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    "ocrText": "SECRET/SENSITIVE/EYES ONLY\nFebruary 11, 1972\nMEMORANDUM FOR\nMr. Theodore Eliot\nExecutive Secretary\nDepartment of State\nSUBJECT:\nRelaxation of Restrictions on Trade\nwith People's Republic of China\nEnclosed is the draft press release, together with draft Qs and\nAs which have been prepared for Monday's announcement which\nI discussed with you telephonically.\nOn a most close hold basis, would you please give us your com-\nments on both the Qs and As and the draft press release, to in-\nclude any recommendations for modification.\nAlexander M. Haig, Jr.\nBrigadier General, U.S. Army\nDeputy Assistant to the President\nfor National Security Affairs\nEnclosures\nSECRET/SENSITIVE/EYES ONLY\nLoud\nAMH:mlh:typed 2/11/72\nReproduced at the Richard Nixon Presidential Library\nDECLASSIFIED This document has been reviewed pursuant to Executive Order 13526 and has been determined to be declassified.\n2/10/72\nProposed Press Release\nFollowing a full review of a report by the Under Secretaries\nCommittee on U.S. trade with the People's Republic of China, the\nPresident today announced his decision to place the People's Republic\nof China in Country Group Y of the Commodity Control List. The\neffect of this decision is to make available under general license to\nthe People's Republic of China all commodities now available under\ngeneral license to the countries of Eastern Europe, including the\nSoviet Union. Poland, Romania, and Yugoslavia are in a separate\ncategory. This also moves controls on the export to the PRC of\nforeign products made with U. S. technical data to the same level\nas those governing such exports to Eastern Europe, except those\ncountries noted above.\nIn addition, the President has decided to modify remaining\nForeign Assets Control Regulations pertaining to the People's Republic\nof China. He has directed removal of the requirement that U. S.\ncontrolled firms in countries (including Western Europe, Canada,\nand Japan) which are members of COCOM -- the international\ncoordinating committee on strategic trade with Communist countries --\nobtain a Treasury license in addition to a host country license for the\nexport of strategic goods to the People's Republic of China. He has\nalso directed elimination of the requirement that U.S. controlled firms\nabroad obtain prior Treasury licensing for the export of foreign\ntechnology to the People's Republic of China.\nReproduced at the Richard Nixon Presidential Library\nDECLASSIFIED This document has been reviewed pursuant to Executive Order 13526 and has been determined to be declassified.\nTHE WHITE HOUSE\nWASHINGTON\nHAR\nar shuldristeen\nI wonder of\nRogers, V.P.,\nCourly Land\n& Petersm lufore W W\ncleasing Reproduced at the Richard Nixon Presidential Library\nED This document has been reviewed pursuant to Executive Order 13526 and has been determined to b\nMEMORANDUM\nNATIONAL SECURITY COUNCIL\n00413\nSECRET\nACTION\nFebruary 10, 1972\nMEMORANDUM FOR: DR. KISSINGER\nFROM:\nROBERT HORMATS0\nSUBJECT:\nRelaxation of Restrictions on Trade\nwith People's Republic of China\nIn response to the President's decisions on this subject,\nattached at Tab A is a NSDM communicating these decisions\nto the bureaucracy, and at Tab B is a proposed press release.\nI will coordinate further with Ziegler's office prior to the\nrelease of this decision.\nRECOMMENDATION:\nThat you sign the NSDM at Tab A and approve the press release\nat Tab B.\nConcurrence: J. H. Holdridge\nDick Kennedy\nSECRET\nReproduced at the Richard Nixon Presidential Library\nDECLASSIFIED This document has been reviewed pursuant to Executive Order 13526 and has been determined to be declassified.\nQ: What are the principal effects of moving the People's Republic\nof China to Country Group Y of the Commodity Control List?\nA: The principal effects of this action are to make available under\ngeneral license for export to the People's Republic of China the same com-\nmodities under general license to the Soviet Union and other nations of\nEastern Europe (excluding Romania and Poland which are treated more\nliberally). Among the additional commodities which will be available under\ngeneral license to the PRC as a result of this action are locomotives, con-\nstruction equipment, a variety of industrial chemicals, internal combustion\nengines, and rolling mills. Also, this action makes available to the PRC\nunder general license the same products made abroad with U.S. technical\ndata as are available to the Soviet Union and Eastern Europe.\nQ: Why liberalize further on trade to the PRC at this time?\nA: In announcing, on June 10 of last year, the President's decisions\nto permit the free export to China of a range of non-strategic U.S. products,\nI indicated that we would consider the possibility of further steps. A thorough\ninteragency review has been conducted by the NSC Under Secretaries Com-\nmittee chaired by the Department of State. Based on the report and recom-\nmendations of that Committee, the President decided at this time to take\nthe steps which I have announced. The President felt that it would be a good\nidea to announce this decision prior to his departure for China.\nQ: How much trade will result from this ?\nA: This is very hard for us to estimate since it depends so much on\nReproduced at the Richard Nixon Presidential Library\nDECLASSIFIED This document has been reviewed pursuant to Executive Order 13526 and has been determined to be declassified.\n2/10/72\n2\nChinese interest. The important thing is that the door to trade has been\nopened wider.\nQ: What will the PRC think about this move?\nA: We would hope that they would welcome this additional step\nforward in opening up opportunities for trade.\nQ: Aren't a number of products which will become available under\ngeneral license of strategic advantage to the People's Republic\nof China?\nA: That issue was certainly one addressed in the Under Secretaries\nCommittee study. It was decided that the decontrol of these items was\nconsistent with the interests of the United States and not detrimental to\nour security.\nQ: What about items which are not on the general list for the PRC?\nA: Items not on the general list for the PRC require a specific\nlicense for export to that country. We are prepared to receive and con-\nsider applications for specific licenses on their merits.\nQ: Before this action, what was the difference in the number of\ncommodities on the general license list for the Soviet Union\nand Eastern Europe as compared to the number of commodities\non the China list?\nA: The general list for China had been at a level of roughly 75 to 80\npercent of that for Europe.\nDECLASSIFIED This document has been reviewed pursuant to Executive Order 13526 and has been determined to be declassified.\n3\nQ: What about the sale of U.S. aircraft to the PRC? There\nseems to have been a good deal of interest in this.\nA: (Note: If you wish, you can refer this and other questions\ninvolving specific products or licensing problems to the Department of\nCommerce, Office of Investment Control.) All aircraft are under\nexport control to Eastern Europe and the PRC. License applications\nindicating a concrete proposed transaction have not yet been received\nby the Department of Commerce.\nQ: What will be the effect of the decision to remove the require-\nment that U.S. controlled firms in the countries of Western\nEurope, Canada and Japan, which are members of COCOM,\nobtain a Treasury license in addition to a host country license\nfor the export of strategic goods to the People's Republic of\nChina?\nA: The effect of this will be to eliminate the necessity of an American\ncontrolled firm in a COCOM country obtaining two licenses -- one from\nTreasury and another from COCOM -- for the export of strategie goods\nwhich -ight is considered strategic\nto the People's Republic of China. The U.S. has a strong voice in the\na\nCOCOM and believes that this is sufficient to regulate the export of such\nproducts 10 the PRC. (This is the practice used with regard to the export\nof strategic goods to the Soviet Union and Eastern Europe.)\nReproduced at the Richard Nixon Presidential Library\nDECLASSIFIED This document has been reviewed pursuant to Executive Order 13526 and has been determined to be declassified.\n4\nQ: What products will be affected by this ?\nA: All strategic products under COCOM control being produced by\nU.S. controlled firms in countries which are members of COCOM. (For\nAmerican controlled firms in non-COCOM countries, a Treasury license\nfor the export of strategic goods will still be necessary.)\nQ: What is the effect of eliminating the requirement that subsidiaries\nof U.S. firms abroad obtain prior Treasury licensing for the export\nof foreign technology to the PRC?\nA: Heretofore American subsidiaries operating abroad had to obtain\na Treasury license in addition to COCOM and/or host country approval\nto export foreign technology to the PRC. Foreign controlled firms in the\nsame country had only to receive COCOM and/or host country approval.\nRemoval of this requirement will put American firms on the same footing\nas foreign firms. (This is the practice used with regard to the export by\nU.S. subsidiaries of foreign technology to the USSR and other Eastern\nEuropean countries. )\nQ: Does this do anything to change the status of blocked assets,\nand will the President discuss this in Peking?\nA: Today's announcement deals only with trade measures. The whole\nquestion of blocked assets is a complicated subject, and it would be pre-\nmature to discuss it at this time. With regard to whether the President\nwi 11 discuss this in Peking, I do not want to comment on what the President\nwill or will not discussuced the Richard Nixon Presidential Library\nDECLASSIFIED This document has been reviewed pursuant to Executive Order 13526 and has been determined to be declassified.\n5\nQ: When will these decisions go into effect?\nA: Within the week.\nQ: Are any further steps planned?\nA: The general license list is under constant review and additions\nare made periodically. With regard to other steps, no decisions have\nbeen made at this time.\nReproduced at the Richard Nixon Presidential Library\nDECLASSIFIED This document has been reviewed pursuant to Executive Order 13526 and has been determined to be declassified.\n413\nDEPARTMENT OF STATE\nWashington, D.C. 20520\nNSC UNDER SECRETARIES COMMITTEE\nCONFIDENTIAL\nNSC-U/DM 60D ADDENDUM\nFebruary 4, 1972\nTO\n: The Deputy Secretary of Defense\nThe Assistant to the President for\nNational Security Affairs\nThe Director of Central Intelligence\nThe Chairman of the Joint Chiefs of Staff\nThe Under Secretary of the Treasury\nThe Deputy Attorney General\nThe Under Secretary of Agriculture\nThe Under Secretary of Commerce\nThe Under Secretary of Labor\nThe Under Secretary of Transportation\nThe Assistant to the President for Inter-\nnational Economic Affairs\nThe Director, United States Information Agency\nMr. W. D. Eberle, Special Trade Representative\nSUBJECT: Travel and Trade with the People's Republic\nof China - Chairman's Report\nThe attached memorandum, \"Actions Against the\nPRC in U.S. Courts\", has been prepared in connection\nwith the NSC Under Secretaries Committee memorandum\nto the President of January 13, 1972 and should be\nconsidered as Addendum No. 2 to Annex A of that\nmemorandum. This section follows Addendum 1 (pages\n37 through 39).\nA.A.Harthan\nArthur A. Hartman\nStaff Director\nAttachment:\nAs stated.\nCONFIDENTIAL\ncys given for Tayris Hormes Kennedy + A'telit 2/8/72 Jon\nReproduced at the Richard Nixon. Presidential Library\nDECLASSIFIED This document has been reviewed pursuant to Executive Order 13526 and has been determined to be declassified.\nCONFIDENTIAL\nActions Against the PRC in U.S. Courts\n2-4-72\nSummary\nAs trade and travel between the United States and\nthe People's Republic of China (PRC) are normalized,\nPRC vessels, aircraft, commodities and other property\nor assets may come within the territory of the United\nStates. United States nationals and others with claims\nagainst the PRC may seek the attachment of such property\nby United States courts to satisfy their claims against\nthe PRC arising out of the nationalization or other taking\nof property by the PRC since 1949. This memorandum\nconsiders the probable significance of such individual\ncourt actions in the absence of a U.S. -PRC claims\n/\nsettlement which effectively barred such actions.\nThe\nprincipal issues discussed, and the conclusions reached,\nmay be summarized as follows:\n1/ There is $196,471,059.33 (plus interest) in private\nclaims against the PRC adjudicated by the Foreign\nClaims Settlement Commission under the Chinese\nClaims Act of 1966 (22 U.S.C. 1643). These claims\nare for losses arising since October 1, 1949,\nresulting from the nationalization, expropriation,\ninterventions, or other taking of, or special\nmeasures directed against property or rights and\ninterests therein.\n2/\nIt is believe that the validation of a claim by\nthe Commission under the Chinese Claims Act does\nnot constitute a judgment upon which execution\nmay be obtained in a U.S. court. However, this\nissue has not been decided by the courts. Neither\nthe submission of a claim to the Commission nor\nits validation by the Commission bars the claimant\nfrom seeking other remedies.\nCONFIDENTIAL\nReproduced at the Richard Nixon Presidential Library\nDECLASSIFIED This document has been reviewed pursuant to Executive Order 13526 and has been determined to be declassified.\nCONFIDENTIAL\n2\n1. Department of State Practice Re Sovereign Immunity.\na. Since 1952 the Department of State has followed\nthe restrictive theory of sovereign immunity and recognized\na foreign state's immunity from suit in courts in the\nU.S. with respect to its governmental or public acts\nbut not with respect to commercial or private acts. No\ncase has yet arisen involving the question whether a\nDepartment of State suggestion of immunity should be\nmade on behalf of an unrecognized regime. (It is assumed\nfor purposes of discussion that the U.S. will continue\nto recognize and maintain diplomatic relations with\nthe ROC, and will not have extended recognition to the\nPRC at the time court actions are instituted against the\nPRC.) The absence of recognition of the PRC need not\nconstitute a barrier to a Department suggestion of\nimmunity -- provided that the Department was otherwise\nsatisfied that the requirements for a suggestion of\nimmunity were met. However, it would be difficult to\nexplain the consistency of continued non-recognition\nwith a suggestion of immunity.\nb. Whether claims against the PRC arising out\nof the nationalization or other taking of property by\nthe PRC since 1949 should be considered to rest upon\ngovernmental or commercial transactions would depend\nupon a careful analysis of each claim. The Department\nof State has in the past suggested immunity where the\ncase involved a foreign government nationalization.\nc. Under the restrictive theory the Department\nhas suggested the immunity from attachment of property\nif the activity forming the basis of the complaint was\ngovernmental in nature or if the property attached was\nbeing used for governmental purposes. Where, however,\na foreign government's property is attached for the\npurpose of executing a judgment (and not for the purpose\nof obtaining jurisdiction), the Department has suggested\nimmunity even when the property was used for commercial\npurposes.\nCONFIDENTIAL\nReproduced at the Richard Nixon Presidential Library\nDECLASSIFIED This document has been reviewed pursuant to Executive Order 13526 and has been determined to be declassified.\nCONFIDENTIAL\n3\n2. Sovereign Immunity in the Courts.\nThe courts have generally acted in accordance with\nDepartment suggestions of immunity. However, the procedures\ninvolved before the court dismissed a suit and released\nany property that may have been attached could take\na considerable period of time. Because of the novel\nand complex legal issues that would be involved in\nany suit against the PRC arising out of the nationaliza-\ntion or other taking of property by the PRC since 1949,\nit is difficult to predict the outcome of such litiga-\ntion. Some claimants might decide it was in their\ninterest to bring suit -- even if only for purposes\nof harassment -- to bring pressure on the USG and PRC\nto conclude an acceptable claims settlement. A series\nof harassing suits against the PRC could present\nsignificant problems and constitute a barrier to\nnormal trade relations between the United States and\nthe PRC. Each suit would involve either the tying up\nof whatever property may have been attached or the\nposting of a substantial bond by the PRC in order to\ngain an earlier release of the property. Also involved,\nof course, would be the trouble and expense to the PRC\nof defending in each suit.\n3. The Act of State Doctrine.\nUnder this doctrine the courts would not examine\nthe validity of a taking of property within its own\nterritory by a recognized foreign government, even if\na complaint alleged that the taking violated interna-\ntional law. The doctrine normally would be available\nto a foreign government as a defense in a suit where\nnationalization or other takings of property formed\nthe basis of the plaintiff's cause of action. Since\nrecognition is a prerequisite for applying the act of\nstate doctrine, the PRC would not be able to protect\nits takings of property from the scrutiny of courts in\nthe U.S. as long as the U.S. did not recognize its\ngovernment. It should be noted, however, that an act\nwhich constituted an act of state would in all probability\nalso constitute a governmental act under the restrictive\ntheory of sovereign immunity. If the PRC prevailed on\nthe issue of sovereign immunity, the court would not\nreach the issue of the act of state doctrine.\nCONFIDENTIAL\nReproduced at the Richard Nixon Presidential Library\nDECLASSIFIED This document has been reviewed pursuant to Executive Order 13526 and has been determined to be declassified.\nCONFIDENTIAL\n4\nDiscussion\nDepartment of State Practice Re Sovereign Immunity\nSince 1952 the Department of State has followed the\nrestrictive theory of sovereign immunity and recognized\na foreign state's immunity from suit in courts in the U.S.\nwith respect to its governmental or public acts but\nnot with respect to commercial or private acts. (\"Tate\nLetter\", 26 Department of State Bulletin 984)\nAlthough not all states follow the restrictive theory of\nsovereign immunity, that theory is now generally\naccepted as entirely consistent with international law.\nNo case has yet arisen involving the question\nwhether a Department of State suggestion of immunity\nshould be made on behalf of an unrecognized regime.\nSince it appears that a claim of immunity as a foreign\nsovereign should be available to the PRC in U.S. courts\neven though it is not recognized by the U.S. (for\nreasons discussed more fully below), the absence of\nrecognition need not constitute a barrier to a Depart-\nment suggestion of immunity -- provided that the Depart-\nment was otherwise satisfied that the requirements for\na suggestion of immunity were met. However, it would\nbe difficult to explain the consistency of continued\nnon-recognition with a suggestion of immunity.\nWhether claims against the PRC arising out of the\nnationalization or other taking of property by the PRC\nsince 1949 should be considered to rest upon govern-\nmental or commercial transactions would depend upon a\ncareful analysis of each claim. The Department of\nState has in the past suggested immunity where the\ncase involved a foreign government nationalization\n(Chemical Natural Resources, Inc. and Venezuelan\nSulphur Corporation, C.A. V. Republic of Venezuela, 215\nA. 2d 846 (Sup. Ct. Pa. 1966)), and the courts have\nconsidered nationalizations to be governmental acts\n(Victory Transport, Inc. V. Comisaria General, 336 F.\n2d 354, 360 (2d Cir. 1964), cert. denied, 381 U.S.\n934 (1965))\nThe most likely manner in which a claimant might\nattempt to assert a claim against the PRC as a defendant\nwould be through a quasi-in-rem procedure, whereby the\nclaimant-plaintiff would attach a ship, bank account\nReproduced at the Richard Nixon Presidential Library\nDECLASSIFIED This document has been reviewed pursuant to Executive Order 13526 and has been determined to be declassified.\nCONFIDENTIAL\n5\nor other property of the PRC found within the court's\njurisdiction. 3/ Under the restrictive theory the\nDepartment has suggested the immunity from attachment of\nthe property if the activity forming the basis of the\ncomplaint was governmental in nature or if the property\nattached was being used for governmental purposes 47\nThus, if the complaint is based on activity which is\npart of a commercial transaction and the property\nattached is used for commercial purposes, 5/ a suggestion\nof immunity from attachment would not be appropriate.\n3/\nSpecial considerations, not relevant here, would\napply to an in rem action against a vessel based\non a claim arising out of the activities of the\nvessel, such as the purchase of provisions or a\ncollision. In either an in rem or quasi-in-rem\naction any ensuing judgment would be limited to\nthe value of the property attached.\n4/\nRecognizing claims of immunity in specific cases\nwhere these criteria were not met -- while possible --\nmight subject the Department to strong criticism\nby the legal community and by business interests.\n5/\nThe Department would probably consider that PRC\nmerchant vessels calling on U.S. ports in the con-\nduct of normal trade relations were involved in a\ncommercial, and not governmental, activity. Diffi-\nculties may arise where property sought to be\nattached, such as money, is used for a variety of\npurposes.\nCONFIDENTIAL\nReproduced at the Richard Nixon Presidential Library\nDECLASSIFIED This document has been reviewed pursuant to Executive Order 13526 and has been determined to be declassified.\nCONFIDENTIAL\n6\nThe Department further distinguishes between attach-\nment for the purpose of obtaining jurisdiction, as\ndiscussed above, and attachment for the purpose of\nexecuting a judgment (sale of the asset to satisfy a\njudgment). The restrictive theory of the \"Tate Letter\"\nis not applied to the latter. Therefore, the Depart-\nment has in the past suggested immunity of foreign\ngovernment property from execution in cases in which\nproperty was used for commercial purposes as well as\ncases in which the property was used for governmental\npurposes. So, even if a judgment could be obtained\nby a claimant against the PRC, it would be consistent\nwith past practice for the Department to suggest the\nimmunity of PRC property from attachment for the\npurpose of satisfying such a judgment 67 (See Weilaman\nV. Chase Manhattan Bank, 21 Misc. 2d 1086, 192 N.Y.S.\n2d 469 (Sup. Ct. 1959) )\nThe Department of State has established informal\nprocedures for considering requests from foreign govern-\nments for assistance in asserting claims of sovereign\nimmunity in litigation in United States courts, including\ncases where property owned by such governments has been\nattached either for the purpose of establishing juris-\ndiction or satisfying a judgment. The foreign government's\nEmbassy is expected to address a communication to the\nSecretary of State setting forth the name of the case\nand the extent of the immunity claimed, accompaned by a\nmemorandum setting forth the relevant facts and laws.\nUpon receipt of such a communication, the Department\nwould notify the plaintiff in the litigation of the receipt\n6/\nCertain limitations on this broad rule of immunity\nof government-owned property from execution have\nbeen urged by several commentators and considered\nby the Department in the context of draft legisla-\ntion on sovereign immunity.\nWe have no information whether judgments have been\nrendered by U.S. or foreign courts upon which claimants\nmight seek execution in U.S. courts.\nCONFIDENTIAL\nReproduced at the Richard Nixon Presidential Library\nDECLASSIFIED This document has been reviewed pursuant to Executive Order 13526 and has been determined to be declassified.\nCONFIDENTIAL\n7\nof the request and would send a copy of the foreign\ngovernment's memorandum supporting its views if the\nplaintiff so desired. Should either party request an\nopportunity to make an oral presentation, the Department\nwould schedule an informal hearing which representatives\nof both parties may attend. Upon the conclusion of\nthese procedures the Department makes a determination\nregarding the foreign government's request and communicates\nthe determination to the Embassy and to the plaintiff's\nrepresentative. If the Department concludes that there\nis a basis for a claim of immunity, the Department\ncertifies to the Attorney General that it recognizes\nand allows that claim.\nSovereign Immunity in the Courts\nThe courts have generally acted in accordance with\nDepartment suggestions of immunity. The above proce-\ndures, including the time required before the court\ndismissed the suit and release any property that may\nhave been attached, would -- under the best of circum-\nstances -- require at least two weeks. However, these\n7/\nIn a recent Second Circuit decision the Court stated\nthat \"once the State Department has ruled in a\nmatter of this nature, the judiciary will not\ninterfere\" (citing the Supreme Court decision in\nRepublic of Mexico V. Hoffman, 324 U.S. 30, at p. 35\n(1945)), and that \"we have no alternative but to\naccept the recommendation of the State Department.\"\nIsbrandtsen Tankers, Inc. V. President of India,\nRepresented by the Director General of the India\nSupply Mission, 446 F. 2d 1198 (2d Cir. 1971),\ncert. denied\n(1971). However, the state courts\nin New York have indicated an inclination to make\ntheir own determinations as to the availability of\nimmunity when suggested by the executive branch in\nsituations involving such questions as the party for\nwhom assets are held by a bank (see Stephen V.\nZivnostenska Banka, National Corp., 15 A.D. 2d 111,\n222 N.Y.S. 2d 128 (Sup. Ct. (1961), aff'd 12 N.Y.S\n2d 781, 235 N.Y.S. 2d 1, 186 N.E. 2d 676 (1962)).\nCONFIDENTIAL\nReproduced at the Richard Nixon Presidential Library\nDECLASSIFIED This document has been reviewed pursuant to Executive Order 13526 and has been determined to be declassified."
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