NEW ORLEANS, July 22, 1862.

Major-General BUTLER:

SIR: The question of the propriety of the payment made to you under protest on the 5th of June last of $8,948.50 by Messrs. S. H. Kennedy & Co., of this city, the estimated value of a third of exchange at sixty days after sight, dated Havana, 30th of the previous April, for 1,789 pounds, 14 s., which you have submitted to this commission, I have carefully considered.

The facts attending the shipment of the cotton to Havana by Messrs. Kennedy & Co., on the proceeds of which the bill was drawn, as well as all the other facts connected with the transaction, are clear. The shipment was in violation of the blockade, and if seized in delicto would have been liable to forfeiture. the proceeds, also, if received here on the return voyage, would have been equally liable. The vessels, also, would, either on the outward or return voyage, have been in like manner liable. But the blockade having been successfully run and the cotton sold in Havana, and the first and second of exchange drawn by the shipper's consignee in Havana and sent to London by shipper's order, to be passed to their credit in London, the first question is whether the third of exchange is to be esteemed the proceeds of the shipment and liable to seizure? I am of the opinion it cannot. The first and second of exchange having been paid by the drawers in London and the proceeds passed to the credit of the shippers, the third is a mere nullity, valueless in the henhouse of the shippers. It was not then the representative of the cotton or its proceeds. The first was the property of the buyers in Havana; the second the property of the shippers, because of the payment of the first or second of exchange and the passing of its proceeds to their credit with their London bankers.

The offense of running a blockade is not under the modern law of nations a personal offense. It affects only the ship and the cargo. If these are not returned physically, or their proceeds on a return voyage, the offense escapes punishment. It never attenhan to the termination of the return voyage. With the exception of the immediate return voyage, the rule is well settled by modern authority (English, Continental, and American) that the offense is purged unless the vessel or cargo is captured in delicto.

The harshness of the ancient doctrine as to breaches of blockade, or of contraband of war, has long since been ameliorated. This has been effected by the silent but sure and effective influence of a more enlightened civilization and a better sense of the importance to the interests of the nations of the world of an untrammeled commerce. The rights of war as originally understood have been made to yield to a conviction of the greater value of this interest. War, fortunately for the welfare of man, is coming to be more and more occasional and temporary. Peace is the condition on which his happiness most depends, and all the ancient rules applicable to a state of war, for a long period barbarous and pregnant with evil, have been for years so modified as to take from war many of its terrible consequences.

Second. But there is another fatal objection to the payment exacted from Messrs. Kennedy & Colonel When the third of exchange was returned here the blockade no longer existed. It had been removed by order of the President and the port declared to be open. Nothing is better settled than that the raising of a blockade, in the interval between the sailing in violation of it and the capture of the offending