This report so far has concerned itself almost entirely with trade between the free world and the Soviet bloc in Europe. Now it is time to shift our attention to the China trade.
During the 6 months under review, free-world trade with Communist China fell far below the first half of the year. Free-world exports to Communist China from July through December are estimated to have been $111.1 million, as compared with $158.9 million in the first half of 1953. This meant that shipments in the report-period fell below even the extremely low level of the first half of 1952.
The result of this decline in shipments to Communist China was that the estimated total for all of 1953 was $270 million, only a slight rise in value from the 1952 exports of $256.5 million1. A larger rise had been foreseen. The last Battle Act report to Congress,World-Wide Enforcement of Strategic Trade Controls, pointed out: “If free-world exports continued at the same rate as that of the first 3 or 4months of the year—and that is not at all certain—the 1953 total would be around $375 million.” It actually seems to have been about $100 million short of that.
Free-world imports from Communist China also dropped in the second half of 1953, though not so sharply as exports. They amounted to $198.4 million in the second half, according to a preliminary estimate, compared with $226.6 million in the first half of the year. This brought the estimated annual total of imports to $425 million in 1953, as compared with $365.8 million in 1952.
It was true that in spite of the decline in the latter part of the year, some countries were able to sell more goods to the Chinese Communists in 1953 than they had in 1952. For example, exports of Western Germany rose from $2.8 million in 1952 to $25 million in 1953, in line with the general rebirth of German foreign trade. Exports of France rose from $3.3 million to $12.4 million, and Japan from half a million dollars to $4.5 million. Exports from the United Kingdom rose from $12.8 million to $17.5 million. On the other hand exports from the British Colony of Hong Kong, the traditional gateway of commerce to and from the mainland of China, fell so drastically in the second half of 1953 that the Hong Kong total forallof 1953 was only $94.6 million, or little more than the $91 million of the previous year. And the Communists slashed their buying of Pakistan cotton, which had come to about $84 million in 1952, down to about $7 million in 1953.
1These 1952 and 1953 figures are adjusted to exclude Swiss watches, which appear in Swiss official statistics as exports to China, but which actually went to the British Crown Colony of Hong Kong and were reexported to other free-world countries. Switzerland, in reporting its “China” trade, lumps together its trade with Communist China, Nationalist China, and Hong Kong. The watches in question are believed to amount to approximately $1 million a month, on the average.
Clearly the glittering prospect of a vast and lucrative trade with the Chinese Communists which had captured the imagination of many Western traders was not materializing.
The China Association, a British trade organization, said in December: “There is no doubt but that the potentialities have been greatly exaggerated in the public mind, partly as a result of the superficial successes of the various unofficial trade missions which have paid visits to Peking this year. This overeagerness has unfortunately been reflected in an increasing severity of the terms which China now demands.”
Information about the increasing severity of the trade requirements which Communist China was trying to impose upon the free world came from all sides in the last half of 1953. Those terms would hardly suggest a genuine interest in normal and expanding trade relations.
When the Chinese Communists sell, they demand a confirmed letter of credit in the hands of their own bank before they will ship the goods. They collect payment as soon as they have loaded the goodson a ship. They present a Communist Chinese Government certificate of inspection against which the buyer has no recourse if he finds—weeks or months later—that the quality of the goods is below specification.
One who sells to Communist China is asked to follow a very different set of rules. He ships his goods and waits until they have arrived in Communist China, have been inspected by Communist Chinese Government inspectors, and are in the hands of the buyers, before he can collect his money. In the meantime he extends credit without interest, immobilizing the capital he had invested in the cargo, freight, and insurance, and is forced to accept claims resulting from inspection of his goods in Communist China.
No doubt exceptions to these rules are still being granted to some Western traders, for the rules are so remote from long-recognized international trading practices that many firms would naturally balk at them. But there is no doubt that the unconventional and frustrating practices of the Chinese Communists have interfered seriously with the amount of commerce and have disillusioned many who saw an almost unlimited market in China’s multitudes.
As mentioned before, the policy of the United States throughout the 6 months under review was to continue its total embargo on all exports—strategic or nonstrategic—to Communist China and North Korea, which were aggressors, and labeled as such by the United Nations. Rumors heard from time to time in various countries, to the effect that the United States had decided to relax its embargo or was under irresistible pressure to do so, and that American cars were reaching the Chinese mainland by way of Japan, were completely untrue.
The position of the United States throughout the review period was also that the free-world embargo on strategic goods to Communist China—an embargo much more sweeping than that applying to the European bloc—should be maintained. Other free governments took the same position, and the embargo continued in force. Such relaxations as took place in controls were changes that did not affect the multilateral embargo. One example was the change in the control of antibiotics and sulfonamides. The nations which carry on trade with Communist China had been controlling those drugs, while hostilities continued in Korea, by limiting the quantities shipped; the quotas assumed by the various nations were scheduled to expire on December 31, 1953, and were permitted to expire on schedule. Another example was the relaxation by Japan on certainitems that had been under embargo by that country—but these were items that the other countries were not embargoing. The same was true of the United Kingdom’s decision to permit the shipment of light passenger automobiles.
Though the policies of other major free governments regarding trade with Communist China have not been identical with our own, the United States has not attempted—and will not attempt—to bring about conformity through coercion.
This is true of all of our relations with other countries, not merely our relations with them on the issue of Communist China.
Leaders of this Government forcefully reaffirmed that principle during the period we are reviewing.
Secretary of State John Foster Dulles said in a statement on December 1:
“The tide of events has made our Nation more powerful but I believe that it should not make us less loyal to our great American traditions; and that it should not blur our dedication to the truths, expressed in our Declaration of Independence, that we owe a respect to the opinions of others.“Today it is to our interest to assist certain countries. But that does not give us the right to try to take them over, to dictate their trade policies and to make them our satellites.“Indeed, we do not want weak or subservient allies. Our friends and allies are dependable just because they are unwilling to be anyone’s satellites. They will freely sacrifice much in a common effort. But they will no more be subservient to the United States than they will be subservient to Soviet Russia.“Let us be thankful that they are that way, and that there still survives so much rugged determination to be free.”
“The tide of events has made our Nation more powerful but I believe that it should not make us less loyal to our great American traditions; and that it should not blur our dedication to the truths, expressed in our Declaration of Independence, that we owe a respect to the opinions of others.
“Today it is to our interest to assist certain countries. But that does not give us the right to try to take them over, to dictate their trade policies and to make them our satellites.
“Indeed, we do not want weak or subservient allies. Our friends and allies are dependable just because they are unwilling to be anyone’s satellites. They will freely sacrifice much in a common effort. But they will no more be subservient to the United States than they will be subservient to Soviet Russia.
“Let us be thankful that they are that way, and that there still survives so much rugged determination to be free.”
On December 2, President Eisenhower endorsed the declaration of the Secretary of State and said this:
“The easiest thing to do with great power is to abuse it—to use it to excess. This most powerful of the free nations must not permit itself to grow weary of the processes of negotiation and adjustment that are fundamental to freedom. If it should turn impatiently to coercion of other free nations, our brand of coercion, so far as our friends are concerned, would be a mark of the imperialist rather than of the leader.“What America is doing abroad in the way of military and economic assistance is as much a part of our own security program as our military efforts at home. We hope to be able to maintain these overseas elements of our security program as long as our enlightened self-interest requires, even though we may, andprobably we always will, have various differences of opinion with the nations receiving our aid.”
“The easiest thing to do with great power is to abuse it—to use it to excess. This most powerful of the free nations must not permit itself to grow weary of the processes of negotiation and adjustment that are fundamental to freedom. If it should turn impatiently to coercion of other free nations, our brand of coercion, so far as our friends are concerned, would be a mark of the imperialist rather than of the leader.
“What America is doing abroad in the way of military and economic assistance is as much a part of our own security program as our military efforts at home. We hope to be able to maintain these overseas elements of our security program as long as our enlightened self-interest requires, even though we may, andprobably we always will, have various differences of opinion with the nations receiving our aid.”
On that same day, Admiral Arthur Radford, Chairman of the Joint Chiefs of Staff, speaking in general of America’s leadership role in the world, said in a speech at West Point:
“Relationships between members of coalitions are never simple, particularly in coalitions as large as ours of the free world. The smaller nations expect, and are entitled, to exercise their sovereignty and independence. Our leadership therefore involves self-restraint if our objectives are to be achieved by consent, rather than through the pressure techniques imposed by the Soviet on her satellites.”
“Relationships between members of coalitions are never simple, particularly in coalitions as large as ours of the free world. The smaller nations expect, and are entitled, to exercise their sovereignty and independence. Our leadership therefore involves self-restraint if our objectives are to be achieved by consent, rather than through the pressure techniques imposed by the Soviet on her satellites.”
There is one commodity that is not on any list but is more important than all others, and that is the cement that binds the free world together.
The Battle Act and Economic Defense
The Mutual Defense Assistance Control Act of 1951, usually known as the Battle Act after Representative Battle of Alabama, established a general framework of policy within which the executive branch takes actions that meet current conditions.
This law reinforced the system of international strategic trade controls that was in existence prior to its enactment. It maintains a close link between United States foreign aid and strategic trade controls. It also recognizes the necessity of international cooperation in the control effort, and it aims toward strengthening the free world as well as impeding the military ability of nations threatening our security.
Administering the Battle Act is one of the responsibilities of the Director of the Foreign Operations Administration, with the help of a Deputy Director for Mutual Defense Assistance Control (MDAC). The Director’s responsibilities under the Act include the following:
The budget of Mutual Defense Assistance Control (MDAC) for the present fiscal year is $1,078,000. As of December 31, 1953, theMDAC staff consisted of 29 persons, including clerical employees. In addition, there were 111 persons on other United States Government agency staffs, both in Washington and overseas, who were performing Battle Act functions and were paid out of MDAC funds. These 111 were in the following agencies:
This brought the total personnel on the MDAC payroll to 140, as compared with 115 on June 30, 1953.
Besides these 140 people, the four agencies listed above had still others, paid from the agencies’ own funds, who were working at least part of their time on similar functions (and generally were engaged in such activities even before the Battle Act became law).
EDAC Structure
The Battle Act is a part of the economic defense program of the Government. The economic defense program involves at least 10 agencies whose activities and interests have to be coordinated. The coordination is accomplished through the Economic Defense Advisory Committee (EDAC). The chairman of EDAC is the FOA Deputy Director for MDAC. The chart opposite this page shows what agencies are members and how the EDAC structure is set up. In addition the United States Information Agency has an observer on EDAC, and economic defense matters are closely coordinated with USIA for overseas information purposes.
The chart also shows that EDAC has an Executive Committee; it handles the day-to-day operating and policy problems of the economic defense program. EDAC advises the Director of the Foreign Operations Administration and the Secretary of State who are charged with coordinating the implementation of the program of economic defense matters including the control of strategic shipments from the free world to the Soviet bloc.
Each agency that has a part in the economic defense program brings its own particular point of view to the discussions which constantly go on in the EDAC structure. For example, the Department of State is the agency that coordinates the overall foreign policy of the Government and deals directly with other countries; hence, that Department is able to speak authoritatively about the vital problems involved in maintaining good relations and close cooperation among the free nations, and concerning the most feasible and effective meansof exerting United States influence in the implementation of United States policies. The Department of Defense, being the agency primarily concerned with military defense, brings to the discussions its own expert knowledge of military matters and contributes valuable advice on the military aspects of the problems that come up. The Department of Commerce brings its specialized knowledge of commodities and its experience in the administration of controls over the exportation of goods from the United States. The Foreign Operations Administration, besides administering the Battle Act, brings the point of view of the program of foreign assistance and the economic factors which must be taken into account. The Treasury Department is the authority on foreign-assets control, the Atomic Energy Commission on the significance and control of all atomic-energy materials, and so on through the list.
All these viewpoints and all these special areas of expert knowledge and experience are necessary to a well-rounded economic defense program. Each agency, while discharging its obligation to make its own special contribution to policy, is perfectly well aware that it is only one of the participants, and that the other agencies have legitimate points of view and valuable contributions to make. It is natural and inevitable that these agencies should not approach every problem of economic defense with identical views. But when the problem has been thoroughly considered, and all viewpoints taken into account, a decision is made on the basis of the overriding security interest of the country, and that decision then becomes the policy of the Government as a whole, respected by each agency regardless of the specialized views which it might have expressed in the discussions.
Organizational changes made in the United States economic defense program during the 6 months under review included the following:
1.Establishment of a Security Trade Controls unit within the United States Regional Organization at Paris.This unit represents the United States in the informal international committee known as the Consultative Group (CG) and its subordinate working bodies, the Coordinating Committee (COCOM) and the China Committee (CHINCOM).1It also performs certain Battle Act duties in Europe. These two functions had previously been handled by separate staffs. The head of the new amalgamated office is responsible jointly to the Department of State and the Director of the Foreign Operations Administration.
2.Establishment of a Joint Operating Committee (JOC) in Washington.This development grew out of the fact that while EDAC is advisory on Battle Act matters and on economic defense in general, another interagency structure known as the Advisory Committee on Export Policy (ACEP) advises the Secretary of Commerce on controls on exports from the United States. EDAC and ACEP rely on basically similar information and upon the same general body of experts throughout the Government. Accordingly, JOC was created to analyze and recommend the strategic rating of commodities and the levels of control which might be exercised by the United States and advocated by the United States in international discussions. JOC is thus the central point of United States commodity review activities in this field, and there are no overlapping or competing activities of this nature. The chairman of JOC is a Commerce Department representative who is also a regular member of the EDAC Executive Committee. The membership of JOC is made up of the principal agencies which sit on both ACEP and EDAC. The new arrangement has proved itself in practice.
1See Third Semiannual Battle Act Report, ch. II.
The Battle Act forbids United States military, economic, and financial assistance to any country that knowingly permits the shipment to the Soviet bloc of items listed for embargo under the Act, except that if the items are not munitions nor atomic energy materials the President may direct the continuance of aid “when unusual circumstances indicate that the cessation of aid would clearly be detrimental to the security of the United States.”
On August 1, 1953, the President notified the Congress that he had directed the continuance of aid to France, the Federal Republic of Germany, Norway, and the United Kingdom, because the cessation of aid would have clearly been detrimental to United States security. Even though this presidential action took place in the second half of 1953 it was covered in the last Battle Act report, entitledWorld-Wide Enforcement of Strategic Trade Controls, and the texts of the letters that went to the Congress were reprinted as appendix B of that document, pages 73-77.
There were no further Battle Act determinations to continue aid during the 6 months covered by the present report. (Another group of determinations went to the Congress on March 5, 1954, and the texts of those letters will be reprinted in the next Battle Act report.)
During 1952 and 1953, the first 2 years in which the Battle Act was in force, the total amount of shipments of Battle Act embargo items knowingly permitted by countries receiving United States aid was in the neighborhood of $15 million. Of this amount, 74 percent consisted of “prior commitments”—that is, commitments made before theBattle Act embargo lists went into effect on January 24, 1952. None of the shipments were arms, ammunition, implements of war, or atomic energy materials. Only $98 of the total went to Communist China, all the rest to the European bloc. The $15 million may be compared with a total of $2.7billionof exports of all descriptions from the entire free world to the Soviet bloc during the same 2 years.
As usual, a wide range of activities relating to the Battle Act and economic defense was carried on during the last half of 1953.
The intensive United States review of the control lists has been mentioned in chapter V.
The United States Government continued to increase its emphasis on seeking improvements in the free-world systems for preventing illegal diversions of strategic goods. This problem involves goods of free-world origin which start out to friendly destinations but are illegally diverted en route to destinations behind the Iron Curtain. Our Government: (1) set up improved machinery in Washington for collection and coordination of information, in order to increase the effectiveness of our participation with other countries in the enforcement program, and (2) sought to work out better intergovernmental machinery to deal with diversions.
Our Government also intensified its efforts to analyze current trade patterns between East and West, including the large number of trade agreements concluded between free-world nations and Soviet bloc nations.
This leads us back to the earlier chapters of this report, which may be summarized as follows:
In chapter I, Stalin’s Lopsided Economy, we looked at the basic economic structure of the Soviet Union. Beginning in the 1920’s, the Bolsheviks deliberately concentrated on an industrial-military buildup, at great cost to their peoples. After the war, the same pattern was forced upon the European satellite countries. Trade was reoriented away from the West. That did not mean that the bloc could do without Western goods, but the goal was to obtain those imports that would help the bloc become more powerful and less dependent on the free world. The Kremlin also sought to use trade to divide the Western powers and to increase the reliance of free-world nations on the bloc. These Soviet policies—not Western strategiccontrols—were the main causes of the low level of East-West trade as compared with prewar. Stalin, shortly before his death, made it clear that he welcomed the establishment of a divided trade world—he saw it as a boon to communism and a blow to the non-Communist nations.
In chapter II, The New Regime and the Consumer, we described the new economic courses announced by the Soviet bloc governments after Stalin’s death. They made a great fanfare about providing more consumer goods to the people and improving the neglected agricultural sectors. But their steps did not go very far, and the purpose was to benefit the state and not the people. They apparently were trying to ease internal pressures—especially in the satellites—by opening the valves a little, as they had done before. But they did not alter the basic war orientation of their economies and they pressed on with the industrial-military buildup.
In chapter III, The Kremlin’s Recent Trading Activities, we reviewed the so-called trade offensive—the various Soviet activities of 1953 and the early part of 1954 which seemed to show a livelier interest in East-West trade. The U.S.S.R. concluded more trade agreements, ordered consumer goods at a somewhat brisker rate, but also expanded its efforts to buy ships and showed plainly that its principal interest was still centered on the kind of materials that would foster industrial expansion. To help pay for imports, the Communist planners put manganese, oil and gold on the market in larger quantities than in recent years, though history showed that they had done the same thing in the past when it served their purposes. They also tried to increase their influence in Latin America and Asia.
In chapter IV, What’s Behind It All, we examined the motives and the goals of the Soviet planners in all these recent trading activities. Oversimplified explanations should be avoided. Their actions are not motivated by a pursuit of peace—at least not peace as the West knows the term. Their motives are mixed. In changing circumstances they are seeking effective ways of accomplishing the same traditional objectives of feeding the economy—especially the heavy industrial base—and of weakening the free world. The free world is strong, and if free nations refuse to be divided or deceived—if they work shoulder to shoulder to prevent the Soviet bloc from getting the advantage—they can trade with the Soviet bloc on terms that bring benefits to the free world.
In chapter V, U.S. Policy on Strategic Trade Controls, we outlined the factors involved in setting policy. Not merely because of Soviet activities but also because of the vast upsurge of free-world production and other considerations, 1953 brought a thorough review of United States policy. The basic policy was reaffirmed, but shifts in emphasis were made to meet current conditions and establish controlson a long-haul basis. Policy on the China trade did not change at all during the 6 months under review. Free-world trade with Communist China dropped sharply in that period, partly because of unequal trading terms that the Chinese Communists were trying to impose upon free-world traders. Finally, the United States reaffirmed its traditional policy of treating its friends and allies with respect. In the words of President Eisenhower, “this most powerful of the free nations must not permit itself to grow weary of the processes of negotiation and adjustment that are fundamental to freedom.”
Trade Controls of Free World Countries
This appendix summarizes, in accordance with section 302 (b) of the Battle Act, the trade control measures of most of the important mercantile countries of the free world, as well as of several others for which there is new information to report. These descriptions supplement the main text of this report and similar appendices contained in previous Battle Act reports.
The main features of the trade-control systems of most free-world countries were originally established to deal with such problems as foreign-exchange control, conservation of goods in short supply, and directing foreign trade to particular currency areas. For most countries security trade controls have been inlaid in these general economic controls and are exercised through them, using the same basic techniques of export licensing and customs inspection as in export control for other purposes. Thus they are closely connected administratively with them.
The details of security trade controls of almost all countries have a security classification. Thus these descriptions must, in a public report, be presented in somewhat general terms.
To avoid duplication, this appendix does not include countries which were included in the appendix of previous Battle Act reports and for which there is no substantial new information on security trade controls which can be reported publicly. Summaries of export controls employed by Thailand and Yugoslavia are given on pages 64 and 69, respectively, of the third Battle Act report. The second Battle Act report contains summaries pertaining to Bolivia, Colombia, Ecuador, Panama and Peru on pages 64-66, and to Indo-China, The Philippines and Lebanon on pages 66, 68 and 71, respectively. Summaries concerning Argentina, Brazil, Chile, Mexico and Venezuela are contained in pages 62-66 of the first Battle Act report, as well as Austria (p. 66), Iceland (p. 70), Afghanistan (p. 75), Burma (p. 76), China (Formosa) (p. 76), Federation of Malaya (p. 81), Iraq (p. 87), colonial Africa (pp. 91-97). All of the summaries mentioned above are still substantially up to date.
Covered in this appendix, in alphabetical order, are the following:
The basic legislation from which the present import-export control system in Belgium has developed was a law of June 30, 1931, modified by the law of July 30, 1934, which authorized in broad general terms the regulation of Belgium’s foreign commerce to promote the general economic well-being of the country. The convention with the Grand Duchy of Luxembourg on the 23d of May 1935, amending the economic union convention of 1922, established also a combined Belgo-Luxembourg Administrative Commission (the Commission Administrative Mixte Belgo-Luxembourgeoise) and in this way provided a central agency for coordinating the import and export licensing procedures of Belgium and Luxembourg. Pursuant to the 1935 convention, when the appropriate agency of either Government desires to modify or expand regulations pertaining to import and export controls, the recommendation is discussed with the appropriate agencies of the other Government; their agreement having been reached the new policies are communicated to the Mixed Commission which then transmits identical instructions to the Belgian Central Office of Licenses and Quotas and the Luxembourg Office of Licenses. This procedure insures close coordination of the import and export licensing operations of the two Governments in order that the general economic welfare of both may best be served.
The control over exports effected by the requirement of export licenses is reinforced by special controls applied at the time of the actual export of the licensed merchandise. Submission to these special controls is required as a previous condition to the obtaining of certain licenses, these special additional controls being applied by reason of the special nature of the merchandise to be exported or to assure the direct delivery of the merchandise to its foreign destination.
Applicants for export licenses must make a declaration that they are familiar with the conditions upon which licenses are issued and the regulations relative to exchange controls, and that they accept these conditions and regulations without reserve. The applicant also acknowledges that the licenses are not transferable and that any irregularity in his application or utilization of the license subjects him to possible refusals of any new export license applications and may expose him to prosecution for a criminal offense. Exporters of products whose final destination is controlled must sign an undertaking that their exports are not to be reexported. In such cases, the exporter renounces his right to obtain any subsequent export licenses in all cases for which nonreexport declarations are required, if the present undertaking is evaded.
At the present time, licenses are not required for goods passing in transit through Belgium, with the exception of arms and implements of war and atomic energy items, as well as petroleum and its subproducts.
Prior authorization is required for all buying and selling transactions abroad by Belgian and Luxembourg residents. The exchange control is carried out by the Belgo-Luxembourg Exchange Institute.
Belgium has taken action to prevent the carrying of strategic goods in Belgian ships to Communist Chinese and North Korean destinations.
The Canadian approach to export control is in two parts: by strategic and short supply commodities, and by areas. Under the commodity control two schedules of goods have been established: (1) goods in short supply for which permits are required for shipment to all destinations; and (2) goods of strategic importance for which permits are required for shipments to all countries other than the United States. The area control sets up a list of countries (roughly all of Europe and the Far East) to which all shipments normally require a permit. A general export permit is in effect which enables the shipment of specified nonstrategic items to all destinations except to Communist countries without individual permit.
Export controls are administered by the Export Permit Section of the Canadian Department of Trade and Commerce under authority of The Export and Import Permits Act.
An export permit is required for all goods originating outside Canada when tendered for export in the same condition as when imported, without further processing or manufacture in Canada. Goods in transit in bond on a through journey on a billing originating outside of Canada, clearly indicating the ultimate destination of the goods to be a third country, do not require a Canadian export permit. Foreign goods passing through Canada to a third country without a through bill of lading require a Canadian export permit. (If such goods represent United States shipments of controlled goods passing through Canada to third countries they must be covered by a United States export permit.) All Canadian goods having an undeclared ultimate destination require export permits. Effective from July 4, 1952, shipments of United States goods through Canada must be accompanied by a copy of the United States export declaration form.
Canada does not exercise financial controls over the movement of any commodity.
Export licenses are required for all commodities, except certain agricultural products, if the goods are exported to or intended for end use in countries which are not members of the European Payments Union or are within the dollar area.
For the goods enumerated in the below-mentioned Commodity Lists A and B, export licenses are required, irrespective of the country of destination.
List A of the Danish export regulations consists of items of strategic significance. For most of these items the licensing authority is the Board of Supply,but the Ministry of Justice controls exports of arms, munitions, and military equipment, and machinery for the production thereof. For the exportation of ships, the Board of Supply must obtain prior approval from the Ministry of Commerce, Industry, and Navigation.
List B consists of nonstrategic goods. Export licenses for these are issued by the Board of Supply, the Board of Health, the Ministry of Public Works or the National Bank of Denmark according to the nature of the commodity concerned.
Denmark has instituted import certificate-delivery verification procedures.
The National Bank of Denmark exercises strict controls over all transactions in foreign exchange. Earnings in foreign currencies must be repatriated and sold to the bank unless special exceptions are made.
The export controls apply to merchandise exported from the Copenhagen free port, including exports from transit or bonded warehouses and goods from free port or private warehouses. They also apply to goods in transit through Denmark, unless these are transiting on a through bill of lading and there is no change in the ultimate destination. They thus effectively prevent unauthorized diversion of goods in transit through Denmark.
All transit transactions financed by Denmark are subject to control by the national bank, regardless of whether the goods in question actually pass through Denmark or are forwarded directly between the countries of origin and destination. In its administration of these provisions the bank observes the same rules as the export control authorities with which the bank cooperates closely in this field.
An arrangement has been made by the Danish Government with Danish shipping companies to prevent the carrying in Danish vessels of strategic goods to Communist China and North Korea. This arrangement is implemented through a licensing system operated under a voluntary agreement with Danish shipowners.
Foreign trade and foreign exchange in Egypt are under official control. These controls were primarily designed to conserve foreign exchange but since the spring of 1951 they have been expanded to prevent the export of short supply items.
Except for books, magazines and newspapers, import licenses are required for all imports. Prior to October 6, 1952, licenses were required for goods originating in hard-currency countries, while imports from other sources were in the most part exempt from restrictions.
Application for imports are submitted to the Controller General of Imports, Ministry of Finance. Exports are subject to export regulations which are divided into three main categories: (a) goods that may not be exported; (b) goods that can be exported freely, through the Customs, without the need of an export license, and (c) goods that should be covered by a license. The Import and Export Committee is the main authority entrusted with the formulation of decisions governing exports and imports. This Committee is under the Secretaries for Finance, Commerce and Industry, Supplies, Agriculture, War, the Director General of Exchange Control, the Director General of Cotton Affairs of the Ministry of Finance, the Controllers General of Exports and Imports, and the Director General of Customs.
There are no special licensing requirements or controls on goods in transit other than the ordinary customs supervision.
Foreign exchange is under official control. The basic regulation requires all foreign exchange earnings to be repatriated to Egypt within 6 months after the shipping date of the goods. The law requires that all dollar holdings or payments received by Egyptian nationals or foreigners residing in Egypt be reported to the Egyptian Government and converted into Egyptian currency at the official rate unless they are the proceeds of cotton yarn and cloth or raw cotton exports in which cases 100 percent or 75 percent, respectively, of the dollars may be retained for up to 210 days in an “import entitlement” account usable to buy certain listed essential and semiessential commodities.
Export licenses are required for over one-half the commodities identified in the French tariff nomenclature. Governmental authority of this control is contained in various decrees, the latest dated November 30, 1944. These decrees also permit addition to or removal from the list of controlled commodities merely by publication of a notice in theJournal Officiel. The most recent list of these commodities, published as a codification of all previous lists, appeared inJournal OfficielNo. 156 of July 5, 1953.
Applications for license to export, as submitted by French exporters, are examined by the Ministry of Industry and Energy, by the Office des Changes (where monetary and financial factors are given consideration), and on occasion by appropriate technical committees and personnel in other agencies. At the time the application for export license is submitted, the exporter may be instructed by the Ministry of Industry and Energy to submit a sample, photograph, blueprint, drawing, or other detailed description of the commodity in question. These data are used in determining the advisability of issuing the export license requested. At the port of exit, random samples of actual exports are extracted by customs officials and these are compared by competent technicians with the original data submitted with the license application. This procedure is designed to assure in as many instances as practical that the commodity exported is identical with the commodity for which the export license is issued.
In the event fraudulent action on the part of the exporter is found and can be legally established, the exporter is subject to confiscation of the goods in question and fines ranging upward to four times the value of the shipment plus penal servitude. The control system in operation in France makes it possible to block or encourage exports to any destination of commodities requiring export licenses.
All transactions in foreign exchange engaged in by French residents, particularly those in which a French resident takes title to foreign merchandise, require the prior authorization of the French Government.
An “exchange commitment” (guaranteeing the return to the Government of the exchange proceeds of a transaction) is required for all exports and reexports of merchandise to which a French resident holds title. Where the products concernedare subject to export license, the export license suffices for the exchange commitment.
In order to avoid the transport on French vessels of strategic commodities to Communist China, the French Government has reached agreement with the only French shipping firm operating on the China run that the latter will not transport commodities of any description to Communist China unless these are covered by export license or permit indicating Communist China as the destination and issued by the French Government or a friendly foreign government maintaining the same level of controls as concerns strategic items to China as is maintained in France.
The French Government has also instituted controls to deny bunkering facilities to vessels transporting strategic commodities to Communist China.
No commodity can be exported from the Federal Republic of Germany or Western Berlin unless it is covered by an export-control document, which is issued by the interior customs authorities. However, certain types of exports require a special export-control document which is granted by the interior customs authorities only after a certificate of approval has been obtained, as appropriate from the Central Export Control Office of the Federal Government or the Central Licensing Agency of the Berlin Senate. A certificate of approval is required for all exports (regardless of commodity) to the Soviet bloc, Hong Kong or Macao, and for the export of all commodities in excess of DM 500 on the “restricted list,” published by the Federal Government, to all other countries. This list, which corresponds to the United States “positive list,” comprises commodities under control for security and short-supply reasons and includes all items covered by title I and title II of the Battle Act.
Exports to numerous western countries, including peripheral countries, are subject to one form or another of end-use checks. The import certificate-delivery verification procedures have been in operation since July 1951.
In conjunction with the issuance of either the export-control document or the special export-control document, the interior customs authorities observe a definite procedure for physical inspection of commodities being exported. Additional control over commodities being exported from the Federal Republic is exercised by the border customs authorities.
Certain items are prohibited for intransit shipments on grounds of health and sanitation, but the number of items so prohibited is very small and the prohibited list has not been changed since 1939. German customs officials may inspect transit shipments at the border and remove any items prohibited under German law. They then seal the containers of all other goods and such goods are permitted to proceed, in accordance with international agreement on transit traffic, without further inspection or restriction, except to insure at the exit border that the original customs seals remained unbroken.
Intransit shipments arriving in the Freeport of Hamburg are subject to a customs documentary and physical check before being allowed to enter the Freeport. When in the Freeport, such shipments are under the control of the Freeport authorities, and may be loaded, unloaded, or reloaded only with their approval. The destination of intransit shipments arriving in the Freeportof Hamburg traveling under a “through bill of lading” can only be changed upon instructions of the original shipper, while the destination of intransit goods traveling under an “ordinary bill of lading” can be determined by the responsible local forwarding agent.
Intransit shipments consigned to West German firms and remaining in the Freeport of Hamburg for shipment to a consignee outside Western Germany, require an intransit trade permit (Transit Handelsgenehmigung), except when the goods are returned to country of origin. Such intransit trade permits are issued by the State Central Banks after careful scrutiny of the West German firm and in accordance with the same regulations applying to shipments of West German origin, and approval by the West German Central Export Control Office. West German firms must be listed in the official trade register in order to qualify for an intransit trade permit.
The identical procedure is enforced in the Freeports of Bremen and Bremerhaven, with the exception that the functions within the Freeport are carried out by Federal Customs Authorities rather than Freeport Authorities. This procedure also applies to Cuxhaven, Emden, and Kiel, which are Freeports of very minor importance.
All financial transactions between residents of Western Germany and Western Berlin and residents of other areas are subject to either general or specific exchange-control authorizations issued by the foreign-trade banks. Before those permits are granted, the transactions in question are not only screened with respect to currency problems but also in regard to the strategic nature of the goods. The latter screening is done by export control officials, who have the power to prevent the transaction.
Export licenses are required for all strategic commodities, all minerals, and for certain nonstrategic commodities for which export quotas have been established. For nonstrategic shipments, licenses are issued by the Bank of Greece in accordance with directives from the Greek Foreign Trade Administration, Ministry of Commerce. For strategic shipments, including those to the Soviet bloc countries, licenses must be obtained from the FTA. Such FTA licenses are limited to items and quantities contemplated by trade agreements or approved private barter arrangements.
A transit shipment whose final destination is not indicated on the manifest or shipping documents must be licensed by the FTA prior to being reexported. If the destination be indicated, no export license is required.
Foreign exchange proceeds must be surrendered to the Bank of Greece.
Effective March 17, 1953, the Greek Government prohibited Greek flag vessels from calling at Communist ports in China and North Korea. This was accomplished by the Greek Council of Ministers Act No. 204 of March 17, which was enacted into law by the Greek Parliament on May 7. Violators are punishable under the provisions of law No. 2317 of 1953, published in Greek Government Gazette No. 61, dated March 17.
The Greek foreign investment law provides that foreign vessels transferred to the Greek flag may only be resold to countries named in the “letter of approval”. This listing has not included Soviet bloc countries. With only minor exceptions, ships already under the Greek flag may not be resold to other countries.
Current bunkering controls require licensing both by the Bank of Greece and the customs authorities. Ship repair controls require licensing by the customs authorities. In neither case is the licensing control based on the nationality of the vessel to be serviced nor, in the latter case, the type of materials used for repair or installed.
While there has been no appreciable change in the already extensive security controls maintained by the Hong Kong Government on exports to Communist China and the Soviet bloc, there were changes in the laws and legal processes under which these controls are enforced. The Emergency (Importation and Exportation Ordinance) (amendment) Regulations, 1953, were promulgated July 10, 1953, in order to prevent evasions of export and import controls. Eighteen modifications were made by these Emergency Regulations. Among them were:
1. It was made an offence to transfer an export permit with intent to deceive or to allow any other person to use a permit with intent to deceive.
2. As court decisions in smuggling cases had thrown doubt on the legality of searches and seizures carried out by the Royal Navy in enforcing export regulations, an amendment in these Regulations specifically authorizes “any commissioned officer of H. M. Armed Forces” to carry out such duties.
3. “Any vessel not exceeding 250 gross tons and any vehicle which is made use of in the importation and exportation or attempted importation or exportation of any article contrary to the provisions of this Ordinance or any regulation made thereunder shall be liable to forfeiture whether or not any person is convicted of any offence.” This article was added to discourage truck owners and particularly, junk masters, from agreeing to the use of their property for carriage of smuggled goods, even though the main purpose of their trip is quite legal. Thus, whether a conviction is obtained or not, the truck or junk is liable to forfeiture.
Several other changes have also been made which were designed to protect the rights of persons tried under the basic Ordinance by bringing the Ordinance into line with usual British judicial practice.
During the past 6 months Hong Kong has added a number of items to its prohibited export list and struck off a number. All of these actions were taken in conformity with the decisions of the United Kingdom Board of Trade.
There were no changes in the transit controls or shipping controls in Hong Kong in the last 6 months of 1953.
In the field of financial controls, since October 1953, approved gold and bullion dealers have been permitted to import nonresident-owned gold solely for reexport. While in Hong Kong such gold must be in the custody of an authorized bank. Such reexport is allowed only to nonsterling area countries and on production of a valid import license from the country of destination.
The right to conduct foreign trade is vested in the Iranian Government by the foreign trade monopoly law of 1931. From time to time the Government grants by decree the right to conduct trade with respect to certain commodities to private individuals and firms.
Exports are controlled primarily through the exercise of financial controls. In general, laws and regulations governing export trade are designed so that commodities that are in short supply, or which would otherwise have to be replaced by imports, may not be exported. Thus there is a standing prohibition against the export of gold and silver in bars, sheets, or coins; cattle, sheep, raw hides, charcoal, matches, butter, sugar, and tea. Also prohibited are exports of arms and ammunition, precious stones other than turquoise and pearls, and archeological articles. Only on rare occasions has the Government authorized the export of any or these commodities.
Decrees currently in effect permit the export of all other commodities without licensing procedure except those under Government monopoly, such as opium, oil and tobacco, and except wheat, flour, barley, legumes, rice, lumber and cotton. Depending on the availability of these last-named commodities, export quotas are established for them each year, and export licenses are issued by the Ministry of National Economy to private individuals or firms to the extent of the quotas established for each commodity.
The issuance of export licenses for lumber and cotton is subject to the approval of the Ministry of Agriculture and the Iran Cotton Co. (an agency of the Plan Organization), respectively. The export of opium and tobacco, which are under Government monopoly, is subject to license of the Ministry of Finance.
Some Iranian exports are effected under barter or clearing agreements which Iran has concluded with a number of countries since 1940, including the U.S.S.R., the Federal German Republic, France, Italy, Czechoslovakia and Poland. Since quota lists under these agreements specify the commodities involved, exports made thereunder are in effect licensed by the agreements themselves.
Regulations promulgated on March 18, 1953, under the Law on the Encouragement of Exports and the Issuance of Licenses to Engage in Foreign Trade of December 22, 1952, require Iranian exporters to submit a preexport declaration, in which they inform the Ministry of National Economy of their intention to export stated commodities to stated destinations. One copy of this declaration is certified by the Ministry and must be returned to the exporter within 48 hours. A second copy goes to the Customs Administration for use in inspecting the goods when they actually leave the country.
Goods having in transit through Iran may enter and leave the country only at places where customs houses have been established for that purpose. Detailed documentation is required by Iranian customs authorities for goods in transit. In practice, there are very few intransit shipments through Iran.
The reexport of specified goods of foreign origin is permitted under a decree of November 11, 1953, which lists five categories of goods eligible for reexport. Reexport of such goods, however, requires the prior approval of a commission established in the Ministry of National Economy, with representatives from a number of other Government departments. Prior to this decree, reexport, of imported goods was permissible only by decree of the Council of Ministers, which rarely considered reexport cases. The new procedure represents a more workable machinery for the licensing of reexports. It should at the same time provide adequate safeguards against the reexport of strategic items.
Exporters of Iranian goods must sign an undertaking that the exchange derived from the export will be sold to a bank authorized by the Government to deal in foreign exchange.
All goods to be exported from Israel (including reexports), with certain minor exceptions such as gift parcels and commercial samples under I£10,000 in value and personal effects of tourists and immigrants, require an export license. The Ministry of Commerce and Industry is responsible for the control of most products. Outstanding exceptions, with the Government department or agency responsible, are as follows:
The Ministry of Commerce and Industry may ask for recommendations from other ministries before licensing certain products, for example foods and pharmaceuticals.
Israel voted to support the United Nations Resolution of May 18, 1951, placing an embargo on shipments of arms and related material to China and North Korea.
The value of intransit trade is small, inasmuch as Israel is bounded on three sides by Arab states with which no legal trade is conducted, but commodities may be entered in bond without becoming subject to export licensing controls. Before reshipment may take place, however, a permit must be obtained from the Office of the Collector of Customs.
The Israel Government exercises far-reaching control over the use of foreign exchange, and it regularly uses this control to restrict the movement of commodities in international trade. Israeli importers are required to submit comprehensive justifications as to Israel’s need for a commodity before they are granted an allocation of foreign exchange. Once the licenses have been granted, it has been to the interest of the Government of Israel to make certain that the commodities are in fact imported and used in the Israeli economy. This identity of interest is a strong safeguard that materials consigned to Israel are not reexported.
All commodities listed in the new export tables dated March 16, 1953, as amended, require an export license to all destinations except Somaliland, which is issued by the Ministry of Foreign Trade. Goods not listed in the export tables are exempt from license, but must be exported in conformity with exchange regulations, which vary according to the country of destination and clearing or other financial agreements.
All items require an export license for shipment to the Soviet bloc, including China.
Exports to the Soviet bloc also require bank validations, as virtually all trade with the bloc is conducted under bilateral agreements which specify the commodities that may be traded and the methods by which payment is to be made. Normally, shipments to the East comprise only those commodities specified in a trade agreement with an eastern country. In order to facilitate checking of east-bound shipments, trade with the Soviet bloc is funneled through selected frontier customs points.
The formulation of export-control policy and the administration of the export licensing system are the primary responsibility of the Ministry of Foreign Trade. This Ministry is advised by a special interministerial committee.
Italy is employing import-certificate delivery-verification procedures and carries out end-use checks for shipments to destinations outside the Soviet bloc, particularly for questionable transactions involving goods of a strategic nature. The country of origin is notified if an attempt is made to divert a shipment.
Financial control over all export transactions is maintained through the licensing system and through implementation of existing exchange-control regulations.
Strict bilateral trade agreements with almost all members of the Soviet bloc have constituted, in effect, a financial ceiling on exports to Eastern Europe. Italian exports to Communist China, with whom there is no trade agreement, must be paid for in hard currency or must be exchanged for goods acceptable to the Italian Government, an arrangement that has severely restricted Italo-Chinese trade. Italian exchange control regulations would not normally permit payment for imports from the Soviet bloc in hard currencies, although sterling is occasionally used in payment for the few items not included in the trade agreements. In certain instances ship charters are completed for sterling when circumstances warrant or it is considered convenient.
Direct and indirect transit shipments are subject to customs check, which includes a screening of documents, physical inspection of goods in case of doubt and control of the routing of shipments to prevent the use of unnatural and unusual methods of transportation. In the case of indirect transit shipments, a check is also made on the regularity of the transaction from the foreign-currency standpoint. In doubtful or suspect cases, customs, while not empowered to stop transit shipments, is able to delay the transaction until the Ministry of Finance, in conjunction with the Ministry of Foreign Affairs and other agencies, obtains detailed information concerning the final destination. When an investigation discloses that a transaction is not in order, the central administration orders confiscation of the goods and prefers charges against those responsible, if they are Italian nationals.
New regulations published in April 1953, imposed a more strict financial control over indirect transit operations. Prior to this time, certain firms and individuals who were officially authorized to hold foreign currency accounts, were permitted to carry on transit operations without making an application for foreign exchange in each case. The new regulations withdrew this privilege, making it necessary for all transit operators to submit an application to the General Directorate for Currencies of the Ministry of Foreign Trade before purchasing abroad any item listed in part A of the export tables (which include strategic items). A later amendment to this regulation permits a certain flexibility by allowing the transit operator to purchase goods abroad and have them shipped to Italy before making application to the Ministry of Foreign Trade. An operator making use of this provision must submit to the bank which holds his currency account a written commitment that the goods will be sent directly to Italy and not diverted and must obtain the clearance of the General Directorate for Currencies before the goods can be onforwarded through Italy to another country.
The Ministry of Merchant Marine has drafted a bill which, when enacted into law, will give the Italian Government the power to exercise control over shipping traffic with countries of the Soviet bloc. The bill contemplates quite severe penalties to be imposed upon owners and masters of ships failing to comply with regulations established by the Ministry of Merchant Marine. Consideration of this bill by Parliament has been delayed for nearly 1 year, however, and there seems to be no immediate prospect that it will be enacted into law.
Penalties that may be imposed under Italian law for violations of export-control regulations include (1) imprisonment up to 2 months, (2) fines up to 40,000 lire, and (3) confiscation of the merchandise involved. Persons and firms under investigation for illegal export transactions are denied foreign trading privileges. However, an amnesty law recently passed by the Italian Parliament has resulted in the dropping of all charges outstanding against violators of the export control regulations.
Irregularities under the customs law may be punished by fines from 2,000 to 20,000 lire, while other infractions may incur the penalties contemplated by the penal code.