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.
[Annex]
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.
