WESTERN CONTROLS APPLIED AGAINST THE SOVIET BLOC

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP64-00014A000100120014-4
• Release Decision: RIFPUB
• Original Classification: S
• Document Page Count: 4
• Document Creation Date: December 12, 2016
• Document Release Date: July 11, 2000
• Sequence Number: 14
• Content Type: REPORT

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WESTERN CONTROLS APPLIED AGAINST THE SOVIET BLOC
1. Transshipment Controls
*DOC Exempt Letter On File*
The US and Canada have instituted a system of transshipment
licensing for goods of all kinds destined for Communist China,
North Korea, Hong Kong and Macao. The UK has a similar trans-
shipment licensing system, but uses a less comprehensive list
which covers in effect arms and munitions, all goods on Inter-
national List I, a few on IL/II, all metalworking machine tools,
and rubber, as these are considered by the UK to be of major
strategic importance to Communist China. The UK transshipment
control applies to goods on the transshipment list when in transit,
whether or not on athrough bill of lading, landed on the quay side
or transferred from one vessel to another in the UK, but not to
goods in transit which remain on board a vessel even when they
are reconsigned to a new destination. There are no transshipment
controls applied to Hong Kong, although legal powers to control
transshipment cargo exLst to be applied at the discretion of the
Hong Kong Government. To date, Belgium and The Netherlands, whose
ports traditionally have served as major transit points in Western
Europe, have not adopted transshipment licensing. All CoCom
countries, however, have agreed that transshipment controls are
necessary, and they are at present engaged in working out the
details of such controls.
2. Bunker Controls
The US prohibits its oil companies from bunkering vessels
carrying strategic cargoes to Far East Communist ports and Macao,
or strategic cargoes destined for these areas even though the vessel
itself does not call at such ports. Although petroleum products
are on IL/I, neither the US nor the UK prohibits their oil companies
from supplying bunkers to vessels carrying non-strategic cargoes
to Communist China. In each case where bunkers are requested of a
US company, the burden of proof as to the strategic character of the
cargo rests with the oil company, unless it seeks prior advice of
consular officials.
Until recently, British companies continued to honor bunkering
contracts for vessels of Soviet flag. Since the beginning of 1953,
however, the UK Government has taken steps to tighten up the oper-
ation of its policy to deny bunkers, where possible, to ships
carrying strategic goods to Communist Ch:`.na, and a new set of in-
structions was brought into use on 30 April 1953 covering bunkering
requests for ports east of and including Port Said. Under these
instructions the British oil companies must refer to the UK Govern-
ment every request for the supply of bunkers to ships sailing to
Communist China if they are of Soviet Bloc registry or sailing from
Soviet Bloc ports. In such cases the request will be refused.
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Bunkering requests for other ships sailing to Communist China and
not subject to voyage licensing are referred to the UK Government
for guidance where time permits, and will be refused, or acceptances
cancelled, if there is available information that they are carrying
a significant quantity of strategic cargo. In any case where a
request has been refused, it is open to the owners or charterers to
produce evidence that the cargo is non-strategic, and if this is
done to the satisfaction of the government, bunkers may be supplied.
A similar system of control applies to the supply of marine lubri-
cants and bunker coal.
Where ships believed to be carrying strategic cargo ask or
are expected to ask British oil companies for bunkers in ports not
under British control, the local government will be asked not to
countermand any instructions given by the UK Government to the
company, but in the last resort the final decision rests with the
local government.
In Hong Kong a system of bunkering controls has been in
operation since mid-1951 whereby the three major oil companies
refuse bunker oil and lubricants to any vessel, whether ocean-going
or junk, unless specifically exempted or in possession of a govern-
ment permit or other authorization stipulating the exact amount of
petroleum products that may be purchased.
The French Government refused in December 1952, to renew the
contract held by Mory Bros. to bunker Polish vessels at Djibouti.
On 28 March 1953, the French Government announced that it would
institute controls to deny bunkers to vessels carrying strategic
cargo to Communist China.
On 15 April 1953, the US instructed its oil companies and their
foreign branches and subsidiaries to refuse bunkers to any vessel
returning from Far East Communist ports and Macao unless it can be
proved that the vessel carried solely non-strategic cargo to these
areas on its outbound voyage. They were further instructed to deny
bunkers to any vessel returning from any Far East ports, where there
is cause to believe that the vessel was refused bunkers on its out-
bound voyage. In the case of the UK, however, British oil companies
are free to bunker, on the return voyage, ships that have carried
strategic cargo to Communist China.
3. Voyage License Controls
US and Costa Rica formally control (and in practice prohibit)
chartering of their flag vessels for trade with the Soviet Bloc.
In addition the US prohibits its flag vessels from calling at
ports under the control of Communist China. Liberia exercises
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controls over cargoes that can be carried by its flag vessels to
the Bloc. The Mutual Security Agency now inserts a clause in its
charter parties for movement of cargoes to Formosa which stipulates
that vessels will not engage in trade with Communist China or any
other Soviet Bloc destination for a period of 60 days after dis-
charge of cargo in Formosa. The NSA now also inserts a restrictive
clause in its charter parties for the movement of cargoes to Indochina,
Thailand, and the Philippines which prohibits a vessel from calling
at any Communist Far East port (the minimum clause) for 60 days after
discharge of cargo in the specified areas. Other government agencies
have agreed to take similar action for charter parties applicable
to areas covered by their programs.
Until recently, only three countries (Panama, Costa Rica, and
Honduras) had regulations similar to the US prohibition of flag
vessels calling at Chinese Communist ports. Most of the Panamanian
vessels engaged in trade with Communist China withdrew after the
Panamanian decree of 18 August 1951. By March 1953, Panama had
revoked the registry of those vessels which remained in that trade.
It is assumed that those vessels are now flying the Chinese Communist
Flag. Effective 17 March 1953, the Greek Government prohibited
Greek-registered vessels from calling at ports controlled by Communist
China and North Korea.
On 31 March 1953, the UK and colonies imposed a system of voyage
licensing to prohibit British ships over 500 GRT from carrying
strategic cargo to any Chinese Communist port. This system applies
to all ships registered in the UK and the colonies, whether or not
chartered to foreign charterers, and irrespective of the origin of
the cargo. Its provisions, therefore, cover voyages from one
Communist Chinese port to another. Strategic cargo, for voyage
licensing purposes, is defined by a list covering substantially the
items on the UK China Prohibited List, but simplified in statement
for purposes of recognition. The terms of the license prohibit the
ship from carrying listed goods to Communist.Chinese ports, and the
duty of compliance rests with the owners and masters. In every case
the grant or refusal of a license is at the discretion of the
authorities. Proof of compliance with the order, by submission of mani-
fests, is not normally required, and where infringement is suspected,
the proof of guilt is the responsibility of the authorities. Canada
has adopted similar legislation. France and The Netherlands have
taken steps which in effect go a considerable way toward this objective.
L. Financial and Transaction Controls
Under regulations issued 17 December 1950, the US Government
prohibited all trade and financial transactions involving the Chinese
Communist and North Korean regimes and their nationals by persons
subject to the jurisdicition of the US, except with prior approval
of the Treasury Department. To make these regulations effective all
Chinese Communist and North Korean assets in the US were frozen and
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OIIL9
provisions were made for remittances to those areas only on a
licensed basis. This action has resulted in an embargo of US
imports from Communist China and North Korea, except for certain
purchases of strategic commodities specifically authorized by
the US Government prior to May 1952.
The US Government also instituted controls during 1952 over
the import from Hong Kong, Macao, Japan, Formosa, and other areas,
of Chinese type merchandise and permitted their import only when they
could be proved to be of non-Chinese Communist origin. The authori-
ties in Hong Kong, Japan, Formosa, and South Korea have cooperated in
these controls by the issue of special certificates of origin in
accordance with procedures agreed upon with the US Government. The
US is the only country which has applied such controls against Com-
munist China.
The UK does not apply transactions controls at present but has
indicated a willingness to adopt such controls in the UK only and
that conditionally upon agreement of all other CoCom countries to
institute simultaneously effective transaction and transshipment
controls.
Barbara M. Shortley
E/ST
21 September 1954
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