811.512 Boats/61

Memorandum by the Legal Adviser (Hackworth)

The attached note from the German Embassy dated March 12, 1934,24 requests the Department to give consideration to the desirability of suggesting an amendment to the Revenue Act of 1934 to the Senate Committee on Finance regarding the special internal tax on the use of foreign built boats, imposed by Section 761 (b) of the Revenue Act of 1932. According to the German Embassy’s note the Senate Committee on Finance has the Revenue Act of 1934 under consideration at the present time.

[Page 504]

The German Embassy first raised the question of a violation of Article 8 of the Treaty between the United States and Germany in relation to a similar tax on foreign built boats imposed by Section 702 of the Revenue Act of 1926.25

When the Revenue Act of 1928 was being considered by the Senate Committee on Finance, a representative of this Department appeared before the Committee and suggested the elimination of the tax. This suggestion was favorably acted upon in the following manner: Section 431 of the Revenue Act of 192826 repealed the provision of Section 702 of the Revenue Act of 1926, which imposed a tax on the use of certain foreign built boats. By Section 708 of the Revenue Act of 192827 foreign built boats were classified by special definition under paragraph 370 of the Tariff Act of 1922,28 thereby imposing a duty of 30 per cent ad valorem. The liability to a 30 per cent ad valorem duty was also subsequently incorporated in paragraph 370 of the Tariff Act of 1930.29

By Section 761(b) of the Revenue Act of 1932 a special tax on the use of foreign built boats was reimposed. Section 761(a) and (b) read as follows:

  • “(a) On and after July 1, 1932, and on July 1, 1933, and also at the time of the original purchase of a new yacht or other boat by a user, if on any other date than July 1 and before July 1, 1934, there is hereby imposed upon the use of yachts, pleasure boats, power boats, sailing boats, and motor boats with fixed or outboard engines, not used exclusively for trade, fishing, or national defense, a tax at the following rates:
    Length over 28 feet and not over 50, feet, $10.
    Length over 50 feet and not over 100 feet, $40.
    Length over 100 feet and not over 150 feet, $100.
    Length over 150 feet and not over 200 feet, $150.
    Length over 200 feet, $200.
  • (b) In the case of any of the foregoing if foreign built and not owned on January 1, 1926, by a citizen of the United States or by a domestic partnership or corporation, the tax under this section shall be twice the amount of the tax provided in subsection (a).”

The German Embassy, by a note dated October 4, 1932,30 again raised the question of the violation of Article 8 of the Treaty between the United States and Germany, which reads as follows:

“The nationals and merchandise of each High Contracting Party within the territories of the other shall receive the same treatment as [Page 505] nationals and merchandise of the countries with regard to internal taxes, transit duties, charges in respect to warehousing and other facilities and the amount of drawbacks and bounties.”

On October 19, 1932, the Department requested31 an expression of the views of the Treasury Department as to the nature of the reply to be sent to the German Embassy. This request was repeated by letters and orally.

On June 2, 1933, the Treasury replied32 by giving a summary of the antecedents, concluding that Article 8 of the Treaty was not violated by Section 761(b), and suggesting that if retaliation in the treatment of American goods in Germany was anticipated, the matter was one for Congress to act upon.

On August 1, 1933, the Department replied to the Treasury,31 requesting in substance a reconsideration of the Treasury’s opinion on the question of the violation of Article 8 of the Treaty for stated reasons.

Subsequently, requests had been received from the German Embassy for a definitive reply which have been communicated to the Treasury. No opinion has been received from the Treasury to date. The last letter from the Treasury states that the question is a complicated one and that it is being given active consideration.

The question whether it is desirable and opportune for this Department to take this question up with the Senate Committee on Finance is one of policy, as is also the method of procedure in approaching the Committee.

  1. Supra.
  2. 44 Stat. 95.
  3. 45 Stat. 867.
  4. 45 Stat. 881.
  5. 42 Stat. 885.
  6. 46 Stat. 625
  7. Not printed.
  8. Letter not printed.
  9. Reply not printed.
  10. Letter not printed.