13 Department of Trade and Customs to Mr L. R. Macgregor, Government Trade Commissioner in North America
Cablegram 2196 CANBERRA, 23 July 1941
Clapp's  telegram 2597 of 19th July.
We cannot understand United States request that Commonwealth
Government should retain title to all material procured through
Lease Lend. Goods to be obtained for non-government use may be
(a) durable equipment for industry,
(b) materials raw or partially manufactured for further
manufacture in Australia,
(c) commodities ready for final consumption.
It would be possible, though inconvenient, for the Government to
retain the title to goods falling in the first class. In this case
the equipment would have to be hired to the users. A charge of
some sort would clearly be essential if user was not to be given
unfair advantage over competitors. Moreover in case of supply of
parts, e.g., locomotive equipment, cost of incorporation may
exceed cost of equipment and in any case Railway Department would
probably refuse to accept such goods on basis of title remaining
with Commonwealth. Although system of hiring equipment would be
possible it would be administratively difficult and we would much
prefer to have the right to sell the equipment outright to the
user devoting the proceeds to war purposes as outlined in my cable
to Dominions Office of which you have Copy. 
Materials for further manufacture in Australia would be for:
(a) contractors producing for Government and
(b) manufacturers producing for sale to public.
It would be possible to retain the title to materials issued to
contractors. These materials could be issued without charge,
contract prices being made up excluding the cost of materials so
issued. We are certain, however, that this method is wasteful and
likely to lead to fraud. In our view proper control and economy
can be obtained only by charging contractors for materials issued
and debiting the cost against the final amount due to them. If
finished goods were subsequently forwarded to Middle East, India
or Singapore fronts it might be impossible or impracticable for
Commonwealth to retain title, e.g., cotton drill made into
It appears to us to be impracticable to retain the title to
materials being manufactured for consumption by the public. If
they were issued free of charge to manufacturers it would lead to
differential prices for similar commodities to consumers which
would be impossible to police. In case of durable goods title
could perhaps be retained on basis of annual rental charge. We
would strongly prefer to avoid this as Lease Lend Clearing House
would probably develop into Hire Purchase Collecting Office.
The foregoing difficulties apply equally to goods for final
consumption. Generally speaking we feel that both these classes
must be sold to commercial users at approximately commercial
prices if the administrative problem is to be kept within bounds.
We took previous requests that distribution should not be on a
profit basis to mean that where agents were employed to distribute
goods to commercial users such agents were to be remunerated on a
payment for services basis. We understood that United Kingdom
proposed to seek U.S. approval for the sale of goods (other than
those for direct use by the Government) acquired under Lease Lend
by the Government to the commercial users whether for manufacture
or for sale to the public on the ordinary commercial basis. (See
D.O. cables 334  para. 7C and 445  para. 3D.) We have made
our plans accordingly. This view is confirmed in cable received
yesterday from Bruce  which he despatched after consultation
with United Kingdom Treasury officials.
We are anxious to meet United States requirements in every way
possible but suggest that you consult with United Kingdom
representatives on this question. In view of United Kingdom
obtaining foodstuffs and other consumption goods under Lease Lend
we cannot see how they can administer their distribution on the
basis of the Government retaining title to all materials obtained
under Lease Lend.
Please advise us of United Kingdom views and urge upon them
strongly the necessity for seeking U.S.A. approval for
distribution on a more practicable basis.
Your telegram raises questions:
(a) whether there are any other British Supply Council
instructions of which we should know,
(b) whether it is agreed that these instructions should apply to
(c) whether the instructions are drawn up primarily to meet
conditions obtaining in the United Kingdom.
Would appreciate earliest possible replies to this and my telegram
of 22nd as plans for Clearing House are vitally affected.