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Wax WRr . File SE 65.00 No. 79.]

AMERICAX LDATION,

Santa Pomingo, neust, 1911. Six: Referring to the department's No. 13 of June 15, and to my No. 64 of July S. I have the honor to incluse you herewith copies and translations of the reply of the minister for foreign affairs to my note forwarding a memorandum reiterating and reattirming the riews of the Government of the United States as to the proper interpretation of the convention of February 5, 1907, in regard to the lair of the Dominican Republie providing for the imposition of a stamp tax on foreign and domestic letters of exchange, etc., and a resolution of the Dominican Congress putting into cperation a municipal surtax upon articles of import leried by the commune of Santo Domingo. I have, etc.,

Wulian W. RUSSELL

(Inclosure.]

The Minister for Foreign Affairs to the American Minister.

[Translation.]

OFFICE OF THE SECRETARY OF STATE FOR
FOREIGN RELATIONS OF THE DOMINICAN REPUBLIC,

Santo Domingo, August 3, 1911. Book B. No. 239.]

Mr. MINISTER: I have the honor to acknowledge the receipt of your excel. lency's courteous communication of July 7, No. 59, confirming the views contained in the memorandum presented to my predecessor on April 11 last, in regard to the law of July 2, 1910, creating the stamp tax, and the resolution or Congress on the 8th of the same month approving and putting into effect a municipal surtax on certain articles of import established by the municipality of Santo Domingo.

I have examined carefully the points set forth in the above-mentioned memorandum, a copy of which your excellency was pleased to forward for that purpose, and I do not find in them a foundation for the right which the United States thinks it has to criticize said taxes from the viewpoint of article 8 of the Dominican-American convention of February 8, 1907.

1 Not printed.

The tax comprised wholly under the law of July 2, 1910, is undoubtedly a particular and internal tax, whose nature and collection are completely different from the nature and collection of those provided for by article 3, which your excellency cites, and consequently not within the reach of this article which refers solely to duties purely from customhouses. A proof of this is that the tariff schedule, in spite of that law, has remained intact.

To have the stamp taxes included under the provisions of article 3 it was necessary to have been so specifically stated, which could have been done had it been the common intention of the high contracting parties, as the law referred to is nothing more than a reproduction of the law of 1906 with some slight changes, which latter law is anterior to the convention.

The position taken by the Government of your excellency leads to the concluision that the Dominican Government can not in any case, or in any form, establish of its own free will taxes on articles from abroad, which was not the intention of the convention, nor could it have been, as there would have thereby been affected one of the most essential rights of the sovereignty of the Dominican nation.

The reasons set forth above are applicable to the municipal surtax alluded

tion, nor is it collected in its name or for its benefit. As a tax on consumption and for local uses it is the work of the municipality of Santo Domingo guaranteed by the constitution. The tax is collected in the name of and for the benefit of said municipality and is applied exclusively to communal uses, and consequently it is not confounded with, nor can it be, as far as the convention is concerned, with national revenues which are the only ones capable of being affected by national engagements.

So that: supposing the impossible case that the municipal tax is customs tariff legislation, and that it was really created by the Nation for its benefit, neither in that case is the Government of your excellency right.

It is true that article 3 provides that for any modification of the import duties of the Republic there must be a previous agreement between the Dominican Government and the United States; but the same article specifies the true reach of this provision, explaining clearly the sense in which said modifications must be understood. The letter and spirit of the convention demonstrate that said agreement is only to be had in case the modification of import duties causes them to be reduced to $2,000,000.

revenues the payment of the 5 per cent bonds, it was natural that the United States should concern itself that said revenues shoul not fall below a definite sum, and for this reason the provisions of article 3 were established; but there is no rational explanation for that provision when a modification leaves the revenues intact in general or tends to augment thein.

On the other hand, the municipal tax referred to is so small that there is no danger that it will have any influence on the customs revenues, as proved by the fact that far from being diminished said revenues have increased, giving more guarantee, in consequence, for the fulfillment of the obligations of the pation.

The position of my Government then is in direct line with the provisions of the oft referred-to article 3. And even if there should be any ambiguity or obscurity in said article the interpretation would have to be made in conformity to that position which is that which is in harmony with the right of sovereignty of the Dominican Nation.

My Government, the best judge on the subject, is of the opinion that the legislation referred to by your excellency, far from being prejudicial to the best interests of the Republic, is a factor for good, because with an increase in the revenues, no damages of any sort being occasioned, the prosperity of the country is increased; said revenues being applied with greater zeal and honesty to works of common progress, as your excellency will see on comparing the present state of the Republic with that of former years.

My Government hopes that your excellency, with your usual high spirit of justice, will know how to appreciate in their just value the arguments in favor of the Dominican Government in this case, and consequently will not insist upon a discussion which as far as the United States is concerned is at least lacking in interest. The occasion is favorable for renewing, etc.

J. M. CABRAL Y BÁEZ,

AMERICAN LEGATION, lo 50.]

Santo Domingo, August 3, 1011. SR: I hare the honor to inclose rou herewith copies of the Official Gazette, with the decree of the municipalitr of Santo Domingo aborishing the municipal surtax on sereral articles of import,

It appeared to me that, as Congress passed a resolution authoriz. ing the municipality to establish this surtas, Congress might have to approve any change therein. I accordingly interriewed Mr. Velázquez, and he stated to me that during the last session of Congress the municipality of Santo Domingo petitioned that body for 211thorits to make some changes in the municipal surtar. Congress decided that any action by it on this subject was unnecessary, but with the understanding that any changes must be a rerision downward, that is, a reduction, but that there must be no change that would operate to increase taxation.

In this connection I will state that Mr. Velázquez has promised to look into the matter of the apparently discriminating tax a minst American soap, and the aruntamiento may take the same action in this matter as was done with the articles mentioned in the published decree. I bare, etc.,

WILLIAM W. RUSSELL.

File No. 639.003/33

The Acting Secretary of State to the American Chargé d'Affaires.

DEPARTMENT OF STATE, No. 69.]

Washington, October 23, 1911, Sir: The Department has received Mr. Russell's No. 68 of July 15, 1911, and his No. 79 and No. 80, both of August 5, 1911, in regard to the municipal surtax levied on imports in the commune of Santo Domingo and the stamp tax which in part applies to articles of import.

The Department has considered the report upon the working of the municipal surtax made in Mr. Russell's No. 68, of July 15, and under the circumstances therein set forth has decided to adopt the suggestion that further specific complaint against the recargo municipal be suspended for the present at any rate.

In this connection, however, you will understand that the Department desires you to continue your efforts to effect the abolition of the discrimination against American soap, referred to in Mr. Russell's No. 80, of August 5, should the matter still be pending. You will, of course, also continue to study further complaints which may be made of this enactment and the stamp-tax law, and will report to the Department.thereon.

The Department also is convinced of the imperative necessity of further determined insistence on the principle involved, namely, the right of this Government under article 3 of the convention of 1907 to have its consent a prerequisite to every modification of the Do

1 Not printed.

minican import duties during the life of the convention, and desires that its position in this regard be tactfully but emphatically laid before the Dominican Government to the end that in future when further modifications of the import duties are contemplated the Dominican authorities will submit the proposed changes for the approval and consent of this Government. You are accordingly instructed to reply to the note of the minister for foreign affairs, dated August 3, transmitted to the Department with your No. 79, of August 5, in the sense of the following:

The Department of State has instructed you to inform the Dominican Government that, after due consideration of the arguments advanced in this and previous similar representations, it continues firmly convinced of the rightfulness of its contention that the stamp and municipal taxes lately enacted and approved by the Dominican Congress effected changes in the Dominican import duties in the sense of article 3 of the convention of February 8, 1907, and that the previous consent and approval of this Government should have been solicited before the laws were put into operation.

Article 3 of the convention in its language, “a like agreement shall be necessary to modify the import duties,” clearly comprehends all import duties, of whatever nature. In view of this general and allembracing description of the duties designated, it is difficult to perceive how the scope of the article can be restricted to apply to the specific matter of the duties established in the formal customs tariff. Accordingly the recargo municipal and the portion of the stamptax law applying to imports seem as clearly within the language of article 3 as the customs tariff itself. Irrespective of their names, these taxes are by design and in effect “import duties," supplemental to the formal tariff duties. Potentially, if not in all cases actually, they are of as much importance to the Dominican commerce as the tariff schedule itself. To declare that they are not included within the purview of article 3 is to put a construction upon that article which makes it meaningless, and of no effect. The mere fact that the taxes were not specifically mentioned in article 3, though they existed prior to the convention, would seem to have no more significance than the fact that the existing customs tariff was not specifically mentioned.

In reply to the suggestion that the recargo municipal, being a purely municipal matter, is not comprehended within the national engagement, it would seem necessary simply to refer to the condition which existed at the time the convention was made and which now persists, namely, that the tax derives its validity and binding effect wholly from the will and sanction of the nation's Congress.

Finally, in reply to the suggestion that the previous consent of this Government to a modification of the import duties is to be sought only in the event that a proposed modification, when put into operation, shall cause the revenue from the duties to be reduced to $2,000,000, it must be stated that such a construction seems impossible of application to the plain language of the article under discussion. Both the arrangement of the article and its context as a whole would seem to establish beyond possibility of controversy that the condition referred to, namely,

That the Dominican Executive demonstrate and that the President of the United States recognize that, on the basis of exportations and importations to the like amount and the like character during the two years preceding that in

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o men of uie im Tae ang immediater precedeny the occasca. cizer it bei s 13 biçesi'e cette for the h ome * 723 woc' seen abse ctes to precade the possibilier of corsruirg it as a condition present to the co. igation of the Dominican Ciorarnment to suimit, ard to the riget the United Siates to pas urran, any and every propori mod buation of the import duties

It is up in this particular right to be portal of the propeu molification of the incport duties and to hare its asent obtained to such modification, a riat clearis and unmistakably giren br the curention entered into by the two Governments, that the Gorernment of the United States must insist. Irrespetive of the actual cong quences of the present or possible future molineations the right of the United States in the premises is potentially of such rital importance that it would be grarely remiss in the performance of its solemn dwies under the convention were it to concede it a war,

In regard to the recent modification etfected br the recargo municipal and the estampilla law, after careful investigation and wontinued study of the etiect of these laws, the Government of the United States is of the opinion that while the recargo municipal especially seems to have been in some respects ill-advised and to have been an obstacle to the success of the new customs taritf, its defects do not seem, as the Department is at prezent informed, suthiciently serious to render imperatire at this time any further changes than those already made or now contemplated. Accordingly, the Depart. ment will now make no specific objection, but will content itself simply with having made clear its view as to the rights of this Government under the convention, confident that in future should further modification of the Dominican import duties be contemplated, as a result of the present discussion and explanation, the Government of the Dominican Republic will fulfill the obligations imposed by the convention and will notify and consult with the representative of the Government of the United States. I am, etc.,

ALVEY A. ADEE.

BOUNDARY DISPUTE BETWEEN THE DOMINICAN REPUBLIC

AND HAITI. File No. 738.3915/30.

The American Consul to the Secretary of State.

AMERICAN CONSULATE, No. 21.]

Puerto Plata, December 29, 1910. SIR: I have the honor to report that on December 27 it was generally reported in Puerto Plata that there was fighting on the frontier. A telegram was received at this office from Consular Agent Petit, at Monte Cristi, stating that it was reported that there was a concentration of Haitian forces at Fort Liberté, on the northern

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