Restrictions Eased on Trade
With Communist China

DEPARTMENT STATEMENT ¹

It has been decided to remove most Foreign Assets Control restrictions on United States foreign subsidiaries and on United States business participation in third-country trade in presumptive Chinese goods. It also has been decided to modify further the regulations on noncommercial imports from China. These revised regulations will be published, as is required, in the Federal Register on December 24.²

These changes have been under consideration for some time. As is evident from their nature, their principal effect is to relax restrictions on American firms and private citizens abroad and thereby to remove administrative difficulties. The restrictions being removed have been a source of increasing irritation to United States citizens and have placed American firms abroad in a disadvantageous position. Additionally, existing Foreign Assets Control restraints on foreign subsidiaries of American firms have been a source of friction between the United States Government and friendly foreign governments, which resent the extraterritorial effect of such controls. While present actions will not relieve all United States restraints—particularly those relating to the Department of Commerce prohibition on the export of U.S.-origin goods and technology to mainland China—they should significantly reduce certain areas of friction.

Now, these changes bear out the previous remarks by Secretary Rogers that we planned to take other steps which we hope would improve relations with Communist China. They are, however, strictly unilateral and are not related to recent Warsaw contacts with Communist Chinese representatives.

CHANGES IN CHINA TRADE RESTRICTIONS

Press release 37S dated December 19

Changes in the Foreign Assets Control Regulations were announced by the State Department on December 19. The changes are summarized as follows:

1. For foreign subsidiaries of U.S. firms, most FAC restrictions on transactions with China regarded as nonstrategic by COCOM [Coordinating Committee on export controls (Paris)] are removed. This is intended to permit American subsidiaries, insofar as FAC restrictions are concerned, to engage in trade with Communist China under regulations applicable to other firms in countries in which they operate and to remove restrictions which those countries view as interference in their domestic affairs. This action will not affect Commerce Department controls on export or re-export of U.S.-origin goods or of unpublished American technology.

2. Present restrictions on U.S. business participation in third-country trade in presumptive Chinese goods are eliminated. This will permit American firms (including banking, insurance, transport, and trading) to purchase and ship to third countries commodities of presumptive Chinese origin that they are now able to ship to the United States under certificates of-origin procedures. Although certificates will not be required for third-country transactions, such goods still may not be shipped to the United States without them. This change is responsive to urgent requests of foreign branches of U.S. firms, and it is expected to improve the competitive position of American business concerns overseas.

3. The $100 ceiling on noncommercial purchases of Chinese Communist goods by Americans is removed, as is the requirement that noncommercial imports from China enter the United States as accompanied baggage. This will further relieve administrative difficulties of American citizens and is responsive to the desire of American tourists, collectors, museums, and universities to import Chinese products for their own account. It will not permit imports by persons or commercial organizations in the United States for resale.

¹ Read to news correspondents on Dec. 19 by Department press spokesman Robert J. McCloskey.

² For amendments to Foreign Assets Control Regulations, see 34 Fed. Rep. 20189.

MEMORANDUM

TO: HAK
FROM: Peter
RE: Yachtsmen

February 13, 1978

There were indeed two separate groups of American yachtsmen detained and released by the Chinese in 1969.

1. The first incident occurred February 16, 1969 when three yachts bound for Macao from Hong Kong were seized in Chinese waters. Four Americans were among the 15 people detained; the others were mostly British. The Chinese released two of the yachts on April 2, continuing to detain the third yacht with Americans Simeon Baldwin and Bessie Hope Donald. One of the yachtsmen released on April 2 told reporters he believed the Americans were being held longer because they had thrown their passports overboard when being captured. (*NY Times*, Feb. 17, 1969; April 3, 1969)

The Chinese released Baldwin and Donald on December 6, 1969, saying the two had been detained after release of the others "because they had attempted to conceal their identity." (*NY Times*, Dec. 7, 1969) This release coincided with exchanges in the Pakistani channel and Chinese moves to resume the Warsaw talks. (See *China* 1969, pp. 67, 77).

2. American yachtsmen T.A. Pierson and his wife were picked up by the Chinese on July 16 when their converted lifeboat had drifted into Chinese waters after an accident during a cruise east of Hong Kong. The Piersons were freed by the Chinese on July 24, eight days later. (*NY Times*, July 25, 1969) (This is the incident that led HK and Richardson to delay the July announcement of trade measures for a few days. See *China* 1969, p. 25)