Foreign Relations of the United States, 1955–1957, American Republics: Central and South America, Volume VII

382. Memorandum of a Conversation, Department of State, Washington, May 19, 1956¹

Washington, May 19, 1956

SUBJECT

• Chilean Controls of Copper Exports

PARTICIPANTS

• Ambassador Beaulac
• Admiral DeLany, Deputy Director, MDAC
• Mr. Anderson, FOA/MDAC
• Mr. Hockersmith, Commerce
• Mr. Wright, State
• Mr. Belton, State
• Mr. Strong, State
• Mrs. Mulliken, State

An inter-agency meeting was held in New State on May 17, 1955, to discuss with Ambassador Beaulac current Soviet bloc efforts to import copper and the copper export control problem in Chile.² The government agencies represented were State, Commerce and MDAC

Admiral DeLany, Deputy Director, MDAC,³ informed the Ambassador that unauthorized copper diversions to the Soviet bloc were frustrating the controls placed upon copper exports by the COCOM PCs and that a study is being made in Washington to identify the weakness in the Chilean copper export controls. When the study is completed a recommendation will be made concerning the best approach for obtaining Chilean cooperation in extending her controls to close existing diversion loopholes.

The following was explained at the meeting:

1. The IC/DV system (source control) and the TAC scheme (trans-shipment control) were developed and accepted by the PCs as being the best controls acceptable at present for preventing diversions.

2. Chile, being one of the world’s largest producers of copper, has been asked on numerous occasions during the past four years to participate in the COCOM control plan by applying effective controls over her copper exports. Although source controls have been applied partially they have not been extended to a point which would remove completely the possibility of diversion of Chilean copper.

3. The bilateral approaches made to the Chilean Government on the implementation of effective controls have met with only limited success since Chile has not applied the IC/DV system to copper produced by the small mining companies and has not applied it to all of the production of the two large companies.

4. During 1954 there were undoubtedly diversions of Chilean copper to the bloc and the amount so diverted may have been as much as 25,000 tons which includes blister and refined, but does not include semi-manufacturers, scrap, ores and concentrates, and wire.

5. All other large copper producing countries in the free world have agreed to apply effective controls over their strategic copper exports.

6. It is appropriate that immediate action be taken to obtain Chile’s full cooperation in applying effective export controls including IC/DV and TAC to all strategic copper exports in view of (a) current COCOM efforts to secure the broadest possible third country cooperative effort in the TAC scheme (which would require Chile formally to enter the scheme and permit publication of her name as a participating country); (b) the recently enacted Chilean copper legislation which will affect the existing pattern of export controls and will necessitate redefining the control arrangements; (c) the advisability of taking action while the present high demand for copper prevails and before the present copper position shifts from a seller’s market to a buyer’s market, thus making it more difficult to obtain Chile’s full cooperation in implementing export controls.

It was explained further that uncovered copper wire which was downgraded last year to IL III actively is being negotiated for upgrading to IL I by COCOM which should take action within the near future. With the exception of the U.K., the COCOM countries have indicated already willingness to reimpose a bare wire embargo.

The Ambassador pointed out that the present Administration in Chile, since its coming into power approximately eighteen months ago, has become progressively more receptive to U.S. proposals generally and has exhibited somewhat less political sensitivity to formed imposition of controls. It was agreed that a comprehensive instruction setting forth the basis for an approach to Chile would be prepared as soon as possible.⁴

1. Source: Department of State, Central Files, 460.259/5–1955. Secret. Drafted by Thomas S. Strong of the Office of International Trade and Resources.
2. U.S. interest in the export of Chilean copper to the Soviet Union and other Communist nations was part of a general policy which encouraged the application of multilateral export controls on trade in strategic items with Communist countries. For a comprehensive summary of the export control system, see The Strategic Trade Control System, 1948–1956, the Ninth Report to Congress by the Director of the International Cooperation Administration on the Mutual Defense Assistance Control Act of 1951 (Washington, 1957). For text of the Mutual Defense Assistance Control Act, commonly known as the Battle Act after its sponsor Representative Laurie C. Battle of Alabama, see 65 Stat. 644.
3. Vice Admiral Walter S. DeLany was also Chairman of the Economic Defense Advisory Committee (EDAC).
4. In circular airgram 8902 to Santiago, June 15, the Department of State recommended an approach for the Embassy to take toward the Chilean Government regarding the institution of an improved export control system for strategic materials. The Department requested the Ambassador at his discretion to make an immediate approach to the Chilean Government at a high level in order to urge that an improved security export controls system be established as soon as possible. The proposed new system would include a series of technical measures regarding export licenses, import certificates, and transshipment controls, among other matters. (Department of State, Central Files, 460.259/6–1555)