611.3231/690

The Department of State to the Brazilian Embassy

Memorandum

Referring to the memorandum of the Department of State dated November 10, 1934, transmitting a list of tariff concessions sought by the United States of America in the proposed trade agreement with the United States of Brazil, there are attached hereto for consideration by the Ambassador of Brazil a suggested draft of the text of the proposed trade agreement between the two countries, and the text of a joint declaration of policy with respect to clearing and compensation agreements, to be annexed to the proposed agreement. It is understood that the Government of the United States reserves the privilege of suggesting such changes in these provisions as may on further consideration seem desirable, prior to their final approval by both Governments.

[Enclosure 1]

Draft Reciprocal Trade Agreement With Brazil

Preamble

The President of the United States of America and the President of the United States of Brazil, desirous of strengthening the traditional bonds of friendship and the commerce between their respective countries by maintaining as the basis of their commercial relations [Page 559] the principle of equality of treatment and by granting mutual and reciprocal concessions and advantages for the promotion of trade between the two countries, have arrived at the following Agreement:

Article I

Articles the growth, produce or manufacture of the United States of America, enumerated and described in Schedule I annexed to this Agreement and made a part thereof,30 shall, on their importation into the United States of Brazil, be exempt from ordinary customs duties in excess of those set forth in the said schedule and from all other duties, taxes, fees, charges or exactions, imposed on or in connection with importation, in excess of those imposed or required to be imposed by laws of the United States of Brazil in effect on the day of the signature of this Agreement.

Article II

Articles the growth, produce or manufacture of the United States of Brazil, enumerated and described in Schedule II annexed to this Agreement and made a part thereof,30 shall, on their importation into the United States of America, be exempt from ordinary customs duties in excess of those set forth in the said Schedule, and from all other duties, taxes, fees, charges, or exactions, imposed on or in connection with importation, in excess of those imposed or required to be imposed by laws of the United States of America in effect on the day of the signature of this Agreement.

Article III

All articles the growth, produce or manufacture of the United States of America or the United States of Brazil, shall, after importation into the other country, be exempt from all internal taxes, fees, charges or exactions other or higher than those payable on like articles of national origin or any other foreign origin.

Articles the growth, produce or manufacture of the United States of America or the United States of Brazil enumerated and described in Schedules I and II, respectively, shall, after importation into the other country, be exempt from any national or federal internal taxes, fees, charges or exactions other or higher than those imposed or required to be imposed by laws of the United States of Brazil and the United States of America, respectively, in effect on the day of the signature of this Agreement.

[Page 560]

Article IV

1.
No prohibitions, import or customs quotas, import licenses or any other form of quantitative restriction or control shall be imposed by the United States of Brazil on the importation or sale of any article the growth, produce or manufacture of the United States of America enumerated and described in Schedule I, nor by the United States of America on the importation or sale of any article the growth, produce or manufacture of the United States of Brazil enumerated and described in Schedule II: Provided, That the foregoing provision shall not apply to prohibitions or restrictions (a) related to public security; (b) imposed on moral or humanitarian grounds; (c) designed to protect human, animal, or plant life; (d) related to prison-made goods; (e) related to the enforcement of police or revenue laws; or (f) permitted by paragraph 2 of this Article.
2.
The provisions of the first paragraph of this Article shall not apply to any quantitative restriction imposed by the United States of America or the United States of Brazil on the importation or sale of any article the growth, produce or manufacture of the other country in conjunction with governmental measures designed to regulate or control the production, market supply, or prices of like domestic articles: Provided, that before any quantitative restriction on importation under the foregoing provisions of this paragraph is established, or having been established, is materially changed, the Government of the country which proposes to establish or materially change such restriction shall give thirty days’ notice thereof to the Government of the other country and shall afford the latter country an opportunity within thirty days after receipt of such notice to consult with it in respect of such proposed restriction or change; and Provided further, That in the event such other country objects to such proposed restriction or change, and if an agreement is not reached by the end of the thirtieth day following receipt of the notice of the intention to establish or change such restriction, the country which proposes to take such action shall be free to do so at any time thereafter, and the other country shall be free within fifteen days after the imposition of such restriction or change to terminate this Agreement in its entirety on thirty days’ notice.
3.
The present Agreement being based on the principle of unconditional most-favored-nation treatment, the United States of America and the United States of Brazil agree that, if either of them should establish or maintain any form of quantitative restriction or control of the importation of any article or of the sale of any imported article the growth, produce or manufacture of the other country, not enumerated and described in Schedules I and II, respectively, and that if [Page 561] either of them should establish or maintain any form of quantitative restriction or control under the provisions of paragraph 2 of this Article, such country will give the widest possible application to the most-favored-nation principle and will administer any such prohibition or restriction in such a way as not to discriminate against the commerce of the other country. To this end it is agreed:
(a)
That neither the United States of America nor the United States of Brazil shall establish or maintain any prohibition or quantitative restriction on the importation or sale of any article the growth, produce or manufacture of the other country which is not applied to the importation or sale of any like article the growth, produce or manufacture of any third country;
(b)
That, in the event that the total quota of permitted imports of any article shall be allotted among exporting countries, it is agreed that the United States of America or the United States of Brazil, as the case may be, will grant to the other country a share of the permitted imports equivalent to the proportion of the total importation of such article which the other country supplied during a previous representative period;
(c)
That, in the event that the United States of America or the United States of Brazil shall impose a lower import duty or charge on a specified amount of any article the growth, produce or manufacture of the other country than that applied to importations in excess of such amount, and if the total quantity permitted to be imported at such lower duty or charge is allotted among exporting countries, the basis for such allotment shall be the same as that provided in paragraph 3 (b) of this Article with reference to import quotas.
4.
Neither the United States of America nor the United States of Brazil shall regulate the quantity of importations into its territory or sales therein of any article the growth, produce or manufacture of the other country, by import licenses or permits issued to individuals or organizations, unless the quantity of permitted imports of such article, during a quota period of not less than three months, shall have been established, and unless the regulations covering the issuance of such licenses or permits shall be made public before they are put into force.
5.
In the event of a quantitative restriction being established by the United States of America or the United States of Brazil for the importation into or sale in its territory of any article the growth, produce or manufacture of the other country, or in the event that either country shall impose a lower duty or charge on a specified amount of any such article than that applied to importations in excess of such amount, it is agreed that the United States of America or the United States of Brazil, as the case may be,
(a)
shall give public notice of the total quantity of such article permitted to be imported or sold, or the amount of such article to which such lower duty or charge is applied,
(b)
shall give public notice of the allotments to supplying countries, in the event that the total quantity of such article permitted to be imported or sold, or permitted entry or sale at the lower duty or charge, is allotted among supplying countries, and shall at all times upon request advise the Government of the other country of the amount of any such article the growth, produce or manufacture of each supplying country which has been imported or sold or for which licenses or permits for importation or sale have been granted,
(c)
shall at all times give sympathetic consideration to any representations which the Government of the other country shall make to the effect that such restriction or imposition of duty or charge, or the administration thereof, does not result in an equitable distribution of the trade.

Article V

In the event that either the United States of America or the United States of Brazil establishes or maintains an official monopoly or centralized control of the importation of or trade in a particular commodity, the Government establishing or maintaining such monopoly or centralized control will give sympathetic consideration to all representations that the other Government may make with respect to alleged discriminations against its commerce in connection with purchases by such official monopoly or agency of centralized control.

Article VI

The tariff advantages and other benefits provided for in this Agreement are granted by the United States of America and the United States of Brazil to each other subject to the condition that if the Government of either country establishes or maintains any system of control of foreign exchange or enters directly or indirectly into any arrangement which affects in fact the provision of foreign exchange or the regulation or control of the transfer or disposition of means of payment, or employs any other system of control or any other arrangement with respect to the settlement of international obligations, it shall, in accordance with the principle of unconditional most-favored-nation treatment, make provision with respect to, and shall administer, any such system or arrangement so as to insure that neither the nationals or commerce of the other country will suffer discriminations, inequalities or inequities as compared with the nationals or commerce of any other country.

In connection with the foregoing provisions, it is agreed that if either country establishes or maintains any such system or enters into any such arrangement, it will take all necessary steps to insure that such system or arrangement is administered in such a manner as not to reduce the proportionate share of the total importation into such country of any individual commodity which, as nearly as may be determined [Page 563] by consultation as provided for in the third paragraph of this Article, would have been supplied by the other country in the absence of such system or arrangement.

In order to insure the effectiveness of the foregoing provisions of this Article and to review the operation of this Article, representatives of the Governments of the United States of America and the United States of Brazil shall meet immediately on the coming into force of this Agreement and quarterly thereafter, each Government agreeing to make available to the other Government all pertinent records and information.

In the event that the Government of either country shall consider at any time that the other Government has failed to comply fully with the foregoing provisions of this Article, and if, within thirty days after receipt of formal representations to the effect that such provisions are not being fully complied with, the Government receiving such representations has not satisfactorily corrected the regulation, restriction, charge or exaction concerning which they were made, the Government of the country making such representations may, within fifteen days after the expiration of the aforesaid period of thirty days, terminate either this Article or this Agreement in its entirety on thirty days’ notice.

Nothing in this Article shall be construed to prevent the adoption of measures prohibiting or restricting the exportation of gold or silver.

Article VII

The United States of America and the United States of Brazil will grant each other unconditional and unrestricted most-favored-nation treatment in all matters concerning customs duties and subsidiary charges of every kind and in the method of levying duties, and, further, in all matters concerning the rules, formalities, and charges imposed in connection with the clearing of goods through the customs.

Accordingly, natural or manufactured products having their origin in the United States of America or the United States of Brazil shall in no case be subject in the other country, in regard to the matters referred to above, to any duties, taxes, or charges other or higher, or to any rules or formalities other or more burdensome, then those to which the like products of any third country are or may hereafter be subject.

Similarly, natural or manufactured products exported from the territory of the United States of America or the United States of Brazil and consigned to the territory of the other country shall in no case be subject with respect to exportation and in regard to the above-mentioned matters, to any duties, taxes, or charges other or higher, [Page 564] or to any rules or formalities other or more burdensome, than those to which the like products when consigned to the territory of any third country are or may hereafter be subject.

Any advantage, favor, privilege, or immunity which has been or may hereafter be granted by the United States of America or the United States of Brazil in regard to the above-mentioned matters, to a natural or manufactured product originating in any third country or consigned to the territory of any third country shall be accorded immediately and without compensation to the like product originating in or consigned to the territory of the United States of Brazil or the United States of America, respectively.

Nevertheless, the advantages now accorded or which may hereafter be accorded to other adjacent countries in order to facilitate frontier traffic, and advantages resulting from a customs union to which either country may become a party shall be excepted from the operation of this Agreement; and this Agreement shall not apply to police or sanitary regulations or to the commerce of the United States of America with the Republic of Cuba, or to commerce between the United States of America and the Panama Canal Zone, the Philippine Islands, or any territory or possession of the United States of America, or to the commerce of the territories and possessions of the United States of America with one another.

Article VIII

Laws, regulations of administrative authorities and decisions of administrative or judicial authorities of the United States of America and the United States of Brazil, respectively, pertaining to the classification of articles for customs purposes or to rates of duty shall be published promptly in such a manner as to enable traders to become acquainted with them. Such laws, regulations and decisions shall be applied uniformly at all ports of the respective country, except as otherwise specifically provided in statutes of the United States of America relating to articles imported into Puerto Rico.

No administrative ruling by the United States of America or the United States of Brazil effecting advances in rates of duties or charges applicable under an established and uniform practice to imports originating in the territory of the other country, or imposing any new requirement with respect to such importations, shall be effective retroactively or with respect to articles either entered for or withdrawn for consumption prior to the expiration of thirty days after the date of publication of notice of such ruling in the usual official manner. The provisions of this paragraph do not apply to administrative orders imposing anti-dumping duties, or relating to sanitation or public safety, or giving effect to judicial decisions.

[Page 565]

Article IX

The United States of America and the United States of Brazil retain the right to apply such measures as they respectively may see fit with respect to the control of the export or sale for export of arms, munitions, or implements of war, and, in exceptional circumstances, of other material needed in war.

Article X

In cases in which any penalty shall be imposed in the United States of America or the United States of Brazil in respect of customs regulations or customs formalities on merchandise arriving from the territory of the other country, a period of at least sixty days will be granted the importer or other party in interest, or the agent of either of them, in which an appeal may be taken to an appropriate authority competent to review the matter: Provided, That in the case of merchandise liable to perish or to waste or to become greatly reduced in value by keeping, or when the expense of preserving the merchandise is out of proportion to the value thereof, such merchandise may be sold, and the net proceeds obtained from such sale shall be considered merchandise within the meaning of this paragraph and shall be accorded all the privileges of appeal as provided herein.

Greater than nominal penalties will not be imposed in the United States of America or in the United States of Brazil upon importations of products or manufactures of the territory of the other country because of errors in documentation obviously clerical in origin or where good faith can be established.

The Government of each country will accord sympathetic consideration to such reasonable representations as the other Government may make regarding the operation of customs regulations, the observance of customs formalities, and the application of sanitary laws and regulations for the protection of human, animal, or plant life.

Article XI

Except as otherwise provided in the second paragraph of this Article, the provisions of this Agreement relating to the treatment to be accorded by the United States of America and the United States of Brazil, respectively, to the commerce of the other country shall not apply to the Philippine Islands, the Virgin Islands, American Samoa, the Island of Guam, or to the Panama Canal Zone.

Subject to the reservations set forth in the last paragraph of Article VII, the provisions of Article VII, and the provisions for most-favored-nation treatment in Articles IV and VI, shall apply to articles the growth, produce or manufacture of any area under the sovereignty [Page 566] or authority of either country imported from or exported to any area under the sovereignty or authority of the other country. It is understood, however, that the provisions of this paragraph do not apply to the Panama Canal Zone.

Article XII

The present Agreement shall, from the date on which it comes into force, supplant the agreement by exchange of notes signed by the United States of America and the United States of Brazil on October 18, 1923.

Article XIII

On and after the day on which this Agreement comes into force, articles the growth, produce or manufacture of the United States of America and articles the growth, produce or manufacture of the United States of Brazil previously imported into the other country shall be subject to the provisions of this Agreement, if entry therefor has not been made, or if they have been previously entered without payment of duty and under bond for warehousing, transportation, or any other purpose, and without any permit of delivery to the importer or to his agent having been issued: Provided, That when duties are based upon the weight of merchandise deposited in any public or private warehouse, the said duties shall, except as may be otherwise specially provided in the tariff laws of the respective countries in force on the day of signature of this Agreement, be levied and collected upon the weight of such merchandise at the time of its entry.

Article XIV

The present Agreement shall come into full force on the thirtieth day following proclamation thereof by the President of the United States of America and the President of the United States of Brazil and shall remain in force for the term of two years thereafter, unless terminated pursuant to the provisions of Article IV or Article VI. The Government of each country shall notify the Government of the other country of the date of the proclamation.

Unless at least six months before the expiration of the aforesaid term of two years the Government of either country shall have given to the other Government notice of intention to terminate the Agreement upon the expiration of the aforesaid term, the Agreement shall remain in force thereafter, subject to termination under the provisions of Article IV or Article VI until six months from such time as the Government of either country shall have given such notice to the other Government.

[Page 567]

In witness whereof the respective Plenipotentiaries have signed this Agreement and have affixed their seals hereto.

Done in duplicate, in the English and Portuguese languages, both authentic, at the City of Washington, this . . . . . . . . . . . . . . .

For the President of the United States of America:

For the President of the United States of Brazil:

[Enclosure 2]

Draft Joint Declaration of Policy With Respect to Clearing and Compensation Agreements

The current trends in commercial policy throughout the world are indicative of the disorganization of the international price structure and of the maladjustments that prevail in international financial and trade relations. The difficulties of maintaining a balance of international payments, the breakdown of fixed exchange relations incident to the deepening of the depression, and the lack of equilibrium in international costs and prices have caused countries to develop direct measures of control of trade and foreign exchange. These measures have not been consciously designed as a general or ultimate solution of international economic relations. They have been resorted to in order to deal with concrete problems such as the disturbance to trade balances, unemployment, and falling prices. Nevertheless the effect has been that through quota restrictions, governmental trading monopolies, import licensing, exchange control, clearing and compensation agreements, the principle of equality is rapidly being superseded by preferential treatment.

In particular, clearing and compensation agreements tend to reduce the volume of triangular trade, and have thus contributed to the disastrous decline in total world commerce. Moreover, they tend to divert purchases from the best markets and to force the importation of goods which are less urgently required. This diversion of trade from its established channels has not only intensified the disturbance to international economic relations but also tends to engender international ill-will.

In these circumstances, the Governments of the United States and Brazil, in cooperation with each other, desire to direct their commercial policies in such a manner as to discourage the multiplication of agreements of this character. They recognize that the policy herein reflected is distinctly divergent from the policies recently pursued by many important trading countries, and that the line of action proposed may involve some sacrifice of immediate interest. Nevertheless, realization of the defects of the system of clearing and compensation agreements as a long-run policy has caused the Governments of the [Page 568] United States and Brazil to refrain from adopting such a policy, as long as there is any other solution in terms of non-discrimination, equality, and most-favored-nation treatment such as that embodied in the trade agreement which they have just concluded.

By refraining from clearing or compensation arrangements in connection with Brazilian-American trade, and in their relations with other countries, the Governments of the United States and Brazil hope to facilitate the progressive removal of the existing network of restrictions on international commerce. They venture to declare this policy in the belief that it is consistent not only with the best long-run economic interests of the parties to the agreement themselves, but also of those of the whole world. They believe that the general interest will be served if, as rapidly as circumstances will permit, nations cooperate in an effort to reestablish the functioning of an international price system, with freedom from exchange control and from quantitative restrictions, and with tariffs considerably reduced below the abnormally high level established in nearly all countries in recent years.

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