611.93231/1–2651
The Department of State to Certain Diplomatic and Consular Offices 1
Foreign Assets Control
The Department has been requested by the Treasury Department to transmit the following information. This information and the attached regulations should serve as a basis both for answering inquiries and for reporting to the Department any alleged violations of the regulations:
“Effective December 17, 1950, the Secretary of the Treasury, acting under the authority of section 5 (b) of the Trading with the Enemy Act, as amended, issued the Foreign Assets Control Regulations, copies of which are transmitted herewith.2 These Regulations block the United States assets of Communist China and North Korea and their nationals, prohibiting all transactions involving such assets unless Treasury Department licenses are obtained. The purpose of these controls is to prevent financial transactions by or with these areas which would be inimical to the interests of the United States.
“A series of general licenses was included as part of the Regulations which authorize certain harmless transactions which would otherwise be prohibited. Thus, individual Chinese and North Koreans in the United States and also in non-Communist areas abroad (termed the Authorized Trade Territory and defined in section 500.322 of the Regulations) will be able to use their assets in the United States unless they are acting on behalf of Communist China or North Korea, or have been in these countries on or since December 17, 1950. Likewise, the assets of business enterprises owned or controlled by such individuals are free from these blocking restrictions if the only Chinese or North Korean interest therein is that of such individuals. Among other general licenses are those authorizing payments into blocked accounts and authorizing payments out of such accounts for United States, state and municipal taxes. Transactions not covered by general licenses may be effected only under specific Treasury license. The Regulations provide that applications for such specific licenses must be filed with the Federal Reserve Bank of New York, on application forms obtainable from that institution.
“Under the Regulations, remittances may be made to persons in [Page 1889] China only in limited amounts for living expenses and on condition that the dollar amount of the remittance is credited to a blocked Chinese account in a United States bank. Exceptions may be made by the Treasury Department in hardship or other special cases.
“The Regulations permit imports from China and North Korea only if the exporter is willing to accept blocked dollars in payment. It should be noted that the Regulations are applicable to indirect importations from China and North Korea as well as to direct importations from those areas. Accordingly, a license is required in connection with any importation through a third country, including countries contiguous to the United States, if the merchandise being imported left China on or after December 17, 1950, or if on or after that date a person in China (except Formosa) or North Korea or a firm owned or controlled from those areas or any other designated national had an interest in the merchandise.
“The Regulations authorize payments from blocked accounts and other transactions incident to exports from the United States to China and North Korea provided the Department of Commerce issues an export license under the Export Control Act of 1949. However, as a practical matter, this authorization is inoperative because the Commerce Department’s policy at present is not to license any exports to China or North Korea. Furthermore, under the Regulations, dollars may not be used to finance transactions between China or North Korea and third countries.
“It should be noted that the term ‘national’ as used in the Foreign Assets Control Regulations is not restricted to citizens of China or North Korea. As defined in the Regulations, the term ‘national’ includes all persons resident in Communist China and North Korea, as well as the governments thereof, and also persons acting for or on behalf of those countries. This last definition is broad enough to include even American citizens residing in the United States who are acting in a financial or commercial capacity here for the benefit of Communist China or North Korea. If the Foreign Assets Control is to be effective, it is essential that the Treasury Department be able to identify and block the accounts of persons acting commercially or financially as intermediaries or cloaks for blocked nationals.”
Any information on violations, especially on cloaking activities in behalf of Communist China or North Korea by persons in other countries which might come to your attention should be reported promptly by official informal letter marked for the attention of the Office of Financial and Development Policy.