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SECRET/SENSITIVE/EYES ONLY
February 11, 1972
MEMORANDUM FOR
Mr. Theodore Eliot
Executive Secretary
Department of State
SUBJECT:
Relaxation of Restrictions on Trade
with People's Republic of China
Enclosed is the draft press release, together with draft Qs and
As which have been prepared for Monday's announcement which
I discussed with you telephonically.
On a most close hold basis, would you please give us your com-
ments on both the Qs and As and the draft press release, to in-
clude any recommendations for modification.
Alexander M. Haig, Jr.
Brigadier General, U.S. Army
Deputy Assistant to the President
for National Security Affairs
Enclosures
SECRET/SENSITIVE/EYES ONLY
Loud
AMH:mlh:typed 2/11/72
Reproduced at the Richard Nixon Presidential Library
DECLASSIFIED This document has been reviewed pursuant to Executive Order 13526 and has been determined to be declassified.
2/10/72
Proposed Press Release
Following a full review of a report by the Under Secretaries
Committee on U.S. trade with the People's Republic of China, the
President today announced his decision to place the People's Republic
of China in Country Group Y of the Commodity Control List. The
effect of this decision is to make available under general license to
the People's Republic of China all commodities now available under
general license to the countries of Eastern Europe, including the
Soviet Union. Poland, Romania, and Yugoslavia are in a separate
category. This also moves controls on the export to the PRC of
foreign products made with U. S. technical data to the same level
as those governing such exports to Eastern Europe, except those
countries noted above.
In addition, the President has decided to modify remaining
Foreign Assets Control Regulations pertaining to the People's Republic
of China. He has directed removal of the requirement that U. S.
controlled firms in countries (including Western Europe, Canada,
and Japan) which are members of COCOM -- the international
coordinating committee on strategic trade with Communist countries --
obtain a Treasury license in addition to a host country license for the
export of strategic goods to the People's Republic of China. He has
also directed elimination of the requirement that U.S. controlled firms
abroad obtain prior Treasury licensing for the export of foreign
technology to the People's Republic of China.
Reproduced at the Richard Nixon Presidential Library
DECLASSIFIED This document has been reviewed pursuant to Executive Order 13526 and has been determined to be declassified.
THE WHITE HOUSE
WASHINGTON
HAR
ar shuldristeen
I wonder of
Rogers, V.P.,
Courly Land
& Petersm lufore W W
cleasing Reproduced at the Richard Nixon Presidential Library
ED This document has been reviewed pursuant to Executive Order 13526 and has been determined to b
MEMORANDUM
NATIONAL SECURITY COUNCIL
00413
SECRET
ACTION
February 10, 1972
MEMORANDUM FOR: DR. KISSINGER
FROM:
ROBERT HORMATS0
SUBJECT:
Relaxation of Restrictions on Trade
with People's Republic of China
In response to the President's decisions on this subject,
attached at Tab A is a NSDM communicating these decisions
to the bureaucracy, and at Tab B is a proposed press release.
I will coordinate further with Ziegler's office prior to the
release of this decision.
RECOMMENDATION:
That you sign the NSDM at Tab A and approve the press release
at Tab B.
Concurrence: J. H. Holdridge
Dick Kennedy
SECRET
Reproduced at the Richard Nixon Presidential Library
DECLASSIFIED This document has been reviewed pursuant to Executive Order 13526 and has been determined to be declassified.
Q: What are the principal effects of moving the People's Republic
of China to Country Group Y of the Commodity Control List?
A: The principal effects of this action are to make available under
general license for export to the People's Republic of China the same com-
modities under general license to the Soviet Union and other nations of
Eastern Europe (excluding Romania and Poland which are treated more
liberally). Among the additional commodities which will be available under
general license to the PRC as a result of this action are locomotives, con-
struction equipment, a variety of industrial chemicals, internal combustion
engines, and rolling mills. Also, this action makes available to the PRC
under general license the same products made abroad with U.S. technical
data as are available to the Soviet Union and Eastern Europe.
Q: Why liberalize further on trade to the PRC at this time?
A: In announcing, on June 10 of last year, the President's decisions
to permit the free export to China of a range of non-strategic U.S. products,
I indicated that we would consider the possibility of further steps. A thorough
interagency review has been conducted by the NSC Under Secretaries Com-
mittee chaired by the Department of State. Based on the report and recom-
mendations of that Committee, the President decided at this time to take
the steps which I have announced. The President felt that it would be a good
idea to announce this decision prior to his departure for China.
Q: How much trade will result from this ?
A: This is very hard for us to estimate since it depends so much on
Reproduced at the Richard Nixon Presidential Library
DECLASSIFIED This document has been reviewed pursuant to Executive Order 13526 and has been determined to be declassified.
2/10/72
2
Chinese interest. The important thing is that the door to trade has been
opened wider.
Q: What will the PRC think about this move?
A: We would hope that they would welcome this additional step
forward in opening up opportunities for trade.
Q: Aren't a number of products which will become available under
general license of strategic advantage to the People's Republic
of China?
A: That issue was certainly one addressed in the Under Secretaries
Committee study. It was decided that the decontrol of these items was
consistent with the interests of the United States and not detrimental to
our security.
Q: What about items which are not on the general list for the PRC?
A: Items not on the general list for the PRC require a specific
license for export to that country. We are prepared to receive and con-
sider applications for specific licenses on their merits.
Q: Before this action, what was the difference in the number of
commodities on the general license list for the Soviet Union
and Eastern Europe as compared to the number of commodities
on the China list?
A: The general list for China had been at a level of roughly 75 to 80
percent of that for Europe.
DECLASSIFIED This document has been reviewed pursuant to Executive Order 13526 and has been determined to be declassified.
3
Q: What about the sale of U.S. aircraft to the PRC? There
seems to have been a good deal of interest in this.
A: (Note: If you wish, you can refer this and other questions
involving specific products or licensing problems to the Department of
Commerce, Office of Investment Control.) All aircraft are under
export control to Eastern Europe and the PRC. License applications
indicating a concrete proposed transaction have not yet been received
by the Department of Commerce.
Q: What will be the effect of the decision to remove the require-
ment that U.S. controlled firms in the countries of Western
Europe, Canada and Japan, which are members of COCOM,
obtain a Treasury license in addition to a host country license
for the export of strategic goods to the People's Republic of
China?
A: The effect of this will be to eliminate the necessity of an American
controlled firm in a COCOM country obtaining two licenses -- one from
Treasury and another from COCOM -- for the export of strategie goods
which -ight is considered strategic
to the People's Republic of China. The U.S. has a strong voice in the
a
COCOM and believes that this is sufficient to regulate the export of such
products 10 the PRC. (This is the practice used with regard to the export
of strategic goods to the Soviet Union and Eastern Europe.)
Reproduced at the Richard Nixon Presidential Library
DECLASSIFIED This document has been reviewed pursuant to Executive Order 13526 and has been determined to be declassified.
4
Q: What products will be affected by this ?
A: All strategic products under COCOM control being produced by
U.S. controlled firms in countries which are members of COCOM. (For
American controlled firms in non-COCOM countries, a Treasury license
for the export of strategic goods will still be necessary.)
Q: What is the effect of eliminating the requirement that subsidiaries
of U.S. firms abroad obtain prior Treasury licensing for the export
of foreign technology to the PRC?
A: Heretofore American subsidiaries operating abroad had to obtain
a Treasury license in addition to COCOM and/or host country approval
to export foreign technology to the PRC. Foreign controlled firms in the
same country had only to receive COCOM and/or host country approval.
Removal of this requirement will put American firms on the same footing
as foreign firms. (This is the practice used with regard to the export by
U.S. subsidiaries of foreign technology to the USSR and other Eastern
European countries. )
Q: Does this do anything to change the status of blocked assets,
and will the President discuss this in Peking?
A: Today's announcement deals only with trade measures. The whole
question of blocked assets is a complicated subject, and it would be pre-
mature to discuss it at this time. With regard to whether the President
wi 11 discuss this in Peking, I do not want to comment on what the President
will or will not discussuced the Richard Nixon Presidential Library
DECLASSIFIED This document has been reviewed pursuant to Executive Order 13526 and has been determined to be declassified.
5
Q: When will these decisions go into effect?
A: Within the week.
Q: Are any further steps planned?
A: The general license list is under constant review and additions
are made periodically. With regard to other steps, no decisions have
been made at this time.
Reproduced at the Richard Nixon Presidential Library
DECLASSIFIED This document has been reviewed pursuant to Executive Order 13526 and has been determined to be declassified.
413
DEPARTMENT OF STATE
Washington, D.C. 20520
NSC UNDER SECRETARIES COMMITTEE
CONFIDENTIAL
NSC-U/DM 60D ADDENDUM
February 4, 1972
TO
: The Deputy Secretary of Defense
The Assistant to the President for
National Security Affairs
The Director of Central Intelligence
The Chairman of the Joint Chiefs of Staff
The Under Secretary of the Treasury
The Deputy Attorney General
The Under Secretary of Agriculture
The Under Secretary of Commerce
The Under Secretary of Labor
The Under Secretary of Transportation
The Assistant to the President for Inter-
national Economic Affairs
The Director, United States Information Agency
Mr. W. D. Eberle, Special Trade Representative
SUBJECT: Travel and Trade with the People's Republic
of China - Chairman's Report
The attached memorandum, "Actions Against the
PRC in U.S. Courts", has been prepared in connection
with the NSC Under Secretaries Committee memorandum
to the President of January 13, 1972 and should be
considered as Addendum No. 2 to Annex A of that
memorandum. This section follows Addendum 1 (pages
37 through 39).
A.A.Harthan
Arthur A. Hartman
Staff Director
Attachment:
As stated.
CONFIDENTIAL
cys given for Tayris Hormes Kennedy + A'telit 2/8/72 Jon
Reproduced at the Richard Nixon. Presidential Library
DECLASSIFIED This document has been reviewed pursuant to Executive Order 13526 and has been determined to be declassified.
CONFIDENTIAL
Actions Against the PRC in U.S. Courts
2-4-72
Summary
As trade and travel between the United States and
the People's Republic of China (PRC) are normalized,
PRC vessels, aircraft, commodities and other property
or assets may come within the territory of the United
States. United States nationals and others with claims
against the PRC may seek the attachment of such property
by United States courts to satisfy their claims against
the PRC arising out of the nationalization or other taking
of property by the PRC since 1949. This memorandum
considers the probable significance of such individual
court actions in the absence of a U.S. -PRC claims
/
settlement which effectively barred such actions.
The
principal issues discussed, and the conclusions reached,
may be summarized as follows:
1/ There is $196,471,059.33 (plus interest) in private
claims against the PRC adjudicated by the Foreign
Claims Settlement Commission under the Chinese
Claims Act of 1966 (22 U.S.C. 1643). These claims
are for losses arising since October 1, 1949,
resulting from the nationalization, expropriation,
interventions, or other taking of, or special
measures directed against property or rights and
interests therein.
2/
It is believe that the validation of a claim by
the Commission under the Chinese Claims Act does
not constitute a judgment upon which execution
may be obtained in a U.S. court. However, this
issue has not been decided by the courts. Neither
the submission of a claim to the Commission nor
its validation by the Commission bars the claimant
from seeking other remedies.
CONFIDENTIAL
Reproduced at the Richard Nixon Presidential Library
DECLASSIFIED This document has been reviewed pursuant to Executive Order 13526 and has been determined to be declassified.
CONFIDENTIAL
2
1. Department of State Practice Re Sovereign Immunity.
a. Since 1952 the Department of State has followed
the restrictive theory of sovereign immunity and recognized
a foreign state's immunity from suit in courts in the
U.S. with respect to its governmental or public acts
but not with respect to commercial or private acts. No
case has yet arisen involving the question whether a
Department of State suggestion of immunity should be
made on behalf of an unrecognized regime. (It is assumed
for purposes of discussion that the U.S. will continue
to recognize and maintain diplomatic relations with
the ROC, and will not have extended recognition to the
PRC at the time court actions are instituted against the
PRC.) The absence of recognition of the PRC need not
constitute a barrier to a Department suggestion of
immunity -- provided that the Department was otherwise
satisfied that the requirements for a suggestion of
immunity were met. However, it would be difficult to
explain the consistency of continued non-recognition
with a suggestion of immunity.
b. Whether claims against the PRC arising out
of the nationalization or other taking of property by
the PRC since 1949 should be considered to rest upon
governmental or commercial transactions would depend
upon a careful analysis of each claim. The Department
of State has in the past suggested immunity where the
case involved a foreign government nationalization.
c. Under the restrictive theory the Department
has suggested the immunity from attachment of property
if the activity forming the basis of the complaint was
governmental in nature or if the property attached was
being used for governmental purposes. Where, however,
a foreign government's property is attached for the
purpose of executing a judgment (and not for the purpose
of obtaining jurisdiction), the Department has suggested
immunity even when the property was used for commercial
purposes.
CONFIDENTIAL
Reproduced at the Richard Nixon Presidential Library
DECLASSIFIED This document has been reviewed pursuant to Executive Order 13526 and has been determined to be declassified.
CONFIDENTIAL
3
2. Sovereign Immunity in the Courts.
The courts have generally acted in accordance with
Department suggestions of immunity. However, the procedures
involved before the court dismissed a suit and released
any property that may have been attached could take
a considerable period of time. Because of the novel
and complex legal issues that would be involved in
any suit against the PRC arising out of the nationaliza-
tion or other taking of property by the PRC since 1949,
it is difficult to predict the outcome of such litiga-
tion. Some claimants might decide it was in their
interest to bring suit -- even if only for purposes
of harassment -- to bring pressure on the USG and PRC
to conclude an acceptable claims settlement. A series
of harassing suits against the PRC could present
significant problems and constitute a barrier to
normal trade relations between the United States and
the PRC. Each suit would involve either the tying up
of whatever property may have been attached or the
posting of a substantial bond by the PRC in order to
gain an earlier release of the property. Also involved,
of course, would be the trouble and expense to the PRC
of defending in each suit.
3. The Act of State Doctrine.
Under this doctrine the courts would not examine
the validity of a taking of property within its own
territory by a recognized foreign government, even if
a complaint alleged that the taking violated interna-
tional law. The doctrine normally would be available
to a foreign government as a defense in a suit where
nationalization or other takings of property formed
the basis of the plaintiff's cause of action. Since
recognition is a prerequisite for applying the act of
state doctrine, the PRC would not be able to protect
its takings of property from the scrutiny of courts in
the U.S. as long as the U.S. did not recognize its
government. It should be noted, however, that an act
which constituted an act of state would in all probability
also constitute a governmental act under the restrictive
theory of sovereign immunity. If the PRC prevailed on
the issue of sovereign immunity, the court would not
reach the issue of the act of state doctrine.
CONFIDENTIAL
Reproduced at the Richard Nixon Presidential Library
DECLASSIFIED This document has been reviewed pursuant to Executive Order 13526 and has been determined to be declassified.
CONFIDENTIAL
4
Discussion
Department of State Practice Re Sovereign Immunity
Since 1952 the Department of State has followed the
restrictive theory of sovereign immunity and recognized
a foreign state's immunity from suit in courts in the U.S.
with respect to its governmental or public acts but
not with respect to commercial or private acts. ("Tate
Letter", 26 Department of State Bulletin 984)
Although not all states follow the restrictive theory of
sovereign immunity, that theory is now generally
accepted as entirely consistent with international law.
No case has yet arisen involving the question
whether a Department of State suggestion of immunity
should be made on behalf of an unrecognized regime.
Since it appears that a claim of immunity as a foreign
sovereign should be available to the PRC in U.S. courts
even though it is not recognized by the U.S. (for
reasons discussed more fully below), the absence of
recognition need not constitute a barrier to a Depart-
ment suggestion of immunity -- provided that the Depart-
ment was otherwise satisfied that the requirements for
a suggestion of immunity were met. However, it would
be difficult to explain the consistency of continued
non-recognition with a suggestion of immunity.
Whether claims against the PRC arising out of the
nationalization or other taking of property by the PRC
since 1949 should be considered to rest upon govern-
mental or commercial transactions would depend upon a
careful analysis of each claim. The Department of
State has in the past suggested immunity where the
case involved a foreign government nationalization
(Chemical Natural Resources, Inc. and Venezuelan
Sulphur Corporation, C.A. V. Republic of Venezuela, 215
A. 2d 846 (Sup. Ct. Pa. 1966)), and the courts have
considered nationalizations to be governmental acts
(Victory Transport, Inc. V. Comisaria General, 336 F.
2d 354, 360 (2d Cir. 1964), cert. denied, 381 U.S.
934 (1965))
The most likely manner in which a claimant might
attempt to assert a claim against the PRC as a defendant
would be through a quasi-in-rem procedure, whereby the
claimant-plaintiff would attach a ship, bank account
Reproduced at the Richard Nixon Presidential Library
DECLASSIFIED This document has been reviewed pursuant to Executive Order 13526 and has been determined to be declassified.
CONFIDENTIAL
5
or other property of the PRC found within the court's
jurisdiction. 3/ Under the restrictive theory the
Department has suggested the immunity from attachment of
the property if the activity forming the basis of the
complaint was governmental in nature or if the property
attached was being used for governmental purposes 47
Thus, if the complaint is based on activity which is
part of a commercial transaction and the property
attached is used for commercial purposes, 5/ a suggestion
of immunity from attachment would not be appropriate.
3/
Special considerations, not relevant here, would
apply to an in rem action against a vessel based
on a claim arising out of the activities of the
vessel, such as the purchase of provisions or a
collision. In either an in rem or quasi-in-rem
action any ensuing judgment would be limited to
the value of the property attached.
4/
Recognizing claims of immunity in specific cases
where these criteria were not met -- while possible --
might subject the Department to strong criticism
by the legal community and by business interests.
5/
The Department would probably consider that PRC
merchant vessels calling on U.S. ports in the con-
duct of normal trade relations were involved in a
commercial, and not governmental, activity. Diffi-
culties may arise where property sought to be
attached, such as money, is used for a variety of
purposes.
CONFIDENTIAL
Reproduced at the Richard Nixon Presidential Library
DECLASSIFIED This document has been reviewed pursuant to Executive Order 13526 and has been determined to be declassified.
CONFIDENTIAL
6
The Department further distinguishes between attach-
ment for the purpose of obtaining jurisdiction, as
discussed above, and attachment for the purpose of
executing a judgment (sale of the asset to satisfy a
judgment). The restrictive theory of the "Tate Letter"
is not applied to the latter. Therefore, the Depart-
ment has in the past suggested immunity of foreign
government property from execution in cases in which
property was used for commercial purposes as well as
cases in which the property was used for governmental
purposes. So, even if a judgment could be obtained
by a claimant against the PRC, it would be consistent
with past practice for the Department to suggest the
immunity of PRC property from attachment for the
purpose of satisfying such a judgment 67 (See Weilaman
V. Chase Manhattan Bank, 21 Misc. 2d 1086, 192 N.Y.S.
2d 469 (Sup. Ct. 1959) )
The Department of State has established informal
procedures for considering requests from foreign govern-
ments for assistance in asserting claims of sovereign
immunity in litigation in United States courts, including
cases where property owned by such governments has been
attached either for the purpose of establishing juris-
diction or satisfying a judgment. The foreign government's
Embassy is expected to address a communication to the
Secretary of State setting forth the name of the case
and the extent of the immunity claimed, accompaned by a
memorandum setting forth the relevant facts and laws.
Upon receipt of such a communication, the Department
would notify the plaintiff in the litigation of the receipt
6/
Certain limitations on this broad rule of immunity
of government-owned property from execution have
been urged by several commentators and considered
by the Department in the context of draft legisla-
tion on sovereign immunity.
We have no information whether judgments have been
rendered by U.S. or foreign courts upon which claimants
might seek execution in U.S. courts.
CONFIDENTIAL
Reproduced at the Richard Nixon Presidential Library
DECLASSIFIED This document has been reviewed pursuant to Executive Order 13526 and has been determined to be declassified.
CONFIDENTIAL
7
of the request and would send a copy of the foreign
government's memorandum supporting its views if the
plaintiff so desired. Should either party request an
opportunity to make an oral presentation, the Department
would schedule an informal hearing which representatives
of both parties may attend. Upon the conclusion of
these procedures the Department makes a determination
regarding the foreign government's request and communicates
the determination to the Embassy and to the plaintiff's
representative. If the Department concludes that there
is a basis for a claim of immunity, the Department
certifies to the Attorney General that it recognizes
and allows that claim.
Sovereign Immunity in the Courts
The courts have generally acted in accordance with
Department suggestions of immunity. The above proce-
dures, including the time required before the court
dismissed the suit and release any property that may
have been attached, would -- under the best of circum-
stances -- require at least two weeks. However, these
7/
In a recent Second Circuit decision the Court stated
that "once the State Department has ruled in a
matter of this nature, the judiciary will not
interfere" (citing the Supreme Court decision in
Republic of Mexico V. Hoffman, 324 U.S. 30, at p. 35
(1945)), and that "we have no alternative but to
accept the recommendation of the State Department."
Isbrandtsen Tankers, Inc. V. President of India,
Represented by the Director General of the India
Supply Mission, 446 F. 2d 1198 (2d Cir. 1971),
cert. denied
(1971). However, the state courts
in New York have indicated an inclination to make
their own determinations as to the availability of
immunity when suggested by the executive branch in
situations involving such questions as the party for
whom assets are held by a bank (see Stephen V.
Zivnostenska Banka, National Corp., 15 A.D. 2d 111,
222 N.Y.S. 2d 128 (Sup. Ct. (1961), aff'd 12 N.Y.S
2d 781, 235 N.Y.S. 2d 1, 186 N.E. 2d 676 (1962)).
CONFIDENTIAL
Reproduced at the Richard Nixon Presidential Library
DECLASSIFIED This document has been reviewed pursuant to Executive Order 13526 and has been determined to be declassified.