631.003/510

The Minister in Venezuela ( Nicholson ) to the Secretary of State

No. 337

Sir: I have the honor to refer to my despatch No. 323 of June 18, 1936, concerning a proposed law for an increase in the internal revenue tax on cigarettes imported into Venezuela, and to enclose herewith a copy and a translation of a note No. 1371, dated June 23, 1936,12 from the Minister for Foreign Affairs on this subject.

In the aide-mémoire 12 which I left at the Foreign Office on June 9, it was observed that since American cigarettes were reported to constitute 90 per cent of the foreign cigarettes imported into Venezuela, a measure of this kind would appear to be directed chiefly against products of the United States. The reply of the Minister for Foreign Affairs states that the measure in question is at present being studied in the Senate, but that it should not be interpreted as being directed against the products of the United States, or of any other country, since the object of the law is to protect the national industry. It would seem, however, that notwithstanding the assurances of the Foreign Office, American cigarettes will be chiefly affected by the proposed measure and that it would, therefore, even if not intentionally, result in discrimination in fact against American products.

On June 23, the Commercial Attaché discussed the matter during the course of a conversation with the Minister of Hacienda, and a copy of his report on the subject is enclosed herewith.12 The Minister pointed out that the project as originally introduced into Congress called for a tax increase from Bs. 10, the present rate, to Bs. 50 per kilogram, and that the Ministry of Hacienda had had the rate reduced to Bs. 25. This, he claimed, although high was not prohibitive to the sale of American cigarettes, and, he added, it might be found advisable later on to lower the customs duty on imported cigarettes.

The Minister of Hacienda also said that the measure was designed to combat smuggling, and that if it discriminated against the cigarettes of any particular country, it was against those of Colombia. While reliable estimates are not available as to the amount of Colombian cigarettes, which are of a relatively cheap grade, actually entering Venezuela either legally or otherwise, principally over the Western border of Venezuela, the Commercial Attaché was unable to find customs statistics to support the Minister’s statement that Colombia is the principal source of Venezuelan cigarette imports.

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The Foreign Office’s note of June 23 concludes with a statement which seems to intimate that the Venezuelan Government is reserving the question of cigarette duties as a bargaining point in negotiations for the reciprocal trade agreement which this Government is anxious to negotiate with the United States.14 The note suggests that should the internal revenue measure in question be adopted, the Venezuelan Government would be in a position to lower customs duties on cigarettes imported from countries extending favors or advantages to Venezuelan products, with the result that the retail price of such cigarettes in Venezuela would remain the same as it is now. Article 18 of the Venezuelan Import Tariff Law15 empowers the Federal Executive to raise or lower customs duties for “justifiable reasons”, and it is under this provision of law that the Government would probably act should it decide to lower the cigarette tariff as part of a reciprocal trade agreement.

The Legation will continue to follow this matter closely and will report to the Department any further developments that may occur.

Respectfully yours,

Meredith Nicholson
  1. Not printed.
  2. Not printed.
  3. Not printed.
  4. For correspondence concerning a trade agreement between the United States and Venezuela, see pp. 955 ff.
  5. Signed July 31, 1934; for text see Venezuela, Laws, Statutes, etc., Récopilación de Leyes y Decretos de Venezuela (Caracas, 1935), vol. lvii, pp. 457, 461.