The Acting Secretary of State to the Ambassador in Germany (Dodd)

No. 724

Sir: With reference to the Department’s instruction No. 711 [710], dated December 11, 1936,18 transmitting copies of two notes addressed to the German Embassy December 8, 1936,19 there are transmitted for your information copies of the translation of the German Embassy’s reply, dated December 16, 1936,20 and of a statement released to the press December 23, 1936, by the Treasury Department, concerning the application of Section 303 of the Tariff Act of 1930,21 in connection with imports from Germany.

The Department’s note of December 8, 1936, transcribing to the German Embassy a statement by the Treasury Department, stated that it was believed that on receiving the German Government’s confirmation of the transcribed statement of the Treasury’s understanding of the German Government’s intentions, the Treasury Department would wish to make public the contents of the Department’s note to the German Embassy, since the subject matter is of interest to many persons. It will be observed, however, that the statement issued to the press December 23, 1936, omits certain parts of the Treasury statement communicated December 8, 1936, notably the following:

“It is further understood by the Treasury Department, that the German Government will not permit, in respect of German products which are to be exported directly or indirectly to the United States pursuant to agreements entered into after August 2, 1936, and which are subject to ordinary duties upon entry into this country, the use of [Page 328] any currency other than foreign currency or reichsmarks freely usable within Germany without legal restrictions for all commercial purposes, except as above specified, and that the application of bond and scrip procedures, or the direct or indirect allowance of any form of public or private subsidy will not be permitted in any instance. Moreover, the use of controlled mark credits or direct two-party barter will be permitted, as above specified, only when the German Government has assured itself that any sale of American goods which may be involved in the transaction and the purchase of the German goods involved have been effected at the current fair German open-market prices for such goods in the quantities involved, and that any direct barter of American exports for German goods will be on the basis of such German market prices.”

The Department of State is not informed of the reasons for the omission from the public statement of parts of the statement communicated to the German Government.

However, the Current Information Division of the Department of State summarized as follows the press treatment of the Treasury press release:

“According to the press the foregoing ruling was issued on the basis of inquiries received by the Treasury Department and was designed to be a guide to others who have similar problems. It was said, however, that officials here had declared themselves unable to estimate to what extent these privileges would be availed of. It was thought that the information would be conveyed to the German Government from its Embassy in Washington and that the former would modify its laws, which at present prohibit the use of other than free gold exchange marks or free inland marks in trade with the United States.”

The press articles apparently contain no mention of recent correspondence with Germany on the subject, although certain earlier press articles had referred to such correspondence and there have been widespread rumors throughout the country, emanating in part from German sources, that some agreement permitting resumption of barter trade was imminent.

The Embassy is requested to inform the Consulate General fully concerning this matter for its information and guidance.

Very truly yours,

For the Acting Secretary of State:
Francis B. Sayre