740.00112A European War, 1939/4125: Telegram
The Ambassador in Brazil (Caffery) to the Secretary of State
[Received November 27—11:50 a.m.]
1829. My 1782, November 20, 1 p.m.43 The operation of the Proclaimed List in Brazil was reviewed at meetings last week by my staff with consular officers from Porto Alegre, São Paulo, Bahia and Pernambuco.
It was agreed that the principal obstacle to attaining the purposes [Page 313] for which the Proclaimed List was promulgated is the impossibility, under existing controls, of preventing cloaking operations of listed firms. It was brought out that some German firms here have organized cloaking systems in order to enable them to accumulate stocks of American products before the adoption of an all-inclusive export control system by the United States which they believe is inevitable.
These firms switch from one cloak to another faster than our system permits us to list those whose operations have been sufficiently well established to warrant our recommendations for listing (see São Paulo despatch 295 of October 30 [31], 194143a).
Inasmuch as the Embassy and Consulate are not in a position effectively to permit [prevent?] cloaking operations, the Consuls have made the following recommendations which I endorse: (1) That all exports from the United States to Brazil be subject to export license; (2) that the Embassy be consulted by telegraph concerning prospective consignees on whom favorable information is not available in Washington. It is recognized that this will require revision of some World Trade Directory reports and compilation of a so-called confidential “white list”. However, in view of the need for or in order to eliminate cloaks it is suggested that the plan be put into operation at once; (3) that the Proclaimed List be maintained. (The suggested procedure for Brazil is all the more important now that the Brazilian Government prohibits the publication of the Proclaimed List.)
I believe that the Brazilian Government would not object to the export license procedure if applied uniformly in the Americas because it would have the advantage of enabling consuming interests here to obtain requirements through legitimate rather than speculative channels thus eliminating profiteering in non-licensed American exports.
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I regard this as an important step towards preventing listed firms from obtaining supplies in the United States.