The big issue, of course, is the sale of surplus material. The Defense Production Act says that minerals and metals shall not be sold at less than the current domestic market prices. Substantially the same provision, but in different words, is provided in subsection 7 (d) of S. 2272 which requires that sales of materials be made with due regard for protecting (1) the United States against avoidable loss, (2) producers, processors, and consumers against avoidable disruption of their usual markets, and (3) the foreign relations of the United States.

The report says that the bill repeals the Strategic and Critical Materials Stock Piling Act but it goes much further than that, as I have indicated above, without complying with Senate rule 29. The Renegotiation Act of 1951 would be amended by subsection 3(b) of S. 2272 and as indicated, the section of the Agricultural Trade Development and Assistance Act of 1954 establishing the supple mental stockpile would be amended.

There is another item in the bill which previously has been before the Senate on several occasions and which the Senate has consistently refused to approve; namely, the cancellation of the borrowing authority under the Defense Production Act and the waiving of the interest due on outstanding notes to the Secretary of the Treasury.

From the foregoing, you will, of course, realize S. 2272 is not a bill that can be passed by unanimous consent. However, if members of the Banking and Currency Committee can have some opportunity to formulate their views, agreement might be reached on amendments that would make the bill more acceptable to me and the members of the Banking and Currency Committee.

With best wishes, I am,
Sincerely yours,

A. WILLIS ROBERTSON, Chairman.

JULY 10, 1964.

MEMORANDUM

To: The chairman.

From: Matthew Hale.

Subject: S. 2272 and the Defense Production Act.

On July 9 Senator Mansfield listed S. 2272 as the second item to be taken up in the Senate's legislative program on Monday, July 20.

S. 2272, to be cited as the Materials Reserve and Stockpile Act of 1964, would supersede the Strategic and Critical Materials Stock Piling Act. In addition, section 7 of S. 2272 would establish a "materials reserve inventory," into which would be transferred materials in the custody of GSA acquired under the Defense Production Act and materials acquired under the Agricultural Trade Development and Assistance Act of 1954.

The effect of this would be to make a number of substantive changes from the operations and procedures being followed under the Defense Production Act. 1. Notes representing the acquisition costs of materials so transferred, together with unpaid interest thereon, would be canceled, and the borrowing authority under section 304 (b) of the Defense Production Act would be correspondingly reduced. Waiving interest and canceling notes under the borrowing authority of title III of the Defense Production Act has been the subject of discussion this year, in 1962, and earlier. Up to the present time, approval of such waivers and cancellation has been denied.

2. Materials in the Defense Production Act inventory may not be sold at less than the current domestic market price. This specific limitation is not included in S. 2272, which contains only a general provision that sales must be made with due regard for protecting the United States against avoidable loss and producers and processors against avoidable disruption of their usual markets. In 1962 it was proposed to eliminate the word "domestic" from this provision of the Defense Production Act. However, the proposal was not adopted by the Congress.

3. There is no requirement in the Defense Production Act for any delay in selling commodities acquired under that act. The timing of a sale is entirely within the discretion of the agencies administering the act. S. 2272 would

impose on sales from the new materials reserve inventory, and consequently on all materials in the Defense Production Act inventory, a requirement of at least 60 days' delay, and would subject them to veto by resolution of the Senate or the House.

4. Section 303 of the Defense Production Act contemplates that materials may be purchased for resale at a lower price where this is necessary to increase the supply of the materials by encouraging high cost sources of production. No such programs are now being carried on, but in recommending approval of H.R. 10000, extending the Defense Production Act to June 30, 1966, the committee expressly recommended continuance of sections 302, 303, and 304 "to continue available to the Executive the means for quick and decisive action to meet a materials supply problem in a new emergency." If materials acquired under programs of this sort were subject to the 60-day waiting period imposed by section 7 of S. 2272, the purpose of the program would be frustrated.

The CHAIRMAN. The distinguished patron of the bill felt that his committee was unanimous, all of the agencies were unanimous and he didn't want to change the bill.

I called attention to the fact that if we passed his bill without change, we would still have under the title I of the Defense Production Act priorities and allocations, under title III of the act we would have the matter of guaranteed V-loans and under title VII voluntary agreements, and so on. Some members of our committee wanted to go into the question of just what this bill did to our jurisdiction and just why we should yield our jurisdicton over the Defense Production Act inventory to the Armed Services Committee. And that is the purpose of this meeting.

All members of the committee received a letter in which I outlined what was involved.

We would be glad to recognize now our distinguished colleague from Missouri, Mr. Symington.

Senator BENNETT. Mr. Chairman, before the Senator starts, may I raise a question with the Chairman?

The CHAIRMAN. The Senator from Utah may do so.

Senator BENNETT. In your statement you said this bill gave the Government the power to buy surplus material. Now actually when we were buying much of this material it was not surplus, it was very badly needed. Magnesium is an example, molybdenum at one time, and one or two others. So we were buying strategic material rather than surplus material.

Later on some of these things became surplus, but it was not the original intention of the program to use it to support markets by taking surplus off the market. We were buying necessary strategic

material.

I hope you will excuse me for trying to make that correction in the record.

Senator ROBERTSON. I agree entirely. Your point is a good one. I did not mean to suggest that the Defense Production Act was designed to take surplus materials off the market, though on occasions this may have been the result of the contracts.

Senator SYMINGTON. May I proceed, Mr. Chairman?
The CHAIRMAN. You may proceed.

STATEMENT OF STUART SYMINGTON, U.S. SENATOR FROM THE STATE OF MISSOURI; ACCOMPANIED BY JAMES J. GEHRIG, LEGISLATIVE ASSISTANT; WILLIAM H. DARDEN, PROFESSIONAL STAFF MEMBER, ARMED SERVICES COMMITTEE; AND J. FRED BUZHARDT, LEGISLATIVE ASSISTANT TO SENATOR THURMOND

Senator SYMINGTON. Mr. Chairman, first on my right is Mr. Fred Buzhardt, legislative assistant to Senator Thurmond, who has been of great assistance in this matter, and who understands the bill at least as well as anybody.

On his right is Mr. Darden, the head of the staff of the full Armed Services Committee, who understands the law brought up in the letter you wrote the majority leader.

On my left is Mr. Gehrig, my legislative assistant. This has been a complicated matter and I have taken the liberty of asking these gentlemen to sit with me.

I have a short statement here which I would read if it meets your approval. I would appreciate reading it through before being questioned.

The CHAIRMAN. You may proceed, but we are making a record that we will have to distribute to the members who are not here, so let's make a complete record while we are at it.

Senator SYMINGTON. Mr. Chairman and members of the committee, it is with pleasure we appear today to discuss S. 2272, as amended.

As you know, the purpose for stockpiling critical and strategic materials is to meet the needs of national defense in times of emergency. It is the purpose of this bill to provide for such stockpiles and also provide guidelines to the executive branch for stockpiling manage

ment.

The present stockpiles of strategic and critical materials have an acquisition cost of approximately $8,600 million. Of that amount, about $5,100 million is now considered excess to requirements by the agencies involved, Defense, OEP, General Services Administration, and so forth.

Without going into the reasons why there is such an incredibly large unneeded surplus, we will all agree that the American taxpayer has a right to get back some of this large investment, now that it is no longer needed.

The subcommittee took some 9 months to study the legislation, then voted it out unanimously to the full committee. The bill was thereupon studied and later reported unanimously to the Senate by the full committee.

All executive agencies support the bill unanimously. The Bureau of the Budget says it has no objection. The administration urges early action.

Under present laws, Congress must take affirmative action before a stockpile disposal can be made from the national or supplemental stockpiles if the materials in question have not been declared obsolescent.

In that connection, anything could be declared obsolescent as a method to effect sale. Disposals from the Defense Production Act inventory can be made without any congressional action of any kind whatever.

The Defense Production Act inventory is free from any congressional control. But the materials must be sold at not less than the domestic market price. It was the committee's hope that a bill would be reported out which would give to the executive branch reasonable management flexibility to operate these huge stockpiles in a businesslike manner.

Under S. 2272, all strategic and critical materials would be placed in two stockpiles. First, the national stockpile which would hold all materials needed to meet stockpile objectives, and, second, the materials reserve inventory which would hold all materials excess to stockpile requirements.

Under S. 2272, disposals of excess strategic and critical materials would be made from the materials reserve inventory, and the bill provides disposal criteria to be followed by the executive branch.

All disposals would have to be made so as to protect the United States against avoidable loss and avoid disruption of usual markets. No disposal could be made until 60 days after notice of the sale had been published in the Federal Register and written notice sent to the House and Senate Committee on Armed Services.

If, during that 60 days, either of the Committees on Armed Services reported out a resolution disapproving the sale, disposal would have to be held up another 40 days. The resolution would be privileged and if, during that 40 days, either the House or the Senate passed such a resolution, the disposal could not be made.

This was a compromise suggested by Senator Thurmond and his staff; namely, maintaining some congressional control, but not requiring action by both Houses.

Thus, as I said, a single House of Congress could prevent any disposal.

This provision of S. 2272 follows closely the Reorganization Act of 1949, as amended. The language allows Congress to retain control over disposals. At the same time, it provides the executive branch with that flexibility essential for efficient management.

As you know, under existing law, Congress does not control disposals from the Defense Production Act stockpile and has control over disposals from the national and the supplemental stockpiles only if the materials have not been declared obsolescent.

And under present law, materials can be declared obsolescent if they are no longer needed in time of war, if they have deteriorated, or if there is a development or discovery of a new or better material.

Senator SPARKMAN. Would you mind reading that sentence again? I didn't get the full import of the very first few words.

Senator SYMINGTON. I would be glad to. I think this important, and am glad you asked, because the net of it is there is no stockpile material the executive branch can't dispose of without any congressional control of any kind whatever, provided they say it is obsolescent. We have nearly three-quarters of a billion dollars worth of rubber, bought primarily to help the economy of a friendly nation; and inasmuch as that rubber is now rotting, and inasmuch as there is now no real requirement for natural rubber, since synthetic rubber is now better than natural rubber, and inasmuch as every other country in the world, including England, has disposed of its rubber stockpile, but we haven't, we still hold ours, I think this is a very pertinent point.

In this case, we are talking about nearly three-quarters of a billion dollars.

As you know, under existing law, Congress does not control disposals from the Defense Production Act stockpile-the one this committee is interested in-Congress has control over disposals from the national stockpile, the largest, and the supplemental stockpile, only if the materials have not been declared obsolescent.

I again emphasize that point, because under present law, materials can be declared obsolescent if they are no longer needed in time of war, if they have deteriorated, or if there is a development or discovery of a new or better material.

I mentioned rubber. There are others. Today, Western Electric is producing better quartz than that which can be purchased from Brazil, where nearly all of our quartz stockpile has come from.

Today, the General Electric Co. is producing diamond bort better than any diamond bort that can be mined, most of which comes from South Africa-in fact, nearly all of which comes from a single mine. So, in effect, without reaching, all of these materials mentioned could be declared obsolescent.

In fact with the definition of obsolescence provided by the present law, obviously the executive branch could first declare obsolete many, if not most, of the materials now in excess to stockpile objectives, and then dispose of them without any congressional authority whatever, in any way they saw fit.

S. 2272 provides that all pertinent information relating to the stockpiling of strategic and critcal materials which does not help a possible enemy will be treated as public information.

The chairman mentioned the fact he has had difficulty in the past getting information and facts with respect to the stockpile. It is my personal opinion—and I have been chairman of the Stockpile Subcommittee for nearly 10 years-that much, if not most, of these problems would not have developed if pertinent information had been available.

In the letter of Chairman Robertson to the majority leader, the chairman states that the Armed Services Committee report on S. 2272 does not comply with section 4 of rule 29 which requires a comparative analysis of all laws repealed or amended. We believe, however, that our report is in compliance with the rule.

The Strategic and Critical Materials Stockpiling Act, which is repealed, is printed in full in the report. The sections of the Defense Production Act, and the Agricultural Trade Development and Assistance Act of 1954, and the Renegotiation Act, which is superseded by S. 2272, were not printed.

The language of these laws, however, is not changed. In some specifics, the provisions are superseded. For example, S. 2272 brings stockpile contracts under the provisions of the Renegotiation Act.

I must say, Mr. Chairman, if we, in the taxpayers' interest, put battleships, carriers, airplanes, tanks, and so forth, under the Renegotiation Act, inasmuch as the only justifications for any stockpile of any kind whatever is national defense, based on the law, I don't see why the Renegotiation Act shouldn't apply to metals and minerals as well as to fabricated units.