654.116 Lard/21

The Secretary of State to the Minister in Switzerland (Wilson)

No. 3872

Sir: Reference is made to your despatch No. 4592, of September 22, 1936,6a enclosing a copy of an informal note from Dr. Stucki7 of September 19, 1936, with regard to the measures adopted by the Swiss Government for the control of lard imports, and to the Department’s instruction No. 3660 of August 7, 1936,8 and your previous despatches on this subject.

The Department is unable to agree with the views expressed in Dr. Stucki’s communication, which has been given careful study. However, in view of Dr. Stucki’s statement that the tax and the quota have been abolished, it is not believed necessary for you to continue the discussion with the Swiss Government as to whether the system previously in effect was in violation of the trade agreement. It is believed desirable, nevertheless, that you reaffirm the Department’s position set forth in its instruction of August 7 with regard to its interpretation of the obligations of the Swiss Government in this matter.

The Department must reserve judgment regarding the import monopoly system described in paragraph (6) of Dr. Stucki’s note until it has had an opportunity to observe its functioning. It has noted with appreciation, however, the assurance of the Swiss Government of its intention to observe the provisions contained in the lard note under the new system.

It is requested that you convey the Department’s views on this matter to the competent Swiss authorities. You are also requested to furnish the Department with information as to the manner in which the monopoly operates and with any observations which you can make on its effect on imports of American lard, particularly in view of the statement made by Dr. Hotz9 to Mr. Bigelow,10 reported in your confidential despatch No. 4619, of October 12,11 that increased quantities of lard would be permitted to be imported.

For your own information, the Department’s views on the contentions made by Dr. Stucki in the note under reference are summarized below. He did not reply directly to the first of the Department’s contentions, namely, that no quota for lard imports from the United [Page 569] States was established, as required by the note to item 95 in Part B of Schedule I. The Department is fully aware of the statement in writing made by the Swiss Government at the time of signature of the agreement that it would only be able to admit small quantities of lard. This understanding in no way compromised the obligation assumed by the Swiss to assign a definite annual quota to the United States, divided into equal calendar quarter quotas. Furthermore, the Department is entirely unable to agree with the interpretation of paragraph 2 of Article VII made by Dr. Stucki. Nothing in the paragraph referred to supports the Swiss view that the assurance of fair and equitable treatment with respect to quotas applies only to new quotas. The words, “any article in which the other country is interested” are not qualified by an exception, either express or implied, in this paragraph or elsewhere in the agreement, in regard to commodities the importation of which was restricted at the time of signature or entry into force of the agreement.

The reply of the Swiss Government with respect to the tax on imported lard was likewise unsatisfactory. Dr. Stucki’s contention that the tax did not constitute an import tax in the sense of Article I, but rather a contribution by which the importer of lard might be relieved of the obligation to make compensatory exports, is inconsistent with the agreement in two respects. In the first place, whatever appellation was given to the tax, it was levied only on imported lard and must therefore be regarded as a charge imposed “on or in connection with importation.” Furthermore, it was not imposed or required to be imposed by laws in force in Switzerland on the day of signature of the agreement, and nothing contained in Article I warrants the substitution of a tax for requirements of an administrative nature which might have been in effect at that time.

Furthermore, the Department cannot agree with the view that the requirement to make compensatory exports was to continue after the importation of lard was authorized in accordance with the note to item 95. Prior to the signature of the trade agreement the importation of lard into Switzerland was entirely prohibited except in connection with compensation transactions. It is obvious, therefore, that the undertaking of the Swiss Government to “authorize the importation of lard” from the United States involved a commitment to remove this condition with respect to the quota to be assigned to the United States.

Very truly yours,

For the Secretary of State:
Francis B. Sayre
  1. Foreign Relations, 1936, vol. ii, p. 812.
  2. Walter Stucki, Foreign Trade Delegate of Swiss Federal Council.
  3. Foreign Relations, 1936, vol. ii, p. 807.
  4. Jean Hotz, Director of Commercial Division of Swiss Federal Department of Public Economy.
  5. Donald F. Bigelow, Second Secretary of Legation.
  6. Not printed.