File No. 812.6363/275

Ambassador Fletcher to the Secretary of State

No. 81

Sir: Supplementing my telegram No. 106 of April 17, 6 p.m.,2 I have the honor to enclose the text and translation of the decree establishing the rates of taxation for petroleum and its products, issued April 13, 1917, by First Chief Carranza of the Constitutionalist Army, to go into effect May 1, 1917.

This decree has not yet been published in the Diario Oficial and this text has been copied from a local paper.

I have [etc.]

Henry P. Fletcher

decree dated april 13, 1917, establishing the rates of taxation for petroleum and its products

Venustiano Carranza, First Chief of the Constitutionalist Army, in charge of the Executive Power of the Nation, in the exercise of the faculties with which I am invested; and whereas the production of petroleum in the country should, because of the great development reached in recent years, constitute a source of income for the Federal Treasury which may bear a just relation to the great profits which companies or enterprises dealing in petroleum obtain from this industry; and whereas it is expedient to exempt from the special stamp tax the petroleum which is consumed in the country for the purpose of aiding industry by furnishing an abundant and economical source of combustible; and whereas the quality of petroleum produced in the country varies greatly and should therefore, in order that it may be taxed reasonably and equitably, bear a tax based on the different commercial values fixed in conformity with the variation in quality; and whereas a considerable quantity of this liquid is wasted because due precautions are not taken in exploration work and in its daily handling, this circumstance causing frequent losses not only to the interested companies but also to the Treasury for taxes not received; therefore

I have seen fit to issue the following decree:

Article I. All crude petroleum of domestic production, its derivatives and the gas from the wells, from the moment that they may leave the fields or tanks, will be subject to a special stamp tax, as follows:

A. All crude petroleum of domestic production as well as fuel not intended for domestic consumption will be taxed according to the following tariff:

Fuel oil will be taxed ten per cent ad valorem per net ton. The valuation of this oil will be considered as pesos 9.50 when its specific gravity is 0.910, this valuation decreasing by twenty centavos per ton for each one-hundredth increase in specific gravity and oil whose specific gravity is 0.970 being included in this variation.

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The valuation of fuel oil, the specific gravity of which may be less than 0.910, will increase by forty centavos for each one-hundredth decrease in specific gravity.

The valuation of all petroleum of which the density is greater than 0.970 is fixed at pesos 7.50.

Crude petroleum will be taxed ten per cent per net ton on its valuation; which shall be considered as pesos 14.00 when its specific gravity is 0.910, this valuation decreasing in the same manner as fuel oil as the specific gravity increases to 0.970.

Fuel oil intended for the use of tug-boats and tank steamers in the export service will be subject to the foregoing tariff.

The products derived from refining crude petroleum and from the use of the gas of the wells not used for domestic consumption will be taxed according to the following tariff:

Refined gasoline, one-half centavo per liter;

Crude gasoline, one centavo per liters;

Crude kerosene, one-half centavo per liter;

Refined kerosene, one-fourth centavo per liter;

Lubricants, one-fourth centavo per liter;

Asphalt, pesos 1.50 per ton;

Gas, five per cent ad valorem.

B. Crude petroleum and its derivatives, when wasted in any quantity, either through carelessness or noncompliance with Government regulations, will be taxed double the amount of similar products.

Products derived from natural gas when wasted for the same reasons will be taxed ten per cent of their commercial value.

Article II. The special stamp tax will not apply, except the tax on sales in accordance with the law of June 1, 1906, to the following:

A. All crude petroleum of domestic consumption, whether sold in the country or used in exploration or development work of the companies in the fields or terminals; that which is delivered to the refineries of the country for refining or for use as fuel oil; that used by steamers or tugs in the coastwise trade; and, in general all crude petroleum of domestic production used in any form within the country.

B. All the products derived from crude petroleum of domestic production, whatever may be their denomination or physical state, which are sold or used within the country, provided they have been refined in the refineries of the country, in the fields or terminals of the companies, whatever may be the process employed.

Article III. For the purposes of the present decree crude petroleum is understood to be the natural product as it comes from the wells or springs, provided that it does not contain more than one per cent of water or sediment. Should it contain more, the excess over one per cent will be deducted when the tax payments are made.

Refined petroleums are understood to be all the solid or liquid products of crude petroleum, whatever may be the treatment employed, either mechanical, physical or chemical, which results in the separation of one or more of the substances which comprise the original product. The operation of separating the water from petroleum is excepted, provided that this is done without the application of heat and without the separation of the component parts of the crude petroleum.

Crude gasoline is the distillate corresponding to this product which has not received any treatment of redistillation or purification by acid or alkali. Crude kerosene is the distillate which corresponds to this product which has not undergone any treatment of redistillation and purification with acid or alkali. Refined gasoline and kerosene are those which have received the treatment of redistillation and purification with acid and alkali.

Fuel oils are understood to be the liquid products of a crude petroleum or mixtures of petroleums from which certain oils have been separated to reduce the ignition point. Fuel oils are comprehended in the denomination of refined petroleums, a special classification being made, however, for the purposes of the tax.

Article IV. In order to be able to fix the tax which according to Section A of Article I corresponds to each one of the derivatives of petroleum, the Ministry of Hacienda will issue a bimonthly statement of the above-mentioned articles fixing the prices in the ports of lading, taking the average valuation of these articles for the previous month. The manifests or invoices presented by the [Page 1067]companies covering domestic sales of these articles will be made the basis for the statement referred to. In case that no domestic sales have taken place the average valuation taken will be that of these articles in New York or in other ports of the United States during the previous month, deducting the cost of transporting the products referred to from the Mexican ports to the foreign ports. In case that sufficient data for making the foregoing calculation are not available, a price will be fixed equal to that which similar products may have in the United States, this price being the basis of the tax.

Article V. All moneys which come to the Treasury as the result of compliance with this decree must be paid only in national (Mexican) gold coin.


Article I. All laws, regulations and dispositions which contravene the present decree are declared null and void.

Article II. This decree will take effect from May 1, 1917.

Therefore, I order that it be printed [etc.]

Constitution and Reforms

V. Carranza
  1. Not printed.