half of the current fiscal year was $14.7 million, as compared with $46.4 million for the full year in fiscal 1959 and $42.1 million in fiscal 1958. It would be completely erroneous to think that anywhere near these volumes or values were actually returned to the United States and competed with new or surplus domestic supplies, or that such amounts would have been imported had there been no limitations. In the first place, a large part of the foreign excess property sold consists of military-type items as distinguished from civilian-type items. Dealers in surplus have a far greater interest and find a more ready market for civilian-type goods than for military-type items. Secondly, in disposing of foreign surplus, the U.S. Government gives priority to the wants of the government of the country where the surplus is located. Substantial sales are made on a negotiated basis to these governments. What is left is then offered to competitive bidders. The number of local bidders is far, far larger than the number of American firms bidding for the products. Unfortunately, there are no data available on the nationality of either the total bidders nor of the successful bidders. Such information would be particularly interesting because it is unlikely that foreign bidders would be in a position to dispose of their purchases in the American market. Purely informal discussions with Government officials and surplus dealers have led to the conclusion that well under 10 percent of disposals abroad are made to American firms. Even such a figure would not be entirely conclusive with respect to the amounts that would be shipped back to the United States were there no restrictions. Many American buyers seek outlets in foreign countries where they can find ready markets for American surplus. Some buyers send the goods back to the United States in bond for reconditioning and for reexport. Certainly, only a small fraction of foreign excess property was returned to the United States prior to the almost complete prohibitions imposed in January 1959. One can only speculate with respect to how much would have come back had there been no restrictions. It is difficult to conclude that more than a few million dollars worth of surplus would be returned per year at sale price and not substantial volume even at acquisition cost. Lieutenant Colonel Rey testified that less than 10 percent of foreign excess property is actually sold for export. Of this less than half is sold to Americans, perhaps $15 or $20 million at acquisition cost this year. This is the maximum that would come back to the United States as foreign excess imports. It may be interesting to the committee to compare the sales of surpluses abroad with sales within the United States for domestic consumption. In fiscal years 1958-59 and 1957-58, sales within the United States of products classified as usable or for salvage were about three times the sales abroad, both expressed in terms of original acquisition cost. It is probable that the original cost of the foreign surplus items returned to the United States in these 2 years was from 1 to 3 percent of the surplus goods sold by the Defense Department here in the United States. Relative to our total national production or to our output of manufactured goods or to more narrowly defined categories of products being disposed as surplus, actual disposals are very limited in magnitude. What appears to have taken place is the tendency for those who have complained about the excessive imports of surplus to generalize from a few isolated instances, some of which would undoubtedly not stand up and have not stood up under intensive scrutiny. In essence, we have adopted policies and procedures which are far more harmful and wasteful than beneficial and constructive in their aggregate impact. Moreover, the amount of regulation and administrative effort that has gone into the control of foreign excess property imports, which are infinitesimal compared to domestic surplus disposal, is wholly out of proportion. If the American economy needs protection, it should be at the point of greatest danger, not at the point of least danger. We talk about economic growth and we talk about efficiency in our economy, and yet in the existing legislation and under the prevailing order, we are arbitrarily being wasteful and inefficient and reducing competition. It is true that the funds which our Government derives from the sale of surpluses are quite limited compared to our total budget, but one would expect that the tremendous drive to reduce expenditures and to maximize revenue would logically lead to efforts to maximize Government revenues from the sale of surplus. It seems clear that the present rules and regulations which restrict imports lead to reducing proceeds from the sale of surplus abroad. Permitting such imports would broaden and expand the markets for such goods and would help bring about higher proceeds. Certainly, it would intensify the competition on the part of buyers and this would increase the proceeds. PROTECTION FROM INJURY The real problem faced in liberalizing imports of foreign excess property stems from the fact that some few individuals or companies might be temporarily affected in an adverse manner. The administrative agencies can establish appropriate regulations after careful study and exploration with all interested parties. The burden of proof of injury ought to be on those who contend they are adversely affected. They should be required to give proof and evidence that they are being or will be harmed and that restrictions should be applied. What we have done in essence in the existing legislation is to bar imports subject to proof and evidence that they will not be harmful. What really ought to be done is to remove all restrictions of surplus property imports. However, if any limits are introduced, they should, as the Senate bill tries to do, permit such imports subject to evidence and proof that they are harmful. In the final analysis, no valid reason exists today for continuing the present dubious and impracticable distinction between foreign and domestic surplus property. If this distinction must remain, then the law should be revised in accordance with the language in the Senate bill which would liberalize the inflow of our surpluses being sold abroad. It provides the administering agencies with the flexibility that is needed and would replace the existing extreme and arbitrary restrictions. Competition is still a powerful constructive force and it should not be shackled as is done inadvertently by the present law, and in a rigid manner by the Department of Commerce. The Senate bill makes the changes that are necessary so that our foreign surplus can come into the United States, thus maximizing our Government revenue, helping to fight inflation and making for more competition. Senator GRUENING. Mr. Randolph K. Vinson, executive director, Machinery Dealers National Association. Mr. Vinson, are you in favor of the bill or are you against it? Mr. VINSON. Yes, Mr. Chairman, we are in favor of the bill. Senator GRUENING. Very well. Mr. VINSON. And as the executive director of our association, I would like to read a brief statement in favor of the bill, for the chairman of our Government affairs committee who was unable to be here today. Senator GRUENING. You may proceed. STATEMENT OF RANDOLPH K. VINSON, EXECUTIVE DIRECTOR, MACHINERY DEALERS NATIONAL ASSOCIATION, FOR ALEX ZEEVE, JR., CHAIRMAN, GOVERNMENT AFFAIRS COMMITTEE Mr. VINSON. Mr. Chairman and members of the committee, please accept my sincere appreciation for the opportunity to appear before your committee on the subject of importing Government-owned surplus machine tools and contiguous production equipment, covered in section 402 of the Federal Property and Administrative Act of 1949. As chairman of the Government Affairs Committee of the Machinery Dealers National Association, my name is Alex Zeeve, Jr., of the Alex Zeeve & Co., Inc., 2617 Woolworth Building, New York 7, N.Y. We believe that S. 3154 will help to bring up to date the law as it specifically applies to machine tools and production equipment and, at the same time, correct a situation which we believe to be detrimental to American industry. We respectfully urge you to seriously consider the following: I. The present foreign excess property law is not protecting domestic machine tool builders as it is intended to do. The present law is presumably intended to protect domestic industry from indiscriminate dumping onto the domestic market of American-built equipment which becomes surplus to the U.S. Government at oversea locations. It fails, however, to accomplish this as regards machine tools and production equipment because it is predicated upon a misconception; namely, that every used machine tool sold here in the United States represents one less new equipment machine tool that could be sold by a builder. This is definitely not the case. There are hundreds and thousands of plants here in the United States which would be glad to buy a used machine tool, but who do not have the funds or budget to buy the equivalent new machine. In other words, these plants never were a customer for the new machine tool. These smaller plants which are in the growing stages could conceivably at some time later in their development become a customer for the new machine tool. If these customers cannot find a good used American-built machine within their allocated budget, their alternate choice then becomes a new foreign-built equivalent machine, and statistics plainly show that in the last 10 years the influx of these new foreign-built machines has grown and grown, to the obvious disadvantage of our domestic machine tool industry. II. The present law is actually improving the chances of foreign machine-tool builders permanently establishing themselves in the U.S. market, which is the exact opposite of what the law is probably intended to accomplish. (See reasons under No. I above.) Furthermore, once a small plant here has started purchasing new foreignbuilt machines, there is a very good chance that as they expand and have more funds, they may continue purchasing foreign tools, whereas if these smaller plants were given the opportunity to buy a reasonably modern used American-built machine, when they became more prosperous and could afford better equipment, they would probably favor American-built machines. III. The present law has undoubtedly caused a substantial quantity of surplus American-built equipment winding up behind the Iron Curtain. The Hoover Commission Reports on Foreign Excess Property repeatedly indicate that their committee believed that a good deal of the foreign excess property being sold overseas was winding up behind the Iron Curtain. Their report admits that there is no effective way that the Government can police the ultimate destination of the property they sell overseas. For this reason alone, we believe a determined campaign to have the law changed should be made, so that at least these surplus American machines can be sold here in the United States without restriction, instead of permitting them to be sold to foreign buyers who may easily dispose of them behind the Iron Curtain. IV. The present law is causing our Government to realize negligible monetary return for surplus machine tools being sold overseas. At present, foreign buyers know that they will have no competition from dealers like ourselves or other purchasers in the United States; they are, therefore, having a "field day" in buying whatever surplus equipment comes up on bids overseas, and are buying it for next to nothing. If American buyers were given the opportunity to compete for these machines, the net return to the Government would obviously be higher because of the greater competition involved. V. The present law is predicated upon the further misconception that machine tools and production equipment located overseas are available in enormous quantities, which is not the case. It might be conceded that if American-built machine tools and production equipment became surplus at oversea bases in enormous quantities, their impact upon the domestic economy if brought back here might be severe; however, the facts are that the amount of such equipment now being sold overseas is practically negligible. I have gone through literally hundreds of Government bid invitations at oversea bases, and in a typical sale running anywhere from 100 to 200 lots of assorted material, it is unusual to find more than two or three machines of any kind in the sale. On this point, there is a further anomaly— even assuming that there was a large quantity of equipment available overseas (which is not the case), then why cannot our Government, using the same reasoning that has gone into the making of our present law, prohibit the sale here in the United States of surplus machinery and equipment which it has for sale at domestic military and naval installations? In other words, if the basic desire of Congress is to protect domestic industry, then why not go whole hog and take all of our surplus machine tools and dump them out in the ocean to prevent their being sold on the market? Why select only surplus Americanbuilt equipment which by an accident of geography happens to be located at a U.S. base overseas instead of being at a U.S. base in Maryland or California? To sum up, we feel that the present law does not accomplish what it is intended to accomplish and actually works to the detriment of the very American industries which it was presumably designed to protect. The proposed law (S. 3154) will correct this situation, and we are behind it 100 percent. Thank you very much for the courtesy you have extended me today. Senator GRUENING. Thank you very much, Mr. Vinson. Are you familiar with the amendments that have been placed in the companion bill in the House, H.R. 9996? Mr. VINSON. Yes. Senator GRUENING. Do you favor those amendments or not? Mr. VINSON. Actually, I have not had an opportunity to discuss them with our committee in detail, but I am sure that the intent and feeling of our committee is that they are good amendments. The language may require a little bit of correction in that. I am not so sure. Senator GRUENING. Then you would not agree with Mr. Kampelman and Mr. Nathan? Will you be kind enough Mr. VINSON. I will be happy to report back to you. Senator GRUENING. Will you be kind enough to submit your views? (The material requested follows:) MACHINERY DEALERS NATIONAL ASSOCIATION, Reference S. 3154 and H.R. 9996 (Rept. No. 1638). Hon. ERNEST GRUENING, Senate Committee on Government Operations, DEAR SENATOR GRUENING: It was kind of you to permit me to consult with our committee on your question, "Do you favor those amendments in the companion bill H.R. 9996?" So that you may have the exact words of a machinery dealer who is directly affected by the bill and is chairman of our committee, I am pleased to again quote Mr. Alex Zeeve, Jr., as follows: "It is our feeling that the change proposed by the Department of Commerce would to a large extent nullify the basic intent of the proposed bill. If it is adopted, it would result in the Department of Commerce having to pass on each application just as they presently do under the present law, with no clear and definite criterion other than what they interpret as to what 'would result in undue loss of production or unemployment.' "One can easily visualize what might very well happen. Each time someone wished to reimport some foreign excess property, it is entirely possible that the Department of Commerce would contact the original manufacturer and ask whether the reimportation would result in undue loss of production or unemployment; now, this would be a difficult question for the original manufacturer to answer. Many manufacturers, as you well know, take the stand that each and every unit sold as used or surplus equipment represents one less new item that they themselves could furnish (even though we, of course, know that this is not so). Such manufacturers would, therefore, undoubtedly tell the Department of Commerce that the reimportation would result in undue loss of production, and the Department of Commerce might, therefore, very well then reject the reimportation application. "We feel this would negate the entire purpose of the proposed bill. It seems to us that the original language of this bill is much more to the point and presents a much fairer criterion as to what will govern the Department of Commerce in passing on reimportation applications. The original language states that the reimportation would have to be proven to be 'injurious to the economy of this country,' which means that anyone objecting to the proposed reimportation would have to make out a case showing not only that his own business might possibly be adversely affected but that the entire economy of the country would likewise be adversely affected, and we feel this should be the true test. "I cannot help but add that the entire background on the subject of foreign excess property shows that the Department of Commerce themselves have never once initiated any action to change the present unfair law. It would, therefore, seem that their feeling has been that the law has been fair, which we, of course, know it has not been. It therefore seems to me that their present request to change the wording on the proposed House bill is a further manifestation of their desire to continue acting as 'policeman,' when that should not be their function at all. From personal experience with their personnel down in Washington, I draw the conclusion that they have not been, nor will they be, sympathetic to reimportation of foreign excess property unless the proposed change in the law is so clearly written that they will be prohibited from acting as the arbiter in each and every case. "I further cannot help but observe that the unfortunate appellation 'Foreign Excess Property,' which has been given to American-built equipment, machinery, etc., sold by U.S. agencies overseas has somehow or other permeated the thinking of Department of Commerce officials who have associated it with some sort of evil connotation, as if it were 'bootleg' or 'clandestine merchandise.' The true facts are, of course, that the equipment involved should have no such connotation attached to it at all-it was produced by American labor in American plants and paid for with American dollars and by an accident of geography happened to become surplus at American bases overseas instead of becoming surplus at a domestic base. The original American manufacturers presumably made satisfactory profit margins on this equipment when they built it, and while it is understandable that they might prefer that it not be put back into |