Foreign Relations of the United States, 1947, Eastern Europe; The Soviet Union, Volume IV

861.24/10–247

The Director of the Office of Financial and Development Policy (Ness) to the Director of the Bureau of Federal Supply, Treasury Department (Mack)

Washington, October 15, 1947.

My Dear Mr. Mack: In your letter of October 2, 1947¹ to Mr. Hale T. Shenefield, Acting Chief, Division of Lend-Lease and Surplus War Property Affairs, you have requested an explicit statement to resolve any possible ambiguity in connection with the declaration as surplus of Union of Soviet Socialist Republics lend-lease articles title to which, pursuant to the terms of the October 15, 1945 “pipeline” Agreement, had been deemed transferred to the Government of the Union of Soviet Socialist Republics prior to December 31, 1946.²

My letter to you of August 20, 1947³ authorized disposal, as surplus, of all Union of Soviet Socialist Republics lend-lease materials covered by the US–USSR Agreement of October 15, 1945 and remaining either in storage or in production under existing contracts. The term “all material in storage” as used in that letter included all materials custody of which had not yet been transferred to the Government of the Union of Soviet Socialist Republics. It is the opinion of this office that the Third Deficiency Appropriation Act, 1946, as subsequently interpreted by the Congress in conjunction with the enactment of the Supplemental Appropriation Act, 1948 in July 1947, clearly prevents further lend-lease shipments of any kind to the Union of Soviet Socialist Republics in as much as any further deliveries of lend-lease articles to Soviet custody would be in the nature of “shipments” and would be contrary to the intent of Congress.⁴ The fact that certain lend-lease articles were “deemed to be transferred to the Government of the Union of Soviet Socialist Republics” on or before December 31, 1946 under Schedule II, paragraph B of the Agreement of October 15, 1945 does not give them the status of having been “shipped” prior to December 31, 1946. The purpose of Schedule II, paragraph B of the Agreement of October 15, 1945 with respect to articles “deemed to be transferred” was to impose upon the Soviet Government complete financial responsibility for articles which remained available for delivery and shipment for three months or more after notice of availability. Under circumstances where there is no expectation of physical delivery of such articles to the Soviet Government, the provisions of this paragraph would cease to have effect. Since articles referred to in your letter of October 2, 1947 are not to be shipped, they would no longer, in the opinion of this office, be subject to the provisions of Schedule II, paragraph B of this Agreement.

Sincerely yours,

Norman T. Ness

1. Not printed.
2. The articles specifically inquired about in this letter were “3,643.8 net tons of equipment, title to which, pursuant to the terms of the October 15, 1945 pipe-line agreement, had been deemed transferred to the U.S.S.R. prior to December 31, 1946. This includes 2,527.7 net tons of miscellaneous equipment and 1,116.1 net tons of oil refinery equipment.” (861.24/10–247)
3. Not printed.
4. The Supplemental Appropriation Act, 1948, contained a provision of $500,000 for liquidation expenses of activities connected with the lend-lease program by the Treasury Department in the fiscal year 1948, including the completion of pipeline deliveries for ten countries. In the Twenty-Fourth Report to Congress on Lend-Lease Operations it is stated: “The omission of the Soviet Union from this list means that the pipe line material in storage and on order for delivery to the U. S. S. R. under the agreement of October 15, 1945, cannot be transferred. As a result the material will be disposed of under the Surplus Property Act, and, subject to applicable laws, will be available to any purchaser and for any other programs of the United States Government.”