WESTERN HEMISPHERE DEFENSE                       651

 dent, I issued on 1 September 1950 a memorandum-3 to the military
 departments and the Joint Chiefs of Staff furnishing them interim
 guidance with respect to this problem, which is of world-wide scope
 and not confined to the Latin American area. That memorandum
 does not, however, develop the possibilities of reimbursement in kind
 or mutual reciprocal aid among the participating nations, which are
 matters of intergovernmental scope. The Department of Defense
 would be prepared to assist the Departments of State and Treasury
 in considering and resolving them. The Joint Chiefs of Staff regard
 the solution of this broad problem as a matter of great importance,
 and recommendations for the acceptance of organized Latin Ameri-
 can units except on a reimbursable basis will have to be contingent
 upon its favorable resolution.
   In closing, I should like to. observe that the Joint Chiefs of Staff
 are convinced that the inability to date of the Latin American nations
 to furnish immediately adequately equipped and trained combat
 forces points up the necessity for the prompt implementation of NSC
 54/2.
   Sincerely yours,                                     Louis JOHNSON

   3This memorandum said in part:
 "The several Services should seek arrangements under which the foreign
govern-
 ments will completely equip and supply their forces. To the extent that
such
 complete support is not practicable but the offer is otherwise desirable,
the mili-
 tary departments of the United States will make available necessary supplies
 or services on a basis of immediate reimbursement in U.S. dollars. To the
extent
 that the foreign Government cannot make prompt reimbursement in U.S. dollars,
 the U.S. Government and the foreign government will negotiate the terms
of
 settlement." (795B.5/9-650)
 In a memorandum of September 14, 1950, to Mr. Merchant, Edward W. Doherty,
 Officer in Charge of Economic Affairs in the Office of Northeast Asian Affairs,
said
 in part:
   "... Mr. Johnson's letter of September 12, in the last paragraph
but one, ex-
pressly states that the acceptance of Latin American units, except on a reimburs-
able basis, will be contingent upon the conclusion of arrangements among
the par-
ticipating nations for reciprocal aid and reimbursement in kind. This is
a gross
misconstruction of the purpose and effect of the memorandum of September
1,
which was to permit offers of military assistance to be accepted withlout
hin-
drance from issues involving compensation or reimbursement, but also without
prejudice to the ultimate settlement of questions of reimbursement between
the
U.S. Government and the foreign government." (795B.5/9-1250)
  Additional documentation on discussions of this question held between officials
of the State, Defense, and Treasury Departments prior to the letter from
the
Secretary of State to Secretary Marshall, September 27, 1950 (p. 664), is
in deci-
mal file 795B.5 for September 1950.
   Of May 18, 1950, p. 628.

720.5621/9-1250
    'The Secretary of Defense (Johnson) to the Secretary of State

CONFIDENTIAL                        "WASHINGTON, 12 September 1950.
  DEAR MR. SECRETARY: You will recall that a substantial number
of patrol, auxiliary and amphibious vessels were sold to various Other