611.613 Coal/39: Telegram
The Acting Secretary of State to the Ambassador in the Soviet Union ( Davies )
70. Your 295, November 26, 1936, 4 p.m.,61 and subsequent with regard to excise duty on Soviet coal. The Soviet Ambassador was informed on June 14 that the Department is prepared to include in the renewal of the commercial agreement with the Soviet Union provisions for unconditional most-favored-nation treatment of imports from the Soviet Union with a reservation in respect of coal, similar to the most-favored-nation provisions and the reservation in respect of coal contained in our trade agreement with The Netherlands by virtue of which imports of Netherland coal are at present exempt from the tax in question. (It was made clear to the Ambassador that, although the inclusion of such provisions in our commercial agreement with the Soviet Union would lead to the exemption of Soviet coal from the tax by the Treasury Department, nevertheless it is possible that the ruling by the Treasury Department in this regard might later be reversed by the courts.)
The Ambassador was further informed, however, that the modification of the agreement indicated above would be conditional upon assurances in writing from him that exports of Soviet coal to the United States during the 12 months’ term of the agreement would not exceed 400,000 tons. The communication from the Ambassador to that effect need not be made public, but at the time of the renewal of the commercial agreement, this Government would issue a statement that it had been assured by the Soviet Government that exports of Soviet coal to this country would not exceed the quantity specified above.
In view of the urgency of this matter, you are requested to endeavor to expedite the reply of the Soviet officials. In discussing this proposal with Soviet officials, you should make it clear that this Government must insist upon the restriction of Soviet coal exports to the United States to 400,000 tons for the 12 months’ period covered by the agreement. You may inform the Soviet officials, if the point is raised, that, in accordance with your confidential letter to Rosenblum of July 8, 1936,61 the Department has given consideration to the possibility of seeking a removal of at least the discriminatory features of the tax in question by legislative action, but that it recently abandoned its endeavors in this connection when it became clear that it would not be possible, in view of the attitude of various interests [Page 408] involved, to effect at this time a change in the existing law. To indicate the sentiment in Congress in regard to this matter, you may refer to the proposed amendment to increase the present tax on imports of coal from 10 cents to 25 cents per 100 pounds. It was accepted by the House of Representatives on the first vote and was eventually defeated by a majority of only three votes.63
Please ascertain from the Soviet authorities the amount of purchases made in the United States from July 13, 1936 to date and amount of orders that will be placed in remaining period up to July 13.