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

No. 80

Sir: Reference is made to the Legation’s despatch No. 5052 of July 21, 1937, and to previous correspondence with regard to the four percent tax on customs receipts levied by the Swiss Government.

The Department has noted the view expressed by the Legation in the despatch under reference, that it would not be desirable to press further upon the Swiss Government the Department’s opinion that the tax cannot properly be collected upon articles included in Section A of Schedule I of the reciprocal trade agreement. The Department has given careful consideration to the factors mentioned in this connection in the Legation’s despatch. In view of Mr. Stucki’s assurances that there will be no increased imposition of the tax; the relationship of the tax to the Swiss budgetary necessities; and the fact that there has been no continued complaint from American firms with regard to the tax; the Department shares the Legation’s reluctance to press the matter further.

The Department maintains its position, however, that collection of the tax upon the articles in question is in direct contravention of the trade agreement. From a legal standpoint the Department does not consider that it can properly acquiesce in a modification of the terms of a trade agreement relating to the treatment of American trade by the other Government.

The Department understands, however, that the Swiss tax on customs receipts is due to expire at the end of the present calendar year, and if this is so, the question will automatically be resolved at that time, provided the tax is not further continued without exemption for the products included in Section A of Schedule I of the trade agreement. This would appear to provide a solution to the question without embarrassment to the Swiss Government.

Since the Legation, by its note of March 25, 1937,18a has set forth clearly the view of this Government that the tax, when imposed upon the articles in question, is in conflict with the agreement, in refutation of the views on the subject expressed in the communication of September [Page 574] 19, 1936, from the Swiss Federal Department of Public Economy,18b it is believed that the Department’s position is adequately expressed on the formal record of this case. The Department desires, however, to obtain confirmation of its understanding that the tax will lapse at the end of the present calendar year. You are therefore requested to bring the Department’s position and views in the matter, as expressed in this instruction, informally to the attention of the appropriate Swiss authorities on an early occasion with a view to obtaining assurances that the tax will lapse, in so far as it is in conflict with the terms of the trade agreement, at the close of the present calendar year.

Very truly yours,

For the Secretary of State:
Francis B. Sayre