CO129-552-6 Traffic of arms to China 2-1-1935 - 27-12-1935 — Page 364

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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/