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1.Signed on August 30,1946; Entered into force at same date.
This agreement between the Government of the Republic of China,
hereinafter called "China," and the Government of the United St-
ates of America, hereinafter called "United States."
Whereas, the cessation of active military operations in the War
with Japan has rendered surplus to the needs of the United Stat-
es quantities of its property now situated in the Western Pacif-
ic Area, and
Whereas, such surplus property available for sale to China repr-
esents an estimated aggregate procurement cost of approximately
Five Hundred Million Dollars ($500,000,000) in movables and Eig-
hty-Four Million Dollars ($84,000,000) in fixed installations,
of which over one-half has already been declared surplus, and
Whereas, the Congress of the United States has, by the Surplus
Property Act of 1994, as amended, authorized the disposal of th-
e surplus property of the United States; and the Foreign Liquid-
ation Commissioner has been charged with responsibility for that
disposal in the Western Pacific Area, and
Whereas, the prosecution of the War with Japan caused widespread
damage and loss in China, and
Whereas, it is the policy of the United States, as declared in
the Surplus Property Act, to establish and develop foreign mark-
ets and promote mutually advantageous economic relations between
the United States and other countries by the orderly disposition
of surplus property in other countries, and to dispose of surpl-
us property as promptly as feasible without fostering monopoly
or restraint of trade, Now, therefore, in consideration of the
promises and the mutual agreements and covenants hereinafter st-
Property Sold
That be these presents the United States sells and China buys a-
ll that property owned by the United States on the date hereof
but surplus to its needs in China, Okinawa, Guam, Saipan, Tinian
, Eniwotok, Marcus, Kwajalein, Los Negros, Ulithi, Majuro, Makin
, Monus, Peleliu, Finschhaven, Iwo Jima, Wake and Roi, except a-
ircraft, nondemilitarized combat material, ships and other mari-
time equipment, and fixed installations outside Chinese Territo-
ry, subject, however, to the limitations following:
(1) That the United States owning agency, as defined in the Sur-
plus Property Act, shall be the sole determining agency as
to what property is surplus to the needs of the United Stat-
es, and
(2) No property is sold hereby which is already under contract
of firm commitment for sale or transfer. All information av-
ailable as to such property shall be furnished on request of
China by appropriate United States representatives.
Transfer of Possession
a. That the right to possession of the property sold under Arti-
cle 1 hereof shall, after declaration to the Foreign Liquida-
tion Commissioner for disposal as surplus, pass to China upon
either (1) the surrender by the United States and the accept-
ance by China of physical possession, or (2) the passage of
sixty (60) days' time after a notice to China that specified
property is available for transfer, whichever shall first oc-
cur. That such notice shall be deemed to have been duly given
when delivered in writing to the office of the Director of t-
he Board of Supplies or its successor, in Shanghai, China, a-
nd shall be deemed sufficient if it either generally describ-
es the property available or generally describes the location
b. That until right to possession passes to China pursuant to p-
aragraph a of this Article, the United States shall continue
to have custody and control of the property sold, and shall
give said property the same care and protection as is accord-
ed its own property of like character.
c. That after the right to possession with respect to specified
property has passed to China pursuant to paragraph a, all re-
sponsibility, risk of loss, and liability for the care, cust-
ody, protection and maintenance of such property shall be up-
on China, including rents and liabilities for the storage th-
ereof and damages and claims of any nature arising out of or
incident to the ownership of such property and China shall i-
ndemnify and hold the United States harmless from any such r-
esponsibilities, risks, liabilities, rents, damages and clai-
d. That China shall take the necessary steps to ensure that its
personnel engaged in the custody or handling of the property
sold outside the territory of China, comply with all orders,
rules and regulations of the owning agency of the United Sta-
tes having jurisdiction of the territory where the property
is located, and shall, within sixty (60) days after removal
of the property, repatriate all non-citizens of the United S-
tates engaged in the custody or handling of the property sol-
d, in default of which the United States is authorized to ac-
complish repatriation for China's account.
e. That the owning agency of the United States shall make prope-
rty available for visual inspection before the transfer of r-
ight to possession.
a. That all storage, crating, conditioning, handling, loading a-
nd transportation of the property sold shall be arranged and
paid for by China, and that all of such property shall be re-
moved within a period of twentytwo (22) months from the date
hereof, or a period of six (6) months after China acquires r-
ight ot possession of the property, whichever shall later ex-
pire. That in the event of China's failure to remove the said
property within the specified period, the United States is a-
uthorized to remove, destroy or otherwise dispose of the pro-
perty for China's account.
b. The Board of Supplies being convinced of the value to China
of obtaining export technical assistance in connection with
this operation; that China proposes to employ an established
American firm or firms acting under the direction of the Boa-
rd of Supplies to coordinate the overall operation of packing
, out loading the property from the islands, rehabilitating,
shipping to China, unloading and moving the property to stor-
age in China in conjunction with Chinese personnel and that
China shall afford to such firm, such personnel, facilities,
support, resources and other assistance as it may require in
order to accomplish the removal to China of the property sold
within the time specified.
c. That the United States shall forthwith make a payment of Thi-
rty Million Dollars ($30,000,000) on its Yuan obligations to
China for use by China in accomplishing the transfer of the
property sold hereby in manner following:
(1) The sum of Twenty Five Million Dollars ($25,000,000) to be
deposited in a special account in the United States to the
credit of China suject to appropriate withdrawal restricti-
ons guaranteeing the payment of charter hire of United Sta-
tes flag vessels, and thereafter the payment of dollar obl-
igations to the United States arising from this agreement,
(2) The sum of Five Million Dollars ($5,000,000) to be deposit-
ed in a second special account in the United States to the
credit of China subject to withdrawal restrictions guarant-
eeing the payment of the fees of the engineering firm empl-
oyed pursuant to paragraph b of this Article, the reimburs-
ement of expenses incurred by the United States under this
agreement, the cost of services and materials furnished Ch-
ina by agencies of the United States on an agreed compensa-
tory basis in connection with the transfer operation and d-
ollar obligations to a limit of Two Million Dollars ($2,000
,000) incurred in the United States for the purchase of ma-
terials and parts needed initially to rehabilitate the pro-
perty sold.
That when the transfer (by which is meant the removal of the pr-
operty from non-Chinese territory) has been completed, the unco-
mmitted balance of both account shall pass to China. That to the
extent that the sums so deposited are insufficient to cover the
United States dollar costs of the transfer, China shall make av-
ailable, as required, the necessary United States dollars.
That China shall utilize to the greatest extent possible establ-
ished commercial distribution channels for the resale of proper-
ty sold hereby and that United States distributors established
in China shall have an equal opportunity to bid for and to obta-
in such property. That China shall recognize normal distribution
practices including the marketing wherever practicable of name
brand products through the established agencies for such produc-
That the United States warrants title to the property sold and
that in lieu of any other warranty or undertaking as to the kind
, size, weight, quantity, quality, character, value, description
, condition or fitness for use of the property sold, it is unde-
rstood that if a material disparity is found to exist between t-
he property sold to China hereunder and the consideration given
therefor by China hereunder, the two Governments will consult t-
ogether to fix an appropriate adjustment in the price paid.
Money Consideration
a. That China hereby releases and acquits the United States of
the balance of the United States obligations to China for Yu-
an and Taiwan Yen advances to and expenditures on behalf of
the United States and its Armed Forces in China to the date
hereof; the said balance being understood to be the total of
the Yuan and Taiwan Yen debt less
(1) payments made by the United States to date, including the
payment provided for in paragraph c of Article 3 hereof,
(2) certain obligations of China to the United States specif-
ically agreed to be offset against the Yuan debt, and he-
reby agreed to total Seventy Four Million Dollars ($74,0-
00,000), and identified as:
(a) The Calcutta Stockpile sale at approximately Twenty
Five Million Dollars ($25,000,000),
(b) The Hogan Project at approximately Six Million Dolla-
rs ($6,000,000),
(c) The Small Ship program, totaling about Twenty Eight
Million Dollars ($28,000,000), of which about Twelve
Million Dollars ($12,000,000) has been delivered and
Sixteen Million Dollars ($16,000,000) remains to be
(d) The down payment on the United States Army's West Ch-
ina sale of Five Million Dollars ($5,000,000), and
(e) Miscellaneous small sales of about Ten Million Dolla-
rs ($10,000,000).
b. That China shall make available to the United States the equ-
ivalent of Fifty Five Million Dollars ($55,000,000) United S-
tates dollars in manner following:
(1) The equivalent of Twenty Million Dollars ($20,000,000) to
be available for the implementation of agreements between
the United States and China for research, instruction and
other educational activities under the terms of section
32 (b) of the Surplus Property Act of 1944, as amended,
(2) The equivalent of Thirty Five Million Dollars ($35,000,0-
00) to be available for the payment of United States Gov-
ernmental expenses in China at rate not exceeding the eq-
uivalent of Two Million Dollars ($2,000,000) a year, and
for the purchase of designated real estate and improveme-
nts to real estate for the use and benefit of the United
States which China agrees promptly to make available at
prices to be agreed upon by the Government.
Miscellaneous Provisions
a. That in connection with the fixed installations and the weat-
her station and communication service equipment in China whi-
ch is sold to China hereunder, and as additional considerati-
on therefor, china shall undertake by separate agreement in
the usual form to operate and maintain weather and communica-
tion services in a manner, to an extent and within limits to
be negotiated.
b. That China shall use its best endeavors to insure that prope-
rty not now in the United States transferred pursuant to this
agreement shall not be imported into the United States in the
same or substantially the same form, if such property was or-
iginally produced in the United States and is readily identi-
fiable as such, unless such property is to be imported into
the United States on consignment to a person or firm in the
United States for the purpose of reconditioning for re-export
, or by a member of the United States Armed Forces for his p-
ersonal use.
c. That no duty, tax, excise, or other governmental exaction is
included in the price, and if any such duty, tax, excise or
governmental exaction is levied or found to be payable, China
shall pay such sum in addition to the purchase price of the
property sold. The United States represents that no duties,
taxes, excises, or other governmental exactions are due to t-
he Government of the United States.
d. That this agreement is without prejudice to the final settle-
ment of accounts between the United States and China arising
out of the war and that China will undertake negotiations for
such final settlement at Washington as soon as possible.
e. That the United States owning agencies shall from to time to
time designate by location quantities of scrap as they become
available and upon acceptance by China by location title and
right to possession thereto shall pass to China without furt-
her consideration. Such scrap shall be subject to the provis-
ions of Article 3.
f. That in the event any surplus property is available in the P-
hilippine Islands after fulfilling the requirements of the G-
overnment of the Republic of the Philippines and its nationa-
ls, as well as the requirements of certain other governments
to which credit has been extended, then the residual surplus
property in the Philippine Islands shall be offered to China
for acceptance within thirty (30) days at price and on terms
to be determined by the Office of the Foreign Liquidation Co-
mmissioner in Manila.
In witness whereof the undersigned, duly authorized by their re-
spective Governments, have signed the present agreement at Shan-
ghai on the thirtieth day of August 1946.
For the Government of the Republic of China
(Signed) T.V. Soong
President of the Executive Yuan
For the Government of the United States of America
(Signed) Thomas B. McCabe
Foreign Liquidation Commissioner