711.00111 Armament Control/Military Secrets/754

Memorandum by the Chief of the Office of Arms and Munitions Control (Green)35

Several months ago the Carp Export and Import Corporation, acting as agent for the U.S.S.R., communicated with the Department in order to ascertain the attitude of this Government toward the purchase in this country of material, equipment and armament for one or more battleships to be assembled in the U.S.S.R. The Corporation made various tentative but unsuccessful proposals to several American companies with a view to entering into suitable contracts. Eventually its negotiations crystallized in an attempt to persuade the Bethlehem Shipbuilding Corporation, Limited, to enter into a contract to furnish the necessary designs, material, equipment and armament. The proposed transaction has been the subject of numerous conversations and several exchanges of letters between the Department and the Carp Export and Import Corporation and the Bethlehem Shipbuilding Corporation, Limited. From the beginning the Department has frequently consulted the Navy Department and has kept that Department fully informed of all developments. In conversations between officers of the Department and representatives of the two Corporations and in its letters, the Department has endeavored to make clear its position in respect to the proposed transaction. It has made clear that it is contrary to its practice to express approval of commercial transactions. It has been repeatedly stated, however, that on the basis of available information it would appear that the carrying out of such a contract as is proposed would not violate any existing statute or treaty. The attention of the two Corporations was invited to the pertinent laws and regulations printed in the attached pamphlet International Traffic in Arms and, in particular, [Page 477] to Section 5 (d) of the Joint Resolution of May 1, 1937,36 which is quoted on page 2, to Category II of the enumeration of arms, ammunition and implements of war contained in the President’s Proclamation of May 1, 1937,37 which is set forth on page 5, and to regulation 26 which is set forth on page 18. It was pointed out that the material, equipment and armament which would be assembled for export under such a contract as that which was proposed would constitute to all intents and purposes a disassembled vessel of war, and that an export license would, therefore, be required to authorize its exportation. It was also pointed out that barring unforeseen changes in existing treaties or statutes, or unforeseen developments in the international situation, it would be the duty of the Secretary under the law to direct that the necessary export license be issued.

The attention of the interested companies was also invited to the provision of the Espionage Act of June 15, 1917, in regard to the revelation of military secrets of interest to the National Defense, which is quoted under Part 5 of the enclosed pamphlet. The Secretary, after consultation with the Navy Department, stated that he assumed that it would be possible for the Bethlehem Shipbuilding Corporation, Limited, or any other corporation with which the Carp Export and Import Corporation might enter into such a contract, to arrive at some agreement with the Navy Department which would adequately safeguard military secrets.

In dealing with questions relating to the international traffic in arms, the Department seldom expresses an objection on grounds of foreign policy to a proposed transaction which would not contravene the pertinent treaties and statutes. Objection is expressed only in exceptional circumstances and in the case of proposed transactions which would definitely and demonstrably interfere with the carrying out of its obligations in the conduct of our foreign relations. The original proposal for a contract between the Carp Export and Import Corporation and the Bethlehem Shipbuilding Corporation, Limited, contained two features to which the Secretary felt constrained to express objection. It was proposed that arrangements should be made whereby some of the material and armament should be inspected and tested by the United States Navy. The Secretary expressed objection to this feature of the proposed contract on the ground that such testing and inspection by an agency of this Government would constitute an infraction of our policy to refrain from the active promotion of the export trade in arms. It is understood that the provisions of the proposed contract relating to inspection and testing by the Navy Department have since been eliminated. The Secretary objected also to the [Page 478] proposal that 16-inch guns should be exported for installation on a battleship for any foreign power. This objection was made in view of the discussions which were being carried on with foreign powers in regard to the maximum caliber of guns to be installed on battleships and in view of the uncertainty as to the ultimate decisions of other powers, and as to the international agreements which might be reached in regard to this subject. The objection to the exportation of 16-inch guns has since been withdrawn.

In view of what has been stated above, it would appear that the difficulties which the Carp Export and Import Corporation has encountered in connection with this proposed transaction result not from the attitude of any Department of the Government but rather from the inability of the Corporation to persuade the Bethlehem Shipbuilding Corporation, Limited, to enter into such a contract as it desires to negotiate.

  1. Prepared at the request of the Under Secretary of State, and transmitted to the White House.
  2. 50 Stat. 121, 125.
  3. 50 Stat. 1834.