File No. 639.003/26.

The Secretary of State to the American Minister.

No. 29.]

Sir: On August 16, 1910, there appeared published in the Gaceta Oficial of the Dominican Republic a law providing for the imposition of a stamp tax on foreign and domestic letters of exchange, on foreign lottery tickets which might be brought into the Republic, and on certain articles of import as designated in a schedule appearing in article 3 thereof.

On August 6, 1910, there appeared in the Gaceta Oficial a resolution of the Dominican Congress approving and putting into operation a municipal surtax upon articles of import levied by the commune of Santo Domingo.

Both these laws were passed without consultation with the United States, and the consent of this Government was never given to either,

The law creating the stamp tax applies to articles of importation and to that extent is tariff legislation. The municipal surtax is directed solely to articles of importation and is in its entirety tariff legislation.

The convention between the United States and the Dominican Republic of February 8, 1907, provides that the import duties of the Dominican Republic shall not be modified except by previous agreement between the Dominican Government and the United States. In pursuance of this provision the Government of the United States approved the tariff enacted by the Dominican Congress which was put into effect on January 1, 1910. At the time of the approval of the new tariff no change in the municipal or stamp taxes was suggested, and the Government of the United States naturally approved that legislation under the assumption that the taxes then in force which directly affect the importations into the Dominican Republic would remain as theretofore or would not be modified by the Dominican Government without the assent of the Government of the United States. Inasmuch as these taxes imposed by the Dominican Congress apply to imported articles and directly affect import commerce, they are in essence tariff legislation, and the approval of the Government of the United States is necessary to their validity. Their nature is not changed by the mere fact that they are designated as municipal or internal taxes.

As indicated above, these taxes recently levied or authorized by the Dominican Congress, although in form internal and municipal taxes, are in substance and effect additional import duties. It is also clear that in imposing these taxes the Dominican Congress has modified the previously existing import duties without the agreement or consent of the United States, as required by article 3 of the convention of February 8, 1907.

You will discreetly but earnestly take up this matter with the Dominican Government. Your representations at this time should be confined, first, to registering the opinion of this Government that the recent tax legislation is a modification of the Dominican import duties in the sense of article 3 of the convention and that the previous [Page 142] assent of the United States to the modification required by the convention should have been solicited; and secondly, having emphasized the principle involved, namely the right of the United States under the convention to have its agreement or consent a prerequisite to any modification in the import duties, you will say that this Government reserves for the present its right hereafter to make any specific objections to the recently levied duties which further careful study and examination may show to be necessary. You will represent that from the preliminary study already made it would, however, appear that the recently approved municipal taxes of the commune of Santo Domingo, at least, threaten injuriously to affect the import customs revenues, which so largely serve the bond issue with which the Dominican Republic is discharging its obligations to its creditors and concessionaires. Moreover, it would seem that the recent legislation is likely to prove prejudicial to the best interests of the Republic in the matter.

You will then in connection with the receiver general of the Dominican customs proceed to make a most careful study and investigation of these laws and of the results of their operation (conferring and cooperating in this matter with the receiver general of the Dominican customs, who will be appropriately instructed by the War Department) to the end that you may be prepared to submit to this Department for its consideration the final opinion and judgment of yourself and the receiver general regarding the effect of the operation of these two statutes. You will report your results to the Department so soon as they are obtained, in order that you may be appropriately advised at an early date regarding the attitude which this Government must take upon these specific statutes.

I am, etc.,

P. C. Knox.