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

No. 627

Sir: Reference is made to your despatch No. 1189 of August 27, 1934, and to despatch No. 107 of March 7, 1934, from the American Vice Consul at Tegucigalpa11 in regard to certain so-called “municipal” taxes in Honduras against which the Governments of El Salvador and Nicaragua protested on the ground that they were in effect import duties and as such were contrary to the provisions of existing free trade treaties between Honduras and the Republics of El Salvador and Nicaragua.

In this regard, the Department concurs in your view that the action of the Honduran Government in yielding to the protests of the Governments of El Salvador and Nicaragua and suspending the application of these “municipal” taxes to importations from those countries while permitting them to remain in effect for importations from elsewhere would not appear to contravene the 1927 Treaty of Friendship, Commerce and Consular Rights between the United States and Honduras. Under Article VII of that Treaty, although American imports into Honduras are generally accorded most-favored-nation treatment, an exception is made in favor of imports into Honduras from other countries of Central America and from Panama. Accordingly, unless exemption from payment of these “municipal” taxes is accorded importations from a country other than the Republics of Central America and Panama, there would not appear to exist any motive for protest by this Government.

However, in order that the Department may determine conclusively whether or not grounds exist for a claim of exemption from these taxes, you are directed to ascertain and report whether there are any treaties in force between Honduras and foreign countries other than the Central American States and Panama which contain an unconditional most-favored-nation clause or which are sufficiently broad in their terms to assure to the merchandise from those countries the same treatment accorded merchandise from Nicaragua and El Salvador. If any such treaties are found to exist, you are requested to forward copies and translations to the Department.

Very truly yours,

For the Secretary of State:
Sumner Welles
  1. Latter despatch not printed.