811.114 Canada/50821/11

Memorandum by the Assistant Chief of the Division of Western European Affairs (Hickerson) of a Conference at the Treasury Department on March 31, 1936

At 2:30 p.m. Mr. Hackworth and I went to the office of Acting Secretary Taylor of the Treasury Department to continue the conversations with the Canadian distillers. A stenographic transcript of the conference is being made and we will be furnished with a copy, probably today. The following high spots in the conversations may, however, be of immediate interest.

Colonel Ralston, speaking on behalf of the distillers as a whole, made a long statement urging that the legislation be dropped on the grounds that it was unfair and inequitable, and that it would accomplish neither of its two purposes, which he understood were (1) to compel the firms to submit to our jurisdiction, and (2) to provide security for the United States against which it could recover if judgments were obtained in the courts. As regards the question of jurisdiction, Colonel Ralston said that one of the most serious aspects of this legislation would be that it would say in effect to his company that they could not continue to ship whiskey to this country unless they produced in the American court, in response to a summons, a stockholder who had what the Secretary of the Treasury deemed “a substantial interest” in the corporation. He said that his company would have no earthly means to force such an individual to appear to answer our jurisdiction, and that under the terms of this proposed legislation they could not do business unless they did force him to appear.

As regards (2) he stated that he had explained in some detail in a conversation with representatives of the Treasury Department how his company at least, and perhaps some of the others, could not provide enough built-up security against which the United States Government could proceed under the terms of this legislation.

Colonel Ralston therefore made the following proposal on behalf of the Canadian distillers. Mr. Lash and Mr. Phillips associated themselves with this proposal: [Page 814]

The Treasury Department would, for the present at least, agree to drop the entire embargo section of H. R. 9185 for “a month or six weeks at least”, and if at all possible until next January, with the understanding that it must be used as a last resort in the event they could not obtain satisfactory settlement or commitment out of the Canadian companies.
The Canadian distillers would, on their part, give commitments not to take advantage of this situation by increasing their exports of whiskey to New York over the present volume, making some allowance for normal increase in business. In this way, they pointed out, even if the Treasury Department found it possible to postpone this legislation until next January, only 10 to 20 percent of the present stocks of whiskey would be exported to the United States in the remaining months of the year, and there would thus be an ample quantity of whiskey against which the Treasury Department could proceed if necessary.
The Canadian distillers would give commitments not to dispose of their stocks of American type whiskey elsewhere so that there would be no dissipation of any of the security against which the Treasury Department might ultimately have to proceed.
The Canadian distillers would give commitments to come to Washington immediately on being summoned by the Treasury Department, sit down around a table and discuss the Treasury Department’s claims against them, with the view to (a) reaching an amicable settlement out of court, or (b) discussing terms, conditions and practical measures in respect to their submitting to our jurisdiction and protecting the United States Government against any losses on judgment which might be obtained against the company.

Mr. Phillips, representing the Seagram interests, pointed out that the distillers were under a considerable obligation to the Canadian Government for taking up their case with the United States Government, and for making arrangements for the present conference. He added that he felt certain that the Canadian Government would be glad to associate itself with such an undertaking and to do everything it could to bring about an honest fulfillment of these conditions.

Acting Secretary Taylor thanked the representatives of the Canadian distillers for coming to Washington, and stated to them that a careful study would be made of their representations, and that perhaps by the end of the week he would be able to give Mr. Wrong, the Canadian Chargé, either through the State Department or directly, the decision of the Treasury Department.

J[ohn] D. H[ickerson]