The Secretary of State to the Chargé in Switzerland (Bigelow)
Sir: Reference is made to your despatches No. 4383 of June 3, and No. 4389 of June 9, 1936,14 and to your telegram No. 51 of June 9 with regard to the conditions under which the Swiss Government is permitting the importation of lard from the United States. Reference is also made to despatch No. 424 of May 19 from the Consulate General in Zurich on this subject, and to a voluntary report dated July 7 from the same office14 on the operation of the trade agreement, in which is included a discussion of the lard trade.
Upon the basis of the information submitted in the communications referred to, the Department is of the opinion that the system established by the Swiss for the control of lard importations is in direct violation of the commitments entered into by the Swiss Government in the trade agreement both as to the method employed in the granting of import permits and as to the levying of an additional tax.
The Department considers that the provision in the decree of April 7, 1936, which makes the authorization of lard imports dependent upon Swiss exports of livestock is inconsistent with the undertaking of the Swiss Government in the note appended to the assurance on lard in Section B of Schedule I of the agreement to allot to the United States an annual quota to be divided into four equal calendar quarter quotas. The requirement that a definite quota be established in the event import licenses or permits are required is also provided for in Section 2 of Article VII. Neither the fact that permits for the importation of [Page 808] lard have been granted within the required three months’ period nor the circumstance that imports have come solely from the United States can be considered as a discharge of these definite obligations.
Furthermore, it is the view of the Department that the tax on lard described in your telegram of June 9 constitutes a direct violation of the obligations assumed by the Swiss Government in Article I of the trade agreement. The Department’s interpretation of this Article has been stated in the instruction No. 3640, of July 25, 1936, with reference to the four percent tax on import duties provided for in the Swiss customs service order of February 1, 1936.
While it may be true that the imposition of a tax on lard was authorized under a law in force on the day of the signature of the agreement, namely, the decree of October 14, 1933, such a tax was not required to be imposed by the decree mentioned, and accordingly, the Department does not consider that the tax on lard constitutes an exception within the meaning of the final clause of Article I.
Although the Department is not entirely satisfied with the measures which have been taken by the Swiss Government to control lard imports, it is not in a position to judge whether a formal protest to the Swiss authorities at this time in the sense of the foregoing would have an adverse or a favorable effect on our trade in this product. The Legation’s despatch No. 4389 of June 9 states that American lard exporters are probably faring as well as is possible under the existing conditions. The report of the Consulate General on the operation of the trade agreement implies, however, that the import control system is operating to their disadvantage.
Although the drought now prevailing may affect the export position of the United States with respect to lard, the Department understands that there is adequate lard available for export at the present time and it does not wish to take any action which will result in a curtailment of Swiss imports. As the Legation is aware, the Swiss negotiators advised the Department at the time the trade agreement was signed that Switzerland would be able to take only very limited quantities of lard. However, it is hoped that lard import permits will be granted in sufficient amount to restore at least a fair part of the market which was previously enjoyed by the United States. Imports of 700 metric tons, mentioned in the Legation’s despatch of June 9 as the amount actually needed to supplement domestic production, would approximate imports of American lard in 1932, the smallest quantity imported in any depression year prior to the placing of the embargo on imports.
On the basis of the information available here, and pending the solution of the four percent stamp tax question, the Department is of the opinion that it would not be advisable to make this matter the subject of a formal protest to the Swiss authorities at this time, especially in the [Page 809] absence of any complaints by American lard exporters. Should you deem it advisable, the matter might be taken up informally with the Swiss authorities in such a way as to point out that this Government is not satisfied with the measures which have been taken to control lard imports and that it reserves its full rights under the terms of the agreement to protest in the event that it is determined that the situation is working out to our disadvantage.
You are requested to keep the Department advised of any developments which would necessitate a review of the question and a further determination of the attitude which should be taken by this Government.
Very truly yours,