The SECRETARY OF THE TREASURY,
SIR: The destruction of the Spanish fleet at Manila, followed by the taking of the naval station at Cavite, the paroling of the garrisons, and the acquisition of the control of the bay, has rendered it necessary, in the further prosecution of the members adopted by this Government for the purpose of bringing about an honorable and durable peace with Spain, to send an army of occupation to the Philippines for the twofold purpose of completing the reduction of the Spanish power in that quarter and of giving to the islands order and security while in the possession of the United States. For the command of this expedition I have designated Major-General Wesley Merritt, and it now becomes my duty to give instructions as to the manner in which the movement shall be conducted.
It is held to be the right to levy contributions upon the enemy in all places which may be in military possession by conquest, and to apply the proceeds to defray the cost of the war, including the expenses of government during the military occupation. It is desirable, however, and in accordance with the views of modern civilization, to confine the exercise of this power, so far as possible, to the collection of such contributions as are equivalent to the duties and taxes already established in the territory. I have determined to order that all ports or places in the Philippines which may be in the actual possession of our land and naval forces by conquest shall be opened, while our military occupation may continue, to the commerce of all neutral nations, as well as our own, in articles not contrabrand of war, upon payment of the rates of duty which may be in force at the time when the goods are imported. In the execution of this policy it may be advisable to substitute new rates of duty and new taxes for those now levied in the Philippines. You are therefore instructed to examine the existing Spanish laws in relation to duties and taxes, and to report to me such recommendations as you may deem it proper to make with respect either to the rates of duties and taxes or to the regulations which should be adopted for their imposition and collection.
As the levy of all contributions in territory occupied by a belligerent is a military right derived from the law of nations, the collection and distribution of duties and taxes in the Philippines during the military occupation of the United States will be made, under the orders of the Secretary of War and the Secretary of the Navy, by the military or naval commanders, as the case may be, of the ports or places which may be in the possession of our forces. Your report is desired in order that I may be able to give the proper directions to the Department of War and of the Navy.