The Secretary of State to the Minister in Czechoslovakia (Carr)

No. 19

Sir: Reference is made to your despatch No. 732 of July 21, 1937, enclosing a memorandum prepared by the Commercial Attaché on the subject of possible discrimination against California wines in the levying of duties thereon in Czechoslovakia.2 It is noted that whereas the general rate on wine is 420 crowns per hundred kilograms if in barrels, and 975 crowns per hundred kilograms if bottled, the rates in certain treaties are 210 crowns and 420 crowns, respectively, the reduced duties being reported to apply only to wines from certain specified districts of the treaty countries.

There is enclosed, for your information, a copy of a further letter, dated November 15, 1937, from K. Arakelian, Inc., of New York,3 bearing on this subject, in which it is alleged that the practice in the levying of wine duties varies somewhat from the theory, and that the conventional rates are in fact applied to all wines imported from the treaty countries. The Department is telegraphing you to endeavor to determine whether this is actually the case, and to inform it by telegraph in the premises.

Paragraph one of the modus vivendi of March 29, 1935,4 between the United States and Czechoslovakia, reads in part as follows:

“1. With respect to customs duties or charges of any kind imposed on or in connection with importation … and with respect to the method of levying such duties or charges … any advantage, favor, privilege or immunity which has been or may hereafter be granted by [Page 224]the United States of America or the Czechoslovak Republic to any article originating in … any third country, shall be accorded immediately and unconditionally to the like article originating in … the Czechoslovak Republic or the United States of America, respectively.”

The United States construes most-favored-nation treatment with respect to customs duties to mean that the lowest duty applicable to a product of any third country shall apply to the (intrinsically) like product of the United States. This principle is one which this Government applies in generalizing its tariff concessions to products of other countries. Moreover, the United States considers that wines of United States origin are intrinsically similar to wines of any other national origin and therefore that the lower conventional Czechoslovak tariff rates applicable to wines of specified districts of France or of any other country should be extended to intrinsically similar wines of American origin. In this connection it may be desirable to point out the practice of the United States, which imposes duties on wines as follows:

Per Gallon
Champagne and other sparkling wines $3. 00*
Still wines produced from grapes (not including vermuth), containing 14 per centum or less of absolute alcohol by volume, in containers holding each 1 gallon or less 0. 75*
Vermuth, in containers holding each 1 gallon or less 0. 625*
Other still wines (i. e., from 14 to and including 24 per centum of absolute alcohol by volume, or in containers holding each more than one gallon) 1. 25
(Wines containing over 24 per centum of absolute alcohol by volume are classed as spirits and are dutiable accordingly.)

The differentiation as to types of still wines for tariff purposes is made on the basis of alcoholic content, which is easily determinable.

These classifications impose no country-of-origin requirements which would negate the principle of equality of treatment.

You are requested to bring this matter to the attention of the appropriate Czechoslovak authorities and to inform them that this Government expects to receive the benefits of the conventional rates on similar wines of United States origin. Such treatment is considered our most-favored-nation right under the terms of the modus vivendi referred to above, and such would be the situation under the most-favored-nation provisions of the proposed reciprocal trade agreement now in the process of negotiation. The Government of the United States, it must be emphasized, does not consider the generalization of conventional rates on wines or any other products of United States origin as a subject for bargaining in connection with the schedule of concessions to this country which will appear in the proposed [Page 225]trade agreement. As stated above, it is a tariff treatment which this Government expects as a right under the most-favored-nation clause of the modus vivendi (or of the proposed trade agreement).

For your information, we expect to discuss this subject with the Czechoslovak negotiating delegation while it is here, and it is in the eventuality that that delegation refers the matter back to Prague for advice that you are being instructed to discuss the matter with the Czechoslovak authorities.

Very truly yours,

For the Secretary of State:
Francis B. Sayre
  1. Neither printed.
  2. Not printed.
  3. Foreign Relations, 1935, vol. ii, p. 145.
  4. Reduced by trade agreement with France. [Footnote in the original.]
  5. Reduced by trade agreement with France. [Footnote in the original.]
  6. Reduced by trade agreement with France. [Footnote in the original.]