Memorandum of Conversation, by Mr. Charles H. Sullivan of the Commercial Policy Staff


Subject: Views of Shipping Lines on Proposed Adjustment of FCN Treaty with Colombia to Special Tax Situation of Flota Gran Colombiana.


Shipping Lines: Department:
Mr. E. Russell Lutz, Grace Line. OSA—Mr. Krieg
—Mr. Gerberich
Mr. Thomas Bartle, Lykes Bros. Steamship Co. ARA—Mr. Nolan
—Mr. Russell
Mr. Henry Giardina, Gulf and South American Steamship Co. SD—Mr. Falck
CP—Mr. Setser
—Mr. Sullivan

This meeting was held in order that representatives of the interested shipping enterprises might communicate to the Department the views of their principals regarding: (1) the Department’s proposed solution (previously explained in a meeting on March 5)1 of the problem occasioned in connection with the treaty negotiations by Colombian insistence on maintaining the existing exemption of the Flota Mercarite Gran Colombiana from income taxation; (2) treaty coverage of consular fees and charges; and (3) exchange restriction’s as they affected navigation enterprises.

The shipping representatives indicated that they thoroughly understood the Department’s problem in connection with the treaty negotiations and felt that it should proceed, as proposed, on the basis of stipulating specifically in the treaty that the income taxation of shipping enterprises should not be dealt with in the treaty itself but should be left to an appropriate agreement for the avoidance of double taxation. They indicated that their principals were strongly interested in the conclusion of an agreement with Colombia that would afford United States shipping enterprises relief from Colombian income taxation and expressed the belief that this interest would be brought to the attention of the Treasury Department, particularly in connection with the long-pending double tax convention. They expressed the view that Flota was not heavily taxed by the United States and stated that their tax experts found it difficult to understand why, under the existing tax regulations, Flota was not required to pay more than appeared to be the case.
The shipping representatives expressed preference for the insertion in the standard FCN navigation provisions of a specific reference to consular fees and charges. The Department representatives indicated that it was the intent to cover consular fees in this provision and they [Page 1297] believed that the present language adequately did so. Moreover, the inclusion in new treaties of a specific reference to consular fees might cause doubts as to whether such fees are covered in existing treaties, such as that with Uruguay, which contain the standard navigation provisions. The shipping representatives explained that consular fees did not constitute a problem with respect to Colombia but were a serious matter in the case of Ecuador; and they hoped that in any negotiation with Ecuador the Department would strongly maintain its present position of insisting on national treatment in this matter.
The shipping representatives expressed gratification with that feature of the Department’s recent FCN” proposals to Colombia on exchange controls which was designed to assure transport enterprises of protection from the application of exchange restrictions in a manner detrimental to their interests or to their competitive position. They were inclined to attach special importance to the latter point; and urged that the Department do its utmost to obtain Colombian acceptance of this particular assurance, and of the new provision in its entirety.
(The shipping representatives indicated that, although they could not speak with authority in this connection, they believed that the United Fruit Company shared their views on these matters.)
  1. See the memorandum dated March 5, 1951, p. 1293.