The Secretary of State to the Delegates to the Conference on Tax Exemptions of Liquid Fuel and Lubricants Used by Civil Aircraft (Williamson and Kennedy)
Sirs: The following instructions are furnished for your guidance in connection with your appointment as delegates to the international conference to be convened in London on February 21, 1939, for the purpose of concluding a convention exempting from customs and other duties liquid fuel and lubricants used by civil aircraft in international operations.
It is realized that occasions will arise at the London conference calling for prompt decision on the part of the American Delegation, and while there is no intention of unduly restricting the Delegation in the development of the American proposals, the following observations are made for your guidance in the efforts which you will [Page 30]make to have the drafts as finally adopted at London conform as nearly as may be feasible to the viewpoint of the Government of the United States.
For your convenience, there is attached as Enclosure No. 1 a copy of the draft of convention4 which was distributed by the British Government to serve as a working basis for the discussions of the conference. Your attention is invited to the following comment on Articles 1 to 3 inclusive of this draft, which are as follows:
- Each High Contracting Party will, in the circumstances specified in paragraph (2) of this article, accord in any of his territories, to which the present convention applies, the treatment specified in Article 2 to any civil aircraft (whether private or State-owned) registered in any territory to which the present convention applies, of any other High Contracting Party whether the aircraft is engaged on an individual flight or in the operation of a regular air service and whether it is flying for commercial purposes or otherwise.
- The treatment specified in Article 2 shall be granted—
- when the aircraft makes a lawful landing in a territory to which the present Convention applies coming direct without a previous landing from another territory, whether such other territory is a territory of the same High Contracting Party or of another High Contracting Party or of a Power not a party to this convention;
- when the aircraft makes a lawful departure from a customs aerodrome in a territory to which the present Convention applies for another territory whether such other territory is a territory of the same High Contracting Party or of another High Contracting Party or of a Power not a party to this convention.
- (a) On arrival of an aircraft, the fuel and lubricants which are contained in the ordinary tanks of the aircraft shall not be liable to customs or other duties. No quantity, however, may be unloaded free of duties.
- (b) On departure, fuel and lubricants intended for the refuelling or lubrication of the aircraft shall be exempt from customs or other duties, or alternatively a refund of such duties if already levied shall be paid.
- Nevertheless, payment of the duties in respect of which exemption was given under (b) of paragraph (1) of this article or a proportionate part thereof may be claimed if the aircraft in fact before landing in another territory lands in the territory in which it has obtained its supply.
- The expression “customs and other duties” includes import duties, export duties, excise duties and internal duties of all kinds.
The present convention does not prejudice the operation of any arrangements which may be in force at any time providing for more favourable treatment.
Proposed Modifications of the British Draft
Article 1 (2) (a)
In the present text, the word “lawful” might be too harsh in certain cases. An aircraft may possibly violate local regulations which could conceivably make the landing technically unlawful, and possibly subject the aircraft to certain penalties, but it is believed that this should not necessarily deny the aircraft the right to the exemptions provided for in this convention. It should be provided that the aircraft on landing shall comply with customs requirements. Furthermore, it is believed that the words “coming direct” in line 3 of subparagraph (a) of paragraph (2) of Article 1 would be clarified if the words “after proceeding directly” should be substituted.
The word “same” in line 5 of subparagraph (a), as referring to a High Contracting Party, is not entirely clear, and it is suggested that a formula might be adopted which would avoid the use of this word.
Having in mind the above suggestions, it is believed that subparagraph (a) of paragraph (2) of Article 1 would be improved if amended to read as follows:
(a) when an aircraft authorized to enter makes a landing and complies with customs requirements in a territory to which the present convention applies, after proceeding directly from another territory, whether such territory belongs to any one of the High Contracting Parties or to a Power not a party to this convention;
Article 1 (2) (b)
It is suggested that the words “proceeding directly without intermediate landing” be inserted after the word “applies” in line 3 of this subparagraph. This proposed amendment is suggested with a view to making it clear that the exemption to be accorded shall be made only at the last port of departure before leaving the country.
It seems desirable also to make several other changes of a drafting nature, to conform to suggestions made above with regard to subparagraph (a). With all these changes pertaining to subparagraph (b) in mind, it is suggested that the subparagraph might be revised to read as follows:
(b) when the aircraft makes an authorized departure from a customs aerodrome in a territory to which the present convention applies, proceeding directly without intermediate landing to another territory, whether such other territory belongs to any one of the High Contracting Parties or to a power not a party to this convention.
Article 2 (1) (a)
The term “on arrival” is not clear without a reference to the arrival contemplated by Article 1 (2) (a), and also presents the inference that fuel and lubricants may be taxed subsequent to arrival. It is believed that it would be sufficient in this connection to refer to a landing and to omit the words “on arrival”. The words “ordinary tanks” as applied to all aircraft, involve difficulties of interpretation, and possibly might not exempt fuel and lubricants carried in special tanks for long distance flights. The word “liable” in line 3 of subparagraph (a) of paragraph (1) of Article 2 appears to be improperly used, as the reference should be to an exemption, in harmony with the corresponding language of subparagraph (b) of Article 2 (1). The reference to exemptions not being accorded for fuel and lubricants unloaded, if taken literally, is not believed to be sufficiently liberal in the British draft. It is believed that the matter can be taken care of by the omission of the sentence reading: “No quantity, however, may be unloaded free of duties” in the British draft. It appears evident that there may be conditions under which there could be an unloading of fuel and lubricants without losing the right to an exemption from customs or other duties. As one illustration, if there should be a temporary unloading, as when repairs are necessary, it is assumed that the exemption would apply. It is believed that the omission of the quoted sentence permits each High Contracting Party to prohibit by regulation such fuel and lubricants from entering the commerce of the country without payment of duty.
Having the above observations in mind, it is suggested that subparagraph (a) of paragraph (1) of Article 2 might be revised to read:
(1) (a) Fuel and lubricants on board the aircraft on landing, as contemplated in Article 1 (2) (a), for use in the operation of such aircraft, shall be exempt from customs and other duties.
Article 2 (1) (b)
This subparagraph requires clarification in the light of the suggested revision of Article 2 (1) (a) and a reference to Article 1 (2) (b). It is suggested, therefore, that Article 2 (1) (b) be revised to read:
(1) (b) On its departure as contemplated in Article 1 (2) (b), fuel and lubricants for use in the operation of the aircraft shall be exempt from customs and other duties, or, alternatively, a refund of such duties, if already levied, shall be paid.
Article 2 (2)
It is the view of the Government of the United States that it is important that an effort be made to provide in this paragraph that [Page 33]the duties will not be imposed in the case of an emergency or forced landing. The paragraph in the British text makes it optional whether the duties may be imposed, which is objectionable in that it may result in a lack of uniformity of requirements in the event of emergency or forced landings. It is suggested that provision should be made for the denial of refunds in the event of a landing after departure but before arrival in another territory. With these observations in mind, it is suggested that paragraph (2) of Article 2 might be revised to read as follows:
(2) Nevertheless, payment of the duties in respect of which exemption was given under (b) of paragraph (1) of this article or a proportionate part of such duties may be claimed, or the refund, or a proportionate part of the refund, provided for in subparagraph (b) of paragraph (1) of this article, may be denied, except in the case of emergency or forced landings, if the aircraft in fact before landing in another territory lands in the territory in which it has obtained its supply.
Article 2 (3)
It is believed that paragraph (3) should include a reference to taxes as well as duties, and that it should be otherwise clarified. It is suggested, therefore, that paragraph (3) might be revised to read:
(3) The expression “customs and other duties” as used in this convention, includes import, export, excise and internal duties and taxes of all kinds, imposed in territories to which this convention applies.
It is difficult to determine in advance the effect of the words “customs and other duties”, because of the meaning of the term in different countries. For example, the use of the words “excise duties” in Article 2 (3) of the British draft would probably be construed to include the United States excise tax, but from the point of view of this Government, the draft would be clarified if taxes were specifically referred to as suggested above.
It is also difficult to determine in advance the extent to which indirect taxes should be included in the convention, but considering that this type of tax is probably employed abroad as it is in the United States, and probably at higher rates abroad, and considering further that the laws of the United States, either through reciprocal provisions or provisions covering exports which include drawbacks, substantially grant relief from indirect taxes in the respects apparently contemplated by this convention, the Delegation should favor a definition which would include indirect taxes. It is believed that such definition would be in the interest of furthering the development of international aviation.[Page 34]
It is believed that there would be an advantage in adding the words “or laws” in Article 3 after the word “arrangements” so as to make it clear that the convention would not prejudice the right of any contracting party to accord under its laws more favorable treatment than that contemplated by the proposed convention.
Suggested Expansion of the Scope of the Convention
[Here follow in greater detail points (a), (b), (c), and (d) listed in the Department’s telegram No. 56, January 21, 1 p.m., to the Ambassador in the United Kingdom, for expansion of the scope of the proposed convention.]
Declaration To Be Made by the Delegation on Signing the Proposed Convention
The Delegation is instructed to make the following declaration, in accordance with Article 11 (1) of the British draft, at the time of signing the convention:
The present convention does not apply to any outlying territories or possessions of the United States of America over which it exercises sovereignty, jurisdiction or authority.
For your information. It has been decided to have this declaration made at the time of signature so as to permit the authorities of this Government to decide what territories or possessions should be included later in the ratification of this Government, in the event that the convention is ratified on behalf of the United States.
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Very truly yours,