The Italian Government recently learned that the United States Treasury has substantially reduced the personnel assigned to this work in France and that at the same time their attributions have been notably limited."

The Italian Government would much appreciate it if the same course were adopted in regard to Italy and the Ambassador would be much obliged to His Excellency the Secretary of State for his kind interest in the matter.

WASHINGTON, February 17, 1928.

102.1702/285

The Secretary of State to the Italian Ambassador (Martino)

The Secretary of State presents his compliments to his Excellency the Royal Italian Ambassador and, with reference to his note of February 17, 1928, relative to the activities in Italy of Agents of the United States Treasury Department, has the honor to advise him as follows.

As regards the Royal Italian Government's expressed desire for the reduction of the investigative personnel of the Treasury Department assigned to work in Italy, it may be stated that the investigative personnel of the Florence office was reduced by fifty per cent, effective March 31, 1928.

Respecting the suggested limitation of the activities of this reduced personnel, the Secretary of State deems it advisable, before the Italian Government decides whether to press its request, briefly to recapitulate for its consideration certain of the facts and explanations which were originally presented in note No. 117 of May 14, 1925, and its attached memorandum from the American Embassy in Rome to the Royal Italian Ministry of Foreign Affairs and to point out certain difficulties which might possibly be met in case the activities of Treasury agents in Italy should further be curtailed.

The United States Customs tariff law' prescribes four alternative legal bases of appraisement, as stated below, upon one of which duty must be assessed:

"Section 402. Value.-(a) For the purposes of this Act the value of imported merchandise shall be

385

(1) The foreign value or the export value, whichever is higher; (2) If neither the foreign value nor the export value can be ascertained to the satisfaction of the appraising officers, then the United States value;

(3) If neither the foreign value, the export value, nor the United States value can be ascertained to the satisfaction of the appraising cfficers, then the cost of production."

Section 499 of the Tariff Act provides that imported merchandise shall not be delivered from customs custody until it is reported by the Appraiser to have been truly and correctly invoiced. Section 500 imposes the obligation on the appraiser of appraising merchandise by ascertaining or estimating the value thereof by all reasonable ways and means in his power, "any statement of cost or cost of production in any invoice, affidavit, declaration or other document to the contrary notwithstanding".

These sections, which are mandatory upon the Secretary of the Treasury and appraising officers, quite clearly indicate the legislative intent that statements of value which were not subject to verification would not be accepted as the bases for the assessment of ad valorem duties, and that, where recourse is had to "foreign value”, "export value" or "cost of production", these should be subject to veri. fication at the source by accredited representatives of the United States Treasury Department. Under the present law, in case foreign or export values cannot be verified at the sources, it becomes necessary to apply United States values, which may be verified in the United States without inquiry abroad. United States value is usually somewhat higher than the foreign value or the export value.

The relative merits of foreign values and domestic values as the basis for assessing ad valorem duties in times past has been the subject of considerable controversy. Those who had favored American valuation, so-called, based their claim on the alleged difficulties incident to verification of foreign values; advocates of foreign valuation, however, contended that basing duties on foreign values serves to remove an element of uncertainty which otherwise would exist, in so far as the exporter is concerned, as to the exact amount of duty to be paid. The inability of customs officers to verify foreign values may, under existing provisions of law, result in increased application of United States value as a basis for assessing duties. Whether the plan submitted would thus introduce an element of uncertainty regarding the amount of duties to be assessed on certain articles imported into the United States and interfere with the fixing and quoting of selling prices and placing of contracts, to the disadvantage of exporters and importers, is a question which seems to merit serious consideration.

It is believed that an attentive examination of the existing system and of its results will show:

1. That the number of bona fide protests against the activities of Treasury representatives in Italy is comparatively small, and that such protests have come from the very limited number of manufac

turers and shippers of that country whose values have been found to be inaccurate.

2. That the proposed change might place Italian manufacturers whose merchandise comes to the United States at a disadvantage by depriving them of an opportunity they now have of presenting their records to accredited American customs experts for verification, in the absence of which United States value might be used as the basis of assessment of duty under the mandatory provisions of American customs law.

3. That since the passage of the American Tariff Act of 1922, Italian exporters have, with rare exceptions, shown themselves quite willing voluntarily to furnish necessary information to American Customs representatives and during this long period only two exporters "failed and refused" to show their books and records, resulting in the application of the measures prescribed in Section 510 of the American Tariff Act, which restrictions were, however, subsequently removed. This is a fair illustration of the extent to which refusals have been encountered.

It is of course impossible to predict the number of cases in which the further curtailment of activities of American Treasury agents in Italy might lead to application of the aforementioned alternative bases of valuation. In order, however, that the Italian Government may be fully apprised of the provisions of existing American law, it is deemed advisable to invite the attention of the Ambassador to the possibility of having to apply such alternative bases in a certain number of cases.

The Secretary of State has the honor to request the Royal Italian Ambassador to communicate to his Government the considerations outlined above.

WASHINGTON, June 29, 1928.

QUESTION OF CONTROL FROM ITALY OF FASCIST ORGANIZATIONS IN THE UNITED STATES

865.044/34

The Chargé in Italy (Robbins) to the Secretary of State No. 1557

ROME, February 9, 1928. [Received February 25.] SIR: I have the honor to enclose herewith a copy in translation of the new Statutes of the Fascist Organizations abroad (Fasci all'Estero) as published in the Italian press on February 5, 1928. The Statutes bear Mussolini's signature and the provisions embodied therein, or "commandments of the Duce" as they are called here, are said to have been worked out by Mussolini himself.

Signor Piero Parini, the new Secretary General of the Fascist Organizations abroad (See weekly report No. 1544 of January

'Not printed.

20, 1928) a comments on the new Statutory regulations in an article published in Il Legionario, the organ of the Fascist Organizations abroad, of which the principal passage runs as follows:

"The Statutes which the Duce has dictated for the Italian Fasci Abroad are our faith and our law. The word of the Duce is a commandment which does not admit of gloss or of interpretations of any kind. The Duce has established the law which must be obeyed from now on by the fascists abroad. Up to today the foreign Fasci have lacked a set of precise regulations. Our duty is now clear; and the fascists abroad, the good fascists (happily there are many of these) know it and feel it. The Duce aims to develop the Fasci abroad into a disciplined and powerful organization, which must be the soul of our colonies. The Fascist Organizations abroad must gradually become identified with the colonies themselves, which shall be stirred to new life by Fascism. These objectives can easily be attained if we be at all times what the Duce wishes us to be."

Considerable importance is attached here to the new Statutes, which, according to the Messaggero, mark the beginning of a new phase of activity for the Fascist Organizations throughout the world. The regulations of the Statutes are such that every possible inconvenience or abuse is automatically eliminated. Hereafter the control of the Secretariat General over the individual "Fasci" abroad will be more direct, more efficacious, and more salutary. All useless and dangerous interference will also be eliminated. The "Fasci" will come under the immediate control of the diplomatic and consular authorities and, therefore, of the National Government. "We are certain," concludes the Messaggero, "that through the decisive will of Piero Parini, every Italian throughout the world will be made to observe the new by-laws of the foreign fascist organizations with inestimable moral and material advantage to our industrious and prosperous colonies and with the consequent furtherance of our national prestige."

According to La Tribuna, "the new Statutes consolidate all that which has been achieved in the past with so much effort."

It seems clear that these new orders centralize and strengthen the control over the Fascists abroad by the central home organization. I am told by one of the active younger members of the Fascist Party here that it has resulted from considerable bickering and misunderstanding between the local leaders of the Fascist Party in the Italian colonies and the Chiefs of Diplomatic Missions and Consuls, for in some cases it has been found that the Chiefs of Missions or Consuls have been dominated by the Fascist leaders of their respective colonies. Indeed, I am reliably informed that in one European post the Italian

8 Not printed.

Minister, who is apparently not a strong Fascist, was continually in fear of criticism and complaint at home by the Fascist leader of his own colony.

It would appear that in putting the direction of Fascism abroad in the hands of the Italian Diplomatic Agents and Consuls the above-mentioned situation will no longer occur. One may also deduce that in the future no diplomatic representatives or Consuls other than strong Fascists will be employed.

I have [etc.]

865.012/23

WARREN D. ROBBINS

Memorandum by the Assistant Secretary of State (Castle) of a

Conversation With the Italian Ambassador (Martino)

[WASHINGTON,] February 10, 1928.

The Italian Ambassador urged me to read an interview by Mussolini which came out in the January 27 number of the Christian Science Monitor. The interview is on the subject of naturalization and the Ambassador tells me that Mussolini has said just what he said to him in Rome.

In connection with this, he says that, of course, the general orders sent out to the Fascisti Society have made a good deal of talk here and that he has urged Mussolini, on account of special conditions in the United States, to make those orders not applicable in this country. In connection also with what Mussolini had to say about naturalization, the Ambassador said that the policy of Italy with regard to immigration laws has entirely changed, that, even if the American immigration laws were revised, at the present time Italy would not send her people to this country because they need them at home. He says that the process of drafting people on land which has not been cultivated is going on very successfully. He says also that the population is growing so fast that it is necessary to send some out of Italy and that the purpose is to send them to Mediterranean countries. This being the case, he said that it was inevitable that in from seven to fourteen years Italy would be facing a great crisis, that it had to have its place in the sun and that it was impossible to see what this crisis would develop. Clearly the Ambassador said it could not affect the United States because there would be no question of emigration to this country or any possibility that the United States might be involved in any trouble which might occur as a result of the Mediterranean colony policy.

W[ILLIAM] R. C[ASTLE, Jr.]