611.6231/783½
The German Embassy to the Department of State
Memorandum
Answers to the Questionnaire dated May 5, 193642
Answer to Question No. 1.
It is intended to allow and make possible payments for the increased volume of imports specifically as follows:
The value of Germany’s imports from the United States in 1935, according to the German statistics, amounted to 241 million RM. An increase by 10 per centum will result in imports from the United States valued at approximately 265 million RM for the first year of the duration of the agreement. This amount represents the minimum allotment of foreign exchange for the first year. If the foreign exchange situation makes it possible to increase the allotment beyond that figure, the German Government is willing to do so.
The German proposal is based, as it was said, upon the assumption that Aski and private compensation transactions are to continue to the same extent as heretofore.
[Page 237]With regard to Germany’s imports from the United States, the ratio of Aski and private compensation transactions to payment in actual foreign currency and by acceptance credits has been approximately ⅔:⅓ Therefore, foreign-exchange allotments to make possible imports valued at 265 million EM would be granted as follows:
| ⅔ | = | approximately | 177 | million | RM | for payment of Aski and private compensation transactions, |
| ⅓ | = | “ | 88 | “ | “ | for payment in foreign currency and by acceptance credits. |
Further details may be found in the answers to the subsequent questions.
Answer to Question No. 2 (a).
“Foreign Exchange” (in German “Devisen” or “Devisenzuteilun-gen”) comprises every kind of payment of imports of foreign commodities, whether by actual foreign currency or by acceptance credits, or by Aski and private compensation transactions.
In accordance with the principles of Germany’s foreign exchange management known as “The New Plan” every payment of imports of foreign goods is subject to a license (a so-called foreign-exchange certificate (Devisenbescheinigung)) by the control office established for the particular group of commodities. The control offices are authorized by a central office to issue foreign-exchange certificates for the payment of imports by actual foreign currency or by means of acceptance credits to such an extent only as is determined in the case of certificates for foreign currency, by the actual amount of foreign currency on hand, and in the case of certificates for acceptance credits, by the amount of foreign currency expected to be received with certainty up to the maturity of the credits. The issuance of such a certificate guarantees, therefore, to the foreign seller (exporter) prompt payment at maturity in the currency agreed upon. The Aski permit is an assurance to the foreign seller that payment of the imported goods will be effected at maturity in Reichsmark to a bank account from which shipments of German goods to the country of origin of the imports may be paid. The compensation permit guarantees to the foreign seller the payment of the imported goods through the use of the proceeds from exports to the country of origin of the imports.
Answer to Question No. 2 (b) (1).
The total sum of foreign exchange at Germany’s disposal in a “representative period” and the proportion thereof employed for payments to the United States are calculated from the German import statistics, [Page 238] because they correspond approximately to the value of Germany’s total imports and to the value of imports into Germany from the United States as shown by the German statistics for the time prior to the adoption of the principles governing at present the German foreign-exchange management.
For example: In case that 1933 is agreed upon as “representative period”, the value of total imports into Germany in that year amounted to 4,203,612,000 EM, while the imports from the United States for the same period had a value of 482,772,000 RM = 11.5 per centum. As to the “deductions which may be required by the foreign-exchange situation”, cf. the answer to Question No. 3 (a).
Answer to Question No. 2 (b) (2).
The total sum of foreign exchange at Germany’s disposal in the period to be covered by the suggested agreement cannot be stated in advance. It is made up as follows: From the total sum of foreign exchange received either in foreign currency or through Aski and private compensation transactions, or by payments to clearing accounts, certain necessary payments outside of imports must be—before anything else—made abroad, such as, for instance, freight, insurance payments, commissions and similar service payments, interest under the standstill agreement, foreign service and certain other administrative expenses. The balance is allotted by the control offices to the payment of the various imports in accordance with directions given by a central office. In this connection it should be noted that the receipts of foreign exchange, insofar as they result from Aski and private compensation transactions or from payments to clearing accounts, may in turn only be used for the payment of Aski, compensation and clearing transactions.
The control offices would be instructed to allot foreign exchange for purchasing American goods in the amount of the proportion of the total foreign exchange corresponding to the United States. As to the calculation of this proportion, cf. the answer to Question No. 3 (a); with regard to the apportionment of foreign-exchange allotments to actual foreign currency and acceptance credits on the one hand, and to Aski and private compensation transactions on the other hand, cf. the answer to Question No. 1.
Answer to Question No. 2 (c).
An interpretation of the term “foreign exchange” has been given in the answer to Question No. 2 (a). The sentence “It is taken for granted that Aski and private compensation transactions will be allowed to continue to the same extent as heretofore” is to be interpreted as meaning—as stated correctly in the Questionnaire—that settlements of payments for imports into Germany from the United States effected by these two methods are to be considered as allotments of foreign [Page 239] exchange for the purpose of the assurance suggested in the first part of paragraph 2 of the German memorandum.
Answer to Question No. 3 (a).
The sentence “Assurance of allotment of foreign exchange on the principle of a proportion of a representative period (1933 or the average of the years 1931 to 1933), subject, however, to such deductions as the foreign exchange situation may require” is adequately explained and amplified by the statement that “an average increase of the imports from the United States amounting, for the present, to 10 per centum over 1935 ought to result”. If that statement had not been made in the German memorandum, it would have remained doubtful to which extent the deductions mentioned before might be made. This additional statement (increase by 10 per centum over 1935) was intended to illustrate the meaning of the phrase “deductions such as the foreign-exchange situation may require”.
In the year 1933, for instance, the value of the imports from the United
States was
483 million RM = 11.5 per centum of the total German
import value;
in 1935 it was
241 million RM = 5.8 per centum.
If the year 1936 were chosen for the duration of the agreement, the total value of imports into Germany would presumably amount to about 4.2 billion RM. To allot foreign exchange for imports from the United States to the extent of 11.5 per centum of the total import value expected to reach the sum of 4.2 billion RM, is at present impossible due to Germany’s difficult foreign-exchange situation. It would, therefore, be necessary to make deductions from that sum which would result if merely the principle of a representative period were to be applied. In order to convey to the American Government an understanding of the extent to which such deductions altogether are proposed, the German proposal contains the statements that
(a) “the imports of any commodity will not fall short of the level of 1935 through the deductions in question”
and that
(b) “the result should be an average increase of the imports amounting for the present to 10 per centum over 1935”.
This is tantamount to imports from the United States in an amount of at least 265 million RM for the year to be chosen as period of the agreement, the understanding being that payment will be effected as heretofore, i. e. two thirds of the total imports to be settled through Aski and compensation transactions. Insofar as the licensing of Aski and private compensation transactions is concerned, a limitation is [Page 240] warranted as bilateral transactions cannot be increased at will by the German partners alone.
The deductions will vary according to commodities. In this connection American wishes shall be given consideration as far as possible. An excess of the total volume of the imports from the United States over the value of the imports in 1935 plus 10 per centum, cannot, for the reasons stated, be assured at this time, on the other hand, it need not be considered impossible either, this question being dependent upon the development of the foreign-exchange situation.
By way of explanation the following examples are given:
(a) Cotton (German classification schedule No. 28a).
Imports of cotton into Germany from the United States in 1933 amounted to 74.1 per centum of the total German cotton imports; in 1935 it was but 20.6 per centum of the total. The total imports into Germany from the United States having decreased, as outlined above, from 11.5 per centum in 1933 to 5.8 per centum in 1935, the percentage of the decrease of imports of cotton from the United States being considerably larger, however, an important part of the increase of imports from the United States as shown to be possible in the German proposal might be given to the imports of cotton.
(b) Cash Registers (German classification schedule No. 891 D 3). Imports of cash registers from the United States amounted to 75.5 per centum of the total imports of cash registers into Germany in 1933; in 1935 the percentage was 93.1 per centum. Taking the year 1933 as a basis, no deduction from the sum resulting by applying the principle of a representative period would be necessary.
Answer to Question No. 3 (b) (1).
The necessary harmony of the two ideas “representative period” and “deductions such as the foreign-exchange situation may require” will be found in the answer to Question No. 3 (a).
Answer to Question No. 3 (b) (2).
Deductions from the total import volume which is calculated exclusively on the principle of a representative period will certainly be necessary. It is, however, very well possible that no deductions may be necessary in the case of certain commodities.
Answer to Question No. 4.
The German Government does not propose to exclude any specific commodities from the operation of the principle of a “representative period” as outlined above.
Answer to Question No. 5.
Goods the import of which into Germany from the United States has disappeared entirely in 1935 may be included in the procedure, [Page 241] provided the total import volume for imports into Germany from the United States as stated above (imports in 1935 plus 10 per centum) is not exceeded.
Answer to Question No. 6 (a).
Yes, insofar as private compensation transactions to the extent as stated before (1935 plus 10 per centum) are concerned.
Answer to Question No. 6 (b).
The phrase “as far as foreign exchange …” shall not be considered as modifying the statement.
Answer to Question No. 6 (c).
1:1.