BRITISH EMBASSY, WASHINGTON, D. C June tOth, 1939 No. 696 My Lord, With reference to my despatch No. 23ft of the 28th February and to connected correspondence regarding the exemption from United States customs duty of spores etc. for Messrs. Imperial Airways, X have the honour to transmit herewith copies of a note from the United states Government in reply to the application contained in Mr. Mallet's note of the Slot December, 1938, copies of which wore enclosed in his despatch No. 1121 of that date to Your Lordship. 8. So far as it goes, the enclosed note appears to bo satisfactory in that it concedes privileges "substantially reciprocal" to those granted by the United Kingdom. Your Lordship will however observe that it does not expressly covor the refund of customs duties paid by Imperial Airways since Jtily, 1937 nor, in referring to Customs duties, does it appear to cover the question of the Federal tax on the gasoline and oil used by the Company. 3. As regards the first of these points the Financial Advisor to this Embassy had a conversation on May 26th with one of the Counsel in the Customs Bureau who informed him that he thought it prima facie very doubtful whether the Administration had/ The Right Honourable The Viscount Halifax* K.Q • 9 etc. , etc • 9 etc. had power to grant exemption effectively before the date (May end, 1999) of the letter la which the Department of Commerce had Informed the Customs Bureau that corresponding privileges were already granted la the United Kingdom. It was this official's opinion that it would be better if Imperial Airways, should they wish to press the point, were to raise the matter la the form of a demand for a apeeifie list of refunds to the Customs Office in New York. I think that Imperial Airways should be advised to proceed in this manner. 4. .As regards the qiestion whether fuel and oil are amongst the supplies whleh are now to be granted privileges, I should Inform Your Lordship that the action suggested in paragraph 2 of the American Department letter (A 8368/90/45) of the 23rd May was held in abeyance since it appeared likely to cause further delay in the receipt of the present answer from the State Department on the mala question of principle• 5. I propose to approach the United States Government again in an endeavour to make certain that the Federal tax oa gasoline and oil is in fact covered, as It should "be, by the phrase "substantially reciprocal privileges* in the State Department * a note, and I shall inform Your Lordship of the result in due course. X have the honour to he, with the highest respect, My Lord, Your Lordship * s moat obedient, hurable serve nt, (SOD) ft. 6. LINDSAY