The Ambassador in Panama (Wiley) to the Secretary of State
108. As Dept will note from Embtel 107,1 proposed decree basing action on UN resolution May 18 prohibits (1) export or reexport war material from Panamanian ports to North Korea, Commie China, [Page 1555] USSR and satellites, Hong Kong and Macao; (2) transport in Panamanian registered ships of all types of goods and war material toward these areas, (3) export and re-export war material to other areas except by permission Ministry Finance upon presentation certificate issued by authorities country destination and authenticated by Panamanian consul, containing official assurance materials will not be re-exported to these prohibited zones or will not be used for manufacture war material destined prohibited zones. In defining war materials, decree incorporates exact categories of US presidential proclamation 2776.2
Decree provides Panama will, after consular investigation, cancel registry ships transporting war material or goods of any type toward prohibited zones unless captains such ships discharges goods and war material in designated port and undertake not to continue to port destinations; if ship carries war material will also be fined $1,000 to $10,000 by consular official and registry cancelled if refuses discharge entire cargo. Panama will cancel registry any ship engaging coastal service between ports prohibited zones. Ship with registry cancelled under decree may reregister only by Panamanian executive resolution, if any UN state cancels registry its vessels on grounds analagous those above, their registry under Panamanian flag will not be permitted if other state adopts same provision.
Comment: Action taken so far to curb traffic by Panamanian flagships with Commie ports may have been successful largely because of element of surprise and effective measures taken locally by US consular reps.
To have situation clarified by a decree as now proposed by Panamanian Govt might worsen rather than help effective control. Such decree might even serve as blueprint for successful evasion of controls. For example, there is no prohibition of traffic per se with Commie ports. Penalties cited are certainly not forceful deterrents. I understand Article 5 Law 80 of 1934 is drafted in general terms only. (This will be checked when office opens.) The fines proposed in decree are insignificant.
Moreover, there are many ports where effective control is difficult under any circumstances. My own experience as Consul General at Antwerp during height of alcohol smuggling to US demonstrated that illicit shipping enjoys great facilities for by-passing obstacles.
That Panamanian law is definitely inadequate to give President Arosemena solid basis for going further is definite conclusion legal experts who have studied question carefully. Memorandum3 from Bentz4 general counsel, being air mailed.[Page 1556]
Foreign Minister knows my views. Before discussing matter further with him would greatly appreciate Dept’s guidance. Probably can arrange for President Arosemena postpone signature for two or three days.