File No. 600.119/427

Report of the Joint Subcommittee on Export Licenses 1

This report is based on the assumption that a law will be enacted applying to insular possessions of the United States as well as to continental United States, and including not only exportations of articles in commerce but the carrying out of United States ports of coal, fuel oil or other ships’ stores. The question is whether the United States Government would, under the provisions of such an act, be empowered to accomplish the same objects as are accomplished by the Allies by their rationing of neutral countries, letters of assurance, bunker control, and black lists, and if the same objects can be substantially so attained, then what administrative procedure and machinery are necessary for this purpose. The law should prohibit and penalize the carrying out of the United States or its possessions of any article proclaimed by the President except by license and under rules and regulations issued by him.

[Page 847]

I. Rationing Neutral Countries

A “ration” is the amount of any commodity imported or permitted to be imported by a neutral country of Europe. The determination of the amount of the “ration” in general depends upon an estimate of the domestic needs of the neutral country, and this estimate is usually made in agreement with the importing interests in the neutral country concerned, such for instance as the Dutch N. O. T., Danish Merchants’ Guild, and various Norwegian associations, who agree not to import quantities in excess of the ration fixed. In some cases these agreements are made with the neutral government itself. In fixing the “ration” the aim of the Allied Governments has been—

To satisfy the home requirements of the neutral country;
To maintain its exports of imported or native produce to the Allies; and
To prevent all exports to enemy countries whether of imported or native produce.

It is understood that whereas in the past, in view of the fact that the enforcement of the “rationing.” was of necessity based upon maritime international law and not on sovereignty, the Allied Governments have not felt able to introduce as a factor in fixing “rations” the idea of putting pressure upon neutral countries to render services in the form of shipping or otherwise, and have been obliged to take into account the necessity of reaching an agreement with the neutral countries in each case as to the amount of the ration, it will now be possible, should the Government of the United States so desire, to fix rations without obtaining the consent of the neutral countries and to reinforce the rationing system by requiring that, in exchange for exports from the United States, the neutral countries should perform certain services such as employing a reasonable percentage of their shipping in certain trades. Whether or not this is to be done is a question of policy which the sub-committee is not competent to decide.

The sub-committee has had submitted to it the confidential figures in the possession of the British mission as to the imports and exports of neutral countries. We understand that the Secretary of State and Mr. Balfour were anxious to know whether on a purely statistical basis new rations could be worked out for certain neutral countries which would prevent them from exporting their own produce to enemy countries. Such calculations could hardly be made in Washington with the statistics available here, and, so far as immediate questions of policy are concerned the sub-committee feel that they should point out that there can, in the nature of things, be no scientific accuracy in any estimate of the effect upon neutral exports to Germany, of a reduction of overseas imports into the neutral country concerned.

[Page 848]

For instance, the imports of fodder into Denmark in the period July to December, 1916, were only 394,319 tons, as against an average import less all exports for six months during 1911–13 of 459,225. Yet, during the third and fourth quarters of 1916, Germany took 15 per cent and 24 per cent of Danish exports, respectively, as against an average of 3 per cent before the war, Danish exports to the United Kingdom being correspondingly reduced. Moreover, while Denmark before the war exported about 5,000 head of cattle a week to Germany (live and slaughtered), she is now exporting over 7,000 head a week.

That is to say that while the fixing of a ration for a neutral country can attain the object mentioned under (1) above, i. e., it can satisfy the home requirements of the neutral country and while it can, to a certain extent, at least attain the object mentioned under (2), i. e., it can maintain exports from such neutral country of imported or native products to the Allies, it cannot of itself prevent all exports to enemy countries whether of imported or native products, i. e., the object mentioned under (3).

In order to attain this last object there must be a definite diplomatic agreement with the government of the neutral country concerned that it will prevent such exports, since without such an agreement, however low the ration of imported goods may be, the native products will inevitably seek the market where they can find the highest prices and that market will, under the present circumstances, always be Germany. In order to reach such an agreement the first thing that has to be done is to restrict exports to the neutral country for bargaining purposes and such restrictions must be made on diplomatic rather than on statistical grounds.

In so far as a permanent and standing modification of existing rations on a statistical basis is now called for, the new rations should, we feel, be worked out by the Rationing Committee and the War Trade Statistical Department in London with the collaboration of an American representative, rather than by any committees in Washington, since these bodies in London have been working at the complicated statistics involved for many months and there is no English representative in Washington with sufficient statistical knowledge to undertake a re-examination of each individual ration. It is believed that the American representative should be appointed as soon as possible to collaborate with these bodies in London.

Until the new rations are determined upon, the United States Government (1) may use the present rations as one factor in determining the issuance of export licenses and (2) may independently use its control to cut off any part, or the whole, of any existing ration as a means of pressure upon neutral countries to enter into agreements. Whether these courses will be followed or not by the United States, the [Page 849] sub-committee believes that the control of exports provided for in the proposed legislation will confer upon the United States Government full power to do so.

II. Letters of Assurance

Hitherto, the only control over exports from the United States has been carried out by the system of letters of assurance issued by the British Embassy in the case of shipments to Norway, Sweden and Denmark. These letters of assurance represent simply a statement made to such American exporters as may apply to the British Embassy that so far as the British Government is aware, and subject to new facts coming to their knowledge subsequent to the issue of the letter, there is no objection to the shipment of the articles through the British naval patrols. Consequently, a letter of assurance is not a license but simply a facility and operates as a pass attached to the goods for the information of the examining officer at the British port of call, or the British naval patrol.

In order that such a pass may be as certain and effective as possible applications for letters of assurance are referred by the British Embassy to London by telegraph in all cases where the character of the consignee or the amount of the shipment raises any doubt as to its ultimate destination. The letter of assurance thus merely aims at assuring the exporter a maximum of certainty that the goods will reach their destination without difficulty and with the minimum amount of delay in examination.

Under the pending legislation, the President will have authority to do all and more than is accomplished by letters of assurance. It is, however, uncertain at present to how large a range of commodities that authority will in practice be applied.

In the case of commodities against which no prohibition of export has been imposed it may be necessary for the British system of letters of assurance to be continued. In case the prohibition of exportations from the United States is complete, the question is whether American licenses should supersede or accompany British letters of assurance. How this matter may be arranged in the interest of the greatest economy and efficiency may be left to the two Governments concerned.

III. Bunkers, Oil Fuel, and Ships’ Stores

The bunker control built up by Great Britain is dependent upon:

A prohibition of the supply of bunkers to neutral ships, except to ships approved by the British Government;
A prohibition of the export of coal to neutral countries, except to firms that have agreed to supply bunkers only to such ships, and generally not to dispose of coal in any way which might be beneficial to the enemy.

[Page 850]

As a condition of approval and of the supply of bunkers, neutral shipowners enter into certain agreements with the British Government commonly known as “bunker conditions.” Originally the “bunker conditions” enacted by the British Government were directed to two main objects: first, the facilitation of the blockade by requiring neutral ships to call at British ports for examination, etc., and second, the prevention of supply for commerce raiders by preventing the carrying of coal, oil, or supplies except to approved consignees. Another provision was directed against the transportation of enemy reservists. To these original conditions have gradually been added other stipulations, of which the most important is the requirement that ships shall do a certain amount of service beneficial to the Allies, such, for instance, as the carrying of coal from the United Kingdom to the Atlantic islands, i. e., Cape Verde (St. Vincent), and Canary Islands (Las Palmas), etc.

Now that the shipping situation has grown so much worse this last object has become by far the most important and it will be essential to reinforce the “bunker conditions” by requiring all neutral shipowners to perform a fuller measure of service to the Allies in return for the supply of British and American coal and also, as a subsidiary measure, in the direction of requiring neutral ships to take only approved cargoes so as to reduce to a minimum the delay caused by examination in British ports. A memorandum by the British mission on the whole question is attached hereto.1

The British mission recommends that the licensing of the export of coal from the United States should be on the basis of a list of approved consignees in neutral countries and that no licenses should be issued for any export except to firms on this “white” list. If this procedure is adopted by the United States licensing authorities, it will be desirable that all the Allies should so far as possible work on an identical list of approved coal consignees. The British Government is at present working on the basis of a comprehensive list known as the “Regular and Reliable List of Coal Importers in Neutral Countries” the firms on which have entered into the agreements mentioned under (b) above, and have been reported as trustworthy by H. M. representative in the country concerned.

As regards the bunkering of ships in United States ports, it is recommended that power should be taken to control the supply to ships of coal, oil fuel, or ships’ stores. The various possible methods of exercising this control are dealtwith in the attached memorandum of the British mission.

The sub-committee believe that the proposed legislation in Congress, will empower the President to obtain by licensing ships’ supplies all of the objects attained by the British bunker control. It is essential [Page 851] that it should apply to bunkers and other supplies shipped for use on board rather than as cargo for trade.

IV. Black Lists—British Statutory List and French Official Black List

The “statutory list” is the list of persons or firms of enemy nationality and association proclaimed by the British Government under the Trading with the Enemy (Extension of Powers) Act, 1915. British subjects are in every case prohibited by this act from trading with these firms, and therefore no application for exporting to them can, in the nature of things, even be received by the British licensing authorities. The same applies to the French official black list. The “confidential black list” in Great Britain is not published and is not compiled under statutory authority, but is simply a confidential guide used by the licensing authorities as a record of undesirable consignees in neutral countries; that is, consignees whom experience has shown to be acting as channels for the passage of goods or money through neutral countries to the enemy. This list in Great Britain is purely an administrative list for the purpose of the execution of the various acts and orders in council prohibiting exports. The British Government does not necessarily refuse all applications for all goods to all the firms on their confidential black list. There is a subdivision of that black list which is composed of firms against whom there are merely suspicions more or less serious. The placing of a firm on this subdivision of the list is merely a precautionary measure and is especially used as a guide to the customs in exercising their right of challenge.

In regard to the question whether the export licensing system to be set up under the export restriction bill will fulfill the objects intended by the Allied black lists, it must first of all be pointed out that if the export licensing system is of itself to act as a complete bar to trade with any given firm in a neutral country, it would be necessary to prohibit the export except under license of all commodities whatsoever.

The United States will find itself in the same difficulty with both Great Britain and France as confronted Great Britain with respect to France before the enactment of the British Enemy Trade Extension Act, 1915, unless the United States is at least prepared to regard the British statutory list and the French official black list as lists of persons to whom it is undesirable to issue export licenses. The “confidential black list” would also, in practice, have to be used as a determining guide in the licensing of American exports. A conflict in the matter of the restriction of exports from the United States as between the United States and France or Great Britain would seem to be a fruitful cause for dissatisfaction on the part of the citizens of both countries. If the exporters in the United States are permitted [Page 852] to ship goods to persons who are not permitted to receive goods from Great Britain, there will be much cause for dissatisfaction on the part of the shippers in Great Britain. The same would be true if the cases were reversed. If, however, the character of the consignee could be agreed upon by the War Trade Intelligence Department in London and the representatives of the United States Government there, to whom all the evidence would be available, such difficulties would be avoided.

The British members of the sub-committee point out that so far as exports to firms of enemy nationality or association are concerned, the licensing system may adequately meet the situation, but they emphasize the fact already mentioned above that this is conditional upon the prohibition of all exports whatsoever except under license and it is hardly possible that such comprehensive prohibition will be issued at first. Moreover, the British experience has been that the control over exports by licensing is apt not to be totally effective in administrative practice as a complete barrier to trade unless reinforced by legal penalties, because it is hardly possible in all cases to prevent the goods passing out of the hands of the original consignee into the hands of parties who may be entirely willing to use the goods for the benefit of our enemies. The black list accomplishes this object by advertising all the concerns which have been found to be for one reason or another undesirable to Great Britain. The original consignee, therefore, and any subsequent persons to whom the goods are later transferred are warned not to deal with persons whose names appear on the black list, under pain of statutory and other penalties.

The British members further point out that, so far as imports from firms of enemy nationality or association are concerned, the licensing system as to exports will not prevent such firms from selling goods to the United States and obtaining from the United States either a remittance of funds or a credit in the United States in payment of such goods. That is to say, a firm whose activities are regarded as being so much in the enemy interest that goods cannot be licensed for exportation from the United States to it will be allowed to receive for its imports into the United States money and credit, which are much more fluid and can much more easily be transferred to any enemy country itself. Moreover, enemy money or credits have been and will almost certainly continue to be used both for conducting German propaganda and intrigue and also for buying stocks of material urgently needed by the United States and the Allies for military purposes and it may be expected that one of the main activities of the enemy in South America will consist in cornering so far as possible, South American supplies upon which, in the present situation, the United States must depend to a peculiar degree.

[Page 853]

The British members strongly put forward the view that in remote neutral countries, no less than in countries contiguous to enemy countries, the policy of prohibiting all dealings with enemy firms is of the most direct belligerent value and tends to shorten the war. They have explained that this has been the great object of the British statutory list, that the gradual destruction of long-established organizations providing channels for German trade abroad works powerfully on the German mind against a prolongation of war and that in the contrary case the knowledge that overseas connections are being maintained and that credits are being built up and stocks of raw materials accumulated for post-war shipment is a very substantial asset for the enemy in continuing the war. In short, they point out that every argument commonly used to support the theory that a trade war during peace is an incentive to war emphasizes the conclusion that trade war during the war is an incentive to peace. They would therefore strongly urge that adequate measures should be taken to deal with the situation.

In regard to the above observations it may be pointed out that in so far as the remittance of funds or the creation of credits in respect of imports into the United States is concerned the objects effected by the British statutory-list policy might, under pending or proposed legislation, be in large measure if not entirely accomplished in the following ways:

Remittances can be prevented by the control of exports of specie and by the control, through the censorship, of all transfers of money, if a strict postal as well as wireless censorship is established in the United States and is exercised for such objects.
The Enemy Trading Act, as drafted, will prevent any business transactions or intercourse by persons in the United States either directly or indirectly with, for benefit of, or in behalf of, persons in Germany or persons in neutral countries doing business in Germany, or German agents in neutral countries or, by proclamation of the President, natives or subjects of Germany in neutral countries. The Enemy Trading Act is drafted to include also the allies of Germany. Under the powers given by the act it will presumably be possible to set up a control of banking accounts, etc., which besides reinforcing the control of transfers by the censorship might, to a certain extent at least, operate to block and prevent the utilization of credits established in the United States in respect of goods imported.

The doubt, however, is how far any censorship control or any control over banking accounts, etc., could operate against monetary transactions with firms in neutral countries with whom transactions in goods are ex hypothesi not entirely prohibited. The question, therefore, comes down to the problem how far the Enemy Trading Act, as drafted, would give enemy character to persons in neutral countries who are natives of that country but not agents of the Government of Germany or an ally of Germany, and who nevertheless might [Page 854] be shown to be actively assisting Germany in such ways as propaganda and intrigue carried on in such neutral countries.

V. Plan of Procedure

The procedure for the restriction of exports from the United States presupposes a central authority in the United States that would control by license the exports of the United States to specified countries. The amounts of exports from the United States will be determined by one or more of the following considerations:

The conservation of the products of the United States.
A “ration” as defined above, for a given neutral country will be fixed by rationing committees in London in consultation with the American representatives. Such a ration, when fixed, will be divided between the various Allies and other neutrals in proportion to their normal exports of the particular commodity.
It may be convenient to bring pressure to bear upon neutral countries in order to bargain for one of the following objects:
To prevent commodities exported from the United States, or their equivalents or derivatives, passing into the hands of our enemies.
To obtain from neutral countries goods or services in exchange for exports from the United States.

When the amount of any specified commodity to be exported from the United States to any country has been fixed, the problem then will arise as to how the total permitted quantity is to be allotted among shippers.

  • First, as to consignors:

    In Great Britain applicants for export licenses are reduced in number by several screenings. The first to be rejected are the applications of those who have been convicted of enemy trade, and second, those whose trade has been shown to be suspicious. Thereafter, the applications of bona fide traders are considered by the following tests: (a) whether the proposed export is part of the applicant’s normal business, (b) whether he has a firm order for the goods, (c) whether he has any long-established connection or familiarity with the consignee, and (d) whether the agent through whom his customer was introduced to him bears a clean record. When this test has been satisfied, (a) applications are sometimes granted in order of priority; (b) in other cases a proportion of the goods applied for is allotted to each of the applicants whose record is satisfactory, prorated to the amount set out in their applications; (c) in some cases where a comparatively small and well-organized group of exporters controls the business, allotments may be made proportionate to the business generally done in normal times. The last is the procedure followed generally by the rubber and tin exports committee dealing with British exports of rubber and tin.

  • Second, as to the consignee:

    It is undesirable that exports from the United States should be permitted to any persons or corporations through whom our enemies [Page 855] could derive any advantage directly or indirectly. This is particularly important in the case of the neutral countries of Europe, because goods and especially moneys can be transmitted with comparative ease to our enemies, if the holders so desire.

Great Britain has already worked out an elaborate organization known as the War Trade Intelligence Department for determining facts of this character. They know, for example, that if goods are consigned to certain consignees, those goods or the products thereof will be ultimately in the hands of our enemies. It will be almost impossible to duplicate the machinery already in existence and it would seem to be a waste of time and effort to do so. It would seem, therefore, that the consignees for exports from the United States should be agreed upon with the Government of Great Britain, before being approved by the United States Government.

VI. Administrative Machinery

Certain practical machinery must be brought into existence to carry out the export restrictions under a system of licensing. This machinery is graphically outlined in the chart that accompanies this report.1

It is recommended that under the authority of the Exports Control Act when passed by Congress the President issue an Executive order (1) creating an inter-departmental committee to be known as the Exports Control Committee; (2) authorizing and directing the Secretary of Commerce to execute the Exports Control Act and the recommendations thereunder of the Exports Control Committee, and to make such rules, regulations, and orders therefor as may be necessary; and (3) directing the Secretaries of War, Navy and Treasury to instruct their respective officers not to permit the exportation or carrying out of any article except under a license or order over the signature of the Secretary of Commerce.
The Exports Control Committee should be composed of representatives of the Departments of State, Commerce, Treasury, War, and Navy, who should determine the general policies to govern the system of licensing. A representative of Great Britain should participate in the deliberations of this committee, especially when international matters are to be under consideration. Its recommendations should be subject to the approval of the Secretary of State through his representative on the committee and should be made to the Secretary of Commerce for his guidance in executing the Exports Control Act.
In order to keep in touch with the various industries of the United States affected by the licensing of exports, expert advisers [Page 856] of the Bureau of Foreign and Domestic Commerce should be asked to gather, collate, and present the facts with reference to each industry.
The Exports Control Committee should have on its staff a shipping expert to keep the committee in touch with the Shipping Board.
Under the general direction of and reporting to the Exports Control Committee there should be a War Trade Intelligence Division. This division should cooperate first of all with the War Trade Intelligence Department of Great Britain, and should endeavor not to duplicate the information available there, except in so far as such duplication would be practical and would expedite the work of granting licenses. This division should collect such information as may be available through the censorship conducted by the United States, through the State Department and particularly the Consular Service, through the Department of Justice and through the Treasury Department.
All applications for licenses for the exportation of goods from the United States will be referred in the first instance to the British Embassy for advice as to the character of the consignee and other points of information in its possession. In case the British Embassy has not complete information it will refer the application to London, by telegraph, as in the case of application for letters of assurance at present. A representative of the United States Government in London charged with such matters will have an opportunity in each case of examining these applications and telegrams from the British Embassy, as well as the date upon and methods by which they are decided in London, and of attending the deliberations of the competent body in London having charge of such applications.
In order to take care of the necessary and special statistical work, a War Trade Statistical Division should be organized in the Bureau of Foreign and Domestic Commerce which has facilities for this work. Much of the statistical information is already available in that bureau and only needs to be properly arranged and interpreted.

In the actual case of application for exporting a commodity, the application would be addressed to the Secretary of Commerce and would be acted upon by the licensing bureau, that is, the Bureau of Foreign and Domestic Commerce of the Department of Commerce. The licensing bureau would decide whether or not a license should be issued, in conformity with the recommendations of the Exports Control Committee. The license, if the application is approved, would then be issued over the name of the Secretary of Commerce.

The British members of the sub-committee express no opinion upon various recommendations involving questions of constitutional [Page 857] or administrative machinery and policy of the United States Government, in enforcing the proposed Exports Control Act.

The American members of the sub-committee desire it to be understood that the foregoing report in so far as it sets forth the British methods and practices in the present war, and arguments in support of such methods and practices, does not commit the United States to agreement with or acquiescence in such methods, practices, or arguments.

  • [ Eustace Percy ]
    On behalf of British members
  • [ L. H. Woolsey ]
    Solicitor Nominate, Department of State
  • [ F. M. Halstead ]
    Chief, Division of Customs, Treasury Department
  • [ E. E. Pratt ]
    Chief, Bureau of Foreign and Domestic Commerce, Department of Commerce
[Annex 1]

Memorandum on the Coal Policy at Present Adopted by the British Authorities

The basis of the coal policy is a prohibition of the export of British coal except under license. Coal supplied as bunkers with the consent of the commissioners of customs is exempted from the prohibition. This is essential in practice as it would be extremely cumbersome, if not impracticable, to require a formal export license to be obtained in every case for the loading of a few tons of bunkers. It will be convenient to divide the memorandum into two sections as follows:

The control over the export of British coal;
The control over ships’ bunkers.

i. the control over the export of british coal

The present control over the export of British coal is directed towards the following objects:

To conserve the supply for home consumption;
To prevent British coal imported into neutral countries or other coal made available in those countries by the importation of British coal, being used directly or indirectly for the benefit of the enemy;
To require services or conditions from neutral countries in exchange for British coal. Under this heading is included the bunker policy.

(1) and (3) are attained by fixing the total amount of coal which is to be exported in a given period to the different countries. When [Page 858] this has been done, (2) is attained by exercising careful discrimination between and supervision over consignees to which the coal available for the particular country is exported.

Originally the licensing authority in Great Britain contented itself with refusing licenses to firms of known enemy activity or connection (i. e., the policy of a black list). It was soon found, however, that this control was not nearly sufficient, as all that an importer on the “black list” had to do was to apply for a license in the name of a “dummy” consignee. Cases occurred in which British coal was actually supplied indirectly to enemy warships. Towards the middle of 1915, therefore, the British Government decided to abandon the policy of the black list in favour of a policy by which British coal is exported only to reliable firms who are known as regular importers, and who have agreed not to supply any coal (not only British coal) to enemy ships or to ships trading to enemy countries or to any other ships specially notified by the British authorities; not to supply coal to any firm known to be supplying goods to the enemy; not to use the coal for the production of goods or by-products destined for the enemy; and, finally, not to transfer coal to another importer without permission. These firms are placed on a fist called the “Regular and Reliable List of Coal Importers” or the “coal white list.” As a failure to abide by this undertaking renders the firm liable to be refused all future supplies of British coal, firms of high standing and large connections have the strongest inducement to observe the conditions faithfully.

The experience of the British Government has been overwhelmingly in favour of the white-list policy as opposed to the black-list policy. It prevents coal reaching unreliable consignees either direct or through “dummies,” and it also prevents ships clearing with cargoes of coal ostensibly destined for a consignee in a neutral port, but really acting as supply ships for enemy warships. On military grounds alone, therefore, the policy is vindicated, but it is also of value because it enables pressure to be put upon manufacturing firms in countries adjacent to Germany to discontinue supplying manufactured articles to the enemy and further it is the foundation of the control exercised over neutral shipping through the supply of bunkers at ports abroad. If, therefore, the United States Government are willing to cooperate with the British Government in this matter, it is suggested that the cooperation should be on the lines of prohibiting the export of American coal to any firm not on a white list. In such event, it would be desirable that the two Governments should, so far as possible, work in close cooperation and that there should be one coal white list common to both Governments.

The British white list is at present compiled by the British Foreign Office on the advice of His Majesty’s representatives in foreign countries. [Page 859] A copy of this list is attached.1 If a firm desires to import British coal, all that it has to do is to satisfy the British Embassy or Legation in the country that it is trustworthy and undertake to abide by the “Conditions of Supply,” of which a copy is attached.2 The firm is then added to the coal white list. The British Government would welcome the cooperation of the United States Government in the compilation of the white list in any way which appears desirable. In view of the fact that, from the point of view of tonnage, there are strong arguments, in the common interest, for discontinuing, so far as possible, the export of American coal to Europe, in favour of export to such destinations as the Plate, where American coal can be supplied with greater economy of shipping than British coal, one method of cooperation would be that the British Government should hand over to the United States Government the primary responsibility for the white list in South America, while themselves primarily remaining responsible for the white list in Europe.

ii. the control over ships’ bunkers

The present control over the supply of bunkers is directed to the following objects:

The prevention of supplies reaching the enemy. This is effected by requiring neutral ships not to carry cargoes destined directly or indirectly for an enemy country and by requiring all neutral ships proceeding to Europe to call at a British port for examination.
The prevention of coal, oil, etc., being conveyed to enemy commerce raiders in neutral ships.
The prevention of the uneconomical use of tonnage in the way of long ballast passages and in certain cases the requirement that the fleet of any one owner shall perform a reasonable amount of service in the Allied interest.

Hitherto the policy of the British Government has been to impose-on neutral shipowners, in return for an unrestricted use of British coal, which is practically essential for their trade, conditions which they will recognise as reasonable in the circumstances and are such as to give the shipowner every opportunity of engaging in lucrative trade. A copy of the conditions at present in force is attached.3 This policy has, it is believed, been on the whole successful. It is, however, not very effective in Holland, where German coal is available and recently certain firms in other countries have shown an inclination to evade the control by using American coal.

Now that the tonnage question has become so serious, the third object of the policy, viz., the prevention of uneconomical use of tonnage [Page 860] and the requirement of a reasonable amount of service in the Allied interest, has become the most important. It is proposed to reinforce the bunker conditions both in the direction of requiring neutral ships to perform a fuller measure of service in the Allied interest and, as a subsidiary measure, in the direction of requiring all neutral ships to take only approved cargoes, so as to reduce to a minimum the delays caused by examination in British ports. Should the United States Government be prepared in principle to cooperate in this direction, the British Government are anxious to enter into a discussion of the provisions which should be added to the present conditions in order to attain the above objects.

The general basis of the bunker control is the refusal of bunkers in British and Allied ports and in foreign ports, where British coal is used, to a neutral ship whose owner—or, if the ship is on time-charter, time-charterer, has not intimated to the British authorities his intention to abide by the “Conditions of Supply” not only in respect of the particular ship, but in respect of all ships owned or controlled by him. When an owner has given this undertaking all the ships controlled by him are added to the ships’ white list. They are then treated, generally speaking, in the same way as British or Allied ships and allowed unrestricted bunkers in any port where the control is in the hands of the British or Allied authorities. The ships’ white list, of which a copy is attached,1 is now a very large list and it may be said that the great majority of neutral shipowners have given the required undertakings. The penalty for a breach of the undertaking is removal of the ships from the white list to the ships’ black list. The latter is a very small list and consists of ships whose owner or charterer has broken his undertaking, has traded with the enemy or supplied enemy warships. The ships’ white list and black list are compiled by the British Admiralty under the instructions of a committee called the Bunker Committee on which the Foreign Office, Board of Trade and Admiralty are represented. Ships are removed from the black list only if time-chartered to the Inter-Allied Chartering Executive.

In the event of the bunker conditions being revised on the lines mentioned above, it would be necessary to remove from the ships’ white list those ships whose owners do not make a satisfactory arrangement in regard to the employment of a proportion of their tonnage in essential Allied trades. This would involve a number of negotiations with individual shipowners and these negotiations would be carried out by the Bunker Committee. In connection with these negotiations the committee’s object would be to reduce to the minimum the employment of neutral ships in non-essential [Page 861] trades and to divert the balance into trades essential for the war. The extent to which this object can be attained will depend largely upon the cooperation of the United States Government. If the United States Government does not control the use of American coal at all, it will be possible for the neutral shipowner to evade altogether the bunker control by importing American coal and/or loading bunkers in United States ports sufficient for the round voyage. This will, of course, be very expensive, but the prospect of remunerative trade out of the danger zone might be sufficiently attractive to induce the shipowner to incur this expense.

The machinery by which the bunker control is exercised is as follows:

In all British ports the supply of bunkers is regulated by the local customs officers who, under standing instructions from London, grant applications for bunkers to Allied ships and neutral ships on the ships’ white list. All other applications are referred to London where each case is considered on its merits. If it appears that the proposed voyage is in the interest of the Allies, bunkers are often granted, even though the ship is not on the white list.
In certain neutral ports (e. g., the Atlantic islands) where the depots are owned by British firms and managed from London, the supply of bunkers is regulated by the firm under a voluntary arrangement with the British authorities and in consultation with them.
In all other ports where British coal is used the supply of bunkers is controlled by the British consul through the undertaking given by every importer of British coal that he will not supply bunkers, whatever the origin of the coal, to ships specially notified to him. The consul has full standing instructions, allowing him wide discretion, but in case of doubt he communicates by telegram with the authorities in London.

There appear to be three considerations in favour of the United States Government cooperating fully in the bunker policy defined above. First, the success of the war depends in large measure on every available ton of shipping being employed in the most economical manner possible and in essential trades. Secondly, the Allies may claim, not on the ground of their belligerent interests but on broad grounds of justice and public utility, that neutral ships, forming part of the world’s commercial service, shall share with the Allies the dangerous trades to a reasonable extent. Thirdly, the interests of the United States must always be an important factor in administering any policy which aims at the control of tonnage and the British Government are therefore anxious that they should be fully informed of the needs and wishes of the United States in a way which can only [Page 862] be wholly attained by the closest cooperation and consultation. If, therefore, the United States Government should decide to adopt a control on the same lines as and closely coordinated with that adopted by the British Government the latter would welcome such cooperation. If, however, the United States do not wish at this moment to identify themselves wholly with such a policy, it is hoped that they will at least take such steps as are necessary to prevent American coal being used to weaken or evade the control at present exercised by means of British coal. In this event, the necessary steps would be that the United States Government should (1) limit the export of American coal to firms on the Regular and Reliable List of Coal Importers (coal white list) and (2) control the supply of bunkers in the ports of the United States and its territories and possessions in such a way as to prevent a neutral ship bunkering for the round voyage or, in fact, for a voyage further than to the next suitable bunkering port. It must, however, be pointed out that this policy might not really be sufficient to attain the objects aimed at since it might not avail to prevent a neutral ship in an American port from taking sufficient bunkers to carry her to her home port for the purpose of there laying up for the remainder of the war.

[Annex 2]

Coal White List Conditions

revised conditions of supply of cargo coal

That no coal of any kind or from any source is furnished directly or indirectly—
To any vessel belonging to or chartered by a German subject, or the subject of any State allied with Germany;
To any vessel which is known to trade to Germany or any country allied with Germany;
To any vessel, the name of which is specially notified.
That no coal of any kind is furnished directly or indirectly to any firm or person known to be supplying goods directly or indirectly to Germany or to any country allied to Germany, or to any firm which may be specially notified.
That no coal is used for the production of goods or of byproducts of distillation which are furnished directly or indirectly to Germany or to any country allied with Germany.
That no coal is sold or transferred by one importer to another importer without the express permission of the licensing authority.
  1. Signed texts both of this report and the report of the Subcommittee on Statistics and Sources of Information, which follows it, are shown by correspondence in the files of the Department of Commerce to have been sent to the Secretary of State and the Secretary of Commerce on May 14, 1917; none of these original texts has been found. The files of the War Trade Board contain another copy of this report, included with a collection of papers on the subject “General Policies of the Embargo”.
  2. Printed as Annex 1 to this report.
  3. Not printed.
  4. Not printed.
  5. Printed as Annex 2.
  6. Ante, p. 839.
  7. Not printed.