811.61311 Germany/10: Telegram
The Ambassador in Germany (Sackett) to the Acting Secretary of State
[Received August 5—5:45 p.m.]
159. Embassy’s 139 and 147, July 21 and 24 respectively. An offer to the Farm Board in regard to cotton resulted from conference at [Page 303] Foreign Office yesterday and today. In the telegrams under reference difficulties as to price were set forth. These difficulties are confirmed by the Foreign Office experts. Therefore, they propose a purchase without maximum or minimum prices. Their preference within the scope of the total order would be to make each purchase separately at the price governing in the New York Cotton Exchange upon the date of sale as according to paragraph 4 of the offer. As an alternative which they prefer not to use otherwise, they offer, however, a price based upon the monthly price in New York for all cotton shipped within that month. After conferring with the spinners and other users of cotton, the Foreign Office alleges that it is not practical for the Germans to handle this cotton unless they have definite knowledge of the price at which the cotton can be turned over to the manufacturer whose competition from other countries is based on spot prices. Although the quantity they can use is substantially reduced under the amount of the previous years’ imports because much of the former imported cotton was resold, by the brokers buying it, to other countries, the officials at the Foreign Office are quite anxious to do this business.
The proposal of Germany is as follows:22
“Basic principles of a contract concerning a cotton transaction between the Federal Farm Board and the German Government.
1. The German Government obligates itself to purchase from the Farm Board a total quantity of 600,000 bales with an option on a further 200,000 bales of American cotton.
The German Government may entrust a special bureau with the carrying out of the transaction.
2. The purchaser determines the individual quantities to be bought and shipped in each case as well as the qualities and the steamer on which shipment is to be made.
In case the Farm Board cannot supply certain qualities in the quantity demanded the German Government can demand that the total quantity of 600,000 bales be reduced by a corresponding quantity.
3. The acceptance and shipment must take place within the 12 months following the signing of the contract and in every month about one-twelfth of the total quantity is to be taken over. If desired the Farm Board will also supply larger monthly quantities. If the purchaser in any month takes less than one-twelfth of the total quantity he must pay the storage charges for the quantity not taken starting with the end of the month insofar as the deficiency in the amount taken is not balanced by previous excess purchases.
The individual purchases must as far as possible not amount to less than blank bales (the number to be inserted here to be agreed on later, the idea being that not less than a shipload is to be purchased).
4. The price for each purchase, id est, call for delivery, is determined by the official quotations on the New York Cotton Exchange.
[Page 304]5. In the absence of any provisions to the contrary in the contract the terms usual in international cotton transactions and the draft of agreement (form) of Liverpool and Bremen contracts at the choice of the purchaser are to hold good for the transaction of the business.
6. The Farm Board grants the German Government a credit of 3 years for the payment of the purchase price. Interest is to be paid on the coupon at the rate of 4½ percent. The interest is to be paid yearly.
7. The German Government gives as security for the price of each purchase note in dollars which becomes due 3 years after shipment.
8. The two parties will agree upon a court of arbitration.
9. The use to which the cotton is put, the participation of German private importers and of the Bremen Cotton Exchange, as well as the conditions of the use of the quantities purchased, are the private concern of the German Government.
Alternative proposal for section 6: The price for the purchase made in a calendar month is to be determined by computing the average of the official quotations on the New York Cotton Exchange on all business days of the calendar month for the qualities in question. These average prices during the calendar month apply to the purchases during that month.
Alternative proposal for section 7: The German Government gives as security a bill in dollars for the total price of the purchases in a calendar month computed as per section 4, the bill to become due 3 years after the end of the calendar month”.
Embassy’s 155, 31st of July. I was asked again by the Foreign Office about the basing point for calculating the average wheat prices and whether the Farm Board would agree to base them on the Rotterdam and Liverpool markets with adjustments for American grades and also whether the grades mentioned in that telegram could be supplied by the Farm Board in those approximate quantities. On the hypothesis that the Department replies in the affirmative to both of these questions, the Germans are preparing a proposal for wheat which will probably be submitted to us in a day or two. I have insisted that should they desire to do any wheat business, the prices which you quoted to me must be the basis of any proposal coming from them.
- Quotation not paraphrased.↩