832.6584/4–2347
Memorandum by Mr. Leo I. Highby of the International Resources Division to the Chief of the Division of Brazilian Affairs (Dawson)
Subject: Flour Allocation to Brazil
I note your revision of the last sentence in your memorandum of conversation of April 1554 on “Controversy over Export Licensing of 200,000 Bags of Flour for the Government of the State of São Paulo”, as well as the revision of the second page as of April 16. The last sentence suggests that the State Department might intervene to attempt to assure the State of São Paulo of receipt of the necessary flour for the special uses contemplated, in view of the nature of the transaction and of the fact that it had been initiated before the removal of wheat flour from general license.
A stand in the Department reflecting the underlined words would involve the Department in difficulties, since the embargo announced on March 20 and made effective on April 1 was intended, to cut off such contracts, permitting only those to be completed where the flour had [Page 470] already been started on its way on April 1. In fact, if it had been permitted to fulfill outstanding contracts, it is estimated that perhaps 200,000 tons more would have moved to general license areas and the embargo would have had little meaning. As laid down by the Department of Agriculture, the procedure henceforth will be to send flour to the general license areas only on an emergency basis and with need well established. The Department of Commerce, which administers licenses covering any allocations made by the Department of Agriculture, awards licenses to applicants for the same on the basis of historical experience of United States exporters in shipping to the market in question and without reference to contracts made before the cut-off day of the embargo. This principle is also acceded to by the flour trade.
Consequently, granting of a license on the basis of initiation of a, transaction before removal from general license would open the door to a demand for like consideration by all other exporters who had negotiated deals before the embargo and would make it impossible to administer the flour control. Only if altogether convinced of a need which cannot be met by equalization of supplies within the importing country in question would it appear that the State Department should support requests for allocations. The need does not appear to have been established in this case. The allocation was apparently established only because of the activities of a well-known lobbyist. I should perhaps also mention that it was especially the excessive shipments of flour to Brazil while grave shortages were developing elsewhere, that caused Mr. Clayton55 to urge Secretary Harriman56 and Secretary Anderson57 to agree to flour being put back on specific license some time ago.