611.003/1472
The Secretary of State to Representative Willis C. Hawley2
Dear Mr. Hawley: Certain difficulties in the conduct of the foreign relations of this Government have arisen by reason of the existence in the Tariff Act of 19223 of provisions which are inconsistent with the established policy and with the treaty obligations of this Government. Other provisions in the Act have proved to be a source of international friction. In view of the fact that revision of the Act is now under consideration I feel that I should bring these matters to the attention of your Committee.
The Tariff Act of 1922 contains in eight paragraphs of its schedules provisos the effect of which is to cause the duty levied upon the products mentioned therein to vary in accordance with the amount of import duty placed by the country of origin upon similar products. Such a proviso is found in paragraph 369 which reads as follows:
“Automobiles, automobile bodies, automobile chassis, motor cycles, and parts of the foregoing, not including tires, all of the foregoing whether finished or unfinished, 25 per centum ad valorem: Provided, That if any country, dependency, province, or other subdivision of government imposes a duty on any article specified in this paragraph, when imported from the United States, in excess of the duty herein provided, there shall be imposed upon such article, when imported either directly or indirectly from such country, dependency, province, or other subdivision of government, a duty equal to that imposed by such country, dependency, province, or other subdivision of government on such article imported from the United States, but in no case shall such duty exceed 50 per centum ad valorem.”
Provisos of similar effect are also embodied in paragraphs 371, 1302, 1536, 1541, 1543, 1548 and 1585. In addition there are provisos in three other paragraphs, namely, 401, 1301 and 1700, which are similar [Page 986] in character and intent to those mentioned, differing only in certain particulars.
These communications were transmitted to the Senate Committee through the Department of State.
These provisions are open to serious objection on the ground that the imposition of increased duties under the terms thereof conflicts with the stipulations for most-favored-nation treatment found in practically all our comprehensive commercial treaties with foreign countries. The following stipulation in the Treaty of Friendship, Commerce and Consular Rights with Germany, signed December 8, 1923,4 is typical of the provisions of similar treaties recently concluded.
Article VII (Paragraph two):
“Each of the High Contracting Parties binds itself unconditionally to impose no higher or other duties or conditions and no prohibition on the importation of any article, the growth, produce or manufacture, of the territories of the other than are or shall be imposed on the importation of any like article, the growth, produce or manufacture of any other foreign country.”
Duties imposed pursuant to the provisions of paragraph 369 and other similar paragraphs of the Tariff Act apply without regard to whether the foreign country discriminated against subjects the American products in question to discriminatory treatment. Under these provisions the Treasury Department has considered it necessary, despite the obligations imposed on this Government by treaties containing stipulations of the above character, to impose on certain products imported from particular countries higher duties than those applicable to importations of the products in question from other countries.
The fact that none of the provisos of the above mentioned paragraphs of the Tariff Act can be applied in the case of importations from the numerous countries with which the United States has treaties containing the most-favored-nation clause without violating our treaty obligations would seem to be sufficient ground for the repeal of the provisos in question.
I should also point out that even though the application of these provisos were limited to importations from countries which are not entitled by treaty to most-favored-nation treatment, they would still be open to the objection that they are inconsistent with the general policy of this Government envisaged in Section 317 of the same Act. Section 317 authorizes the President to impose penalty duties on importations from countries which discriminate against the commerce of the United States. Yet the provisos in question require that the commerce of foreign countries be subjected in certain circumstances to discriminations which, if employed by the same foreign countries against [Page 987] the commerce of this country, would render their trade liable to customs penalties by the United States.
These inconsistencies with the general policy of equality of treatment envisaged in Section 317 of the Tariff Act have in fact proved to be a source of embarrassment to this Department in important negotiations having in view the removal of discriminations against American trade.
I desire to invite your further attention to the provisions of the Tariff Act pursuant to which inspections are made of the books of foreign exporters and in particular to Section 510 which provides as follows:
“If any person manufacturing, producing, selling, shipping, or consigning merchandise exported to the United States fails, at the request of the Secretary of the Treasury, or an appraiser, or person acting as appraiser, or a collector, or a general appraiser, or the Board of General Appraisers, as the case may be, to permit a duly accredited officer of the United States to inspect his books, papers, records, accounts, documents, or correspondence, pertaining to the market value or classification of such merchandise, then while such failure continues the Secretary of the Treasury, under regulations prescribed by him, (1) shall prohibit the importation into the United States of merchandise manufactured, produced, sold, shipped or consigned by such person, and (2) may instruct the collectors to withhold delivery of merchandise manufactured, produced, sold, shipped or consigned by such person. If such failure continues for a period of one year from the date of such instructions the collector shall cause the merchandise, unless previously exported, to be sold at public auction as in the case of forfeited merchandise.”
The inspection of private records of foreign business concerns by officials of this Government has caused widespread criticism and resentment in foreign countries. In addition to formal protests by the Governments of Great Britain, France and Italy against such inspections and informal representations to officials of this Government by representatives of one or two other countries, strong resentment has been expressed by the press and by public officials in a very considerable number of other foreign countries.5 One of the consequences of the tariff controversy with France in the fall of 19276 was that, owing to the latter’s insistence, this Government discontinued inspections of the books of French business concerns.
In the case of certain countries complaint has been made on the ground that in virtually compelling exporters to permit the inspection of their private books officials of this Government seek privileges [Page 988] which could be denied under the laws and policy of the foreign country to officials of the government in whose jurisdiction such inspections are made. There also appears to be apprehension on the part of foreign business concerns that in consequence of such inspections of their private records, trade secrets may find their way into the possession of their American competitors.
Regardless of the opinion which may be held concerning the validity of these complaints, the fact that such activities on the part of officers of this Government have caused widespread dissatisfaction and resentment abroad argues strongly for some steps being taken to remove this source of international friction and ill-feeling. The Committee on Ways and Means will doubtless wish to consider whether some suitable basis of dutiable value or some method of verifying declarations by foreign exporters can not be found which will obviate the necessity of compelling foreign business concerns to submit to the inspection of their private records by officials of this Government.
Representations have been made to this Government by the Governments of Spain and Portugal against a recent ruling of the United States Customs Court handed down in Armstrong Cork Company vs. United States, the Boucher Cork Company appearing as a party in interest, T. D. 42993. The Court held in that case that tapered corks imported into the United States are capable of being marked without injury within the meaning of Section 304 of the Act of 1922, and assessable with additional duty therein provided for, if not so marked. The Spanish Embassy, in a note dated June 15, 1927,7 contended that “the expense of marking these corks and cork discs would be disproportionate to the cost and the selling price of the article and would amount to an embargo on these articles, to the detriment of an important Spanish industry”. The existence of regulations and restrictions of this character upon goods imported into the United States makes it difficult for this Department to assist American exporters adversely affected by analogous foreign regulations and restrictions.
It is desirable for obvious reasons that the views of the Department of State on the above matters should not be made public.
I am [etc.]
- Chairman of the Ways and Means Committee of the House of Representatives.↩
- 42 Stat. 858.↩
- Foreign Relations, 1923, vol. ii, p. 29.↩
- See “Unsuccessful efforts to have American customs attaches accorded diplomatic status,” Foreign Relations, 1925, vol. i, pp. 211 ff. For representations by the Italian Government, see ibid., 1928, vol. iii, pp. 104 ff.↩
- See ibid., 1927, vol. ii, pp. 631 ff.↩
- Not printed.↩