Office of the Historian

611.626/174a

The Secretary of State to the Textile Alliance, Inc.

Washington, April 10, 1920.

Gentlemen: I beg to refer to conferences held recently between Mr. Van S. Merle-Smith of this Department and a representative of your Company with regard to the purchase of twelve hundred tons of German dyes available under option to the United States.

[Page 496]

By agreement entered into in connection with the Peace Negotiations the German Government gave to the Allied and Associated Powers a right of option to dyes from impounded stocks as well as from subsequent production of German manufacturers. Inventories were furnished by the German authorities covering impounded stocks as of August 4, 1919. These inventories contained also the prices at which Germany desired to receive credit for these dyes on account of the claims of the Allied and Associated Powers. These prices were stated in German marks upon the understanding that credit would be given for the marks at the rate of exchange current on the date of delivery of the dyes by the shippers to the transportation company as evidenced by the bill of lading.

The total amount of dyes covered by the inventories was approximately 20,000 metric tons of which the Allied and Associated Powers were entitled to receive not to exceed 50%.

Thus far there has been but a partial allocation of these impounded dyes among the Allied and Associated Powers. The apportionment amounted in all to 5200 metric tons of which the United States was given the right to take at the prices above referred to an amount up to 1500 metric tons without restriction as to colors except that the amount taken of any one color was limited to 10.22% of the total stock of that particular color as covered by the inventories above referred to.

American consumers were informed of this 1500 tons of German dyes available from this source and were given an opportunity to order therefrom through the Textile Alliance, Inc. such colors and amounts as were permitted to be imported under governmental regulations. Only 300 tons were so ordered. There remain approximately 1200 tons still available to the United States at the prices above referred to. Such dyes may be acquired at a price far below the present market value and therefore present an exceedingly valuable asset whether for internal use or for re-sale on foreign markets to which this country is entitled. We are informed that unless arrangements can be made allowing further time to the United States in which to exercise its option, an order with full specifications must be given to the proper authorities in Paris, not later than April 15, 1920, by the United States or its nominee. In default of such order these 1200 tons of dyes will revert to their source for re-apportionment among the Allied and Associated Powers, and will be for the most part lost to this country with detriment to American interests.

While recognizing the loss that would result if these dyes were allowed to revert, the Department cannot take upon itself the commercial function of purchase and sale.14 The Textile Alliance Inc., [Page 497] of New York, therefore, provided the necessity arises, is authorized to purchase in its private capacity in the interest of the people of the United States these 1200 tons of dyes, upon the following conditions:

1.
The Textile Alliance Inc. will select such colors and may make trades with other nations during allocation of the colors, as in its judgment may seem desirable and are approved by representatives of the Department of State. The Alliance will fully cooperate with the proper officials of this Government in arranging the details of this transaction.
(a)
The Textile Alliance Inc. will undertake to furnish to the proper authorities in Paris not later than April 15, 1920, or to the State Department not later than April 8, 1920, a formal order together with specifications for these dyes not exceeding in all 1200 tons, such order being conditional on the dyes being of standard quality and available at prices similar to those referred to in the first [second] paragraph of this letter, and with the additional provision that the Alliance shall not be required to pay for any of these dyes until delivery is accepted and receipted for by the Alliance or a transportation company acting as its agent.
(b)
The Department of State will in due course advise the Textile Alliance Inc. to whom the purchase price of these dyes is payable and in what manner.
2.
The following conditions shall apply to the importation and sale of these dyes by the Alliance:
(a)
The Textile Alliance, Inc. will not import dyes into this country except in accordance with governmental regulations as to their entry into this country.
(b)
In the sale of dyes which may be imported the Textile Alliance Inc. will not charge prices considered unreasonable by the Department of State. It shall conform with advices as to the policy of the War Trade Board or its successor, which shall be given for the purpose of protecting generally the interests of dye consumers and manufacturers; and it shall discriminate in no way by price or otherwise between consumers that wish to purchase such dyes.
(c)
The Textile Alliance Inc. may sell the dyes abroad with the approval of the Department of State. The following considerations shall govern such approval by the Department of State: The retention for a reasonable period by the Textile Alliance Inc. of such dyes as may be necessary for import into the United States under governmental regulations; the prevention of “dumping”,—dyes to be sold at reasonable market prices; the arrangement of sales so that as far as reasonably possible the marketing of these dyes will not compete with the sale of dyes exported from the United States.
3.
It is recommended that until imported into this country for sale as provided above, the dyes shall be kept stored outside of this country.
4.
The net profits accruing from the sale of these dyes by the Textile Alliance Inc. shall be paid into the Treasury on such conditions as shall be authorized by the Secretary of State and the Secretary of the Treasury, provided, however, that the Textile Alliance Inc. may retain as a reserve fund to meet accruing expenditures, such sums as may be agreed upon between the Alliance and the proper officials of the State and Treasury Departments.

I am [etc.]

For the Secretary of State:
Frank L. Polk

Under Secretary
  1. The remainder of this letter was cabled to the Ambassador in France, for Boyden and Perret, no. 723, Apr. 9, 4 p.m. (File no. 611.626/169.)↩