893.24/7–2347
Memorandum by the Director of the Office of Far Eastern Affairs (Vincent) to the Secretary of State
There is attached a copy of memorandum, prepared in OFLC, of a meeting held on July 18, 1947 between officers in the Department and the Chinese Supply Commission in regard to the 8⅓ Group Program.44
During the course of the meeting Dr. Wang, Chairman of the Commission, was given the basis on which the transfer to China of [Page 878] the matériel earmarked for the 8⅓ Program could be made. In brief, the terms offered were as follows:
- (1)
- The commitments under the Program will be met up to the limits of availability from surpluses in the Pacific and the Zone of Interior;
- (2)
- OFLC’s field representative at Manila has been given complete authority to negotiate a contract for the sale of Pacific source items and transfer of stocks made available from the Zone of Interior would be handled by Colonel Kingman, Field Commissioner for Military Programs in Washington;
- (3)
- Under no circumstances can the transfer be made a part of the Bulk Sale Agreement of August 30, 1946;
- (4)
- No item-by-item check will be considered;
- (5)
- Any contract must be on a cash basis although we are prepared to offer liberal terms;
- (6)
- Combat materiel, such as fighter aircraft and lethal weapons, are specifically excluded although spare parts for matériel already transferred may be included; and
- (7)
- On the basis of present estimates there are available for this Program some $5,000,000 (procurement cost) of matériel in the Pacific and $16,000,000 in the Zone of Interior.
With regard to sub-paragraph (5) above, although Dr. Wang was not so informed, OFLC is prepared to offer open-end contracts on about the following terms: 20–25% on spare parts and 30% on common user items with over-all 10% discount if considered desirable in order to offset shortages and deterioration.
Dr. Wang said that it was his Government’s hope that China might be given concessions beyond those outlined by OFLC and that the transfer might be considered to have been included in the Bulk Sale Agreement, or, failing that, China could arrange for a generous credit. He was informed by OFLC that the Program had been given very thorough consideration and that the terms and conditions offered were considered both fair and liberal. In reply to a further inquiry, Dr. Wang was informed that, if it developed that the Chinese Government had insufficient funds to purchase the entire amount, consideration might be given to the transfer of only a portion of the items to be set aside, but on a category—rather than on an item—basis.
After the meeting Dr. Wang told Mr. Ringwalt privately that Ambassador Koo had received instructions from the Generalissimo to urge that the materiel held for the 8⅓ Program be considered to have been transferred under the Bulk Sale Agreement and that the Ambassador would doubtless wish to take up the matter with the Secretary in the near future.
On July 22 Mr. Ringwalt discussed this question with General McConnell who very emphatically expressed the opinion that the [Page 879] 8⅓ Program should be kept entirely separate from the Bulk Sale Agreement because (1) if it were included there would be likelihood that items earmarked for the Chinese Air Force would become dissipated in the black market, and (2) we have consistently held that the Bulk Sale Agreement contained only civilian end-use items. OFLC strongly concurs in these views.
It is recommended that if the Chinese Ambassador raises the issue he be informed that the 8⅓ Program can not be considered to have been included in the Bulk Sale Agreement.
- Memorandum not attached to file copy.↩