893.24/10–1547
The Secretary of the Army (Royall) to the Secretary of State
Dear Mr. Secretary: Reference is made to your letter of 28 July 1947 in which you discuss the matter of Chinese procurement of ammunition [Page 897] from United States industry. In this regard, the Department of the Army has been approached by an American manufacturer on the question of urgent Chinese requirements of .50 caliber ammunition.
The Chinese requirements on this manufacturer amount to 2,000,000 rounds of assorted .50 caliber ammunition, with an estimated value of $700,000. The manufacturer has pointed out that owing to the dismantling of production lines as a result of termination of war orders, considerable time will be required to fill the Chinese orders. The Chinese are anxious for the earliest possible delivery. The manufacturer has suggested the possibility of securing from the Department of the Army the quantities required with a view to subsequent replacement.
Investigation reveals that as much as an estimated ten times the quantity involved exists in Army stocks of a classification that could be considered obsolescent or surplus. Existing legislation, specifically Public Law 703,73 could be applied to such an exchange with a value of the exchange to be subject to later contractual negotiations. However, certain types of munitions, .50 caliber ammunition as an example, cannot be produced in private United States industry without utilizing capital equipment, drawings and specifications owned by the United States. In this regard, appropriate leasing arrangements would have to be consummated.
Such arrangements would, of themselves, prove advantageous to the Army in two respects. First, they would provide a means of replacing five-year-old ammunition with the latest types; secondly, it would be advantageous from a procurement standpoint to provide the manufacturer with essential knowledge and experience in the production of standard types of ammunition. These advantages are, of course, proportional to the size of the orders under consideration.
Moreover, as a general observation, it may be stated that it is to the decided advantage of the Army to insure production of standard military types of ammunition by United States industry. Otherwise, United States industry could become engaged in the production of non-standard and foreign types which might be considered as diminishing the military potential of the United States.
Before exploring the problem further along the lines suggested above, it is felt desirable, in light of your letter of 28 July, to ascertain the attitude of the State Department in this matter of involving the United States Government in the proposed arrangements.
Sincerely yours,
- Approved July 2, 1940; 54 Stat. 712.↩