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Published online by Cambridge University Press: 12 April 2017
The recent decision of the United States Court of Customs and Patent Appeals in the case of John T. Bill Co. Inc. v. United States, C.A.D. 57, 27 C.C.P.A. (Customs) 26,104 F. (2d) 67 (decided May 29, 1939), is of distinct importance in its bearing on the foreign commercial policy of the United States. In this case, an appellate court, for the first time, had squarely presented to it the question of giving effect to the unconditional mostfavored- nation provisions of an American commercial treaty as against a later statute containing no express reservation respecting treaty provisions. This decision may well be regarded as the turning-point in the construction given to the most-favored-nation clause by the American courts.
The statements made in this article are the personal views of the author and are not an official expression of the views of the Department of State
1 Printed in this Journal, infra, p. 160.
1a In United States v. Domestic Fuel Corp. and Geo. E. Warren Corp. (1934), 21 C.C.P.A. (Customs) 600, 71 P. (2d) 424, this Journal, Vol. 30 (1936), p. 142, the same court gave effect to the most-favored-nation provisions of the treaty of 1923 with Germany and of the treaty of 1815 with Great Britain in connection with an import tax on coal which had been levied under the Revenue Act of 1932. However, the statute contained an express reservation respecting treaty obligations.
2 See Reciprocity and Commercial Treaties (U. S. Tariff Commission, 1919), pp. 389–456, for a detailed description of the “conditional” and “unconditional” forms and the traditional American interpretation; also, Moore, International Law Digest, Vol. V, pp. 257–319; Crandall, Treaties—Their Making and Enforcement (2d ed., 1916), pp. 404–411; Hornbeck, The Most-Favored-Nation Clause in Commercial Treaties (1910).
3 The text of a typical conditional clause will be found in footnote 30. An example of the unconditional clause is set forth in footnote 10.
4 McClure, A New American Commercial Policy (1924); Culbertson, Reciprocity (1937), pp. 238–279; U. S. Foreign Relations, 1923, Vol. I, pp. 121–133.
5 U. S. Treaty Series, No. 672.
6 Ibid., No. 725; 44 Stat. 2132. For an excellent brief article on the background of this treaty and its significance in American commercial policy, see McClure, , “German-American Commercial Relations,” This Journal, Vol. 19 (1925), p. 689 Google Scholar.
7 For lists of the treaties and agreements of the United States containing the most-favored-nation clause, as of July 31, 1940, see Department of State Bulletin, Vol. III, No. 58, pp. 96–98.
8 Since Oct. 15, 1935, when the most-favored-nation provisions of the 1923 treaty with Germany were abrogated by mutual agreement, the reductions in American duties effected pursuant to trade agreements have been withheld from products of Germany because of German discrimination against American commerce (see Treasury Decisions 47865 and 50056). Products of Cuba have received preferential customs treatment since 1903, at first under the commercial convention of 1902 (U. S. Treaty Series, Nos. 427 and 428), and now under the trade agreement of Aug. 24, 1934, as amended by the supplementary agreement of Dec. 18, 1939 (Executive Agreement Series, Nos. 67 and 165).
9 Par. 371 of the Tariff Act of 1930: “Bicycles, and parts thereof, not including tires, 30 per centum ad valorem: Provided, that if any country, dependency, province, or other subdivision of government imposes a duty on any article specified in this paragraph, when imported from the United States, in excess of the duty herein provided, there shall be imposed upon such article, when imported either directly or indirectly from such country, dependency, province, or other subdivision of government, a duty equal to that imposed by such country, dependency, province, or other subdivision of government on such article imported from the United States, but in no case shall such duty exceed 50 per centum ad valorem.” (The proviso was repealed by sec. 2 (a) of the Trade Agreements Act of June 12, 1934.)
10 Art. VII of the treaty with Germany provided in part as follows:
“Each of the High Contracting Parties binds itself unconditionally to impose no higher or other duties or conditions and no prohibition on the importation of any article, the growth, produce, or manufacture of the territories of the other than are or shall be imposed on the importation of any like article, the growth, produce, or manufacture of any other foreign country.
“Each of the High Contracting Parties also binds itself unconditionally to impose no higher or other charges or other restrictions or prohibitions on goods exported to the territories of the other High Contracting Party than are imposed on goods exported to any other foreign country.
“Any advantage of whatsoever kind which either High Contracting Party may extend to any article, the growth, produce, or manufacture of any other foreign country shall simultaneously and unconditionally, without request and without compensation, be extended to the like article the growth, produce, or manufacture of the other High Contracting Party.
. . . . .
“With respect to the amount and collection of duties on imports and exports of every kind, each of the two High Contracting Parties binds itself to give to the nationals, vessels and goods of the other the advantage of every favor, privilege or immunity which it shall have accorded to the nationals, vessels and goods of a third State, and regardless of whether such favored State shall have been accorded such treatment gratuitously or in return for reciprocal compensatory treatment. Every such favor, privilege or immunity which shall hereafter be granted the nationals, vessels or goods of a third State shall simultaneously and unconditionally, without request and without compensation, be extended to the other High Contracting Party, for the benefit of itself, its nationals and vessels.”
11 An analogous provision was contained in par. 218 of the Tariff Act of 1890, which made the rate of our import duty on sawed lumber dependent upon whether or not an export duty was imposed by the country of origin on logs.
12 For a detailed study of this unusual tariff device, see Nerlove, , “Contingent Duty Provisions in American Tariff Legislation,” 33 Journal of Political Economy (1925), p. 318 Google Scholar; see also Viner, Dumping: A Problem of International Trade (1923), p. 311, and “The Most-Favored-Nation Clause in American Commercial Treaties,” 32 Journal of Political Economy (1924), pp. 118–119, 128–129; McClure, A New American Commercial Policy (1924), pp. 139–161; Culbertson, International Economic Policies, pp. 78–80, 114–117.
13 See the testimony of Francis B. Sayre, Assistant Secretary of State, in Hearings before the Committee on Ways and Means on H. R. 8430, 73d Cong., 2d Sess., pp. 314–377.
14 House Report No. 1000, 73d Cong., 2d Sess., pp. 16–17; the same statement is also found in the Report of the Senate Finance Committee, Senate Report No. 871, 73d Cong., 2d Sess., pp. 19–20.
15 Hearings on H. R. 8430 (cited supra), pp. 374–377.
16 Although it is sometimes argued that a countervailing duty, which is applied to offset a bounty, likewise violates the most-favored-nation clause, this type of duty is generally recognized, in American practice at least, as a legitimate exception to most-favored-nation treatment, on the ground that a bounty tends to destroy the equality of treatment which it is the object of the most-favored-nation clause to establish. In support of this view it is argued that a bounty results in a discrimination in favor of the products of the country granting such aid to its exports, thus placing products of other countries at a competitive disadvantage, and that a countervailing duty merely neutralizes this “unfair” advantage—it eliminates this “discrimination” and reestablishes that equality of treatment for the imports of all countries, which the most-favored-nation clause seeks to guarantee. See Culbertson, International Economic Policies, pp. 71–73, U. S. Tariff Commission, Reciprocity and Commercial Treaties (1919), p. 433; Report of Committee of Experts of League of Nations on “The Most-Favored-Nation Clause” (1927), League of Nations Doc. C.205.M.79.1927.V, pp. 10–11.
It has been urged with much force that, in order to avoid controversy on the question whether the imposition of countervailing duties on bounty-fed products is consistent with most-favored-nation obligations, an express exception should be written into treaty provisions. See Riedl, Exceptions to the Most-Favored-Nation Treatment (1931), pp. 44–48.
17 Secretary of State Gresham was of the opinion that the provisions of the Tariff Act of 1894 imposing countervailing duties against bounty-fed sugar violated the treaty obligations of the United States, and President Cleveland recommended but did not secure their repeal. U. S. Foreign Relations, 1894, p. 236 and p. IX.
18 See, particularly, the opinion of Attorney General Olney with regard to a contingent duty on salt under the Act of 1894, 21 Op. Atty. Gen. 80. See also U. S. Tariff Commission, Reciprocity and Commercial Treaties (1919), pp. 433–435; Moore’s Digest, Vol. V, pp. 305–309, 273, 274; Fairbanks v. United States, T. D. 43643 (U. S. Customs Court, 1929); Gray v. United States, T. D. 48679 (U. S. Customs Court, 1936).
19 The complete text of the letter from Mr. Hughes appears in the Hearings before the Senate Committee on Foreign Relations, 68th Cong., 1st Sess. (1924), on the Treaty of Commerce with Germany; also in U. S. Foreign Relations, 1924, Vol. II, pp. 183–192.
20 Hearings on H. R. 8430 (cited supra), pp. 374–377; see also Viner and McClure, cited in footnote 22.
21 See footnote 18.
22 Viner, 32 Journal of Political Economy, pp. 101, 118–119, 128; McClure, A New American Commercial Policy, pp. 140–148.
23 See speech of Senator Smoot on April 24, 1922, 62 Cong. Rec. 5880.
24 See Report No. 595 of Senate Finance Committee, 67th Cong., 2d Sess., p. 4: “Section 302 of the House bill and the mandatory application, by provisos of Titles I and II of the same principle to particular articles is especially objectionable. These provisions would permit or require the enforcement of several different rates of duty upon the same article, according to the rate in force in the country of production. The objections are that such action on our part is contrary to many of our treaties as we have ourselves interpreted them in the past. . . .”
25 32 Journal of Political Economy, pp. 101, 119.
26 See U. S. Foreign Relations, 1899, pp. 299–301.
27 Hearings before the Committee on Ways and Means on H. R. 8430, 73d Cong., 2d Sess., p. 39.
28 U. S. Foreign Relations, 1924, Vol. II, pp. 191–192.
29 U. S. Treaty Series, No. 28; 19 Stat. 628. This treaty is still in effect. However, the trade agreement between the United States and Belgium, signed on Feb. 27, 1935 (Executive Agreement Series, No. 75), provides for unconditional most-favored-nation treatment.
30 “In all that relates to duties of customs and navigation, the two high contracting parties promise, reciprocally, not to grant any favor, privilege, or immunity to any other State which shall not instantly become common to the citizens and subjects of both parties respectively; gratuitously, if the concession or favor to such other State is gratuitous, and on allowing the same compensation, or its equivalent, if the concession is conditional.”
31 21 Op. Atty. Gen. 80.
32 While the same issue was again raised before the United States Customs Court in a later case, Lancia Motor Car Co. v. United States, C. D. 238 (Oct. 23, 1939), 3 Customs Court Reports 223, the trial court felt bound to follow the decision of the appellate court in the Minerva case, and the importer did not prosecute an appeal to the Court of Customs and Patent Appeals.
33 Hearings before the Committee on Ways and Means on H. R. 8430, 73d Cong., 2d Sess., p. 39.
34 The treaty with Estonia, signed on Dec. 23, 1925, was proclaimed on May 25, 1926 (U. S. Treaty Series, No. 736, 44 Stat. 2379); the treaty with Hungary, signed on June 24, 1925, was proclaimed on Oct. 4,1926 (U. S. Treaty Series, No. 748,44 Stat. 2441); the treaty with Honduras, signed on Dec. 7,1927, was proclaimed on July 23,1928 (U. S. Treaty Series, No. 764, 45 Stat. 2618); the treaty with Latvia, signed on April 20,1928, was proclaimed on July 25,1928 (U. S. Treaty Series, No. 765,45 Stat. 2641); the treaty with Turkey, signed on Oct. 1,1929, was proclaimed on April 25,1930 (U. S. Treaty Series, No. 813, 46 Stat. 2743).
35 Many of our most-favored-nation commitments were, in 1930, as today, embodied in executive agreements rather than treaties; moreover, in the case of several important commercial nations (e.g., Canada and France), we had, in 1930, neither executive agreement nor treaty commitments respecting most-favored-nation treatment.
36 See letters from the State Department, dated Sept. 4,1929, and Feb. 4,1930, printed in 72 Cong. Rec. 4690–4692.
37 See Crandall, Treaties—Their Making and Enforcement (2nd ed., 1916), pp. 183–199; see also the opinion of Evans, J., for the U. S. Customs Court, in Domestic Fuel Corp. v. United States (1933), T. D. 46455.
38 See the Government’s brief in United States v. Domestic Fuel Corp. and Geo. E. Warren Corp., Customs Appeal No. 3727. While the lower court held in this case that the clause was self-executing (T. D. 46455), the Court of Customs and Patent Appeals, 21 C.C.P.A. (Customs) 600, 71 F. (2d) 424 (1934), did not deem it necessary to consider this question, but based its decision on an express reservation contained in the statute respecting treaty obligations (see footnote 1).
39 This Journal, Vol. 27 (1933), p. 559.
40 Ibid., Vol. 32 (1938), p. 372.
41 It should be pointed out that counsel for the Government did not argue in the bill case that the treaty was not self-executing; nor did the court discuss this point further than in the brief statement quoted.
