tion of arms and ammunition and that followed in not allowing supplies to be taken from its ports to ships of war on the high seas, it is only necessary to point out that the prohibition of supplies to ships of war rests upon the principle that a neutral power must not permit its territory to become a naval base for either belligerent. A warship may, under certain restrictions, obtain fuel and supplies in a neutral port once in three months. To permit merchant vessels acting as tenders to carry supplies more often than three months and in unlimited amount would defeat the purpose of the rule and might constitute the neutral territory a naval base. Furthermore, this Government is unaware that any Austro-Hungarian ship of war has sought to obtain supplies from a port in the United States, either directly or indirectly. The subject has, however, already been discussed with the Imperial German Government, to which the position of this Government was fully set forth Dec. 24, 1914.

In view of the positive assertion in the statement of the Imperial and Royal Government as to the unanimity of the opinions of text writers as to the exportation of contraband being unneutral, this Government has caused a careful examination of the principal authorities on international law to be made. As a result of this examination it has come to the conclusion that the Imperial and Royal Government has been misled and has inadvertently made an erroneous

assertion. Less than one-fifth of the authorities consulted advocate unreservedly the prohibition of the export of contraband. Several of those who constitute this minority admit that the practice of nations has been otherwise. It may not be inopportune to direct particular attention to the declaration of the German authority, Paul Einicke, who states that, at the beginning of a war, belligerents have never remonstrated against the enactment of prohibitions on trade in contraband, but adds "that such prohibitions may be considered as violation of neutrality, or at least as unfriendly acts, if they are enacted during a war with the purpose to close unexpectedly the sources of supply to a party which heretofore had relied on them."

The Government of the United States deems it unnecessary to extend further at the present time a consideration of the statement of the Austro-Hungarian Government. The principles of international law, the practice of nations, the national safety of the United States and other nations without great military and naval establishments, the prevention of increased armies and navies, the adoption of peaceful methods for the adjustment of international differences, and, finally, neutrality itself are opposed to the prohibition by a neutral nation of the exportation of arms, ammunition or other munitions of war to belligerent powers during the progress of the war. LANSING.

under way; presses, machinery, and all other material are being promptly assembled, and there is every indication that deliveries will commence as provided in the contract, i. e., on Sept. 1, 1915.

Hereto attached is a plan of the B. P. Co.'s grounds, giving floor outlines of the various buildings and indicating the railway tracks leading into the factory for the delivery of raw materials and fuel and for the loading of the product directly from and to railway cars.

Article II. (a) Powder-Attached to my report of May 31 was A.'s letter to B.'s assignee (Exhibit K) of May 17, advising his compliance with provisions of this section of Article II. by contracting for the output of Aetna's smokeless powder to Dec. 31, 1915, and asking for B.'s letter of release, which until date has not been forthcoming. I recommend that it be sent.

The contract of sale of 1,000,000 pounds of powder to the Spanish Government is not yet formally signed. The delay is caused by the fact that the Official Spanish War Commission had to await the arrival of an expert from Spain, who was to pass on the specifications of the powder. He has arrived and all his objections to our own specifications have now been overcome and his recommendations have been accepted by Aetna, who have agreed to manufacture a powder to meet the Spanish requirements.

Now the legal adviser of the Official Spanish War Commission, Mr. Louis Hess of 42 Broadway, after the commission advised him that the contract was now in order and could be drawn up, writes at length and raises innumerable insignificant legally technical objections to the form of contract, submitted to him by me, and he fills an eight-page letter with reforms to the same. I have advised him in reply that his objections and suggested reforms cannot be considered, since my offer to the commission was based on our own contracts with Aetna and that my offer was accepted by the commission on such basis, and that we must insist on the contract being carried out accordingly. I hope he will

now withdraw his objections and that final contract will be signed soon.

(b) Antimony-A. secured offers of antimony during May as per Exhibit L, attached to report of May 31, varying in prices from 30 to 25 cents per pound.

One further offer has been secured since, the price being 361⁄2 cents, which indicates an upward tendency in the price of this metal.

According to this section of the contract, A. is to wait instructions from B. in case that he is to purchase antimony.

Article III. Presses-A. advised B. under date of May 17 (see Exhibit M of report May 31) that 534 hydraulic presses, suitable or necessary for the manufacture of shells of calibre 2.95 inches to 4.8 inches, had been contracted for, mostly with privilege of cancellation of part of the orders against payment of an indemnity.

There are actually being manufactured, and there will be delivered to A., 132 presses, the price of which aggregates $417,550.

There have been canceled until date 392 presses at an aggregate cost of indemnity of $238,945.64.

As provided for in the agreement, "all contracts of purchase between A. and the builders " have been "approved" by me in representation of B., but, as was anticipated during the discussions between A. and B. prior to the final drawing up of the agreement, it has been impossible to contractually "bind" such builders to exclusive manufacture for A., since that would be contrary to prevailing laws, implicating both contracting parties; furthermore, that question proved very delicate and required a good deal of diplomacy in dealing with the manufacturers, so as to avoid suspicion.

A fact is that A. succeeded in having all the builders bound to him, most of same by some legally non-committal phrase in the contracts, and one, a personal friend of A., by simple word.

By the above-mentioned payments of indemnity for the cancellation of orders the builders are not yet all bound to us until Jan. 1, 1916, as the contract between A. and B. requires, because it