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EXISTING CONTRACTS

SEC. 18. (a) If (1) any processor, jobber, or wholesaler has, prior to the date of approval of this act, made a bona fide contract of sale for delivery after such date of any article in respect of which a tax is imposed under this act, and if (2) such contract does not permit the addition to the amount to be paid thereunder of the whole of such tax, then (unless the contract prohibits such addition) the vendee shall pay so much of the tax as is not permitted to be added to the contract price.

(b) Taxes payable by the vendee shall be paid to the vendor at the time the sale is .consummated and shall be collected and paid to the United States by the vendor in the same manner as other taxes under this act. In case of failure or refusal by the vendee to pay such taxes to the vendor, the vendor shall report the facts to the Commissioner of Internal Revenue who shall cause collections of such taxes to be made from the vendee.

COLLECTION OF TAXES

SEC. 19. (a) The taxes provided in this act shall be collected by the Bureau of Internal Revenue under the direction of the Secretary of the Treasury Such taxes shall be paid into the Treasury of the United States.

(b) All provisions of law, including penalties, applicable with respect to the taxes imposed by section 600 of the revenue act of 1926, and the provisions of section 626 of the revenue act of 1932, shall, in so far as applicable and not inconsistent with the provisions of this act, be applicable in respect of taxes imposed by this act: Provided, That the Secretary of the Treasury is authorized to permit postponement, for a period not exceeding 60 days, of the payment of taxes covered by any return under this act.

(c) In order that the payment of taxes under this act may not impose any immediate undue financial burden upon processors, any processor subject to such taxes shall be eligible for loans from the Reconstruction Finance Corporation under section 5 of the Reconstruction Finance Corporation act.

The CHAIRMAN. The committee will come to order. Mr. Secretary, we have asked you to come up and go over this bill section by section, explaining the terms and purposes, and answer such questions as members of the committee may see fit to ask. I think the committee has some question about title 1, and in order to conserve time I would ask, unless the committee otherwise desires, that you take up title 2 and explain it, or have anyone that you may desire do so.

STATEMENT OF HON. HENRY A. WALLACE, SECRETARY OF

AGRICULTURE

Secretary WALLACE. I may say that Mr. Lee, who drafted the bill, was not in his office when you called, but we hope to have him here in 15 minutes, and he will explain the legal points in the bill. Necessarily, the legal points will be delayed until Mr. Lee arrives.

Senator MCGILL. What Mr. Lee is this?

Secretary WALLACE. Mr. Frederick T. Lee of the firm of McCracken & Lee, who formerly was head of the Senate drafting bureau and who has been acting as special council for the Department since March 4.

Senator McGill. He is the one that drafted the allotment feature?

Secretary WALLACE. Yes; he has drafted many types of farm legislation.

Senator THOMAS. Mr. Secretary, I have received a great many telegrams from individuals and farm organizations in Oklahoma endorsing the farm program. They must have gotten the bill very quickly.

Secretary WALLACE. The substance of the bill was not known to the press or the public or the farm groups, to anyone in fact except a very small number, until yesterday noon. The bill was drawn, you understand, to carry out as nearly as possible the recommendations of the farm organization people when they met here Friday and Saturday of last week, and they might have had the bill which conformed to those recommendations—they might have had it in mind on that account.

Senator BANKHEAD. What farm organizations were those ?

Secretary WALLACE. We have a complete list of them over in the office. There were about 50 persons present representing the three main groups.

Senator BONE. The National Grange, the Farm Bureau, and the cooperatives?

Secretary WALLACE. Yes.
Senator BONE. Is this the draft of what they decided on?

Secretary WALLACE. I have not been in touch with any of them since the bill was up. I do not know how well satisfied they are with it.

The CHAIRMAN. Mr. Secretary, I will ask that you furnish a list of the representatives of the farm organizations for the record and it can be incorporated later on. Now, if you will just take the bill and go through it.

(The list of representatives asked for by the chairman is as follows :) U. B. Blaylock, president American Cotton Cooperative Association. E. F. Creekmore, American Cotton Cooperative Association, New Orleans, La.

C. G. Henry, president Midsouth Cotton Cooperative Association, Memphis, Tenn

C. G. Smith, director, Midsouth Cotton Cooperative Association, Blytheville, Ark.

Dr. Tait Butler, editor Progressive Farmer, Memphis, Tenn.
Homer D. Wade, Texas Cooperative Council, Dallas, Tex.

C. W. Holman, National Cooperative Milk Producers' Federation, Washington, D.C.

Robin Hood, secretary, National Cooperative Council, Washington, D.C.
Judge J. D. Miller, National Cooperative Milk Producers' Federation.
Edward A. O'Neal, president American Farm Bureau Federation. Chicago, Ill.
Charles E. Hurst, Iowa, vice president, American Farm Bureau Federation.

M. S. Winder, executive secretary, American Farm Bureau Federation, Utah; Chicago, Ill.

Earl C. Smith, president legislative committee, American Farm Bureau Federation, Chicago, Ill.

R. W. Blackburn, president legislative committee, American Farm Bureau Federation, Thermal, Calif.

C. R. White, president legislative committee, American Farm Bureau Federation, Iona, N.Y.

L. J. Taber, master National Grange, Columbus, Ohio.
Fred Brenckman, National Grange, Washington, D.C., representative.
S. S. McClosky, National Grange, Washington, D.C., representative.
Fred J. Freestone, New York National Grange, Interlaken, N.Y.
Dr. J. Phil Campbell, director of extension, Athens, Ga.
Representative W. P. Lambertson, Congressman, representing Farmers' Union.
0. 0. Wolf, National Livestock Marketing Association, Ottawa, Kans.
E. W. Benjamin, Pacific Egg Producers' Association, New York, N.Y.
Chester Gray, American Cotton Cooperative Association, Washington, D.C.
C. V. Gregory, editor Prairie Farmer, Chicago, Ill.
Dan Wallace, editor The Farmer, St. Paul, Minn.
Dante M. Pierce. Wallace Publishing Co., Des Moines, Iowa.
Charles A. Ewing, National Livestock Marketing Association, Chicago, Ill.
P. O. Wilson, National Livestock Marketing Association, Chicago, Ill.

Elmer Beamer, National Livestock Marketing Association, Chicago, Ill,

Ralph Snyder, chairman Committee of National Farm Organization, Manhattan, Kanş. George N. Peek, Moline, Ill.

M. W. Thatcher, Washington representative, Farmers' National Grain Corporation.

H. I. Harriman, president United States Chamber of Commerce.
Secretary WALLACE. Starting on page 5, section 8?

The CHAIRMAN. Yes; the part that we would like to have thoroughly discussed is title 2, as it is the general legislation, and if you will begin there now and explain as you proceed.

Secretary WALLACE. You will note that, starting with section 8, page 5, broad general powers are conferred on the Secretary of Agriculture in order to attain the objectives which were set forth on page 2. These broad general powers are listed on pages 6 and 7.

The first power is, shall we say, essentially the allotment plan idea, although it is somewhat broad, providing for reduction in the acreage or reduction in production, not only acreage but production, if it seems feasible, of some commodities.

Senator WHEELER. How do you propose to provide for reduction of acreage? I am very much interested in that, and I would like to get your ideas as to just how you are going about it, if you have it in mind.

The CHAIRMAN. Does that not follow in subsequent sections, that provision?

Secretary WALLACE. Yes; that is elaborated further over here, but it is also left, of course, to regulation to a very considerable extent. That şection covers substantially all the powers of the Secretary relating to production, but leaves the Secretary free to use on each particular crop that method of reduction which appears most effective for that product, after going into the matter with his representatives, producers, and processors and so on, concerned, and it may be by renting land in particular areas, or it may be by renting land pro rata from every farmer producing, or it may be by paying the farmers to retire lands in production and making them a benefit payment as proposed under the original allotment plan.

Senator WHEELER. Then I would assume, from that statement, that you do not have any particular definite plan in mind with reference to how you are going about it, but to leave it entirely in the discretion of the Secretary of Agriculture. Is that it ?

Secretary WALLACE. Yes.

Senator WHEELER. Now, let me ask you this: Is not that going to—I am just looking at it now from the standpoint of the Secretary of Agriculture himself—is not that going to involve you and the Department in interminable conflicts with the different groups? For instance, you are going to have insurance companies or perhaps not insurance companies, but bonding companies and people of that kind that own the land, have taken it over under mortgage, and they are going to want to lease their land to the Government at the present time, it seems to me, because of the fact that it is standing idle and probably will stand idle until they can resell it; then you are going to have the farmers' group, many of whom will want to lease part of their land; and in my section of the country, where there are vast cortions of undeveloped land that may be used for the production of

wheat, I am wondering just how it is going to be possible to work out that provision, and if you have any particular idea in mind with reference to it I would like to know, because of the fact that we are going to immediately get requests from the different groups and different people as to just what the policy of the Department is going to be with reference to that.

Secretary WALLACE. Senator Wheeler, it seems to me that in the carrying out of the provisions under this no. 1, you should also keep in mind a matter which is developed under section 2, which would amount to this kind of a situation, resulting very promptly in the administration of the act: That commodity councils would be set up, in which would be represented producers, processors, possibly certain other elements in the trade or in the commodity, and these people, experienced in the production and in the handling of the commodity, would decide on the particular method which seems to work to best advantage in adjusting production to the consumption of that commodity. In one section with one commodity they might use the rental method; in another section they might use what you would call the allotment-plan method. It would devolve very largely on the experienced producers and processors to decide which scheme would apply to their situation.

The CHAIRMAN. May I make the suggestion that the Secretary go through the bill, giving his explanation, discussing the different sections, and each member make note of any questions, and when he gets through with his general explanation then take it up specially, so that he may present to use the concrete form in which he wants to put it.

Secretary WALLACE. The second paragraph provides that the Secretary of Agriculture shall have power

To enter into marketing agreements with processors, associations of producers, and other agencies engaged in the handling, in the current of interstate or foreign commerce, of any agricultural commodity or product thereof, after due notice and opportunity for hearing to interested parties.

Then there is the provision for securing loans from the Reconstruction Finance Corporation.

Senator McGILL. That is by the processors, associations of producers, and so on?

Secretary WALLACE. Yes.
Senator McNARY. That is what you call the commodity councils?

Secretary WALLACE. Yes; providing the essentials for commodity councils, and providing also, as I read it, for the possibility of entering into contracts with processors to get rid of abnormally large stocks, not for stabilization purposes, but for purposes of moving them out of the country and getting them off the market, so that there will be a possibility of price rise. The rest of it merely has to do with getting money from the Reconstruction Finance Corporation.

(3) To issue licenses permitting processors, associations of producers, and other agencies to engage in the handling, in the current of interstate or foreign commerce, of any basic agricultural commodity or product thereof, or any competing agricultural commodity or product thereof. Such licenses shall be subject to such terms and conditions, not in conflict with existing acts of Congress or regulations pursuant thereto, as may be necessary to eliminate unfair practices or charges that prevent or tend to prevent the effectuation of

the declared policy and the restoration of normal economic conditions in the marketing of such commodities or products and the financing thereof. The Secretary of Agriculture may suspend or revoke any such license, after due notice and opportunity for hearing, for violations of the terms or conditions thereof.

And the penalty provided. That, of course, really furnishes the power to prevent unfair trade practices from crippling the act.

Senator McGILL. You mean that no one could engage in the business of processing or handling unless he has a license, and will be subject to a fine in the event that he does ?

Secretary WALLACE. Suppose, for instance, your commodity council had been set up under no. 2, and certain agreements had been entered into by which it was undertaken to protect the common interest of all parties involved, the interest of the producers, the processors, and the consumers, and suppose that some individual processor, some group of producers of course, no producers are involved in this licensing; they could not be—but suppose some association or some processor deliberately tries to sabotize the agreement entered into, we have here the power to make him behave.

Senator MCGILL. Then a man engaged in operating a flour mill would not be permitted to do that unless he engaged in that business under this license?

Secretary WALLACE. That is right, in case it had been found necessary to license such flour millers.

Senator CAPPER. This requirement of the license applies only to associations of producers, and not to individual producers ?

Secretary WALLACE. That is right, associations of producers are listed here. They should be listed.

Senator McGILL. Does that mean that it is wholly discretionary in the first instance with the Secretary of Agriculture as to what concerns would be permitted to have a license, or would they all be permitted to have this license and not be deprived of it unless they violated the provisions of this act?

Secretary WALLACE. I will ask Mr. Lee to answer that question.

Mr. LEE. The licensing provisions would apply to such classes of processors, associations, and other agencies as the Secretary prescribed in his regulations. He is given authority further on to prescribe. The terms of the license would be left to the discretion of the Secretary of Agriculture and would in general be such as would prevent unfair practices or charges which tended to defeat the purpose of the act. It is remedial power too or ancillary power to carry out the other authority of the Secretary in trying to arrive at a better price for agricultural commodities. The license might be suspended for violation of the terms under which it is granted.

Senator BANKHEAD. But the license is granted to all applicants who comply with the regulations?

Mr. LEE. Yes.
Senator McGILL. There would be no discretion to deny any license ?

Mr. LEE. But if there were arbitrary discrimination that would be a legal question.

Senator MoGILL. But it would not be discretionary as to who would receive the license in the first instance, if he made proper application ?

Mr. LEE. Yes.

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