WESTERN HEMISPHERE DEFENSE


   [Here follows a discussion of procedural matters.]
 The Mutual Defense Assistance Act of 1949
   The Mutual Defense Assistance Act of 1949 (Public Law 329-81st
 Congress) was approved by the Congress on September 28, 1949, and
 signed by the President on October 6, 1949. It is -an act to promote
 the foreign policy and provide for the defense and general welfare
 of the United States by furnishing military assistance to foreign
 nations. Title I of the MDAA provides for the furnishing of grant
 aid to the nations party to the North Atlantic Treaty; Title II pro-
 vides for grant aid to Greece and Turkey; Title III provides for
 grant aid to Iran, the Republic of Korea, and the Republic of the
 Philippines; and Title IV, in Section 408 (e), provides for reimburs-
 able aid to Title I, II, and III nations, and to "a nation which has
 joined with the United States in a collective defense and regional
 arrangement."
 Eligibility under the MDAA
   The above-cited Section 408 (e) has been interpreted to mean that
 only Latin American countries which have ratified the Inter-American
 Treaty of Reciprocal Assistance may participate under 'Section 408
 (e) of the MDAA.
   [Here follows a discussion of the possible applicability of other
 legislation to arms purchases by the American Republics.]
 Terms of Payment
 On the subject of reimbursable aid, your attention is drawn to the
 fact that Section 408 (e) of the MDAA stipulates that "the full cost,
 actual or estimated" of equipment, materials or services must be made
 available to the United States prior to any transfer or the execution
 of any contract. This means that a Latin American country partici-
 pating under the MDAA must pay the full cost involved at the time
 an order is placed-this as distinct from payment upon delivery.
 Further, it has been determined that "full cost" means full original
 cost, actual or estimated-not (current value. Hence, for example, it
 has been held that United States naval vessels may not be sold under
 the MDAA to Latin American countries for less than their full origi-
 nal cost regardless of their current value and need for rehabilitation
 which would add to their full cost.
   [Here follows a discussion of procedural matters.]
   In conversations with the foreign government regarding any re-
quest it may initiate, you should indicate that the great extent of the
calls upon the United States for assistance limits the amount of pro-
curement which can be undertaken for Latin American countries, and
accordingly, that it may not be-possible in every case, to provide Latin


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