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MONDAY, MARCH 13, 1972.

EXPORT MARKETING SERVICE

WITNESSES

CLARENCE D. PALMBY, ASSISTANT SECRETARY OF AGRICULTURE CLIFFORD G. PULVERMACHER, GENERAL SALES MANAGER, EXPORT MARKETING SERVICE

FRANK G. McKNIGHT, ASSOCIATE GENERAL SALES MANAGER, EXPORT MARKETING SERVICE

JOHN C. SCHOLL, ASSISTANT SALES MANAGER (COMMERCIAL CREDIT AND BARTER), EXPORT MARKETING SERVICE

GEORGE S. SHANKLIN, ASSISTANT SALES MANAGER (COMMODITY EXPORTS), EXPORT MARKETING SERVICE

JAMES A. HUTCHINS, ASSISTANT SALES MANAGER (PUBLIC LAW 480), EXPORT MARKETING SERVICES

KENNARD 0. STEPHENS, DEPUTY ASSISTANT SALES MANAGER (COMMODITY EXPORTS), EXPORT MARKETING SERVICE ARTHUR MEAD, DEPUTY ASSISTANT SALES MANAGER (PUBLIC LAW 480), EXPORT MARKETING SERVICE

WILLIAM FELLER, DEPUTY DIRECTOR, BUDGET DIVISION, AGRICULTURAL STABILIZATION AND CONSERVATION SERVICE JEROME A. MILES, DIRECTOR OF FINANCE, DEPARTMENT OF AGRICULTURE

Mr. WHITTEN. The committee will come to order.

We have with us today, Mr. Pulvermacher and his associates and Mr. Palmby representing the Secretary's Office to take up the Export Marketing Service.

We will place in the appropriate place of the record pages 58 through 77 of volume II of the justifications.

(The justifications follow:)

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EXPORT MARKETING SERVICE

Purpose Statement

The Service was established on March 28, 1969, pursuant to the authority of 5 U.S.C. 301 and the Reorganization Plan No. 2 of 1953. The programs of the Service were formerly performed by the Foreign Agricultural Service and the Agricultural Stabilization and Conservation Service.

The major objective of the Service is to promote and assist in the expansion of export sales of U.S.-produced farm products. This is accomplished through a series of programs and activities described in the three major categories below, and through continuing cooperation with other U. S. Government agencies, foreign governments, export trade firms, banks, and ocean chartering agencies.

1. Commodity exports. The Service administers programs to facilitate and expand the commercial export sales of privately owned and Commodity Credit Corporation (CCC) owned agricultural commodities, and develops related pricing policies and export payment rates for applicable commodities. The Service also carries out the domestic operations to implement the Wheat Trade Convention of the International Grains Arrangement, including the fixing of payment rates and certificate costs for export marketing certificates. These programs are authorized by the CCC Charter Act, and the Agricultural Acts of 1949, 1964, and 1970, as amended.

2.

Public Law 480 program. The Service conducts programs which facilitate the sale of agricultural commodities for dollars on credit terms. In addition, large quantities of these commodities are donated to foreign governments, intergovernmental and voluntary agencies and the World Food Programs in some 100 countries. These programs are authorized by Titles I and II of the Agricultural Trade Development and Assistance Act of 1954, as amended (Public Law 480).

3. Commercial Credit and Barter programs. The Service conducts the CCC Export Credit Sales program under authority of the Corporation's charter authority and Section 4 of the Food for Peace Act (7 U.S.C. 1707a). This is a commercial program under which U.S. agricultural commodities obtained either from corporation inventories or from private stocks are financed for export up to a maximum credit period of three years. For all transactions there is required an irrevocable letter of credit from an acceptable foreign or U.S. bank assuring payment in dollars, with interest at rates comparable to private U.S. commercial rates. The Service also conducts, under the CCC Charter Act and the Agricultural Trade Development and Assistance Act of 1954, barter transactions which use agricultural exports to generate the funds to pay for goods and services which U. S. Government agencies would otherwise buy abroad with dollars. Exports are restricted to areas where they will help maintain or increase the U.S. share of markets, thereby benefiting the balance of payments. In exceptional circumstances, barter may also be used to procure strategic materials for the national and supplemental stockpiles. Other than in stockpile barters, the agricultural commodities may be from private stocks or from those acquired by CCC in its support operations. No new contracts for strategic materials have been made since fiscal year 1968 and none are planned. Activity under these old contracts was completed during FY 1971.

Organization.

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The work of the Service is carried out by the staff in Washington, D. C. and a field representative in New York City.

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a/ Reduction of $250,000 due to employment limitations in fiscal year 1972.

4,003,000 a/187 3,633,000 179

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a/ Agency estimates a reduction of $250,000 will be made in 1972 obligations due to employment limitations.

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(1) A decrease of $370,000 due to employment limitations.

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This agency is financed by an allotment of funds from the Commodity Credit Corporation, since its functions relate entirely to carrying out programs and activities financed by the Corporation. The Export Marketing Service conducts the export selling programs of the Corporation and the results of its activities are included in the financial statements of CCC. The head of the agency is also a Vice President of CCC.

STATUS OF PROGRAM

The Export Marketing Service has primary program responsibilities for the Department's export activities. The financing of these programs is through the appropriation "Commodity Credit Corporation, Reimbursement for Net Realized Losses" and "Public Law 480". Additional details of these programs may be found under the CCC activity and the Foreign Assistance Programs and Special Export Program activities. The administrative expenses of the agency are financed from an allotment of funds from the Commodity Credit Corporation, "Limitation on Administrative Expenses". The following activities were carried out under the programs administered by EMS during fiscal year 1971.

COMMODITY EXPORTS

Equally important, commercial Two of the programs designed

Agricultural exports reached a record $7.8 billion. sales for dollars made up 86 percent of the total. to increase commercial sales for dollars are the Export Payment Program and Sales from CCC-owned Stocks.

Export Payments on Wheat and Rice

Export payments are made to U.S. exporters to enable them to be competitive with major exporting nations. In fiscal year 1971 export payments were made on most of the wheat exported and virtually all of the rice. The wheat payment rate averaged abour 23 cents per bushel. Payments on wheat exports for the year totaled $140.2 million and for wheat flour about $7.1 million, making a total for wheat and products of $147.3 million. The rice export payment averaged about $1.02 per hundredweight and totaled $37.6 million. (All data includes payments for PL-480 exports as well as on commercial sales.)

Sales for Export from CCC-owned Stocks

Sales of Government-owned commodities are made when stocks of U.S. export firms are inadequate. On occasion, sales of these commodities are also made to foreign governments or to private relief organizations at special prices for school lunch and other charitable uses. In fiscal year 1971, the following commodites were sold from CCC-owned stocks: wheat, barley, grain sorghums, rice, rye, butter, nonfat dried milk, cottonseed oil, and linseed oil. Proceeds from such sales totaled $118.4 million.

PUBLIC LAW 480

The Public Law 480 program was extended through December 31, 1973, by the Agricultural Act of 1970. During fiscal year 1971, the transition from sales for local currency to sales for long-term credit repayable in dollars continued. Local currency sales represented 27 percent of the commodity shipments compared to 37 percent during fiscal year 1970 under the Title I program.

Although fiscal year 1971 programs were limited by strict controls requiring continuous monitoring of program operations, transportation problems connected with rail and dock strikes contributed to net outlays being below budgeted

amounts.

Shipments under Title I, totaling $800 million were made up mainly of wheat, rice, cotton, and vegetable oil products. Ocean transportation costs financed amounted to $51 million.

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