Foreign Relations of the United States, Diplomatic Papers, 1941, The Far East, Volume IV

894.24/13393/5

The Treasury Department to the Department of State

[Washington,] August 7, 1941.

Re: Exports to Japan (including Manchuria)

1. The procedure described below is to be followed in handling applications involving exports to Japan:

A. Merchandise (except petroleum products, tetraethyl lead, or certain pharmaceuticals) the exportation of which is subject to export controls. Foreign Funds Control will deny.

B. The following categories of merchandise, whether or not subject to export control: (1) Wood Pulp, (2) Metals and Manufactures, (3) Machinery and Vehicles, (4) Rubber and Manufactures, (5) Chemicals and Related Products (except certain products, such as pharmaceutical preparations, etc., to be specified after further study; to be used for pharmaceutical purposes in Japan). Foreign Funds Control will deny.

C. Petroleum Products and tetraethyl lead. Foreign Funds Control will deny except where an export license has been issued.

D. Cotton. There are pending before the Foreign Funds Control 10 applications covering the export of 27,500 bales of cotton to Japan, the value of which is approximately $2,000,000. It is stated in the letter addressed by the Under Secretary of State to the President under date of July 31, 1941, that raw cotton exports to Japan have averaged about $600,000 per month in the first six months of 1941, as against slightly over $4,000,000 per month average in 1938. A memorandum is being prepared by the Treasury Department discussing exports of cotton to Japan and making recommendations with respect to the licensing thereof. No action is being taken by the Foreign Funds Control with respect to the pending applications referred to above until a decision is reached as to what quantities of cotton are to be licensed, on a monthly or other basis, for export to Japan.

E. All other merchandise. There are pending before the Foreign Funds Control 15 applications covering the export to Japan of merchandise not included in the above categories. The total value of such merchandise is $167,000. Such merchandise consists of fur waste and cuttings, pencil slats, fir lumber and spruce logs, and airplane spruce. The Treasury Department is preparing a memorandum with respect to the treatment to be accorded applications of this type. Some of such merchandise, for example airplane spruce, although not subject to export control, may have a strategic value to Japan. No action will be taken on cases in category E pending a policy determination.

2. A memorandum is being prepared in the Treasury Department indicating the amounts of unblocked funds available to Japan for purchases in this Hemisphere, and discussing whether licenses issued under the freezing order covering exports to Japan should permit any payment from blocked Japanese accounts so long as it appears that unblocked funds are available to finance such transactions.

3. Attention is directed to the fact that the Foreign Funds Control is holding without action a group of applications involving exports from Latin America to Japan, to be financed by means of debits to blocked Japanese accounts in the United States. A list of some of the pending applications has been furnished to the State Department. No action will be taken on cases in this category pending a policy determination.

4. It should be noted that the following general licenses have been issued on the freezing control order:

(a) General License No. 56 relating to trade between the United States and any part of China other than Manchuria.

(b) General License No. 64 relating to trade between the Philippine Islands and China, and trade between the Philippine Islands and Japan.

It should be noted that insofar as Foreign Funds Control is concerned, merchandise may be exported pursuant to the terms and conditions of the above General Licenses, and accordingly will not require individual licenses from the Treasury Department.