Foreign Relations of the United States, 1950, Central and Eastern Europe; The Soviet Union, Volume IV

S/S–NSC Files: Lot 63 D 351: NSC 91 Series

Note by the Executive Secretary of the National Security Council (Lay) to the National Security Council ¹

secret
NSC 91/1

[Washington,] November 17, 1950.

East-West Trade

References:

A. NSC 91²

B. NSC Actions Nos. 370³ and 347⁴

C. NSC 69 Series⁵

The enclosed draft statement of policy on the subject, prepared pursuant to NSC Action No. 370–a by the Special Committee on East-West Trade,⁶ is submitted herewith for consideration by the National Security Council, the Secretary of the Treasury, the Secretary of Commerce and the Economic Cooperation Administrator.

Attention is invited to the attached “Interim Procedure Under Program Determination 381”,⁷ which is also enclosed for consideration as a response to NSC Action No. 370–b, on the recommendation of the Departments of State and Commerce and the Economic Cooperation Administration in conjunction with the Special Committee.

It is recommended that, if the enclosed statement of policy and attached Interim Procedure are adopted, they be submitted to the President for consideration with the recommendation that he approve them and direct their implementation by all appropriate departments and agencies of the U.S. Government in accordance with the procedures outlined therein.

James S. Lay, Jr.

[Enclosure 1]

Draft Statement of Policy by the National Security Council, Prepared by the Special Committee on East-West Trade

secret

[Washington,] November 16, 1950.

East-West Trade

1. It is recommended that the following policy be approved to become effective at the conclusion of the current negotiations with the Consultative Group countries, but not later than January 8, 1951.

a. After adequate notice to the Consultative Group countries, any non-agreed 1A items which the United States considers sufficiently strategic to justify continued embargo to the Soviet Bloc should be denied to those countries unless assurance is obtained that identical items (items falling within the particular 1A listing) will be totally denied to Soviet Bloc countries.

b. After adequate notice to the Consultative Group countries, any non-agreed 1B items which the United States considers to be sufficiently strategic to justify continued limitative controls should be denied to those countries unless assurances are obtained that shipments from those countries to Soviet Bloc countries of the identical items (items falling within the particular 1B listing) will be reduced to a level mutually agreed upon between the United States and the country involved either through bilateral discussions or through the Consultative Group.

c. When either a or b above becomes effective, similar action shall be taken with respect to specialized capital equipment and raw and semi-finished materials, which will be used for the production of items covered by a and b above. However, specific procedures should be developed through the administrative organization of the Department of Commerce Advisory Committee on Export Policy, to permit a selective review, on an interagency basis, of particular cases, or groups of cases, arising under this paragraph. The provisions of this paragraph shall apply only to capital equipment and materials on the U.S. Lists 1, 1A and 1B.

d.

(1) The concept of “identical” shall be understood to mean “items falling within a particular U.S. 1 or 1A listing”, and “items falling within a particular U.S. 1B listing”.

(2) “Soviet Bloc” shall be understood to include the USSR (inclusive of Latvia, Esthonia and Lithuania), Poland, Czechoslovakia, Hungary, Rumania, Bulgaria, Albania, the Soviet Zone of Germany, and that part of China and North Korea under Communist control.

e. A comparable policy shall be applied to Western European countries not in the Consultative Group for all items on the U.S. List 1 and 1A and List 1B. Appropriate assurances should be obtained, when necessary, through bilateral discussions, and where appropriate, in concert with other Consultative Group countries.

f. No assurances of the type referred to in a and b above shall be required from the Consultative Group countries with respect to any 1A items accepted for inclusion on International List 1, or any 1B item accepted for International List I or II.

g. Shipments of strategic commodities to any Western European country should be denied where there is evidence indicating that such shipments may be transshipped, directly or indirectly, to the Soviet Bloc. A careful review of the transit trade policies of Western European countries should be made with a view toward limiting U.S. shipments of strategic goods to any country whose controls over transit trade appear inadequate to prevent unauthorized transshipment.

h. The U.S. agencies responsible for establishing and screening programs under MDAP should conform to the general policy set forth above.

j[i]. Existing policies on U.S. exports to Finland and Yugoslavia are not included within the scope of this document.

2. The following procedures should be followed in implementing this policy.

a. As soon as practicable after the effective date of this policy:

(1) The Secretary of Commerce, through the Advisory Committee on Export Policy, shall review United States 1A items that have not been accepted for International List I to determine whether they should remain on the United States 1A List for embargo to Soviet Bloc countries, and to determine whether their exportation from the Consultative Group countries to the Soviet Bloc is of sufficient strategic importance to justify denial of licenses for shipment from the United States to the Consultative Group countries.

(2) In the case of items which are so determined, the United States should notify the Consultative Group countries that licenses will not be issued for such items unless assurances are obtained from the government of the importing country that all shipments of identical items to the Soviet Bloc will be denied and the item in question will not be transshipped.

b. As soon as practicable after the effective date of this policy:

(1) The Secretary of Commerce, through the Advisory Committee on Export Policy, shall review those United States 1B items which have not been accepted for the International Lists I or II to determine whether they should remain on the United States 1B List, and to determine whether their quantitative control by the Consultative Group countries is of sufficient security importance to the United States to justify denial of licenses by the United States to a Consultative Group country.

(2) The United States should notify the Consultative Group countries that licenses will not be issued for such items unless assurances have been given by the government of the importing country that shipments of identical items to Soviet Bloc countries will not be transshipped and will be reduced to a level mutually agreed upon between the United States and the country involved either through bilateral discussions or through the Consultative Group.

c. If the head of any department or agency participating in the Advisory Committee on Export Policy disagrees with a determination or proposed determination by the Secretary of Commerce within the scope of this policy, the Secretary of Commerce will submit the matter, together with a statement of divergent views, to the National Security Council.

d. Until decisions are made as required by 2–a and –b above licensing policies shall follow the attached “Interim Procedure under P.D. 381”.

e. In the case of non-Consultative Group countries of Western Europe, the basic policy will be implemented as follows:

(1) Switzerland and Sweden.

(a) The United States should inform the governments of Switzerland and Sweden that the U.S. will no longer approve licenses for the export of U.S. List 1 and 1A items to those governments unless assurances are received that such items, and strategic end products of such items, will not be exported from those countries to the Soviet Bloc.

(b) When the policy set forth in paragraph 1–b is instituted, the United States should inform the Governments of Switzerland and Sweden that the U.S. will no longer approve licenses for the export of U.S. List 1B items, and strategic end products thereof, to those governments unless assurances are received that exports of such items to the Soviet Bloc will be reduced to a level mutually agreed upon between the United States and the country involved either through bilateral discussions or through the Consultative Group.

(c) The United States should seek to have the other Consultative Group countries adopt similar policies regarding exports to Sweden and Switzerland, and to approach Sweden and Switzerland either directly or through the Consultative Group machinery. However, the institution by the U.S. of the procedures set forth in (a) and (b) above should not be dependent upon actions taken by the other governments.

(2) Austria.

The policy set forth in paragraph 1–e should be generally applicable to Austria. However, for the time being, the recommendations of the Vienna Screening Committee should be considered as appropriate assurances. The Vienna Screening Committee should be informed of this policy.

(3) Other Countries.

The trade of other European countries (including Spain, Portugal, Trieste, Greece and Turkey) with the Soviet Bloc should be examined to determine whether comparable action with respect to U.S. exports to them is necessary.

f. The Secretary of State will transmit to the NSC a report of the current tripartite negotiations on export controls upon their conclusion in London, and will also transmit a report of the negotiating situation as a result of the Consultative Group meeting which takes place in Paris on November 29.⁸

[Enclosure 2]

Paper Prepared by the Department of State, the Department of Commerce, and the Economic Cooperation Administration

secret

[Washington, undated.]

Interim Procedure Under Program Determination 381

As an interim measure, instead of requiring assurances by various Western European governments that they are not shipping, or transshipping the kind of 1A commodities they are receiving from the U.S., cases may be approved by OIT unless there is reasonable indication that the country of destination is shipping, or is likely to ship, such goods to the Soviet Bloc.

After reviewing each case to determine that the particular shipment involved is not likely to be transshipped to the Soviet Bloc, the following procedure should be followed by OIT:

1. u.s. list 1 and 1a commodities in general

(a) Applications may be approved unless there is reasonable indication that the country of destination is shipping items within the particular U.S. 1 or 1A listing to the Soviet Bloc; and if it is either consuming imports received from the United States within its own boundaries or shipping only to friendly destinations.

(b) If there is reasonable indication that the country of destination is shipping items within the particular U.S. 1 or 1A listing to the Soviet Bloc, the application should be held and the country of destination requested to clarify its status or furnish appropriate assurances. OIT will consult State and ECA where such assurances seem required.

2. capital equipment

(a) Applications may be approved for equipment under the MDAP or if there is evidence that the equipment is for the production of military end items which would directly benefit Western European defense.

(b) Applications may be approved for equipment producing U.S. List 1 or 1A items, where those items are clearly intended to remain in friendly territory.

(c) Applications should be held for appropriate assurances, where the capital equipment involved will be used to produce U.S. List 1 or 1A items for which there is reasonable indication that the country of destination is shipping such items to the Soviet Bloc. OIT will consult State and ECA where such assurances seem required.

3. projects

Applications for projects in Western Europe which have been programmed by ECA may be approved unless there is reasonable indication that the project will increase the production of U.S. List 1 or 1A items which are being exported to the Soviet Bloc by the country of destination.

In addition to the general procedures set forth above, the following specific procedures have been instituted by the Department of Commerce and should be followed by OIT:

(a) In the case of Austria, the recommendations of the Vienna Screening Committee for approval of pending cases shall be considered as appropriate assurances under P.D. 381.

(See Notice of Action No. 77, dated October 25, 1950⁹)

(b) OIT has been authorized to approve applications involving components and parts where the value does not exceed $1,000, etc. (See Notice of Action No. 77.1, dated October 28, 1950⁹)

(c) In cases where there is reasonable indication that the country of destination is shipping or is likely to ship or is transshipping the kind of 1A commodities they are receiving from the U.S., the OIT has been authorized to approve such cases when the Washington embassy of a Western European country informs OIT in writing that the country is not shipping the commodity to the Soviet Bloc.

(d) OIT has been authorized to approve certain hardship cases for which a U.S. exporter can take the responsibility for adhering to our export control policy.

1. This note was circulated under a cover sheet entitled “A Report to the National Security Council by the Executive Secretary on East-West Trade, November 17, 1950”. At its 72d Meeting, November 22, at which President Truman presided and in which Under Secretary of Commerce Blaisdell, the Acting Economic Cooperation Administrator, and Secretary of the Treasury Snyder participated, the National Security Council, in NSC Action 387b, adopted the statement of policy and the interim procedure included here as enclosures 1 and 2. According to a memorandum of November 24, by Council Executive Secretary Lay, not printed, President Truman that day approved the statement of policy and interim procedure presented here and directed their implementation by all appropriate departments and agencies of the Government, in accordance with the procedures outlined therein.
2. October 30, p. 216.
3. See the Record of Actions of the Council Meeting of November 2, p. 225.
4. See the Record of Actions of the Council Meeting of August 24, p. 179.
5. See NSC 69/1, August 21, p. 163.
6. Regarding the establishment of the Special Committee on East-West Trade, see footnote 6, p. 225.
7. Regarding the Program Determination under reference here, see telegram 1498, September 23, to Paris, p. 194, and telegram 1962, October 16, to London, p. 208.
8. A report prepared by the Department of State on January 8, 1951, on recent progress in export control negotiations was circulated to the National Security Council on January 29, 1951. (S/S–NSC Files, Lot 63 D 351, NSC 104 Series) Regarding the Consultative Group meeting of November 29, see telegram 3069, November 30, from Paris, p. 246.
9. Not printed.
9. Not printed.