611.653/112: Telegram

The Ambassador in Italy (Phillips) to the Secretary of State

242. From Treasury Attaché Wait for Treasury Department:

“Payments to exporters of silk are substantially as heretofore reported. Entenazionale Serico, the Government organization, pays exporters of raw silk to all countries the difference between fixed Italian domestic prices and the average price of white raw silk on the Yokohama, New York markets which is computed on the 15th and last day of each month. Payments on exports of manufactured silk are based on the raw silk content as scheduled in Decree Law No. 1267 of May 29, 1937. An extra payment of lire 4 per kilo is made on exports to America. The Italian domestic price for the year beginning July 1, 1939 is fixed at lire 127 per kilo which is the same as for 1938. The average Yokohama, New York price on June 15 was lire 99.33 hence payment for export of raw silk to the United States now is lire 27.67 [Page 640] per kilo plus lire 4 a total of lire 31.67. Payments are based on prices prevailing on date of acceptance of order and not on date of export.

In addition to the above the manufacturers association Ufficio Serico Italiano pays lire 20 per kilo on exports of raw silk or raw silk used in exported manufactured products. This constitutes a return of lire 13 paid to the association by each buyer for each 10 kilos of domestic cocoons plus 7 lire from the association fund which accumulates as no repayment is made on domestic sales. This lire 7 represents the difference between the average New York, Yokohama price for white silk and the lower export price of Italian yellow silk. Amounts to be paid for the year beginning July 1, 1939 is not yet fixed.

The Italian Minister of Foreign Trade and Exchange says benefits are paid solely as an agricultural measure to encourage cocoon raisers by guaranteeing them a profitable price for cocoons corresponding to benefits given cotton and wheat growers in the United States; that payments to exporters will decrease as the price level of Japanese silk increases; that exports are made at world price levels that do not injure our trade; that any curtailing of Italian exports caused by a countervailing duty will be met by curtailing to the same extent imports from the United States into Italy. The Minister seemed particularly perturbed because a countervailing duty might apply to shipments of silk fabrics from England, France and Switzerland made from Italian silk which would result in ruining the raw silk business with those countries and giving it to Japan. He pointed out the practical difficulty of determining whether silk in fabrics was of Italian, Japanese, or other origin.

My opinion is the payments come within the provisions of Section 303.

With respect to import permits for leather, cotton, and wool, I am satisfied the present situation does not come within the provisions of Section 303. A report on such permits will follow.”