811.512337 Shipping/13
The Chargé in Cuba (Briggs) to the Secretary of State
[Received June 26.]
Sir: I have the honor to refer to the Department’s air mail instruction No. 1830 of June 19, 1943 (no file number), transmitting a copy of a letter dated May 26, 1943,56 from the Defense Supplies Corporation, regarding its purchase of the 1942 Cuban molasses crop, and instructing the Embassy to bring this letter to the attention of the Cuban Government and to request a waiver of the 2.65 per cent and the 3.60 per cent taxes assessed on the total ocean freight charges on all shipments of molasses made by the Defense Supplies Corporation from Cuba to the United States.
The Department refers in this connection to the Embassy’s note No. 834 of November 6, 1942,57 as a result of which the Cuban Government [Page 274] issued Decree No. 14 of January 8, 1943 (not No. 140 of January 9, 1943, as mentioned in the Department’s instruction No. 1830), exempting sugars and molasses purchased by the Defense Supplies Corporation from payment of the 2.65 per cent gross sales tax on transportation, handling, storage and other charges. This decree afforded the Defense Supplies Corporation a substantial measure of relief from local tax charges and, in fact, the local representative of the Defense Supplies Corporation has assured the Embassy that with the exception of the 1 per cent railroad retirement tax (from which exemption was also requested in the Embassy’s above mentioned note No. 834), the Defense Supplies Corporation has been exempted from all Cuban state, provincial or municipal taxes on its sugar and molasses operations in Cuba in accordance with Article XV of the Contract of Purchase of the 1942 sugar crop entered into between the Defense Supplies Corporation and the Cuban Sugar Institute.
With regard to the 1 per cent railroad retirement tax, the railroads have continued their efforts to collect this tax from the Defense Supplies Corporation on railroad freight charges on molasses and refined sugar (raw sugar is not subject to this tax) on the ground that it is not a tax but, in effect, a contribution to the Railroad Retirement Fund. The representative of the Defense Supplies Corporation here tells me, however, that he is not paying this tax and is contesting its assessment. The Embassy proposes, therefore, in accordance with the Department’s instructions, to inquire of the Foreign Office what decision has been made on its request for exemption from the 1 per cent railroad retirement tax on the refined sugars and molasses owned by the Defense Supplies Corporation.
With reference to the main purpose of the Defense Supplies Corporation’s letter, namely, the request for exemption from the 2.65 per cent and 3.60 per cent taxes on the total ocean freight charges on its molasses shipments to the United States, there appears to be some misunderstanding. These taxes are not assessed on the owners or exporters of the merchandise (in this case the Defense Supplies Corporation), but on the owners or operators of the vessels on which the merchandise is shipped. The Cuban Government has been collecting these taxes from the War Shipping Administration, which has been handling practically all of the Defense Supplies Corporation’s molasses and sugars, and the War Shipping Administration may have attempted to recover the amount thereof from the Defense Supplies Corporation.
The Department will recall, however, that pursuant to its instructions, the Embassy has been requesting the Cuban Government to exempt vessels owned by or chartered to the War Shipping Administration from these taxes, and that this matter was last officially brought [Page 275] to the Cuban Government’s attention in the Embassy’s note No. 414 of April 20, 1943, of which a copy was submitted to the Department with the Embassy’s despatch No. 3459 of June 12, 1943.58
In view of the fact that the taxes in question are assessed on and collected from the ocean carriers, and as the Embassy is already endeavoring to obtain exemption therefrom on behalf of the War Shipping Administration, there would appear to be no grounds for further representations in connection therewith on behalf of the Defense Supplies Corporation, and the Embassy would appreciate receiving the Department’s views in the matter.
In connection with the foregoing, the Department will doubtless recall that as mentioned in the Embassy’s air mail despatch No. 3459 of June 12, the Prime Minister, in discussing this matter with Ambassador Braden on June 4, again pointed out the substantial loss of revenue which would result should the Cuban Government exempt from taxes the freight revenue obtained in Cuba by the War Shipping Administration, and that he urged that the matter not be pressed further. In view of the Prime Minister’s comments and of the Cuban Government’s obvious reluctance to accede to our repeated requests for exemption from the taxes under reference, the Embassy is not overly sanguine as to the eventual outcome of its representations in the matter.
Respectfully yours,
Counselor of Embassy for Economic Affairs