13 Department of Trade and Customs to Mr L. R. Macgregor, Government Trade Commissioner in North America

Cablegram 2196 CANBERRA, 23 July 1941

Clapp's [1] telegram 2597 of 19th July.

We cannot understand United States request that Commonwealth

Government should retain title to all material procured through

Lease Lend. Goods to be obtained for non-government use may be

classified into:

(a) durable equipment for industry,

(b) materials raw or partially manufactured for further

manufacture in Australia,

(c) commodities ready for final consumption.

It would be possible, though inconvenient, for the Government to

retain the title to goods falling in the first class. In this case

the equipment would have to be hired to the users. A charge of

some sort would clearly be essential if user was not to be given

unfair advantage over competitors. Moreover in case of supply of

parts, e.g., locomotive equipment, cost of incorporation may

exceed cost of equipment and in any case Railway Department would

probably refuse to accept such goods on basis of title remaining

with Commonwealth. Although system of hiring equipment would be

possible it would be administratively difficult and we would much

prefer to have the right to sell the equipment outright to the

user devoting the proceeds to war purposes as outlined in my cable

to Dominions Office of which you have Copy. [2]

Materials for further manufacture in Australia would be for:

(a) contractors producing for Government and

(b) manufacturers producing for sale to public.

It would be possible to retain the title to materials issued to

contractors. These materials could be issued without charge,

contract prices being made up excluding the cost of materials so

issued. We are certain, however, that this method is wasteful and

likely to lead to fraud. In our view proper control and economy

can be obtained only by charging contractors for materials issued

and debiting the cost against the final amount due to them. If

finished goods were subsequently forwarded to Middle East, India

or Singapore fronts it might be impossible or impracticable for

Commonwealth to retain title, e.g., cotton drill made into

uniforms.

It appears to us to be impracticable to retain the title to

materials being manufactured for consumption by the public. If

they were issued free of charge to manufacturers it would lead to

differential prices for similar commodities to consumers which

would be impossible to police. In case of durable goods title

could perhaps be retained on basis of annual rental charge. We

would strongly prefer to avoid this as Lease Lend Clearing House

would probably develop into Hire Purchase Collecting Office.

The foregoing difficulties apply equally to goods for final

consumption. Generally speaking we feel that both these classes

must be sold to commercial users at approximately commercial

prices if the administrative problem is to be kept within bounds.

We took previous requests that distribution should not be on a

profit basis to mean that where agents were employed to distribute

goods to commercial users such agents were to be remunerated on a

payment for services basis. We understood that United Kingdom

proposed to seek U.S. approval for the sale of goods (other than

those for direct use by the Government) acquired under Lease Lend

by the Government to the commercial users whether for manufacture

or for sale to the public on the ordinary commercial basis. (See

D.O. cables 334 [3] para. 7C and 445 [4] para. 3D.) We have made

our plans accordingly. This view is confirmed in cable received

yesterday from Bruce [5] which he despatched after consultation

with United Kingdom Treasury officials.

We are anxious to meet United States requirements in every way

possible but suggest that you consult with United Kingdom

representatives on this question. In view of United Kingdom

obtaining foodstuffs and other consumption goods under Lease Lend

we cannot see how they can administer their distribution on the

basis of the Government retaining title to all materials obtained

under Lease Lend.

Please advise us of United Kingdom views and urge upon them

strongly the necessity for seeking U.S.A. approval for

distribution on a more practicable basis.

Your telegram raises questions:

(a) whether there are any other British Supply Council

instructions of which we should know,

(b) whether it is agreed that these instructions should apply to

the Dominions,

(c) whether the instructions are drawn up primarily to meet

conditions obtaining in the United Kingdom.

Would appreciate earliest possible replies to this and my telegram

of 22nd as plans for Clearing House are vitally affected. [6]

1 Australian representative on the British Purchasing Commission

in the United States. The cablegram is on file AA : A59/2/1, i.

2 See Document 11, note 1.

3 Documents on Australian Foreign Policy 1937-49, vol. IV,

Document 449.

4 Dispatched 29 June. On the file cited in note 1.

5 High Commissioner in the United Kingdom. See AA : A3195, 1941,

1.13006.

6 See cablegram Ausco 1 of 26 July on file AA : A3300, 103

[AA : A3196, 1941, 0.10346]