The Minister in Honduras (Lay) to the Secretary of State

No. 1189

Sir: I have the honor to refer to despatch No. 107 of March 7, 1934, from the Consulate in this city,8 enclosing a copy and translation of Decree No. 84 of the Honduran Congress, passed on February 17, 1934, and published on March 3, 1934, in which special municipal taxes were imposed upon certain articles of importation to Honduras.

Although the provisions of the Decree applied to all countries, it was considered to be primarily aimed at Nicaragua and El Salvador, whose imports, particularly in cattle, cheese, lard, butter and rice, admitted without duty under the free trade treaties between Honduras and those countries were constituting a serious menace to the Honduran producers of these commodities. As was pointed out in the Consulate’s despatch, while the amounts were termed “municipal taxes” they were in reality import duties and were merely given another name for the purpose of evading the obligations of the free trade treaties. This was the view taken of the Decree by Nicaragua and Salvador, since both of these Governments immediately made strong protests to the Government of Honduras against the imposition of these taxes upon imports from their respective countries. As a result of these representations the Council of Ministers finally suspended the provisions of the Decree with respect to importations from Nicaragua and Salvador, although they remained in effect concerning other countries. In view of the provision in the last paragraph in Article VII of the Treaty of Friendship, Commerce and Consular Rights with Honduras,9 it is felt that the action of the Council of Ministers, however detrimental its effect may be upon American trade, cannot be regarded as a contravention of this treaty.

The Vice Consul at La Ceiba has reported to the Legation that local merchants in that city have been informed that they are required to [Page 378] pay the taxes prescribed in Decree No. 84 on all importations of shoes (listed under “leather goods” and “sole leather”) as of March 8, 1934, the date upon which the Decree entered into effect. The Vice Consul also pointed out that since importations in shoes have already been paid for to the American exporting houses and the shoes sold, the local merchants stand to lose a considerable amount by being obliged to pay this tax retroactively and in consequence future importations of shoes from the United States will be adversely affected. In the despatch from the Consulate in this city referred to above it was also indicated that American trade might likewise be affected so far as lard and butter were concerned.

In an interview which I had yesterday with the President of the Chamber of Commerce of San Pedro Sula he pointed out that the above facts had the practical, if not legal, effect of imposing upon certain American imports to Honduras, so far as the North Coast was concerned, additional duties which were not shared by other countries.

It is felt therefore that in view of the Department’s instruction No. 592 of July 20, 1934, with respect to the possibility of concluding a mutually advantageous trade agreement with Honduras, the present application of Decree No. 84 would appear to possess particular significance and is in consequence brought to the attention of the Department for its consideration.

Respectfully yours,

Julius G. Lay
  1. Not printed.
  2. Signed December 7, 1927, Foreign Relations, 1927, vol. iii, p. 101.