611.2231/281c: Telegram
The Secretary of State to the Minister in Ecuador (Long)
45. Department’s 44, August 6. The following explains the necessity of inserting proviso at end of Schedule II: Sawed balsa timber classified under Paragraph 1803 (1) of the Tariff Act is free of duty but under ruling of the Treasury Department it is subject to the import tax imposed by Section 601 (c) (6) of the Revenue Act of 1932.22 This ruling is now being contested by importers in the customs courts. In the Revenue Act of 1938,23 passed recently, Congress enacted into legislation the Administrative interpretation of the 1932 Act by the Treasury Department. If the Treasury ruling should eventually be upheld by the courts, the tax will continue to be imposed on balsa and other timber. If the courts reverse the Treasury ruling, the application of the tax to all timber will depend upon a change in language in our present trade agreement with Canada, which is now being revised. The proviso is necessary in view of the uncertainty as to whether existing law requires the assessment of the tax and, if not, as to whether the change contingently provided for in existing legislation will become effective. Should it be held at some time in the future that the tax is required to be imposed on balsa timber, the situation will, as a matter of fact, be the same as it is at present, in view of the Treasury Department’s [Page 531] consistent practice during the past 6 years of assessing a tax on balsa and other timber.
The insertion of the proviso in Schedule II will not, therefore, subject balsa timber imported from Ecuador to the payment of any taxes which are not being assessed at the present time. The basis for determining board measure stated in the proviso is that customarily used in the United States (see Paragraph 401 of Tariff Act of 193024) and is the basis on which measurement is being determined at present.
The other changes requested in Schedule II are required for legal reasons in order to make the wording of the provisions in question conform to that of the corresponding paragraphs of the Tariff Act of 1930.