Foreign Relations of the United States: Diplomatic Papers, 1943, The American Republics, Volume V

832.24/1223: Airgram

The Acting Secretary of State to the Ambassador in Brazil (Caffery)

Washington, March 10, 1943—7 p.m.

A–1040. Reference seventh paragraph of Department’s 4136, December 31, 1942 concerning Brazilian arsenal requirements and section 6 of the Decentralization Agreement.¹³

The Department is in receipt of a communication from the War Production Board which states that the Chemicals Division has been asked to make available a series of five critical chemicals for the manufacture of explosives in Brazil. All of these cases have been supported by Certificates from Lieutenant Colonel Stenio Lima, Chief of the Brazilian Military Commission in Washington. The communication states further:

“Our first recommendation, which was repeated to Colonel Lima few days ago, was that if these are genuine direct military requirements they should be made part of the Lend-Lease Program for Brazil and handled as Lend-Lease requisitions. The Brazilian Military Commission has been unable to comply with this request for the reason that the Brazilian Government apparently makes a practice of making arrangements directly with the representatives of U. S. exporters either in Rio or in this country. In the case of the chemicals in question, the applications have been handled in a highly irregular way by two companies, Tuteur & Company, Inc., 60 Wall St., New York, N.Y., and the U. S. Ordnance Engineers, Inc., 3650 East 93rd Street, Cleveland, Ohio.…

“It is perfectly possible that the materials requested represent a military need of some urgency. We would therefore recommend that the State Department make the strongest possible representations to the Brazilian Military Commission and the Government of Brazil that they cease handling their requirements through such concerns. This would be a gain for Brazil and a great saving of time and nervous energy for officials of the WPB,¹⁴ BEW,¹⁵ etc. It would be much better if Brazil would put the handling of all its important requirements in the hands of its own commission in Washington who could then learn the proper procedures and be in a position to expedite applications in the case of difficulties such as the present.

“In the case of the present applications, since considerable delay might be involved in the passing of these through the Office of Lend-Lease Administration, we suggest that the BEW be asked to issue immediately new export licenses covering the same materials, but made out in the name of the appropriate Brazilian agency in town here.”

With reference to the last suggestion of the War Production Board, the Board of Economic Warfare has now issued Current Control Bulletin 75 which implements the Decentralization Agreement and states that applications for “all shipments to Brazil on which individual, SP, or WP licenses” have not been issued before March 1, 1943 will not be accepted at the Board of Economic Warfare unless they are presented under cover of “Preference Bequests” and the procedure set up for Decentralization.

Section 6 of the Decentralization Agreement states that the system will cover “the importation from or by way of the United States of all materials other than arms, munitions, and implements of war.” An interpretation of what will be excluded from the necessity of obtaining a Preference Request from the Bank of Brazil under the term “implements of war” must be made clear. According to the President’s Proclamation of April 9, 1942¹⁶ only those items which are licensed by the State Department are included in such a definition. For these items, the Brazilian Military Commissions are registered and can make application while Lend-Lease shipments have been exempted from the license procedure.

For requirements of other materials, the Department desires to remind the Embassy that the American Requirements Committee sets separate allocations for civilian needs and Lend-Lease requirements. The estimate of supply which the Bank of Brazil receives is based upon the civilian allocation. The Office of Lend-Lease Administration’s allocations are based on its request to the American Requirements Committee which has been obtained from information submitted to it by the various Brazilian military commissions. When export licenses are issued, they are charged to one or the other of these allocations depending on whether they are presented through commercial channels or through the Office of Lend-Lease Administration. If the military authorities are allowed to present export license applications directly to the Board for purchases from commercial firms, these supplies will be charged to the civilian allocation thus reducing the available supply against which the Carteira¹⁷ may issue Preference Requests. Obviously, military requirements must either be handled through Lend-Lease Requisitions and cash reimbursements, or through the Carteira of the Bank of Brazil and be accompanied by approved Preference Requests.

The Embassy is requested to take this matter up immediately with the proper Brazilian officials and advise the Department of the results of its conversation.

The chemicals covered by the applications pending at the War Production Board are:

• Sodium Azide
• Diamylphthalate
• Phthalic Anhydride
• Monoethylaniline
• Phosgene (in Cylinders)

If there is an urgent need for them, please cable how the Brazilian authorities desire to handle their obtainance, through Lend-Lease or through Preference Requests. Phosgene (in cylinders), unless applied for through Lend-Lease, will have to be handled separately as to licensing only since it is considered an “implement of war” and will require a State Department license for exportation.

Welles

13. This agreement established a procedural arrangement of decentralizing many phases of export control. It required the Brazilian importer to apply to a branch of the Bank of Brazil for a permit to import, a permit which then had to meet the approval of the American Embassy in Rio de Janeiro and the Board of Economic Warfare in Washington.
14. War Production Board.
15. Board of Economic Warfare.
16. Department of State Bulletin, April 11, 1942, p. 323.
17. Carteira de Exportação e Importação of the Bank of Brazil.