611.42251/133

The Department of State to the British Embassy

Aide-Mémoire

The Government of the United States is very grateful for the desire expressed by the British authorities in the aide-mémoire left at the Department of State on January 11 to assist in reaching a solution of the difficulties at present affecting the shipment of Canadian grain through the United States to the United Kingdom. Over a long period of time the method now employed in shipping Canadian grain through American ports to Great Britain has been found to be the most satisfactory from the point of view of economy and expediency and this Government feels strongly that it would be a grave mistake to restrict in any way a method which vitally affects not only the Canadian producers, the exporters and carriers but also the ultimate consumer in the United Kingdom.

On January 11 and 12 a large delegation representing the American terminal, transportation and port interests discussed with representatives of this Department, the Department of Commerce and the Department of Agriculture the existing practices in the grain trade, stressing the difficulties in which they now find themselves in view of the recent decision of the British authorities regarding the granting of tariff preference to Canadian wheat under the Ottawa Agreements Act.

The principal difficulties encountered in conforming to the British regulations are as follows:

At the time Canadian grain is shipped from the head of the Lakes its ultimate destination and purchaser are unknown. These cannot be known since the transactions are financed by traders on the New York Grain Exchange who maintain an open market for North American grain. Hence, the title to Canadian grain may change many times between its original shipment from the head of the Lakes and its reaching the ultimate purchaser in the United Kingdom or Europe.

In the past the grain has moved to Buffalo and through the New York Barge Canal to tidewater in anticipation of the closing of navigation on the Great Lakes and the St. Lawrence River. The grain is accumulated at New York and other seaports for shipment to various parts of the world during the winter months. It is not possible with [Page 3]existing transportation facilities in Canada to use a water route to accumulate grain at Canadian seaports for shipment during the winter months. By making use of the New York Barge Canal in piling up wheat in ocean ports prior to the closing of navigation on the Great Lakes a saving of more than four cents per bushel in transportation costs is realized. Grain shipped from North America largely moves as bottom cargo on regular shipping lines and Canadian grain shipped via United States Atlantic ports has the benefit of liner services which in frequency, speed, variety of destinations and transportation economy probably surpass those available anywhere else in the world. It may be noted that British vessels participate largely in the handling of this traffic.

Despite the fact that any change in the trading methods which have been developed gradually over several decades would involve added burdens, a majority of the representatives of the port, transportation and terminal interests have expressed a desire to go as far as possible in an effort to work out a formula to comply with the British regulations. After careful consideration, the following proposal has been drafted which the American Ambassador in London1 has been requested to submit to the appropriate British authorities:2

  • “A. Will a shipment of Canadian wheat via the United States be accepted under the present British Customs Regulations as entitled to Imperial preference under the following conditions:
    (1)
    The Lake bill of lading and the invoice to show shipment as consigned from a Canadian port for export to a named consignee in a specified port in the United Kingdom, it being understood that the grain may not in fact necessarily move to the original consignee specified but after intermediate sales may be delivered to an actual purchaser at any port in the United Kingdom.
    (2)
    The certificate of origin to be filled out as far as possible by the qualified person in Canada and the supplementary certificate, when necessary, to be filled out by the exporter in the United States when the definite routing and ultimate destination in the United Kingdom are known.
  • “B. As a transitory provision in view of the uncertainty in the grain trade as to the precise procedure required under the application of the Ottawa Agreements Act to Canadian grain shipped via the United States, would it not be satisfactory to the British Customs Authority to allow such Canadian grain as is now in the United States consigned on the accustomed “for export to the United Kingdom” bill of lading to be recognized upon importation into the United Kingdom as Canadian grain for purposes of preferential tariff treatment provided that this transitory privilege is to apply only to grain which had left Canada before the close of navigation on the Great Lakes in 1932.”

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It may be stated that the procedure under A (1) above differs from that used in the Laconia case in that the Lake bill of lading would be endorsed for export to a named person in a specified port in the United Kingdom, in practice the name of the exporting firm’s usual customer or agent; for example, “for export to John Jones, Liverpool” instead of merely “for export to the United Kingdom”. However, since intermediate sales between the consignment of the grain and its ultimate delivery are common, it should be definitely understood that the grain need not necessarily be delivered to the person specified in the bill of lading notation and invoice at the stated port but may be delivered to an actual purchaser at any port in the United Kingdom without losing the right to preference. This flexibility is absolutely indispensable if Canadian grain is henceforth to be shipped through the United States to Great Britain. It should be noted that since Canadian wheat moves in bond through the United States because of the American tariff of 42 cents per bushel there can be no question whatever as to its Canadian origin, because its identity as such is carefully preserved under customs supervision at all times.

As regards B mentioned above, it is understood that the quantity of Canadian grain now in American ports is about ten million bushels, only a portion of which will probably be shipped to the United Kingdom even if it be accorded imperial preference. This grain was shipped from Canada before the British Government had announced any decision in regard to the requirements to be met to enable Canadian grain to obtain the preference, and it is felt that this request is altogether a reasonable one.

In taking up this matter with the British authorities, the American Ambassador has been requested to make it clear that its discussion should not be construed as implying acquiescence on the part of the United States Government in the principle of imperial preference, a subject on which the United States Government expresses no opinion at this time and on which it reserves its position.

  1. Andrew Mellon.
  2. Telegraphic instruction No. 16, January 19, not printed.