MEMO FOR RECORD: (SCAPIN - 1926/4)
FEP/SJl/JMC/ars
25 February 1949
1. Paragraph 9 of SCAPIN 1926 (Tab A) directs the Japanese Government to "eliminate functions of Governmental Foreign Trade Kodans and reduce personnel of such Kodans to the extent that functions previously performed by them are restored to private sellers and buyers under this memorandum. On or before 31 August 1948, the Japanese Government will submit a plan to General Headquarters, Supreme Commander for the Allied Powers, for the abolition of the four existing Foreign Trade Kodans and the establishment in their place of two Foreign Trade Kodans, one for the purpose of handling imports by the Japanese Government and one for the purpose of handling exports by the Japanese Government."
2. The above instructions were considered desirable because many of the functions of the four Foreign Trade Kodans have been reduced as a result of revised procedures and new legislation governing export inspections. Examples are:
a. The new private trade contract procedure made it possible to eliminate the Kodans;
b. The new fiscal procedure eliminated the Kodans and Boeki Cho from the procedures relating to documentation and payment. These functions were to be discharged by the commercial banks;
c. The new export inspection law eliminated mandatory governmental inspection and transfers responsibility for necessary spot inspections from the Kodans to the appropriate ministerial bureaus.
3. In C.L. C.O. No. 3154 (2P), dated 6 September 1948 (Tab B) filed as required under paragraph 9 of SCAPIN 1926, the Japanese Government indicated that it would abolish the four Foreign Trade Kodans and established two new Kodans (export and import) by 31 March 1949. This memorandum of the Japanese Government stated that details of a concrete plan would be submitted by the Japanese Board of Trade.
4. In the course of informal discussions with appropriate officials of the Board of Trade pursuant to the SCAPIN and the Japanese Government reply, the Japanese officials made the following observations:
a. Certain government trading functions as long as they remain necessary should be retained by the Kodans which are temporary organizations, rather than transferred to the permanent ministries where the bureaucrats would tend to entrench themselves by making these functions permanent:
b. To require separation of export and import functions for administration through separate corporate structures would involve duplication of personnel, a revision of procedures which would delay ultimate dissolution of the Kodans, and undue complexity where government imports and government exports are related transactions:
c. The Foodstuffs Foreign Trade Kodan could be eliminated in the near future without unduly disrupting foreign trade. Almost all food exports are on a private contract basis. Food imports are virtually all distributed within Japan by temporary government agencies which, without greatly increasing personnel, could also handle the receipt, inspection, weighing and storing of imported foods:
d. The Raw Materials Foreign Trade Kodan could be eliminated without disrupting trade for the following reasons:
(1) The Kodan has not engaged in operations to any great extent but has performed its business under contracts with private concerns:
(2) To the extent that domestic stockpiling remains necessary, it can be performed by some other temporary governmental agency, such as the Sangyo Fukko Kodan:
(3) Such procurement expediting assistance as may be necessary can be performed by the remaining Foreign Trade Kodans:
e. The remaining Kodan functions could be materially reduced with the introduction of a private import procedure under appropriate exchange controls and the improvement of credit facilities for export manufacture.
5. The Board of Trade officials indicated informally that a plan would be prepared incorporating the above observations and would be presented for consideration to officials of SCAP. However, on 13 February 1949, the Board of Trade submitted a "Proposal for Abolition of Foreign Trade Kodans and Realignment of Private Foreign Trade Structure" (Tab C), which not only indicated intent to delay abolition of the Foreign Trade Kodans until 30 September 1949 (paragraph 1 of the proposal), but also proposes reestablishment of the Foreign Trade Associations with functions dissonant with the intent of earlier SCAPINS (see paragraphs 2 and 5 of the proposal), and with paragraph 1c of JCS 95 (Tab D), as follows:
a. The associations would be permitted to engage in buying and selling:
b. The associations would provide cooperative facilities and guarantee credit for members:
c. The associations would be exempted from the Anti-Monopoly Law.
6. The Proposal of 13 February 1949 also discusses possible changes (paragraph 3) in the methods of financing export production. No comment is made with respect to these changes since the method of financing export production is now under discussion among interested SCAP and Japanese agencies.
7. Paragraphs 1, 2 and 5 of the Board of Trade Proposal of 13 February clearly indicate a sharp reversal of earlier Japanese Government expressions of intent to comply with the spirit of SCAPIN 1926 as shown in their Memorandum C. L. C. O. No. 3154 (2-P) (Tab B) and subsequent discussions (see paragraph 4 above).
8. Experience to date indicates that the Foodstuffs Foreign Trade Kodan and the Raw Materials Foreign Trade Kodan CAN be abolished by 1 April 1949, and that the Textile Foreign Trade Kodan and the Minerals and Industrial Products Foreign Trade Kodan can continue to handle Japanese Government foreign trade sales and purchases, and other necessary continuing functions without impairing present operating efficiency.
9. In order to discourage further efforts by agencies of the Japanese Government to delay implementation of SCAPIN 1926, it is recommended that the attached SCAPIN be approved which:
a. Requires elimination of unnecessary Kodan functions by 31 March 1949:
b. Requires abolition of the Foodstuffs Foreign Trade Kodan and the Raw Materials Foreign Trade Kodan by 31 March 1949:
c. Requests plans for the handling of necessary functions and for their eventual elimination.
10. Concurrence: ESS/IND
ESS/AC
ESS/PD
ESS/TEX
ESS/FIN
DS
J. M. Capron 26-8593
F. E. P.