711.632/22b

The Secretary of State to the Minister in Austria (Washburn)

No. 566

Sir: The following instructions in regard to Article VII of the Treaty of Friendship, Commerce and Consular Eights which you are engaged in negotiating with Austria are supplemental to the Department’s instructions No. 527 of December 1, 1926, and No. 552 of February 11, 1927.

Article VII. Importations, exportations, most favored nation clause, etc. The Department desires that you propose to the Austrian Government certain further additions to the text of Article VII relating particularly to indirect shipments, to quotas and licenses for the importation or exportation of restricted goods and to customs formalities. As the United States does not require certificates of origin to accompany imports from foreign countries and maintains no prohibitions except for sanitary or other special reasons, there is no such condition facing Austrian commerce in this country as faces American commerce in a number of European countries.

Second paragraph. In view of the difficulties that have been encountered by American merchandise in obtaining most favored nation [Page 961] treatment in countries which import largely from warehouses in third countries, this Government desires that the Treaty specifically stipulate that American products shall enjoy equality of treatment from whatever place arriving. It has been decided, therefore, to endeavor to have a provision designed to protect indirect trade inserted in the treaties of friendship, commerce and consular rights which the United States shall hereafter conclude. The following paragraph which it is proposed to substitute for the second paragraph of Article VII of the draft of the Treaty with Austria will also be proposed in drafts submitted to other countries:

[Here follows the second paragraph of draft article VII quoted infra.]

Fourth paragraph. As you are aware a number of countries, particularly countries in Central Europe, have established systems of licenses and of rations or quotas for imports and exports. In some of these countries it has developed that in practice American commerce has been discriminated against. In this situation the Department deems it wise to make express provision in Article VII of the treaty in regard to the treatment which shall be accorded to American commerce in respect of licenses, quotas and contingents. In thus attempting to assure for American commerce treatment which shall be not less favorable than that accorded to other nations in the matter of licenses and of rations or quotas, this Government is not proposing to insert in its Treaty with Austria a provision which will be unique. The same provision will be proposed in treaties of friendship, commerce and consular rights which the United States will undertake to negotiate with other countries.

The Department understands that Austria is a party to the International Convention Relating to the Simplification of Customs Formalities signed at Geneva November 3, 1923,83 which contains stipulations in regard to prohibitions, restrictions and licenses, and that the matter of prohibitions and licenses is also dealt with in Article 9 of the Anglo-Austrian Treaty of May 22, 1924.84 Under the most favored nation provisions of Article VII of the draft under negotiation as interpreted by the Department, the obligations of Austria under the two above mentioned agreements would be extended to the United States. Accordingly, it is not desired by this Government to incorporate in extenso in the Treaty of the United States with Austria the stipulations of the convention and treaty referred to.

This Government desires, however, that you propose to the Austrian Government that the following paragraph, which is an adaptation and amplification of a provision contained in the second paragraph of exchanges of notes signed by the United States with several [Page 962] countries (Poland, February 10, 1925, Treaty Series No. 727; Finland, May 2, 1925, Treaty Series No. 715; Estonia, March 2, 1925, Treaty Series No. 722; Rumania, February 26, 1926, Treaty Series No. 733; Latvia, February 1, 1926, Treaty Series No. 740; Lithuania, December 23, 1925, Treaty Series No. 742; and Haiti, July 8, 1926, Treaty Series No. 746)85 and of a part of Article IX of the Anglo-Austrian Treaty, be inserted in Article VII of the draft treaty under negotiation as the fourth paragraph thereof:

[Here follows the fourth paragraph of draft article VII quoted infra.]

Fifth paragraph. One further change in Article VII is suggested, It has developed that in certain customs districts of some countries there is a practice of affording to some favored nation privileges not accorded to American commerce. It appears that as such practice is not the result of any express provision of treaty, laws, or regulations, it may be claimed that it is not within the most favored nation provisions of the fourth paragraph of the draft as originally written, now the fifth paragraph. While this Government has not concurred in such an interpretation of that paragraph, it proposes, in order to avoid misunderstandings in regard to such practices, to insert in the paragraph the phrase “by treaty, law, decree, regulation, practice or otherwise.” As the proposed phrase only clarifies and does not alter the meaning of the paragraph, it is hoped that the Austrian Government will have no objection to its acceptance.

The complete text of Article VII revised in accordance with the foregoing suggestions is as follows:

Article vii

“Between the territories of the High Contracting Parties there shall be freedom of commerce and navigation. The nationals of each of the High Contracting Parties equally with those of the most favored nation, shall have liberty freely to come with their vessels and cargoes to all places, ports and waters of every kind within the territorial limits of the other which are or may be open to foreign commerce and navigation. Nothing in this treaty shall be construed to restrict the right of either High Contracting Party to impose, on such terms as it may see fit, prohibitions or restrictions of a sanitary character designed to protect human, animal or plant life, or regulations for the enforcement of police or revenue laws.

“Each of the High Contracting Parties binds itself unconditionally to impose no higher or other duties or charges or bases of such duties or charges, and no conditions or prohibition on the importation of any article, the growth, produce or manufacture of the territories of the other Party, from whatever place arriving, than are or shall be imposed [Page 963] on the importation of any like article, the growth, produce or manufacture of any other foreign country; nor shall any such duties, charges, conditions or prohibitions on importations be made effective retroactively on imports already cleared through the customs, or on goods declared for entry into consumption in the country.

“Each of the High Contracting Parties also binds itself unconditionally to impose no higher or other charges or other restrictions or prohibitions on goods exported to the territories of the other High Contracting Party than are imposed on goods exported to any other foreign country.

“In the event of licenses being issued by either of the High Contracting Parties for the importation into or exportation from its territories of articles the importation or exportation of which is restricted or prohibited, the conditions under which such licenses may be obtained shall be publicly announced and clearly stated in such a manner as to enable traders interested to become acquainted with them; the method of licensing shall be as simple and unvarying as possible and applications for licenses shall be dealt with as speedily as possible. Moreover, the conditions under which such licenses are issued by either of the High Contracting Parties for goods imported from or exported to the territories of the other Party shall be as favorable with respect to commodities, formalities and otherwise as the conditions under which licenses are issued in respect of any other foreign country. In the event of rations or quotas being established for the importation or exportation of articles restricted or prohibited, each of the High Contracting Parties agrees to grant for the importation from or exportation to the territories of the other Party an equitable share, in view of the normal volume of trade in the particular class of goods between the two countries, in the allocation of the quantity of restricted goods which may be authorized for importation or exportation. In the application of the provisions of this paragraph no distinction shall be made between direct and indirect shipments. It is agreed, moreover, that in the event either High Contracting Party shall be engaged in war, it may enforce such import or export restrictions as may be required by the national interest.

“Any advantage of whatsoever kind which either High Contracting Party may extend, by treaty, law, decree, regulation, practice or otherwise, to any article, the growth, produce or manufacture of any other foreign country shall simultaneously and unconditionally, without request and without compensation, be extended to the like article the growth, produce or manufacture of the other High Contracting Party.

“With respect to the amount and collection of duties on imports and exports of every kind, each of the two High Contracting Parties [Page 964] binds itself to give to the nationals, vessels and goods of the other the advantage of every favor, privilege or immunity which it shall have accorded to the nationals, vessels and goods of a third State, whether such favored State shall have been accorded such treatment gratuitously or in return for reciprocal compensatory treatment. Every such favor, privilege or immunity which shall hereafter be granted the nationals, vessels or goods of a third State shall simultaneously and unconditionally, without request and without compensation, be extended to the other High Contracting Party, for the benefit of itself, its nationals and vessels.

“The stipulations of this Article do not extend to the treatment which is accorded by the United States to the commerce of Cuba under the provisions of the Commercial Convention concluded by the United States and Cuba on December 11, 1902,86 or any other commercial convention which hereafter may be concluded by the United States with Cuba, or to the commerce of the United States with any of its dependencies and the Panama Canal Zone under existing or future laws.”

You will note that in the above quoted draft of Article VII no exception in favor of Austrian trade with Czechoslovakia or Hungary is included. Should the Austrian Government insist on such an exception, you will recall that you are authorized to agree to it in the terms set out on page 2 of instruction No. 527 of December 1, 1926.

It is believed that if Article VII as set out above is accepted by Austria a sufficient assurance will have been given of equality of treatment for the commerce of the United States with that of every other country. As equality of treatment of Austrian commerce with that of other foreign countries in the United States is secured by the Treaty, it is believed that the interests of both parties will be conserved by the Article as re-drafted.

Article XXV. Duration and termination of Treaty. The inclusion of the new paragraph proposed above as the fourth paragraph of Article VII may necessitate a change in the provisions of the third paragraph of Article XXV relating to the termination of the Treaty. You will recall that a suggested new paragraph of Article VII was set out on page 3 of instruction No. 527 of December 1, 1926, and that a special mode of termination was provided for it on pages 22 and 23 of instruction No. 552 of February 11, 1927. With the insertion of the new fourth paragraph quoted above, it will be necessary to reconsider Article XXV, so that the paragraph proposed on page 3 of instruction No. 527, if included in the Treaty shall be referred to by its proper number.

I am [etc.]

Frank B. Kellogg
  1. League of Nations Treaty Series, vol. xxx, p. 371.
  2. Ibid, vol. xxxv, pp. 175, 180.
  3. For notes exchanged with Estonia, Finland, Lithuania, and Poland, see Foreign Relations, 1925, vol. ii, pp. 66 ff., pp. 86 ff., pp. 500 ff., and pp. 692 ff.; for those with Haiti, Latvia, and Rumania, see ibid., 1926, vol. ii, pp. 401 ff., pp. 488 ff., and pp. 898 ff.
  4. Foreign Relations, 1903, p. 375.