Papers Relating to the Foreign Relations of the United States, 1927, Volume I

560.M2/18a

The Secretary of State to the Minister in Switzerland (Wilson)

Washington, October 6, 1927.

[No.] 65

Sir: The President has instructed me to inform you of his desire that you should represent this Government at the forthcoming conference on import and export prohibitions and restrictions to be held at Geneva beginning October 17, 1927, to consider the adoption of an agreement for the abolition of such prohibitions and restrictions. You will be assisted by H. Lawrence Groves, Commercial Attaché at Vienna; Charles E. Lyon, Commercial Attaché at Berne; Henry F. Worley, of the Treasury Department; and Percy W. Bidwell, one of the European representatives of the Tariff Commission. Mr. S. P. Tuck, American Consul at Geneva, will serve as secretary of the delegation.

The Department desires you to be governed by the following instructions as representative of the United States at the forthcoming Conference on Import and Export Prohibitions and Restrictions, which convenes at Geneva October 17, 1927.

The subject matter of the Conference is the preliminary draft agreement prepared by the Economic Committee of the League. The following comments are made in relation thereto.

Article 1

Having in mind that the object of the conference is to abolish the system of prohibitions and restrictions, it appears that the undertaking in the first paragraph to abolish “all import and export prohibitions and restrictions” could probably not be construed as extending to import duties imposed for the purposes of revenue or protection to domestic producers. The Department, however, feels it essential to dispel any possible doubt on that score. It is believed that most if not all the other governments will share that view. The Department therefore desires that an appropriate modification to that effect be embodied in the agreement. If an appropriate amendment is proposed by one of the other delegations you may support it. If not, you may suggest that the following be included as a separate article:

“Nothing in this Agreement shall be construed as affecting the right of any contracting state to impose import duties; or to adopt measures to prevent or counteract dumping or to offset bounties or subsidies paid to foreign producers.”

It would appear preferable that the proposal of such an amendment, if found necessary, be made in the latter stages of the conference, in order to avoid giving opportunity for the suggestion to be made that import duties be brought within the scope of the conference.

Article 2

No observations appear to be called for.

Article 3

The provisions of Article 3 of the International Convention for the Simplification of Customs Formalities of November 3, 1923, should be incorporated in the Article rather than merely included by reference. Since the United States is not a party to that Convention, it is the more desirable that any agreement to be signed at the present Conference be complete in itself.

You will recall that Article 3 of the Convention of November 3, 1923, is quoted on page 21 of Document C.I.A.P.1,⁹⁸ which contains the draft agreement under discussion at the present conference.

It is suggested that the introductory paragraph of Article 3 of the draft Agreement should read as follows:

“In the case of any prohibitions or restrictions which may be applied within the limits set by the present Agreement, the contracting States shall in the matter of licenses comply strictly with the following provisions:”

There should then be inserted paragraphs (a) to (d) inclusive of Article 3 of the Convention of November 3, 1923. The Department feels, however, in the light of its experience in endeavoring to protect American trade with countries having a system of licenses, that paragraph (e) of that Convention needs to be revised and broadened in order to prevent possible abuses. There is transmitted herewith for your information a copy of the draft form of Article 7 which is being inserted in commercial treaties now being negotiated by the United States.⁹⁹ You will note that the fourth paragraph of Article 7 deals with the issue of licenses.

The Department feels that sub-paragraph (e) should be revised, to read as follows:

“(e) That, in the event of the fixing of rations or quotas, no conditions or formalities shall be imposed or required, in connection with the allocation of licenses for restricted goods authorized for importation or exportation, that may prevent according to each other contracting state an equitable share of such importation or exportation, having regard to the normal volume of trade of the respective countries in the particular class of goods in question. In the application of the provisions of this paragraph no distinction shall be made between, direct and indirect shipments.”

It may be added for your information in connection with paragraph (e) of Article 3 of the convention of November 3, 1923, that the Department has considered the possible bearing of the practice and requirements of the Federal Narcotics Board, which allocates among American importers permits to import narcotics. The Department understands that the reference in paragraph (e) to “equitable allocation”, refers to allocation in respect of foreign sources of supply, and not to allocation among domestic importers, since the latter is obviously an internal question. In order to avoid any possible question, it is important that the language adopted on this point be entirely clear.

Article 4

With respect to the reference in the introductory sentence to the possibility that prohibitions and restrictions may have a concealed economic purpose, the Department calls attention to the circular instruction recently issued on this subject, copy of which is transmitted herewith.¹ This instruction sets forth the position in the matter of the United States Department of Agriculture.

The United States has in force certain prohibitions or restrictions coming within all the ten categories of suggested exceptions excepting numbers 5, 8 and 10. The views of the Department concerning each, of the proposed exceptions are as follows:

Point 1. The legislation of the United States in relation to helium gas, copies of which are enclosed,² comes under this point, and the maintenance of this exception is necessary from the standpoint of the United States.

Point 2. American prohibitions or restrictions on grounds of public health relate, for example, to the importation of viruses or serums, or of hay and straw not disinfected. The maintenance of this exception is thus obviously necessary.

Point 3. American prohibitions or restrictions designed to protect animal and plant life relate to foreign plants, fruits, seeds, bulbs, wild animals, eggs, etc. as well as to the prohibition of importation of seal skins from seals and otters taken in prohibited waters. The maintenance of this exception is thus necessary.

Point 4. American prohibitions or restrictions imposed for moral or humanitarian reasons or to suppress improper traffic relate inter alia to intoxicating liquors, smoking opium and narcotic drugs, lottery tickets, obscene and immoral articles, counterfeits, pictorial representations of prize fights and the plumage of certain birds. The maintenance of this exception is therefore necessary.

Point 5. The United States has no prohibitions or restrictions for protection of “national treasures of artistic, historical or archaeological value”, but has no objection to this exception.

Point 6. American prohibitions or restrictions to protect industrial, literary and artistic property or unfair competition relate to infringements of trade marks, trade names and copyrights, and also include the requirements of the United States regarding marking of the foreign origin of imported goods.

The Department considers that the language of point 6 requires modification in order to cover the necessary prohibitions or restrictions enforced in the United States. In connection with this matter, reference is made to Section 316 of the Tariff Act of 1922, which relates to unfair competition.³ Reference is also made to the requirements of American law that certain classes and kinds of imports be marked to show the country of origin (see the customs regulations of the United States, index under “Marking”; a copy of the Customs Regulations is among the documents left at the American Consulate at Geneva by the American delegation to the Economic Conference). It is of course impracticable for the United States to require that domestic products for sale in the United States be marked in the same manner as similar imported products.

The Department therefore considers that point 6 should be amended to read as follows:

“Prohibitions or restrictions intended, in conformity with national legislation or international conventions, to protect industrial, literary and artistic property, and to prevent unfair competition in regard to the false marking or appellation of origin, on condition that an analogous protection or supervision (except in the case of marking or appellation of origin) is applied to national products.”

Point 7. American prohibitions or restrictions extending control equivalent or analogous to that applied to domestic products apply, for example, in the case of intoxicating liquors. This exception is thus necessary.

Point 8. The United States has no prohibitions or restrictions such as those enumerated under point 8, i. e. in relation to monopolies. It may be observed that while State monopolies in foreign countries are frequently felt to be detrimental to American interests, their establishment is in the last analysis a matter of internal policy for the country in question, and the Department accordingly feels that it is not in a position to offer any objection to the proposed exception.

Point 9. While the Department has no objection to the exceptions embodied in the draft of point 9, it considers that these exceptions should not be limited to those made necessary pursuant to international conventions relating to traffic in arms, opium, etc., or unfair methods of competition.

In this connection, reference is made to the Joint Resolution of Congress approved January 31, 1922,⁴ authorizing the President to prohibit or restrict the exportation of arms or munitions of war to countries in which the United States exercises extraterritorial jurisdition, or in which conditions of domestic violence exist. A copy of this resolution is transmitted herewith, together with copies of a ruling of the Department of State dated May 3, 1927, concerning the kinds of articles requiring individual export licenses when destined to Mexico.⁵ A copy of the President’s proclamation of January 7, 1924, concerning the restriction of exports of arms or munitions to Mexico is also transmitted herewith.⁶

The Department accordingly considers that Point 9 should be amended to read as follows:

“Prohibitions or restrictions established in pursuance of international conventions or domestic legislation regulating traffic in arms, opium, or other forms of trade which give rise to dangers or abuses, or relating to methods of unfair competition.”

Point 10. The United States has no prohibitions applicable to “coins, gold, silver, currency notes or securities”. While the establishment of prohibitions such as would appear possible under the exception set forth in point 10 might be subject to abuse, there are circumstances in which such prohibitions appear necessary and accordingly this Department makes no objection to that exception. The Department is not clear why exception 10 makes no reference to “restrictions”. It appears also that a comma should follow the word “currency”, in case, as it appears, that word is intended to cover coins or circulating media other than gold and silver.

Additions to the exceptions listed in Article 4 are necessary to cover the following points, in view of American legislation: (a) prohibition or restriction of importation of prison-made goods; (b) restrictions and prohibitions pursuant to the so-called grain, cotton and tea standards legislation.

With respect to prison-made goods, the situation might be met in one of two ways. The following statement might be included at the end of point 9:

“(including the prohibition or restriction of importation of prison-made goods, regardless of whether domestic commerce in such goods is prohibited or restricted).”

Alternatively, a separate exception having a distinct number might be inserted, as follows:

“Prohibitions or restrictions applied to the importation of prison-made goods, regardless of whether domestic commerce in such goods is prohibited or restricted.”

With respect to the grain, cotton and tea standards legislation, it is suggested that an additional exception be inserted, as follows:

“Prohibitions or restrictions in connection with the application of standards for classification and grading of commodities in international commerce, provided equivalent measures are applied to national products.”

In connection with this matter, reference is made to the letters from the Department of Agriculture, transmitted with the Department’s instruction No. 63 of September 30, 1927.⁷

A further prohibition authorized by American law is that provided for in Section 510 of the Tariff Act of 1922⁸ to the effect that the Secretary of the Treasury may prohibit importation of specific shipments when the foreign shipper thereof has refused to permit a duly accredited officer of the United States to inspect his records pertaining to the market value or classification of the goods in question. The Department prefers that you should not raise this question until the general discussions on the draft treaty have practically crystallized the treaty into final form when you should ask specific instructions on this point.

Article 5

The Department considers that this article, in its present draft form is far too broad and vague, and that if permitted to stand might practically nullify the convention. If the article were maintained, countries that have the system of prohibitions and restrictions might feel free to contend that its continual existence is necessary “to protect the vital economic and financial interests of the State.” Heretofore, such measures have been defended as necessary to protect the currency, or to develop industries regarded as “vital”. It is believed that in general States considering it necessary to protect their industries against foreign competition may do so with less disturbance to international trade by employing protective duties than by the arbitrary method of prohibitions or restrictions, which so greatly interferes with commercial stability.

The Department suggests the following substitute for Article 5:

“Nothing in this Agreement shall affect the right of any contracting State to apply to importation or exportation all necessary measures in case of war or national calamity. The duration of any such measures shall be restricted to that of the causes or circumstances from which they arise”.

The Department attaches great importance to effecting the change set forth above, and desires you strongly to oppose the original wording, even though it appears likely that the State maintaining the licence system will try to keep the original draft.

Article 6

The Department considers that the provisions of this article are necessary. It is doubtless intended to cover the application of prohibitions or restrictions as penalty measures, as authorized or contemplated in Section 317 of the Tariff Act of 1922⁹ and in Section 26 of the Shipping Act, 1916.¹⁰

It is, however, necessary to leave out the word “third”. Otherwise, it appears that a State party to the Agreement which might impose “measures of exclusion or discrimination” would be in a position to object to prohibitions or restrictions which another State party to the Agreement might adopt for the purpose of penalty or retaliation.

Article 7

It is believed that the first paragraph of Article 7 would be clarified if the words “provided they mutually agree to do so” are inserted in the fourth line between “may” and “before.”

Inasmuch as the United States has not adhered to the Statute of the Permanent Court of International Justice, it is essential that the United States should not be obligated by the Agreement to submit to that Court a dispute arising thereunder. At the same time, the United States naturally does not wish to object to the adoption by the states adhering to the Statute of such procedure for settlement of disputes among them as they may consider appropriate. Nor does the Department desire you to take a position that might be taken to indicate that it would not in any circumstances submit a dispute to that Court.

The Department would greatly prefer to substitute for the entire Article 7 language based upon Article 35 of the Convention for the Supervision of the International Trade in Arms and Ammunitions and in Implements of War, concluded June 17, 1925,¹¹ changing “shall” to “may” wherever occurring. If this proves impracticable, you should telegraph the Department for further instructions, at the same time offering such suggestions as you may deem appropriate.

Article 8

The second paragraph of Article 8 is not clear. It provides that “such State” may accede to the agreement. The reference is to the preceding paragraph which provides for accession by States members of the League of Nations or to which the Council shall have communicated a copy of the agreement for purpose of signature.

It would thus appear that only such States as are members of the League of Nations or are invited to sign the agreement may accede. Such a provision is adequate only if all States are invited to sign. The Department considers that the utility of an agreement on this general subject would be the greater if all States should adhere thereto.

Article 9

The Department does not at this time desire to give you instructions as to the number of States whose ratification is requisite, but desires your telegraphic comment on this point after you have had opportunity to discuss the matter with your colleagues.

The Department has no objection to the wording proposed. It is presumed that it will not be suggested that the United States be included as one of the States whose ratification shall be requisite before the Agreement becomes effective, since the United States does not enforce the prohibitions or restrictions against which the Agreement is understood to be directed.

Article 10

The second paragraph of Article 10 refers to the “contracting States named in the preceding article.” No States are named in the preceding article, in which there is only a reference to countries named in the appendix.

No time is fixed in the second paragraph of Article 10 within which the Council must decide whether or not to summon a conference. Apparently some clarification of drafting is requisite with respect to this matter.

Article 11

From the point of view of the countries not members of the League of Nations, it seems preferable to omit this article, involving as it does, an obligation to make a report to the Secretary General of the League. Undoubtedly, Governments, regardless of League membership, would be glad to respond to any inquiries which the Secretary General might make on the subject.

Article 12

The Department feels that this article might appropriately be redrafted with a view to making the obligations thereof more definite and clear.

In reference to the question raised in the note at the bottom of page 18 of C. I. A. P. 1. as to the application of the Convention to colonies and overseas possessions, the following provision which is contained as Article 13 in the International Convention for the Unification of Certain Rules in Regard to Bills of Lading, signed at Brussels, in 1924 and 1925¹² would be satisfactory to this Government:

“Article —.

“The high contracting parties may at the time of signature, ratification, or accession declare that their acceptance of the present convention does not include any or all of the self-governing dominions, or of the colonies, overseas possessions, protectorates, or territories under their sovereignty or authority, and they may subsequently accede separately on behalf of any self-governing dominion, colony, overseas possession, protectorate, or territory excluded in their declaration. They may also denounce the convention separately in accordance with its provisions in respect of any self-governing dominion, or any colony, overseas possession, protectorate, or territory under their sovereignty or authority.”

The Department is concerned lest the various countries attending the Conference may introduce so great a number of exceptions such as are contained in Article 4 to the provisions eliminating import and export prohibitions and restrictions that the usefulness of the proposed agreement will be threatened. You should particularly observe signs of such a tendency during the opening days of the Conference and should keep the Department fully informed. It seems possible that, in the event that the usefulness of the proposed agreement is too seriously threatened, this Government may withhold its signature, in which case the introduction of exceptions by the United States might possibly be omitted entirely.

The Department has undertaken to reduce as far as possible the number of exceptions which it must request in order to conform to the requirements of American law. In introducing those brought forward in this instruction you may appropriately avoid being among the first delegates to propose exceptions not included in the draft as prepared. You may also appropriately introduce them one by one at times when they will create the smallest impression of piling up exceptions.

The Department calls particular attention to the recommendations of the Economic Conference endorsing the draft convention as “a very satisfactory basis” for the work of the forthcoming conference. The Economic Conference, however, in addition recommended:

“That, moreover, the application of the principles laid down in this draft should not be indirectly defeated by such means as export duties, the fixing of quotas, health regulations or any other measures not justified by exceptional or imperative circumstances;

“And, further, that the application of these principles should not be indirectly defeated by restrictions on the free circulation of capital—including, for example, any system for controlling exchange which impedes the purchase or exportation of foreign exchange for the purpose of paying for goods imported”. See page 21 of the Final Report of the Economic Conference, Document C. E. I. 44 (1).¹³

In the same connection reference is also made to the provisions on page 31 of the report of the Economic Conference dealing with “Export Duties”.

Accordingly, questions relating to the points quoted above will presumably arise at the forthcoming conference. The Department will address to you separate instructions regarding the attitude you should take concerning these points.

The Department considers it important that a suitable agreement be reached for the abolition of import and export prohibitions and restrictions. Such measures have caused material difficulty to American commerce in the period since the war, by reason of the arbitrary and discriminatory manner in which they have been applied. They have interfered with that stability of conditions which is so essential to the development and progress of international commerce. Moreover, their application has led to a number of diplomatic controversies and has complicated the negotiation of the commercial treaties which the United States has desired to conclude in order to establish its commercial relations with foreign countries on a mutually satisfactory and permanent basis.

During the negotiations of the Conference you will of course keep the Department closely advised of important developments, including the substance of any new proposals that may be seriously considered. The Department will endeavor promptly to instruct you in relation to such points as may develop.

It may be that certain of the governments participating in the Conference will be disposed to extend in some directions the scope of the matters dealt with. As indicated above, the Department is of the opinion that in view of the declarations of the Economic Conference in relation to export duties, the scope of the Conference may be extended to deal with them. But the Department is inclined to the view that in principle it would not be advisable to extend the scope of the Conference in other directions for example in relation to questions affecting import duties and commercial treaties. Apart from the fact that certain inquiries pertaining to these matters are being conducted by the League of Nations pursuant to the conclusions of the Economic Conference, the Department believes that no useful purpose will be served by the injection of such controversial matters into the present Conference. The Conference is more likely to succeed if its objectives are definitely limited.

Before signing an agreement you will of course report the full text to the Department for consideration.

I am [etc.]

Frank B. Kellogg

98. See footnote 96, p. 249.
99. Not printed; but see art. 7, par. 4, of the draft treaty submitted to France, vol. ii, pp. 639, 642.
1. See the Department’s diplomatic serial No. 660, Sept. 19, 1927, vol. iii, p. 734.
2. Not printed; see the act of Mar. 3, 1927, 44 Stat. (pt. 2) 1387.
3. 42 Stat. 858, 943.
4. 42 Stat. 361.
5. Not printed.
6. Foreign Relations, 1924, vol. ii, p. 428.
7. Not printed.
8. 42 Stat. 858, 968.
9. 42 Stat. 858, 944.
10. 39 Stat 728.
11. Foreign Relations, 1925, vol. i, p. 61.
12. Foreign Relations, 1925, vol. i, p. 254.
13. League of Nations, The World Economic Conference, Geneva, May 1927: Final Report.