Fifth Report to Congress on Lend-Lease Operations

[Fifth Report to Congress on Lend-Lease Operations]
[From the U.S. Government Publishing Office, www.gpo.gov]

FIFTH REPORT TO CONGRESS ON LEND-LEASE OPERATIONS

For the Period Ended June 11, 1942

FIFTH REPORT TO CONGRESS ON LEND-LEASE OPERATIONS

For the Period Ended June 11, 1942

“The President from time to time, but not less frequently than once every ninety days, shall transmit to the Congress a report of operations under this Act except such information as he deems incompatible with the public interest to disclose.”
[From Section 5, subsection b of ‘‘An Act to Promote the Defense of the United States” (Public Law No. 11, 77th Congress, 1st Session).]

CONTENTS

Chapter Page
President’s Letter of Transmittal............. 5
1. Lend-Lease Progress.......................... 7
2. Lend-Lease and the War...................... 12
3. Lend-Lease and the Peace.................... 21

Appendix I. Lend-Lease Act.............................. 24
IL Accounting for Lend-Lease Funds............. 28
III . Master Agreement with China................. 30

PRESIDENT'S LETTER OF TRANSMITTAL

To the Congress of the United States of America:

This is the fifth ninety-day report to the Congress on operations under the Lend-Lease Act.
For the three months ending May 31, 1942, lend-lease aid amounted to more than $1,900,000,000. For the fifteen-month period from March 1941 through May 1942, aid totalled $4,497,000,000 in goods and services. We are now making aid available at a monthly rate equivalent to $8,000,000,000 per year.
Dollar figures do not portray all that is happening. The Congress has wisely set few limits to the types of aid which may be and are being provided. Food—over 5,000,000,000 pounds—and medicine have helped to sustain the British and Russian and Chinese peoples in their gallant will to fight. Metals, machine tools and other essentials have aided them to maintain and step up their production of munitions. The bombardment planes and the tanks which were ordered for them last spring and summer are now putting their mark on the enemy. The British pilots trained in this country havebegun their work at Cologne and Essen.
And lend-lease is no longer one way. Those who have been receiving lend-lease aid in their hour of greatest need have taken the initiative in reciprocating. To the full extent of their ability, they are supplying us, on the same lend-lease basis, with many things we need now. American troops on Australian and British soil are being fed and housed and equipped in part out of Australian and British supplies and weapons. Our allies have sent us special machine tools and equipment for our munitions factories. British anti-aircraft guns help us to defend our vital bases, and British-developed detection devices assist us to spot enemy aircraft. We are sharing the blueprints and battle experience of the United Nations.

These things, invaluable as they have proven, are not the major benefit we will receive for our lend-lease aid. That benefit will be the defeat of the Axis. But the assistance we have been given by our partners in the common struggle is heartening evidence of the way in which the other United Nations are pooling their resources with our own. Each United Nation is contributing to the ultimate victory not merely its dollars, pounds or rubles, but the full measure of its men, its weapons, and its productive capacity.
Our reservoir of resources is now approaching flood stage. The next step is for our military, industrial, and shipping experts to direct its full force against the centers of enemy power. Great Britain and the United States have together set up expert combined bodies to do the job, in close cooperation with Russia, China and the other United Nations. They are equipping the United Nations to fight this worldwide war on a world-wide basis. They are taking combined action to carry our men and weapons—on anything that will float or fly—to the places from which we can launch our offensives.
By combined action now, we can preserve freedom and restore peace to our peoples. By combined action later, we can fulfill the victory we have joined to attain. The concept of the United Nations will not perish on the battlefields of this terrible war. It will live to lay the basis of the enduring world understanding on which mankind depends to preserve its peace and its freedom.

Franklin D. Roosevelt.

The White House, June 11,1942.

Chapter 1

LEND-LEASE PROGRESS
The lend-lease program was inaugurated on March 11, 1941 as our peacetime contribution to nations aiding our defense by resisting Axis aggression. Now that we are at war, lend-lease continues as an instrument by which we strengthen our allies according to the strategic plans of the United Nations as a whole. The assistance we have rendered to date represents 12 percent of our entire war program.

Amount of Lend-Lease Aid
Lend-lease aid for the 15-month period from March 1941 through May 1942, has totaled $4,497,000,000. The rapidly rising trend in the amount of this aid is indicated by the chart, which shows the amount of aid provided during each month since lend-lease began. Currently, aid is being provided at a rate equal to approximately $8,000,000,000 per year.

ACCELERATION IN LEND-LEASE AID
[Millions of Dollars]

Quarter Ended
May 31, Aug. 31, Nov. 30, Feb. 28, May 31,
1941 1941 1941 1942 1942
Quarterly. . 118 369 715 1,368 1,927
Cumulative. 118 487 1,202 2,570 4,497

Table No. 1

TOTAL LEND-LEASE AID [Millions of Dollars]

Total Aid Aid During
Type of Aid to May 311 Quarter
1942 Ended May
31, 1942
GOODS:
Articles transferred.................... 2 601 1,210
Articles awaiting transfer or use.......... 231 136
Articles in process of manufacture........ 841 320
Total Goods....................... 3,673 1,666
SERVICES:
Servicing and repair of ships, etc., in U. S. . 157 31
Production facilities in U. S............. 283 114
Rental of ships, ferrying of aircraft, etc. . . . 371 107
Facilities for supply bases abroad, etc. .. . 13 9
Total Services..................... . 824 261
Total Aid. . 4,497 1,927

Table No. 2

Lend-lease aid has two main divisions—the value of goods, actually shipped, awaiting shipment or in process of manufacture, and the value of various services of production and supply. Goods include military items, such as planes, tanks, guns and ammunition, as well as food, medical supplies, machine tools, metals and other materials. Services include the shipping necessary to carry goods to lend-lease countries, the servicing and repair of warships and merchant ships of the United Nations, new factory and shipyard facilities in the United States for production of lend-lease goods, and facilities for supply bases abroad.
A breakdown of the total of $4,497,000,000 of lend-lease aid is given in Table No. 2. About 82 percent of aid is represented by goods and 18 percent by services.

While lend-lease aid has continued to increase each quarter, the proportion of fighting weapons included in the materials transferred to our allies has also increased. Whereas last fall munitions comprised a relatively small part of total transfers and the major portion consisted of foodstuffs and industrial materials, during recent months military items have constituted more than half of total transfers. (See chart.)

The proportion of our total production of guns, planes, ships and industrial materials that goes to lend-lease countries and the proportion that is furnished to our own armed forces and industries is determined by the expert military and civilian bodies in charge of our entire war program, not by the agencies charged with the immediate supervision of the lend-lease program. Every decision is aimed at putting our resources to their most effective use in fighting our common enemies.

Exports of Lend-Lease Goods
Articles transferred are those which have been delivered in this country to lend-lease nations, either at points of production or at points of export. Articles transferred up to May 31, 1942 amounted to $2,601 million, as shown in Table No. 2. Of this amount $2,138 million has been exported. The difference between the value of articles transferred and the value of those which have actually left the United States is due to the necessity of maintaining adequate inventories of finished articles at points of export, the fact that transfers of ships are not included in the exports figure, and other factors.
Lend-lease exports have accounted for a steadily increasing part of all exports from this country, excluding “exports” shipped to our own forces fighting abroad. From March 1941 through May 1942 the value of lend-lease exports amounted to 29 percent of the value of all exports. In May 1942 lend-lease exports were approximately 54 percent of total exports.
In the beginning, lend-lease exports went primarily to the United Kingdom to help in the battle of Britain. As the theaters of war in Africa, the Middle East, India, and Australia became critical lend-lease aid was sent to the support of our allies fighting in those areas. With the signing of the Russian protocol last October, arms and supplies began to flow to Russia in large quantities. Transportation difficulties, climaxed by the closing of the Burma Road, have been the factor limiting the volume of aid to China, but new ways of getting help to China in substantial amounts are being developed.

Lend-Lease Countries
As the war has spread over the world and aid to more and more countries has become essential to our own national safety, the President has added to the list of lend-lease nations now eligible for lend-lease assistance. The roll now includes the members of the British Commonwealth of Nations and 35 other countries :

Argentina Egypt Nicaragua
Belgium El Salvador Norway
Bolivia France (Free) Panama
Brazil Greece Paraguay
Chile Guatemala Peru
China Haiti Poland
Colombia Honduras Turkey
Costa Rica Iceland U. S. S. R.
Cuba Iran Uruguay
Czechoslovakia Iraq Venezuela
Dominican Republic Mexico Yugoslavia
Ecuador Netherlands

British Commonwealth of Nations

Chapter 2

LEND-LEASE AND THE WAR

In the three months since the last report, the lend-lease program has been further adapted to the needs of war. The administrative machinery for fulfilling the Act of March 11, 1941, has evolved in response to the pressures and shortages of our wartime economy. That machinery now serves the United Nations in the developing processes by which they are unifying their strategy and pooling their resources.
One of the major contributions of the lend-lease program has been the resulting expansion of American munitions capacity to meet the needs of our allies and ourselves. The first lend-lease orders, together with the earlier munitions contracts of the British, French, and Netherlands governments, helped to erect the factory‘facilities that have become the backbone of our armament program. Today the battle of production is on the way to being won. The pressing immediate problem is to distribute our weapons where the need is greatest, and to get them there in sufficient quantities in the shortest time. The battle of distribution is in its critical phase.
In this battle, lend-lease is the principal means through which those charged with strategic direction of the war allot American supplies to our allies. And it is becoming an element of increasing importance in the process by which our allies supply us with reciprocal aid.

Lend-Lease and the United Nations
On January 1, 1942, the United States, Great Britain, Russia, China, and 22 other nations* united in a declaration that “they are now engaged in a common struggle

* Mexico has now become the twenty-seventh government to announce its adherence to the Declaration.

against savage and brutal forces seeking to subjugate the world.” They resolved that “complete victory over their enemies is essential to defend life, liberty, independence, and religious freedom, and to preserve human rights and justice in their own lands as well as in other lands.” They subscribed unanimously to the principles and purposes set forth in the Atlantic Charter. They pledged themselves to employ their full military and economic resources in the war, and not to make a separate peace.
The United Nations have thus declared that they are more than a temporary military combination, and that they will wage the war together for a common victory and a common program of peace aims.
To fight a common war which extends around the world, the United Nations need a common plan for the most effective possible use of their resources in men and materials and machines. All the battlefronts are linked together. The United Nations are concentrating their weapons on those battlefronts where pressure is heaviest and where military success is of the greatest strategic importance. They are moving in a coordinated way toward organizing offensives backed by their combined resources.
Our lend-lease program is one means, and a simple one, by which the common economic effort pledged in the Declaration by United Nations may be secured. The lend-lease principle, as it develops, is removing the possibility that considerations of finance can interfere with the full use of material resources. The transfers made under the Lend-Lease Act are not commercial loans to other nations. They are contributions of material to a common pool with which a common war is being waged. In return, other United Nations are contributing their utmost to the common fight—in men, materials and machines—and are furnishing us with the weapons and supplies which we, rather than they, can most effectively use.
Considerations of transportation, supply, and strategy must determine the countries from which war materials are to be drawn and where they are to be sent. Some nations

are able to contribute vast quantities of finished munitions; some only the materials from which those munitions are to be made. Some are able to give industrial and military information which will expedite the war production of all the United Nations. These contributions, varying greatly both in character and amount, find their uses in various parts of the world, as common plans for victory dictate.
It is for this reason that American, Canadian, and British tanks are found in North Africa, and American planes, based in England, fly regularly over Germany, that British and American planes fight in Russia and English antiaircraft guns defend our bases. This is why the United States sends food to Great Britain while American troops on British and Australian soil are being maintained and equipped in part with British and Australian materials and weapons; and why the patents, secret processes, production know-how, and battle experience of each United Nation are available to the armies and industries of its allies.

Control by United Nations Cooperation
Long strides have been made toward achieving the unified direction necessary to put the combined resources of the United Nations to most effective use. Combined agencies have been established by joint action of the United States and Great Britain to coordinate strategy and to map the production and distribution of munitions and raw materials. The members of these combined boards have been instructed to “confer with representatives of the Union of Soviet Socialist Republics, China, and such other of the United Nations as are necessary to attain common purposes and provide for the most effective utilization of the joint resources of the United Nations.’’*
To date, the combined boards which have been created include the Combined Chiefs of Staff, the Munitions Assignments Board, the Combined Raw Materials Board, the Combined Shipping Adjustment Board, the Combined Production

*The quotation is from the joint announcement issued January 26, 1942, when the combined boards for munitions, raw materials and shipping were established.

and Resources Board, and the Combined Food Board. These expert bodies are welding the American and British war efforts together. As part of their job, they exercise control over all lend-lease transfers. They plan for the production of materials to fill lend-lease needs, determine the quantities of finished and raw materials available for immediate lend-lease transfer, fix their destination, and provide the necessary shipping. By shaping their plans to fit the needs of all United Nations, they are helping us to fight a world-wide war on a worldwide basis.

Combined Chiefs of Staff
The Combined Chiefs of Staff is composed of the ranking staff officers of the various branches of the American and British armed forces. It meets in Washington to formulate the broad strategic plans to which the actions of the other combined agencies are adjusted. Production requirements, raw material allocations, munitions assignments, and ship routings are all related to its decisions.

Munitions Assignments Board
With Russia and China locked in decisive struggles on their own soil, the principal United Nations in a position to export munitions are Great Britain and the United States. To solve the technical and practical problems involved in distributing British and American munitions among all the United Nations, the Munitions Assignments Board was created on January 26, 1942. It has two coordinate branches, sitting in London and Washington, under the Combined Chiefs of Staff. Each branch is staffed by officers of the British and American armed forces, -under the direction of a civilian chairman.
The Board operates upon the principle that the entire munition resources of Great Britain and the United States are considered as a common pool. As munitions are produced and ready for distribution in each country, the branch of the Board sitting in that country advises on their assignment to Great Britain, the United States, or one of the other United Nations in accordance with strategic needs. The American branch of the Board now assigns almost all munitions manu

factured in this country and presently ready for distribution. Regardless of whether a given weapon was originally ordered for our own Army or Navy, for cash sale to another nation, or for transfer under lend-lease authority, its assignment is examined anew to meet the most urgent need existing at the time it rolls off the production lines.* As part of this same pooling policy, most of the munitions now being ordered are usually not earmarked in advance for particular forces. To facilitate final assignment, efforts have been made to integrate the requirements and specifications of other nations with our own, so that, where feasible, standard types of each weapon can be manufactured.-
Assignments of finished munitions raise many complex strategic and technical problems. The needs of the forces of the nation producing the munitions must be appraised in terms of the uses to which those forces will be put, and weighed against the competing needs presented by the forces of other United Nations. After the basic decisions on such questions have been made in accordance with broad principles determined by the Combined Chiefs of Staff, they must be implemented by specific assignments of innumerable types of equipment. To handle this vast body of work, various groups of technical subcommittees have been organized. Thus, the branch of the Board in the United States has a special aircraft assignment committee under which there are subcommittees for aircraft, for aircraft ammunition and bombs, and for aviation petroleum products. Similar committees and subcommittees advise on assignments of land and naval items.
Except for a substantial number of British and other dollar contracts on which deliveries are still being made with the approval of the Munitions Assignments Board, American munitions allocated to other nations are usually transferred under lend-lease authority. The actual assignments, however, are not made by the Office of Lend-Lease Administration, but by the military experts on the Munitions Assignments Board. A copy of each request for American munitions is sub

* Assignments to nations other than the United States are made within the limits of the authority granted by the Congress in the appropriation acts summarized in Appendix II *

mitted to the Lend-Lease Administration, which in appropriate cases will assist the applicant country to present its case to the Board. The Lend-Lease Administration also acts as the central recording agency for all lend-lease munitions transfers.

Combined Raw Materials Board
The common war pool of the United Nations goes far beyond munitions. It also includes the raw materials from which munitions are made. Scarcities in many of these materials have been caused by military reverses which have shut off or curtailed sources of supply, by shortages of shipping space, and by the rapidly expanding requirements of war production.
To manufacture munitions, the United States must import many raw materials; Great Britain, nearly all of hers. To a considerable extent, they have competing needs which must be filled from the same sources of supply. The entire war effort of the United Nations depends on the most efficient possible distribution, use, and expansion of these available raw material resources.
On January 26, 1942, the Combined Raw Materials Board was set up to achieve these results. It consists of an American member, representing the Chairman of the War Production Board, and a British member, representing the British Minister of Production. The Board allocates strategic raw materials controlled by the United States and Great Britain among the United Nations and collaborates with other countries to secure the maximum development and utilization of their raw material resources.
Complete allocations have been made on a world basis for such materials as tin, rubber, and manila fiber, of which the principal sources of supply were cut off by the war. Similar action has been taken on certain ferro-alloys, copper and other materials which have not been cut off, but which are in short supply because war requirements have outstripped available production. In addition, the Combined Board makes temporary allocations from time to time to meet urgent special needs, as, for example, tin plate for Great Britain, aluminum for the United States, and rubber for Russia.

Through the allocations made by the Board, the United States receives strategic materials under British control and provides Britain with materials under American control, while other United Nations share in the total supply on the basis of relative need in terms of the common war effort. Normal considerations of international commerce, finance, and foreign exchange are not permitted to interfere with fundamental war needs. In appropriate cases where dollars have been needed to purchase materials for the use of another United Nation, and are unavailable to it, lend-lease has been used to obtain the supplies to further the prosecution of the war.
The Combined Raw Materials Board performs other important functions. It has acted to increase the supply of strategic raw materials by recommending specific production projects in many parts of the world. It has promoted conservation of materials by changes in specifications, substitutions, and other means. Where present buying methods have been found to impede effective distribution, the Board has recommended changes. In collaboration with the Combined Shipping Adjustment Board and other agencies, it has also acted to secure more effective use of shipping and rail transport in order to speed the flow of materials and to bring strategic supplies out of war-threatened areas to safe destinations under emergency conditions.
Combined Shipping Adjustment Board
The Combined Shipping Adjustment Board was created on January 26, 1942, in recognition of the principle that the shipping resources of the United States and Great Britain are a common pool, to be operated for the benefit of all the United Nations.
The Ministry of War Transport directly controls the movement of British shipping, while American vessels operate under orders from our War Shipping Administration. Norway, the Netherlands, and many other United Nations have contributed their many ships and sailors to the service of the common cause, for charter operation under Ministry of Transport or War Shipping Administration direction.

The Combined Shipping Adjustment Board integrates the work of these two agencies and the portions of the pool under their respective control. The Board has coordinate branches in London and Washington, each composed of a representative of the War Shipping Administration and a representative of the Ministry of War Transport.
The struggle to move materials in sufficient quantities to the places where they are most needed has assumed paramount importance: The job of the Combined Board is to see that the shipping of the United Nations is utilized in the most effective manner, by eliminating overlapping and unnecessary duplication of services, and by exploring the possibilities of joint economies in the use of the two portions of the pool.
With available cargoes in excess of available ships, loading and routing have become matters of strategic selection among conflicting needs. The ships which carry lend-lease goods are assigned by the Combined Board through the Ministry of War Transport and the War Shipping Administration after appraisal of all competing needs. When American-controlled shipping is assigned to carry lend-lease cargoes, lend-lease funds are used to finance their operation, in order to prevent dollar exchange problems from impeding vital movements to the battle areas. Additional sums have been provided to service and supply the vessels of other United Nations which carry materials to and from our shores.

Combined Production and Resources Board
One of the most recent additions to the machinery being developed for coordination of the United Nations war effort is the Combined Production and Resources Board, which was established on June 9, 1942, by the United States and Great Britain.
The Combined Production and Resources Board consists of the Chairman of the War Production Board and the British Minister of Production. The Board is charged with responsibility for combining the war production programs of the United States and Great Britain in a single, integrated program which will meet the military requirements and essential civilian needs of the United Nations as a whole.

The Board will work in close collaboration with the Combined Chiefs of Staff and the Munitions Assignments Board in order to assure continuous adjustment of the combined production program to munitions requirements. It will keep the Combined Chiefs and Munitions Assignments Board currently informed of all relevant factors and potentialities of war production, and they will keep the Board informed of changing military needs.
Planning for utilization of the combined resources of the two countries in such a way as to reduce demands on shipping space will be one of the Board’s prime objectives.

Combined Food Board
On the same day the Combined Production and Resources Board was established, the United States and Great Britain created a Combined Food Board “to obtain a planned and expeditious utilization of the food resources of the United Nations.”
The Board will sit in Washington and be composed of the Secretary of Agriculture and the head of the British Food Mission. It will consider common problems concerning the supply, production, transportation, disposal, allocation or disposition of food and food-producing equipment throughout the world.

These are the principal agencies so far developed to carry out the principles of combined effort set forth in the Declaration by United Nations, and to govern the distribution of lend-lease aid. Additional agencies will be established to function in other fields when necessary.

Chapter 3

LEND-LEASE AND THE PEACE

The lend-lease program has already become a prime mechanism in the combined efforts the United Nations are making to win the war. The program of lend-lease agreements is also emerging as a factor in the combined effort of the United Nations to weave a pattern for peace. Those agreements are taking shape as key instruments of national policy, the first of our concrete steps in the direction of affirmative post-war reconstruction.
The agreement with Great Britain was signed on February 23, 1942. On June 2, 1942, an agreement was made with the Republic of China embodying the same terms (see Appendix III). On June 11,1942, a similiar agreement was signed with the Union of Soviet Socialist Republics. The provisions of these agreements are now being offered to our other allies receiving lend-lease assistance.
These basic lend-lease agreements place the problem of the peacetime settlement in a realistic and appropriate setting. The agreements postpone final determination of the lend-lease account until “the extent of the defense aid is known and until the progress of events makes clearer the final terms and conditions and benefits which will be in the mutual interests’* of the signatory nations, and which “will promote the establishment and maintenante of world peace.’’ Final settlement has been postponed since the course of the war may further change the complexion of the issue.
We are now in the war, as we were not in March 1941 when the Lend-Lease Act was passed. We have pledged our resources without limit to win the war, and the peace which will follow it. We look forward to a period of security and liberty, in which men may freely pursue lives of their choice, and governments will achieve policies leading to full and

useful production and employment. If the promise of the peace is to be fulfilled, a large volume of production and trade among nations must be restored and sustained. This trade must be solidly founded on stable exchange relationships and liberal principles of commerce. The lend-lease settlement will rest on a specific and detailed program for achieving these ends, which are, as Article VII of the agreements with Great Britain, China and Russia point out, “the material foundations of the liberty and welfare of all peoples. ’ ’
Cooperative action among the United Nations is contemplated to fulfill this program for economic progress, in the many spheres where action is needed. It is hoped that plans will soon develop for a series of agreements and recommendations for legislation, in the fields of commercial policy, of money and finance, international investment and reconstruction.
Article VII of each of the basic agreements pledges that “the terms and conditions” of the final determination of the benefits to be provided the United States in return for aid furnished under the Act “shall be such as not to burden commerce between the two countries, but to promote mutually advantageous economic relations between them and the betterment of world-wide economic relations.” By this provision we have affirmatively declared our intention to avoid the political and economic mistakes of international debt experience during the twenties.
A lend-lease settlement which fulfills this principle will be sound from the economic point of view. But it will have a greater merit. It will represent the only fair way to distribute the financial costs of war among the United Nations.
The real costs of the war cannot be measured, nor compared, nor paid for in money. They must and are being met in blood and toil. But the financial costs of the war can and should be met in a way which will serve the needs of lasting pea*ce and mutual economic well-being.
All the United Nations are seeking maximum conversion to war production, in the light of their special resources. If each country devotes roughly the same fraction of its national

production to the war, then the financial burden of war is distributed equally among the United Nations in accordance with their ability to pay. And although the nations richest in resources are able to make larger contributions, the claim of war against each is relatively the same. Such a distribution of the financial costs of war means that no nation will grow rich from the war effort of its allies. The money costs of the war will fall according to the rule of equality in sacrifice, as in effort.

APPENDICES

Appendix I

LEND-LEASE ACT

Further to promote the defense of the United States, and for other purposes.
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled. That this Act may be cited as “An Act to Promote the Defense of the United States.”

Section 2.
As used in this Act—
(a) The term “defense article” means—
(1) Any weapon, munition, aircraft, vessel, or boat;
(2) Any machinery, facility, tool, material, or supply necessary for the manufacture, production, processing, repair, servicing, or operation of any article described in this subsection;
(3) Any component material or part of or equipment for any articlr described in this subsection;
(4) Any agricultural, industrial or other commodity or article for defense.
Such term “defense article” includes any article described in this subsectione Manufactured or procured pursuant to section 3, or to which the United States or any foreign government has or hereafter acquires title, possession, or control.
(b) The term “defense information” means any plan, specification, design, prototype, or information pertaining to any defense article.

Section 3.
(a) Notwithstanding the provisions of any other law, the President may, from time to time, when he deems it in the interest of national defense, authorize the Secretary of War, the Secretary of the Navy, or the head of any other department or agency of the Government—
(1) To manufacture in arsenals, factories, and shipyards under their jurisdiction, or otherwise procure, to the extent to which funds are made available therefor, or contracts are authorized from time to time by the Congress, or both, any defense article for the government of any country whose defense the President deems vital to the defense of the United States.

(2) To sell, transfer title to, exchange, lease, lend, or otherwise dispose of, to any such government any defense article, but no defense article not manufactured or procured under paragraph (1) shall in any way be disposed of under this paragraph, except after consultation with the Chief of Staff of the Army or the Chief of Naval Operations of the Navy, or both. The value of defense articles disposed of in any way under authority of this paragraph, and procured from funds heretofore appropriated, shall not exceed $1,300,000,000. The value of such defense articles shall be determined by the head of the department or agency concerned or such other department, agency or officer as shall be designated in the manner provided in the rules and regulations issued hereunder. Defense articles procured from funds hereafter appropriated to any department or agency of the Government, other than from funds authorized to be appropriated under this Act, shall not be disposed of in any way under authority of this paragraph except to the extent hereafter authorized by the Congress in the Acts appropriating such funds or otherwise.
(3) To test, inspect, prove, repair, outfit, recondition, or otherwise to place in good working order, to the extent to which funds are made available therefor, or contracts are authorized from time to time by the Congress, or both, any defense article for any such government, or to procure any or all such services by private contract.
(4) To communicate to any such government any defense information, pertaining to any defense article furnished to such government under paragraph (2) of this subsection.
(5) To release for export any defense article disposed of in any way under this subsection to any such government.
(b) The terms and conditions upon which any such foreign government receives any aid authorized under subsection (a) shall be those which the President deems satisfactory, and the benefit to the United States may be payment or repayment in kind or property, or any other direct or indirect benefit which the President deems satisfactory.
(c) After June 30,1943, or after the passage of a concurrent resolution by the two Houses before June 30, 1943, which declares that the powers conferred by or pursuant to subsection (a) are no longer necessary to promote the defense of the United States, neither the President nor the head of any department or agency shall exercise any of the powers conferred by or pursuant to subsection (a); except that until July 1,1946, any of such powers may be exercised to the extent necessary to carry out a contract or agreement with such a foreign government made before July 1, 1943, or before the passage of such concurrent resolution, whichever is the earlier.
(d) Nothing in this Act shall be construed to authorize or to permit the authorization of convoying vessels by naval vessels of the United States.
(e) Nothing in this Act shall be construed to authorize or to permit the authorization of the entry of any American vessel into a combat area in violation of section 3 of the Neutrality Act of 1939.

Section 4.

All contracts or agreements made foe** the disposition of any defense article or defense information pursuant to section 3 shall contain a clause by which the foreign government undertakes that it will not, without the consent of the President, transfer title to or possession of such defense article or defense information by gift, sale, or otherwise, or permit its use by anyone not an officer, employee, or agent of such foreign government.

Section 5.

(a) The Secretary of War, the Secretary of the Navy, or the head of any other department or agency of the Government involved shall, when any such defense article or defense information is exported, immediately inform the department or agency designated by the President to administer section 6 of the Act of July 2, 1940 (54 Stat. 714), of the quantities, character, value, terms of disposition, and destination of the article and information so exported.
(b) The President from time to time, but not less frequently than once every ninety days, shall transmit to the Congress a report of operations under this Act except such information as he deems incompatible with the public interest to disclose. Reports provided for under this subsection shall be transmitted to the Secretary of the Senate or the Clerk of the House of Representatives, as the case may be, if the Senate or the House of Representatives, as the case may be, is not in session.

Section 6.

(a) There is hereby authorized to be appropriated from time to time, out of any money in the Treasury not otherwise appropriated, such amounts as may be necessary to carry out the provisions and accomplish the purposes of this Act.
(b) All money and all property which is converted into money received under section 3 from any government shall, with the approval of the Director of the Budget, revert to the respective appropriation or appropriations out of which funds were expended with respect to the defense article or defense information for which such consideration is received, and shall be available for expenditure for the purpose for which such expended funds were appropriated by law, during the fiscal year in which such funds are received and the ensuing fiscal year; but in no event shall any funds so received be available for expenditure after June 30, 1946.

Section 7.

The Secretary of War, the Secretary of the Navy, and the head of the department or agency shall in all contracts or agreements for the disposition of any defense article or defense information fully protect the rights of all

citizens of the United States who have patent rights in and to any such article or information which is hereby authorized to be disposed of and the payments collected for royalties on such patents shall be paid to the owners and holders of such patents.

Section 8.
The Secretaries of War and of the Navy are hereby authorized to purchase or otherwise acquire arms, ammunition, and implements of war produced within the jurisdiction of any country to which section 3 is applicable, whenever the President deems such purchase or acquisition to be necessary in the.interests of the defense of the United States.

Section 9.
The President may, from time to time, promulgate such rules and regulations as may be necessary and proper to carry out any of the provisions of this Act; arid he may exercise any power or authority conferred on him by this Act through such department, agency, or officer as he shall direct.

Section 10.
Nothing in this Act shall be construed to change existing law relating to the use of the land and naval forces of the United States, except insofar as such use relates to the manufacture, procurement, and repair of defense articles, the communication of information and other noncombatant purposes enumerated in this Act.

Section 11.
If any provision of this Act or the application of such provision to any circumstance shall be held invalid, the validity of the remainder of the Act and the applicability of such provision to other circumstances shall not be affected thereby.
Approved, March 11, 1941.

Appendix 11

ACCOUNTING FOR LEND-LEASE FUNDS

In the early stages of the lend-lease program, emphasis was placed on the allocation and obligation of funds appropriated by the Congress, since it was essential for the moneys to be made available to the procuring agencies and to be put to work by them at the earliest possible date. This has progressed so far, however, that today the significant thing to know is not the amount of money that has been allocated or obligated, but the amount that has been converted into articles and services, and this has been shown in Chapter 1.
Lend-lease aid is now being provided from appropriations which have been made directly to the Army, Navy, and Maritime Commission, as well as from appropriations made directly to the President. It is not feasible to give a detailed accounting of the lend-lease portion of the funds appropriated to the Army, Navy, and Maritime Commission, since the lend-lease portion (see Lend-Lease Appropriations and Transfer Authorizations) is pooled with the funds appropriated to those agencies for our own war program. However, an accounting of the allocation, obligation and expenditure of funds appropriated to the President is given in the following table.

ALLOCATIONS, OBLIGATIONS, AND EXPENDITURES Lend-Lease Funds Appropriated to the President [Millions of Dollars]

Adjusted Cumulative to May 31, 1942
Appropriation Category Appro- Alloca- Obliga- Expendi-
priations tions tions tures
Ordnance and stores. . . . 2,026 2,003 1,484 394
Aircraft and material.. 2,877 2,839 2,526 690
Tanks and other vehicles. 1,100 996 780 348
Watercraft............ 2,417 . 1,918 1,364 475
Mise, military equipment. 468 461 300 73
Prod, facilities in U. S. • . 1,163 1,066 883 345
Agr. and indust, commod. 6,831 4,397 2,441 1,527
Servicing, repair of ships. 513 348 238 171
Services and expenses.. . 982 328 159 57
Administrative expenses. 20 10 6 6
Total. . 18,397 14,366 10,181 4,086

The amount of lend-lease aid that may be provided under the various acts is given below.
LEND-LEASE APPROPRIATIONS AND TRANSFER AUTHORIZATIONS
Appropriations to the President
First Lend-Lease Appropriation Act.............. $7,000,000,000
Second Lend-Lease Appropriation Act............... 5,985,000,000
Third Lend-Lease Appropriation (Fifth Supplemental)... 5,425,000,000

$18,410,000,000

Transfers Authorized from Other Appropriations
War Department—Third Supplemental............... $2,000,000,000
War Department—Fourth Supplemental............... 4,000,000,000
War Department—Fifth Supplemental............... 11,250,000,000
War Department—Sixth Supplemental................ 2,220,000,000
Navy Department—Naval Approp. Act (Ships)........ 3,900,000,000
Navy Department—Naval Approp. Act (Articles)..... 2,500,000,000
Navy Department—Sixth Supplemental.................. 18,000,000
Maritime Commission—First Supplemental........... 1,296,650,000
Maritime Commission—Fifth Suppl. (Approp. Funds). .. 1,500,000,000
Maritime Commission—Fifth Suppl. (Contr. Auth.).. 2,350,000,000
Other Departments—Third Supplemental............... 800,000,000

$31,834,650,000

Maximum Amount of Aid That Can Be Provided.............. $50,244,650,000

Appendix III

MASTER AGREEMENT WITH CHINA

Agreement between the United States of America and China on the Principles Applying to Mutual Aid in the Prosecution of the War Against Aggression.

Whereas the Governments of the United States of America and the Republic of China declare that they are engaged in a cooperative undertaking, together with every other nation or people of like mind, to the end of laying the bases of a just and enduring world peace securing order under law to themselves and all nations;
And whereas the Governments of the United States of America and the Republic of China, as signatories of the Declaration by United Nations of January 1, 1942, have subscribed to a common program of purposes and principles embodied in the Joint Declaration made on August 14, 1941 by the President of the United States of America and the Prime Minister of the United Kingdom of Great Britain and Northern Ireland, known as the Atlantic Charter;
And whereas the President of the United States of America has determined, pursuant to the Act of Congress of March 11, 1941, that the defense of the Republic of China against aggression is vital to the defense of the United States of America;
And whereas the United States of America has extended and is continuing to extend to the Republic of China aid in resisting aggression;
And whereas it is expedient that the final determination of the terms and conditions upon which the Government of the Republic of China receives such aid and of the benefits to be received by the United States of America in return therefor should be deferred until the extent of the defense aid is known and until the progress of events makes clearer the final terms and conditions and benefits which will be in the mutual interests of the United States of America and the Republic of China and will promote the establishment and maintenance of world peace;
And whereas the Governments of the United States of America and the Republic of China are mutually desirous of concluding now a preliminary agreement in regard to the provision of defense aid ana in regard to certain considerations which shall be taken into account in determining such terms and conditions and the making of such an agreement has been in all respects duly authorized, and all acts, conditions and formalities which it may have been necessary to perform, fulfil or execute prior to the making of such an agreement in conformity with the laws either of the United States of America or of the Republic of China have been performed, fulfilled or executed as required;
The undersigned, being duly authorized by their respective Governments for that purpose, have agreed as follows:

Article I
The Government of the United States of America will continue to supply the Government of the Republic of China with such defense articles, defense services, and defense information as the President of the United States of America shall authorize to be transferred or provided.

Article li
The Government of the Republic of China will continue to contribute to the defense of the United States of America and the strengthening thereof and will provide such articles, services, facilities or information as it may be in a position to supply.

Article III
The Government of the Republic of China will not without the consent of the President of the Unitea States of America transfer title to, or possession of, any defense article or defense information transferred to it under the Act of March 11, 1941 of the Congress of the United States of America or permit the use thereof by anyone not an officer, employee, or agent of the Government of the Republic of China.

Article IV
If, as a result of the transfer to the Government of the Republic of China of any defense article or defense information, it becomes necessary for that Government to take any action or make any payment in order fully to protect any of the rights of a citizen of the United States of America who has patent rights in and to any such defense article or information, the Government of the Republic of China will take such action or make such payment when requested to do so by the President of the United States or America.

Article V
The Government of the Republic of China will return to the United States of America at the end of the present emergency, as determined by the President of the United States of America, such defense articles transferred under this Agreement as shall not have been destroyed, lost or consumed and as shall be determined by the President to be useful in the defense of the United States of America or of the Western Hemisphere or to be otherwise of use to the United States of America.

Article VI
In the final determination of the benefits to be provided to the United States of America by the Government of the Republic of China full cognizance shall be taken of all property, services, information, facilities, or other benefits or considerations »provided by the Government of the Republic of China subsequent to March 11, 1941, and accepted or acknowledged by the President on behalf of the United States of America.

Article VII
In the final determination of the benefits to be provided to the United States of America by the Government of the of the Republic of China in return for aid furnished under the Act of Congress of March 11, 1941, the terms and conditions thereof shall be such as not to burden commerce between the two countries, but to promote mutually advantageous economic relations between them and the betterment of world-wide economic relations. To that end, they shall include provision for agreed action by the United States of America and the Republic of China, open to partic

ipation by all other countries of like mind, directed to the expansion, by appropriate international and domestic measures, of production, employment, and the exchange and consumption of goods, which are the material foundations of the liberty and welfare of all peoples; to the elimination of all forms of discriminatory treatment in international commerce; to the reduction of tariffs and other trade barriers; and, in general, to the attainment of economic objectives identical with those set forth in the Joint Declaration made on August 14, 1941, by the President of the United States of America and the Prime Minister of the United Kingdom.
At an early convenient date, conversations shall be begun between the two Governments with a view to determining, in the light of governing economic conditions, the best means of attaining the above-stated objectives by their own agreed action and of seeking the agreed action of other like-minded Governments.

Article VIII
This Agreement shall take effect as from this day’s date. It shall continue in force until a date to be agreed upon by the two Governments.
Signed and sealed at Washington in duplicate this second day of June, 1942.
For the Government of the United States of America:
Cordell Hull, Secretary of State of the United States of America.
For the Government of the Republic of China:
T. V. Soong,
Minister for Foreign Affairs of China.