811.512 Boats/64

The Secretary of State to the Chairman of the Seriate Finance Committee (Harrison)

My Dear Senator Harrison: By Section 761 (b) of the Revenue Act of 1932 a tax, twice the amount of that imposed on American built boats was imposed on foreign built boats. This Section reads as follows:

“(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).”

A provision similar to this was embodied in the Revenue Act of 1926, as a result of which protests were laid before the Department [Page 506]by certain foreign governments which alleged that such taxation imposed upon their boats was discriminatory and in violation of treaty obligations undertaken by this Government with the foreign governments concerned. Pertinent treaty provisions are as follows:

Treaty of Friendship, Commerce and Consular Rights of December 8, 1923, with Germany.

“Article VIII.

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

Treaty of Friendship, Commerce and Consular Rights of June 5, 1928, and February 25, 1929, with Norway.35

“Article VIII.

“The nationals, goods, products, wares, and merchandise of each High Contracting Party within the territories of the other shall receive the same treatment as nationals, goods, products, wares, and merchandise of the country with regard to internal taxes, transit duties, charges in respect to warehousing and other facilities and the amount of drawbacks and export bounties.”

The Department considers that the discriminatory tax in question is inconsistent with the obligations of this Government under the treaty provisions above quoted. Mr. Kellogg informed the Chairman of the Finance Committee of the Senate in letters dated March 20 and April 25, 1928, of this Department’s views.36 Copies of these letters are doubtless in the files of the Committee.

The situation was met by providing in the Revenue Act of 1928 for the repeal of the provision in question and by introducing in that Act a provision which had the effect of making foreign boats dutiable at 30% ad valorem under paragraph 370 of the Tariff Act of 1922. This protection was continued in paragraph 370 of the Tariff Act of 1930. However, as indicated above, provision for a discriminatory tax was again included in the Revenue Act of 1932. The net result is that foreign built boats are compelled to pay both the import duty and the discriminatory internal tax. Since the enactment of the 1932 legislation further protests against this discriminatory tax have been received by this Government from foreign governments with which we have entered into commercial treaty obligations.

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I recommend, in view of the considerations set forth above, that provision be made in the pending bill, H.R. 7835, for the modification of the provisions of Section 761 of the Revenue Act of 1932 in such a manner as to remove the discrimination against foreign built as compared with American built boats.

Sincerely yours,

Cordell Hull
  1. Signed at Washington; Foreign Relations, 1928, vol. iii, p. 646.
  2. For letter of March 20, 1928, see ibid., vol. ii, p. 943; letter of April 25, 1928, not printed.