Papers Relating to the Foreign Relations of the United States, 1925, Volume II

611.60 d 31/27a

The Department of State to the Finnish Legation⁵

undated

Memorandum

The draft for an exchange of notes between the United States and Finland, which was handed to the Minister of Finland by the Under Secretary of State on July 31, 1924,⁶ related only to the treatment of commerce. By the counter-draft presented to the Under Secretary of State by the Minister of Finland on October 30, 1924,⁷ the scope of the modus vivendi, as is indicated by the language of the preamble, would be enlarged so as to provide also for the treatment to be accorded to “navigation, citizens, corporations and consuls general, consuls, vice-consuls and consular agents”. The counter-draft provides in its twelfth paragraph that the stipulations concerning customs duties and navigation shall be brought into effect thirty days after the exchange of notes shall have been made, and that with the exception of these stipulations the arrangement shall become operative after each party shall have notified the other that the necessary legislative measures have been brought into effect.

Specific stipulations in regard to the subjects which the Government of Finland proposes to add to the arrangement are introduced throughout the counter-draft. With most of these proposals the Government of the United States is sympathetic and it will be glad to consider them when negotiations for a general treaty of friendship, commerce and consular rights are resumed between the United States and Finland. The United States is constrained, however, to request that, in the proposed modus vivendi, Finland will not insist on them. It is the hope of the United States that the proposed modus vivendi may become operative at an early date, but that it will within a short time give place to a long-term general treaty.

The particulars in which the counter-draft differs from the draft submitted to the Minister of Finland by the Under Secretary of State may be considered in order as follows:

The Government of Finland proposes to apply the stipulation in the second paragraph for unconditional most-favored-nation treatment to navigation and to “taxes, imposts or charges of whatever denomination”, as well as to commerce, to transit, warehousing and other facilities, commercial travelers’ samples and the licensing and prohibition of importations and exportations.

The United States prefers that the treatment to be accorded its vessels in ports of Finland and that to be accorded Finnish vessels in ports of the United States should be on the basis of national rather than most-favored-nation treatment. Under the laws of the United States certain charges on navigation, known as alien tonnage taxes and light money, which do not apply to vessels of the United States are chargeable on vessels of foreign countries. By stipulations of treaties, vessels of many maritime countries have been placed on an equality with vessels of the United States with respect to these charges. Apart from an agreement by treaty, the President is empowered by Act of Congress to suspend and discontinue by proclamation the collection of alien tonnage taxes and light money on the vessels of foreign countries, and also the collection of discriminating duties on goods imported in vessels of such countries, when he has received satisfactory proof from foreign governments that no discriminating duties of tonnage or imposts are levied in their ports on the vessels of the United States or on the goods imported in them. The method prescribed by the Act of Congress is considered as exclusive of all other methods for the suspending of alien navigation charges except stipulation by treaty. The Government of the United States is, therefore, not in a position to accord by exchange of notes national treatment to Finnish vessels in ports of the United States. It is ready, however, to recommend to the President the issuance of his proclamation according national treatment to Finnish vessels in ports of the United States upon the receipt of formal assurances from the Government of Finland that the discriminating charges against vessels of the United States in ports of Finland have been discontinued and that no discriminating tonnage or import dues are imposed or levied on American ships or their cargoes in the ports of Finland. A copy of a proclamation which the President issued in regard to the vessels of Germany is enclosed.⁸

In reference to internal taxation it is necessary to mention that in the United States both the Federal Government and the State Governments have the power to levy taxes. It is within the power of both Federal and State Governments to levy discriminating taxes upon aliens. By a treaty, which under a provision of the Constitution is the supreme law of the land, the United States may and does assure to the nationals of other countries the same treatment in respect to taxation in the United States as is enjoyed by nationals of the United States or by nationals of the most favored nation. Such an assurance could not well be given by the United States otherwise than by treaty. The provision in the counter-draft that stipulations in regard to taxation will remain inoperative until appropriate legislation is passed for giving them effect, does not render the proposal to include them in the modus vivendi acceptable to the Government of the United States for the reason that it is impracticable for the Federal Government to undertake to obtain the necessary legislation. The Government of the United States, accordingly, must ask the Government of Finland to omit the matter of internal taxation from the proposed modus vivendi and leave it for consideration when the proposed commercial treaty is under negotiation.

The counter-draft contains a paragraph according most-favored-nation treatment to citizens and corporations of Finland in the United States and to citizens and corporations of the United States in Finland. Here, also, authority, except when exercised through treaty, is divided between the Federal Government and the governments of the States. The latter may within their sphere discriminate between nationals and aliens and between domestic and foreign corporations. It is, therefore, not practicable for the Government of the United States to consider this proposal of the Finnish Government except in the negotiation of a treaty.

The counter-draft also contains a paragraph according most-favored-nation treatment to consular officers. It has not been the practice of the United States to enter into agreements permitting the exercise of consular functions in this country otherwise than by treaty and this Government regards it as impracticable to enter into such an agreement in an exchange of notes. The Government of the United States must, accordingly, request that the Government of Finland defer consideration of consular rights until such time as a treaty may be under negotiation between the two countries.

To the exceptions from the matters to which the proposed modus vivendi relates the Government of Finland adds the following:

The treatment in regard to the employment of pilots which Finland actually accords or may hereafter accord to Sweden in respect to navigation north of 59° north latitude; the treatment which Finland actually accords or may hereafter accord to Russia in regard to fishing and sealing in the Arctic waters of Finland; nor the treatment which Finland accords to France in Article 6 of the Treaty of Commerce concluded between Finland and France July 13, 1921.

In view of the fact that the United States must ask that matters relating to navigation be excluded from the pending modus vivendi, the first of these exceptions becomes irrelevant. Likewise, as the subjects of fishing and sealing are not embraced in the notes, an exception with respect to particular privileges in these matters is unnecessary. The Government of the United States is glad to accede to the wishes of the Government of Finland and to except from the matters to which the modus vivendi relates the treatment which Finland accords to France in Article 6 of the Treaty of Commerce of July 13, 1921.

It is noted that the exception “or regulations for the enforcement of police or revenue laws”, contained in the paragraph the fourth from the end of the original draft, does not appear in the counter-draft. This exception is deemed important by the Government of the United States and it is requested that the Government of Finland agree to its retention in the modus vivendi.

In view of the fact that the United States must insist upon confining the present exchange of notes to the subject of commerce, it is assumed that the Government of Finland will not care to retain the proposal for changing the provisions of the original note in regard to the coming into force of the modus vivendi. The Government of the United States must, moreover, request the retention of the following language in the paragraph relating to the termination of the arrangement:

but should either party be prevented by future action of its legislature from carrying out the terms of this arrangement, the obligations thereof shall thereupon lapse.

The proposed modus vivendi is an executive agreement and not a treaty. It should be made clear, therefore, that the provisions of the modus vivendi will be dominated by legislation which the Congress of the United States or the Parliament of Finland may in the future enact.

A draft of a note prepared by the Department of State in accordance with the foregoing explanations is attached hereto for the consideration of the Government of Finland.⁹

5. This paper bears the annotation: “Original handed to the Minister of Finland, March 17, 1925, by Mr. Evan Young, Chief of the Division of Eastern European Affairs. W[allace] Mc[Clure].”
6. See telegram No. 16, Aug. 1, 1924, to the Minister in Finland, p. 86.
7. Supra.
8. Not printed.
9. Not printed; the notes exchanged May 2 (printed infra) are substantially the same as this draft, the principal modification being the date on which the agreement was to go into effect.