FOREIGN TRADE: Disgraceful

By export controls and other restrictions, the U.S. thought that it had staunched the flow of strategic materials into Communist China and Iron Curtain countries. But last week Maryland’s Democratic Senator Herbert O’Conor, who has been looking into Far Eastern shipping (TIME, Oct. 30), found that the ban on such exports was about as effective as a sieve.

In the past five months, said O’Conor, no less than 14,373 tons of materials useful in war—steel products, scrap rubber, transformers, motors, fire engines—had been carried to China from U.S. ports and from occupied Japan. Most of the shipments, O’Conor pointed out, were technically legal, since many of the products were not specifically banned for export. But some shipments, even though legal, were plain dodges of U.S. and Japanese export controls.

Steel & Copper. A case in point was a big shipment of silicon steel (vital for electrical equipment) by Boston’s Pacific Trading Corp. Pacific Trading’s President Shao Ti Hsu calmly told O’Conor’s Senate subcommittee that he bought the steel in Belgium and France, shipped it to China via New York. Did Hsu know that it is illegal to export silicon steel from the U.S. to Communist China? Yes, said Hsu, but the Commerce Department had told him that it was O.K. as long as the steel had not originated in the U.S. That, said Senator O’Conor, was “disgraceful.”

The most remarkable deal of all involved 4,000,000 Ibs. of copper which went to Red China before the Korean war. It was bought in Japan for shipment to New York. Because of the New York destination, a Japanese export license was easily obtained. In transit, the copper was resold to agents of Red China. Since the shipment originated in Japan, the copper was exempt from U.S. export controls when it passed through New York. Said Jerome Kohlberg,* president of the Kane Import Corp. which bought & sold part of the copper: “We acted in accordance with all Government regulations.”

Violation or Outrage? Senator O’Conor was not so sure. Said he: “This double shipment around the world has resulted in evasion, if not actual violation of the Japanese export laws.”The shipment, O’Conor added, was made possible by “misrepresentation” and “spurious” bills of lading. To crusty, crafty Hans Isbrandtsen, whose shipping line had drawn up some of the questionable bills of lading, O’Conor’s charges were an outrage. “A steamship line such as ours,” said he, “. . . follows the shipper’s directions . . . whenever those directions are within regulations.”

At week’s end Herbert O’Conor referred the entire matter to SCAP “for possible action on the part of Japanese authorities.” And the Commerce Department hastily called a meeting of shippers and exporters in Manhattan, to plug the loopholes in its export regulations.

* Distant cousin of Manhattan Importer Alfred Kohlberg, vigorous, supporter of Chiang Kai-shek.