740.00112A European War, 1939/966a
The Secretary of State to Diplomatic and Consular Officers in the American Republics
Procedures and Policies on Maintenance of the Proclaimed List of Certain Blocked Nationals
Sirs: Reference is made to the Department’s strictly confidential circular telegram of August 8, 1941 concerning Proclaimed List matters and to the previous instructions concerning the representation of American business in the other American Republics by undesirable firms identified directly or indirectly with anti-American activities.
From September through December 1940 a visiting group of officials of the Office of the Coordinator of Commercial and Cultural Relations between the American Republics (now the Office of the Coordinator of Inter-American Affairs), which included representatives of the Department of State and the Federal Bureau of Investigation made a survey of the nature and extent of the problem arising from the representation of American business by undesirable firms throughout the other American Republics. This survey was undertaken not as a primary investigation of these situations but was carried out primarily through consultation with the American diplomatic missions on the basis of the information then available to the missions and certain well-informed American residents recommended by the missions for such consultations. The reports made from each mission by the visiting group and the missions’ reports which have been made on this subject furnished the factual basis for the cooperative program which was carried out by the Coordinator’s Office in conjunction with the Department and the Department of Commerce during the first six months of 1941. This program was designed to enlist the voluntary cooperation of American foreign-trade firms in replacing agencies or sales outlets which appeared to be undesirable under existing [Page 272] conditions. The Department of Commerce and the American foreign service officers in the field assisted such American firms in obtaining satisfactory replacements. In the course of this cooperative program the problem was taken up individually with more than a thousand American firms and some 17,000 American companies generally interested in export trade were formally informed of the program and requested to check any new accounts with the Department of Commerce or the Coordinator’s Office in order to avoid establishing new relations with undesirable or questionable firms and particularly to prevent American firms from unwittingly taking on undesirable firms which had been dropped by other American companies cooperating with the Government’s program.
It is believed that by the end of June 1941 this program had resulted in substantially arresting the problem and in preparing American business for the more stringent regulatory controls which were being applied by the Export Control authorities and the Treasury Department in the administration of the “freezing orders”, Executive Order No. 8389, as amended. By the end of June 1941 upwards of 1,000 accounts had been terminated with undesirable firms.
The information concerning undesirable firms which was collected in connection with this program was made available throughout this period to the Administrator of Export Control and was used by the Export Control authorities in passing on license applications for products which were subject to control. On June 17, 1941 the “freezing” of foreign funds and related transactions was extended to additional countries including Germany and Italy and nationals thereof. With this extension of the regulatory controls which potentially embraced the principal portion of American foreign trade and financial transactions, it rapidly became necessary to integrate and develop the handling of information and lists relating to undesirable trading connections. The Department by strictly confidential circular telegram of June 21, 19418 requested the missions to review the British Statutory List and to indicate such omissions from and additions to this list as were desirable for the purpose of administration of the freezing controls by the Treasury Department. On the basis of the replies from the missions a list was prepared by the Department and made available for the immediate use of the Treasury. At the same time steps were taken to utilize this list in supplementing the information being used by the Export Control authorities.[Page 273]
II. The Proclaimed List
The question of publishing a list of undesirable firms in connection with some regulatory authority had been under general consideration. The necessity of integrating so far as possible the handling of these matters by the regulatory authorities concerned and the severe dislocation to American trading and financial business with the other American Republics which was threatened unless this integration could be effected and the business community given public guidance on the question made it imperative to arrange for the publication of a list. Accordingly, on July 17, 1941 the President by Proclamation provided for the publication of “The Proclaimed List of Certain Blocked Nationals” which was first issued on that date. The President’s proclamation provides that the list shall be prepared by the Secretary of State in conjunction with the Secretary of the Treasury, the Attorney General, the Secretary of Commerce, the Administrator of Export Control, and the Coordinator of Inter-American Affairs. The list as issued July 17, 1941 was prepared by these agencies on the basis of the information previously forwarded by the missions, including the names on the British Statutory List which had been approved by the missions for “freezing” purposes in reply to the Department’s circular telegraphic instruction of June 21, 1941.
It was recognized that despite the efforts of those engaged in preparing the initial list to leave off cases concerning which there appeared to be any doubt on the basis of available information, there were bound, under the circumstances, to be cases which would be the subject of reconsideration shortly after publication. Accordingly, Supplement No. 1 to the Proclaimed List, dated July 28, 1941 was devoted solely to such deletions and corrections as were immediately possible. These deletions were made on the basis of the missions’ replies to the Department’s strictly confidential circular telegraphic instruction of June 19, 1941.9
III. The Division of World Trade Intelligence
Immediately upon the issuance of the President’s proclamation of July 17, 1941 and the issuance of the initial list on that date, the Department took steps to fulfill its primary responsibility with respect to the preparation of the list by establishing within the Department on July 21, 1941 the Division of World Trade Intelligence (symbol WT). This step was effected by transferring to the Department the personnel of the Special Division of the Coordinator’s Office, which [Page 274] division had had charge of the administration of the cooperative program up to that time. The Director of the Coordinator’s Special Division10 was at the same time designated Acting Chief of the Division of World Trade Intelligence.
The publication of the Proclaimed List brought the cooperative program largely to a close. Henceforth the Coordinator’s Office and the Department will not make recommendations for replacement other than in exceptional cases unless a firm is on the Proclaimed List. The Department of Commerce will continue to furnish American firms on inquiry with pertinent information concerning firms not on the Proclaimed List.
Under Departmental Order No. 956, of July 21, 1941,11 the Division of World Trade Intelligence is charged with handling “the activities and problems envisaged in the President’s Proclamation of July 17, 1941, relating to trade with aliens whose interests are inimical to the United States.” The Division functions under the general administrative supervision of Assistant Secretary Dean Acheson in close collaboration with the Division of Commercial Affairs and the other divisions and offices of the Department concerned.
The Secretary of State has designated Assistant Secretary Acheson Chairman of an Interdepartmental Committee on The Proclaimed List to integrate the participation of the departments and agencies named in the President’s proclamation in the preparation of the Proclaimed List. A subcommittee with similar representation has been established under the chairmanship of the Acting Chief of the Division of World Trade Intelligence to pass on all cases proposed for addition to and deletion from the list.
The Division of World Trade Intelligence is at present primarily concerned with gathering, analyzing, digesting and recording all available information concerning firms or individuals which are considered undesirable trading or financial connections for American firms under existing conditions. This information is being gathered and organized so that each case may be considered on its merits in respect to the Proclaimed List. As the information becomes available the list will be extended to cover other countries in addition to the other American Republics.
IV. (A) Additions and Deletions—General
Additions to and deletions from the Proclaimed List can be made only with the publication of supplements based upon administrative orders signed by the six departments and agencies specified in the [Page 275] President’s proclamation of July 17, 1941. Supplement No. 1 containing certain deletions and amendments was issued July 28, 1941 and it is anticipated that Supplement No. 2 containing additions, deletions and amendments will be issued sometime shortly after September 1, 1941. Thereafter it is expected that supplements will be issued from time to time at intervals of approximately three weeks. The supplements will be collated and published as a basic revision quarterly or thereabouts.
As a general policy only names will be considered for addition or deletion on which a report has been received from the missions and in no event will additions or deletions be made until the proposed action has been communicated to the mission concerned for its final approval. The urgency with which these matters must generally be handled will necessitate the use of telegraphic communications in most instances. When the mission is notified that action is proposed on certain cases a telegraphic reply should be made usually within three days unless otherwise instructed; such replies should state that the proposed action is approved or not recommended or that postponement of action is recommended in specific cases. Unless otherwise advised the mission may generally assume that such final recommendations will be followed by the Department.
It will be recognized that the prompt transmission of current information and recommendations from the field is imperative if this program is to be administered efficiently and effectively. It must be emphasized that while the missions’ recommendations are desired on all cases and are given primary weight in the interdepartmental deliberations, the general rule will be to take no action on a case unless the underlying information supporting such action is available here. The Department’s ability to secure action in the interdepartmental committee will depend upon the extent and character of the information furnished. In reporting on firms proposed for deletion or addition particular care must be exercised to review all previous reports submitted on the firm in despatches, world trade directory reports or otherwise so as to avoid unexplained inconsistencies in the information on presentation of the case to the interdepartmental committee. Previous unfavorable reports should be disposed of in detail whenever a deletion is recommended. When recommendations for additions or deletions are made by telegram a summary of the salient facts underlying the recommendation in each case should be included in the same telegram and reference made to the airmail despatch furnishing full particulars. In order to facilitate the distribution of such telegraphic reports here, the gray code may be used whenever secrecy in transmission is not essential; the brown code should be used, for the transmission of information of a confidential nature.[Page 276]
IV. (B) Policies and Procedures Concerning Additions to List
The underlying objective of the Proclaimed List is to prevent American firms and individuals from engaging in trading or financial transactions with persons who are identified directly or indirectly with objectives and activities inimical to the national defense policies of this Government and in particular the hemispheric defense policies of the American Republics. To this end we seek to deny to such persons the financial assistance and prestige resulting from the maintenance of commercial and financial connections with the United States under existing conditions. This Government is endeavoring in every feasible way to cooperate with the other American Republics to assure that their internal economies will not be disastrously disrupted by the loss of former markets and sources of supply due to the war. In many instances these efforts will entail sacrifices here and it is a natural and proper concern of this Government that such sacrifices should not be made for the benefit of firms and persons known to be unfriendly to the defense policies of this country. In other words, the Proclaimed List and the related controls of trade and financial transactions are designed for the protection of this country and of the other American Republics; the list is not to be used to place the handling of American products solely or principally in American hands and it will not be administered to serve selfish or acquisitive trade ends.
It is recognized that it is not possible to state precisely the factors which are to be taken into account in recommending specific firms for inclusion on the list. These factors will vary from country to country and from case to case depending upon local circumstances. Certain general considerations may be noted:
- Persons should not be recommended for inclusion merely because of German, Italian or Japanese nationality, although this fact should be reported wherever known.
- Consideration should be given to the position which a firm occupies as an essential part of the local economy. In all cases where the firm appears to be indubitably essential to the local economy, careful attention should be given to the possibility that the undesirable influences within the firm can be eliminated or controlled if the question is discreetly handled. All such situations should be fully reported with your recommendations.
- All cases should be fully reported where inclusion on the list would be called for except for local political considerations. It is to be noted that although such cases will continue to arise, they must be most carefully weighed since this approach is usually resorted to by the larger and frequently most serious offenders in endeavoring to avoid inclusion or to secure removal from the list. There is good reason to believe that indiscriminate acceptance of such considerations frequently results in an unfavorable local impression and eventual [Page 277] lack of respect for the entire policy and administration governing the list.
- Any person acting for or on behalf of a firm on the Proclaimed List for the purpose of any transaction which is not permitted directly with a person on the Proclaimed List, shall be considered a “cloak” and the facts immediately reported to the Department. The inclusion of such a person on the Proclaimed List should be recommended if the mission has reason to believe that such a person will persist in so acting.
- The policies to be followed with respect to transactions between local firms, including branches of American companies, with firms on the Proclaimed List are presently being formulated. It is recognized that this entire question is highly complicated and will involve problems arising from the existence of contracts entered into prior to July 17, 1941; and in some countries local laws will have to be taken into account. Further instructions are being prepared on these aspects and pending the receipt of such instructions all such situations should be fully reported to the Department.
So far as possible the Department desires each case reported on, considered by the mission on the basis of certain basic factors. Enclosure 1 entitled “Chart of Certain Unit Factors Used In Rating” has been prepared on the basis of the experience gained in analyzing information submitted on this subject by the missions during the past year. The ratings assigned to the various factors are intended to indicate generally the significance attached to the specific factors and to give the mission some precise guidance concerning the factors taken into account here in rating firms for internal administrative purposes. A firm or individual is not necessarily given an “A” rating merely because of one “A” factor but it may be; similarly several “C–A” or “C” factors taken together may result in an “A” rating for the firm. Each case must be evaluated on its merits and any recommendation of the mission is given careful consideration. The Department believes that the value of recommendations submitted by the missions will be increased if they are related generally to a uniform pattern of rating factors.
The “Chart of Certain Unit Factors Used in Rating” is furnished merely as a general guide and it is not intended to routinize the reporting on this basis nor is it intended that the missions should attempt to rate specific factors in their reports. However, any available information bearing on the factors set forth in Enclosure 1 should be furnished for each case and it will be helpful to have the mission indicate any special reasons why specific factors reported should not be evaluated on the basis of the rating assigned on the chart. Reference is also made to Enclosure 2 of strictly confidential circular instruction of February 7, 1941, File No. 164.12/2923A,12 with respect to other items [Page 278] of information which should be furnished. The despatch referred to related primarily to undesirable agencies but the information requested, so far as applicable, should now be furnished for any firm or individual considered an undesirable commercial or financial connection within the purview of this instruction.
The firms and individuals reported on are assigned ratings here on the basis of all available information. An “A” rating is given to persons with respect to whom there is “conclusive” information establishing the undesirability of the person as a trading or financial connection for American firms under existing conditions. Ordinarily “A” cases will be considered for inclusion on the Proclaimed List. The “C–A” rating is used for two types of cases: (1) those on which the information, although reliable, is not sufficiently serious to justify an “A” rating, and (2) those on which the information, although of a serious nature, is not sufficiently reliable or current to warrant an “A” rating. The “C” rating is used for the remaining cases which are under suspicion and require further observation. The former “B” rating has been superseded by the use of the letter “S” placed behind either “A”, “C–A” or “C” cases which because of political factors or other special circumstances require special treatment (thus “A–S”, “C–A–S” or “C–S”).
It will be noted that the “Chart of Certain Unit Factors Used in Rating” draws a distinction between “Conclusive” and “Inconclusive” information. Information furnished by the missions or other official sources without specific indication that the reliability of the information is unknown or questioned is generally considered to be reliable and therefore “conclusive” for rating purposes. The significance attached to “conclusive” information, as indicated on the chart, depends upon the importance of the factor. “Inconclusive” information covers both information the reliability of which is specifically questioned and unconfirmed data received here from unofficial sources.
Most of the factors listed on the chart do not require comment, but it should be noted that the applicability and significance of many factors will vary with the nationality of the firm or individual concerned. In reference to the factor designated “Preference for Axis Trade” consideration must be given to the nature of the trade involved, e.g. if Germany was the logical or sole source of supply for a product the fact that a firm purchased principally or substantially from Germany might not be significant. On the other hand if a firm served as a principal or substantial supplier to Germany of a product which might have been secured from other firms in the same market there is usually good reason to believe that the firm in question, at least in recent years, was persona grata with the Nazi authorities. Certain of these general variations are reflected in the chart, others [Page 279] must be taken into account and indicated by the individual missions as particular circumstances and local conditions necessitate.
The mission’s recommendation with respect to the rating to be assigned firms as they are reported on will be helpful and the mission’s opinion is desired on all cases proposed for addition to or deletion from the Proclaimed List. It is to be reemphasized, however, that such recommendations and opinions should be supported in all cases by detailed statements of the underlying facts. For example, in reporting on “cloaks” in addition to stating that a firm is acting as a “cloak” the mission should give the facts with respect to specific transactions which establish that the firm is so acting. Similarly, whenever compatible with the understanding on which information is acquired, the mission should indicate the source of its information. Whenever it is not feasible or desirable to disclose the source of information the mission’s opinion concerning the reliability of the source should be indicated.
Whenever a firm is recommended for inclusion on the Proclaimed List, care should be taken to give the accurate address of the firm and to indicate the location of all branches which should be listed as well as the names and business addresses of any individuals connected with the firm who should be separately listed.
Unless the mission indicates otherwise it is assumed that all factors reported have current significance. If a report indicates that certain factors were known to be present some years ago but are no longer present, the significance which is attached to the factor depends upon the nature of the factor. Factors relating to political attitudes which are not known to have been operative since 1936 are generally given a lower rating here in evaluating the present status of the firm since prior to that time the nature of the totalitarian movement and its activities in the hemisphere were not as widely appreciated as has been the case in recent years.
It is contemplated that improvements and further clarification of the chart will be developed on the basis of subsequent experience here and in the field.
In reporting on the political status of trading and financial connections under existing conditions it is to be borne in mind that even though a particular firm may not be included on the Proclaimed List, the information may be used by the Department of Commerce in advising American firms and by the licensing authorities in the administration of the trading and financial controls. For example any firm with an “A”, “C–A”, or “C” rating would not ordinarily be considered by the Department of Commerce as a recommendable connection for American firms under existing conditions. Likewise, Export Control takes into account many factors in passing on license applications. [Page 280] Accordingly, any limitations with respect to the application of unfavorable information for such purposes should be indicated in your reports and conversely any such specific application of the information which you think advisable should be noted.
IV. (C) Policies and Procedures Concerning Deletions From List
The same general procedure will be followed in making deletions as has been set forth above for additions to the list, i.e., upon receipt of information here indicating that removal of a firm should be considered the case will be presented to the interdepartmental committee; if the proposed action is approved by the committee the mission will be notified by telegram and unless objection is then raised by the mission the action will be taken with the publication of the next Supplement to the list.
Many inquiries are being received by the Department and by the missions concerning the procedure to be followed by firms in having their names removed from the list. The Department is stating in reply to such inquiries that any information available to American companies here indicating that a particular firm should be removed from the list may be submitted to the Department which will see that careful consideration is given the matter by the appropriate authorities and that the firm which is included on the list may present similar information and its representations to the mission or the nearest American consulate. In reply to such inquiries it is stated that the list as published is not final and that additions and deletions will be made from time to time on the basis of continuing study and current developments.
It is not, of course, possible to indicate the action which must be taken by firms generally in order to have a case removed from the list. Each case must be dealt with on its individual merits and the question of indicating to a firm the unsatisfactory factors in a case with a view to having them remedied must be left to the discretion of the missions. Generally such considerations are not revealed by the Department in response to written inquiries, but on occasion these matters are frankly discussed with American firms in conference. As a general rule firms cannot be considered for removal from the list until clean-cut evidence is forthcoming that the unsatisfactory conditions which resulted in the firm’s inclusion have been remedied and the mission is satisfied that the future conduct of the firm can be expected to be satisfactory. Ordinarily the burden of proof must be carried by the firm in question to establish these conditions to the satisfaction of the mission.
Where special considerations are involved relating to the unique [Page 281] and essential position of a firm in the local economy or to local political considerations the mission should on its own initiative thoroughly investigate the situation and report to the Department. Reference is made to the discussion of this type of situation at page 6 above.13
The question has been raised as to what procedure, if any, is to be adopted by this Government for receiving formal “undertakings” assuring satisfactory conduct from firms as a condition precedent to not listing a firm or to removal from the list. The British authorities have been taking such undertakings in certain cases and on occasion the results have apparently not been entirely satisfactory. For the present, this Government will not require such formal undertakings as a general policy. However, you are authorized to request or receive such informal assurances, either orally or in writing, as may appear to you to be useful in particular cases. In all cases where such assurances are received it should be made clear to the firm that the mere giving of an assurance does not guarantee the firm’s removal from the list nor does it assure a firm that it will not be placed on the list at any time in the future when in this Government’s opinion circumstances require such action. It should be made clear that any assurances which are given will be communicated to the authorities in Washington for consideration in the light of all the circumstances. Except in those cases where the mission considers it necessary to initiate consideration of removal of a firm because of special circumstances, the mission should not solicit such assurances for the purpose of initiating consideration of the firm for deletion. The question of soliciting assurances in such special cases is left to the mission’s discretion. The opinions of the missions concerning the feasibility and advisability of establishing a procedure for receiving standardized, formal undertakings will be helpful to further consideration of this question.
In any discussions relating to the deletion of a firm on which you may make a favorable recommendation you should make clear to the firm that if it subsequently becomes necessary to consider the firm for inclusion a second time the fact that the firm was previously removed from the list will count heavily against it and that very rarely, if ever, will a firm be considered for deletion after having been put on the list a second time.
V. Cooperation With the British Authorities
The British Embassy here has taken up with the Department the question of establishing close cooperation here and in the field on [Page 282] matters relating to the Statutory List and the Proclaimed List.14 The British missions have been instructed to maintain close contact with our missions on these matters and the Department desires that you maintain close contact with their missions for the purpose of establishing free and full exchanges of information and views on individual cases being considered for inclusion on or deletion from the respective lists. In line with the Department’s general policy of not acting jointly with the British on matters pertaining to the other American Republics care should be exercised that such cooperation is not in the nature of joint action. Moreover, such cooperation should be carried on in such a way as to avoid giving any impression to firms or to the government to which you are accredited that joint action is involved in these matters. For example, the Department considers it inadvisable that these matters should be discussed with a firm in a joint interview with the British.
There is complete agreement between us concerning the desirability of having our lists and policies on these questions generally in harmony and it is believed that a full and free exchange of information and views on individual cases will serve this end.
We have been informed that the British missions have been instructed to report on all cases included on our list which are not on the Statutory List with a view to having such cases considered for inclusion on their list. In the meantime steps have been taken to discourage British trade with all firms on the Proclaimed List. The British authorities here have discussed with us the text of comprehensive revised instructions which London proposes shortly to send to the British missions. These instructions as drafted contemplate, it appears to us, a rather drastic reorientation of their listing policies away from the narrow trading with the enemy concept towards a broader concept which embraces the principal factors with which we have been principally concerned. It is to be noted that this development had taken place before the United States Proclaimed List was announced and it is believed that as a result of the publication of our list and the subsequent discussions which have been held here the new British instructions will be based on policies substantially parallel to our own. Close contact will continue to be maintained between us here both on individual cases and on questions of general policy pertaining to these matters.
It is anticipated that in the future there will be generally a close [Page 283] parallel on cases added to and deleted from the respective lists, but it is not contemplated that this will be in the nature of simultaneous publication or that the same action will necessarily be taken on all cases. It is desirable that you should indicate what action the British mission is taking on all cases proposed for addition to or deletion from our list.
VI. Matters Relating to Administration of Executive Order No. 8389, as Amended
The basic freezing order, Executive Order No. 8389, as amended, and that portion of the President’s proclamation of July 17, 1941 authorizing the publication of the Proclaimed List, which is based on Section 5(b) of the Act of October 6, 1917,15 as amended, provide that the transactions covered thereby are prohibited without license. Accordingly, the power rests with the Treasury Department to grant or deny licenses for any transaction covered by the order. Moreover, under unusual circumstances the Treasury Department may issue licenses for specific transactions with firms on the Proclaimed List to the extent that the freezing order is applicable. Furthermore, the exportation from the United States to firms on the Proclaimed List of any article covered by the Export Control Act is not permitted unless a license is also obtained in accordance with Section 3 of the proclamation. Each such case is decided on its merits and the Department will endeavor to see that relevant policy considerations receive careful attention by the licensing authorities.
As matters now stand, ordinary commercial transactions with the American Republics may be carried out, pursuant to Treasury General License No. 53, with any firm not on the Proclaimed List. An export control license is necessary, however, if the product involved is exported from the United States and is subject to control.
VII. Communications with Consulates
In order to assure uniform handling in each country of all cases considered for addition to or deletion from the Proclaimed List and to facilitate checking with the missions on such matters, the Chiefs of Mission are requested to arrange with the Consuls in their jurisdiction to have all reports on firms forwarded to the Department through the mission. The mission in forwarding such reports from the consulates should furnish any further information available and indicate its view with respect to recommendations made by the consulate. The Department for the present will forward all communications on these matters to the mission.
Very truly yours,
- Not printed.↩
- Not printed.↩
- John S. Dickey.↩
- For text, see Department of State Bulletin, July 26, 1941, p. 78.↩
- Not printed.↩
- See page 276, paragraph numbered (3).↩
- For a British account of the beginnings of this cooperation, see W. N. Medlicott, The Economic Blockade, vol. i (London, His Majesty’s Stationery Office, 1952), pp. 499–503; ibid., vol. ii (London, Her Majesty’s Stationery Office, 1959), pp. 38 ff. The official primarily responsible for proclaimed list matters at the British Embassy was Noel F. Hall, one of the joint directors of the British Ministry of Economic Warfare, who was appointed on March 20, 1941, to take charge of economic warfare matters at the Embassy, with the rank of Minister.↩
- 40 Stat. 411, 415.↩