Senator GRUENING. Highly competitive?

Mr. KAMPELMAN. Highly competitive, and these sales are done in sealed bids; although of late, the auction principle has been adopted. Now, the auction principle was adopted, I understand, by the Department of Defense because there has been a great deal of pressure and urging on the part of some of the committees of the Congress on the Department of Defense to increase its return on the acquisition dollar, and they have been challenged, therefore, to find techniques which might increase the amount received. Therefore the auction principle went into effect so these sales are either by sealed bid or auction.

Our people would all fit within the category of small business. It is an industry that came into existence, Mr. Chairman, after the war. It was started by a great many individuals who used their ingenuity to find out how best they could prosper and find a place for themselves in the community. During the course of the last 15 years or so this industry has become firmly established as a good, valid, respectable industry. It is an industry which is now on its feet and would like to remain and survive as an industry.

Senator GRUENING. I suppose as long as there are large quantities of surplus there will be agencies originating efforts to dispose of it. Could you give me any idea about what percent of the original cost is provided in the bidding by these various surplus importers?

Mr. KAMPELMAN. It is very difficult to tell, and there is no constant on it. I have asked this question of our members, and I have been answered with illustrations. For example, it might go as high as 20 cents on the acquisition dollar, and sometimes even higher. On the other hand, it will go as low perhaps as 5 cents on the acquisition dollar. It would depend on the item.

If I can add a word at that point, I would say that we have found, and we have introduced rather substantial evidence, Mr. Chairman, during the course of three different hearings before the House Committee on Government Operations, that, in addition to that cost, our members will frequently spend as much, if not more, in additional cost in order to improve the items that are purchased.

Senator GRUENING. Now, Mr. Kampelman, do you favor the passage of S. 3154?

Mr. KAMPELMAN. I do, Mr. Chairman.

Senator GRUENING. You do?

Mr. KAMPELMAN. I do.

Senator GRUENING. You think this is good legislation?

Mr. KAMPELMAN. We think it is good legislation. The fact is, Mr. Chairman, we think it is essential legislation if we are going to survive. You will see from a reading of my testimony when the committee gets to studying the testimony, Mr. Chairman, that we are now goyerned by a 1949 statute. We had been operating under that 1949 statute until 1958, and had been surviving. We had always assumed that the 1949 statute had a definite established meaning, and everyone seems to have the same assumption. Beginning in 1958, however, administrative practice altered, so that without the Congress passing an amendment to the law, the Department of Commerce completely changed the interpretation of the law. The result is that, since 1958, there has been a virtual embargo. I do not want to say that nothing has been allowed in on a license, but very little has been allowed in on a license.

Senator GRUENING. Well, I will be glad to have you develop that. Tell us how it happened and what has happened.

Mr. KAMPELMAN. Thank you, sir.

Section 402 of the existing law reads, and I will quote just that provision:

But in no event shall any property be sold without a condition forbidding its importation into the United States, unless the Secretary of Commerce determines that the importation of such property would relieve domestic shortages or otherwise be beneficial to the economy of this country.

Foreign excess property is defined elsewhere in the act to mean property under the control of any Federal agency which is not required for its needs and the discharge of its responsibilities and which is located outside the United States.

It is worth noting that such property is really not foreign in any sense other than its being situated outside the United States; in every other sense it is thoroughly American.

Now, in our judgment—and we have material that we will submit for the record in this connection, Mr. Chairman-the legislative history of section 402 establishes that the Congress never intended to prohibit or unnecessarily curtail imports of surplus property purchased by Americans from the U.S. Government at overseas bases. Quite to the contrary, Congress clearly intended this provision only as a safety valve to avoid serious repercussions which might result from substantial imports of foreign excess property in the event of economic depression. Everything in the legislative history suggests that a flexible reasonable policy in the light of actual economic circumstances was contemplated. And that is the manner in which the Department administered the section from the time of its enactment in 1949 until the last several years.

In 1958, this was changed by the Department and its extremely restrictive and inflexible policy resulted in an absolute embargo on importation of foreign excess property. Now, this new policy was adopted largely as a consequence of hearings held by a subcommittee of the House Committee on Government Operations in July 1958, and that committee's subsequent report and hearings. Although the House committee was concerned only with what it regarded as slipshod administration of the section by the Department, nevertheless these hearings led to the change in the interpretation.

As a result, during the first 6 months of 1959, for example, when we first began to feel the pinch of this-the new regulations were effective in January of 1959 the Foreign Excess Property Office had authorized the importation in only 2 cases out of 73 applications submitted.

I might say, by the way, that many potential importers recognizing that the cards were stacked against them, did not even bother to submit applications.

As a result of this, Mr. Chairman, our association last July went before the same House subcommittee which had investigated this program in 1958. We reported what had transpired. We were given 2 days of hearings by Mr. Dawson. As a result of that, the bill which is now before you was originally drafted by Chairman Dawson of the House committee. It reflects the judgment of that committee based on its extensive study of this problem over a period of 3 years, including three rather extensive hearings.

I will not take the time of the committee at this point to analyze why we were unhappy with the regulations, but I will say that the representatives of our association testified at very considerable lengths before the Dawson committee as to problems they had been encountering under the present law and as to the necessity for a change in the law.

Again in the interest of time, I suggested to our members that we not individually appear before your committee repeating that testimony. But you can see from their previous testimony that in many cases the form and usefulness of foreign excess property items were substantially altered and improved by the importers before the property is sold to the ultimate user.

One of our witnesses, for example, told about how his company had imported surplus hydraulic traversing mechanisms which were originally used-and this is interesting as a part of tracking gear in a 40-millimeter antiaircraft gun. Then Mr. Groban converted these mechanisms into hydraulic transmission for midget automobiles with gasoline engines made for children. In this case the mechanisms which otherwise would have been sold for scrap at 75 cents apiece were purchased by him for $5 apiece under competitive bidding. Thereafter, Mr. Groban spent an additional $15 per unit converting them into transmissions.

Subsequently, when Mr. Groban's competitors saw how it was done, they wanted to copy his ingenuity, so they bid $12 per unit. Thus, these mechanisms got to be a competitive item on the next sale, and the return to the Government as a result of this was dramatically increased.

Sometimes surplus equipment is converted by the importer's customers. For example, one of the witnesses at last July's hearing testified that his company purchases surplus trucks from the importers, and spends approximately $1,000 a truck in reconditioning them. That is in American labor. Then he mounts water tanks on each truck, at an additional cost of from $1,750 to $2,500 per truck, depending on the size. These trucks are then used to provide vitally needed water for construction projects in California in areas which have virtually no water otherwise. This company spent $351,000 in the first 9 months of its last fiscal year for labor and material incident to the production of these water trucks. Surplus trucks are the only kinds of trucks desired by contractors for this purpose and they are the only kind of trucks which it is economically feasible to use for this purpose. This is because surplus World War II vintage trucks have a special added ruggedness and utility for this particular kind of work.

We believe that we play an important role in the economy. We believe that our economic well-being is something which ought to be considered by this committee and by the American Government when it formulates public policy.

Again my prepared testimony cites specific instances as to how we have become unable to operate our businesses. But I, again, do not want to take the time of the committee in connection with that, other than to say this: All of these restrictions and administrative problems which we face-and, Mr. Chairman, they have plagued us legionreally appear ludicrous in the light of the actual dimensions of the

matter. The question raised by the chairman a few moments ago, I think, tends to highlight that.

Almost all of the foreign excess property is generated by the Department of Defense. They have given us the figure of $340 million worth of property and acquisition costs. Only 10 percent of this is sold to Americans, and the American purchasers desire to bring only half of that back into the United States. This compares with $2 billion worth of surplus sold annually within the United States by the Department of Defense, without any restrictions on its resale in the domestic economy.

Actually, the domestic surplus, when it is sold-and this came out during the House hearings as well-is sold after informal consultation between the Department of Defense and the Department of Commerce with respect to the possible adverse effect on the economy. As a practical matter, the difficulties we have had with foreign excess property because of the special statutory provisions applicable to it are hardly warranted by the dimensions of the problem.

The Department of Commerce itself told the Dawson committee during last year's hearings that section 402 as presently in effect imposes a severe administrative burden, and the Department itself suggested the desirability of reexamining the problem to see whether section 402 has any value in its present form.

Again during the recent House committee hearings on the companion bill to S. 3154, the Department indicated that that bill, with certain suggested changes, "would facilitate administration of our responsibilities under the law."

Other agencies of the Government and the Comptroller General have indicated approval of S. 3154 as it now stands. The Budget Bureau supports the bill as it is now written and before you. The Dawson committee, with years of experience in dealing with this problem, believes that this legislation is necessary and has reported out the companion bill favorably.

In short, since there is agreement on the part of Government agencies and those congressional committees that have looked into this matter that some change is necessary in the criteria for determining whether foreign excess property may be imported, the only question seems to be the form this legislation should take.

We had hoped that Congress would see fit to eliminate entirely the present anomalous distinction between foreign and domestic surplus. On the other hand, we support the existing bill, even though it falls short of our expectations. We recognize that in the legislative process there are considerations that must be taken into account as to what is real and what is not real in this connection. And under this bill before you, foreign excess property could be brought into the United States unless the Secretary of Commerce determines that the reentry would be injurious to the economy of the country. This would place the burden of proof squarely where it belongs on the Department of Commerce-and would still permit restrictions on the import of foreign surplus where restrictions are deemed necessary for the general rather than the special welfare.

We are prepared to say that our own special welfare ought to suffer if it is in the interest of the general welfare as a whole. We are not prepared to say it should suffer if it merely conflicts with another

special welfare. We would like to have the general welfare be the main consideration.

The Department of Commerce has suggested an amendment to the present language of S. 3154 which would, in our judgment, reverse the thrust of the bill. Instead of prohibiting the importation only if the Secretary had made a determination that injury would result, the Commerce amendment would prohibit the importation unless a determination were made that no injury would result. In addition, the Commerce amendment would change the criterion from “injurious to the economy of the country" in the present bill to "injurious impact on domestic production or employment."

The Department of Commerce justifies the proposed amendments on grounds of administrative convenience and "an effort to supply more specific guidelines," but under these guises it would, we fear, do damage to the present intent of the bill. The Department would have to make an affirmative negative finding that there would not be an injurious impact. There is no quantitative standard as to how much injury would warrant denial of an import application under the Department's recommendation.

We are concerned that the orientation of the Department could lead the Department to deny applications as in the past because of vague claims of potential injury to one particular segment of an industry without considering the overall impact of the importation on the economy as a whole.

We were very much impressed, Mr. Chairman, with the comoment that the Bureau of the Budget made on the legislation. It is a very short sentence which I would like to read. It told the Dawson committee that the criterion adopted should give consideration

**not only to the possible effect of an import upon a particular industry but also to other factors such as employment and production in other segments of the economy, including the possible beneficial effects of imports.

Accordingly, we urge that the so-called "affirmative-negative amendment" as proposed by the Department of Commerce, be rejected by the committee.

Now, Mr. Chairman, I want to conclude by saying this. Surplus property is not offered for sale until after the Government has disposed of surplus under the donable program of existing law. We support the donation program as in the public interest. Our only position is that, after Congress in its wisdom has established its policy on what is to be donated, where and to whom, we wish to have the right as American businessmen to bid competitively and fairly for the purchase of the property that remains, and then to utilize that property in our normal business activities, with the right to bring that property to the United States during the course of that pursuit.

Mr. Chairman, I want to again express my appreciation and that of our association for your courtesy in hearing our testimony and our recommendations. And we trust that your committee will favorably report S. 3154.

AMENDMENTS TO H.R. 9996

Senator GRUENING. Mr. Dawson of the House, of course, had a pending bill, H.R. 9996, and that bill has been reported by the Committee on

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