711.00111 Unlawful Shipments/258

The Chargé in Canada (Simmons) to the Secretary of State

No. 2424

Sir: I have the honor to refer to the Department’s instruction No. 1311 of July 23, 1938, (file No. 711.00111 Unlawful Shipments/239)33 and to previous correspondence concerning the shipment to Canada of United States airplanes and airplane parts, with a presumable destination of Spain, and to transmit herewith a copy of note No. 107 dated July 27, 1938, which has today been received from the Canadian Department of External Affairs33 relative to this subject. The Department will note particularly that the Canadian Government now recognizes the fact that the documentary evidence which led the Canadian authorities to grant export permits in the case of certain shipments made by the Canadian Car and Foundry Company Limited was of a fraudulent character. The concern of the Canadian Government in regard to the question of responsibility for this fraudulent action is clearly stated, and it is set forth that the company in question, although taking the position that its officers were at all times innocent of any complicity in this fraudulent scheme, has nevertheless been penalized by the refusal of the Canadian Government to issue further export permits to this company.

I should judge from the note in question, and also from recent personal conversations which I have had with Mr. John E. Bead, Legal Adviser to the Department of External Affairs, on this subject, that the Canadian Government has been subjected to considerable pressure on the part of the Canadian Car and Foundry Company Limited, to relax its present restrictions on that company. In this connection it is of interest to note that the Department of External Affairs argues that the continuance of these restrictive measures on the company in question, coupled with the maintenance of the present refusal of the United States Government to permit the shipment of airplane parts to that company from the United States, would have an effect upon the supply of aircraft for the domestic trade in Canada and for export to countries where such export is proper. It is also argued that a continuance of present restrictions would cause a shut-down of the company’s plant with severe financial losses to the company and serious hardship to the workmen who normally would be employed in the plant.

It occurs to me in this connection that, for the first time in recent negotiations which have occurred with the Canadian Government on this general question, the Department of External Affairs has shown [Page 359] an active interest in settling this whole question. Although this interest may have been inspired by pressure from the Canadian Car and Foundry Company, it is nonetheless evident that the Canadian Government would now welcome some practical solution of this problem so as to ensure that there will be no further export to countries to which export is forbidden under the laws of either country, and at the same time to permit all proper transactions in connection with the aircraft trade.

This increased solicitude and interest on the part of the Canadian Government in the general problem involved would, in my opinion, furnish the United States Government with an excellent opportunity of stressing once more to the Canadian Government its desire for more direct and efficient cooperation in connection with the exchange of information concerning shipments of airplanes, airplane parts, and other similar material to foreign countries from Canada. Should the Department so desire, I shall be glad to approach the Canadian Government once more on this general question in connection with the solution which is now being sought covering the difficulties which have been encountered by the Canadian Car and Foundry Company Limited.

Respectfully yours,

John Farr Simmons
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