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the reasons stated above, there will be need to prohibit entirely the entry of wheat into the United States which had previously been shipped from the United States with benefit of subsidy. It is doubtful that such a prohibition is authorized under section 22. Moreover, action to control imports in order to implement the wheat agreement should not be subject to the time-consuming procedure involved in invoking section 22.
Mr. Sanford also questioned the need for the export-control authority contained in section 3. He contends that the need of exporters to qualify for subsidy payments would provide control of exports at all times except “when supplies are scarce and world prices exceed the domestic-support level or the maximum price set in the wheat agreement, whichever is higher.” We agree with Mr. Sanford that export controls are necessary in such circumstances. We do not agree that these are the only circumstances which would require imposition of export controls. Mr. Sanford appears to be of the erroneous opinion that all commercial sales for which the United States will be credited under the wheat agreement will require a subsidy or export payment and that in the making of such payment the Government can control the destination of the wheat with respect to which the payment is made. It is our hope that all sales under the wheat agreement will not require a Government subsidy. It is possible that domestic and world prices will be at levels which would not require the Government to subsidize wheat to fulfill its obligations under the wheat agreement, and in such a situation it may be necessary for this Government in order to fulfill its obligations under the wheat agreement to channel wheat to importing countries which have unfilled guaranteed purchases.
Mr. Sanford also testified that the reporting requirements and investigatory powers authorized by section 3 (b) are unlimited and unwarranted, particularly with reference to importers. If it is recognized, as we think it should be, that import controls are necessary to implement the wheat agreement, then, of course, it follows that importers should be subject to the reporting requirements and investigatory authority. We object, therefore, to the proposal made by Mr. Sanford that there be inserted after the words "are relevant” in line 3, page 4, the words “to transactions eligible for recording under the international wheat agreement,” since importations of wheat could not be considered “transactions eligible for recording,” for we are an exporting nation under the wheat agreement. Furthermore, by reason of article VIII of the wheat agreement, the United States is under obligation to report to the council such information as the council may request in connection with the administration of the wheat agreement. Conceivably, such information may not be confined to transactions eligible for recording under the wheat agreement but may relate to transactions which, although outside the wheat agreement, have an important bearing on the administration of the wheat agreement.
Mr. Sanford recommends the deletion of section 3 (d), contending that it is too harsh and is unnecessary. Section 3 (d) imposes upon an importer or exporter of wheat or wheat flour who knowingly imports or exports wheat in excess of the amount authorized under regulations issued by the President, a forfeiture of three times the market value of the quantity of wheat or wheat flour by which such importation or exportation exceeds the authorized amount. This provision is patterned after other regulatory statutes, such as the Sugar Act of 1948, which imposes a like penalty for the sale overquota sugar. The regulations governing the import and export of wheat and wheat flour will be directed toward the fulfillment of our obligations under a treaty.
Effective sanctions for the violation of these regulations are deemed necessary to the fulfillment of our international obligations. While section 3 (c) provides for a penalty of up to $1,000 for the violation of any export or import regulation issued under the bill, it is not felt that such a penalty constitutes an adequate deterrent to a person contemplating the exportation of wheat in violation of regulations. On the other hand, as has been indicated by our experience in the Sugar Act, the forfeiture imposed by section 3 (d) will be an effective deterrent.
There was some indication in the testimony before your subcommittee that as a result of devaluation Australian and Canadian prices would not be changed in relation to pound sterling. Insofar as prices under the wheat agreement are concerned, the United States maximum and minimum prices remain the same in United States currency, and the Canadian and Australian prices are increased by the amount of the devaluation of their currencies. This is so because of the wording of article VI, paragraph 1, of the wheat agreement itself.
The committee asked that a report of the amount of wheat bought from the United States last year (1948-49 marketing year) by ECA be furnished. The requested information is set out in the enclosed table.
In accordance with your request, the following table is furnished showing the amount of wheat purchased by ECA countries from the United States since the wheat agreement went into operation which was purchased at wheat agreement prices and the estimated cost (difference between the actual market price and the maximum price under the wheat agreement).
In order to furnish you with the requested information as soon as possible, this letter has not been cleared with the Bureau of the Budget. Sincerely yours,
Ralph S. TRIGG,
Procurement authorizations issued by ECA for purchase of United States wheat and wheat flour during period July 1, 1948, through June 30, 1949
(Metric tonsflour in wheat
546, 404 Belgium and Belgian Congo
483, 704 France..
239, 267 French North Africa.
36, 576 Other French colonies.
87, 724 Germany (bizone) -
64, 009 Germany (French zone)
353, 121 Greece
525, 785 Ireland.
107, 035 Iceland.
5, 327 Italy
1, 733, 344 Netherlands
579, 040 Indonesia
48, 094 Norway
213, 806 Trieste
54, 173 United Kingdom.
5, 459, 798 118, 695 55, 878
5, 634, 371 207, 027, 638
DRAFT OF AMENDMENT TO S. 2383 To PROVIDE APPROPRIATIONS TO COVER
COMMODITY CREDIT CORPORATION Cost IN CARRYING OUT WHEAT AGREEMENT
At the end of section 2 add the following: "There are hereby authorized to be appropriated such sums as may be necessary to make payments to the Commodity Credit Corporation of its estimated or actual net costs of carrying out its functions hereunder. The Commodity Credit Corporation is hereby authorized in carrying out its functions hereunder to utilize, in advance of such appropriations or payments, any assets available
EXPLANATION OF PROVISION
This provision would authorize either advance or subsequent appropriations for the purpose of making payments to Commodity Credit Corporation to cover its estimated or actual net costs in carrying out its functions under section 2. The provision contemplates that until such payments are received by Commodity Credit Corporation, the net cost of the Corporation in implementing the wheat agreement would be reflected on its books as a receivable. In order that the implementation of the wheat agreement may not be impeded by delays in the making of appropriations or by the insufficiency of any appropriation made or of the payments therefrom, Commodity Credit Corporation is expressly authorized to proceed in advance of such appropriations or payments and to utilize its capital funds and other assets in so doing. The net cost to Commodity Credit Corporation would include, among other proper charges, the following:
(1) For wheat acquired by the Corporation under the price-support program and sold pursuant to the wheat agreement, the amount by which the domestic market price exceeds the sales price for such wheat. The Corporation would not include as part of its net cost under the wheat agreement the amount by which its cost of wheat acquired under the price-support program exceeds domestic market price.
(2) For wheat or wheat flour acquired by the Corporation under its supply program and sold pursuant to the wheat agreement, the amount by which the cost to the Corporation exceeds the sales price for such wheat or wheat flour.
(3) Payments made by the Corporation to exporters for wheat or wheat flour purchased on the open market and sold pursuant to the international wheat agreement.
(4) Administrative expenses incurred by the Corporation in implementing the wheat agreement.
NATIONAL GRAIN TRADE COUNCIL,
September 27, 1949. Hon. Olin D. JOHNSTON, Committee on Agriculture and Forestry,
Senate Office Building, Washington, D. C. DEAR SENATOR: The Department of Agriculture's observations on the provisions of S. 2287 and S. 2383, contained in Mr. Ralph S.Trigg's letter to you of September 26, 1949, convinces us that Mr. Sanford's objections to the provisions of these bills are well taken. The National Grain Trade Council, therefore, wishes to record again its opinion that in legislation to implement the international wheat agreement, there is no justification to grant to the Government authority to control imports; that exports can be controlled by subsidy payments and a requirement for the recording of sales; that the reporting requirements and investigatory requirements of section 3 (b) of S. 2383 are unwarranted; and that the forfeiture provisions of section 3 (d) of S. 2383, calling for treble damages, are too harsh.
Apparently the only justification for authority to control imports is the alleged need to prevent reentry of United States wheat on which an export subsidy has been paid. The Department seems to argue that, in the absence of import controls, such wheat might be returned to the United States and sold above the wheat agreement ceiling with a resulting element of unjust enrichment.
This might occur only when our domestic price is well above the maximum price of the agreement, for to reship United States wheat for import into the United States would require the payment of ocean freight plus the payment of our import duty plus the payment of freight to an interior point for delivery or processing If our domestic price was high enough to absorb these added charges, a short domestic supply situation would permit our being relieved of our export obligations under the agreement-in which case we would have subsidized no exports-or our domestic needs would require us to import wheat at any cost.
The Department's position, that import controls are necessary, disregards the function of the International Wheat Council. As the Council would require us to channel exports to meet our export obligations under the agreement, it should follow that the Council will require importing nations to handle their import quotas so that the exporting nations, such as the United States, will not be harmed or embarrassed in carrying out their export obligations. The United States should look to the Council and its mechanism to prevent the reentry of United States wheat rather than rely on detailed import rules and regulations that will inevitably lead to international ill will.
Again we wish to point out that the forfeiture provisions of section 3 (d) are too harsh. Triple damages, in terms of a cargo of wheat, would mean a penalty of nearly $2,000,000. The remote possibility of such a forfeiture cannot be said to encourage exports. We believe the penalty is more than an “effective sanction" to assure fulfillment of the agreement. We regard it more as a deterrent to free trade in wheat at the international level. We suggest that, if sanctions as severe as this are necessary to accomplish the ends international commodity arrangements are supposed to develop, the Congress should now revalue those ends to determine if they warrant the means now proposed to accomplish them.
I would appreciate your incorporating this letter in the report of hearings by your subcommittee. With kindest personal regards, I am, Sincerely yours,
William F. BROOKS,
Executive Secretary. x