Foreign Relations of the United States: Diplomatic Papers, 1943, The American Republics, Volume V

811.20 (d) Regulations/9639b: Circular airgram

The Secretary of State to Diplomatic Representatives in the American Republics Except Argentina, Brazil, and Mexico, and to the American Consul at Martinique

Washington, January 19, 1943—8 p.m.

As the Missions are aware several months ago the Board of Economic Warfare¹ and the Department of State discussed the possibility of “decentralizing” certain operations of the Office of Exports.²

In February of 1942 the “Certificate of Necessity” procedure was adopted and each American republic established or designated an agency with authority to issue certificates. As originally planned under the Certificate of Necessity procedure it was proposed to notify each country after the allocation of material had been made by the War Production Board or other supply control agency in the United States and well in advance of the beginning of each quarterly period, with the Country Agency³ in each country issuing certificates of necessity to importers who would forward them to the exporters in the United States. The exporters would attach the Certificate to the export license application and forward to the Board of Economic Warfare.

In actual practice it proved impossible to obtain firm allocations of materials sufficiently far in advance of the calendar quarters to which the allocations applied to permit notification of this amount to the Country Agencies, the issuance of Certificates and the filing of export licenses and Certificates with the Office of Exports, prior to the beginning of the quarter to which the allocations applied.

In 1942 there was much less shipping available for the American Republics than had been in service in prior years. It seems likely that there will be a further restriction of shipping in 1943. Obviously all available cargo space must be used to the fullest advantage, and space can no longer be used to send goods or materials which are not prime essentials to the country of destination. It is believed that one of the soundest ways to secure the most advantageous use of critical materials and the most efficient use of cargo space is to secure advice from each importing country as to its needs.

In consideration of the above factors, and in accordance with the general idea of decentralization, there has been developed a plan under which it is proposed that each country expand the functions of its Country Agency to the point where no materials, with certain exceptions (see 12.)⁴ will be imported from or by way of the United States unless a “Preference Request” has been issued by the Country Agency.

The basic reasons for the plan are:

1. The desire to accord the foreign government a participation in the determination of imports within the limited shipping availabilities.

2. The necessity of correlating the issuance of licenses with estimated available shipping for forward periods so as to avoid the accumulation of excessive cargo backlogs.

3. The necessity of developing further information of the advance requirements for many end-products soon to be brought within the Controlled Materials Plan⁵ of the War Production Board.

4. To establish a procedure under which the recommendations of the Mission will be in such form that the Office of Exports can give full weight thereto.

The type of plan (with interpretative comment) under consideration is as follows:

1. The government of each country will designate one of its agencies (hereinafter referred to as “Country Agency”) with which all parties, desiring to import articles and materials from or by way of the United States will file applications for “preference requests”. These preference requests and the procedure outlined hereafter are to replace the present Certificates of Necessity procedure or similar device now in use.

a. This means that all products (with certain exceptions, see 12.) which are to be imported by a country are to be covered by a preference request.

b. The preference request, the form of which is being transmitted by air mail, is a controlling document which will take the place of the Certificate of Necessity.

2. The Country Agency will be furnished with an estimate, on a quarterly basis, of (1) the total amount of specified materials which, under then prevailing conditions, it is expected will be authorized for export to the country, and (2) the total amount of available shipping space. The estimates so furnished will not constitute an allocation, allotment or assurance that the articles, materials or shipping will be available. The country agency will, as soon as practicable, announce a list of articles and materials which are importable.

a. Points (1) and (2) above anticipate the continuance of the present procedure of announcing advance estimates of available supply for all commodities under allocation for export, and certain other products (largely end-products) which are, or may be, under restrictive licensing quota.

b. The Country Agency and the Mission, will proceed as soon as possible to compile a list of licensable items in accordance with the classifications of Commerce “Schedule B Statistical Classification”,⁶ copies of which have been furnished the Missions. This list will be sent to the Board of Economic Warfare. Pending the development of the proposed decentralization procedure to a point where all imported materials are subject to preference requests, the Board of Economic Warfare will remove the articles and materials which the Country Agency does not wish to import from General License, and endeavor to reject individual export license applications therefor. It may be easier for the Country Agency to compile and have published a list comprising items which it does not desire to import. This may be done.

3. The Country Agency will transmit to the Mission (Embassy or Legation of the United States) copies of all preference request applications. The Mission will screen the preference requests issued by the Country Agency not only in the light of the factors considered by it but also:

a. Against Proclaimed and Confidential Lists and,

b. Commodity involved and end use. This commodity control will be for the purpose of assuring that the product or materials in question is not approved in quantities in excess of the requirements of satisfactory consignees and consumers.

4. The Country Agency, jointly with the Mission, will examine, select and recommend preference requests within the limits of the estimated amount of articles and materials and estimated available shipping (as referred to in paragraph 2). The preference requests will be classified according to three categories as follows:

Category A—Orders relating to the production and transportation of materials essential to the war program of the United Nations.

Category B—Orders relating to the maintenance of essential services of the local government (this category will include public utilities).

Category C—Orders relating to the maintenance of civilian enterprises essential to the economy of the country of destination.

[Here follow sections 5–8 dealing with methods of handling preference requests.]

9. The Board of Economic Warfare will endeavor to issue export licenses for which the country agency has issued preference requests. The Board of Economic Warfare in Washington reserves the right to deny preference requests approved by the Country Agency and the Mission, and to issue export licenses without approved preference requests when it deems such action necessary to the best interests of the war program of the United Nations.

10. The Mission will be informed of the action taken by the Board of Economic Warfare, Office of Exports, on the recommended preference requests and of the issuance of export licenses not covered by preference requests. Through appropriate channels, the Country Agency will also be informed.

11. All shipments, whether permitted by an individual, multiple order or project type license, will come within the scope of this plan.

a. In connection with project licenses and multiple order licenses, one preference request for each license may be issued.

12. A project, for the purposes of this plan, is defined as any single undertaking involving (a) new construction, (b) establishment of new facilities, (c) expansion of existing facilities or (d) the maintenance, repair and supply of industries operating for the purposes of the war program of the United Nations or vital to the subsistence of the economy of a country. Preference requests for the material requirements for projects shall, where such are necessary, be separately identified and consolidated as such. The Country Agency will be advised by the Board of Economic Warfare, through the Mission, of all project licenses now outstanding and of all projects hereafter initiated by the Board of Economic Warfare, Washington, D. C. Requirements for nil such projects as well as requirements for petroleum companies producing for the war program of the United Nations and mining enterprises holding mine serial numbers of the War Production Board must be provided for in preference to all other requirements. Materials required for such projects for each quarter year will be charged by the country against the estimated amounts of available materials and shipping space although no preference request will be issued therefor.

Projects initiated in the country will be submitted to the Country Agency for approval and a preference request recommended or denied. Preference requests so filed may list on a single document all the materials involved.

a. The question of handling project licensing under the proposed decentralization procedure will be explained and clarified by officials of the Department and the Board of Economic Warfare upon their arrival.

Representatives of the Department and the Board of Economic Warfare are leaving on or about January 23 to visit the Missions for the purpose of presenting and explaining the operation of the proposed plan. Pending the arrival of this special mission, it is suggested that any discussions of the proposed new procedure with officials of the Government to which you are accredited be deferred. The Mission will be advised by cable of the names of these officials and their approximate date of arrival.

Hull

1. The Board of Economic Warfare superseded the Economic Defense Board on December 17, 1941. Its purpose was to develop policies and plans in the field of international economic relations in the interest of national defense.
2. This office, a constituent part of the Board of Economic Warfare, directed the flow of commodities in commercial export channels.
3. That office which, under a variety of names, administered the import controls in each country.
4. See paragraph 12, p. 109.
5. For an explanation of this plan, see circular instruction of April 26, p. 111.
6. Statistical classification of domestic and foreign commodities exported from the United States; issued by the Bureau of the Census, Department of Commerce.