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August 06, 1946

Note: The Agreement entered into force, August 6, 1946. The abrogation of the Agreement was requested by the Philippines November 18, 1946. It was abrogated, December 3, 1946;

Reference: This Agreement is also published in I DFA TS No. 1, p. 16.

This Agreement, made as of August 8, 1946, by and between Reconstruction Finance Corporation, a corporate agency of the Government of the United States of America, and the Republic of the Philippines, hereinafter called the Republic,

WITNESSETH:

That in consideration of the mutual agreements herein contained the parties hereto agree as follows:

1. This Agreement shall be effective for the period August 8, 1946 to June 30, 1947, both dates inclusive.

2. During the period of this Agreement Reconstruction Finance Corporation or any other agency of the Government of the United States of America will purchase, and will have the exclusive right to purchase, the entire exportable surplus of abaca fiber (fiber of Musa Textilis) of the grades described in Paragraph 3 hereof, from all sellers in the Philippines, at the prices and upon the terms and conditions hereinafter set forth.

3. The prices for the respective grades of abaca fiber in cents per pound United States currency, free on board ocean carrier, Philippine ports, shall be as follows:

	Davao	Non-Davao
CD	15-3/4	15-3/4
E	14-3/8	14-3/8
F	13-1/2	13-1/2
I	13-1/8	12-1/8
S-2	12-1/4	10-3/4
J-l	12	10
S-3	9	8
G	10-1/2	18-3/8
H	7	6
J-2	9	7
K	6-7/8	5
L-1	4-1/2	3-5/8
L-2	4-1/8	3-1/4
M-1	3-3/4	2-7/8
M-2	3-1/2	2-1/2
OTYW	1-3/8	1-3/8
Decco 1	12-5/8
Decco 2	11-1/4
Decco 3	9
Decco 4	7
Decco T	1-3/8

In the event that existing freight rates be changed materially, either party to this Agreement may request a reconsideration of the free on board prices stipulated herein, for such modification of these prices as may be agreed upon between the contracting parties.

4. All of said grades of abaca fiber shall be as defined in Fiber Inspection Administrative Order No. 4 (Revised Dec. 1, 1939) of the Fiber Inspection Service of the Department of Agriculture and Commerce of the Commonwealth of the Philippines entitled "Determination and description of the official standards for the various commercial grades of certain Philippine fibers", and shall other wise conform to the quality and standards set forth in said Order. The fiber shall be marked and baled for export in a careful manner in accordance with standard commercial practice, in bales weighing approximately 126.5 kilograms (278.88 pounds) net, and of cubic measurement not exceeding 13 cubic feet, or as other wise acceptable to Reconstruction Finance Corporation.

5. The terms of payment shall be arranged with the individual sellers gen erally according to the following pattern. Reconstruction Finance Corporation will pay no less than eighty per cent of the purchase price by means of letters of credit opened by Reconstruction Finance Corporation in favor of the seller authorizing sight drafts on a New York bank when accompanied by commercial invoices, clean on board bills of lading drawn to the order of Reconstruction Finance Corporation, and other customary documents as directed by Reconstruction Finance Corporation. Settlement of the balance of the purchase price or any adjustment thereof shall be made to the seller after the fiber has arrived at United States port of entry and has been weighed and inspected. The fiber shall be invoiced on the basis of 273 pound bales, when baled in accordance with standard commercial practice, or net shipping weights less 2 per cent when otherwise baled; but the price of all fiber, however baled, shall be based on net landed weights.

6. The seller shall pay all inspection fees, lighterage fees, wharfage taxes, internal revenue taxes, export taxes and all other taxes, fees and charges of what soever nature imposed on the fiber or in connection with the exportation thereof from the Philippines; and the Republic agrees that no such taxes, fees or charges shall be collected from Reconstruction Finance Corporation. The seller shall bear all risk, costs and liability incurred in connection with the fiber up to the time it has been loaded on board the ocean carrier.

7. Reconstruction Finance Corporation shall have the right to purchase abaca fiber from any seller upon a delivery basis other than free on board ocean carrier Philippine ports, in which event proper adjustment of the terms and prices shall be made between Reconstruction Finance Corporation and the seller on the basis of the free on board prices stipulated herein.

8. The Republic agrees immediately to establish and maintain during the term of this Agreement an export restriction on abaca, limiting the export of this product to the United States for the Reconstruction Finance Corporation, or to its designees and consignees in the United States or other countries.

9. The Republic agrees that it will use its best efforts to cause the maximum quantity of abaca fiber, which Reconstruction Finance Corporation has agreed to purchase under this Agreement, to be produced and exported under the terms of this Agreement. To this end the Republic agrees that it will not impose any restrictions upon the exportation of abaca fiber to the United States for the Reconstruction Finance Corporation, or to its designees and consignees in the United States or other countries; and that it will render to Reconstruction Finance Cor poration all reasonable cooperation and assistance.

10. The Republic agrees that if the Republic finds it advisable, during the period of this Agreement, it will establish and enforce price ceilings covering the sale of abaca fiber to local manufacturers, which price ceilings shall not be higher than the free on board prices for the various grades stipulated herein, subject to proper adjustment for other terms of delivery. The Republic further agrees that it will use its best efforts to prevent the cordage mills in the Philippines from accumulating a supply of abaca fiber in excess of three times their current monthly consumption of fiber and that it will require the mills to report on the first day of each calendar month beginning September 1, 1946, their inventories at the be ginning of the preceding month, their purchases and consumption of fiber during such preceding month and their inventories at the end of the month.

11. The Republic agrees that during the period of this Agreement, National Abaca and Other Fibers Corporation (hereinafter called NAFCO), a corporate agency of the Republic, will enter into a contract with Reconstruction Finance Corporation whereunder NAFCO will agree that it will sell and will cause to be sold to Reconstruction Finance Corporation, through NAFCO or any exporter under contract to sell abaca fiber to Reconstruction Finance Corporation, upon the terms and conditions stipulated herein, all of the abaca fiber derived from the following sources:

(a) Produced upon lands formerly owned, leased or otherwise operated or controlled by Japanese individually or through corporations the majority of the issued and outstanding stock of which was owned or controlled by Japanese and over which lands NAFCO, the Republic or any of its subdivi sions, agencies or instrumentalities are now exercising or may hereafter exer cise control through the appointment of administrators or otherwise;

(b) Produced upon lands now or hereafter owned, leased or otherwise operated or controlled by NAFCO, the Republic and any of its subdivisions, agencies and instrumentalities;

(c) Produced upon lands owned, leased or otherwise operated or con trolled by corporations, the majority of whose issued and outstanding stock is now owned or controlled or which may hereafter be owned or controlled by NAFCO, the Republic and any of its subdivisions, agencies and instrumentalities;

(d) Acquired from any sellers in the Philippines by NAFCO, the Re public and by any of its subdivisions, agencies and instrumentalties authorized to purchase abaca fiber.

All of such fiber will be clearly marked by an appropriate symbol identifying it as fiber derived from the aforesaid sources.

12. Reconstruction Finance Corporation agrees that upon entering into the purchase contract with NAFCO, it will advance to NAFCO, for the purpose of rehabilitating the abaca plantations in Davao formerly owned, leased or otherwise operated or controlled by Japanese individually or through corporations the majority of the issued and outstanding stock of which was owned or controlled by Japanese, the sum of $2,000,000, upon the following terms and conditions to which the Republic agrees:

(a) The Republic will guarantee the repayment of the advance in full upon the terms stipulated herein.

(b) Until the advance is fully repaid, Reconstruction Finance Corpora tion may deduct and retain, as partial payment of said advance, 10 per cent of the purchase price of all abaca fiber sold to Reconstruction Finance Cor poration pursuant to the aforesaid contract with NAFCO.

(c) The unliquidated balance of the advance will be paid by NAFCO or the Republic at the earlier of the two following dates: July 1, 1947, or at the time that the United States Government or any of its agencies extends a loan to the Republic or any of its agencies, partly or wholly for the purpose of repaying the advance.

(d) In the event that the advance is not fully liquidated by July 1, 1947, Reconstruction Finance Corporation will have the option to demand from NAFCO and the Republic, the payment, in cash, of the unliquidated balance of the advance or to postpone payment of all or any part thereof. In the event of such postponement, Reconstruction Finance Corporation shall have the right, during the period of postponement, to continue to purchase all abaca fiber derived from the sources described in. Paragraph 11 hereof, at prices generally prevailing at the time of such purchases on sales of Philippine abaca fiber to purchasers in the United States; and, until the advance is fully repaid, Reconstruction Finance Corporation shall have the right to deduct and retain, as partial payment of the advance, 10 per cent of the purchase price of all such abaca fiber sold to Reconstruction Finance Corporation.

(e) Prior to July 1, 1947, no interest will be charged on said advance. but thereafter, interest at 3 per cent per annum will be payable on any un liquidated balances.

13. All doubts and difficulties under this Agreement will be settled between the Government of the Republic of the Philippines and the Government of the United States of America. Provisions respecting prices are subject to review on the initiative of either Government at any time during the life of this Agreement

IN WITNESS WHEREOF, each of the parties has caused this instrument to be executed by a duly authorized representative as of August 8, 1946.

I

LETTER OF THE VICE-PRESIDENT PROPOSING CANCELLATION OF ABACA FIBER AGREEMENT MANILA, November 5, 1946

EXCELLENCY:

On November 1st, I had the honor to send to Your Excellency a proposal by my Government to cancel the Copra and Coconut Oil Agreement entered into with the Commodity Credit Corporation of the United States on August 8th.

My Government has since had occasion to review the situation with regard to the Abaca Agreement entered into on the same date with the Reconstruction Finance Corporation of the United States. The reasons impelling my Government to seek the voiding of the Copra Agreement also largely pertain to the Abaca Agreement. The cost of production of Abaca is steadily rising. It continues to rise with each passing month as prices increase for products which must be imported from the United States. My Government does not believe that there can be any proper justification for continuation of the price ceiling on abaca. Without price structure, the Agreement itself becomes quite meaningless and there ceases to be cogent reason for the sale of abaca exclusively to the Reconstruction Finance Corporation. The same factors disturbing our copra producers also are now agitating our abaca producers, with resulting ill effects on the steady flow of abaca to market and the production of this vital commodity.

My Government, therefore, proposes that your Government immediately consider the cancellation of the Abaca Agreement. The promptest possible reply to this proposal will be appreciated by my Government, as enabling a clarification of a situation which has now become very disturbing to a considerable part of our population. As in the case of copra, general world conditions have changed radically from those existing at the time of the signing of this accord. My Government continues to be anxious to cooperate in order to alleviate the present world shortage of critical commodities and to arrange for their distribution in the most orderly manner possible. In any fair and feasible program for such a distribution, my Government is happy to join. Accept, Excellency, the renewed assurances of my highest consideration.

II

LETTER OF HIS EXCELLENCY, THE U. S. AMBASSADOR TO THE PHILIPPINES, PAUL V. McNUTT, TO HIS EXCELLENCY, ELPIDIO QUIRINO, VICE-PRESIDENT OF THE PHILIPPINES, AND CONCURRENTLY SECRETARY OF FOREIGN AFFAIRS.

EMBASSY OF THE UNITED STATES OF AMERICA

November 15, 1946

EXCELLENCY:

I have the honor to refer to Your Excellency's note of November 5 proposing that my Government immediately consider the cancellation of the Philippine Abaca Fiber Agreement of August 8, 1946 between the Republic of the Philippines and the Reconstruction Finance Corporation, an agency of the Government of the United States, and setting forth the reasons impelling your Government to seek the voiding of the Agreement.

I am happy to inform you that in order to permit full establishment of a free market in abaca fiber, the Government of the United States accedes to your request and agrees to the outright cancellation of the Philippine Abaca Fiber Agreement of August 8, 1946 as amended by the exchange of notes dated August 30 and September 2 agreeing upon increases in prices in the said Agreement. The Government of the United States further announces that it will eliminate United States import restrictions on abaca fiber, and that it withdraws the request that Philippine export control measures be continued in its behalf.

The Government of the. United States accepts your Government's offer for immediate repayment of the loan of $2,000,000 extended by the Reconstruction Finance Corporation to the National Abaca and Other Fibers Corporation under Paragraphs 11 and 12 of the Philippine Abaca Fiber Agreement of August 8, 1946, and will instruct the representative in the Philippines of the Reconstruction Finance Corporation regarding settlement of the unpaid balance of the loan.

The Government of the United States states that announcement of cancellation of the Agreement and elimination of import restrictions on abaca fiber will be made in Washington at 7:00 a.m., Monday, November 18, and requests that announcement in Manila will be made simultaneously, which will be at 8:00 p.m.,

Monday, November 18. The Department of State requests an urgent reply if simultaneous announcement is not possible.

Accept, Excellency, the assurances of my most distinguished consideration.