611.5731/79

The Norwegian Minister ( Morgenstierne ) to the Assistant Secretary of State ( Sayre )

My Dear Mr. Sayre: I beg to refer to our conversation the 21st instant regarding the new tax on whale oil. As you will remember I promised to send you a written communication concerning the point of view of my Government in the matter. Owing to absence from Washington I have not had an opportunity until today to send you this communication.

As you will recall I took the liberty the other day to call attention to the fact that the new tax of 3 cents per pound on whale oil is imposed under Title IV, section 602 of the Revenue Act of 1934, and that said Title IV is headed “Excise Taxes”. The section concerning whale oil is added to section 601, “Manufacturers’ Excise Taxes” of the Revenue Act of 1932,8 under which certain taxes are imposed “unless treaty provisions of the United States otherwise provide.” My Government feel that the fact that this tax is imposed under the heading “Excise Taxes”, makes it fair to interpret it as an excise tax in fact, regardless of what is otherwise stipulated in said section. [Page 648] And my Government further feel that in the case of this tax not being levied on whale oil of American origin, the levying of such tax on Norwegian whale oil would not be in accordance with Article VIII of the Treaty of June 5, 1928 between Norway and the United States stipulating that “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” etc.

I understood you to emphasize that in spite of this tax being imposed under the heading “Excise taxes” it was in the opinion of the authorities of the United States nevertheless an “importation tax”, in view of the fact that it is stipulated in said Section 602 of the Revenue Act of 1934 that “The tax on the articles described in this paragraph shall apply only with respect to the importation of such articles” etc.

While my Government cannot accede to this interpretation of the nature of said new tax on whale oil, it cannot help feeling that even if the tax might be defined as an “importation tax”, its eventual imposition on Norwegian whale oil would hardly be in accordance with the spirit of said Treaty of Friendship, Commerce, and Consular Rights between Norway and the United States.

You will recall that the balance of trade between our two countries is generally and normally in favor of the United States. In view of this and in view of the fact that it has been the sincere hope of my Government that our present efforts should be in the direction of reducing the barriers to trade between our countries, you will undoubtedly appreciate that the imposition of this new tax was a keen disappointment to my Government. As I took the liberty to point out to you, this tax of 3 cents per pound being imposed in addition to the present tariff duty of 6 cents per gallon (approximately 0.8 cents per pound) is absolutely prohibitive as far as Norwegian whale oil is concerned. Whale oil, one of the most important items in our mutual balance of trade has by this measure been virtually excluded from the United States. What this means, from a Norwegian point of view, is amply shown by the figures which I casually referred to during our conversation and which I now beg to confirm in the enclosed memorandum9 showing the amount and value of Norwegian whale oil imported to this country and also the Norwegian and American statistics pertaining to our mutual trade relations. It will be seen that in 1931 whale oil represented more than 60 per cent of the value of goods which, according to American statistics, were imported [Page 649] from Norway. Permit me in this connection further to refer to the memorandum of August 22, 193310 which on said date was handed to the Department of State by the Norwegian Chargé d’Affaires Mr. Offerdahl.

That the effect of this new, prohibitive tax will be a deplorable one on Norwegian-American trade relations can not be doubted. The closing of the American market to one of our most important articles of export will be keenly felt by that section of our population which is dependent upon the whaling industry and on the export to foreign markets of the products of that industry. Their purchasing power will necessarily be reduced and the effect will undoubtedly be felt with regard to our importation from the United States which is dependent on a high standard of life, being made up by such goods as automobiles, gasoline, tobacco, fruits, etc. Let me mention particularly in this connection that, according to information submitted to me, the Norwegian whaling fleet has been using annually between 300.000 and 400.000 tons of fuel oil, mostly purchased from American firms. These purchases do not appear in the Norwegian import statistics, because the fuel oil is for the most part taken on outside of Norway.

In view of the severity of this new tax it is doubtful whether even a material reduction of the tax would be sufficient to allow Norwegian whale oil to regain its place in the American market. My Government feel therefore that in the interest of the mutual trade relations between our countries efforts should be made to reestablish conditions as they were before the imposition of the tax. My Government are familiar with the steps taken by the President of the United States with a view to inducing the Congress of the United States to reconsider the provision for a 3 cents per pound tax on coconut oil from the Philippine Islands, and it has occurred to my Government whether there might not be substantial reasons, in the interest of both our countries, for appealing to the Congress to take under renewed consideration also the prohibitive tax on what has until recently been one of the most important articles exported by Norwegians to this country.

I was happy to feel during our conversation that I may count on the same sympathetic attitude in this matter on the part of the Department of State which my predecessor always found, and that in this as in other matters pertaining to a free and active interchange of goods and services between Norway and the United States I shall have the privilege of your good will and cooperation.

I remain [etc.]

W. Munthe Morgenstierne
  1. 47 Stat. 259; 48 Stat. 762.
  2. Not printed.
  3. Foreign Relations, 1933, vol. ii, p. 624.