893.24 FLC/5–1048

Memorandum by Mr. Paul H. Nitze, Deputy to the Assistant Secretary of State for Economic Affairs (Thorp), to the Foreign Liquidation Commissioner (Hyssong)

Reference is made to a memorandum of May 10, 1948 from Major General Brown. It is requested that appropriate instructions be prepared for the Ambassador at Nanking and OFLC’s Central Field Commissioner at Shanghai. It is believed that the instructions should include the following points:

Negotiations should be held as soon as possible.
The question of “underrun” should not be raised by representatives of the United States. However, if the Chinese should raise the question, the views of the Chinese should be received without any indication that compensation will be made in dollars. The Chinese should be informed that claims for underrun should be postponed until the removal has been completed. We shall be in a better position to determine whether there has been an underrun, after the Chinese have completed performance of the agreement. Moreover, as pointed out in the memorandum of May 10, there is a possibility that the Chinese may incur obligations, particularly claims under Article 2c, unless they promptly complete removal.
In any event, claims for underrun should be considered with the lend-lease settlement.
The instructions should also include all other appropriate directions for winding up matters under the agreement.