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the domestic market, there is not the slightest reason why it should not be made available to American users now. We feel it is almost criminal to forbid. this material from being brought back here for sale, knowing that the Hoover Commission reports have plainly indicated that a large quantity of this foreign excess property has undoubtedly wound up behind the Iron Curtain, which is the last place it should wind up. Any change in the present law should be so clearly and strongly written as to make it as difficult as possible for any Government agency to prohibit the reimportation of this property. We therefore feel that the House bill, as originally written, contains the most desirable language; however, if the Department of Commerce's wording is adopted, we see strong possibility of the present law being continued instead of changed." With the hope this information will be helpful to you, I am

Respectfully yours,

R. K. VINSON, Executive Director.

Senator GRUENING. Our next witness is Mr. William C. Weber, Jr., executive director, Electronics Representatives Association. Mr. Weber, have you a prepared statement?

Mr. WEBER. Yes, I do, Mr. Chairman.

Senator GRUENING. I am wondering whether, in the interest of time—we have a lot of witnesses-whether you would not summarize your views and allow us to put your full statement in the record following your remarks?

Mr. WEBER. I will be glad to do that, Mr. Chairman.

STATEMENT OF WILLIAM C. WEBER, JR., EXECUTIVE DIRECTOR, ELECTRONICS REPRESENTATIVES ASSOCIATION, CHICAGO, ILL.

Mr. WEBER. I am William C. Weber, Jr., and I am executive director of the Electronics Representatives Association, with offices in Chicago. And I am appearing on behalf of the association and specifically our president, Mr. Wally Shulan of Jersey City, N.J., who wanted to be here but could not.

For the clarification of the committee, our members are independent manufacturers' representatives who sell all types of electronics components and equipment. They employ a substantial number of people and are involved in direct day-to-day selling.

Competition in the electronics sales today is very, very severe. We are facing not only competition from domestically generated surplus but also from the Japanese manufacturers of the same types of electronic equipment sold here in this country. So far as we are able to determine, there is no shortage of electronic parts and equipment in this country.

On the other hand, we are fairly certain that overseas there either are now or will be in the future substantial quantities of electronic goods that will be available for reimportation into the United States. With the steady improvement in military hardware, and particularly in our industry where electronics is changing almost every day, we are pretty certain that this is going to happen. Under the present. law we feel that the country and the electronics economy, is protected from the wholesale dumping of foreign excess property.

Even if it were small in amount, we see no reason for compounding the difficulties of an electronics market that already has a more than plentiful supply.

Under the present law, of course, there has to exist a domestic shortage, and this is a determination now made by the Department of Com

merce. If the law were changed as is provided in S. 3154 or H.R. 9996, this means a shifting of the burden of proof over to the injured industry. Our basic position is that, if it is now difficult for the Department of Commerce to determine an import which is beneficial to the economy or, in other words, determine the actual existence of a shortage, that it is far harder for them to determine a potential impact on an economy in advance.

We wonder how you determine in advance the impact on the economy as a whole, on a given industry, or on production or on employment. You can prove this, once it has happened, but of course then the damage is done and the market is severely injured.

If it were not true that competition is as severe as it is in our electronics industry, perhaps we would feel otherwise. Listening to the witnesses this morning, I gathered their particular complaint is directed at the current policies of the Department of Commerce in administering the present law. If these policies are incorrect, I believe they can be changed by the Department of Commerce just as they apparently were changed in 1958. And we submit that this is

the better action.

In the meantime, we respectfully ask you not to compound our present difficulties by changing the present law. Perhaps through better procurement on the Government's part or whatever other means are necessary. They can remedy a current domestic situation and, as I say, not add to our difficulties by bringing in goods which, once brought in, are certain to have a depressing effect so long as the goods are already in adequate supply.

Senator GRUENING. Well, then, as I understand it, your association is opposed to the enactment of S. 3154?

Mr. WEBER. Yes, sir; we are.

Senator GRUENING. And you prefer to leave the situation with the current provisions?

Mr. WEBER. Yes, Senator, we do. Primarily, as I say, because there are no provable shortages in electronics goods in the country. Our electronics manufacturers, from what we can determine from the electronics industries in the association, are well able to meet the demands; and the demands that they cannot meet, if there are such, are certainly being met by Japanese and German manufacturers.

Senator GRUENING. You feel that the importation of surplus commodities in your field would be injurious to your industry?

Mr. WEBER. Yes, sir; because the supply is already plentiful, and any goods which are brought back are bound to have a depressing effect on the local market.

Senator GRUENING. Do you feel that, despite the provisions of the bill, that the Secretary of Commerce may rule against the importation if he finds it injurious to production here?

Mr. WEBER. Senator, under the proposed language how do you determine such a thing as, for example, "injurious to the economy"? This is difficult as we see it, and the Secretary being unable to prove the injury in advance would be required to grant a license.

Now, as I say, once it happens, of course, it is a provable situation, and we know that in the case of domestic surplus, where, for example, after World War II, communications gear was dumped on the market, it did have a depressing effect on U.S. manufacturers.

But we would prefer to see the determination made now, as to whether a shortage exists. Under this test the Department of Commerce can go to the industry affected and ask them what their current stocks are, both in plant and in their distribution points. This gives a pretty adequate measurement of whether or not there is a shortage existing and whether or not importation of a given quantity of goods would result in a benefit to the economy.

But how they would determine undue loss of production or undue loss of employment or impact on either the whole economy or a part of it, we frankly, Senator, do not see how they could establish reasonable criteria.

Senator GRUENING. Well, thank you very much, Mr. Weber. We are very happy to have your testimony.

Mr. WEBER. Yes, sir.

(The full text of the statement by Mr. Weber follows:)

STATEMENT ON S. 3154 AND SIMILAR BILLS RELATING TO THE DISPOSAL OF
FOREIGN EXCESS PROPERTY

Mr. Chairman, my name is William C. Weber, Jr., and I am executive director of the Electronic Representatives Association, with offices at 600 South Michigan Avenue, Chicago, Ill. I appear on behalf of the association, and specifically its national president, Mr. Wally Shulan, of Jersey City, N.J., who had hoped to be present, but was prevented from doing so by circumstances beyond his control.

ERA is composed of some 725 independent manufacturers representatives throughout the country, small business firms which sell electronic components and equipment to commercial, industrial, and military customers. These firms employ well over 3,500 persons, most of whom are involved in direct day-to-day selling in every State of the Union against various forms of competition. Ever since World War II, and the Korean war, our members have faced competition from domestically generated surplus electronic parts and equipment returned to the American marketplace. We are well aware that this situation is caused by inadequate Government procurement policies, in many instances, and we support wholeheartedly the efforts of various Members of Congress who seek to rectify this situation. I am confident that we would lend our complete backing to efforts which would, in the interim, alleviate this condition through better control of the disposal of domestic surplus, even as current law exercises a measure of control over surplus reimported from abroad.

The present law, which S. 3154 (and H.R. 9996) seek to amend, provides that such foreign surplus may be reimported only in cases of a shortage here in the United States; we submit, Mr. Chairman, that no domestic shortages exist in the case of electronic parts and equipment. Quite to the contrary, and from what we can determine, electronic manufacturers are well able to supply both military and nonmilitary needs, and the fact that very few applications for the reimport of electronic surplus are now pending before the Department of Commerce would seem to support this thesis.

At the same time, we are confident that the rapidly changing technology of our industry means that substantial quantities of obsolete electronic parts and equipment either are now surplus overseas, or will be, as new equipment replaces that in current use. I regret to say that we have been unable to learn from either the Departments of Defense or Commerce exactly the items and quantities which are now (or are in the process of being declared) surplus, but the steady improvement in military electronic hardware is a good indication that large amounts of such material are or will be available for reimportation, particularly if the present law is changed.

If such goods are reimported, it can only mean further hardship on those in our industry, like electronic representatives, who must meet the competition of domestically generated surplus, not to mention the increasing competition from Japanese and other foreign manufacturers of the same equipment. Any merchandise dumped into a market of plentiful supply must have a depressant effect, which will translate into a lessening of the need for goods which are manufactured domestically. Obviously, a diminished demand means decreased

production by U.S. manufacturers, and a consequent loss of employment among their workers. It will also mean a loss of sales income for the representatives, wholesalers, dealers, and others who would normally be able to sell such goods to their customers.

Regardless of the extent of the loss of production and/or employment, it must necessarily mean a loss in corporate and personal income, and thus a loss of tax revenue to the Government. In view of the small rate of return to the Government (and thereby the taxpayers) on surplus property-estimated to be about 5 percent by the Chief of the Surplus Disposal Branch of the Defense Department—we seriously question whether the money obtained by the Federal Government from the domestic sale of surplus now overseas will offset the tax revenue loss resulting from the almost-certain loss of some production and employment caused by the reimportation of goods already in adequate supply. Above and beyond this is the question of whether or not the reimportation of these goods is worth even 1 day's lost wages for one worker anywhere in the United States, particularly when the loss is due to the now-preventable return of goods which were purchased by his Government with his own tax dollars, and might even have been manufactured by the firm which employs him.

One further point in re the financial return to the Federal Government: testimony from Colonel Rey, of the Surplus Disposal Branch, Department of Defense, indicates that the return on surplus sold abroad is about 7 percent, compared to the 5 percent realized on domestic sales. Economics alone, then, would indicate that the taxpayer is better off if the goods are sold overseas, rather than reimported.

Aside from the Federal Government, the only other beneficiary of a relaxation of the present law is a small group of importers. Their argument about creating business opportunities for various U.S. businessmen and consumers takes no note of the corresponding loss of employment and production which the reimported goods will cause among domestic manufacturers, and the consumers which they employ. They can now bring in any goods which they can prove are in short supply, and we have seen no evidence to indicate that current Department of Commerce policy is depriving domestic users of oversea surplus which they actually need.

Why, then, we ask, should the present law be changed for the benefit of a few, as opposed to potential damage to the many in the electronics and other industries which constitute so important a part of our peacetime and war-ready economy. The fact that there has been little provable damage to date is undoubtedly due to the small volume of reimports permitted so far; a change in the law could alter this picture in a very short time. In the absence of a proven domestic shortage, we can find no reason for gambling on potential damage, which, once it occurs, cannot be repaired. Determination of reimports “beneficial to the economy" is not a simple determination for the Commerce Department, but they have already indicated serious reservations as to their ability to interpret and apply as broad a standard as “injurious to the economy." We submit, Mr. Chairman, that interpreting the language "undue loss of produetion or employment" (as provided in H.R. 9996 as amended) is no simpler a task than determining injurious effects upon the economy.

Not only is it easier to determine the existence of a shortage, as must be done under the present law, but it would seem reasonable to assume that the number of applications for reimport will rise sharply if the basis of the determination is changed to one of impact on production or employment. In this event the workload of the Commerce Department will also increase, and a corresponding increase in the number of Government employees (and thus payroll costs) could easily negate any moneys accruing to the Government from the sales of such surplus. Furthermore, while the existence of a shortage can now be ascertained by checking the domestic stocks of manufacturers and their distribution outlets, the determination of economic damage in the form of production or employment loss is certainly a much more complicated and conjectural process, requiring far more research than is currently involved.

At this point, Mr. Chairman, I should like to add that the chief complaint of the importers seems to be directed toward the current administrative policies of the Foreign Excess Property Office of the Department of Commerce. They claim that the policy of this office changed in 1958, and that goods actually in short supply have been denied clearance. If, in fact, this is true, the remedy wold seem to be that FEPO, and certainly their current policy can be changed as indicated to rectify these situations.

I submit, Mr. Chairman, that the current law is adequate to cover all situations of actual domestic shortage, and that the burden of proof of shortage does now lie with the Department of Commerce which must consult with both the importer making application for import as well as the particular industry involved. I repeat, our feeling that the determination of shortage (and thus benefit to the economy) is far easier to accomplish than ascertaining in advance, the potential impact on the economy, or an employment, or production. The difficulties involved in the latter types of determination must, in our opinion, add to the workload of the Commerce Department, and cause them to make judgments based on criteria which are nebulous at best. A previous witness, Mr. Nathan, has admitted that the burden of proof, if the present law is changed, will be shifted to the industries affected. These industries will have no less difficulty that the Commerce Department, in proving in advance, the potential damage to the national economy, as a whole, or even to their particular industry. (They can prove damage once it happens, but it is then too late.)

Mr. Chairman, knowing that you have statements submitted to you by the Electronic Industries Association on behalf of electronic manufacturers, and by the National Electronic Distributors Association, representing the wholesalers of electronics parts and equipment, I think it safe to say that I speak for the majority of the electronics industry in asking you to reject the philosophy expressed in S. 3154, and to let the present law stand as it is. We ask, most respectfully, that you do not compound the difficulties created by domestically generated surplus by adding to them the impact of foreign surplus, regardless of quantity. When electronic manufacturers and their sales representatives have acted in good faith in supplying the Government with the electronic hardware for which it contracted, it seems to us unfair for that same Government to be the instrument by which their nonmilitary business is injured, regardless of the degree of damage. We are more than willing to meet the severe competition of the worldwide marketplace, but can find no justification for a change which would hamper our ability to keep American producers operating at the best possible capacity.

NOTE.-Value of Government excess property overseas as of December 31, 1959, $493 million.

Senator GRUENING. Mr. Robert P. McKenrick, executive vice president, Construction Industry Manufacturers Association.

Mr. McKenrick, would you be willing to have your statement put in the record and briefly summarize your position on it? I understand that you are appearing in opposition to this bill.

Mr. MCKENRICK. Yes; that is right, Mr. Chairman.

My statement is brief and, if you would bear with me, I would like to scan over it just as quickly as possible.

Senator GRUENING. We do not want to foreclose any testimony. So go right ahead as you desire.

STATEMENT OF ROBERT P. MCKENDRICK, EXECUTIVE VICE PRESIDENT, CONSTRUCTION INDUSTRY MANUFACTURERS ASSOCIATION, CHICAGO, ILL.

Mr. MCKENRICK. Thank you, sir.

My name is Robert P. McKenrick. I am executive vice president of the Construction Industry Manufacturers Association, with offices at 135 South La Salle Street, Chicago, Ill. My appearance today is on behalf of the manufacturers of construction machinery and equipment, whose membership in this association represents approximately 95 percent of the dollar volume of construction machinery sold in the United States; 80 percent of these companies are rated by the Department of Commerce as small business manufacturers.

My statement is in opposition to any change in section 402 of Public Law 152.

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