861.24/11–2746
The Lend-Lease Administrator (Lane) to the Chairman of the Government Purchasing Commission of the Soviet Union in the U.S.A. (Eremin)
Dear Mr. Eremin: This will confirm the substance of our conversation of Saturday morning, the 16th, concerning the shipment to the Soviet Union of lend-lease pipeline goods after December 31, 1946.
The Agreement of October 15, 1945, which relates to these goods, provides that they shall be made available subject to the Act of Congress of March 11, 1941, as amended, and acts supplementary thereto. Such a supplementary act was passed in July of this year making available a sum of money for the administrative expenses of this Government in connection with the procurement and delivery of lend-lease goods, but providing that no part of the appropriation was to be used for expenses incident to the shipment of such goods abroad [Page 857] after December 31, 1946.46 It was thought by this office that the intent of the Congress was to place a limitation only upon the use of the particular funds appropriated in July, but we have recently been advised by the Comptroller General that in his judgment of [the?] language of the appropriation act has the effect of prohibiting the use of any appropriated funds whatsoever for the stated purposes after December 31.
Present information indicates that there will be some material requested for delivery under the Agreement of October 15, 1945 remaining unshipped at the end of the year.
In order to meet the difficulties created by this situation, I propose that the practices which have been followed under the Agreement of October 15, 1945, be modified in the respect that the Soviet Union will take over at factory all goods which cannot be shipped prior to December 31, 1946, and will handle all storage, transportation, shipment, etc., from that point on. This course will remove the difficulty with respect to the unavailability of funds to meet accessorial expenses. Administrative expenses for the activities of the Treasury connected with the procurement of the materials involved will still have to be met; and to this end I propose that the Soviet Union make available to the United States not later than December 15th of this year a sum in cash equal to 2½% of the procurement cost of the materials involved. This sum of 2½% will be deducted from the amount which will be billed to your Government under the Agreement of October 15, 1945.
If in any particular instances it is impracticable for the Soviet Union to take over materials at factory, the Treasury will be prepared to continue to handle transportation, with its incidental operations, to shipside, but for this purpose will need, likewise by December 15th, an additional cash payment equivalent to 10% of the procurement cost of the goods involved. It is hoped that no such instances will arise, and that in any event they will be kept to the minimum. Of course, to the extent that the Soviet Union thus supplies the funds for handling goods to shipside, no charge for such handling will be included in the bill under the Agreement of October 15, 1945.
If the course outlined above is in general agreeable to your Government, I will be pleased to arrange prompt conferences to work out the detailed mechanics involved. In the course of these conferences I propose, as indicated to you in our discussion, that every effort shall be made to reach mutual agreement on the cancellation of as many contracts as possible where it appears that delivery cannot be secured in the reasonably near future.
[Page 858]I wish to assure you that we have carefully considered every aspect of the rather unfortunate situation which presents itself, and feel that the only alternative to the foregoing proposal is the cancellation on December 15 of those contracts under which delivery cannot be anticipated before the first of next year.
It is understood that you are presently communicating with your Government at Moscow and will advise me of its acceptance or rejection of this proposal as soon as possible.47
Sincerely yours,