The State Department favors the enactment of appropriate legislation to transfer from the Department to other agencies of the United States Government operating responsibilities for further disposal of overseas surplus property. The proposed bill provides for this transfer of responsibility to the owning agencies as rapidly and as effectively as can be reasonably managed.

There is, however, a very considerable work load remaining in connection with agreements and commitments which have already been entered into by the Office of the Foreign Liquidation Commissioner as an Office of the Department of State which the Department must, in our opinion, continue to handle and which it would be both unreasonable and inefficient to impose on other agencies. The proposed legislation provides for an orderly completion of the Department's responsibility in this respect. The Department is prepared to continue to discharge these residual responsibilities until such time as they are completed or it is determined with the owning agencies and representatives of the President that what remains of this work can be appropriately turned over to the owning agencies or other agencies for completion.

Mr. Ramsey, the Foreign Liquidation Commissioner, who is here on my left, Mr. Chairman, will outline for you in more detail the way in which we believe the division of responsibility under the terms of the bill should be set up, and is also in a position to discuss with you, if you desire, the nature and extent of the remaining foreign disposal problems.

The CHAIRMAN. The committee would like to hear from Mr. Ramsey. Mr. Ramsey.

STATEMENT OF FRED W. RAMSEY, FOREIGN LIQUIDATION COMMISSIONER, DEPARTMENT OF STATE

Mr. RAMSEY. Mr. Chairman and members of the committee, in the opinion of the Office of the Foreign Liquidation Commissioner, the work of completing foreign surplus disposal can be effectually accomplished under the proposed legislation.

In consultation with the Bureau of the Budget and the owning agencies, we have agreed that a redistribution of the remaining functions of disposal may now be undertaken. The work remaining, in our opinion, divides into two main brackets:

I. The responsibility for disposal of surplus property not yet committed for sale on the effective date to be determined under the proposed enactment. This includes surplus property in inventory as well as additional surplus not previously committed under engagements of the Department of State. The proposed legislation would place this work in the agencies owning the surplus property-all this overseas, of course.

II. All work necessary to completely carry out engagements for the sale of surplus property entered into prior to the effective date. It is considered essential that this work be performed by the Department of State and the proposed legislation so provides, except as otherwise directed by the President.

In respect to the first bracket, it is the view, I believe, of the Military Establishment that the transfer of the disposal function on remaining inventory and new surplus could be effected by July 1, 1948. Until that date the Department of State would continue its sales activities.

In respect to the second bracket, I wish to touch upon the character of the functions which the Department of State, for the time being, should retain and discharge. There are two major functions involved:

1. Completion of all work incident to sales and commitments made prior to the effective date of the proposed transfer of future disposal functions, including deliveries to be completed under bulk sales to foreign governments.

The work load here involved is extensive and while it will be progressively rolled up in the course of fiscal 1949, it will take most of that year to finalize operations in this category. The work includes the turn-over of property sold prior to the effective date; all billing and collection functions; and the completion and audit of all accounts and records. It also involves the examination of claims relating to discrepancies in delivery from our contractual obligations and the making of any nécessary adjustments in respect thereto. This work load embraces a vast amount of detail and a great variety of operational procedure, much of it being performed, may I say, on the site overseas in the various offices of the Foreign Liquidation Commissioner. For example, in Europe alone there are over 2,000 contracts arising out of recent sales of property situated in Germany. Deliveries under these contracts require many months and the final billing, auditing, and adjusting of any contract can only be done after delivery is effected.

The CHAIRMAN. To whom would such sales be made?

Mr. RAMSEY. They would be made, sir, to foreign governments— there are quite a number of them in the list-and to private interests, private enterprises.

The CHAIRMAN. In Germany or—

Mr. RAMSEY. Made out of German surplus and made by our office at Paris with its stations in Germany, but not to German buyers. The CHAIRMAN. Sales to foreign governments, to countries other than Germany. What countries would that be?

Mr. RAMSEY. They would include such countries as France and Italy and Greece and all of the countries that are on the list that we are presently in open relations with.

The CHAIRMAN. Former allies?

Mr. RAMSEY. Yes; and members of the group of 16 nations.

The CHAIRMAN. Would they include sales to eastern European countries as well?

Mr. RAMSEY. Not in this recent period, sir. Earlier there were sales to some of the there have been fairly recent sales to Poland, I should say, under credit arrangements entered into quite a long time ago.

The CHAIRMAN. Would they include sales to Czechoslovakia?

Mr. RAMSEY. Czechoslovakia was acquiring property until recently. The CHAIRMAN. To both the Government and individuals?

Mr. RAMSEY. I think largely Government. There may have been some individual sales.

The CHAIRMAN. Have there been any sales to Russia?

Mr. RAMSEY. Practically none, sir. Going back a considerable distance, there were a few fragmentary transactions, but nothing of any importance.

The CHAIRMAN. What would such sales consist of?

Mr. RAMSEY. I would ask my associate, Mr. Noyes, to give you that. The total amount, I am just advised by my colleague, sir, is within $100,000.

The CHAIRMAN. That covers the total period since the end of the war?

Mr. RAMSEY. Since the beginning of our operation, sir, yes, the last 2 years.

The CHAIRMAN. And that applied only to property that has been declared surplus?

Mr. RAMSEY. Yes.

The CHAIRMAN. What does this property consist of, largely? Mr. RAMSEY. Mr. Chairman, it is every variety of property. It has run largely to motorized vehicles in every state and condition. There have been some consumers' goods, very little food supply in it, some medical supplies. There has been considerable construction equipment, considerable in the way of rubber, tires particularly, some construction building material, machinery, machine tools, and really a great variety of things.

The CHAIRMAN. Material such as automotive equipment?

Mr. RAMSEY. Automotive equipment is very large; aircraft to some extent but on a very restricted basis.

The CHAIRMAN. And some consumer goods, probably not negligible but small in comparison to the others.

Mr. RAMSEY. Small in comparison because our Military Establishments have needed the consumer type of items and UNRRA consumed a very considerable volume of what has been declared to us.

The CHAIRMAN. That is, in the way of consumer goods and expendables?

Mr. RAMSEY. Yes.

The CHAIRMAN. About what remains to be disposed of? Perhaps you will cover that later.

Mr. RAMSEY. If I may go on a little, I shall be glad to.

Mr. WOOD. Mr. Chairman, may I break in for just a moment to add one fact here that is pertinent?

The CHAIRMAN. Yes, Mr. Wood.

Mr. WOOD. In many cases after the sales efforts had gone on for some time, and there was a residual amount that wasn't selling very fast-that is true in the case of Britain and in the case of France and others—the selling job has been wound up in those countries by a bulk sale. That was done early this year in connection with the remainder of the German surplus property. It was sold to the

Bizonal Economic Agency and therefore will remain in Germany and will ultimately be used there. That was the residual amount of property that had not been sold and that had been well picked That is a common practice. There was precedent for it in other cases. It is the way to wind up as far as the major selling activities are concerned.

over.

The CHAIRMAN. There is a bill before the committee, S. 2109, the so-called steel scrap bill, which the committee hasn't considered as yet and which personally I haven't studied, but I understand it applies to the return of steel scrap from foreign countries to the United States. The committee does not wish to go into a general discussion

of that bill at this time because we will have to consider it on its own merits later, but can you tell us if there is any great amount of steel scrap in foreign countries still belonging to the United States, and what about the feasibility of returning it? Should it be returned to this country, converted, and then restored or resold or refurnished to the foreign countries?

Mr. WOOD. I believe all that is the property of the United States Government has been brought back, or is being brought back; isn't that correct? There is, of course, a considerable amount in the rubble in Germany, and we have recently had a commission over there composed of steel experts and Government representatives, representing Commerce and State and the Army, which has been studying this question. They have brought forth a report which I believe has been taken into account in the bill before you. I believe, however, that the amount of scrap owned by the United States Government, Armygenerated scrap, has either been brought back or is well on the way to being completed-in Germany, that is.

Now, there would be some in the Far East still, I believe.

Mr. RAMSEY. I would add something to that, very briefly. Under the President's counsel and direction and that of Mr. Steelman, 5 or 6 months ago, we put into effect a requirement upon all of our selling agents over the world that any scrap that we had to do with or any property which had only a scrap end use be sold only with a warranty for return to the United States. The armed services largely dispose of their own scrap and they have been under the same restraint for the last 5 or 6 months and have been only selling their scrap and salvage where it contained ferrous scrap material for return to the United States. It has been under that control for some time.

The CHAIRMAN. Was there much of that scrap disposed of before the armed services came under such restrictions?

Mr. RAMSEY. Yes. I think probably a considerable quantity, but the heavier volume has been coming up since this restriction has been placed upon us all.

Senator HOEY. Mr. Chairman.

The CHAIRMAN. Senator Hoey.

Senator HOEY. Mr. Ramsey, can you tell us what is the total amount of surplus property undisposed of under the State Department in foreign countries?

Mr. RAMSEY. I can give you the round figures, sir. We have had declared surplus to us for disposal approximately $11,000,000,000 worth of surplus at procurement cost in the United States. We have sold or have covered by contract of sale over $10,000,000,000 worth of that $11,000,000,000. So that at the moment the disposal rises on 90 or 95 percent of the total amount which has thus far been declared surplus.

Now, beyond what has been declared, there is a potential of further surplus arising which may run anywhere between $500,000,000 and $1,000,000,000, and it would be that residue coming up later which it is proposed the owning agencies themselves dispose of after June 30 next, together with any inventory remaining in our hands which we have not covered under contracts or commitments.

The CHAIRMAN. I believe that S. 2109 directs the State Department to enter into negotiations to seek the return to the United States of steel which has already been sold in foreign countries. Would you

consider that you could get practical results from entering into such negotiations?

Mr. RAMSEY. I doubt, sir, that we could. You confront, of course, the rights of the other man.

The CHAIRMAN. I believe the bill, although I do not have it here, directs the State Department to try.

Mr. RAMSEY. To try, perhaps. Are you familiar with that?

Mr. NOYES. We have submitted our comments to the committee. They were prepared in the Legal Division. I could not quote them at length now.

The CHAIRMAN. You will undoubtedly be called upon to testify in that respect when we consider S. 2109 directly.

Mr. RAMSEY. Very good. If I may proceed, then?

The CHAIRMAN. You may proceed.

Mr. RAMSEY. The second bracket remaining for the State Department to discharge are these: Servicing and administering credit arrangements with foreign governments.

These credit arrangements are extensive, involving 40 countries and approximately $1,000,000,000 of moneys due us under the contracts. Related importantly to these credits are the educational undertakings provided for in the Fulbright Act 3 and the acquisition of real property for the use of State Department missions overseas authorized by the Foreign Service Buildings Act. It has been proposed that the Treasury Department assume responsibility for these accounts when they have become firm. Nearly all of these accounts are indeterminate as to amount, in that deliveries are still being effected, adjustments are still being negotiated, and determinations in respect to acquisitions of property being made.

There are three lesser functions which are, however, of substantial interest and importance:

1. Lend-lease activities. A considerable volume of lend-lease transactions are still pending and will probably extend well into fiscal 1949. These transactions involve the disposal of lend-lease property offered for return by the holding government and pertain principally to lendlease property in the hands of the United Kingdom. This operation is the responsibility, we believe, of the State Department. I am not suggesting that will be an operation that will be prolonged for any great length of time. I think in the next 12 months it can be pretty well wound up and completed.

2. Military transfers. Military transfers involve continuing work load related to the transfer to the countries of the Western Hemisphere and others of surplus property of a military character. It is possible that a transfer of this function can presently be made to another agency of the United States Government, but, inasmuch as considerations of foreign policy are paramount, it is obvious that the Department of State will have a continuing interest in this operation.

3. Reparations. The disposal of reparations which may be allocated to the United States has become the responsibility of the State Department, which stands as owning agency when properties are turned over to our Government. The volume of further work attending this activity cannot be foreseen at this time. It pertains particularly to additional industrial plants which may be allocated to the

In this connection, see letter dated April 15, 1948 from Hon. J. W. Fulbright, p. 130, and letter dated April 26, 1948, p. 132; also letter from Charles E. Bohlen, counselor, Department of State, p. 131.