the last few years we have tightened our inspection procedures so that now we require that all commodities sold under titles I or IV authorizations be inspected by an authorized inspection service. The actual grade and quality of the commodity to be purchased is specified in the contract between the U.S. private exporter and the foreign importer and the safeguards which we have established will assure that commodities delivered under the program will meet contract requirements for quality. COTTON Public Law 480 regulations applicable to title I and title IV sales of cotton, where the Government has the direct financing interest, provides that CCC will not finance sales where the exporter's contract price exceeds the prevailing range of export prices for comparable cotton. All sales made and registered under the above programs are price analyzed for compliance with regulations by the following basic steps: A. We require the shipper to supply us with the quality of cotton called for by the contract if sold on basis of universal standard designations or an actual sample (private type) of the cotton he is contracting to supply if sold on basis of private type. Private type sales predominate and all such samples are classed for quality by USDA classers. By established formulas the shipper's contract price is compared to the maximum price the contracted quality will support. If contract price exceeds the maximum acceptable price CCC refuses to accept the sale for financing. If 'contract price is determined not to exceed the maximum acceptable price the sale is registered for financing. B. In the case of "description" and "private type" sales CCC requires that cotton to be shipped be classed by AMS classing service on the basis of official samples from at least 10 percent of the bales in the shipment. CCC designates the bales to be sampled from the shipper's tag lists and notifies the warehouseman to draw and forward the samples to AMS for classification. Since the bales to be sampled are designated after the tag list is supplied by the shipper and no standard formula of bale designation is used whereby bales to be sampled can be predetermined the shipper cannot influence the precise bales to be sampled. The results of the AMS classification of the 10 percent bale sample serves as a basis for CCC to make pricing comparisons between contract price, prices based on private classification and the quality of the cotton shipped. From such comparative price analysis CCC makes its determination as to whether or not to submit the sale to foreign arbitration boards for a determination if the cotton actually shipped by the U.S. exporter was up to the quality standard called for by contract terms. If a quality deficiency is thus determined to have occurred the appropriate price adjustment is established by the appropriate arbitration group which is procedurally spot checked by CCC for adequacy. C. Program procedures provide for sales to be contracted on USDA Form A classification. This means that each bale is officially classed for quality and appropriate price check is made before the sale is registered for financing. Since the initiation of the price and quality checking procedures described above in late 1962, we have no cases of a shipper engaging in a flagrant violation to provide cotton of the quality called for in the contract called to our attention. Neither have we observed or detected from our reports that qualities delivered. after arbitration and/or appealed, if conducted were noticeably out of line with the contract price. The Department does not exercise direct supervision over the quality of cotton shipped under contracts conducted on the basis of dollar commercial sales. It is our understanding, however, that most such contracts provide for arbitration before an organized Foreign Exchange Arbitration Board. Either the buyer or seller can place a shipment of cotton before the proper arbitration board for a determination, on a bale basis, as to whether any bales are below the quality called for by contracts. Awards, if any, by such boards are subject to appeals to an appeal board for further rulings as to quality compliance with contract terms. MEAT AND POULTRY INSPECTION ORGANIZATION Mr. WHITTEN. Mr. Secretary, last year the Department indicated that a study was being made of the possibility of consolidating meat and poultry inspection which would lead to closer coordination and some monetary savings. What is the status of that study? Secretary FREEMAN. We have been giving intensive consideration to that question, Mr. Chairman. We have found that the cooperation and coordination between the staff administering the two programs is generally satisfactory under the present arrangement, though a consolidation could be expected to make coordination somewhat easier. The two agencies have already taken advantage of many opportunities that exist for savings through cross-utilization of manpower, although in a consolidated organization we could expect to achieve some additional limited savings at the headquarters level and at the field supervisory level. At the same time, a consolidation would create many new problems through disrupting the close working relationships that exist with other on-going programs within each of the agencies now administering the two programs, such as the animal disease eradication work of the Agricultural Research Service and the meat and poultry grading work of the Agricultural Marketing Service. Furthermore, representatives of the meat industry have voiced their opposition to transferring meat inspection to AMS while representatives of the poultry industry are equally opposed to transferring poultry inspection to ARS. Mr. WHITTEN. Thank you, Mr. Secretary. Secretary FREEMAN. Gentlemen, it is always a pleasure. Thank you very much. Mr. WHITTEN. Thank you, Mr. Secretary. We appreciate the chance to visit with you. The committee will stand adjourned for the day. MONDAY, FEBRUARY 24, 1964. THE BUDGET FOR THE DEPARTMENT OF AGRICULTURE WITNESSES JOSEPH M. ROBERTSON, ADMINISTRATIVE ASSISTANT SECRETARY CHARLES L. GRANT, DIRECTOR OF FINANCE AND BUDGET OFFICER, DEPARTMENT OF AGRICULTURE HARRY B. WIRIN, DEPUTY DIRECTOR OF FINANCE, DEPARTMENT OF AGRICULTURE SAM H. NEEL, CHIEF, DIVISION OF BUDGET POLICIES AND OPERATIONS, OFFICE OF BUDGET AND FINANCE Mr. WHITTEN. The committee will come to order. We shall insert in the record pages 4 through 8 of the committee print. (The pages referred to follow:) 3 In addition, $45,000,000 transfer from sec. 32 funds authorized. In addition, $3,117,000 transfer from sec. 32 funds authorized. +20,860 +6,550,000 In addition, transfers from Commodity Credit Corporation provided as follows: Fiscal year 1964, $94,885,000; fiscal year 1965, $87,708,000. Amounts transferred from other agencies of the Department. Agricultural Research Service, meat inspection.. Agricultural Stabilization and Conservation Service, expenses.. Agricultural Stabilization and Conservation Service, Sugar Act. Agricultural Stabilization and Conservation Service, cropland conversion. Under proposed new legislation: Agricultural Research Service, meat inspection. Agricultural Marketing Service, poultry inspection and other regulatory activities. Agricultural Stabilization and Conservation Service, cropland con- Rural Electrification Administration revolving fund 2. Total.. $840,000 1 Reflects estimates shown in 1965 budget. Supplemental submissions may differ from these amounts based on more current estimates. 2 Represents estimated decrease in authority to borrow from Treasury if proposed legislation adopted. Mr. WHITTEN. Mr. Grant, we will be glad to have your general statement. GENERAL STATEMENT Mr. GRANT. Thank you, Mr. Chairman. I appreciate this opportunity to summarize for the committee the 1965 budget for the Department. I have two of my associates from the Office of Budget and Finance with me today: Harry Wirin, Deputy Director of the Office, who will be assisting me throughout these hearings, and Sam Neel, who has |