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In view of these conditions, we believe that section 3 (d) is not only unnecessary, but that the penalty provided therein is unduly harsh in view of penalties already available under existing law as well as those proposed in section 3 (c). I repeat our recommendation that section 3 (d) should be deleted.
In passing, we see no reason for including imports in any part of section 3 of the bill. Imports of wheat and wheat flour into the United States are already controlled by quotas proclaimed by the President under authority of the Agricultural Adjustment Act, as amended, and such quotas have been and are in effect.
In summary, we recommend:
2. Full and complete authority to administer all provisions of the legislation should be granted to the Secretary of Agriculture by the Congress and the President.
3. Commodity Credit Corporation should be authorized and directed to make the necessary subsidy payments out of its own funds on export shipments to all eligible wheat-agreement countries, including those countries receiving assistance from ECA.
4. Authority in section 3 (b) to examine books, papers, records, , et cetera, should be specifically limited to matters relevant “to transactions under the international wheat agreement."
5. Section 3 (d) should be deleted because it is unnecessary and imposes unduly harsh penalties in addition to those already available and proposed.
6. Control over imports of wheat and wheat flour proposed in section 3 is unnecessary because of the authority already vested in the President of the United States, and all reference to imports should be deleted.
With the adoption of the foregoing recommendations, we favor prompt and affirmative action by the Congress on S. 2383.
Senator JOHNSTON. Senator Young, do you have any questions?
Senator YOUNG. I am not familiar with that reference that you make to import controls now. Do you refer to the 1938 act?
Mr. FAKLER. That, Senator, is under section 22 of the Agricultural Adjustment Act as amended by the Agricultural Act of 1948. That is now in effect.
Senator Young. I think grain-trade spokesmen yesterday had reference to the act of 1938.
Mr. FAKLER. That is the original act, but it was amended several times, and the latest amendment is contained in title I of the Agricultural Act of 1948. It amends section 22 of the original Agricultural Adjustment Act.
Senator Young. The House has already voted to repeal the socalled Aiken Act.
Mr. FAKLER. That is correct, but I do not believe that affects the amendment to section 22 of the Agricultural Adjustment Act.
Senator Young. We would have to reinsert that into any new legislation that might be passed.
Senator JOHNSTON. That is in the Anderson Act, is it not? That is my understanding.
Mr. FaKLER. I am not sure. I have not examined the latest copy. It just became available this morning.
Mr. KENDALL. It is permanent legislation and continues to be in effect.
Mr. FAKLER. So that authority does exist, Senator, in two respects. It not only gives authority to the President to impose quotas, but also to impose additional fees up to 50 percent of the existing tariff. For the moment the President has chosen, upon recommendation of the Tariff Commission, to impose quotas. Those quotas are very small, by the way. Would you be interested in having the figures?
Senator YOUNG. Yes; I would.
Mr. FAKLER. The total quota for a year is 800,000 bushels of wheat and 4,000,000 pounds of wheat flour.
Senator YOUNG. Imports?
Mr. FAKLER. Imports. And those quotas for this current year have already been filled.
Senator YOUNG. That is all right with me.
Mr. FAKLER. That has been the case for several years during which this quota provision has been in effect.
Senator Young. That answers my question.
Senator HOLLAND. I am particularly interested in what the witness said with reference to section 3, subsection D.
Senator YOUNG. Senator, I would like to say this off the record. (Discussion off the record.)
Senator JOHNSTON. I have an amendment here which has been submitted by Senator Anderson, which I would like to have inserted in the record at this point. (The document referred to follows:)
AMENDMENT SUBMITTED BY SENATOR ANDERSON On page 3, line 7, before the period insert the following: "on and after August 1, 1949. Where prices in excess of the international wheat-agreement prices have been paid for such wheat and wheat flour financed by the Economic Cooperation Administration on or after August 1, 1949, the Secretary of Agriculture or Commodity Credit Corporation is authorized to reimburse the Economic Cooperation Administration for such excess amounts. Funds realized from such reimbursement shall revert to the respective appropriation or appropriations from which funds were expended for the procurement of such wheat and wheat flour.”
Senator JOHNSTON. Are there any further questions?
Senator HOLLAND. I just mentioned section 3 (d) on page 4 of the printed bill. I note that the witness recommends the elimination of that section; and, offhand, it seems to me it is a very harsh section. I wonder if the testimony of those who drafted the bill has been heard on that point. I do not recall that it has. That is the penalty.
Mr. FAKLER. May I say this off the record?
Senator JOHNSTON. It might be well to ask the Department for a reply on that question of the Senator's.
Senator HOLLAND. I am greatly concerned with that provision because it seems to me that it is drawn in such a sweeping way as to discourage and inhibit any effort to build up an outlet for wheat or flour, either one, outside of the provisions of the international wheat agreement.
It appears to me that under it apparently it could easily be made illegal to attempt to find by initiative other than by the international wheat agreement. I am sure that is not intended.
Senator JOHNSTON. I think you will notice ore little word there that has a great bearing on the whole thing—"willful,” and “knowingly.” When you use those wordsSenator HOLLAND. It says:
Any person who knowingly exports wheat or wheat flour from the United States or who knowingly imports wheat or wheat flour into the United States for consumption therein in excess of the quantity of wheat or wheat flour permitted to be exported or imported, as the case may be, under regulations issued by the President, shall forfeit to the United States a sum equal to three times the market value and so forth.
Apparently from that it is contemplated that regulations should be issued by the President entirely regulating and entirely controlling the movement out of and into the United States of wheat and wheat flour, irrespective of whether it is moving under the terms of the international wheat agreement.
Mr. FAKLER. I think it is susceptible of that interpretation, and that is why we think it is far too broad and in our judgment entirely unnecessary for the proper administration of the United States obligations under the international wheat agreement.
Senator HOLLAND. I feel there should be no objection from anyone to the inclusion of a section which would make the provisions of the international wheat agreement effective and shall give to the President's regulations enforceability in the field of making effective both sides, both the export and the import side of the international wheat agreement, but to have it as broad as this where it apparently shuts off any other traffic or might include any other traffic, regardless of whether it is under the terms of that agreement, might be so broad as to preclude any international traffic at all in those two commodities that would not be under the agreement, and I doubt the wisdom of such a sweeping provision and I hope the Department will deal with that in their supplemental showing.
Senator JOHNSTON. I would like to have in the record, too, when they answer this question, just why such a severe penalty as this is included. I cannot see why it is so far-reaching.
Senator HOLLAND. Do you represent the Department? Is it the contemplation of this international wheat agreement that the entire trade out of the United States in wheat and flour and into the United States in wheat and flour should be incorporated into and considered within the machinery of the international wheat agreement?
Mr. BORTON. I do not know, Senator. It may be necessary to restrict exports of wheat outside the wheat agreement in order to assure that we fulfill our guaranteed quantities. I hope that point will not be lost sight of, because it might be possible that in certain years we would have no wheat left if too much was exported outside of the agreement to fulfill our guaranteed quantities; and that is an international obligation which we assume under this treaty.
Senator JOHNSTON. When you make your report, you will touch on that, too; will you not?
Mr. BORION. Yes, sir.
Mr. BORTON. Yes, sir. Senator JOHNSTON. We have been notified that the National Grange wishes to submit a statement. That will be filed at this point.
(The statement of the National Grange is as follows:) TEMENT FILED BY J. T. SANDERS, LEG ATIVE COUNSEL, THE NATIONAL
GRANGE The National Grange is a farm organization of over 800,000 members, including a high proportion who produce wheat. We are, therefore, directly and vitally concerned with the problems of international trade in wheat. We have consistently supported the use of international commodity agreements aimed at the improvement of our wheat markets and international trade relations. Specifically, we gave unqualified support to the international wheat agreement which went into effect on July 1 of this year. We believe that its effective operation should not be impeded by inaction or delay on the part of the United States in implementing our commitments under that agreement.
To this end, the Grange favors the adoption of S. 2383, which is now before your committee for consideration. We are in general agreement with the detailed provisions of that bill, We also favor its adoption for the following reasons:
1. It authorizes the Commodity Credit Corporation to make wheat available at the same price terms to all importing countries which have formally ratified and accepted the international wheat agreement.
2. It places the responsibility for administering, pricing, and other operations under the agreement in the Department of Agriculture, the hands of the agency best qualified to do the job. Aside from its experience in the type of operations required, the CCC is of a more permanent nature than ECA, whose program, for example, is now scheduled to expire during the life of the wheat agreement.
3. Under present world conditions we are convinced that world peace and welfare will be greatly facilitated if a number of other commodity agreements similar in general to the wheat agreement can be worked out. This true, we do not believe a temporary or partial provision should be worked out for implementation of the wheat agreement—the first agreement we have ratified and the first that has been successfully launched among the several peace-loving nations that are signatories.
4. Its provisions, we believe, are more equitable to importing countries than those of other proposed legislation (S. 2287) which has been introduced. We believe that the wheat agreement should stand along and that ECA countries in the agreement should not be denied its benefits by reason of their participation in the European recovery program. It is assumed, furthermore, that ECA appropriations for the current year have already been reduced to take account of savings made possible by the maximum price provisions of the wheat agreement.
We also favor the adoption of an amendment to S. 2383 making its provisions retroactive to August 1, 1949, the date the wheat agreement became effective. This would extend for the entire first year of the wheat agreement the benefits of policy determined by the Congress at this time, and would add to its effective operation.
Every means should be taken to expedite action that will assure carrying out our wheat-export program for the 1949–50 year to the fullest possible extent. Already we have lost valuable ground because of the inability to maximize our exports during some of the most favorable months of the wheat-marketing year. Failure to take advantage of this opportunity to export wheat would be difficult to justify, especially in view of the recently announced reduction in our wheatacreage allotments.
The United States played a leading role in the negotiation of an international wheat agreement. It would indeed be unfortunate, therefore, to incur the ill will of the importing countries in this agreement through failure to establish the policy of Congress regarding United States participation. We urge, therefore, the prompt enactment of S. 2383 in order that the United States may realize maximum benefits under the agreement and that importing countries may be assured of supplies from this source at prices consistent with the terms of the agreement.
Although we will not undertake to analyze the bill in detail as to any unnecessary provisions it may contain limiting private handling of grain going to export and in fulfillment of our obligation under the agreement, we are in full sympathy with a minimum necessary restriction to private trade under the agreement. We trust that before reporting the bill the committee will scrutinize with great care the
details of regulation provided in the bill and will limit such detail regulation to the minimum necessary for reasonable assurance of fair and efficient compliance on our country's part with the provisions of the agreement.
Senator JOHNSTON. That concludes the hearing, and I thank you all for coming.
(Whereupon, at 10:50 a. m., the subcommittee adjourned.)
(Supplementary statements filed by the Department of Agriculture and the National Grain Trade Council are as follows:)
DEPARTMENT OF AGRICULTURE,
Washington, D. C., September 26, 1949.
United States Senate, DEAR MR. JOHNSTON: This responds to your oral request for the views of this Department on the statements relating to S. 2287 and S. 2383, made to the subcommittee of the Senate Committee on Agriculture and Forestry on September 21, 1949, by Mr. H. E. Sanford, on behalf of the National Grain Trade Council, and Mr. Don Parel on behalf of the American Farm Bureau Federation.
Both S. 2383 and S. 2287 contemplate that the operations to be conducted by the Commodity Credit Corporation under the bills would be financed by it in the same manner as other operations conducted under its charter. Mr. Parel recommended that the Commodity Credit Corporation not be required to bear the losses which will be incurred in conducting operations to implement the international wheat agreement, and that Congress appropriate funds for the purpose of defraying the costs of these operations. Mr. Sanford endorsed this recommendation. This Department has no objection to this proposal, and if the committee adopts the proposal we suggest that it be accomplished by amending S. 2383 in the manner set forth in enclosed draft.
Mr. Sanford objects to the controls and penalties authorized by section 3. It is Mr. Sanford's contention that these provisions constitute a broad grant of unlimited powers which go far beyond those necessary to the accomplishment of the purposes of the bill.
We hasten to assure your committee that it is not our desire to obtain any more authority than that needed to fulfill our obligations and obtain the benefits under the wheat agreement. It is our view that S. 2383 grants only such limited authority. The authority to impose import and export controls and to take other action authorized in section 3 (a) is, by the terms of such section, limited to such action as is necessary in the implementation of the international wheat agreement. Such authority cannot be likened to or exercised as an extension of wartime control powers.
The need for import and export controls has been questioned by Mr. Sanford. As has been pointed out, only such controls would be imposed as would be necessary to the proper fulfillment of our responsibilities under the wheat agreement. It is contemplated that import controls would be imposed when needed to prevent the reentry into the United States of wheat exported with benefit of subsidy under the agreement. Without such controls, the United States might lose the full benefits accruing to it under the agreement. An importer in a participating country can purchase wheat under the agreement at the maximum price of $1.80. When the domestic price of wheat is above the wheat agreement price, an export payment or subsidy to the domestic exporter will be required. Unless authority is available to exclude the reentry of such wheat into the United States, the wheat which was exported under subsidy could be reshipped back to the United States and sold on the domestic market at the greater domestic price and in competition with other domestic wheat. Thus, what was intended as a disposal of domestic wheat in a foreign country under the wheat agreement becomes in effect a payment of subsidy for wheat which is not removed from the domestic market.
It has been stated before your subcommittee that, even though a proper case could be made for the need for import controls, existing legislation is sufficient to provide these controls. Reference is had, no doubt, to existing import controls on wheat under authority of section 22 of the Agricultural Adjustment Act, as amended. As you know, import controls are imposed thereunder only after public hearing and investigation by the Tariff Commission, and quotas imposed thereunder may not reduce the total quantity which may be entered below_50 percent of that quantity which was entered during a representative period. For