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Hong Kong, and another set between the Hong Kong firm and
the importer in China which is shown to the Hong Kong
authorities as proof that the arms are "in transit" for
China, and if the goods are not shipped on any through
bill of lading or other through document from the United
States to their ultimate destination, then it would appear
that the arms are not strictly in transit at all and that
the transaction consists technically of an export from
the United States to Hong Kong followed by a re-export
from Hong Kong to China, so that the Hong Kong authorities
would be justified in demanding a Chinese Government huchao
before permitting the re-export.
5. This would be an alternative method of dealing with
the matter to that proposed by the United States Government,
which is in effect that no shipment arriving at Hong Kong
from the United States should be regarded as being in transit
to China unless some sort of through document is produced
prepared in the United States and seen by the United States
authorities authorising the export, showing the ultimate
destination of the goods. It would however be preferable in
Sir John Simon's opinion, subject to any technical difficulties that may arise, to adopt a procedure which would enable the
United States Government themselves to verify the real
destination of arms to be exported from United States territory. In any case he regards it as important that means should be
adopted whereby an effective control may be exercised and
irregularities prevented.
6.
Sir John Simon would be glad if Sir Philip Cunliffe-
Lister would furnish him with information on these points,
and/