Minister Dawson to the Secretary of State.
Santo Domingo, March 3, 1905.
Sir: Referring to the subject of my No. 101, of January 3 [not printed], the enforcement of the sugar-production tax, I have the honor to report that, on January 17, at Macoris, Dominican authorities, acting under instructions from the department of finance, seized 400 bags of sugar belonging to the Porvenir sugar estate for the purpose of selling it and applying the proceeds on the amount of sugar-production tax alleged to be due from said estate. I inclose herewith a copy of a letter from the manager of the estate, reciting the facts, and the telegraphic correspondence between him and myself.
Immediately on the receipt of the first telegram I had gone to the minister of foreign affairs and then to the minister of finance, respectively, representing the inadvisability of such action. The latter was at first inclined to stand to what he had done, but on my earnestly calling his attention to the inconvenience, at that critical juncture of the negotiations for a general financial arrangement, of involving his government and our legation in a serious difference, and to the fact that I was daily expecting definite instructions from my government, he finally promised to issue orders to suspend the legal process. However, he delayed two days in carrying out his promise and I was compelled to bring further pressure to bear on him through the President and minister of foreign affairs.
Mr. Farrand did not write me when the sugar was finally released, but I think it was done on January 22.
President Morales and General Sanchez have spoken to me repeatedly during the last six weeks, urging me to tell them what decision my government had arrived at as to the validity of the contract and the right of the Dominican Government to enforce the law of last April. They represent to me that they have held the matter open for months to allow my government to investigate the contract; that the presumption ought to be in favor of the validity of the law, contract or no contract; and that the delay occurring as it does in the producing and shipping months, the sugar producers will get all their sugar safely out [Page 392] of the country and the tax will be impossible of collection if the State Department should finally conclude not to intervene.
To this I answer that the contract must be regarded as prima facie valid and the Department given time to consider the arguments pro and con, which did not reach Washington before the middle of January. I can not tell how long such arguments and my frankly expressed personal desire will continue to prevail, and I should be glad to receive the instructions of the Department at the earliest date possible. The sugar-shipping season is drawing to a close, and I do not believe this government will let the last shiploads of the different estates be exported without seizure, unless in the meantime I am instructed to say definitely that my government believes the contract is valid and will make a claim if it is violated.
As a matter of fact I am surprised that my good offices have continued to be successful since February 7, when the protocol was signed, because this government believes it would get for its own use all the sugar tax it can collect or which will become due up to the moment the protocol goes into effect. The total sum for the season will probably reach $125,000, and it practically will be very difficult to secure the application of any part of it which goes into Dominican hands to the benefit of existing foreign creditors. Even if the contract should be held by the State Department to be valid, this government might well believe that it runs no risk in violating it, since the injured sugar planters would strictly have nothing more than a claim, which under the protocol the United States would have to provide for out of the 55 per cent of the customs collected after the protocol goes into effect.
I am, however, of the opinion that it would become my duty, if forcible collection is attempted and the Department sustains the contract, to demand the immediate release of the sugar which may have been seized, and also the repayment of the specific sums of money which may have been paid, and this on the theory that the damages would be ipso facto liquidated at once and that the claimants would have a specific lien on the fund wrongfully taken from them. Since it is unlikely that any of the sugar planters would voluntarily pay, my action practically would be directed to securing the release of sugar which will be seized.
Another difficult question will probably arise if the contract is held to be invalid and the tax therefore collectible. When the convention goes into effect, the Dominican Government will very likely insist that this sugar-production tax is not a custom-house receipt and that its proceeds should not be included in the revenues which are to be divided between the creditors and the government. I will combat this position, should it be taken, unless the Department instructs otherwise. However, the question is not likely to become of practical importance, since all the sugar crop of this year will probably have been shipped before the convention is ratified, and by next year this government will, if it carries out its expressed intention, have abolished the export taxes and this “production” tax, which is in effect nothing more than an export duty.
I have, etc.,