The Acting Secretary of State to the British Ambassador ( Lindsay )

Excellency: I have the honor to refer to your Excellency’s note of July 1, 1935, and previous correspondence, in regard to the procedure now in force in Hong Kong in respect to the trans-shipment and exportation of arms to China, and have to inform you that I have been pleased to note the procedure which your Government proposes to adopt with a view to closing the loophole which I pointed out in my note of January 10 and which we are equally desirous of dealing with effectively.

I am prepared to adhere provisionally to the procedure suggested in your note No. 76 of March 27 and I shall immediately initiate the practice of sending copies of all licenses issued for the exportation of arms and munitions to Hong Kong to the Consul General in that city for transmission to the Governor of Hong Kong.

I should appreciate it if you would inform me of the date after which the Governor of Hong Kong will require as evidence that arms consigned to China via Hong Kong are entitled to an “in transit” status the production of copies of the export licenses issued.

I have recently received information that shipments of arms from Hong Kong to China via Macau have been increasing in quantity. I should appreciate it if you could find it possible to confirm my assumption that the Governor of Hong Kong will take measures to assure himself that shipments of arms ostensibly destined to Macau are actually destined to that port and in case he finds that in reality their ultimate destination is China, he will apply to them the same regulations which he will apply to direct shipments of arms to China.

I assume that the Governor of Hong Kong will be instructed to continue to scrutinize shipments of arms and munitions from Belgium and Switzerland to China via Hong Kong, and I should appreciate it if you could find it possible to furnish me with information from time to time in regard to such shipments, in order that I may be in a position to determine whether the proportion which they attain warrants reconsideration of the arrangements which we have now agreed upon.

Accept [etc.]

William Phillips