S/SNSC files, lot 63 D 351

No. 6
Report to the President by the National Security Council 1

secret
NSC 122/1

United States Export Licensing Policy Toward Hong Kong and Macao

objectives

United States export licensing policy to Hong Kong and Macao should serve to insure that the aims set forth in NSC 104/2,2 of limiting Soviet bloc access to strategic and critical commodities and of denying any United States exports to Communist China, Manchuria, and North Korea, are not frustrated, while at the same time permitting Hong Kong and Macao to receive United States exports to meet essential minimum short-term requirements for local consumption and for the continuation by Hong Kong of mutually beneficial transshipment or resale of United States commodities to non-Soviet bloc areas.

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recommendations

I. United States Licensing Policy for Hong Kong

A.
Treatment of Rated and/or Short Supply Items on Positive List and Non-Positive List I–C Items.3
1.
Rated Items (Items on U.S. Security Lists)
a.

International List I (including the Munitions List and Atomic Energy Items)

Items on International List I, the Munitions List and Atomic Energy items, which have been embargoed to the Soviet Bloc by Hong Kong, may be licensed, where supplies are available, to the extent necessary to meet essential minimum short-term requirements in Hong Kong, and for transshipment or resale to meet similar requirements in non-Soviet bloc destinations, provided shipments to Hong Kong do not involve stockpiling beyond normal requirements, important industrial expansion, or other questionable security risks.

b.
Items on United States List IA, II, IIB, and IC may be licensed within the limits of availability, to meet essential minimum short-term requirements for local consumption in Hong Kong and for transshipment or resale to meet similar requirements in non-Soviet bloc destinations, provided shipments do not involve stockpiling beyond normal requirements, important industrial expansion or other questionable security risks and, provided the United Kingdom Government agrees to impose or has imposed and maintains at Hong Kong an embargo on the shipment of these or identical items to Communist China and North Korea or has explained satisfactorily why such action cannot be taken. Otherwise export should be denied unless it is found that the granting of the license would be of a net security advantage to the United States.
c.
No rated item should be approved for export to Hong Kong where that item or an identical item is utilized in Hong Kong as a raw material or as capital equipment in the production of any item a significant quantity of which is being exported to Communist China, North Korea, Macao or Far Eastern destinations of the U.S.S.R.
d.
Shipments to Hong Kong of any rated items should be denied where there is probability that unauthorized diversion of these shipments, directly or indirectly, to the Soviet bloc may occur; or that shipments of like items from other sources are being diverted in significant amounts.
2.
Short Supply Items on the U.S. Positive List
a.
Items on the United States Positive List for reasons of short supply shall be licensed, within the limits of availability, to meet minimum essential short-term local requirements for Hong Kong, or for non-Soviet bloc areas for which Hong Kong is normally a transshipment center, such requirments to be determined in accordance with the usual procedures in effect for non-Soviet bloc countries, taking into consideration Hong Kong’s other sources of supply and Hong Kong’s exports, authorized or unauthorized, of such items to all destinations. However, items in short supply which are also on any United States strategic list shall also be subject to the appropriate provisions of Section I–A–1, above.
b.
No item on the Positive List for reasons of short supply should be approved for export to Hong Kong where that item or an identical item is utilized in Hong Kong as a raw material or as capital equipment in the production of any item a significant quantity of which is being exported to Communist China, North Korea, Macao or Far Eastern destinations of the U.S.S.R.
c.
Shipments to Hong Kong of all items on the Positive List for reasons of short supply should be denied where there is probability that unauthorized diversion of these shipments, directly or indirectly, to the Soviet bloc may occur.
3.

Shipments by Hong Kong to Macao

Shipments by Hong Kong to Macao are to be treated as shipments to Communist China unless they are determined by the United States to be necessary to meet minimum essential short-term requirements for local consumption in Macao.

B.
Treatment of Residual Items
1.
All other items should normally be licensed to Hong Kong, to meet short-term requirements for local consumption and for transshipment or resale to non-Soviet bloc countries.
2.
Shipments of any item in this category should be denied where this item or any identical item is utilized in Hong Kong for the production of any item a significant quantity of which is being exported directly or indirectly to Communist China, North Korea, Macao or Far Eastern destinations of the U.S.S.R.
3.
Shipments of such commodities should be denied where there is evidence that such shipments will be transshipped to Communist China, North Korea, or Far Eastern destinations of the U.S.S.R.

II. United States Licensing Policy for Macao

A.

Treatment of Rated and/or Short Supply Items appearing on the Positive List and I–C Items not on the Positive List.

Exports of items in this category directly or via Hong Kong to Macao shall be denied except where they are judged to fall within the limits of availability and (a) are found necessary to meet minimum essential short-term local requirements; (b) are supported by formal requests of the Portuguese government, backed by evidence of Macao’s total requirements and proposed sources of supply; and (c) and investigation had demonstrated that there is no likelihood the proposed export will be made available to the Soviet bloc.

B.
Treatment of Residual Items
1.
All other items may be licensed directly or via Hong Kong to Macao only to meet demonstrated minimum short-term requirements for local consumption.
2.
Shipments of such commodities should be denied, however, where there is evidence that they will be transshipped, directly or indirectly, to Communist China, North Korea or Far Eastern destinations of the U.S.S.R.
3.
Shipments of any such item should also be denied, however, where this item or any identical item is utilized in Macao for the production of any item which is being exported, directly or indirectly, to Communist China, North Korea or Far Eastern destinations of the U.S.S.R.
  1. A covering note of Feb. 6 to the National Security Council from Acting Executive Secretary S. Everett Gleason states that NSC 122/1, a revision of NSC 122, a report by the Secretary of Commerce, Jan. 18, not printed, had been approved on Feb. 6 by the National Security Council, the Secretaries of the Treasury and Commerce, and the Director of Defense Mobilization, who accordingly were submitting it to the President with the recommendation that he approve the Objectives and Recommendations contained therein and direct their implementation by appropriate executive departments and agencies under the coordination of the Secretary of Commerce. A memorandum of Feb. 7 from Gleason to the National Security Council states that on that date the President had so approved and directed. (S/SNSC files, lot 63 D 351, NSC 122 file)
  2. NSC 104/2, “U.S. Policies and Programs in the Economic Field Which May Affect the War Potential of the Soviet Bloc”, Apr. 4, 1951, adopted by the National Security Council on Apr. 11, 1951, is printed in Foreign Relations, 1951, vol. i, p. 1059.
  3. The lists under reference were among the lists of items subject to U.S. export controls; there were, in addition, three lists of items subject to export controls by the countries participating in the Coordinating Committee (COCOM) of the Paris Consultative Group of nations working to control export of strategic goods to Communist countries. International List I consisted of items embargoed to the Soviet bloc by the COCOM participants; items on International List II were subject to quantitative controls; and items on International List III were subject to surveillance and exchange of information between the COCOM countries. U.S. Lists I and I–A consisted of items which the United States considered of primary strategic significance and embargoed to the Soviet bloc; List I was identical to International List I, while List I–A consisted of items embargoed by the United States but not by all the COCOM countries. U.S. Lists II and II–B consisted of items of secondary strategic significance, the export of which was highly restricted; List II included all items (except those on U.S. List I–A) on International List II, while II–B included items not on International List II. U.S. List I–C included items not on the lists mentioned above which might support military activity; their export to the Soviet bloc was restricted. The Positive List was the official public list issued by the Department of Commerce of items, the export of which to all, or most, destinations required a validated license issued by the Office of International Trade of the Department of Commerce; it included all the items on the U.S. security lists, except for a few on the IC list, and all items controlled for reasons of short supply.

    For documentation concerning general U.S. trade restrictions on the Soviet bloc and U.S. participation in COCOM, see vol. i, Part 2, pp. 817 ff.