811.20 Defense (M) Spain/671: Telegram

The Secretary of State to the Consul General at Algiers (Wiley)

848. For Murphy. Reference Department’s 927, April 23, 5 p.m., to Madrid, and 710, April 23, 5 p.m., to Lisbon. The reference telegrams gave general instructions concerning the ad hoc trade. It is not desired to interfere with any arrangements that may have been made by US or British representatives for expediting the immediate shipments of phosphates as authorized in the reference telegrams, but BEW submits the following suggestions as to possibly desirable mechanism for handling the ship-for-ship exchanges.

Army purchases in Portugal and Spain:
The U. S. Commercial Company would purchase for pesetas or escudos in Spain and Portugal such items as from time to time might be directed by the Army.
Such goods would be shipped in Portuguese or Spanish vessels to ports designated for lifting phosphates.
Instructions would be sent through NAEB to Madrid or Lisbon (and repeated to Washington), as to consignee of goods in North Africa.
The Army would pay full landed costs to the USCC in dollars either in Washington or in Algiers.
Civilian goods to be purchased in Iberian Peninsula:
The USCC and UKCC, subject in each case to confirmation by Washington, would purchase such items as might be directed from time to time by NAEB. Goods would be shipped as set forth in paragraph 1 (b) above.
Such purchases would be made c. i. f. North African port, war risk and marine insurance for seller’s account, both to be satisfactory to the commercial companies.
The goods would be disposed of by the commercial companies in North Africa for full landed cost.
Phosphate purchases in North Africa for the Iberian Peninsula.
These would be purchased by the commercial companies, f. o. b. vessel North African port, under direction of the Procurement and Development Division, NAEB.
Payment would be made in dollars or sterling as the case may be to the Commandant en Chef, or at its order, when the phosphate prices are fixed.
The commercial companies would in turn sell the phosphates, f. o. b. vessel North African port, to the Portuguese or Spanish governments, or to such agencies as these should designate, for escudos or pesetas on the basis of the full cost to the commercial companies.
The foregoing paragraph indicates desirability of early agreement with French for fixed prices for phosphates. It should, of course, be understood by all that prices determined for ad hoc trade should not be considered as precedent for prices to be established for long-range program.
It appears most desirable that the Spaniards and Portuguese predetermine shipping rates, so that the use of Iberian freight rates as a means of inflating export prices on commodities purchased in the Peninsula may be avoided.
It would doubtless be impracticable for the USCC and UKCC to handle the business on a straight 50–50 basis. Accordingly, the two companies would decide between themselves which one would handle a particular item, having in mind the desirability of a total participation on an approximate 50–50 basis.

Please repeat to Madrid and Lisbon, as Department’s 992 and 776 respectively.