651.113/181

The Secretary of State to the Ambassador in France ( Straus )

No. 443

Sir: Reference is made to your despatch No. 939 of May 31, 1934, with regard to the French duty on rice.

I am disappointed that the French Government has taken the position which it has taken in this matter, although its attitude with regard to the applicability of the 1927 modus vivendi is in line with that which they have heretofore adopted. I think that the Embassy’s interpretation of the 1927 arrangement is fully in line with what the Department understood and has understood to be the meaning of the 1927 agreement. The French Government has not, however, at any time, so far as I know, recognized our interpretation of the 1927 agreement. The language of that agreement is, of course, of such a nature as to make it difficult to show clearly that in a situation such as this increase in the duty on rice, the rate accorded the United States should be the minimum rate.

The Foreign Office’s note suggests that the minimum tariff rate might be granted to whole rice imported from the United States if the American Government were to cancel the excise tax of ten cents per hundred pounds assessed on anthracite coal imported from Indochina.

Section 601, sub-paragraph 5 of paragraph (c) of the Revenue Act of 1932,47 provides for a tax of ten cents per hundred pounds on coal [Page 193] imported from those countries which during the preceding calendar year exported more coal to the United States than was exported by the United States to the countries in question. It is understood that under this provision the tax is being applied to imports of coal from all sources except Canada and Mexico.

Paragraph (a) of Section 601 provides that this tax shall be imposed “unless treaty provisions of the United States otherwise provide.” The Department has taken the position that under this language coal imported from those countries with which the United States has most-favored-nation treaties should be exempt from this tax. The Treasury Department held otherwise and has been imposing this tax on imports from all sources except those which take more coal from the United States than the United States takes from them. Importers of foreign coal have taken the matter to the appropriate courts and decisions have been handed down by two courts to the effect that by reason of the foregoing quoted language, coal imported from those countries with which the United States has most-favored-nation treaties should be exempt from the tax. The question is now pending appeal to the Supreme Court of the United States. However, since this Government does not have a commercial treaty with France, there is no basis under existing law whereby the removal of this tax could be brought about in so far as coal imported from Indochina is concerned. Coal imports from Indochina have been so small that I can hardly believe that the French Government puts much weight on its request for the removal of this tax. There were no imports of coal from Indochina up to 1930, in which year 2,000 tons were imported. In 1931 1,010 tons were imported; in 1932 5,628 tons were imported, and in 1933 only two tons were imported. The drop in imports from 1932 to 1933 may have been due to the imposition of this tax of ten cents per hundred pounds on coal. Nevertheless, the imports even in 1932 were so small that the tax in question cannot be considered to have been of great importance.

Coal imported from Indochina has been subject to a duty equal to that imposed by Indochina upon coal imported into that country. Paragraph 1650 of the Tariff Act provides for the free importation of coal provided that other countries do not impose a duty on coal when imported from the United States. If a duty is applied the United States will assess a duty equal to that imposed by the foreign country, thus the tariff rate on coal imported from Indochina has been equal to six francs per ton, six francs per ton being the rate applied by Indochina on coal imported into its territories. Under the Tariff Act which has just been signed by the President,48 the [Page 194] proviso part of paragraph 1650 has been annulled, and therefore from now on coal imported from Indochina will be admitted entry-duty free, and there will only remain the excise tax of ten cents per hundred pounds.

I do not know whether it will be possible to get the French Government to change its position in this connection. Nevertheless, I suggest that you go into the matter orally with the Foreign Office and point out the fact that the duty on Indochinese coal has been removed and although this was done gratuitously, it would seem that the French Government might reasonably give consideration to this fact. Furthermore, coal imports into the United States from Indochina have been so small in importance as compared with rice exports from the United States to France that I do not believe the French lay much store in seeking the removal of this tax. The amount of rice exported to France from the United States does not appreciably affect the market in France, but that amount is of great importance to rice producers in the United States. Furthermore, rice is one of the agricultural commodities for which this Government has been seeking appropriate outlets.

Very truly yours,

For the Secretary of State:
Francis B. Sayre
  1. 47 Stat. 260.
  2. i. e., An Act To Amend the Tariff Act of 1930, approved June 12, 1934:48 Stat. 943.