38. AMERICAN INTERPRETATION AS A HINDRANCE TO THE

NEW COMMERCIAL POLICY

The expression "American interpretation may be thought of as including both construction of non-conditional provisions as conditional and persistence in maintaining a system of most-favored-nation treatment based on language that, whether in form conditional or non-conditional, is given the conditional interpretation. Section 317, as has already been pointed out, forms the logical basis for the development of unconditional most-favored-nation treatment. It is clearly in opposition to the discriminations and preferences that are permissible when most-favorednation treatment is interpreted as conditional. The retention by the United States of the "American interpretation of the most-favored-nation clause would be a scarcely surmountable obstacle in the development of the more farreaching purposes of the new American commercial policy.

CHAPTER VI

THE AMERICAN COLONIAL PREFERENCES AND THE RECIPROCITY TREATY WITH CUBA

Under Section 317 defensive duties, as has been noted, appear to be applicable not only against the discriminations which fully "sovereign" members of the family of nations may see fit to produce through the grant of favors to other fully sovereign states, but also against differential treatment resulting from the exchange of concessions between colonies, or between colonies and sovereign states, even if the latter are the colonies' mother countries. That discriminations against the United Staes in favor of a country's own colonies are contemplated by Section 317 seems to be an inevitable conclusion from the definition of foreign country" as "any empire, country, dominion, colony, or protectorate, or any subdivision or subdivisions thereof (other than the United States and its possessions), within which separate tariff rates or separate regulations of commerce are enforced."

66

66

With this definition in mind, and remembering the test of separate tariff rates. . . enforced," the relations of the United States and its possessions should now be examined.1

'The information included in the present chapter is largely taken from the U. S. Tariff Commission's report on Colonial Tariff Policies. Specific citations will not be given. See table of principal sources at the beginning of this monograph.

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[398

39. AMERICAN POSSESSIONS WHICH HAVE NO SEPARATE CUSTOMS LAWS

There are a few islands in the North Pacific over which the United States exercises sovereignty but which are uninhabited and hence as a matter of fact not governed by tariff laws. They are, however, apparently included within the Tariff Act of 1922, which applies to goods "imported from any foreign country into the United States or into any of its possessions (except the Philippine Islands, the Virgin Islands, and the islands of Guam and Tutuila)." Wake Island, Midway Island, Howland and Baker Islands and the Guano Islands are the lands in question.

Alaska and Hawaii, which are now "territories" and have a status similar to the pre-statehood condition of most of the forty-eight commonwealths, are not considered "possessions" of the United States in the same sense as the remaining non-state area. The duties of the Act of 1922 are collected at their ports just as at the port of New York and the proceeds are paid into the Federal Treasury. Hawaii is of peculiar interest in the tariff history of the United States because of the reciprocity treaty which preceded its annexation.1 Porto Rico is likewise assimilated in the tariff sense-but the customs union is less complete because the revenues arising from duties collected in Porto Rican ports remain in the island and are used in defraying the expenses of the insular government.

There can be no objection from the point of view of the policy of Section 317 to any of the above arrangements. The territories and possessions referred to are, from the point of view of the tariff, simply parts of the United States, enjoying the unimpeded commercial interchange that is in existence within and among the states themselves.

1Supra, subdivision 37 (c) and (d).

1

The present procedure has not, however, always been observed in Porto Rico. Under the Spanish régime, in return for the free admission of Spanish products if imported in Spanish vessels, Porto Rico received preferential treatment both in Spain and in Cuba. During the period of American occupation prior to May 1, 1900, the former maximum Spanish rates were enforced against all countries alike, including the United States. The loss of the preferences in Spain promptly led to a demand for free entry of Porto Rican products into the United States, but this was opposed by American sugar interests and a compromise was effected. The importation of goods from foreign countries into Porto Rico was made subject to the rates of the American tariff, with the exception of a high special rate upon coffee and the free admission of certain Spanish literary, scientific and artistic works, as provided for by the treaty of peace. Interchange between Porto Rico and the United States was to be at fifteen per centum of the ordinary rates, plus the respective internal revenue dues of the two jurisdictions, and it was provided that after a certain time there should be free trade between them.

2

After July 25, 1901, duties on imports from the United States into Porto Rico and from Porto Rico into the United States were no longer collected.

40. THE CANAL ZONE

The United States enjoys "in perpetuity the use, occupation and control of a zone of land and land under water,"

1 Regulations permitting payment in Porto Rico silver coins at a fixed rate in terms of dollars had the practical effect of greatly reducing duties. An act of Congress of April 29, 1902, provided for the refund of the duties on goods imported from the United States from April 11, 1899, to May I, 1900.

'There were certain modifications of this general rule.

across the Isthmus of Panama, ten miles in width,1 for the construction, maintenance, operation, sanitation and protection" of the Panama Canal. The Canal Zone, including certain islands and other lands outside the strip, would seem thus to have become a portion of the United States for administrative purposes, technical sovereignty apparently remaining in Panama. The Zone is not included in the definition of the United States in the Tariff Act of 1922 and it is not a "possession" of the United States in the sense in which that term is customarily used in tariff legislation.

3

Under the first orders for the regulation of customs, the tariff of the United States was made applicable to imports from foreign countries, including Panama, into the Canal Zone and imports into the United States from the Canal Zone were permitted to enter free-an arrangement which was regarded as very objectionable by the merchants of Panama. The Secretary of War, Mr. Taft, was sent to Panama to enter into an agreement, which he did on December 3, 1904. By its terms the ports of the Canal Zone, Ancon and Cristobal, were limited, as ports of entry, to the receipt of goods for the construction and maintenance of the canal, supplies for the employees of the United States, goods in transit across the isthmus bound for points beyond its limits, and fuel for passing ships. Upon these entries, whatever the source of the goods, no duties were to be charged. Panama, on the other hand, agreed to certain

5

1 Also certain lands around and above Gatun Lake.

"Malloy, Treaties, pp. 1350, 2770 et seq.

Sec. 401 (j).

*See Executive Order of Dec. 3, 1904; Act of 58th Congress, approved Apr. 28, 1904; Executive Order of Dec. 6, 1904. Malloy, Treaties, pp. 2756 et seq. A treaty with Panama to supersede the Taft Agreement was under negotiation in the spring of 1924.

'By Article 1, 2, of the treaty with Colombia signed Apr. 6, 1914, and