Mr. DEWBERRY. I do not know what they would do but they would find some way to haul us in. The problem of complying with Government regulations reaches the absurd and the attendant frustration becomes untenable when one agency mandates action directly in conflict with another.

Recently, after several months of discussions involving representatives of the SEC, the IRS, the Treasury Department, and the American Institute of CPAs, the IRS ruled that disclosure in financial statements of the income effect of the liquidation of a LIFO-inventory layer will not violate the conformity requirements of the tax law and thereby deny a company the right to continue the LIFO method for tax purposes.

IRS decided to permit the disclosure even though, in its view, it represents a technical violation of the literal requirements of the tax law. During this time, the SEC maintained that if the LIFO-inventory liquidation had a material effect on the company's financial statements that disclosure was required under SEC rules and proper financial reporting practices. Until a settlement was reached on January 19, 1976, a company was in the "Non-win" position of either being in violation of SEC requirements or being afoul of the tax laws and losing the ability to use the LIFO method for tax determining purposes.

I am encouraged by the support that Congressman Levitas has with the bill he submitted and which will provide Congress with a second look at administrative rules before they become effective, and, Senator, I am also heartened by your bill which will cure some of these regulatory ills which we have been speaking of. I appreciate the opportunity to present my views.

Senator NUNN. Thank you. We will be glad to put all of your prepared statement in the record, Mr. Dewberry.

[The prepared statement of Mr. Dewberry follows:]

PREPARED STATEMENT OF L. GLENN DEWBERRY, JR., PRESIDENT, ATLANTIC STEEL

COMPANY, ATLANTA, GA.

My name is L. Glenn Dewberry, Jr., and I am President of Atlantic Steel Company, here in Atlanta. Thank you for this opportunity to present some of my views toward the proliferation of Federal rules, regulations and restraints. Atlantic Steel Company is a publicly held company with approximately 1,800 stockholders, employing 1,700 employees. We are an independent steel producer with a wholly-owned subsidiary which manufactures pre-engineered metal buildings and steel tubing. The company is celebrating its 75th Anniversary this year.

In recent years, we have seen an unbelievable growth in government control of every aspect of business endeavor. Today, management spends less and less time in decision-making while more of its time along with lawyers, accountants, and actuaries is spent attempting to comply with laws, rules and regulations administered by a multiplicity of bureaus, agencies and commissions.

Personnel activities are now controlled by governmental agencies-Equal Employment Opportunity Commission, Office of Federal Contract Compliance, the Occupational Safety and Health Commission, and the Employment Retirement Income and Security Act.

Industrial development decisions, such an expansion or relocation, are controlled by the Environmental Protection Agency, and sales activities are controlled by consumer protection agencies and the Federal Trade Commission. Cutting unnecessary government spending, eliminating the red tape and confusion, and streamlining the bureaucracy is absolutely essential if our private enterprise system is to have any future at all.

According to Dr. Murray Weidenbaum, of Washington University, business and individuals are now required to fill out over 5,000 different types of gov

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ernment forms-taking an estimated 130 million manhours each year to complete.

During the past fifteen years, I understand that the Federal Register has expanded from 15,000 pages of fine type to the 60,221 pages last year. Embodied in these 60,000 pages were 25,000 separate regulations, modifications and changes. A major-often crucial-problem of business management today is that of capital formation-the struggle to accumulate funds for replacement, modernization and expansion of facilities.

When depreciation is woefully short, retained earnings are low, equity investment is unattractive, borrowing is almost prohibitive, new social programs require more capital with no promise of improved productivity, business is being asked to absorb the cost of stringent new environmental measures, expanded health and safety standards, the development of new energy sources, and the impact of the Employee Retirement Income and Security Act of 1974. No one doubts the benefits of these programs. But can we afford them? Are they worth the cost? Has Congress balanced the cost against the benefits?

To cite some examples, my company is now in an expansion and relocation program-the first phase costing about $30 million. For the first furnace, which began operations last December, we have installed environmental control equipment at a cost of over $21⁄2 million dollars.

Each year, the cost of operation and routine maintenance of this equipment will be at least $400,000 none of which adds to the productivity, only to cost. I have other examples of the effect of bureaucratic mandate and confusion. Actions under the Occupational Safety and Health Act are often arbitrary and contradictory. Compliance by business is undertaken at great cost, and yet the positive results are far from overwhelming.

We still do not know all of the requirements under the Employment Retirement Income Security Act of 1974. Among other things, the Act provided that a pension plan could elect one of three types of vesting procedures and thereby remain in compliance.

When most companies had selected one of the vesting procedures provided in the Act, Internal Revenue Service issued Revenue Procedure 75-49 which in effect would have disqualified most pension plans-and nothing outside the Act had been done.

This problem may not now be a threat, but it has not been completely resolved.

The problem of complying with government regulations reaches the absurd and the attendant frustration becomes untṇable when one agency mandates action directly in conflict with another.

Recently, after several months of discussions involving representatives of the SEC, the IRS, the Treasury Department and the American Institute of CPA's, the IRS ruled that disclosure in financial statements of the income effect of the liquidation of a LIFO-inventory layer will not violate the conformity requirement of the tax law and thereby deny a company the right to continue the LIFO method for tax purposes.

IRS decided to permit the disclosure even though, in its view, it represents a technical violation of the literal requirements of the tax law. During this time, the SEC maintained that if the LIFO-inventory liquidation had a material effect on the company's financial statements that disclosure was required under SEC rules and proper financial reporting practices.

Until a settlement was reached on January 19, 1976 a company was in the "NON-WIN" position of either being in violation of SEC requirements or being afoul of the tax laws and losing the ability to use the LIFO method for tax determining purposes.

I am encouraged by the support that Congressman Elliott Levitas has with the bill he has submitted, and which will provide Congress with a "second look" at administrative rules before they become effective. I am also heartened by your bill, Senator Nunn, which will cure some of the regulatory ills of which I have been speaking, and should, as you point out, improve responsiveness on the part of Federal agencies.

Senator NUNN. Mr. Howard?

TESTIMONY OF JAMES W. HOWARD, HOWARD LUMBER & KILN CO., ATLANTA, GA.

Mr. HOWARD. I am glad to be here.

Senator NUNN. We are pleased to see you looking in such good

health. I know you had a rough experience in London and it looks like you have recovered.

Mr. HOWARD. Senator, since you brought it up, I will tell you what I have told others and maybe this is a good introduction.

I have been a small businesman in Georgia for 22 years and I have learned how to move. From this experience, I can handle terrorist bombs and the IRA in London or bureaucrats in this country.

First, I would like to say that I have a little different approach toward Government than most businessmen. I am not afraid of bureaucrats. I figure that they have a job to do and I have a job to do. If I can reach the working staff man, I like to feel we can work out our difficulties.

About a year ago, we had an Internal Revenue examiner come to our office. He was an intelligent looking young man. When he introduced himself, he said, "I know you do not want to see me." I replied, "It makes no difference to me. I have been wondering when we would be investigated since we have not had a tax audit before." He told me no one had ever said that to him before. Out of over $1 million expenses, the only disagreement we had was approximately $6,300 which we had expensed and the Revenue man wanted to capitalize. I would have fought him on that point, but my comptroller and CPA kept me away from him and made an agreement while I was out of town.

If we could develop a combination in this country of more businessmen who are willing to deal with bureaucrats in a businesslike manner and more public administrators understanding and cooperating with businesses, we could accomplish a lot more in the American economy. The purpose of this hearing as I understand it is that of small busines involvement with Government operations. I talked with Dr. Jim Greene who has been a friend for years about this committee meeting. We discussed the general purpose of the meeting. Within a day or so of that time, I was to go to Gaithersburg, Md., to appear at a hearing before the Committee on Laws and Regulations of the National Conference of Weights and Measures. I thought this was an excellent example of Government-business confusion to bring to the attention of this committee.

The hardwood industry in this country and Canada has promulgated rules for measurement and inspection of hardwood lumber for 76 years. This has become an international standard. One of the bases of these rules has been the measurement and inspection on an air dried or green basis. A board foot standard of measure on air dried or green moisture cocntent has always been accepted by industry. When lumber is kiln dried it changes its physical size by a set percentage. This percent of change is shown in a table of shrinkage values developed by the Forest Products Research Laboratory of Madison, Wis., an agency of the U.S. Department of Agriculture.

Last summer, there developed a controversy in California on the method of measurement of kiln dried hardwood lumber that involved the California Department of Weights and Measures and local lumber distributors. Industry leaders that I have discussed this with agree that consumption of hardwood lumber in California is less than 1% of the national production. In spite of this, the California Weights and Measures Bureau and local dealers decided the 76-year Industry practice was deceptive, illegal, and they would not only change local

practices but admit for the entire industry that it was illegal. I would like to point out to this committee that California redwood is shipped according to their special rules and 8/4 redwood is only 134" thick when it is dry and shipped, and 8/4 California Douglas-fir is sawn 7/4 and surfaced to 6/4 and shipped on an 8/4 count.

The action of the California group was given wide publicity throughout the hardwood industry. The first response from the National Hardwood Lumber Association, a group of 1,400 members of which 20 percent are Canadian, was that the existing method of measurement had been in use for many years and that it felt that it had not deceived anyone since everyone knows it is an industry practice.

Now we come to the interesting and confusing activities. At this point, it is a little hard to recall exactly what was said and done. There were telephone conversations and stories going around the industry. Someone said that a Government bureaucrat was going to have the executive secretary of the NHLA locked up. According to what the California Weights and Measures people said, we faced huge damage suits and possible prison terms.

In October 1975, the National Hardwood Lumber Association had its annual meeting in Atlanta. The directors of NHLA met and in discussing changes in the measurement standard for hardwoods said we had no alternative but to throw ourselves on the mercy of the National Conference of Weights and Measures and acquiese in any action they might take.

Very little opposition was made to the actions taken although I tried to point out that no standard had been established to replace the one we had been using. Following the Atlanta meeting, NHLA obstensibly under the guidance of the National Conference of Weights and Measures started giving out information as to how the Hardwood industry had to use new methods of measurement.

1

Senator, I would like to put in the record the monthly news bulletins of the National Hardwood Lumber Association from September 15 through March 15 showing the publicity given this matter. It makes very interesting reading considering the fact that no legal bureaucratic rules and regulations had been issued.

In January, it suddenly hit many of the major hardwood dealers in the East that we were about to abandon an old standard but had not established a new standard of measurement and inspection of kiln dried lumber. Many responsible lumbermen began to ask what is going on and what can we do.

For the record, I would like to submit a letter from Mr. Robert Van Keulen 2 of Grand Rapids, Mich., which is very informative on this matter.

The committee on rules and regulations of the National Conference on Weights and Measures held a meeting January 27 in Gaithersburg, Md., to discuss the industry practice of measuring hardwood lumber. I attended the meeting. When I was given a chance to testify the first thing I asked was who were the men who comprised the committee and what was their function under the law? Their response was most

1 See p. 50.

2 See p. 58.

enlightening and reassuring. This committee's responsibility is to investigate industry practices and make recommendations to the National Conference on uniform weights and measures practices to be adopted by the various States. This is a rather involved procedure which is not germane at this point.

The men who comprise this committee are representatives of various State weights and measures bureaus. The Chairman, Mr. Charles Vinson from Dallas, Tex., could not have been more cooperative. The members admitted they knew nothing of the overall problems involved. They were very anxious to hear from all sides of the issue. One of the primary purposes of this committee is to prevent undue economic hardship on industry. In convesation with their attorney, Terry Troy, he reiterated his agreement to meet with representative leaders of the hardwood industry to try to arrive at the best possible solution.

In conclusion, it is my feeling that in this particular case most of the confusion was created by businessmen not Government bureaucrats, although I must admit there were some timely assists to create this confusion from certain bureaucrats.

Thank you for the opportunity to appear before this committee. Congressman LEVITAS. I would just like to make one comment, Mr. Howard, on something you pointed out and I think this is extremely important.

Was the fact that your association-presumably of intelligent, well-educated, responsible businessmen-rolled over, put their feet up in the air, and played dead, about something that was not even the law. One of the major problems that we have, not just for businessmen, but individual citizens, is the fact that this generation of Americans has supinely accepted more regulations without complaining about it, and a loss of freedom, than any other generation of Americans.

They just roll over and play dead, and I think these hearings that Senator Nunn has convened are focusing on this, and ought to let people know, not just businessmen, but the average citizen, that Government is the servant, not the master of the people and just do not presume that you have to roll over and play dead everytime somebody says boo.

Mr. HOWARD. I could not agree more. This is exactly what I am trying to say. You are saying it better.

Senator NUNN. I think that is the key to unwinding a lot of the problems we have, to get industry to sit down with labor representatives and with Government representatives because we are all in the same boat. We have got jobs at stake; we have profits at stake; and we have competition at stake in this country. I think we need to have more joint meetings. We have to have more of a spirit of cooperation and partnership between Government and business and labor and consumer. We are going at it as if each had a separate interest, apart and not affected by the other, while all of us are really in the same boat.

Thank you very much.

Mr. HOWARD. Thank you, sir.
[Material referred to follows:]

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