Executive Secretariat Files

Memorandum by the Secretary of State to the Executive Secretary of the National Security Council (Souers)

Subject: Implementation of NSC 41.

Pursuant to NSC Action No. 123, October 6, 1948, the following progress report on the implementation of NSC 41, “U.S. Policy Regarding Trade with China”, is submitted for the information of the Council:

Discussions have been held with the Department of Commerce regarding the relative merits of applying the R procedure to China, [Page 843] and possibly to adjacent areas, versus adoption of an expanded positive list for licensing of exports to all countries. Commerce has indicated that it was inclined toward the R procedure for reasons of administrative feasibility, but that it desired the Department’s views on the matter. Commerce apparently feels that a decision should depend to some degree on the character of British cooperation, particularly with reference to control of transshipments at Hong Kong, and awaits assurances of British cooperation before taking further action.
A meeting was held on March 22, 1949 with the Counselor of the British Embassy to explain United States policy and procedural plans regarding control of exports to China, to point out the importance of British cooperation and to request an early indication as to what the British Government would be prepared to do in this regard. Substantially the same ground had been covered in more general terms with the British Counselor in a meeting on February 10, 1949 at which time our desire for early action was emphasized. At both meetings the Counselor stated that he would put the matter up to the Foreign Office immediately and ask for a prompt reply, but no response has been received to date.
Officers of the Department have been reviewing the 1A and 1B lists with representatives of Commerce and the National Military Establishment for the purpose of formulating recommendations as to the treatment that should be given applications for export to China of particular items on the lists. NSC 41 policy has been applied thus far by an ad hoc advisory committee to Commerce in processing export license applications for China of items on the positive list.
SCAP has been advised through the Department of the Army that a proposal to SCAP by an American firm for exchange of Manchurian soyabeans against Japanese manufactured consumer goods would be consistent with NSC 41, provided the trade is confined to a cash reimbursement or exchange basis.
In response to their inquiry, the Department has advised the Standard Oil Company of California and the California-Texas Oil Company, principal American oil distributors in China, that, while there is no settled policy in this regard, we would interpose no objection to sales of kerosene and motor gasoline destined for Chinese Communist-controlled ports. We added, however, that it would be desirable to limit such sales to the normal civilian requirements of north China, and that we would prefer that, in general, no sales be made for shipment of petroleum to northern Korea.
It has been decided that the threat or application of economic pressure to gain Chinese Communist recognition of consular status would be tactically undesirable at this time and inconsistent with the policy set forth in NSC 41; that the exercise of consular functions, [Page 844] including confidential communications, as distinguished from recognition of official status, should be sought on its own merits and strengthened by usage wherever possible.
The Department has instructed consular posts in Communist-controlled areas of China to certify invoices upon request. Discussions have been held with Treasury regarding the requirement by Customs of full value bond for entry into the United States of any cargo shipped directly from Tientsin without consular invoices, and regarding the possibility of having Customs apply such regulations as might inconvenience the import of north China commodities that have been transshipped via Shanghai or Hong Kong. The Consulate-Generals at Shanghai and Hong Kong have been instructed to be as strict as possible in applying invoice certification regulations to goods believed to have been transshipped from Tientsin for the United States. Action along these lines would be designed to emphasize the advantages of direct shipment from north China to the United States and to strengthen the position of the United States Consulate-General at Tientsin by encouraging exporters to apply for consular invoices.
Copies of NSC 41 have been sent under instruction to the Embassy at Nanking and to the United States Political Adviser at Tokyo.25 The Department of the Army has sent a copy to CinCFE.26

Dean Acheson
  1. William J. Sebald, Acting.
  2. Commander in Chief, Far East (MacArthur).