811.512337 Shipping/7–1344
The Secretary of State to the Chargé in Cuba (Nufer)
Sir: The Department refers to its instruction no. 1830 of June 19, 1943,28 the Embassy’s despatches no. 3555 of June 23, 1943,29 no. 3623 of June 29, 1943,28 and no. 6194 of March 4, 1944,28 all concerning in part exemptions for the Defense Supplies Corporation from certain taxes on molasses shipped from Cuba.
In despatch no. 3555 it is stated, with reference to the exemption from the 2.65 percent and 3.60 percent taxes on the total ocean freight charges on molasses shipments that “these taxes are not assessed on the owners or exporters of the merchandise (in this case the Defense Supplies Corporation), but on the owners and operators of the vessels on which the merchandise is shipped. The Cuban Government has been collecting these taxes from the War Shipping Administration …”.30
Confirmation of this fact appears in (enclosure to despatch no. 6633 of April 15, 194428) the statement that “… WSA is passing on to the Defense Supplies Corporation the amount of these taxes assessed on the movement of Cuban molasses purchased by it …”
The Embassy’s note no. 67428 (enclosure to despatch no. 3623 of June 29, 1943) to the Foreign Office limited its request for exemption for the Defense Supplies Corporation to the one percent railroad retirement tax.
In the Department’s instruction no. 2917 of February 21, 1944,28 the Embassy was requested to ascertain when a definite response would be made by the Foreign Office to its note no. 731 of October 15, 194228 concerning exemption from taxes on its earnings in Cuba on vessels owned by or chartered to the War Shipping Administration. The Embassy’s despatch no. 6194, of March 4, 1944, in reply to instruction no. 2917, indicated that it had not yet received a definite reply to its note no. 731 of October 15, 1942; that the representations theretofore made in behalf of the Defense Supplies Corporation were limited to relief from payment of the one percent railroad retirement tax and that the request of the Corporation for exemption from ocean [Page 992] freight taxes was merged in the claim for general tax exemption of the War Shipping Administration. The status of the matter at that time therefore was stated by the Embassy33 as follows:
“A note to be sent to the Foreign Office reiterating the principle of no taxation of foreign government projects. It was decided that this note should refer to a previous exchange of notes which took place last year and by which the Cuban Government recognized this general principle. It was likewise decided that the note should refer to the specific cases on which exemption has not yet been accorded. This note, which bears the number 172 of March 1, 1944, has now been forwarded to the Ministry of State. A copy is enclosed for the information of the Department.34
. . . . . . . . . . . . . .
“Likewise, after the receipt of replies to notes 172 and 173,35 I contemplate again raising with the Cuban Government, (in accordance with the Department’s instruction No. 2917) the question of exemption from the 2.75 percent tax and the 3.60 percent tax on WSA shipping. (On the basis of preliminary study, I am inclined to believe that we would not be justified in too strongly urging the Cuban Government to take action which would deprive them of such a substantial amount of revenue which they have been receiving for many years. While it is of course contrary to established international procedure for one government to tax another government, this appears to be a somewhat special case. So long as the private companies—such as the United Fruit Company, the Ward Line, et cetera—operated the vessels plying between Cuba and the United States, these companies of course paid the taxes under reference. If, due to the fact that all of these vessels are now being operated by WSA, exemption from taxes were insisted upon, the Cuban Government would be deprived of a substantial amount of the revenue which it has been accustomed to receive and which, presumably, constitutes a not insignificant portion of its total budget. My efforts, for the present, therefore, will probably be limited to an effort to obtain from the Cuban Government a study of this problem, so that further consideration may be given to the whole question by the Department and WSA)”.
The Department, after careful consideration of all the relevant facts, and consonant with its position in the remission of United States federal and state taxes on activities of foreign countries in the United States, now desires that you promptly seek an opportunity to take up the matter with the Foreign Office emphasizing the long period during which the question has been pending, and press for an early and definite reply to the Embassy’s note no. 731 of October 15, 1942.
[Page 993]The Department encloses for your information only a copy of a letter received from the Defense Supplies Corporation dated July 13, 194436 It desires at this time to refrain from acting on the request of the Corporation so as not to prejudice its previous position on the recognition by Cuba of the principle of the exemption from taxation of this Government’s projects and transactions.
Should it later become desirable, because of Cuba’s economy to make some adjustment as to amounts to be remitted, that question will receive the Department’s consideration, but in the meantime, the Embassy should keep the matter actively before the Foreign Office until a satisfactory reply is received to note no. 731 of October 15, 1942.
Very truly yours,
Legal Adviser
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- Foreign Relations, 1943, vol. vi, p. 273.↩
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- The omissions in this instruction are indicated in the original.↩
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- In despatch 6194, March 4, 1944, from Habana, not printed.↩
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- Note 173, dated February 29, 1944, from Ambassador Braden to the Cuban Foreign Office, not printed; it requested exemption from the 2.75 percent gross sales tax and the 1 percent railroad retirement tax on Cuban refined sugars acquired by the Federal Surplus Commodities Corporation (811.512337 Shipping/23). This note was drawn up in conformity with Department’s instruction 2916, supra, and a copy was transmitted to the Department in despatch 6194 of March 4, 1944, from Habana (not printed).↩
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