[Inclosure.]

U. S. CONSULATE,

London, November 28, 1862.

Honorable WILLIAM H. SEWARD,

Secretary of State:

SIR: I herewith inclose a document in relation to the manner of carrying on the contraband trade with the Confederates, which appears to me to be of much importance.

It shows one way adopted by British merchants of sending out supplies by British steamers under the English flag to be sold in rebel ports at a stipulated value above costs and charges. It also shows the facilities they have and are preparing to carry on trade through Matamoras and Texas.

I think it quite clear that much the largest proportion of the supplies sent from this country are owned and forwarded by rich houses like Begbie's, of London; Fraser, Trenholm & Co., of Liverpool, and others, and by a sort of joint-stock concern like or similar to that pointed out in the letter herewith forwarded.

I may here remark that I know that letter to be genuine, and the copy to be a faithful transcript of the original, which I have seen. I know the person to whom it was addressed, but am obliged to withhold his name. I let the name of the firm writing it stand, but with the understanding that it is not to be made public, as it would compromise friends here and do far more harm than good.

Your obedient servant,

F. H. MORSE,

Consul.

[Sub-inclosure.]

Numbers 77 CORNHILL, F. O.,

London, November 24, 1862.

---- ----, Esq.:

DEAR SIR: We may state for the guidance of any friends who may be desirous of shipping to America that arrangements have been made for the dispatch of a vessel by us to the Rio Grande about first week of December; that cost of freight and insurance on goods can be paid at the port of delivery. The services of the highly respectable firm of Messrs. Brown, Fleming & Co., at Matamoras, have been secured; also those of Mr. Redgate, Lloyd's agent, an expert in cotton, and who has been resident nearly forty years in Texas and Mexico. That gentleman's services will be of great value to shippers in respect to his local knowledge and influence, as also regards agency of the inland transit and landing and shipping of goods and cotton.

Mr. Harding, of the firm of Messrs. Harding, Pullin & Co., of this city, has been named and consented to act as factor for the receiving of the proceeds in cotton and the equal distribution of same to the shippers according to value of respective shipments, and who will effect the necessary insurance. Further, a Mr. Bisbie, of the Confederate States of America, holds a contract from that Government whereby he is to receive 100 per cent. on invoice cost, payable in cotton at specie value, clear of all charges of freight, & c., for any goods he may deliver into the Confederate States. Said contract has been authenticated by Mr. Mason and others. He is willing to share same - say to the extent of 50 per cent. - with any houses who may feel inclined to ship. Moreover, said parties are at liberty to send out their own