Papers Relating to the Foreign Relations of the United States, Transmitted to Congress, With the Annual Message of the President, December 3, 1888, Part II

Message from the President of the United States inclosing a report from the Secretary of State in reference to the international questions arising from the imposition of differential rates of tonnage dues.

To the Senate and House of Representatives:

I transmit herewith, for the consideration of Congress and such legislation in respect of the matters therein presented as may seem necessary and proper, a report of the Secretary of State, with accompanying explanatory correspondence, in reference to the international questions arising from the imposition of differential rates of tonnage dues upon vessels entering ports of the United States from foreign countries under the provisions of the fourteenth section of the act of June 26, 1884, and the later amendatory provisions of the act of June 19, 1886, as set forth in said report.

Grover Cleveland.

Executive Mansion,
Washington , January 14, 1889.

To the President:

On the 26th of June, 1884, the President approved “An act to remove certain burdens on the American merchant marine and encourage the American foreign-carrying trade, and for other purposes.” This statute contained thirty sections, relating to inspection of vessels, shipping and discharge of seamen, the liabilities of ship-owners, and sundry other kindred topics. Section 14 alone related to tonnage dues, but it provided a new system for levying them which radically differed from that formerly in force.

Section 14 provided that in lieu of the uniform tax of 30 cents a ton per annum previously imposed by law, a duty of 3 cents a ton, not to exceed in the aggregate 15 cents a ton in any one year, should be imposed at each entry on all vessels which should be entered in any port of the United States from any foreign port or place in North America, Central America, the West Indies, the Bahamas, the Bermudas, the Hawaiian Islands, or Newfoundland 5 and that a duty of 6 cents a ton, not to exceed the old rate of 30 cents a ton per annum, should be imposed at each entry on all vessels entered in the United States from any other foreign ports or places.

It was, however, provided that the President should suspend the collection of so much of the 3–15 cents duty on vessels entered from any port in Canada, Newfoundland, the Bahamas, the Bermudas, the West Indies, Mexico, and Central America down to and including Aspinwall and Panama, as might be in excess of the tonnage and lighthouse dues, or other equivalent tax or taxes, imposed on American vessels by the Government of the foreign country in which such port was situated.

In course of time claims were presented by the Governments of Belgium, Denmark, Germany, Italy, Portugal, and Sweden and Norway for the 3–15 cent rate. These claims, excepting in the case of Sweden and Norway, were based upon provisions in treaties of those nations with the United States, by which the contracting parties mutually agree not to grant favors to other nations in respect to commerce and navigation which shall not become common to the other party, either with or without expression of equivalent concessions, as the case may be.

In the case of Sweden and Norway there was a further treaty stipulation, which reads as follows:

The two high contracting parties engage not to impose upon the navigation between their respective territories, in the vessels of either, any tonnage or other duties, of any kind or denomination, which shall be higher or other than those which shall be imposed on every other navigation, except that which they have reserved to themselves, respectively, by the sixth article of the present treaty. (Article 8, treaty of July 4, 1827.)

Article 6 referred to coastwise navigation, which the contracting parties reserved to themselves, respectively.

The question of the conflict of the provisions of section 14 of the act of June 26, 1884, with our conventional obligations having been referred to the Department of Justice, the Attorney-General, on the 19th of September, 1885, gave the following opinion:

The discrimination as to tonnage duty in favor of vessels sailing from the regions mentioned in the act, and entered in our ports, is, I think, purely geographical in character, inuring to the advantage of any vessel of any power that may choose to fetch and carry between this country and any port embraced by the fourteenth section of the act. I see no warrant, therefore, to claim that there is anything in the “most favored-nation” clause of the treaty between this country and the powers mentioned that entitles them to have the privileges of the fourteenth section extended to their vessels sailing to this country from ports outside of the limitation of the act.

This opinion was duly made known to the Governments concerned.

In order to illustrate the views of those Governments upon the matter, a passage may be quoted from a note of the German minister at this capital, of the 16th of February, 1886, as follows:

This rejection (of the claim of Germany) is based on the ground that that exemption, which is granted to all vessels of all powers sailing between the countries in question (which enjoy the 3–15 cent rate under the act of 1884) and the United States, is purely geographical in its character, and can not, therefore, be claimed by other States under the most favored-nation clause.

I am instructed, and I have the honor most respectfully to reply to this, that such a line of argument is a most unusual one, and is calculated to render the most favored-nation clause wholly illusory. On the same ground it would be quite possible to justify, for instance, a privilege granted exclusively to the South American States, then one granted also to certain of the nearer European nations, so that finally, under certain circumstances, always on the pretext that the measure was one of a purely geographical character, Germany alone, among all the nations that maintain commercial relations with America, notwithstanding the most favored-nation right granted to that country hy treaty, might be excluded from the benefit of the act.

It can not be doubted, it is true, that on grounds of a purely local character, certain treaty stipulations between two powers, or certain advantages autonomically granted, may be claimed of third states not upon the ground of a most favored-nation clause. Among these are included facilities in reciprocal trade on the border, between states whose territories adjoin each other. It is however, not to be doubted that the international practice is that such facilities, not coming within the scope of a most favored-nation clause, are not admissible save within very restricted zones.* * * This law (of 1884) grants definite advantages to entire countries, among others to those situated at a great distance from the United States; these advantages are, beyond a doubt, equivalent to facilities granted to the trade and navigation of those countries, even if they do, under certain circumstances, inure to the benefit of individual vessels of foreign nations. It scarcely need be insisted upon that these advantages favor the entire commerce of the countries specially designated in the act, since they are now able to ship their goods to the United States on terms that have been artificially rendered more favorable than those on which other countries, not thus favored, are able to ship theirs.

The treaty existing between Prussia and the United States expressly stipulates that “If either party shall hereafter grant to any other nation any particular favor in navigation or commerce, it shall immediately become common to the other party, freely where it is freely granted to such other nation, or on yielding the same compensation when the grant is conditional.” Such a compensation, so far as the reduction of the tonnage tax to 3 cents is concerned, has not been stipulated for by the United States in the aforesaid shipping act. Germany is, therefore, ipso facto, entitled to the reduction of the tax in favor of vessels sailing from Germany to the United States, especially since, according to the constitution of the Empire, no tonnage tax is collected in Germany from foreign vessels, that is to say, no tonnage tax of the character of American tonnage taxes in the sense of section 8, paragraph 1, Article 1 of the American Constitution, viz, those designed to pay the debts of the Government, and to pay the expenses of the common defense and the general welfare.

In the situation thus described matters remained until the 19th of June, 1886, when an act was approved entitled “An act to abolish certain fees for official services to American vessels, and to amend laws relating to shipping commissioners, seamen, and owners of vessels, and for other purposes.” By the eleventh section of this act the fourteenth section of the act of June 26, 1884, was amended. To the area in respect of which the 3–15 cent rate under the latter act applied, was added, “the coast of South America bordering on the Caribbean Sea.” The other amendments were as follows:

As above stated, the act of 1884 provided that the President should suspend the collection of so much of the 3–15 cent duty on vessels entered in the United States from any port in Canada, Newfoundland, the Bahamas, the Bermudas, the West Indies, Mexico, and Central America, down to and including Aspinwall and Panama, as might be in excess of the tonnage and light-house dues, or other equivalent tax or taxes, imposed on American vessels by the Government of the foreign country in which such port was situated. In lieu of this, section 11 of the act of 1886 contains the following provisions:

Provided, That the President of the United States shall suspend the collection of so much of the duty herein imposed on vessels entered from any foreign port, as may be in excess of the tonnage and light-house dues, or other equivalent tax or taxes, imposed in said port on American vessels by the Government of the foreign country in which such port is situated, and shall, upon the passage of this act, and from time to time thereafter, as often as it may become necessary by reason of changes in the laws of the foreign countries above mentioned, indicate by proclamation the ports to which such suspension shall apply, and the rate or rates of tonnage duty, if any, to be collected under such suspension: Provided further, That such proclamation shall exclude from the benefits of the suspension herein authorized the vessels of any foreign country in whose ports the fees or dues of any kind or nature imposed on vessels of the United States, or the import or export duties on their cargoes, are in excess of the fees, dues, or duties imposed on the vessels of the country in which such port is situated, or on the cargoes of such vessels.

The obvious purpose of the subproviso in the above-quoted extract from section 11 was to exclude from the benefit of the proclamation authorized by the main proviso the vessels of those countries which discriminated in their ports in favor of their own vessels and against vessels of the United States, which is the ordinary form of discrimination, and in the absence of which no other is likely to exist.

By the unfortunate employment, however, of the term “such port” in the subproviso, the grammatical antecedent of which term had to be sought in the main proviso, the effect of the subproviso seemed to be to exclude from the benefits of the proclamation only those countries in whose ports a discrimination was practiced against the United States in favor of the country of the port to which the proclamation applied. For example, suppose a proclamation was issued under the act of 1886, for the abolition of tonnage dues on vessels entering the ports of the United States from Amsterdam. By the terms of the act, any vessel, of whatever nationality, entering the ports of the United States from Amsterdam would have been entitled to exemption from dues, unless barred by the existence of a discrimination against vessels of the United States in the ports of the country to which the vessel in question belonged. In determining whether such discrimination existed, the inquiry would naturally be whether the Government of that country discriminates in its ports against vessels of the United States as compared with its own. Thus, if the vessel from Amsterdam were British, the inquiry would be whether a discrimination existed in British ports against vessels of the United States as compared with British vessels. But, upon a strict grammatical construction of the act of 1886, it might have been argued that the inquiry should not be whether in the case supposed such a discrimination was practiced in favor of British vessels, but merely whether vessels of the United States received in British ports the same treatment as the vessels of the Netherlands, the latter being the country in which the port of Amsterdam is situated.

That such was not the intention of Congress, and that a different and more usual form of discrimination was aimed at, namely, that in favor of national as against foreign vessels, seems to be established by the adoption by Congress, when the matter was brought to its attention, of the act of April 4, 1888, the first section of which amends the eleventh section of the act of 1886 by striking out of the subproviso the words “such port,” and substituting therefor words which describe the discrimination which the undersigned supposes to have been intended by the original act.

The undersigned calls attention to this feature of the matter, at the present stage of the discussion, not because it had any bearing upon the treaty claims now under consideration, but in order to avoid the repetition of the terms of the acts of 1884 and 1886, which would be necessary if the subject were left to be mentioned hereafter. In the formulation of proclamations under the act of 1886 the feature just described presented a difficulty which illustrates the complicated character of the subject with which the act attempted to deal and the practical embarrassments which have been developed in its administration.

On the 1st of August, 1886, the German minister at this capital, by direction of his Government, addressed the undersigned on the subject of the act of 1886, as follows:

The new law is evidently based upon the idea of reciprocity. If this idea had been consistently carried out, no objection could be made to it, and the imperial Government would have no farther ground of complaint. This, however, is not the case, inasmuch as the new law grants special privileges, as did the old, to vessels from the above-mentioned ports, declaring tbat they, without any compensation on their part, shall pay but 3 cents per ton, even though a duty in excess of that amount is paid by American vessels in the ports concerned. * * *

The imperial Government has from the outset protested against this one-sided privilege, which is in violation of the treaty stipulations of Germany with the United States. Since this privilege is not only abolished by the new law, but is confirmed and still further extended, the original attitude assumed by the German Government towards the old law has been in no wise changed by the new act. * * * As long as vessels from the ports of North and Central America pay but one-half of the tonnage duty that is levied upon vessels from German ports, without being required to furnish proof that less than 6 cents is exacted from American vessels in their ports, the imperial Government will be obliged to maintain its claim for similar usage, viz, to exemption from furnishing sueh proof.

So far as her treaty claim is concerned, the position of Germany has not been changed.

After the passage of the act of 1886 the controversy also continued with Sweden and Norway, and on the 9th of March, 1887, the minister of Sweden and Norway at this capital transmitted to this Department copies of correspondence exchanged between the United States and his country shortly after the conclusion of the treaty of 1827, and relative to the construction of the eighth article thereof, which seemed to the undersigned to require of this Government the recognition of Sweden and Norway’s claim for the 3–15 cent rate. At the time referred to there existed in Norway a schedule of tonnage duties under which different charges were made on vessels: (1) from any place outside of Europe except the Mediterranean; (2) from the Mediterranean; (3) from any European port not on the Mediterranean.

Under article 8 of the treaty of 1827, then lately ratified, this Government claimed the lowest rate of duty, which was that on vessels in the last category. The Swedish and Norwegian Government denied our claim on substantially the same grounds as those on which this Government has recently declined to recognize a similar claim of Sweden and Norway. But the Government of the United States, through Mr. Clay, then Secretary of State, insisted upon its claim, and the Government of Sweden and Norway conceded it, refunding at the same time certain duties which had been charged on tonnage of the United States in excess of the lowest rate under the Norwegian law claimed by the Government. The correspondence on this subject accompanied the report of the undersigned, submitting diplomatic correspondence for the year 1887, which was transmitted to Congress on the 26th of June last.

Believing that this concession of our claim by the Government of Sweden and Norway created an honorable obligation on our part similarly to concede to that Government the benefit of the construction of the treaty which we had claimed and enjoyed, the undersigned conferred with the Secretary of the Treasury with a view to make that benefit immediately effective. The letter of the undersigned to the Secretary of the Treasury will be found as inclosure 37.

On the 20th of June, 1887, the Secretary of the Treasury replied, communicating a report of the Commissioner of Navigation to the effect that no relief could be afforded by the Bureau of Navigation; and under the law creating that Bureau, the Commissioner holds his decision to be final and not subject to review. (See inclosure 38.) The law provides that “on all questions relating to the collection of tonnage tax, and to the refunding of such tax when collected erroneously or illegally,” his decision shall be “final.”

The undersigned does not desire in the present instance to be understood as dissenting from the Commissioner’s view that no relief could be afforded in respect of the claim of Sweden and Norway, under the strict letter of the act of 1886. But it may be expedient to suggest that the act of July 5, 1884, in relation to the Bureau of Navigation, might properly be so amended as to give the Secretary of State a voice in the decision of treaty and cognate international questions.

The undersigned, in view of what has been above stated, has the honor to suggest that a recommendation be made to Congress to amend the act of 1886, so as to give to Sweden and Norway at once the benefit of the 3–15 cent rate; and that all tonnage dues charged in excess of that rate on Swedish and Norwegian vessels entering the ports of the United States from ports of the United Kingdom since the date at which the 3–15 cent rate went into effect under the act of 1884 be refunded.

reciprocal abolition of tonnage dues under the act of 1886.

Up to the present point, the discussion has related exclusively to the 14th section of the act of June 24, 1884, and the amendatory section of the act of June 19, 1886. But section 12 of the latter act contained the following provisions:

That the President be, and hereby is, directed to cause the governments of foreign countries which at any of their ports impose on American vessels a tonnage tax or light-house dues, or other equivalent tax or taxes, or any other fees, charges, or dues, to be informed of the provisions of the preceding section, and invited to co-operate with the Government of the United States in abolishing all light-house dues, tonnage taxes, or other equivalent tax or taxes on, and also all other fees for official services to the vessels of the respective nations employed in the trade between the ports of such foreign country and the ports of the United States.

Correspondence between the United States and the claimant Governments in respect to the acts of 1884 and 1886 having reached a point where the positions of the parties were fully defined, the undersigned, in July, 1887, addressed to our proper representatives in foreign countries a circular of instructions to extend to foreign Governments a general invitation for the reciprocal abolition of tonnage and equivalent dues. (Inclosure No. 41.)

Prior to that step, and on the 8th of November, 1886, the minister of the Netherlands at this capital had given the requisite assurances as to the absence of any tonnage, light, or equivalent charges on vessels of the United States in the ports of the Netherlands in Europe and in certain named ports of the Dutch East Indies, and had requested the suspension of the collection of such dues, under section 11 of the act of 1886, on vessels entering the United States from the ports in question. This request having been duly considered, the President, on the 22d of April, 1887, issued his proclamation for the suspension of dues accordingly. (Inclosure 70.)

The invitation under the twelfth section of the act of 1886 was extended to the Netherlands as well as to other countries, but the scope of the proclamation of April 22, 1887, has not since been enlarged.

On the 24th of January, 1888, the German minister at this capital, referring to the invitation above mentioned, gave the necessary assurances as to the absence in the ports of Germany of any charges of tonnage or light-house dues, or any equivalent tax or taxes whatever, as referred to in the act of 1886, on American vessels entering those ports. Accordingly the President, on the 26th of January, 1888, issued his proclamation to suspend the collection of such dues on vessels entered in the ports of the United States from any of the ports of the German Empire. (Inclosure 54.)

In the note in which the German minister gave the assurance referred to, he stated that the same absence of the charges in question had been declared in his note of the 15th of February, 1886, in which, prior to the passage of the act of 1886, he had presented the demand of his Government for the 3–15 cent rate under the act of 1884; and he expressed the hope that, in view of this fact, the Government would deem it proper to refund the dues charged on German ships entering American ports from ports of the German Empire since the date of the approval of the act of 1886.

To this suggestion the undersigned was unable to respond, the matter being one for the consideration of Congress. But the request assuredly deserves equitable consideration. In this regard it is to be observed that the government of the Netherlands stands in the same position as that of Germany, since it appears by the note of the Dutch minister of the 8th of November, 1886, that the Netherlands legislation abolishing dues on vessels entering the ports thereof bears date June 3, 1875. (Inclosure 69.)

The proclamations respecting Germany and the Netherlands are the only ones so far issued for the abolition of dues under the act of 1886. It thus appears that in no case has that act been the means of securing the abolition of dues on American vessels in foreign ports. In respect of all countries in which such dues were charged when the act of 1886 was approved, an unfavorable response on one ground or another, has been made to our invitation; and Germany is the only country in respect of which the amendatory features of the act of 1886 have resulted in relief from future treaty claims.

But a question of a different description has arisen in the administration of the German and Dutch proclamations. Those proclamations provide, in accordance with the law, for the abolition of dues on vessels entering the ports of the United States from ports of Germany or of the Netherlands, as the case may be.

If, however, a vessel clears from a port in Germany, or in the Netherlands for a port in the United States, and on her way to the latter calls at an intermediate port, the question has arisen whether she is under the law entitled to exemption from dues when entering in the United States. This question has arisen in a number of cases, of which that of the steamers of the North German Lloyds Line is an example. (Inclosure 54.) These steamers run regularly from Bremen to New York by way of Southampton, touching at the port last named, while such passengers, mails, and merchandise as there maybe are transferred from a connecting vessel. The voyage of the steamer is denoted on the manifests from Bremen as being from that port to New York via Southampton.

It has been claimed that these steamers should be exempt from dues in the United States as coming from a German port, it being argued that their described and principal voyage is from Bremen to New York, and that the stoppage off Southampton is not such as to deprive the run of its character of a voyage from a German port to a port in the United States, within the meaning of the act of 1886 and the proclamation. But it has been held by the Commissioner of Navigation that the voyage can not be so regarded, and that the vessels must pay dues as coming from Southampton, a British port. Similar rulings have been made in respect to other vessels of different nationality.

Another instance of complication is that of a vessel starting from, we will say, a 6–30 cent port, and calling, on her way to the United States, at a 3–15 cent port and a free port. Other combinations will readily suggest themselves and need not be stated. But in each case the vessel is required in effect to pay the highest rate, without reference to the amount of cargo obtained at the various ports from which she comes. Thus a penalty may practically be imposed in many cases on indirect voyages.

It is conceived that in many instances the main purpose of the act may be defeated by these rulings, but it must be admitted that the law contains no provision to meet such cases, and that there would be great difficulty in the executive branch of the Government undertaking to decide that any particular measure of deflection from a direct voyage should or should not determine its character. This appears to be a proper subject for the consideration of Congress.

But the undersigned has the honor to submit whether it would not at least be practicable in the case of vessels coming from two or more ports as to which different rates of tonnage dues are imposed in the United States, to apportion such dues on the basis of the relative portions of cargo Drought from such ports.

In regard to the questions raised by the claimsof various governments, under their treaties with the United States, for the 3–15 cent rate of tonnage duty, the undersigned begs to suggest that the present condition of matters would be greatly simplified, if not by the abolition, at least by the equalization of tonnage duties on the basis of a uniform charge of 3–15 cents; and this without reference to any question of treaty construction, except in the case of Sweden and Norway, in respect to which aspecific recommendation, for reasons stated, has already been made. Such anxequalization of duties would extend the same relief to commerce with all parts of the world as has already, by the acts of 1884 and 1886, been offered to commercial intercourse within certain geographical areas. This change in the law having been effected, the invitation for the reciprocal abolition of dues would still remain as an offer of yet more liberal treatment on the most advantageous basis to this country. In this way the interests of our commerce would be subserved, and the Government would enjoy the additional advantage of having so adjusted its laws as to be free from future demands based upon its conventional agreements, and from the necessity of claiming for them a less liberal construction than the other high contracting parties are willing to admit.

Respectfully submitted.

T. F. Bayard.

Department of State,
Washington , January 14, 1889.