811.114 Canada/5062

Memorandum by the Secretary of State

The Chargé d’Affaires of Canada called upon his request and took up the pending matter under discussion between the Treasury Department and our Government and the Canadian Government pertaining to the claims for taxes on liquors smuggled into this country from Canada, which the Treasury had immediately in charge. He said that he would like to refer to the broader aspects, which, however, did not seem to me to present any particularly new facts or views. He then reviewed the reports of the Alcohol Bureau here in Washington for the years during the prohibition period pertaining to the smuggling of liquors into this country, in which the view was expressed that not over two percent of our domestic consumption was being smuggled in from all parts of the world. He reasoned from this that Canada could not have furnished more than one and one-half percent or less of this amount, and hence it was too small an amount on which to base claims of hundreds of millions of dollars for taxes due the United States Government. He referred to the cooperative efforts of the Canadian Government at much expense to aid the United States against smuggling from Canada. He said that, in his judgment, the Canadian liquor owners were too astute to make themselves liable for liquor taxes in this country in connection with rum running during the years in controversy; that, with possibly scattering exceptions, they were not in collusion with rum runners, and that those exceptions could only have related to an individual here and there. He added that after the Canadian Government intervened in cooperation with us, any liquors sent from Canada to points on the ocean, such as the island of St. Pierre, probably changed hands two or three times.

I stated to the Chargé that I was not quoting on any general comment which he might see fit to make concerning the foregoing. I then went on to say that Messrs. Phillips, Hickerson and Moore were taking up the matter further with the Treasury in the light of the memorandum received yesterday from the Canadian Government through the Chargé; also, that Mr. Phillips had taken up with Senator King, who seemed to be Acting Chairman of the Subcommittee in charge of the proposed legislation in controversy, the question of further postponing consideration of this legislation, pending efforts to deal with the entire matter through negotiation, and that Senator King was conferring with his associates sympathetically in regard to that request. I told the Chargé that he would be made acquainted by us with any and all developments respecting the entire matter.

C[ordell] H[ull]