The Ambassador in Peru (White) to the Secretary of State

No. 2771

Sir: I have the honor to refer to Embassy Despatches No. 2491 of January 26, 1945, entitled, “Representations to the Foreign Office as to Tax Discrimination on American Import Merchandise”, and No. 2567 of February 5, 1945,86 entitled, “Reply of the Foreign Office as to Tax Discrimination on American Import Merchandise”, and in connection therewith to enclose copies and translations of a formal note from the Peruvian Foreign Office, No. (H)–6–3/40, of February 24, 1945, and its accompanying memorandum dated February 5, 1945,87 from the Ministry of Finance and Commerce in reply to the Embassy’s formal representations with regard to tax discriminations [Page 1347] against various American products in contravention of the Peruvian-American Reciprocal Trade Agreement.

The opinion of the Ministry of Finance and Commerce, which the Ministry of Foreign Relations apparently shares, is flatly expressed to the effect that the cited legal provisions and the taxes created by them are applied in perfect harmony with the Agreement, and abide by its terms and spirit.

With respect to toilet articles, the Finance Ministry asserts that the taxes in question were applied prior to the conclusion of the Agreement, which may not be applied retroactively. A similar argument is presented with respect to the taxes imposed on tobacco products, with the additional pleas that, on an ad valorem basis, the rate of taxation on imported tobacco products is lower than for domestic products, and that tobacco products are not included among the commodities specifically exempt from new taxes as provided in Article VII. This, of course, entirely ignores the facts that the taxes for the Peruvian Santa Corporation are entirely new and give domestic products a competitive price advantage.

With respect to the port taxes at Salaverry and Pisco, the Finance Ministry refers to a report from the Superintendency of Customs dated June 23, 1943, in which it was contended that the collections made by the Customhouses at Salaverry and Pisco were in compliance with Article II of the Treaty, which permits taxation on merchandise covered by Article VII whenever it relates to an internal tax imposed on a national product. The Finance Ministry contends that inasmuch as the taxes created by Laws No. 9777 and No. 10016 are applicable to coastwise trade, they are not in conflict with the Treaty.

This argument ignores the attitude of the Department, duly reported to the Foreign Office by the Embassy, to the effect that the United States would have deferred favorable action on the Trade Agreement had it been aware of the discriminatory taxes on toilet articles.

No copy of the report of the Superintendency of Customs dated June 23, 1943, was furnished to the Embassy, and it has no record of a memorandum to the Ministry of Foreign Relations dated June 22, 1943 (apparently a typographical error which should read “June 2, 1943”), in which, as stated in the Finance Ministry’s memorandum, the Peruvian “opinion … was officially accepted by the Department of State”. The pertinent statement on this subject was made by the Embassy in an informal memorandum of June 2, 1943 (subsequent to the receipt of the Department’s air mail instruction No. 2452 of May 27, 1943, File 623.116/19A),88 reading in part as follows: [Page 1348]

“A recent communication from the Department of State regarding this matter expressed the view that Article IX has no application to the taxes in question; and that the application of the taxes to imports of articles in Schedule I appears to be in conflict with the provisions of Article VII of the Agreement. However, the United States Government is not disposed to invoke the provisions of the Commercial Agreement in respect to these taxes at the present time, these being relatively small as applied to exports as well as to imports.

“The above résumé of the views of the Department of State regarding the import and export taxes recently imposed at Salaverry and Puerto Chicama is accordingly brought to the attention of the Ministry of Foreign Affairs for its information and for such action as may be considered desirable in the harmonious application of the Commercial Agreement between the two nations.”

Since the views of the two Governments are at such variance, it is thought that the Department may wish to indicate the nature of the reply to be made to the Peruvian Government.

Respectfully yours,

J. C. White
  1. Despatch 2567 not printed.
  2. Enclosures not printed.
  3. Not printed.