611.3731/2586a

The Secretary of State to the Ambassador in Cuba ( Messersmith )

No. 1080

Sir: With further reference to the supplementary trade-agreement negotiations, the legislative situation in regard to sugar has become so uncertain as to necessitate a reconsideration by this Government of its proposals concerning item 501 of Schedule II. You are therefore instructed to convey the following information to the Foreign Minister of Cuba.

As you are aware, H. R. 5988 was passed by the House on December 1.16 This bill, and the companion bill S. 2041, are scheduled for consideration by the Senate Finance Committee next Wednesday, December 10. Although the interested Departments are doing all they can to prevent favorable action on these bills in the Senate, it is impossible to foresee what the outcome will be or what effect the outcome will have on the proposed trade agreement.

However, if pending sugar legislation should be passed by Congress, and if the President, for compelling reasons, should feel constrained to sign it or let it become law, it would of course be necessary to change the text of the proposed agreement to conform to the new legislation rather than to the Sugar Act of 1937.

If pending sugar legislation should not be enacted, the way probably would be cleared for the signature of a trade agreement, otherwise mutually satisfactory, which would contain in addition to the present note to item 501 another note to cover periods when there might be no sugar-quota legislation in effect in the United States. The additional note would avoid the criticism that during such periods this Government would be powerless to deal with the situation.

In the case of the second alternative, there would be inserted in the agreement, immediately following item 501, a note (Note I) the [Page 210] English and Spanish texts of which are enclosed.18 The existing note to item 501 would remain, as Note II.

In connection with the new note to item 501, the Embassy should bring to the attention of the Cuban authorities the following specific points:

1.
The note is broadly similar to that which appeared in the draft text of the agreement transmitted with the Department’s instruction no. 935 of October 3, 1941,18 with which the Cuban authorities are familiar.
2.
While the note would reserve to the President of the United States the right, subject to the conditions specified, to impose a customs quota on imports of Cuban sugar into the United States, the amount of the customs quota so established could not, under the new note, be less than a quantity equivalent to 28.60 percent of the total sugar consumption requirements of the United States as estimated by the Secretary of Agriculture. The rate of duty for such customs quota could not be higher than $0.75 per 100 pounds of raw sugar (96° basis), and the rate of duty on imports in excess of the quota could not exceed $1.50 per 100 pounds of such sugar.
3.
The share of 28.60 percent of the total consumption requirements of the United States which is specified as the minimum customs quota would be larger, in certain circumstances, than Cuba’s share of this market under the provisions of the Sugar Act of 1937; specifically, whenever such total consumption requirements are less than 6,682,670 short tons, raw value. The Embassy will recall that, under the Sugar Act of 1937, Cuba’s share decreases in the latter case by operation of the so-called “minimum provisions” of the Act, which assure to domestic areas a minimum amount of 3,715,000 short tons.
4.
The note is of a purely emergency character, applicable only in the absence of sugar-quota legislation, and is designed solely to permit alleviation of possible distress, to the benefit of Cuba as well as of domestic and other suppliers, until such time as appropriate legislative measures could be taken.

With reference to the Embassy’s despatch no. 2966 of November 19, 1941,18 transmitting a copy of a memorandum handed the Cuban authorities on the same date, the Department has observed that the memorandum contains a definitive proposal by this Government to grant the maximum reduction in the rates of duty on molasses and sugar syrups classified under paragraph 2 of Schedule II. When the possibility of such a concession was mentioned in the course of a telephone conversation, it was clearly stated that the proposal was tentative and that it had not yet been approved by the Trade Agreements Committee. Objection was subsequently expressed to granting this concession on the ground that it would be open to criticism as benefiting monopoly interests. In any event the communication of this proposal [Page 211] to the Cuban Government prior to its approval by the trade-agreements organization is unfortunate. The Embassy is now requested to withdraw this proposal unless, in its opinion, withdrawal would complicate current negotiations for the purchase of the Cuban sugar crop by interjecting a discussion of the tariff on molasses as an element to be taken into account in computing the basic price of the crop.

It is noted from the Embassy’s telegram no. 186 of November 28, 1941,19 that the Cuban authorities continue to press for inclusion in the second indented paragraph of Article VII of the Spanish draft text of the words “taxativamente económico”, so as to qualify the manner in which an object of the agreement must be considered by either Government to have been impaired or nullified by a measure adopted by the other Government before the former may take action under the provisions of the paragraph. Although the Department believes that any such qualification would be undesirable, it would be willing, if the Cubans continue to insist on this point, to agree to the insertion of the Spanish equivalent of the adverb “materially” to modify the verbs “anular o menoscabar”; in the English text “materially” would be inserted immediately before “nullifying or impairing”. If Cuban insistence on using the words “taxativamente económico” continues, you are authorized to accede, inserting in the English text, between the words “impairing” and “any”, the words and punctuation “, in an economic sense,”.

With regard to the text of Schedule I of the proposed agreement, the form and substance of the Spanish and English versions transmitted with the Embassy’s despatches nos. 3013 and 3016 of November 29 and December 1, 1941, respectively,20 are satisfactory to the Department, subject to the following:

1.
The reference to gross weight should be removed from item 108–C in the English text.
2.
Effort should be made to extend through November 30 the season specified, in the note to item 260–D, (specified fresh vegetables except tomatoes and cabbage) during which the concession rate will apply.
3.
The word “specified” in the English text of the note to item 272–B should be changed to “included” to correspond with “comprendidas” in the Spanish text. The Department approves this note with the understanding that it covers mixtures of preserved fruits composed principally of the fruits included under item 272–B and would not exclude such mixtures when containing relatively small proportions of citrus fruits.
4.
The present rate of duty of 0.1625 peso per kilogram for item 120–B should be bound in the agreement, as indicated in point number (5) of the Department’s instruction no. 1051 of November 22, 1941.19
5.
Those articles for which a rate of duty is specified in the notes only, and for which no rate appears in Column 2, would not be covered by paragraph 1 of Article IV of the draft text, relating to other charges in connection with importation, and it will therefore be necessary to delete from the fourth line of that paragraph the words “Column 2 of”. This deletion has been made in the Department’s copies of the English and Spanish texts of the agreement.

With regard to the outstanding items comprising the original Schedule I requests of this Government and on which no concession has yet been received, the Embassy is authorized to make the following proposals to the Cuban authorities:

1. This Government will agree to withdraw its request for concessions on smoking tobacco (item 297–C) and cigarettes (item 297–E) provided the Cuban Government will withdraw its request for a concession on cigars. The Embassy may recede from this position by maintaining an offer to reduce the rate of duty on Cuban cigars to $1.80 per pound plus 10 percent ad valorem provided the concession on smoking tobacco is obtained as originally requested.

2. With respect to rice (item 253–B) this Government desires that the Embassy make an effort to obtain on a basis of deferred application of the concession following the form indicated in the Department’s telegram no. 360 of November 19, 1941,21 a rate of duty of 1.65 pesos per 100 kilograms applicable to a customs quota of 220,000,000 pounds (100,000,000 kilograms) of rice imported from the United States in any calendar year, the rate of duty applicable to extra-quota amounts to remain at 1.85 pesos per 100 kilograms and the minimum preference to remain at 50 percent.

In this connection, the proposal on rice advanced by the Commercial Attaché which was communicated by telephone on December 2 has been carefully examined. However, apart from other considerations, it was felt that further delay would be avoided by proceeding on the basis of the latest recommendations of the trade-agreements organization regarding rice and other Schedule I items.

3. At the same time that the foregoing proposal on rice is submitted to the Cuban authorities you should also request further consideration of the following concessions, most of which, it will be noted, have been modified: 95–A and 95–B (salt), rate of duty originally requested; ex–105–E, (shaving soaps and creams), elimination of the ad valorem portion of the present duty; 106–C, (toilet powders, etc.), rate of duty originally requested, the reduced rate to apply, however, only to rouge, face-paint of any color, including cosmetic pencils or crayons, and skin creams; ex–108–A (industrial corn [Page 213] starch), rate of duty of 3.64 pesos per 100 kilograms, which rate is the same as the present rate on corn products classified under item 256–C and the concession rate obtained for edible starch and fecula of corn in the note to item 290–B of the draft text of Schedule I; 161–D (Kraftboard), rate of 1.20 pesos per 100 kilograms; 241–B, (“tocineta” or fat pork), rate of 7.50 pesos per 100 kilograms, together with a request for the same rate on item 238–C (pork); 269–G (specified poultry feeds), insertion of a note under this item classifying therein all mixed feeds for poultry; 269–H, (other feeds, not specifically classified), insertion of a note under this item providing for a rate of duty of 1.40 pesos per 100 kilograms on mixed feeds for livestock.

In the event the Cuban authorities refuse to grant the requested concession on rice, you are authorized to drop rice from the negotiations, in which case you should place further emphasis on the concessions (other than that on rice) outlined above, and in addition the following requests should be made: ex–256–C (specified products of white corn), rate of duty as originally requested; 269–E (specified livestock feeds), rate of duty of 0.90 pesos per 100 kilograms; 269–G (specified poultry feeds), rate of duty of 1.05 pesos per 100 kilograms (if this concession is secured, the same rate should be obtained for mixed feeds for livestock in the proposed note to item 269–H, mentioned above); 307–B (rubber heels for shoes), rate of 0.195 peso per kilogram; 307–D and 307–E (canvas rubber footwear), rates of 0.26 and 0.24 per kilogram, respectively; 307–K (articles of rubber not specifically classified), binding of the present rate of 0.1625 peso per kilogram with respect to the entire item.

Of the foregoing proposals, other than that relating to rice, the Embassy should place greatest emphasis, in relative order, on 95–A and 95–B; 241–B and 238–C; ex–256–C; and ex–106–C: of least importance are, in relative order ex–105–E; 307 items; 269–E; 269–G, with respect to rate of duty; and ex–269–H.

In connection with item 314–B (tires) and 314–C (tubes), the Department has reason to believe, from conversations with the Minister of the Presidency of Cuba, Dr. López Castro, that the Cuban Government has decided to grant the concessions requested. The Department feels that concessions on these items are essential, particularly in view of the volume of trade involved.

The only remaining point is the proposed exchange of notes relating to grapefruit standards, on which a definite decision should be obtained from the Cuban authorities as soon as possible.

Very truly yours,

For the Secretary of State:
Sumner Welles
  1. Congressional Record, vol. 87, pt. 9, p. 9298. The Senate approved the House bill with an amendment on December 19 and the House in turn approved the bill as amended by the Senate on the same day; see ibid., pp. 10021 and 10069. The President signed the bill on December 26; see 55 Stat. 872.
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