Senator GRUENING. Very good. Let me ask you one question. What type of schools would have this priority under this proposed bill? Do you favor certain educational institutions as against those now getting Mr. Dix. No, sir, enactment of S. 3489 would establish no new classes of donees as such. Schools which now meet our criteria are those which conduct ROTC program at standards acceptable to the military department concerned and which apply for surplus property. Then, providing the criteria is met, my colleagues here in the Supply and Logistics Office negotiate a donative agreement with the school for surplus property. Senator GRUENING. I have no further questions. Mr. Shriver has a question. Mr. SHRIVER. On page 2 of the bill, a reference is made to the agencies or organizations that receive this property now. That proviso is as follows: That any organization established by law of the United States whose object is to encourage and foster the development of aviation that was eligible to receive surplus property under this paragraph on the day before the date of enactment of this proviso shall continue thereafter to be eligible to receive surplus property under this paragraph. Is that intended to cover the Civil Air Patrol? Mr. Dix. Yes, sir; the Civil Air Patrol only. Mr. Dix. No, sir. Mr. SHRIVER. Thank you, Mr. Dix. Senator GRUENING. Thank you very much, Mr. Dix. We appreciate your comments. Now we will turn to Col. John F. Rey, Chief, Surplus Property Disposal Branch, Department of Defense. Have you a statement, Coloney Rey? STATEMENT OF LT. COL. JOHN F. REY, CHIEF, SURPLUS PROPERTY DISPOSAL BRANCH, DEPARTMENT OF DEFENSE Colonel REY. No, sir; I do not have any statement. Senator GRUENING. Well then, perhaps we can ask you a few questions. Colonel REY. All right, sir. Senator GRUENING. Are you prepared to answer almost anything we ask you? How much foreign excess property will be disposed of by the Department of Defense this year? Have you any idea in round numbers? Colonel REY. Well, I can give you what we have done for 9 months thus far this fiscal year. Senator GRUENING. That is the 9 months going back to the beginning of this fiscal year? Colonel REY. That is beginning July 1, 1959, through March 31, 1960. Thus far this fiscal year on foreign excess property we have disposed of property having an acquisition cost of $637,899,000. That is the total disposal. Senator GRUENING. We can assume that represents roughly about three-quarters of what the annual disposal would be. Colonel REY. That is a pretty fair assumption, Senator. At the present we have available for disposal some $578 million in property, and based on past experience it will take about 6 to 8 months to move all of that property, considering the screening time available that is necessary, plus the actual disposal time. So I would say, based on what we have available, plus what we have already disposed of, the figure will probably be somewhere between $850 million and $900 million this fiscal year. Senator GRUENING. Is that amount likely to increase or decrease? Colonel REY. I would say that the amount of foreign excess property that will probably generate over the coming years and this is, now, total acquisition cost, this includes scrap, salvage, and usable property-will probably level off somewhere around $800 million to $900 million. It will probably slightly decrease from what we have this year, I would say, next year and the year after, and this is only a long-range guess on my part at this point in time. Senator GRUENING. That is approximately a level. That is not much of an increase or decrease? Colonel REY. It is a decrease over what our peak was. was reached during fiscal year 1959. Senator GRUENING. What was it then? Our peak Colonel REY. It was about $1.3 billion in round figures, and it has reduced somewhat during this fiscal year. I feel there is going to be a further slight reduction, and then it will probably level off, unless oversea programs change significantly, which I cannot predict. Senator GRUENING. Would you tell us how much of this is in the form of scrap? Colonel REY. Yes, sir. Senator GRUENING. And how much is reusable? Colonel REY. Yes, sir. The usable property portion of what we have disposed of is $266 million. And if that is projected, our usable property probably will run somewhere around $355-360 million this fiscal year. Senator GRUENING. So less than half is usable? Colonel REY. Yes, sir. Senator GRUENING. The majority is reduced to scrap. Colonel REY. This is the total disposal, Senator. This includes transfers to Federal agencies, transfers to the military assistance program. There is very little actually donated here in overseas, and then the residue is what has actually been sold. And that is running approximately 50-50. Senator GRUENING. That includes what you dispose of in all ways, including donable property? Colonel REY. Yes, sir. Senator GRUENING. That is everything? Colonel REY. The figure I gave you initially, the $637 million, includes all forms of disposition. Senator GRUENING. I mean, approximately then a total of $850 million a year. Have you any idea how much of this is likely to be bought for importation in the States? Colonel REY. Well at the present time very little is being purchased for importation in the United States. Senator GRUENING. Do you think that is due to the restrictions of the Department of Commerce? Colonel REY. There was a decline starting in 1958 because of change in regulations by the Department of Commerce, and there has been a decline in the amount of property that has been sold to American buyers versus that which had been sold in prior years. Senator GRUENING. Well, then, it is really due to Government policies that a smaller amount is now being imported into the United States; is that correct? It is not through any lack of demand; it is due to restriction on the part of the Department of Commerce? Colonel REY. I would say that is one of the factors; yes, sir. Senator GRUENING. You think that is one of the factors. does the foreign surplus compare with what you sell at home domestically? Colonel REY. The volume? Senator GRUENING. Yes. How Colonel REY. Well, our volume of usable property, domestic, that we have sold thus far this fiscal year is $1,353 million. Senator GRUENING. $1,350 million? Colonel REY. As compared to the $266 million of the foreign excess. Now, this again is for the first 9 months. Senator GRUENING. This is 9 months? Colonel REY. Of fiscal year 1960. Senator GRUENING. So we can project it to a full year by merely adding one-fourth, approximately? Colonel REY. I would say a little better than that because we have here, again, had a little increase in our amount that is available, our excess generations during the prior 3-month period, and we have an inventory of surplus and excess on hand here of $3,533 million at the present time. That is the total inventory. Senator GRUENING. Well, now, with the decrease in the importations to the United States, what becomes of this surplus, where does it go? Colonel REY. Well, we dispose of our surplus by sale, Senator. In the Far East and in Europe we have approximately 2,000 bidders on each list who purchase property. These are the oversea buyers. There are, in addition, a small number of American buyers that are buying our property. Now this property is offered competitively overseas, the same as it is offered here in the United States, and it goes to the high bidder be he American or from one of the foreign countries. Senator GRUENING. Well, then, presumably the greater portion of it stays abroad, goes to foreign countries? Colonel REY. Yes, sir. Senator GRUENING. It is not coming into United States? Colonel REY. As I said, before the Department of Commerce changed their regulations, over 90 percent of the property that we were selling was for importation into the economy of the countries where the property was located. Senator GRUENING. Does it go to Government mostly? Colonel REY. We do sell some property on a direct government-togovernment basis; yes, sir. In each of these countries in which we sell our foreign excess, we have either formal or informal agreement with the governments—with the host governments where we have our troops stationed. In many of these agreements the host government is given the first right to purchase our property, and we negotiate a sale with those governments. Senator GRUENING. Well, now when you negotiate a sale, then there is no bidding? Colonel REY. There is no bidding except that the U.S. Government retains the right to get a fair price for the property. Senator GRUENING. On the property that is not reduced to scrap, that is usable, about what percentage of the original cost do you get back? Colonel REY. It has been running around 7 percent on our foreign excess disposal, Senator. Senator GRUENING. It seems a rather small return, doesn't it? Colonel REY. Well, I put no value on an across-the-board figure. We are dealing with many different types of property, different conditions of property. For some property we are getting as high as 50 percent on an item, and others we are getting 1 percent. For some we get just above the scrap value. Senator GRUENING. If the average is as little as 7 percent, there must be some of it that is practically given away. Colonel REY. For some we are getting little more than the scrap value because of no demand; yes, sir. Senator GRUENING. If you say some sell as high as 50 percent- Senator GRUENING (continuing). And the average is 7 percent, there must be a lot given away for a song? Colonel REY. Some of it is in very bad condition, poor condition, that we get a low return on, or property for which there is very little demand. Senator GRUENING. But some of it is new, isn't it? Colonel REY. Some of it is new; yes, sir. Senator GRUENING. What do you get for that? Colonel REY. It depends on what the item is and what the demand for the item is, sir. Senator GRUENING. Could you give us for the record, not right now, but could you supply for the record some sample figures as to what shoes or clothing or radios, automobiles or trucks sell for? Colonel REY. I certainly can, sir. Senator GRUENING. We would like to get a sampling of those things which are new, and find out what the treasury gets back. Now of course there is no proper way of estimating things that have been used because it is difficult to know what the condition it. However, we would find the information very valuable, if you are giving away things that are just declared surplus because they are obsolete or because you have gone to different models. Colonel REY. There are some of those items being disposed of, and I will attempt to get what figures I can for you on that. Senator GRUENING. That would be very helpful, if you can do that. |