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The Embargo Act of 1863 (known as the Corn War) was a general embargo enacted by the United States congress on the sale of corn against Great Britain after the British navy ran the blockade of the Confederate States of America.
The American Civil War had been fought for nearly two year and America's naval blockade of sourthern ports had been impossed. When the British naval vessel HMS Hydra entered into resticted waters off the Viginia shores. The USS Aeolus sank this ship beleaving it to be the Confederate blockade runner SS Banshee. According to the HMS Hydra sister ship (which was out of range to interfer in the battle and out-gunned to try to avenge the Hydra) the Hydra's Union Jack had blown off over night and was sailing without her colours when she came under attack.
After the British government heard of this incident it strongly protested the action and demained compensation for the loss. The United States refused to pay any compensation as it was in a known war zone and the Hydra had been station in the North American and West Indies Station under the command of Cdr. Richard Vesey Hamilton since June 9, 1858 and was quite aware of the Rules of War on the High Seas. The British which still wanted to avoid a direct conflict with the Union and also didn't want to recognize the Confederatcy instead decided to run the blockade and deliver guns in exchange for cotton. They hope this would anger the Union without starting a war and demonstrate to them that the Royal Navy should not be taken lightly.
The United States also hoped to avoid a direct conflict with the move powerful Royal Navy and risk a two front war did not engage the blockade runners. Instead it decided to stop the export of corn to Britain which had become an important and differcult commodity to replace. The hope was to force the British to maintain the statis quo and stop gun runner.
To be continued...