tory requirements that farm commodities be sold for at least the parity or comparable price and the statutory requirement that Commodity Credit Corporation be fully reimbursed for commodities transferred to other Government agencies. Other corporate agencies are acquiring stock piles of critical and strategic materials. These stocks represent investment of corporate funds and constitute corporate assets of those agencies, the proceeds from which would normally be retained by the corporations as corporate assets. It is suggested that the disposition of corporate-owned inventories and the resulting proceeds be made in accordance with the laws applicable to such corporate agencies. An illustration of the point under discussion is found in section 410, page 18, of S. 1823, which requires that proceeds from sale or transfer of inventories constituting corporate assets go into miscellaneous receipts of the Treasury. Training and placement of war workers and returning servicemen.—Agriculture has a tremendous stake in the prompt retraining and reemployment of returning servicemen and war workers. Full employment at good wages will be essential to widely distributed purchasing power which would enable consumers to buy an abundance of agricultural production. The farmers' market at the end of the war will depend largely upon how well we succeed in maintaining this purchasing power, recognizing, of course, that the amount of foreign trade will also influence the welfare of agriculture. We are in general agreement, therefore, with the measures proposed not only to retrain and reemploy returning servicemen and war workers promptly, but also to assure purchasing power during the interim period until they are placed. Other agricultural problems.-Not only do farmers have a tremendous stake in the proper and speedy termination of war contracts, in the efficient disposition of surplus war property, and in the training and placement of war workers and returning servicemen, they also have problems in connection with the reconversion of agriculture itself. Many of these agricultural problems in our opinion have not yet received adequate attention. In our opinion, the Department of Agriculture should have the authority and the funds at the end of the war to participate in the solution of over-all national problems, and also to carry out an adequate agricultural reconversion program. This program would include supporting prices for farm products; encouraging necessary shifts in production, processing, and marketing by whatever methods may be appropriate; disposing of apparently excess foods in an orderly manner; maintaining adequate levels of production; and doing its part in encouraging full domestic consumption of agricultural products and freer and expanding international trade. The Department should also be in position to assure that the physical resources of soil, water, and range, and forest lands are properly maintained and conserved, and that definite improvements in rural living, consistent with the full potentialities of our great Nation, are brought about. Since you requested that this report be submitted by May 15, we have not had an opportunity to clear this report with the Bureau of the Budget and are not advised as to the relationship of the proposed legislation, or this report thereon, to the program of the President. Sincerely, CLAUDE R. WICKARD, Secretary. UNITED STATES TARIFF COMMISSION WASHINGTON, April 6, 1944. CUSTOMS TREATMENT OF SURPLUS UNITED STATES WAR SUPPLIES SOLD IN FOREIGN COUNTRIES AND REEXPORTED TO THE UNITED STATES At the close of the war the United States will undoubtedly have large supplies of war materials in foreign countries. If these supplies are sold abroad some of them may find their way into commercial channels, and if the differences in the prices of such goods in United States and foreign markets are such as to favor any large backflow to this country the customs treatment of the goods on importation into the United States may become a matter for the consideration of Congress. Under present legislation goods of United States origin sold abroad by this Government and also lend-lease goods of domestic origin could reenter the United States free of duty under the provision of the Tariff Act covering American goods reimported without having been advanced in value or improved in condition in foreign countries (par. 1615 of the Tariff Act of 1930, as amended). The question of the appropriate customs treatment of war supplies sold abroad and subsequently shipped back to the United States is closely related to the broad policies to be pursued in the disposal of surplus both here and abroad. This memorandum, however, does not undertake to analyze the whole disposal problem, which is an integral part of the problem of transition of the American economy from war to peace. The return from abroad, in the first year or so after the war, of surplus United States supplies of goods which are adaptable to civilian consumption might help somewhat to ease temporary post-war domestic shortages of various commodities and thus contribute to the prevention of an undue rise in prices. However, the longer the time which elapses before supplies are returned, the less likely is their return to be helpful in this respect. Moreover, even immediately after the war, and to a greater extent later on, the return of certain articles might have unduly depressing effects on prices of those articles. Substantial losses are likely to be sustained by this Government on the supplies held abroad, whatever plan for their disposal may be adopted. The losses might be larger than otherwise if speedy liquidation is attempted, for although the foreign needs at the end of the war may be at their maximum, purchasing power abroad may be at a minimum. Quick acceptance of losses might, however, be preferred to the uncertainty both as to costs of administration and as to how much, if any, better prices can be obtained through gradual liquidation. Moreover, the restoration of trading operations to private commercial enterprise as soon and as completely as possible may be regarded as a major consideration favoring quick Пquidation by the Government. If, for whatever reasons, United States supplies held abroad are to be disposed of on a forced sale, it may be contended that American consumers, particularly in view of the acute civilian shortages in many lines, should have access to the bargain counters so created. Moreover, the Government's losses might be somewhat reduced if prospective purchasers were not restricted in shipping back to the United States such of the goods as would find here their most profitable market. A possible program would be one of advertising in the United States as well as elsewhere, the sales of supplies abroad, with a view to disposal to the highest bidders, and of shifting to the purchasers the burdens and risk of storage and marketing. It may be suggested that, if these supplies can with advantage be shipped back to this country for storage or for release in the domestic market, they should be reimported on Government account rather than sold and returned through commercial channels. The decision as to which goods ought to be brought back would, however, be a difficult one for Government officials. The restoration of peacetime economic activity in foreign countries may be facilitated by the sale of many kinds of surplus American war supplies for use in those countries themselves (in addition to the portions of such supplies that may be definitely earmarked for relief and rehabilitation). Administrative activities by United States Government officials might be simplified by bulk sales of heterogeneous goods rather than selective sales of particular varieties and quantities of goods. The Government might find it advantageous to dispose of some supplies held in foreign countries on terms or through procedures that would not be justified if it were thought likely that a considerable part of the goods would find their way back to this market and be offered here at prices that might interfere with the demobilization program. If the Congress considered such to be appropriate, it would be advisable to enact appropriate legislation to prevent or restrict the return of such goods. The formulation of any legislation designed to restrict the return of surplus United States war supplies would require much care. The experience at the close of the last war, outlined in the succeeding section of this memorandum, should be given due consideration. Preliminary study makes one point clear: If Congress should decide that the return of surplus war supplies to the United States should be restricted, it would not be sufficient merely to reenact that provision of the act of 1922 which limited the duty-free entry of American goods to goods returned to the original exporter. The practical effect of such an enactment would doubtless be to prevent any considerable duty-free commercial importation of articles which would otherwise be dutiable. This, however, would not necessarily mean a material lessening of the quantities of war supplies which would be brought back to the United States. Particularly if the owners had bought the supplies abroad at prices much lower than those prevailing in this country, the existing rates of duty might have little effect in limiting imports. For example, returned automobiles and tires would be dutiable at only 10 percent ad valorem; shovels, spades, and scoops at 15 percent; and barbed wire would be free of duty. The imposition of special import duties to restrict the return of various classes of surplus war supplies would be attended by many difficulties. It would require prolonged and detailed examination of the various situations respecting different classes of goods, and there would probably be uncertainty as to the actual effect of the duties. The administration of such duties, particularly the ascertainment of dutiable value, would be especially difficult. The Congress might therefore deem it preferable to provide for direct licensing or similar restriction (including prohibition in some cases) of reimports of war supplies rather than application of duties-either duties now levied on goods of foreign origin or duties specially enacted for the particular purpose. In case such direct restriction is adopted it might be desirable to provide that any restriction on the reentry of supplies be made subject to such regulations and such exceptions as those officials in charge of demobilizing the United States war economy may specify, on the basis of general principles set forth in the legislation. Attention is called to the fact that, although the 1922 provision confining free entry of returned American goods to goods brought back by the original exporter was designed primarily to restrict the return of surplus war supplies, the wording of the law was such as to apply also to goods which had been exported commercially. This provision remained in effect until 1938 and applied to a multitude of transactions resulting from ordinary peacetime exports. The consequence was that the distinction between goods brought back by the original exporter and American goods brought in by other persons became a nuisance to the administrative officials and caused hardship to many individual enterprises. In connection with formulating any legislation on this subject, special attention should be given to the trade in scrap. In the supply of some materials, Such as aluminum and brass, battle scrap may come to be an extremely important factor in post-war years. It may be that Congress would wish specifically to exempt scrap derived from American war equipment from any restrictions imposed upon the reimportation of war supplies. There follows a brief account of the handling of the question of surplus United States war supplies in Europe at the end of the previous World War. SUPPLIES HELD ABROAD BY THE UNITED STATES GOVERNMENT AT THE CLOSE OF WORLD WAR I Of the large supplies which the services of the United States had accumulated at the close of the war in 1918, a portion valued at $672,000,000 was returned to the United States, presumably by Government agencies. The remainder was found to be "surplus" and responsibility for the disposition of this surplus was placed in the United States Liquidation Commission created by the War Department in February 1919. The supplies coming under the control of the Liquidation Commission were in England, Germany, the Netherlands, Belgium, Spain, Portugal, Italy, and France-the greater part being in the lastnamed country. Information contained in the following paragraph has been drawn from the Commission's report published in 1920 and has to do exclusively with the supplies in France, data on which were set forth in considerable detail in the report. The surplus goods in France at the end of the war had an inventory cost of $1,700,000,000 and an estimated value on July 8, 1919, of $970,000,000. Goods valued at $16,000,000 were sold to the American Relief Administration, headed by Herbert Hoover, and medical, hospital, and surgical supplies valued at $10,000,000 were turned over to the American Red Cross. After allowance for loss and damage during storage and for relatively minor quantities sold to private purchasers, goods having an estimated value of $750,000,000 remained. These goods were transferred in a bulk sale to the Government of France. The Government of France paid $400,000,000 in 10-year debentures. That Government also assumed as part of the deal unliquidated claims against the United States, including among other things the French claim for customs duties on the war supplies shipped to France.1 1 Table 1, attached hereto, shows in tabular form the principal categories of supplies included in the "surplus," the inventory cost of each category, the proportions of the total surplus represented by each category, and the percentage of value written off in estimating the value as of July 8, 1919. REIMPORTATION OF SURPLUS SUPPLIES AFTER WORLD WAR I There was considerable agitation for action by the Congress to prevent the return to the domestic market of surplus supplies sold abroad by the Government. It was alleged that after the bulk sale to France in 1919 large quantities of the goods had been sold by the French Government to private interests at prices which made it profitable to ship the goods back to the United States. Data are not available to indicate with any degree of certainty the quantity, kind, and value of the surplus war supplies that were actually returned to this country by private interests. The official import statistics did not separate war supplies from other American goods returned, and customs documents for the period immediately following World War I which might give information on that matter are no longer available for examination. 2 Estimation on the basis of available information of the amounts of war supplies which may have been returned through commercial channels to the United States after 1918 gives conflicting results. On the one hand, American goods returned free of duty were valued at $97,000,000 in 1920 as compared with $17,000,000 in 1913, $34,000,000 in 1923, and $24,000,000 in 1939. The abnormally large amount which entered in 1920 suggests that a considerable part of the imports of American goods returned in the years immediately following 1918 were accounted for by the trade in surplus war supplies. On the other hand, imports from France of American goods returned free of duty in the peak year, 1920, were only about $6 030 000. The total value of American automobiles brought back from Europe in 1920 was less than a half million dollars, of which only $169,000 represented automobiles returned from France. Of all American goods returned free of duty, the proportion from France was actually less in 1920 than in 1913-about 6 percent in 1920 compared with 8 percent in 1913. Since the most of the United States war supplies sold abroad were sold in France, the latter figures would seem to suggest that the return of such supplies was not an important matter. The data, however, are inconclusive, especially since the return of American goods from countries other than France may have included large quantities of war supplies and possibly some of the supplies sold in France. It is also possible that though the total may not have been important, entries of some classes of goods may have had an appreciable effect on the American market. LEGISLATION TO RESTRICT RETURN OF SURPLUS WAR SUPPLIES AFTER 1918 Various proposals to restrict the return of war supplies sold abroad by the American Government through commercial channels were considered by Congress during the time in which the Tariff Act which became effective September 22, 1922, was under discussion. The act which was adopted provided for the imposition of a duty of 90 percent of the original value in the United States on reimports of American automobiles and parts, including tires, exported from this country before February 11, 1919, for the use of the American Expeditionary Forces or of allied governments. In addition the provision for free entry of American goods returned, which in unqualified form for practically all goods had been a feature of the American tariff system since 1799, was modified to confine such free entry to such goods when returned "by or for the account of the person who exported them from the United States." These changes in the law required the imposition of regular customs duties on returning war supplies except automobiles and parts which instead became dutiable at 90 percent of their original value in the United States rather than at 25 percent or 10 percent ad valorem, which were the rates applicable to automobiles and tires, respectively, of foreign production under the Tariff Act of 1922. REPEAL OF THE LEGISLATION DESIGNED TO CURTAIL THE REIMPORTATION OF UNITED STATES WAR SUPPLIES THROUGH COMMERCIAL CHANNELS In 1930 Congress repealed the provision for a duty of 90 percent on American automobiles and parts sold abroad as surplus war supplies. The provision that American goods returned were to be permitted free entry only if returned by or 2 See table 2, attached. During the pendency of the tariff bill the House of Representatives passed H. J. Res. 183, 67th Cong., which provided a duty of 90 percent on returned war supplies of all kinds. This action was intended as a stop gap pending enactment of the tariff bill. Although favorably reported by the Senate Committee on Finance, the joint resolution did not come to a vote in the Senate. for the account of the original exporter had a longer life. Although this provision was designed as a deterrent to the return of surplus war supplies, it had some significance also to the return of goods exported commercially. It thus became a nuisance to administrative officials and caused hardship to individual enterprises. The difficulties are suggested by the following illustrations: In one case an American-made automobile sold on the installment plan was taken to Mexico contrary to the terms of the contract. Thereafter the purchaser defaulted and the vendor repossessed the car. Although legal title had remained in the domestic vendor who reclaimed the car in Mexico and returned it to the United States, import duty was required to be paid when the car was brought back to this country. Another case involved oil-well casings which were exported to Canada by a Pennsylvania corporation and subsequently returned to the United States consigned to an affiliated Delaware corporation having the same name, officers, and directors as the Pennsylvania company and engaged in the same line of business. Although the casings were products of the United States which had not been advanced in value or improved in condition abroad, they were held subject to duty on the ground that the Pennsylvania and Delaware corporations were different legal entities and that the goods were not "imported by or for the account of the person who exported them from the United States." In spite of such complications it was not until 1938 that, on the suggestion of the Treasury Department, the provision making free entry for returned American goods dependent upon their reimportation by the same concern as had exported them was repealed and free entry of returned goods again became unrestricted without regard to the ownership of the goods. TABLE 1.-Surplus United States war supplies in France after World War I Source: Compiled from the Report of the U. S. Liquidation Commission (1920), appendix VII. TABLE 2.-United States imports for consumption of articles the growth, produce, or manufacture of the United States, returned, in specified years 1913–39 316, 000 $2, 162, 000 2,667, 000 2,907, 000 1921 5, 601, 000 2, 972, 000 1922. 3, 101, 000 3, 342, 000 4,323, 000 4, 544, 000 3,680,000 3, 339, 000 1 Containers or coverings exported filled, or exported empty and returned filled, including bags, barrels containing petroleum, casks, shooks and staves returned as barrels or boxes, quicksilver flasks, etc. Containers, except bags, were not subject to requirement imposed in 1922 that they be imported by the exporter. Bags were subject to this requirement since 1894. 2 Fiscal years ended June 30. 3 Not separately reported. Source Foreign Commerce and Navigation of the United States. $2,000 1,574, 000 36,000 (3) 1, 005, 000 84,959, 000 96, 830, 000 55, 417, 000 65, 081, 000 36, 007, 000 46, 956, 000 332,000 24, 778, 000 33, 877, 000 125,000 20, 257, 000 27, 132, 000 (3) 265, 000 20, 226, 000 24, 455, 000 20, 236, 000 |