Memorandum by the Secretary of State

The Italian Ambassador called and I read over to him the attached statement relative to the proposed imposition of countervailing duties by the Treasury Department on certain imports from Italy.

I then said to the Ambassador that the State Department had earnestly exercised itself to prevail on the Treasury to allow the Government of Italy forty-five days in which to give attention to the alleged subsidies and to take steps if at all consistent to remove the grounds on which my Government is proposing to take action by applying the anti-dumping law.17 He seemed entirely good-natured about the matter and appreciative of the forty-five day extension. I suggested that he get in touch with the appropriate Treasury officials for the full facts and for discussion.

C[ordell] H[ull]

Statement Read to the Italian Ambassador by Secretary Hull on May 6, 193918

Pending Countervailing Duties on Certain Imports From Italy

Under the provisions of Section 303 of the Tariff Act of 193019 it is mandatory upon the Secretary of the Treasury to impose additional [Page 629] duties upon imports into the United States when he finds that such imports have been subsidized. The law leaves no discretion as to its application and applies to bounties or grants, by whomever paid or bestowed, upon either the production or the exportation of the articles in question. The additional countervailing duties are required to be equal to the amount of the subsidy in question. The law applies to all dutiable imports into the United States. (The text of Section 303 is attached hereto.)

Under the provisions of this section the Treasury Department has informed the Department of State that it has reliable information

“… that the exportation of silk goods from Italy is subsidized to the extent of lire 6 to lire 63 per kilo of silk used in producing the exported goods. In the case of silk goods exported to North America and South America the exporter receives an additional subsidy of lire 4 per kilo.

“Each year an official price is fixed for raw silk made up of an arbitrary price to be paid to the farmer for the silk cocoons and a fixed cost for drying and selecting. The cost of raw silk to the buyer for the 1938–1939 period was fixed by official decree at lire 127 per kilo.

“Upon exportation of the silk goods the exporter is compensated in amounts varying according to the character of the goods exported, which are predicated on a basic rate representing the difference existing between the Italian fixed price of simple drawn silk and the average price of similar Japanese silk on the New York–Yokohama markets calculated monthly.”

It is the conclusion of the Treasury Department that this compensation to Italian exporters of silk goods constitutes a bounty or grant upon exportation and that countervailing duties should be imposed under Section 303 of the Tariff Act of 1930 on dutiable importations of silk goods from Italy.

The Department is further advised as follows:

“The Treasury Department is also satisfied from information before it that grants are being bestowed upon Italian exports of cotton, wool and leather goods. These exports are aided by the issuance to the exporters of special permits for the importation of raw materials. Such importations are ostensibly to replace the raw materials used in producing the exported goods, but in fact cover substantially more than replacement amounts in many, if not all, cases. The Italian restrictions upon imports are such that these permits have a substantial value, which in some cases may amount to as much as 200 percent of the value of the goods which may be imported under them.

“The issuance of these permits gives the Italian exporter a subsidy having a value equal to the price obtainable for so much of the permit as covers goods in excess of the quantity required to replace like material used in producing the exported articles.

“Section 303 of the Tariff Act of 1930 requires the Treasury Department to determine or estimate the net amount of the subsidy allowed [Page 630] with respect to each shipment of dutiable merchandise from Italy to the United States in connection with which the above described procedures obtain. However, Treasury representatives who have visited Italy for the purpose of investigating this matter have been denied access to necessary information.”

Although the Treasury Department is under the mandatory obligation of applying countervailing duties in these circumstances, this Department has secured the consent of the Treasury Department to suspend announcement of the imposition of such duties for a period of 45 days in order to afford an opportunity to the Italian Government to submit pertinent information concerning the procedures obtaining with respect to the four classes of goods above mentioned. The Treasury Department will of course be ready at any time during that period to discuss its findings with members of the Italian Embassy and to give additional information as to the basis of its pending action.

If the Italian Government should find it feasible or possible to modify its procedures with respect to exports to the United States of the classes of goods concerned, so as not to involve the payment or bestowal of a bounty or grant, such modification would of course obviate the necessity for the imposition of the contemplated countervailing duties and would, it would seem, constitute a desirable solution both from the standpoint of the Italian Government and that of the Government of the United States. Such a solution would have the advantage not only of eliminating both the subsidy and the offsetting additional duty, but also of removing delays in final liquidation of entries of merchandise which may be occasioned by the necessity of withholding final liquidation until the net amount of the subsidy allowed in connection with any particular shipment has been determined.

  1. Anti-Dumping Act of 1921; 42 Stat. 11.
  2. Filed separately under 611.653/100.
  3. 46 Stat. 590, 687.