File No. 763.72112/6464a

The Secretary of State to the Diplomatic and Consular Officers in Latin American Countries

No. 618
Special Instruction
Consular

Gentlemen: In the administration of the Trading with the Enemy Act the War Trade Board has found it expedient to compile several distinct lists of names of individuals and associations as an aid to effective restriction of enemy trade. At the request of the War Trade Board the Department sends you herewith a brief description of these lists and of their purposes as an indication of the way in which the diplomatic and consular service may best aid in compiling and perfecting them.

I. The Enemy Trading List

This list is compiled to give merchants, bankers, shippers, and others notice that “trade” with the persons and associations whose names are included in it may involve a violation of the Trading with the Enemy Act of October 6, 1917, or may result in restrictions being imposed under regulations issued in pursuance of Title VII of the Espionage Act of July [June] 15, 1917. Three classes of persons and associations are listed: [Page 1043]

(1)
“Enemies” as defined by the Enemy Trading Act and as extended by the President’s proclamation of May 31, 1918,1 issued in pursuance of section 2–c thereof, and as defined in Department’s circular telegraphic instructions of September 14, 1917,2 and June 14, 1918;3
(2)
“Allies of enemies” as defined by said act;
(3)
Those who are trading, directly or indirectly, for or on account of, or on behalf of, or for the benefit of an “enemy” or “ally of enemy,” as defined by the act and proclamation above named. (See section 3–a of the Trading with the Enemy Act.)

The peculiar technical definitions of “enemy” and “ally of enemy,” “person,” and “trade” in the act should be examined carefully in order to determine the qualifications for listing. The scope of the definition of “enemy” has been extended by the proclamations of the President dated February 54 and May 31, 1918.

The first proclamation applies only to aliens of German or Austro-Hungarian nationality or nativity interned in the custody of the War Department. The second relates to certain specified classes of citizens or subjects of nations with which the United States is at war and should be carefully studied by you.

Supplements to the enemy trading list are published every other Friday, and the changes are telegraphed in advance to the United States missions in the respective countries covered by the changes.

II. The Confidential Enemy Trading List

For various reasons it may be undesirable to include in the enemy trading list a certain name which, according to the technical rules of section I hereof, would ordinarily be placed on the list. For instance, the person or firm may be so connected officially with a neutral government as to make it inexpedient to publish the name, although it is clear that exports and other facilities should be denied; or the person may not be engaged in trade and no collateral object would be gained by publishing the name which could not be accomplished as well by other administrative measures; or the person or firm may be of such small importance that to publish the name would tend to unnecessarily increase the bulk of the list without compensating advantages. To cover such cases and to prevent the published list from acquiring unwieldy proportions, all names eligible for listing which it is not expedient to publish for any reason, are included in a confidential enemy trading list. The same technical rules of inclusion apply to this list as to the published list and the same procedure should be followed in recommending changes therein.

[Page 1044]

In deciding whether to recommend a name for the published or confidential list two main considerations should be kept in view:

(1)
The value of the notice of publication to American, Allied and neutral merchants, shippers, bankers, etc., who are seeking to conform to the laws, regulations, and wishes of the United States in enemy trade matters, and
(2)
The collateral effects of publication on the business, social, and financial affairs of the person or association in question and on public opinion.

III. The Cloak List

This is a special list confined to “cover names” used only to cloak enemy trade transactions, which are either fictitious or represent straw men not personally engaged in international trade and of no financial importance. This cloak list for Latin America and Spain is henceforth to be compiled by the United States War Trade Board for use by the Governments of Great Britain, France, and Italy as well. The understanding under which the War Trade Board controls this list necessitates that it be confined strictly within the limits described above in section I. No names of established firms or independent businesses should be included in the cloak list. On the other hand, enemy trade “cover names,” including names of employees and friends used as cloaks, should not be proposed for the enemy trading list, but should be proposed for the cloak list.

The cloak list is confidential and is not widely distributed. There are two main reasons for this:

1.
If the cloak list were made public, it would become obsolete immediately for new cloaks would be used.
2.
Often the cover names are those of individuals who have not consented to the cloak use and who would be affected unjustly and unnecessarily by inclusion in the published list.

IV. Purposes of Enemy Trade Listing and Considerations Applicable Thereto

Before proposing additions to the enemy trading lists, published or confidential, two main questions should be considered and answered affirmatively:

1.
Are there facts in the case which constitute sufficient grounds for listing under section I hereof?
2.
Will any definite advantage be promoted by listing which will overweigh possible disadvantages?

Listing is not an outlet for vindictiveness, nor a device for punishment, but a measure for accomplishing certain practical purposes involved in the legislation of the United States to prevent trading with the enemy. No good would be accomplished by listing a quiet, [Page 1045] inoffensive German merely because he is a German, even though he expresses a belief in the justice of the German cause; and in many cases considerable harm might arise from indiscriminate listing.

Furthermore enemy nationality alone is not sufficient to justify listing under section I hereof, although it is under the French, British, and Italian laws. On the other hand, if, for instance, the enemy national is an enemy agent or agency, actively engaged in propaganda in aid of the enemy cause, is fomenting dissension between the Associated peoples and neutrals, is backed by enemy capital, is controlled from enemy territory, is trading directly or indirectly for the benefit of an “enemy” or “ally of enemy” or is furthering trade with enemy countries, with listed persons and associations or with persons and associations who should be listed as “enemies” or “allies of enemies,” he should be proposed for the lists.

Enemy nationality is an important cumulative consideration in favor of listing, although it is not sufficient alone. If there are technical reasons for listing a person, the fact that he is a German generally will be decisive in favor of listing, whereas if he is a neutral the taking of assurances sworn to before a proper official that he has discontinued his enemy trade connections and will not resume them in the future of ten is preferable to listing immediately.

It should be noted that public opinion in a neutral country is important. This consideration applies with peculiar force to the listing of newspapers and other organs of public opinion. The principle of freedom of the press should not be ignored. It is undesirable to list newspapers merely because they favor the German cause. If, however, they are backed by German capital, or are subsidized by the German Government or German propagandist organizations, or are otherwise controlled by enemy interests, they should be nominated for listing.

In proposing additions to the lists, the specific grounds on which the recommendation is based should be stated, since before listing a name the War Trade Board must have a justifiable reason within the scope of section I hereof. It also is of great assistance to the Board to know the nationality of the nominees and any disadvantages which might result from listing, peculiar to the circumstances of the case.

In recommending partnerships for the lists, both the partnership name and the names and nationality of the individual partners should be given. In Latin American countries these matters appear in the public records. In recommending a corporation for listing, its nationality, and the names, residence, and nationality of its officers, shareholders, and others who control its activities and interests, should be given as far as possible.

[Page 1046]

In recommendations by telegraph the specific grounds and nationality can be briefly indicated. A fuller account should always follow by mail.

V. The White List

While no white list is compiled by the War Trade Board in the sense that trading between the United States and foreign countries is confined to the houses upon such a list, the War Trade Board is endeavoring to furnish American exporters and importers, upon their request, with information concerning trustworthy houses abroad from the standpoint of the laws of the United States to prevent trading with the enemy. For convenience, this list is called in this circular a white list.

The white list includes names of persons and firms and associations who are approved affirmatively as clearly unobjectionable and proper connections for American trade. No names which are doubtful should be included in this category, for they will be recommended unqualifiedly to American shippers and merchants.

In reporting a firm for inclusion in the white list you should only endorse those of whose trustworthiness you are satisfied and who in your opinion furnish a proper connection for American trade, bearing in mind not only the absence of present enemy activities and connections, but also their value to American trade for the future. These firms will be recommended by the War Trade Board to American houses without qualifications. While the War Trade Board does not purpose to endorse the financial standing of any such house, it is obviously desirable that it should not recommend irresponsible persons or those with a questionable business reputation.

I am [etc.]

For the Secretary of State:
William Phillips