The work that is now going on in the U. S. Zone was actually begun at Yalta early in February 1945. There, the Chiefs of State of the United States, United Kingdom, and the Union of Soviet Socialist Republics declared their inflexible purpose to destroy German militarism and to eliminate or control all German industry that could be used for military production. They also agreed on the principle that Germany should make compensation in kind, to the greatest extent possible, for the damage and destruction inflicted on the Allied countries during the war.

At Potsdam, between 17 July and 2 August 1945, the same Three Powers spelled out the Declaration of Yalta in terms of a definite program, which included: (1) Elimination of the facilities for, and prohibition of the production of, arms, ammunition and implements of war as well as all types of aircraft and seagoing ships. (2) Destruction of the German war potential by removal of industrial capital equipment from the heavy industries, principally metals, machinery and chemicals.

The Potsdam Declaration also provided that, during the period of occupation, Germany should be treated as a single economic unit, with common policies in regard to economic life and reparation removals. To implement this provision, central German administrative departments were to be established for finance, transport, communications, foreign trade and industry. Such departments were to be headed by State Secretaries and act under the direction of the Control Council.

Between JCS 1067 and the Reparations Agreement of March 1946, the U. S. military government launched one of the greatest industrial hide-and-seek operations on record. There was no complete, easy-to-be-had list of Nazi war facilities. They were scattered throughout the length and breadth of Hitler's Germany inside mountains, in forests, below the ground, on isolated beaches and in hosts of small shops and plants that were never designed explicity for war production. An economic hunt was called for.

Since the summer of 1945, Military Government has been sifting, screening and reviewing a list of hundreds of reputed German war plants in the U. S. Zone. Work on this list, which represents a pool of Army-Navy-Air Force data, is now almost complete. In addition, the various sections of the Economics Division Industry Branch -metals, chemicals, machinery and optics are constantly considering and investigating other plants for destruction or reparations, or for retention in the German economy in keeping with the Level-of-Industry Agreement. In all, the number of plants so considered and which will either be available for reparations or retained for the German economy runs into the thousands.

On 4 May the U. S. Deputy Military Governor gave instructions to stop further dismantling of reparations plants in the U. S. Zone except for those 24 plants allocated as "advance reparations" and war explosives plants on which work was already under way. This policy was adopted pending definite assurance that the provisions for treating Germany as an economic unit as specified in the Potsdam Declaration and the Reparations Plan will actually be put into effect.

The established level of industry for Germany is based on the existing plant capacity of all four zones. Plants considered for reparations and removal are war potential plants and plants not required to maintain the established level of industry. Until such time as Germany is treated as a single economic unit it is necessary that some plants now scheduled for reparations or removal be retained in each of the industrial fields to supplement the capacity originally anticipated from the other zones.

The Potsdam agreement provides that during the period of occupation Germany shall be treated as an economic unit; that allied controls shall be imposed on the German economy only to the extent necessary to ensure equitable distribution of German commodities as between the several zones in order to produce a balanced economy throughout Germany and reduce the need of imports, that certain specified German central departments be created to assure the administration of these controls. As none of these provisions have so far been executed within nearly a year of occupation it was found necessary to stop further dismantling at reparations plants except at those plants referred to above until a decision was reached as to whether the resources of all of Germany were to be available for the support of Germany as a whole.