893.24 FLC/5–449
The Secretary of State to the Chinese Ambassador (Koo)
Excellency: I have the honor to refer to the following communications between Naval Officials of the Republic of China and the former Central Field Commissioner for China, Japan and Northern Pacific,67 Office of the Foreign Liquidation Commissioner, representing the United States of America, regarding the payment of an installment of principal and interest due the United States as of May 1, 1948 under Sales Contract No. W–FLC(CH) 338, as amended by Supplemental Agreement No. 1, sometimes referred to as the “China Dockyards Contract”:68
[Here follows a listing of six communications.] Typewritten copies of these communications, marked as enumerated above, as well as photostatic copies of the Sales Contract and Supplemental Agreement No. 1, are enclosed69 herewith for your convenience.
The office of the former Central Field Commissioner for China, Japan and Northern Pacific, located in Shanghai, has been discontinued and accordingly this communication is being addressed to your Excellency so that the contents may be conveyed to the appropriate officials of your Government.
Your Excellency will note from the communications referred to above that the net amount of the payment due as of May 1, 1948 under the China Dockyards Contract was $179,447.98, computed as follows:
| Interest accrued to April 30, 1948 | $65,482.17 |
| Principal installment due May 1, 1948 | 136,059.39 |
| Total amount due May 1, 1948 | $201,541.56 |
| Less value of goods and services furnished to April 30, 1948 | 22,093.58 |
| Net amount due May 1, 1948 | $179,447.98 |
The value of goods and services furnished by China to April 30, 1948 has been deducted from the total amount due as of May 1, 1948, inasmuch as the United States has elected to exercise the option contained in Article 7a ii of the Contract.
[Page 769]The three proposals contained in paragraph 3 of reference (3),70 enclosed herewith, and the request contained in paragraph 7 of reference (4),71 enclosed herewith, have received careful consideration and I am authorized to inform your Excellency that, in addition to exercising the option contained in Article 7a ii as noted above, my Government is willing in principle to exercise also the option contained in Article 7b of the Contract, as proposed by your Government, subject to mutual agreement as to the appropriate method of implementing the option provision contained in Article 7a ii. According to my Government’s interpretation of Article 7a ii, as amended, the value of goods and services furnished by China in any year ending April 30 may, at the option of the United States, be credited to the payment of principal or interest which shall become due and payable as provided in the contract. It is the view of my Government that such option was not intended to permit the crediting of the value of such goods and services to the payment of future installments of principal or interest beyond the ensuing May 1 which have not yet matured under the provisions of Article 6, as amended. However, in the event that interest is deferred or principal installments extended pursuant to Article 7b, with the effect of postponing the obligation of China to pay in United States currency as provided in Article 6d, my Government desires to reserve the right to credit the value of goods and services furnished by China in any subsequent year ending April 30 to the payment as of the ensuing May 1, in the following order, of (a) past due interest, if any, (b) any interest which may have been deferred beyond its original due date by exercise of the option contained in Article 7b, (c) past due principal installments, if any, (d) any interest or principal installment which shall become due and payable on the ensuing May 1, and (e) any principal installments which may have been extended beyond their original maturity dates by exercise of the [Page 770] option contained in Article 7b. If your Government concurs in this interpretation of the Contract, the United States agrees as follows:
- (A)
- To defer to May 1, 1949 the time of payment of the unpaid interest due as of May 1, 1948, less the value of goods and services furnished by China to April 30, 1948, the net amount to be thus deferred being $43,388.59, and
- (B)
- To extend to May 1, 1978 the time of payment of the unpaid installment of principal due as of May 1, 1948, in the amount of $136,059.39.
If your Government concurs in the arrangements outlined above, it is requested that my Government be notified to that effect so that the records of the Foreign Liquidation Commissioner may be adjusted accordingly.
Accept [etc.]
- Capt. S. N. Ferris Luboshez.↩
- Signed at Shanghai, May 15, 1946. For correspondence on negotiation of this agreement, see Foreign Relations, 1946, vol. x, pp. 1069 ff. The supplemental agreement was signed at Shanghai on January 24, 1948.↩
- None printed.↩
-
Letter of November 18, 1948, from Vice Adm. Kwei Yung-chin, Commander in Chief of the Chinese Navy, to Harry L. Hornback, Deputy Central Field Commissioner for China, Japan, and Northern Pacific, OFLC. It recommended the following:
“(1) To request the United States Congress to consider the entire purchase of the surplus as a Military Aid from the United States Government apart from the $125,000,000—already located (allocated?] by the U.S. Government.
(2) To request the U.S. Government to defer the payment of both the principal and interest, basing on Article 7(2) (b) [7b?] of the Contract.
(3) To request the U.S. Pacific Fleet to make full use of the facilities of the Kiangnan and Tsingtao Dockyards for repair, so that the proceeds therefrom can be used to offset the annual payment of principal and interest.”
For correspondence on the $125,000,000 grant, see Foreign Relations, 1948, vol. viii, pp. 73 ff., and ante, pp. 472 ff., passim.
↩ - Letter of November 22, 1948, from Rear Adm. Pellian T. Mar, Director of the Chinese Navy Kiangnan Dock, to Mr. Hornback. It requested deferment of principal and interest payments.↩
- Assistant Secretary of State for Economic Affairs.↩