611.3431/66b

The Secretary of State to the Ambassador in Paraguay ( Frost )

No. 1030

Sir: With reference to the concluding paragraph of the Department’s instruction no. 972 of August 17, 1943, in which it was stated that definitive proposals regarding schedules for inclusion in the proposed trade agreement with Paraguay would be forwarded following consideration of the information presented at the public hearings, there are enclosed definitive proposals regarding Schedules I and II of the agreement.70 You may transmit these Schedules to the Minister of Foreign Affairs and proceed to a discussion of them in an endeavor to obtain agreement thereon.

In formulating the list of concessions on products of the United States imported into Paraguay, this Government has attempted to restrict its requests to moderate proposals, keeping in mind the extent of the concessions it is in a position to offer in Schedule II of the agreement. In the case of the majority of the items in Schedule I which involve trade of considerable value, it will be noted that United States requests are merely for the binding of existing customs treatment.

If Paraguayan officials are not willing to bind the present rates of duty on lubricating oils and greases, in accordance with this Government’s request on Tariff Paragraph 156 of Schedule I, you are authorized to drop the request on that item. In the event of an unwillingness by those officials to grant the concessions requested on any other items, the matter should be referred to the Department for further consideration.

The rates of duty which are set forth in Schedule I are the basic Paraguayan import duties only. It is understood, of course, that in accordance with the provisions of the second sentence of Article VII of the General Provisions of the proposed agreement, supplementary duties, taxes, et cetera, on products imported from the United States which are included in the Schedule will be bound against increase during the life of the agreement.

It is not believed that the individual items in Schedule I require specific comment except perhaps in the case of the note following Paragraph 154. For your own information, it is the Department’s understanding that the bulk of imports of leaf tobacco from the United States would properly be classified under Tariff Paragraph 154(d) at a high rate of duty, whereas, as a matter of practice, such imports are actually entered under Paragraph 154(e) at a substantially lower rate of duty. The purpose of the note, of course, is to [Page 705] maintain, during the life of the agreement, this apparently irregular but favorable tariff situation affecting imports of leaf tobacco from the United States. If the Paraguayan authorities raise difficulties about the inclusion of the note (which is of greater value than the binding of the rate of duty under 154(e)), you might point to the fact that, in one of the four exchanges of notes which supplemented the trade agreement between the United States and Argentina, provision was made for continuing, during the life of that agreement, the existing customs treatment of certain articles about which there might have been some doubt.

The note which follows Tariff Paragraph 667 should be selfexplanatory. It relates to such office equipment as “Dictaphones”, and is included at the request of an exporter who had found that his product was apparently being subjected to import duties as a musical instrument at much higher rates than those generally applied to office equipment. You might point out to the Paraguayan officials that a number of other governments have, in recent trade agreements with the United States, agreed to the classification of such machines as office equipment. Paragraph 667 seems to be the most suitable paragraph in this section of the tariff under which to include the note on dictating machines and parts and accessories thereof.

Purely as a matter of convenience to you and possibly to the Paraguayan officials, the proposed Schedule I has also been prepared in Spanish, in conformity with the Paraguayan Tariff.

There is also enclosed for your convenience a copy of the report71 on Schedule I of the Country Committee on Paraguay to the Committee on Trade Agreements. This report is sent to you solely in order that you may have readily available trade statistics regarding each item included in the Schedule. The columns referring to the proposed rates of duty should be ignored, as the proposals of the Country Committee were considerably modified by the Committee on Trade Agreements.

It may be useful, in your discussions with the Paraguayans, to have available data regarding trade coverage. From that standpoint, products listed in Schedule I accounted for 28.6 percent of total Paraguayan imports from the United States in 1940 while products listed in Schedule II accounted for more than 95 percent of total United States imports from Paraguay in the same year.

With regard to Schedule II, this Government has not found it possible to accede to the Paraguayan Government’s request for concessions on castor oil, lemon-grass oil and certain fatty acids and salts derived from tallow, but requests for concessions on all other items which were included on the list published here have been granted to [Page 706] the full extent permitted under existing authority. It is understood that the tallow acids and salts are not produced in Paraguay and their omission should therefore not be the cause of any concern to the Paraguayan authorities.

With reference to the omission of castor oil and lemon-grass oil from Schedule II, you may inform the Paraguayan officials that, in the opinion of this Government, the position of Paraguay as a present or potential supplier of the United States market does not warrant a concession on these products to Paraguay in the first instance. If they should be the subjects of concessions in later trade agreements negotiated by this Government with other countries which are important suppliers, however, imports from Paraguay would of course be entitled to most-favored-nation treatment.

It will be noted that the description of rum appearing in Schedule II is the same as that used in previous trade agreements, and no special reference has been made to “Paraguayan” rum. If the Paraguayan officials take notice of this and again request specific reference to “Paraguayan” rum, you may inform them that despite thorough investigation here it has been impossible to obtain sufficient information regarding that product and its use, if any, in the United States to permit specific reference to it in the Schedule. As a matter of practice, the Bureau of Customs insists that when some specific description such as “Paraguayan rum” is used in a schedule, such reference shall be the common and commercial designation of the product in the United States market. If the Paraguayan officials insist on some such specific designation (which in any case will result in no more beneficial concession than can be granted on rum generally), you should request them to provide as detailed information as possible concerning the products used in and the process of manufacture of, the product, as well as any other information which they can supply regarding the sale of the product in foreign countries including the United States, and the specific name by which it is known. It would be helpful, if you should have need to report further on this matter to the Department, to include a label used on the product as sold in Paraguay or abroad.

It will be noted that concessions to the maximum extent permitted by the Trade Agreements Act have already been granted on many of the products included in the proposed Schedule II. In discussing this Schedule with the Paraguayan authorities, you should emphasize the fact that the concessions offered represent the greatest improvement in tariff treatment which it is possible to accord in relation to the statutory rates set forth in the Tariff Act of 1930. You should also stress the value of the fact that, as a result of the proposed agreement, the improved treatment of the products included in Schedule II [Page 707] would be granted to Paraguay in its own right and that the Paraguayan products in question, upon importation into the United States, would no longer have to depend upon extension of most-favored-nation treatment by the United States in order to obtain such improved treatment. Unless these facts are pointed out, Paraguayan authorities may be inclined to overlook them in their consideration of the proposed Schedule.

Very truly yours,

For the Secretary of State:
Dean Acheson
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