103.9169/5–1745
The Ambassador in China (Hurley) to the
Secretary of State
No. 406
Chungking, May 17,
1945.
[Received June 1.]
Sir: I have the honor to enclose a copy of a
communication prepared at my request by the Chungking office of the Foreign
Economic Administration, describing certain services performed by the FEA
[Page 1092]
on behalf of the Soviet
Government in providing transportation for such important commodities as
tin, tungsten, bristles, mercury, silk, tung oil and bismuth, from South
China to Assam via Kunming.
It appears from the FEA statement that its work on behalf of the U. S. S. R.
has been confined to movement of commodities from China to Assam by air, but
that such movement has amounted to upwards of one-third of the total
transported westbound in the past two years. It appears further that
commodities moving by ATC69 are paid on the basis of U. S. one dollar per ton mile
and that “payment is effected through Lend-Lease to the U. S. S. R.”.
Freight moving on the other hand under the Services of Supply—Chinese
National Aviation Company contract, is said to be carried free.
I have inquired further of Mr. Stanton70 regarding the
foregoing and he has given me orally the following additional information:
- 1.
- Most of the Soviet freight has moved by CNAC (free) rather than by
ATC.
- 2.
- The statement relative to ATC movement that “payment is effected
through Lend-Lease” in fact means that the amount involved is merely
“added to the account”; insofar as Mr. Stanton is aware, this
account is not being currently paid.
- 3.
- With regard to the SOS–CNAC contract, it appears that all the space westbound is being paid for by
our Government, the argument reportedly being that since the
American Government has little westbound freight, our Government
incurs no additional expense by giving the space gratis to the U. S.
S. R.
Mr. Stanton had no answer to the question why our Government has contracted
for and is paying for the entire westbound space which we ourselves do not
need, or why—if we are paying for it but not using it for ourselves—we are
not charging the U. S. S. R. as at least a partial reimbursement to our
Government. Mr. Stanton’s only comment on this was to the effect that the
decision had been made in Washington.
While I note the statement in Mr. Stanton’s enclosed letter that “at no time
during the movement of these commodities has there been a shortage of
westbound hump space” and that “consequently the movement of U. S. A.
materials has in no way been delayed thereby”, I wish to point out that
insofar as I am aware this Embassy has not participated in any way
whatsoever in the making of these arrangements for the transportation of
Soviet Government freight. The Embassy has not been consulted to my
knowledge in regard to the policies involved or to the accountability for
the services rendered.
In these circumstances, which apparently involve transportation of Soviet
Government freight from China to Assam at the expense of
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the American taxpayer, I wish to make clear
that the Embassy is obviously not in a position to accept any responsibility
arising from the execution of this program, and to suggest that an immediate
investigation be undertaken, at the instance of the State Department, by the
agencies concerned. I should be pleased to be informed of the results of
such an investigation.
Respectfully yours,
[Enclosure]
The Special Representative of the Foreign Economic
Administration in China (Stanton) to the
Economic Counselor of Embassy in China (Briggs)
[Chungking, May 15, 1945.]
Dear Mr. Briggs: You have asked for my
comments on the relationship existing between FEA and the USSR
Government in connection with the latter’s purchase of strategic
commodities in China and their movement out of this country. FEA’s
assistance has been entirely confined to the latter phase of operations
and at no time have we acted for the USSR in the purchase in China of
commodities for their account.
It is my understanding that the origin of these Russian purchases is to
be found in certain commodity loans extended by the USSR to China some
years ago. Repayment of these loans has been, and is being, accomplished
by delivery on the part of certain Chinese Government agencies to the
USSR Trade Representative in China of certain commodities selected by
him. These, in the approximate order of their importance, have been as
follows: Tin, tungsten, bristles (and riflings), mercury, silk, tung
oil, and bismuth.
Inasmuch as FEA on behalf of the United States Commercial Company is
interested in the acquisition of certain of these materials, it may be
asked whether or not unnecessary and undue competition exists in the
filling of our mutual requirements. It is my belief that this is not the
case inasmuch as commodities delivered to the USSR are valued at the
price established between the Chinese Government selling agencies and
FEA for our current purchases. (Thus, in the case of tin, the equivalent
of so many tons of tin delivered to the USSR Trade Representative at the
current price at which we are purchasing from NRC will be applied in U.
S. dollars to liquidate an equivalent amount of the outstanding loan,
which, it is understood, is expressed in U. S. currency.) Thus, the
matter of competitive bidding would not appear to be involved.
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Active assistance to the USSR has been accorded by FEA in the movement of
these materials by air from China to India. In point of fact, this
assistance consists in FEA acting as shipping agent under instructions
from the WPB Washington to make available to the USSR Trade
Representative the facilities of ATC and/or CNAC planes under contract
to U. S. Army SOS. Our responsibility lies in arranging shipments,
supervising same, and accounting for the quantity of materials involved.
Necessary recording is made both at this end and at point of delivery in
Assam where Messrs. Cox and King’s Ltd. receive the cargo as agents for
the USSR Government. It may be emphasized that no Russian materials are
moved without the establishment in Washington of an air priority by the
WPB and that this is accomplished upon representations to the WPB from
Moscow.
Parenthetically, there may be stated the obvious fact that at no time
during the movement of these commodities has there been a shortage of
west-bound hump space. Consequently, the movement of USA materials has
in no way been delayed thereby.
The following approximate figures show the total quantities of strategic
materials shipped by air through FEA during 1943 and 1944 together with
that part of these totals which comprised USSR materials:
(Figures are of gross weights)
| 1943 total shipment |
32,831,000 lbs. |
| Of this for USSR account: |
|
| Tungsten |
2,002,000 lbs. |
| Silk |
58,000 lbs. |
| Mercury |
238,000 lbs. |
| Tin |
7,140,000 lbs. |
| Total |
9,438,000 lbs. |
| or 34.7% |
|
| 1944 total shipment |
32,765,000 lbs. |
| Of this for USSR account: |
|
| Wolfram |
11,676,000 lbs. |
| Tung Oil |
248,000 lbs. |
| Mercury |
222,000 lbs. |
| Silk |
133,000 lbs. |
| Bismuth |
23,000 lbs. |
| Total |
12,302,000 lbs. |
| or 37.5% |
|
Under present arrangements payment of freight at approximately US$1.00
per ton mile is required on shipments by ATC, and such payment is
effected through Lend-Lease to the USSR. Under the terms
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of the SOS/CNAC contract, westbound
space after meeting U. S. Army demands is at the disposal of FEA and no
charge is made therefor. From this allocation to FEA, there is granted
the space necessary for USSR cargo and consequently no charge is made to
the USSR in this respect. In point of fact, the amount of freight
charged to Lend-Lease has been very small indeed, as since the necessity
for this payment has been enforced USSR shipment has been virtually
confined to CNAC planes.
To complete this summary, I should mention that on occasions FEA in China
has purchased from the USSR Trade Representative certain quantities of
strategic materials which had been previously delivered to him by
Chinese Government agencies as above outlined. This is notably so in the
case of bristles which, incidentally, are purchased by us for allocation
at varying percentages to USA and to UK. The last such purchase from the
USSR was concluded in late 1943 or early 1944. As stated above, at no
time have we purchased strategic materials from the Chinese Government
for subsequent allocation to the USSR.
If you have any further queries in connection with the foregoing, please
communicate them to me.
Very sincerely yours,
