is not permitted to deal with Communist countries, including the PRC; this prohibition can be waived by the President, and waivers have been obtained for Yugoslavia, Rumania, Poland, and the Soviet Union. The Jackson-Vanik amendment (which applies as well to other programs) also would pose obstacles to the extension of credit and guarantees, unless waivers are obtained.84

In addition, there may be some question concerning whether contracts signed between the bank and the ROC or its agencies remain in force after withdrawal of recognition, since the ROC would cease to exist in American eyes. This issue is discussed elsewhere in this study in the context of United States-ROC treaties. It should be noted, however, that the case for continuing the validity of contracts is especially strong. Contracts generally concern commercial matters and private rights. A fair quid pro quo is exchange such that the breaking of a contract is likely to lead to unjust enrichment or unfair damage to one of the parties.

Overseas Private Investment Company.-OPIC provides insurance and guarantees against war, expropriation, and non-convertibility for American investments in "less developed friendly countries and areas" and also operates a direct loan program to new companies in these countries or areas. It is expected that non-convertibility and expropriation risk insurance will gradually be passed over to private industry.86 If OPIC insurance and guarantees are extended in accordance with an agreement signed between the United States and the foreign government which provides adequate protection against the insured risks.87 If this agreement lapses upon the withdrawal of recognition and no new agreement is signed, then OPIC insurance of investments in Taiwan will cease.

Unlike Export-Import Bank programs, OPIC is considered assistance, and hence is covered by the provisions of Section 2370(b), (f), and (t) which prohibit deals with Communist countries or countries with which the United States has severed diplomatic relations.

Most-Favored-Nation. This principle of non-discrimination declares that "except as otherwise provided . . . any duty or other import restriction or duty-free treatment proclaimed in carrying out any trade agreement under this chapter shall apply to products of all foreign countries." 88 In practice two columns of rates of duties are established, with specified countries, e.g., "China (any part of which may be under Communist domination or control" in column 2 with higher rates, and "all other countries" in column 1.89

The statute defines "country" as a "political entity known as a nation." 90 The regulations, however, provided that "colonies, possessions, or protectorates outside the boundaries of the mother country are considered separate countries." 91 (Emphasis added.) Thus, there does not appear to be any difficulty in listing Taiwan in column 1 after with

84 19 U.S.C. 2432 (d).

85 22 U.S.C. 2191.

86 22 U.S.C. 2199 (b).

87 22 U.S.C. 219 (a). See also. Agreement relating to guarantees for projects in Taiwan proposed by nationals of the United States (1956) and amendment, TIAS 2657.

88 19 U.S.C. 1881.

89 19 U.S.C. 1202 (e), (f).

90 19 U.S.C. 1202.

01 19 C.F.R. 134.1.

drawal of recognition, although a change in phrasing would be necessary so that Taiwan would not be described as "China."

Export Administration Act.-This statute gives the President broad discretionary powers to control American exports for economic and foreign policy reasons.92 The Department of Commerce controls exports through the issuance of general licenses for most goods, and validated (specific) licenses for goods appearing on the Commodity Control list. (See also the section on arms transfers, infra, for a discussion of the export of military and high technology items.)

At present Taiwan and "China excluding the ROC" are listed in separate control categories.93 After withdrawal of recognition, some other phrasing can produce the same result. It should be noted that the absence of diplomatic relations would not affect export controls since section 3(1)(a) of the 1969 Export Administration Act refers to "all countries with which we have diplomatic or trading relations." (Emphasis added.)

Johnson Debt Default Act.-This act imposes a criminal sanction on persons in the United States who deal in the securities of a foreign government or extend loans to a foreign government that is in default of payments due the United States. 94 It does not apply to transactions of the World Bank. Whether the financing of a particular transaction is a "loan" depends on the economic function rather than the formal title. Credit sales of agricultural commodities are not considered loans, nor are various bona fide commercial credits.95

The PRC is currently considered to be the party in default of loans made by the United States to the ROC before 1947. If Taiwan becomes a subdivision of the PRC after withdrawal of recognition, then in the absence of amending legislation the restrictions of the Johnson Act will apply to dealings with Taiwan.

98

ARMS TRANSFERS

The statutory scheme for arms transfers is based on the Military Assistance Program 96 under the Foreign Assistance Act,97 and the Arms Export Control Act (amending the earlier Foreign Military Sales Act) and supported by the International Traffic Arms Regulations 99 issued by the secretary of state. These various laws were amended and brought under a single statutory authority by the International Security Assistance and Arms Export Control Act of 1976.100

The Military Assistance Program authorizes the President "to furnish military assistance, on such terms and conditions as he may determine, to any friendly country or international organization, the assisting of which the President finds will strengthen the security of the United States. 101 (Emphasis added.) Assistance is provided through grants and loans of military items, as well as training of foreign mili

92 50 U.S.C. App. 2401.

93 15 C.F.R. 385.4, supplement 1.

24 18 U.S.C. 955.

95 42 Op. Att'y Gen. 15 (1963), 27 (1967).

96 22 U.S.C. 2301 et seq.

722 U.S.C. 2151 et seq.

08 82 Stat. 1320; 22 U.S.C. 2751 et seq.

9022 C.F.R. 121.01 et seq.

100 90 Stat. 729.

101 22 U.S.C. 2311.

tary personnel. The Military Assistance Program, including the Military Assistance Advisory Group, will terminate at the end of 1977, except for some training programs and for some commitments made under section 2318 prior to September 30, 1977.102

As discussed earlier, a number of limitations on assistance are imposed by section 2370, which bars dealings with Communist countries and countries with which diplomatic relations have been severed, unless a waiver is obtained. Section 2364 provides some relief by authoriizing the President to spend each year up to $250 million plus another $100 million in foreign currency, without regard to the limitations of section 2370, if he determines that such spending "is important to the security of the United States” and also reports to Congress.103 In addition, the President may order up to $67.5 million from the stocks of the Department of Defense subject to reimbursement from subsequent appropriations in emergency situations.104 Title I, section 101 (a) of the International Security Assistance and Arms Export Control Act, however, sets spending limits of $197 million for FY 1976 and $177 million for 1977, section 2364 notwithstanding. At present, Taiwan receives only limited funds under the Foreign Assistance Act for training of personnel. In case of emergency, however, assistance may be given under the above sections.

In the Foreign Military Sales Act, Congress declared:

The need for international defense cooperation among the United States and those friendly countries to which it is allied by mutual defense treaties is especially important, since the effectiveness of their armed forces to act in concert to deter or defeat aggression is directly related to the operational compatibility of their defense equipment.105

Sales are made to "friendly countries" where such sales will strengthen the United States and promote world peace.106 Limitations are placed on sales of sophisticated equipment to underdeveloped countries, but a specific exception is made for Taiwan.107 Sales of over $25 million or of major defense equipment must be reported to Congress, which may block the transaction by concurrent resolution unless the President certifies that "an emergency exists which requires such sale in the national interest of the United States." 108 The limitations of section 2370 apply to arms sales as well.

The majority of sales are on cash or 120 day terms.109 Sales on credit are also permitted.110 The International Security Assistance and Arms Export Control Act increased the maximum term of credit from ten to twelve years and also increased the amount of credit available,111 apparently to help soften the effects of phasing out the grant program. In addition, the United States may provide guarantees against both

102 International Security Assistance and Arms Export Control Act (ISAAEC), Title I, sec. 104, 105, 541; 22 U.S.C. 2321 (i), (j), 2347.

103 22 U.S.C. 2411. See also 22 U.S.C. 2314, 2318 (a), 2360 (a).

104 ISAAEC, Title I, sec. 102 reduced the limit from the earlier $150 million, 22 U.S.C. 2318. See also 22 U.S.C. 2411.

105 22 U.S.C. 2751; see also ISAAEC, Title II, sec. 202.

political and credit risks on financing arms sales.112 The President also may authorize co-production or licensed production outside the United States when it "best serves the foreign policy, national security, and economy of the United States." 113

Private American arms dealers must register with the Office of Munitions Control, and also must obtain a license for export of any items appearing on the Munitions List. Licenses could be revoked or amended without notice by the secretary of state whenever he "deems such action to be advisable." 114

The principal criterion for arms transfers is that the buyer is a "friendly country." As discussed earlier, it should be possible to continue sales if, after withdrawal of recognition, Taiwan is treated as a "de facto recognized friendly country." In addition, it should be noted that the "Japanese formula" would impose additional, though not insurmountable difficulties. Parts of the statutory scheme are framed in terms of government-to-government transactions, and also contemplate the participation of American diplomatic missions and military officers abroad.115 Taiwanese parties in the United States might have more difficulty dealing with American officials and corporations if they represent a "private" corporation rather than the Taiwan government.

IMMIGRATION

Numerical Limits.-It is specified in 8 U.S.C. 1152 that the number of immigrant visas and conditional entries made available "to natives of any single foreign state" shall not exceed 20,000 a year. "Each independent country, self-governing dominion, mandated territory, and territory under the international trusteeship system of the United Nations . . . shall be treated as a separate foreign state when approved by the Secretary of State. All other inhabited lands shall be attributed to a foreign state specified by the Secretary of State." 116 If an area is found to be a "colony or other component or dependent area" of a foreign state, the quota for that area is 3 percent of the quota for the foreign state or 600.117 The secretary of state appears to have the authority to take "appropriate action" in adjusting quotas if the territorial limits of a foreign state change.118

At present, the "China" quota encompasses both Taiwan and the mainland. The state against whose quota an immigrant is counted generally depends on the alien's place of birth. For example, a person born in Hong Kong would be charged to the dependent area quota for Great Britain; a person from Hong Kong born in Taiwan or the PRC would be charged against the 20,000 limit for China.

The law as presently written would present difficulties after the withdrawal of recognition. There is little room for ambiguities, since all "inhabited lands" are foreign states or are attributed to foreign states. Obviously, the PRC would be very unhappy with a designation by the secretary of state, even for purely internal purposes, that Tai

117 8 U.S.C. 1152 (c). Before January 1977 the quota was 1 percent.

118 65 U.S. Code Congressional and Administrative News 3228; 8 U.S.C. 1152 (d).

wan is an "independent country or self-governing dominion." This designation also would double the "Chinese" quota to 40,000. Treating Taiwan and the PRC as a single state so that, in a manner similar to the present arrangement, both could share in the "China" quota might also create problems. Such an action might affect the interpretation of other statutes that limit dealings with countries or areas having a "Communist government" or "controlled by a Communist government." Moreover, if Taiwan were treated as a "colony or other component or dependent area" of the PRC, then the limit of 600 immigrant visas would apply.

In this instance, specific legislation may be needed so that an adequate number of immigrant visas would be made available, without either declaring Taiwan an "indepedent country or self-governing dominion" or suggesting that it is part of a "Communst country." An adequate number might be the average annual number of immigrant visas issued to residents of Taiwan since the new quota system was instituted in 1965. Another possible solution would be to treat Taiwan as an integral part of China (so that Taiwan would share in the China quota), but at the same time to declare that Taiwan is not under the control of a Communist government. This is somewhat awkward since Taiwan would be a part of China for immigration purposes, but a de facto recognized country for other purposes (including deportation). It is not unprecedented, however, since the United States now treats the PRC in a similar, although reversed, manner.

Deportation. Three steps in determining a "country" to which an alien will be deported are established in 88 U.S.C. 1253 (a). Under the first priority, deportation is to "a country promptly designated by the alien if that country is willing to accept him into its territory." In order to facilitate deportation and reduce the number of "undeportables," courts have interpreted "country" very broady. "Any place possessing a government with authority to accept an alien deported from the United States can qualify as a 'country' under the statute." Chan Chuen v. Esperdy 285 F. 2d 353, 354 (2d Cir. 1960) (holding that Hong Kong, a colony, is a "country" for purposes of the first priority). Also found to be "countries" were Taiwan, a place whose legal status is "undetermined," Rogers v. Cheng Fu Sheng, 280 F.2d 663 (D.C. Cir. 1960), and the PRC, a country not recognized de jure, Hom Sin v. Esperdy, 209 F. Supp. 3 (S.D.N.Y. 1962).

A procedural problem arises under the first priority if the country designated by the alien has no diplomatic relations with the United States. In such a case, the attorney general would be unable to inquire whether that country would accept the alien. Wong v. Esperdy, 197 F. Supp. 914 (S.D.N.Y. 1961).

If the first priority fails, then the attorney general is directed to deport the alien "to any country of which such alien is a subject national, or citizen if such country is willing to accept him into its territory." Although in the same paragraph of the same statute, "country" is interpreted differently for the second priority than for the first. Under the present situation where the United States recognizes the ROC, courts have refused to treat Chinese respondents as citizens of the PRC for purposes of the second priority. Ng Kam Fook v. Esperdy, 320 F. 2d 86 (2d Cir. 1963); Lee Wei Fang v. Kennedy, 317 F. 2d 180