Aden) but had been inapplicable to the People's Democratic Republic of Yemen since that country became independent on November 30, 1967. The Government of Yemen did not take the necessary steps to affirm that it was assuming the obligations of the convention.

For the Treasury Dept. notice, see Fed. Reg., Vol. 41, No. 147, July 29, 1976, p. 31578. See also Dept. of State File L/T.

U.S.-Chile

By an exchange of notes dated December 29 and 31, 1975 (TIAS 8252; 27 UST 1371), the United States and Chile concluded an agreement granting, on a reciprocal basis, relief from double taxation on earnings derived from the operation of aircraft. Upon receipt by the United States of a further note dated January 30, 1976, from the Government of Chile, stating that it had fulfilled its constitutional procedures, the agreement became effective with respect to taxable years beginning January 1, 1975.

The U.S. Internal Revenue Code authorizes exemption from U.S. income tax of foreign aircraft registered under the laws of countries which grant an equivalent exemption to U.S. citizens and corporations. Specifically, both section 872 (b) (2) defining gross income for tax purposes of nonresident aliens, and section 883 (2) defining the same for foreign corporations connected with U.S. business, state:

(2) Aircraft of Foreign Registry. Earnings derived from the operations of aircraft registered under the laws of a foreign country which grants an equivalent exemption to citizens of the United States and to corporations organized in the United States. If the foreign country has a similar statutory provision, it is adequate for U.S. purposes to submit to the Internal Revenue Service a certified translation of relevant sections of the foreign country's law. However, the United States prefers a formal agreement so as to avoid an interpretation by U.S. authorities of a foreign country's tax laws. The exchange of notes with Chile constitutes such an agreement. U.S.-India

The United States and India concluded a similar agreement granting the international airlines of the two countries exemption from tax on their earnings on the basis of reciprocity, by an exchange of notes on November 26, 1976. It was effective for taxable years beginning on or after January 1, 1976. For the purpose of exempting from double income tax the earnings from operation of aircraft in international traffic, the term "operation of aircraft" means the business of transportation by air of persons, livestock, goods or mail, carried on by the owners or lessees or charterers of aircraft, including the sale of tickets for such transportation on behalf of other

enterprises, the incidental lease of aircraft, and any other activity directly connected with such transportation. The exemption also applies in respect of participation in pools of any kind regarding air transport. Interest on funds connected with the operation of aircraft in international traffic is regarded as income from the operation of such aircraft.

§ 5

Foreign Assets Control

Delivery of U.S. Checks and Warrants

Vietnam and Cambodia

The Department of the Treasury announced on April 8, 1976, that on the basis of information available to it, including advice from the Department of State, the Secretary of the Treasury had determined that postal, transportation and banking facilities in general, and local conditions in all of Vietnam and in Cambodia, were such that there was not a reasonable assurance that the payee of a check or warrant drawn against funds of the United States, or any agency or instrumentality thereof, would actually receive such a check or warrant and be able to negotiate it for full value. Accordingly, the Treasury Department revised its regulations at 31 Code of Federal Regulations Part 211, on delivery of checks and warrants to addresses outside the United States, its territories and possessions, so as to add North and South Viet-Nam and Cambodia to the list of restricted areas to which such a check or warrant may not be sent from the United States for delivery. Prior notice and public procedure were not deemed necessary for the revisions since they involved a foreign affairs function of the United States.

For the text of the regulations as revised, see Fed. Reg., Vol. 41, No. 74, Apr. 15, 1976, pp. 15846-15847.

86

Debt Rescheduling

Bilateral Agreements

U.S.-Bangladesh and U.S.-Pakistan

The United States entered into a debt rescheduling agreement with Bangladesh on March 3, 1976 (TIAS 8423; 27 UST; entered into force May 11, 1976), and one with Pakistan on March 4, 1976 (TIAS 8447; 27 UST; entered into force May 12, 1976).

Under the agreement with Bangladesh, Bangladesh assumed the performance of all payment obligations pertaining to $85.1 million in principal amount due the Agency for International Development. This is to be repaid over 40 years, including a 15-year grace period. Interest will accrue at 1.6 percent per annum. Bangladesh also

assumed responsibility for servicing $2.6 million in Export-Import Bank loans which will not be rescheduled.

Under the agreement with Pakistan, the United States rescheduled approximately $203 million in debt service falling due over the five-year FY 1975-79 period. Principal is to be repaid in 39 semiannual installments commencing July 1, 1985. Interest will be charged at a rate of 2.15 percent per annum.

The agreements implement the provisions of the June 28, 1974, "Memorandum of Understanding" signed by the Government of Pakistan and the International Bank for Reconstruction and Development (IBRD) as Chairman to the Aid-to-Pakistan Consortium. In addition to the United States, countries implementing the Memorandum of Understanding are Belgium, Canada, France, Federal Republic of Germany, Italy, Japan, Netherlands, Sweden, and the United Kingdom.

Creditor negotiations with Pakistan and Bangladesh were in response to unique circumstances that arose as a result of the 1971 war and the independence of Bangladesh. After the war Pakistan insisted that debts resulting from programs of primary benefit to Bangladesh, which it estimated at about $1.2 billion, should be paid by Bangladesh. For its part, Bangladesh affirmed its intention to assume the international responsibilities incumbent upon a sovereign state, including a portion of the external debt of the formerly united Pakistan, but only within the context of an overall financial settlement.

The creditor countries of the Aid-to-Pakistan Consortium agreed to work towards developing a procedure to overcome the impasse with the aim of avoiding a default on any portion of the total debt. The creditors also sought to frame any agreement in the context of Pakistan's unique situation so as to avoid setting an undesirable precedent for other countries. In order to facilitate a final settlement which would achieve creditor objectives, the Aid-to-Pakistan Consortium agreed to short term debt reorganizations in 1972 and 1973. United States implementation of the 1973 understanding, under which the United States agreed to reschedule approximately $23 million in debt falling due between July 1, 1973, and June 30, 1974, was also formalized in the current agreement with Pakistan.

In the June 28, 1974, Memorandum of Understanding the creditor countries agreed to provide debt relief to Pakistan in the amount of $650 million, to be provided over the four years beginning July 1, 1974. The creditors also agreed that the terms of relief would be at a grant element of no less than 62 percent. Pakistan agreed to continue payments upon all debt due to creditors in the participating countries. The United States share of relief to be provided to Pakistan over the four years was about $196 million. The actual amount the

United States decided to reschedule during this period was $186 million. The United States has indicated its intention, however, to provide compensating relief in a fifth year, an option permitted in the Memorandum of Understanding provided that the present value of the amounts rescheduled is unchanged from what it would have been had relief been provided as assigned in each year of the four year period. The United States would thus reschedule the following amounts due to the Agency for International Development in such years as follows:

The amount the United States would reschedule in FY 1979 is subject to revision-as are the final amounts being rescheduled by other creditors-to insure that the total amount of relief received by Pakistan is as agreed in the Memorandum of Understanding.

Directly related with the creditor agreement with Pakistan, is the agreement by the Government of Bangladesh to assume responsibility for approximately $450 million in debt service on projects visibly located in its territory. The United States and other creditors agreed that such loans assumed by Bangladesh would be rescheduled on terms equivalent to a minimum of 84 percent grant element.

Dept. of State File L/T.

87

Intellectual Property
Trademarks

The Embassy of Switzerland addressed a note to the Department of State on May 3, 1976, referring to the registration in the United States of a trademark which the Embassy stated was a "simulation" of the Swiss coat of arms, "especially in view of the fact that the mark's owner used the name 'Swiss Maid Emblems'." The Embassy stated the view that the registration of the mark was in conflict with 18 U.S.C. 708 (which imposes penalties for willful commercial misuse of "the coat of arms of the Swiss Confederation, consisting of an upright white cross with equal arms and lines on a red ground, or any simulation thereof"), 15 U.S.C. 1052 and 1125(a), article 53(2) of the First Geneva Convention of 1949 (TIAS 3362; 6 UST 3114), and article 6ter of the Paris Convention for the Protection of Industrial Property (TIAS 6923; 21 UST 1583). It requested that the registration be invalidated.

The Department of State replied by note dated July 30, 1976, that the Assistant Commissioner for Trademarks in the Patent and Trademark Office had provided the Department with the following comments:

The Swiss Embassy suggests that the registered mark is a "simulation" of the Swiss coat of arms, particularly in view of the fact that the registrant uses the name "Swiss Maid Emblems." In this regard, it should be noted that the name of the registrant would not be considered by the Trademark Trial and Appeal Board in determining whether the registered mark constitutes a simulation of the Swiss coat of arms. Only the registered mark may be considered in making such a determination.

When the registered mark is examined, it is noted that the mark does not comprise a red background which is identified as a component of the Swiss coat of arms in 18 U.S.C. 708. In addition, the mark as presented comprises other features arranged in such a manner as to obviate the impression that the white cross employed would suggest a simulation of the Swiss coat of arms. While the Embassy has noted that from a heraldic point of view the color black may be considered a neutral color and therefore equivalent to any other color, i.e. red, nevertheless the overall impression created by mark does not suggest the Swiss coat of arms.

In addition, the Department informed the Embassy that, as a result of consultations with experts in heraldry, it believed that the color black (the background color of the trademark) was not considered neutral, but one of the five distinct colors in heraldry. It expressed doubt that the trademark in question would lead a consumer to believe that the goods were of Swiss origin or that a U.S. court would find the trademark to be a false designation of origin as prohibited by 15 U.S.C. 1125a. The Department's note concluded:

In view of the foregoing comments, the Department of State does not consider that the Swiss Maid trademark is a simulation of the Swiss coat of arms; therefore, it considers that section 708 of 18 U.S.C. and section 1052 of 15 U.S.C. are not applicable, nor is article 53(2) of the First Geneva Convention of 1949.

Dept. of State File Nos. P76 0118-0355 and P76 0118-0353. Art. 53(2) of the 1949 Geneva Convention for the Amelioration of the Condition of the Wounded and Sick in Armed Forces in the Field (TIAS 3362; 6 UST 3114) prohibits "the use by private individuals, societies or firms, of the arms of the Swiss Confederation, or of marks constituting an imitation thereof, whether as trademarks or commercial marks, or as parts of such marks, or for a purpose contrary to commercial honesty, or in circumstances capable of wounding Swiss national sentiment." Art. 6ter of the Paris Convention for the Protection of Industrial Property, as revised at Stockholm July 14, 1976 (TIAS 6923; 21 UST 1583), provides in par. 1(a) that parties will refuse or invalidate the registration, and will prohibit the use without authorization, "as trademarks or as elements of trademarks, of armorial bearings, flags, and other State emblems, of the countries of the Union, official signs and hallmarks indicating control and warranty adopted by them, and any imitation from a heraldic point of view."