations of the United States, 1930, Volume III

411.58J63/11

The Secretary of State to the Swedish Minister (Boström)

Washington, June 13, 1928.

Sir: Adverting to recent conferences which you had with members of the Department to discuss the claim of your Government in behalf of the Rederiaktiebolaget Nordstjernan, a Swedish corporation, on account of the alleged detention of the motor ship Kronprins Gustaf Adolf from October 27, 1917, to July 12, 1918, and the motor ship Pacific from September 14, 1917, to July 19, 1918, I have the honor hereby to answer your note of June 16, 1927, in regard to the claim.

It appears that the Kronprins Gustaf Adolf arrived at the port of New York on June 23, 1917, and that about October 27, 1917, the owners of the vessel were orally informed by the War Trade Board that the vessel would not be permitted to leave the port of New York without an export license for the fuel oil which was on board when the vessel entered the port. It appears that on July 1, 1917, the motor ship Pacific arrived at the port of Newport News, Virginia, with a cargo of nitrate and that on September 14, 1917, application was made for a license to export the cargo of the vessel to Sweden.

In the note of your Legation dated June 16, 1927, the circumstances under which the vessels entered the ports of the United States and the efforts of the owners of the vessels and of your Legation to obtain licenses for the exportation of the cargo of the Pacific and for the exportation of fuel oil carried by both vessels on entering the United States were reviewed. The position was taken in your note and enclosure thereto that the Export Administrative Board and later the War Trade Board, in refusing to grant licenses for the exportation of the cargo of the Pacific and for the fuel oil carried by both vessels, detained the ships and the commodities thereon contrary to Article XVII of the Treaty of 1783 and denied the subjects of Sweden freedom of navigation of vessels contrary to Articles VII, VIII, IX and X of the Treaty.

It is understood that your Government predicates the claim on behalf of the owners of the Kronprins Gustaf Adolf and the Pacific on the refusal of the War Trade Board to grant licenses, and that your Government contends that the action of the War Trade Board in refusing to grant licenses constituted detention of the vessels and denial of freedom of navigation.

The formalities required of vessels in ports of the United States to depart for foreign ports are prescribed by Section 4197, Revised Statutes of the United States. The Section cited reads as follows:

“The master or person having the charge or command of any vessel bound to a foreign port, shall deliver to the collector of the district from which such vessel is about to depart, a manifest of all the cargo on board the same, and the value thereof, by him subscribed, and shall swear to the truth thereof; whereupon the collector shall grant a clearance for such vessel and her cargo, but without specifying the particulars thereof in the clearance, unless required by the master or other person having the charge or command of such vessel so to do. If any vessel bound to a foreign port departs on her journey to such foreign port without delivering such manifest and obtaining a clearance, as hereby required, the master or other person having the charge or command of such vessel shall be liable to a penalty of five hundred dollars for every such offense.”

It will be observed from the foregoing that the Collector of Customs is the official to whom application should be made for clearance for vessels. As indicated by the enclosure to your note of June 16, 1927, the War Trade Board was created by Executve Order for the purpose among others of effectuating Title VII of an Act approved June 15, 1917.¹¹ Section 3 of that Title read as follows:

“Whenever there is reasonable cause to believe that any vessel, domestic or foreign, is about to carry out of the United States any article or articles in violation of the provisions of this Title, the Collector of Customs for the district in which such vessel is located is hereby authorized and empowered, subject to review by the Secretary of Commerce, to refuse clearance to any such vessel, domestic or foreign, for which clearance is required by law, and by formal notice served upon the owners, master, or person or persons in command or charge of any domestic vessel for which clearance is not required by law, to forbid the departure of such vessel from the port, and it shall thereupon be unlawful for such vessel to depart. Whoever, in violation of any of the provisions of this section, shall take, or attempt to take, or authorize the taking of any such vessel, out of port or from the jurisdiction of the United States, shall be fined not more than $10,000 or imprisoned not more than two years, or both; and, in addition, such vessel, her tackle, apparel, furniture, equipment, and forbidden cargo shall be forfeited to the United States.”

Section 3, Title VII, of the Act of June 15, 1917, conferred upon the Collector of Customs authority to refuse clearance to vessels in some circumstances. Although Title VII of the Act of June 15, 1917, constituted the authority of law for the licensing of exports that Title contained no provision by virtue of which the War Trade Board could properly have detained vessels or denied freedom of navigation. Nor were such powers conferred upon the War Trade Board by any other provision of law. It may be observed, moreover, that no showing has been made that officials of War Trade Board detained the vessels or denied them freedom of navigation. The only conceivable way by which the vessels could have been lawfully detained would have been for the Collectors of Customs at the two ports to have refused clearance and to have forbidden the departure of the vessels. It is not contended, and the records do not disclose, that application for clearance was ever made to the Collectors of Customs. In the absence of a showing that such action was taken, it is scarcely necessary to consider whether refusal of clearance and the forbidding of the departure of the vessels without clearance would have been warranted by law or would have been in violation of the provisions of the treaties to which you refer. It may be stated, however, that had the vessels been denied clearance and had their departure been forbidden, there was yet an appeal to the Secretary of Commerce. Had he sustained the Collectors of Customs, the question whether such action was warranted by law and was in violation of the provisions of the treaties would have been for determination by the competent courts in proceedings instituted by the owners of the vessels.

Reference is made in your note of June 16, 1927, to the correspondence exchanged between the Secretary of State and your Legation from November 24, 1917, to June 26, 1918.¹² In the course of that correspondence your Legation expressed the view that the export regulations of the United States did not apply to bunker fuel on board vessels when they entered ports of the United States, and that it was contrary to the provisions of Article XVII of the treaty of 1783 and Article XII of the treaty of 1827 to apply those regulations to bunker fuel for vessels of Sweden. The Secretary of State advanced the view that the Articles of the treaties mentioned were not applicable in the circumstances attending the Kronprins Gustaf Adolf and the Pacific.

The question whether Title VII of the Act approved June 15, 1917, and the regulations issued thereunder, applied to bunker fuel and cargo brought into the ports of the United States on the Kronprins Gustaf Adolf and the Pacific and the relation of the provisions of the treaties to which you have referred to Title VII of the Act of June 15, 1917, could have been authoritatively determined only in the course of appropriate proceedings instituted in the competent court by the owners of the vessels. The War Trade Board adhered to the view that Title VII of the Act of June 15, 1917, and the regulations issued pursuant thereto, applied to the cargo and bunker fuel brought into the ports of the United States on board the vessels concerned. The Secretary of State in his note of January 24, 1918,¹³ expressed the view that the provisions of the treaty to which attention had been called by your Legation had no application in the circumstances attending the vessels. The issue was susceptible of judicial determination. The owners of the vessels failed to take the necessary steps to have their rights determined in that manner. Considering that the rights of the owners of the two ships were susceptible of judicial determination and that they failed to resort to the available judicial remedy, the Government of the United States can not receive with favor a claim in their behalf.

In reaching the conclusion announced above, the Department has not failed to give due consideration to the memorandum which accompanied your note of March 7, 1928,¹⁴ and to subsequent communications on the subject.

In part one of the memorandum which accompanied your note of March 7, 1928, the proposition is advanced that there was no legal remedy open to the claimant in the courts of the United States by which the claimant could have obtained either the right to take the vessels in ballast out of the United States or reparation for their detention. This proposition is discussed in the memorandum under four subdivisions. It is asserted

1. That Title VII of the Act of June 15, 1917, applied to all articles within the territorial jurisdiction of the United States whether on board a foreign vessel or not.

2. That the War Trade Board to which the President, by Executive Order of October 12, 1917, delegated his authority, under Title VII of the Act of June 15, 1917, applied the regulations to cargoes and bunkers brought in by foreign vessels to ports of the United States.

3. The treaty with Sweden being one hundred years prior to the Act of June 15, 1917, the United States courts were bound to enforce the statute and not the treaty.

4. The courts of the United States could have given the Swedish owners no redress.

Considering these several assertions in the order in which they are stated above, it may be said, with respect to the first assertion, that the question whether Title VII and the regulations issued pursuant thereto applied to bunker fuel and cargo on vessels coming into the United States was one for judicial determination. In the note which the Swedish Legation addressed to the Secretary of State on November 24, 1917, the view was expressed that the regulations issued pursuant to Title VII of the Act of June 15, 1917, had no application to bunker fuel on board vessels when they arrived in the United States. The War Trade Board adhered to the opposite view. The proper procedure for the owners of the vessels to have pursued would have been to apply for clearance to the Collectors of Customs at the ports which the vessels had entered. Had the Collectors of Customs denied clearance, and been sustained in such action on appeal by the owners of the vessels to the Secretary of Commerce, action would have been available to the owners in the courts of the United States to recover damages for the refusal to grant clearance to the Kronprins Gustaf Adolf and the Pacific. This action Would have brought in question the scope and effect of Title VII of the Act of June 15, 1917, and the regulations issued thereunder, with respect to those two vessels. The question whether Title VII of the Act of June 15, 1917, and the regulations issued thereunder applied to the cargo and bunker fuel brought into ports of the United States by the Kronprins Gustaf Adolf and the Pacific or whether the Title and the regulations did not apply to those vessels was one which, as already stated, could have been authoritatively determined only by appropriate action in the competent courts. The owners of the vessels failed to institute the necessary proceedings to have the question adjudicated. The Government of the United States can not consider as established the proposition that Title VII of the Act of June 15, 1917, applied to the two vessels.

With respect to the second assertion advanced in part one of the memorandum, it is pertinent to reiterate that the War Trade Board possessed no authority to detain vessels or cargoes. The authority of the War Trade Board was limited to granting or refusing to grant export licenses. The authority to grant or refuse clearance rested with the Collectors of Customs. Had the owners of the vessels applied for clearance and had clearance been refused, their remedy would have been by appropriate action in the courts, as previously suggested. While the War Trade Board adhered to the view that Title VII of the Act of June 15, 1917, applied to the Kronprins Gustaf Adolf and the Pacific, the decision of the War Trade Board was not final and its attitude did not constitute detention. The position of the War Trade Board with respect to the scope and effect of Title VII of the Act of June 15, 1917, and the regulations issued thereunder, could have been brought in judicial review had clearance of the vessels been refused. The Government of the United States does not consider that the action of the War Trade Board in regard to the two vessels to which this discussion relates afforded grounds for a claim against the Government of the United States.

With respect to the third assertion advanced in part one of the memorandum, it may be said that the relation of the treaties and the Act of June 15, 1917, was susceptible of judicial determination. The courts were competent to consider what application, if any, the treaties with Sweden had in the circumstances attending the two vessels. By proper diligence the owners of the vessels could have had the question judicially determined. They failed to take the necessary steps to have this done. The Government of the United States does not accede to the proposition that the treaties exempted Swedish vessels from the operation of Title VII of the Act of June 15, 1917, even if it be assumed that Title VII applied to bunkers on those vessels, or that if the treaties did entitle the vessels to exemption from the operation of Title VII and complementary regulations, the treaties would have been disregarded had the matter been presented to the courts.

The Government of the United States does not concur in the fourth assertion set forth in part one of the memorandum, but maintains that the courts were competent to afford redress had the owners of the two vessels been entitled to relief. As has been emphasized in the foregoing, the proper procedure for the owners of the vessels to have taken was to apply to the Collectors of Customs for clearance. Had clearance been denied, the owners could then have appealed to the Secretary of Commerce and, if necessary, to the courts, and could have had determined whether Title VII of the Act of June 15, 1917, and the regulations issued thereunder, applied to the two vessels, as well as the bearing of the treaties on the rights of the owners and the status of the vessels. As bearing on the power of the courts of the United States to review the action of Collectors of Customs in refusing to grant clearance to vessels, reference may be made to Hendricks v. Gonzalez, reported in 67 Federal Reporter, page 351. The decision is interesting also in relation to the power of the courts to grant redress for withholding clearance without justification of law.

In part two of the memorandum the proposition is advanced that there is no impediment to the presentation of the claim of the owners of the Kronprins Gustaf Adolf and the Pacific through diplomatic channels, and in support of this proposition the assertions are made

1. That the War Trade Board was the agent of the President and an authority for whose conduct the Government of the United States was responsible.

2. That there was no legal remedy which should have been exhausted prior to diplomatic interposition.

The answer to the assertions advanced in part two of the memorandum is apparent from what has been said in the course of this note. The War Trade Board had no authority to detain vessels or cargoes. It was without means of detention and no showing has been made that the War Trade Board attempted to detain the two vessels or cargoes concerned in this discussion. The War Trade Board was authorized only to grant or refuse to grant licenses for export. The War Trade Board may or may not have been mistaken in its interpretation and application of the law. This question could and should have been submitted to the courts for decision. The action of the War Trade Board, however, did not find expression in the detention of the vessel or cargo. The allegation that the War Trade Board detained the vessels and cargo can not, therefore, be accepted as a basis for a claim.

The impression under which you seem to be laboring that there was no legal remedy which should have been exhausted has doubtless been dispelled by what has heretofore been stated in this communication. It is obvious that the owners of the Kronprins Gustaf Adolf and the Pacific had available a remedy in the courts by which they could have had adjudicated their rights under the laws of the United States and under the treaties. The Government of the United States considers that it was incumbent upon the claimants to exhaust that remedy. Failure to do so leaves them by their own omission without redress. In these circumstances the Government of the United States can not entertain a claim in behalf of the owners. To do so would be to ignore the remedies established by the Government pursuant to the sovereign right of the State. Whether the remedies established by the laws of the United States are to be employed or ignored is a matter of vital concern to the Government of the United States.

In conclusion I respectfully submit that the allegation that the United States, acting through the War Trade Board, detained the Kronprins Gustaf Adolf and the Pacific finds no support in the record presented to this Department; that the vessels mentioned were not detained by the War Trade Board or by any other authority of the Government of the United States; that had there been any attempt to detain the vessels the owners would have had access to the courts of the United States; and that the claim on behalf of the owners must be rejected for lack of legal basis.

Accept [etc.]

Frank B. Kellogg

11. 40 Stat. 217.
12. See footnotes 3, 4, 5, and 8, pp. 819, 820.
13. Department of State Arbitration Series No. 5 (3), appendix, p. 103.
14. For text of this note, see Department of State Arbitration Series No. 5 (1), p. 303; enclosed memorandum not printed.