HASTINGS, United States Vice-Consul to Comly, May 30, 1879

Mr. Hastings to Mr. Comly.

Sir: I have the honor to acknowledge the receipt of your letter of the 28th instant, informing me confidentially that information had been received by the Secretary of the Treasury of alleged and contemplated frauds upon the revenue of the United States, by the repacking of foreign rice and sugars at these islands, and their importation into the United States as the product of these islands, thus evading the duty.” Requesting such assistance as I may be able to render in the discovery of the facts in the case, you submit the following questions, viz:

[Recites all of my questions in full. Vide inclosure No. 7, preceding this.]

In reply I have the honor to state:

1. That I do not know of any frauds, either actual or contemplated, upon our revenues by the repacking of rice and sugar not the product of these islands at this port or any of the ports of these islands, for export to the United States for free entry under the provisions of the treaty of reciprocity, nor have I ever known or had any cause to suspect, during a residence of nearly two years at this port, that either rice, sugar, or any of the articles named in the schedule of Article II of the treaty were being brought to these islands for any such purpose. Had any such transactions been discovered or suspected, it would have been the duty of this office to at once [have] brought the matter to the attention of the collector of the port to which such goods were destined, and to have sent full information in regard to such intended fraud to the Secretary of the Treasury at Washington.

2. In my judgement there are no facilities whatever for the carrying out of such a scheme of fraud. In the first place, Honolulu is the only harbor of the islands that affords any conveniences for reshipment. Kahulũi, the port for Wailuku, and Hilo are very good harbors, but with no wharves or conveniences for landing goods; besides, they are not at all remote, but are the harbors of two of the largest ports of the island outside of Honolulu.

At all the parts of the islands, except Honolulu, freight of all kinds is landed in boats from the schooners and steamers in the interisland carrying trade, and the loading of freight is done in a like manner, and at many of the landings at some risk. I do not think a vessel could be chartered to land a cargo at any port or place on the islands, except the three harbors hereinbefore mentioned, and possibly Lahaina, an open roadstead, on the leeward side of Maui.

If such a charter was made, it would be at a very high rate per ton. The cost of landing, repacking, and reloading sugar so landed would be at the lowest calculation one cent per pound, not including damage by sea-water, which is quite a risk. It is my opinion, therefore, sugar from China, Philippine Islands, Mauritius, or any sugar-producing country in the world, could be landed in San Francisco or any port of the United States, Atlantic or Pacific, duty paid, much cheaper than such foreign sugars could be brought to these islands and landed, and repacked, and shipped from any port or place on these islands, except at the harbors mentioned, and landed in San Francisco or any port of the United States duty free. From the harbors mentioned such sugar cannot be shipped without the fact coming to the knowledge of this office.

3. I am cognizant of all sugars and rice taken out of bond in the United States and landed here, through landing certificates which have to be presented at this office for verification, and by the publication in the papers here of the manifests of the cargoes coming from all countries to these islands.

All importations to these islands, excepting now and then a cargo of lumber, coal, or machinery landed at Hilo, Lahaina, Kahulũi, are entered at this port.

I do not think it possible that a cargo of any kind could be landed or transshipped from one vessel to another, at any port or place on these islands, without the fact coming to the knowledge of this office. News is weekly received from all parts of the group. Should any unrefined sugar be landed on these islands, I should at once take it for granted that fraud was intended on our revenue.

4. The merchant, the planter, and I may say the whole people of these islands, having a pecuniary interest in the continuance of a treaty so much in their favor, and the fact that any fraud committed under it would be sufficient cause for its abrogation, makes the customs officials and all interested in its continuance ever on the alert to see that no fraud is committed.

On one or two occasions the customs officials here hare informed me of the landing of Chinese and Japanese rice from Hong-Kong, and have acted in concert with me to see that no attempt was made to re-export it as Hawaiian produce. There are Hawaiian customs officials stationed at the ports of Lahaina and Kahulũi on the island of Maui, Koloa on the island of Kauai, and at Hilo, Kawaihæ, and Kealakekúa, on the island of Hawaii.

5. The bulk of the rice imported into this kingdom is from Japan, having been purchased in bond at San Francisco. This rice costs in bond at San Francisco from 3 to 3½ cents per pound, and can be laid down here, duty paid, for about 4 cents per pound. It sold here for 4½ cents per pound. It is used to feed Chinese servants and laborers on the plantations in the various parts of the islands and here in Honolulu. Hawaiian rice brings from 5½ to 7 cents per pound, according to quality, laid down in San Francisco. It is, therefore, very easy to be seen why foreign rice is imported into this, a rice-producing country.

In regard to the peculiar characteristics of Hawaiian rice, an unpracticed eye can at once detect the difference between Chinese, Japanese, and Hawaiian rice. The grain of the Chinese rice is long and slender, the Japanese short and quite full, while the grain of the Hawaiian is rather flat in appearance, a medium between the Chinese and Japanese in length, and takes a better polish than either of the other two. The dffierence in size and shape could easily be detected at any of the ports of entry of the United States.

The difference between Hawaiian and other sugars I am not able to describe, but I am satisfied that no unrefined sugars have been imported into these islands since the reciprocity treaty took effect. All the refined sugars used on these islands are imported, from San Francisco in bond, and the landing certificates for the same are verified at this office.

6. About one year ago the attention of this office was directed to this subject. It was then claimed that the increase in the exportation of sugar from these islands, from the time the treaty went into effect (September 9, 1876) up to that time (June, 1878), was from ten to twenty-five million pounds, an increase of fifteen million pounds in the two years, and it was assumed that this increase in the exportation could not have been from the increase in the production.

On looking over tables of domestic exports for the years mentioned I fail to find any such increase, as the following table will show:

Amount of sugar produced on these islands and exported to the United States for the year ending December 31.

From the enlargements of old plantations and the opening of new ones since the treaty took effect, it would not be a surprising fact if the increase in the production of sugar, does not bring the amount of export up to 50,000,000 pounds at the end of the next two years.

The consular agent at Hilo, Hawaii, was instructed, under date of July 27, 1878, to at once inform this office of any vessels touching at that port, or any of the ports within his jurisdiction, having on board unrefined sugar or rice not the product of these islands.

While I am of the opinion that it is impracticable to import foreign sugars and rice into this kingdom and re-export them as Hawaiian product, I shall preserve the same watchfulness as heretofore to observe that such a scheme is not carried into practice.

I have, &c.,