My telegram 167 of 15th March. [1]

Your telegram 186 of 27th March. [2]

The British Supply Council in the United States have been actively
pursuing the question of the treatment which the United States
Administration are prepared to give to Dominion requirements of
non-armament stores under the Lease Lend Act. Reports received
recently make it possible to give some indication of the position
though it has not yet been fully clarified.

2. The Commonwealth Government will be familiar through its
representatives in the United States with the general developments
since enactment of the Lease Lend Act and of approval by Congress
of an appropriation of 7,000,000,000 dollars under it. The
decision of the United States Administration as to the amount of
this appropriation was not directly related to requirements filed
by the British Supply Council. It represented the largest amount
that the President [3] was prepared to submit for approval of
Congress at that time. This appropriation which, of course, has
also to cover assistance given by the United States to other
countries is not sufficient to cover estimated requirements up to
30th June, 1942 of the United Kingdom and the rest of the Empire
as notified through the British Supply Council. We can only hope
that when the appropriation is becoming exhausted the United
States Government will be prepared to ask Congress for a further
appropriation. Nevertheless for this reason and for the reasons
set out below a portion of our requirements in the United States
will still have to be paid for in gold or dollars.

3. My immediately following telegram [4] gives a general summary
of the present arrangements and the procedure in the United States
in connection with the Act.

4. As regards supplies to Empire Countries other than the United
Kingdom the general attitude of the Administration as explained in
paragraph 5 of my telegram 101 [5] is to insist that requirements
of the Empire should be dealt with through one channel. This
implies that all such requirements so far as they are to be
covered by the Lease Lend terms would have to be handled by the
appropriate United Kingdom organisations working in the United
States under the British Supply Council and would be Lease Lent in
the first place to the United Kingdom. In this connection section
4 of the Act has to be taken into account. This reads: 'All
contracts or agreements made for disposition of any defence
article or defence information pursuant to Section 3 shall contain
a clause by which the foreign Government undertakes that it will
not without the consent of the President transfer the title to or
possession of such defence article or defence information by gift,
sale or otherwise, or permit its use by anyone not an officer,
employee or agent of such foreign Government'.

It will be seen that this section governs both transfer by the
United Kingdom of defence articles to other parts of the Empire
and other countries and domestic distribution of non-warlike
defence articles after they have been delivered to the
Governments.

5. The following is an extract from a recent report from the
British Supply Council on their discussions with the United States
administration on these problems.

'While various questions under Section 4 of the Act are still not
settled we think it wise to give you an interim report on the
present position.

The position has been constantly discussed with the Administration
over the past few weeks. Close contact with Hopkins [6] and with
his legal advisers shows that the President's unwillingness to
give clear cut decisions of principle on the Lease Lend questions
involved is due to his fear that some of our requests if divulged
to American public at this stage might have unfavourable political
repercussions.

On the other hand we have reason to believe that wherever our
vital needs are concerned we shall in practice receive necessary
support to cover the following:

a. Transfer of non-warlike defence articles by commercial treaty
or otherwise to persons in the United Kingdom.

b. Transfer of warlike defence articles and main items of non-
warlike articles to Dominion, Indian, and Colonial Governments,
due notice being given to the United States of the Government to
which we intend to transfer them.

c. Transfer of non-warlike articles by Dominion etc. Governments
within their own territories as under (a).

d. Free discretion to permit the use of warlike articles by, or to
transfer them to, Dominions etc. or Allies on the field of battle.

This support may take the form of
(a) an exchange of letters with Hopkins which will have the effect
of recording the Administration's knowledge and acquiescence in
the above outline procedure,
(b) an oral Presidential consent on the lines of an agreed
memorandum,
(c) verbal understanding that in fact the President consents as
and when the goods are handed over to us.'
6. As regards the needs of Empire countries other than United
Kingdom the British Supply Council have reported as follows:

'We are regularly sending in requisitions for all kinds of goods
for use in the United Kingdom regardless of the method of
distribution and we now propose to put in requisitions for
transfer to Dominions etc. for the following classes of goods
besides arms and munitions (including aircraft) viz: iron and
steel (including alloy steel), non-ferrous metals, oil and other
petroleum products, fertilizers, chemicals, machine tools,
miscellaneous machinery, civil aircraft, merchant ships and
shipping stores and motor vehicles.

All such requisitions show the destination of the goods. If the
Administration object they can refuse to accept the requisition.

If they do not object we think that we can assume that the
requisite consent will be forthcoming. Failing clear-cut decisions
of principle which as we have explained we do not believe can be
obtained, we think it better to allow any difficulties that may
come up to arise on submission of individual requisitions'.

7. The following general points in connection with the Lease Lend
procedure are of special importance:

a. Existing contracts are not being brought within the scope of
the act.

b. Goods can only be obtained on Lease Lend terms if they are
purchased by a United States Government department and transferred
to the United Kingdom Government. Purchases through private
channels cannot be brought within the scope of the Act. The
organisation for public purchase by the United Kingdom Government
of food, and most important raw materials already exists and
arrangements are being made to extend the field of public
purchases to cover other raw materials and miscellaneous purchases
wherever Administrative difficulties are not too great.

c. As regards distribution there are obvious difficulties from the
point of view of United States Administration especially in view
of Article 4 of the Act, in the sale by the receiving Government
of the goods which they are obtaining at the expense of the United
States tax payer. No blanket or formal consent to such sales is
therefore likely to be obtained. On the other hand the United
States Administration recognise that for a large number of
commodities, free distribution by the receiving Government is
impossible and in a number of cases they have already given such
consent to the sale by us to consumers in the United Kingdom on
condition that where distribution has to take place through
intermediaries these should act as agents of the United Kingdom
Government and not as profit making principals.

8. The Commonwealth Government will appreciate from the foregoing
that to benefit under the Lease Lend Act in respect of non-warlike
'defence articles' they will have to arrange for public and
controlled purchases of any commodities to be obtained under these
terms and where necessary also make appropriate arrangements for
sale to consumers. We should be grateful if they could consider
their existing organisation and controls from this point of view.

9. It will also be necessary for there to be arrangements in the
United States by which detailed requirements can be transmitted by
the British Supply organisation together with evidence of their
essential requirements. Paragraph 3 (b) of my immediately
following telegram gives indication of the kind of details
required.

Doubtless the Commonwealth Government will be able to use or adapt
their existing organisation in the United States for this purpose.

Their representatives in the United States may wish to discuss the
matter with the British Supply Council.

10. We hope that the foregoing statement of the position will be
of assistance to the Commonwealth Government. If there are any
points on which further information is available we will endeavour
to supply it though the situation is of course not yet entirely
clear.