811.114 Newfoundland/59

The Under Secretary of State ( Phillips ) to the British Ambassador ( Lindsay )

My Dear Mr. Ambassador: I have been informed that there has been a considerable increase recently in the liquor smuggling activities from Newfoundland. During September the three vessels Malbo, May and June, and Placentia were reported by the Newfoundland Customs authorities as having cleared from St. John’s for Bermuda with cargoes of liquor, and during the early part of October the three vessels Anna D., Margaret S. II, and Ganneff were likewise reported as having cleared from St. John’s, the latter two with cargoes of liquor for Bermuda. All of these vessels are known from the history of their operations over a long period of time to be engaged in the illicit liquor traffic. The Margaret S. II, following its clearance from St. John’s on October 3 with a cargo of liquor for Bermuda, arrived at Yarmouth, Nova Scotia, on October 11 in ballast from Lunenburg. From the short interval of time between its clearance from St. John’s and its arrival at Yarmouth it may naturally be assumed that the vessel succeeded in promptly disposing of its cargo off the coast of the United States. Advice has just been received, furthermore, that the same vessel has again cleared from St. John’s, on October 24, with a cargo of liquor or alcohol for Bermuda and also that the Anna D. cleared again on October 29, with a cargo of alcoholic spirits for St. Pierre, making a total of five clearances during October. This is indicative of the present activity of this illicit trade. According to information received from the appropriate authorities of Bermuda, not one of the vessels clearing for Bermuda has arrived at any port of that island since leaving St. John’s. Furthermore, the master of the Placentia filed an affidavit with the Collector of National Revenue at Yarmouth, Nova Scotia, on the arrival of his vessel at that port in ballast on October 17, stating that the Placentia cleared from St. John’s Newfoundland, on September 26, [Page 400] 1934, for Bermuda, with a cargo of 1667 cases of alcohol; that the vessel proceeded to a point south-south-east of Nantucket Lightship where the entire cargo was transferred to a motor ship called the Corsair on October 13, 1934. The history of the previous operations of the Placentia, as well as of the Anna D and the Malbo, were sent to you with my note of October 5, last.13

Although all six of the vessels mentioned above are registered at St. John’s, Newfoundland, they are operated from Nova Scotia, with the exception of the vessel May and June. The same is true of practically every liquor vessel registered at St. John’s. I enclose for your information in this connection a list of 19 liquor vessels registered at St. John’s, all of which, with the one exception of the May and June above mentioned, are owned by companies or individuals in Nova Scotia. St. John’s, Newfoundland, thus bears the onus of being regarded as a base for vessels engaged in the smuggling traffic when, as a matter of fact, the vessels are actually operated from Nova Scotia. Some of the reasons why St. John’s is used as a port of registry and clearance are as follows:

The Canadian authorities are enforcing a law requiring the furnishing of landing certificates in connection with cargoes of alcoholic liquors, whereas no such certificates are required by the Newfoundland authorities.
Newfoundland regulations respecting registration of vessels and licenses to operate ships are not enforced as strictly as are those obtaining in Canada; this is understood to be particularly the case with reference to the qualifications and character of applicants for licenses.
Vessels registered in Newfoundland, although Canadian-owned, are not subject to Canadian navigation laws.
Vessels registered in Newfoundland may clear from Canadian ports without being subject to Canadian laws as to the proper licensing of radio apparatus.

In connection with the above, attention is invited to the fact that these vessels habitually base at Canadian ports between trips.

Furthermore, certain provisions of the present laws of Newfoundland appear to encourage the smuggling traffic. In particular, I enclose a copy13 of Section 108, Chapter 57, of the Newfoundland Customs Act, 1933, which provides that landing certificates shall be required for all classes of merchandise exported from a Customs warehouse except those upon which an ad valorem duty is not imposed. I am informed that at the present time alcoholic liquors are the only articles for which no landing certificates are required. In addition, the laws of Newfoundland permit clearance of suspected vessels for the high seas, thus facilitating the illicit traffic, since vessels engaged in legitimate cargo trade do not clear for the high seas.

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I am also informed that there are at present 70 bonded warehouses in Newfoundland, and that less than two percent of the total quantity of alcoholic liquors imported are consumed in the Colony, the remainder being exported. As there would not appear to be any demand for the legal transshipment of liquors or alcohol at St. John’s for Canada, the United States or ports in other countries, it may be assumed that the remaining 98 percent is intended for the illicit traffic.

In order to prevent the use of ports in Newfoundland from serving as bases for the smuggling of alcohol and liquor into the United States, it would be greatly appreciated by this Government if the necessary steps could be taken as soon as possible to accomplish the following objects:

To require landing certificates upon the clearance of vessels with cargoes of alcohol and/or liquors to insure the delivery of the cargo at its declared destination.
To prohibit the clearance of vessels for the high seas with cargoes of alcohol and/or liquors.

It is understood that the above-mentioned steps could be taken immediately by the Governor-in-Council.

The persons engaged in the smuggling traffic direct their operations not only against the United States, but also against Canada and Newfoundland. They, furthermore, compete with legitimate producers of spirits in Great Britain as well as in the United States, with a consequent damage to the interests of both countries. Immediate action is necessary to frustrate the activities of these lawless elements before they become too strongly intrenched. Now that the true condition of affairs is made known to the British Government, I feel confident that the appropriate steps will be taken at once.

I am [etc.]

William Phillips
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