611.623 Coal/45

The German Ambassador (Von Prittwitz) to the Secretary of State

[Translation]

The German Ambassador has the honor to make the following statement to His Excellency the Secretary of State of the United States, by direction of his Government, and with reference to the note of January 20 of the current year:

The German Government has taken note with increasing surprise of the note of the Secretary of State of January 17 in which the proposal of the German Government for the exemption of German coal from the duty provided in the Revenue Act of 1932 is merely answered with the statement that in the opinion of the Attorney General this claim must be decided by a suit brought by the interested parties before an American domestic court and that the Secretary of the Treasury has therefore directed the collectors of customs to again collect the duty on imports of coal from Germany until further notice.

The German Government has the honor to make the following remarks supplementary to the statements in the note of the German Embassy of September 18 [28], 1932 and the memorandum transmitted by the Embassy on January 6:

In Article 7 of the German-American Commercial Treaty of December 8,1923, Paragraph 2, the importation of German goods into the territory of the United States of America is granted unconditional most favored treatment. In Paragraph 4 of that article, which was formulated at the time by the American Government itself, it was agreed in the most positive way, admitting of no doubt, that every advantage of any nature whatever which the United States grants to any goods produced or manufactured in any other country shall be extended, at the same time and unconditionally, without request being made and without quid pro quo, to the same goods if they are produced or manufactured in Germany. Consequently it does not devolve upon the interested parties to enforce this right in an individual case by a suit before the courts, nor can the [Page 526]fulfillment of this right in an individual case be made dependent upon the interpretation or application of a provision of the American customs tariff law by the American Government or the American domestic courts. As soon as Canadian coal could be imported into the United States without being subject to the coal duty, the exemption from the duty was to be extended to German coal, without application and without quid pro quo, and this right exists as long as Canadian coal or coal produced in any third country is imported into the United States duty free.

In contrast thereof, the opinion of the Attorney General followed by the American Government in its decision of January 9, T.D. 46102, states the following:

The additional provision “unless treaty provisions of the United States otherwise provide” in Section 601a of the Revenue Act of 1932 refers, according to the wish of the legislator, exclusively to the special rights granted Cuba by treaty; the application of this stipulation to all most favored nation treaties concluded by the United States would not correspond to the will of Congress and in practice would make the intended effect of the coal duty provision illusory.

The Attorney General is of the opinion that international obligations might indeed possibly be violated by the collection of the duty on German coal, that the violation of international obligations is to be avoided if possible, but in the last analysis it is a matter of determining the intention of the Congress (“If one view is adopted and payment of the import tax is insisted upon, we may be in the position of committing a breach of international obligations. … Having in mind that the ultimate objective is to ascertain the intention of the Congress, and that on the other hand violation of international obligations is to be avoided if possible, the questions present serious difficulties”.)

The German Government can not declare itself in agreement with this view of a merely conditional validity of international obligations.

The Attorney General then believes that he can state that the decision of the Secretary of the Treasury of November 14, 1932, would be inoperative, as it had changed in a way disadvantageous to the United States a previous decision made by the Secretary of the Treasury, without the assent of the Attorney General provided for in the Tariff Act of 1930,71 Section 5026 or without a previous decision of the Customs court having been made. The Attorney General draws the conclusion from this that in the situation which has thus arisen the matter would have to be passed on by the courts at all events, in one case on the initiative of the importers and in the other case on the initiative of the American producers of coal. The Attorney General considers it simpler and quicker to leave it to the importers to obtain a court decision. He states further that in case the court should decide in favor of the [Page 527]collection of the duty, the United States Government would be in a more favorable position with respect to the collection of the duty if the Secretary of the Treasury had previously directed the collectors of customs to collect the duty.

The German Government ventures to observe in this connection that in this case questions of simplicity of procedure and of a more or less favorable position of the American Government are not involved and that the right to the exemption of the importation of German coal from the duty, based on the clear provision of Article 7, Paragraph 4, of the commercial treaty could not be infringed by any decision of the Customs Court, no matter what the decision might be. The rights of a state arising out of a treaty can not be restricted by the provisions of a domestic law or by the decision of a domestic court.

The statements made by the Attorney General in his opinion are consequently irrelevant to the decision of the essential question.

The German Government ventures to hope that after renewed consideration of the matter, the American Government will adopt the view of the German Government and will order within a very short time the exemption of German coal from the duty, without awaiting the decision of the Customs Court.

The German Government considers it advisable to make the following general remarks, on this occasion, in supplementing the statements made verbally by the German Ambassador on the commercial relations existing between the United States and Germany.

Under the commercial treaty which took effect in October, 1925, German-American trade has assumed a development unsatisfactory to Germany and shows year after year an unfavorable balance that is in the long run unbearable for Germany. The average level of duties in the United States has repeatedly been raised in general and in particular on goods in which Germany is interested, since the treaty went into effect, and is considerably above the level of German tariffs. In the meantime, American trade has, by virtue of the treaty, automatically obtained enjoyment of all tariff favors granted by Germany to third countries without German trade having received the benefit of an equivalent therefor (in consequence of the American tariff system). The unfavorable development brought about by these circumstances has, however, been made considerably worse by the fact that the Tariff Act of the United States offers a means for investigations and preparatory measures of the most varied nature, which not only produce a chronic disturbance and constant uncertainty in normal trade relations, but in part also involve direct financial burdens upon German exports, even if the final outcome of these tedious investigations does not result in an increase in the existing tariff rates or the application of special additional tariffs to [Page 528]German goods. These investigations which as such damage German export trade very seriously, amount under certain circumstances, to a temporary embargo on German goods.

In the first place there are the so-called dumping investigations. The German Government is still of the opinion, as before, that the exact wording of the unconditional most favored nation clause in Article 7, Paragraphs 2 and 4, of the German-American Commercial Treaty forms a basis for a right to the lowest rate on any article imported from the territory of one party to the treaty that the same article has to pay upon importation from any other country, and that the collection of additional duties of any kind whatsoever in trade between the two countries is inadmissible, no matter what the stipulations regarding production, sale and competition may be otherwise. The German Government hitherto refrained from making an issue of the differences of opinion existing between the German and the American Governments on the interpretation and the scope of the concept of the unconditional most favored nation clause, particularly concerning the justification for additional tariffs of any kind, and has preferred to clear up differences that have arisen in single cases by negotiations between the two governments, as far as they could not be adjusted by the regular procedure in disputes on matters of administration, without entering into the fundamental question of the unconditional most favored nation clause. Among other things, the decisive factor for this stand was the consideration that hope existed, in accordance with the recommendations of the World Economic Conference of 1927,72 of determining uniform principles, by international agreements, as to the interpretation and scope of the most favored nation clause in existing commercial treaties. This hope has not been fulfilled The Economic Committee of the League of Nations did complete a report on commercial policy on June 18, 1929;73 however, the recommendations contained therein have not been generally heeded and have not eliminated all doubtful questions in the field of most favored treatments. In the meantime the difficulties resulting from a differing interpretation of the idea of most favored treatment have increased considerably. We may, therefore, venture to recall that, for example, the order of the Treasury Department of May 20 [13], 1926,74 concerning the so-called “Avi bounties” was not revoked until January 31, 1927,75 after negotiations covering months, and that the order of January 29, 1927,76 following immediately, by which investigations concerning a [Page 529]reported dumping of pig iron were begun, was not revoked until late in November, 1928,77 by another order. At present, investigations are again being carried on because of a suspected dumping of German iron and steel; they have now for more than three-quarters of a year made importation of certain types of iron and steel from Germany into the United States extremely difficult and in part effectively cut off such importation.

The application of the so-called flexible provisions of the customs tariff is also leading to an increasing degree to interference with German exports to the United States; a constantly increasing number of just those goods of interest to German exporters has recently been subjected to the tedious investigations of the Tariff Commission on the basis of these provisions. Since the Tariff Act of 1930 went into effect, investigations of this kind have been conducted up to February 1, 1933, on the basis of Section 336 of the Tariff Act (with Germany as the chief competing country) as to the following articles:

  • (Tariff No. 397) Wire fencing and wire netting.
  • (Tariff No. 318) Metal cloth.
  • (Tariff No. 364) Bells for bicycles and the like.
  • (Tariff No. 41) Inedible gelatine and glue.
  • (Tariff No. 396) Folding rulers of aluminum.
  • (Tariff No. 412) Folding rulers of wood.
  • (Tariff No. 228a) Prism field glasses over $12.00.
  • (Tariff No. 331) Upholsterer’s nails, chair glides, thumb tacks.

In all these cases the investigations have led to increases in the tariff, with the sole exception of glue made from hides (under Tariff No. 41). for which the tariff rate was lowered.

Moreover, in cases in which investigations have been merely ordered, this very fact acts as a hindrance to German exportation and in certain cases affects exportation more disadvantageously than an actual increase in the tariff rates.

If there should now be added to this disadvantage to German trade resulting from an unrestricted application of the administrative provisions of the Tariff Act, further injuries to the exportation of German goods, due to the non-observance by the American Government of clear provisions of the German-American commercial treaty, allowing of no doubt, according to the German view, the German Government, confronted with such a state of affairs, must reserve its full freedom of action.

  1. 46 Stat. 590.
  2. See Foreign Relations, 1927, vol. i, pp. 238 ff.
  3. League of Nations Economic Committee, Observations on the Present Prospects of Commercial Policy (Geneva, 1939).
  4. Decision No. 41561, May 13, 1926; for text, see Treasury Decisions, vol. 49, p. 806.
  5. Decision No. 41964, January 31, 1927; ibid., vol. 51, p. 80.
  6. Decision No. 41965; ibid., pp. 80–81.
  7. Decision No. 43047, November 28, 1928; Treasury Decisions, vol. 54, p. 397.