Past and present experience is showing that the major part of the world is woefully short of adequate transportation and communications facilities. The use of light utility aircraft has proven to be of inestimable benefit in the rapid and logical development of these underdeveloped nations. We feel that our products are aiding large scale international development, since the major use of these products is necessary transport in the expansion of local business and trade. The increasing use and sales potential of light aircraft in necessary transportation in the underdeveloped nations can be said to be many times the present volume, as their local economies continue to expand. This follows because the use of light aircraft has proven to be the least expensive form of transportation where satisfactory surface transport is not available. The lack of adequate finance capital is the largest deterrent to increased utilization and purchase of this equipment to meet the rapid growth of transport needs. Since financial credit has been a major factor in the economic growth in the United States of America, it follows that foreign financial aid is vital in the development of the many oversea markets. Our individual companies are in no position to evaluate the shifting political and economic, as well as the normal credit problems in numerous foreign nations. In addition, we cannot absorb the credit risks in doing business with entities in these many countries. It is becoming apparent that foreign manufacturers are selling aircraft products largely by offering short- and long-term credits. This foreign competition is growing rapidly and will continue to do so at the expense of U.S. trade, unless competitive financing can be offered by U.S. manufacturers. Therefore, our industry feels a tremendous need for aid in providing some method of credit financing for our foreign customers which would be comparable to that received by our domestic accounts. In general, the proposal of the National Coordinating Committee for the establishment of an Export Credit Guarantee Corporation meets with our approval. It is very evident that positive action should be taken at the earliest opportunity. Otherwise, our European competition, with presently available credit insurance, will acquire the major portion of these markets. It would be very difficult to recoup this loss. It is known that foreign government and business people resent the fact that U.S. business in general will not grant financing terms to foreign customers; although Russian and European firms do grant this aid. When we are able to offer our customers a means of financial credit on a private enterprise basis (but with Federal support) international government and business relationships will enjoy a much greater degree of friendship and trust. In turn, foreign trade must increase and our own national economy must benefit in gross national product. The end result will be of lasting mutual benefit to all concerned. In summary: We believe that approval of treasury support for an Export Credit Guarantee Corporation, or some other method to accomplish the same results, will enable our industry to increase its sales by a conservative 50 percent during the first year of participation. Since total benefits to the U.S. economy could be expected to assume even greater proportions, we sincerely urge that the Senate Committee on Interstate and Foreign Commerce encourage a careful and objective analysis of the National Coordinating Committee's proposal. We would hope for legislation, at the earliest date, which will assist U.S. business to grant financing terms as attractive as those being offered by foreign competitors. Very truly yours, M. F. MELLINGER, Export Manager, Commercial Aircraft Division. HARBISON-WALKER REFRACTORIES CO., Hon. WARREN G. MAGNUSON, Chairman, Committee on Interstate and Foreign Commerce, U.S. Senate, Washington, D.C. DEAR MR. MAGNUSON: Your letter of February 26 is respectfully acknowledged and the opportunity to submit a written statement regarding proposed export credit insurance guaranteed facilities is indeed appreciated. 56472 0-60-16 Harbison-Walker Refractories Co., whom I serve as general credit manager, has been vitally interested in export shipping for many years. Our products have contributed to the economical and industrial growth of 70 nations all over the world. Our industry was classified as critical during World War II and granted high priorities as well as certificates of necessity for expansion of product facilities. Our contribution toward improving conditions in the countries served has been a matter of considerable pride. In doing so, we have had to face many problems such as financing, transportation, selling, and administrative details. These have all been met but not without exposing ourselves to financial risks and delay in payments, some of which is necessary to the normal conduct of business enterprises. We have been faced with credit exposures in countries without any guarantee or protection against such risks as political, exchange transfer delay, war, revolution, imposition of new Government restrictions, and similar hazards beyond our control. This During these periods, competition from other countries was covered adequately through Government guarantees and insurance. In addition, foreign competition was in a much more favorable position to offer longer terms. The facilities available to exporters during the past years through the Export-import Bank have proved extremely helpful when the transaction fell within the scope of its operation. This was generally confined to income-producing capital goods sold on terms of 1 year or longer or a guarantee of the exchange transfer. There has been a void in the coverage for exporting by U.S. concerns. we feel could be eliminated under the proposal of the national coordinating committee sponsored by the international section, New York Board of Trade for the establishment of an American Export Credit Guarantee Corporation. We are in agreement with this plan with only minor exceptions. This proposed corporation would be essentially a private enterprise; operation with Government assistance limited to political risks (such as blocked receivables) which only Government can support. Naturally the exporter should assume the responsibility for commercial risks such as insolvency or prolonged payment default. It would be their responsibility to determine whether the customer is deserving of credit based on the normal investigation and analysis used in everyday credit approval. May we invite your careful objective analysis of the national coordinating committee proposal with a view to legislation authorizing essential U.S. Treasury support. This will permit the proposed corporation to be federally chartered and incorporated. Through this corporation, U.S. commercial insurers could coordinate their direct underwriting and reinsurance of commercial risks with each other. It is vitally important that our Government provide the necessary financial backing to permit the enterprise to proceed with an export guarantee system that will be adequate and realistic for their needs. This organization should be flexible and have the ability to render immediate decisions on the exporters' problems. Please be assured that your consideration will be greatly appreciated and will prove helpful to the many U.S. manufacturers to whom exporting has become an integral and important part of their organizations. Yours very truly, G. S. MCLAUGHLIN, EXPANDING THE FACILITIES OF THE EXPORT-IMPORT BANK Statement by the International Trade Committee, James L. Donnelly, executive vice president, Illinois Manufacturers' Association, Chicago, Ill. U.S. exports for the first 6 months of 1959 were 4 percent below the same period of 1958 and 23 percent below the first half of 1957. The decline is primarily due to credit and price competition. Credit competition by other nations is made possible by government export credit insurance which is available in most industrial countries. The United States is the only major nation which does not presently have private or government export credit insurance. The Export-Import Bank of Washington, which extends term credit in foreign trade, is making its facilities available mainly for development projects abroad and for a limited category of capital goods. The Illinois Manufacturers' Association being cognizant of the fact that U.S. manufacturers may eventually lose their foreign markets unless they meet this growing price and credit competition, recommends the following: That the lending activities of the Export-Import Bank be expanded to include the financing of all types of capital goods; That the primary consideration for the financing should be direct assistance to American manufacturers and exporters without regard to the size of the enterprise; That loans or guarantees should not be extended for the development in other countries of enterprises competitive to U.S. industries; and That the processing of loan applications by the Export-Import Bank should be completed in the shortest possible time and their approval expedited in every way, thus giving U.S. manufacturers the same advantages which our foreign competitors receive from export credit agencies in their respective countries. JOHNSTON PUMP CO., Pasadena, Calif., April 18, 1960. Re National Coordinating Committee for Export Credit Guarantees. Chairman, Committee on Interstate and Foreign Commerce, DEAR SENATOR: In response to your March 31, 1960, letter, our problems in obtaining guarantees through the Exim Bank have been threefold: Too much time required; insistence upon additional financial reports; and demand for local guarantors. 1. Processing of our applications have taken from 3 to 8 months from time of filing to the date of a decision thereon made by Exim Bank officials. Our prospective customers will not wait that long for a decision in these competitive times. 2. When we first send in the application to the Exim Bank, we also send in the most recent financial statement of the applicant but by the time it is processed, the applicant's fiscal year may have come to an end, in which event the Exim Bank requests a later statement, entailing additional delay. For example: Applicant's fiscal year ends March 31. An application is filed in February 1959 with a copy of applicant's March 31, 1958, statement, the latest available annual financial statement at the time. In June 1959, Exim Bank asks for a statement for the year ended March 31, 1959. 3. Exim Bank, instead of rejecting our applications, requests that the applicant furnish local bank guarantors, upon receipt of which Exim Bank "Will give further consideration to the application." Obviously, if the applicant can furnish local bank guarantors, such local banks could finance the purchase and would prefer to do so and get the loan business rather than act just as a guarantor. Whether or not a particular applicant is entitled to credit based on an analysis of his application file can be a matter of opinion. While the undersigned does not advocate the indiscriminate approval of every application, it does seem to the undersigned that the Exim Bank has been too rigid in its financial and guarantor requirements as a condition for approval. Every applicant submitted by the undersigned has been in business for many years, and Johnston Pump Co. has transacted business with them for over 10 years. If such applicants do not merit Exim Bank approval, it is inconceivable to the undersigned what kind of applicants would. The undersigned is A. H. Miller, age 52, and resides at 1471 Westhaven Road, San Marino, Calif. Respectfully, A. H. MILLER, Vice President-General Manager. Hon. WARREN G. MAGNUSON, THE LUMMUS Co., New York, N.Y., March 9, 1960. Chairman, Committee on Interstate and Foreign Commerce, U.S. Senate, Washington, D.C. MY DEAR SENATOR MAGNUSON: The officers of the Lummus Co. appreciate the opportunity afforded by your committee to submit a statement in connection with the hearings on export credit facilities. As pointed out in our letter of March 3, we are unable to have a representative attend the hearing on March 16. In lieu of an oral statement, we respectfully request the admission of this letter and attachments as our written statement of interest. In This company is engaged in the design and construction of industrial process plants throughout the free world. It has been our experience that foreign clients often prefer services and equipment from the United States, not only because of superior quality, but for reasons of faster delivery and installation. Negotiations with such clients frequently require long-term financing with its attendant risks of nonpayment for both commercial and political reasons. recent years, requests for 5- to 8-year credit terms have not been unusual. Of current interest to the Lummus Co. is the situation in Latin American countries where there is a tremendous demand for industrial development with potential clients interested mainly in plants and equipment of American design. Due to the present weak financial situation in many of these countries, projects of considerable magnitude are being awarded to the European market because of the availability of long-term financial arrangements supported by credit guarantees. We have felt, for some years, that our efforts to provide American industrial "know-how" and equipment in foreign countries have been hindered by the lack of a credit guarantee scheme similar to those plans which now exist in the leading European industrial countries. Those plans are available to our foreign competitors and, in many instances, the negotiations narrow down to the engineering firm which presents the best long-term financing scheme. We have been successful in obtaining such contracts but financing has been provided through credit facilities available to our foreign subsidiaries. Most notable was the recently completed oil refinery in Naantali, Finland, which supplies one-half of that country's current demand for petroleum products. We are pleased to provide as an attachment herewith, a reprint of an article from the French petroleum journal "L'Industrie du Petrole," which sets forth the interesting development of this project from its initial proposal in 1938 to the formal inaugural in 1958. The inaugural message of Mr. U. Raade, Director General of Neste Oy, refers particularly to the financial difficulties encountered, and praises French banking interests for their understanding support of the project. In connection with the inaugural ceremonies of the Finnish refinery, the Lummus Co. published one of its "New Horizon" series of brochures entitled "Lummus at Neste Oy," a copy of which also is attached. The descriptive material and photographs included therein give some indication of the industrial "know-how" and equipment which this company can provide abroad, in many cases only by the support of long-term credit arrangements. The Lummus Co. enthusiastically supports the proposal of the National Committee for Export Credit Guarantees for the formation of an American Export Credit Guarantee Corporation to correct the present disadvantage faced by U.S. industry. We firmly believe that, in the tradition of American free enterprise, such a corporation should be managed privately. Because of our interest in major industrial projects throughout the free world, we solicit your committee's consideration of legislation authorizing U.S. Treasury support so that an American Export Credit Guarantee Corporation may be federally chartered and incorporated at an early date. Respectfully submitted. D. BREIEN, Vice President, Administration and Finance. MACK TRUCKS, INC., Plainfield, N.J., March 7, 1960. Hon. WARREN G. MAGNUSON, Chairman, Committee on Interstate and Foreign Commerce, U.S. Senate, Washington, D.C. DEAR SENATOR MAGNUSON: We find it increasingly more difficult to compete in the world markets due to a number of factors, including the lack of credit facilities to finance the exports and also the fact that our selling prices are not competitive with foreign producers, due to our higher cost of production. We have tried continuously to increase our export market because the increased sales volume reduces our overall production costs making more jobs available for American workers as a result of being able to sell more trucks at home as well as abroad. There is increasing need for additional credit facilities with more liberal credit terms including longer maturities, lesser down payments and still maintaining a 5 percent or 6 percent simple interest finance charge. We have always considered that the political risk is as important a factor in the extension of credit as any other factor connected with export sales. It is difficult for us to compete with other industries where the exporters have credit-insuring facilities. We have made use of the facilities of Export-Import Bank but we find that these facilities are not adequate to handle the situation, as far as maturities and also interest rates. As Mack Trucks, Inc., has been an expanding corporation in the past 5 years, we have limited working capital to use for our own financing of foreign sales. Our restrictions on the use of our working capital are placed upon us by our own commercial bank and investment company loans. We know of no agency or corporation existing in the United States that has an export credit guarantee similar to those in foreign countries. The Eximbank has been very helpful to Mack in certain circumstances; however, it is a detailed and consuming operation when a special export deal comes up for action. We are in complete support to the proposal of the National Coordinating Committee (sponsored by international section, New York Board of Trade) for the establishment of an American Export Credit Guarantee Corporation. We feel that there is a sound need for the establishment of this corporation as quickly as possible. This corporation will be operated as a private enterprise with the Government assistance limited to political risks, as the Guarantee Corporation will normally pay its own way from premiums received and from other income. The Government support would be of a temporary nature to meet situations such as when receivables are frozen in a foreign country. The Treasury would be reimbursed when the receivables were unfrozen.. Commercial risks are generally in connection with default of payment, bankruptcy, etc., whereas political or noncommercial risks are for imposition of new Government restrictions, war, exchange transfer delays and similar items that are beyond the exporter's control. We urge that the Senate committee carefully and objectively analyze the proposal of the National Coordinating Committee with the view of legislation authorizing U.S. Treasury support so that this proposed corporation may be federally chartered and incorporated. It is important to provide the necessary Government financial backing so that private enterprises can proceed to put the export credit guarantee system into early operation. It is desirable that the organization be established along commercial lines where quick decisions can be given as opposed to a wholly owned and managed Government operation. We thank you for your consideration. Sincerely yours, C. G. HOFREITER, Vice President. Hon. WARREN G. MAGNUSON, ZENITH SALES CORP., Chicago, Ill., March 9, 1960. Chairman, Committee on Interstate and Foreign Commerce, U.S. Senate, Washington, D.C. DEAR SENATOR MAGNUSON: In connection with the hearings of the Senate Interstate and Foreign Commerce Committee, dedicated exclusively to a searching |