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-
Colonel REY. Some does; yes, sir.

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.

(The information referred to follows:)

Information received from oversea commands on representative foreign excess sales of unused items1

1 No known sales of unused radios, automobiles, or trucks were held in oversea areas during fiscal year 1959.

Senator GRUENING. Have you studied the provisions of S. 3154? Colonel REY. Yes, sir; I am familiar with that.

Senator GRUENING. That is the bill that is supported by the importers of surplus property and opposed by certain manufacturers and distributors here. What is your opinion?

Colonel REY. The Department of Defense has no objection, opinion, on any one of the three versions that have been presented. Senator GRUENING. No opposition?

Colonel REY. That is right, sir.

Senator GRUENING. What do you think the effect on the construction industry in the United States would be with the passage of S. 3154? The manufacturers are opposed to it. They say conditions are not good now, that their profits are decreasing, and that further importations will aggravate their presently not too good a situation. Have you any opinion on that?

Colonel REY. Well, I will give you some factual information based on a study that was conducted by the Department of Defense, Senator. I do not feel qualified to say what effect our disposals might have. We look to the Department of Commerce for guidance on our domestic disposals in those cases where we might have market impact implications.

However, during fiscal year 1959 we did make a study in the Department of Defense to see just how much construction equipment was being disposed of by sale. It covered 9 months of fiscal year 1959. During that period we were disposing of, by sale, approximately $1 million per month, at acquisition cost, of construction equipment. So I would say that our rate of disposal, domestically, of construction equipment is running somewhere around $12 million at acquisition cost per year. Now what effect that has on the overall of the economy of an industry that is doing a $1.7 billion business, I do not know. As I say, I would look to the Department of Commerce for guidance. The Department of Commerce in this particular instance did not see fit to advise the Department of Defense to slow down its disposal program for these particular commodities. Senator GRUENING. Well, you feel that is a sphere that belongs to the Department of Commerce and not the Department of Defense?

Colonel REY. The final decision on the disposal rests with the Secretary of Defense. However, the Secretary of Defense, by agreement with the Department of Commerce, has entered into an informal agreement whereby we do seek the advice and guidance of the Department of Commerce relative to the market impact implications. of our disposals.

Senator GRUENING. Now, in this disposal of property abroad, what precautions do you take to see that it does not go behind the Iron Curtain, to some of these countries with which we do not trade? Colonel REY. We have developed, in conjunction with the Department of State and the Department of Commerce, very complete and extensive security trade controls.

Senator GRUENING. Do you feel they are airtight?

Colonel REY. I would not say anything is airtight, but I would say it is as airtight as we have been able to make it.

Senator GRUENING. Because we hear various reports that some of it does find its way from the governments to which it sold to a government behind the Iron Curtain by process of resale. Do you have any knowledge of that?

Colonel REY. Senator, all I can say is that we are attempting to minimize any diversions of this property to the maximum extent feasible. We have worked this system out at great length, and it has taken a long time to put the system we now have in effect, and all the reports I get back are that it is working very satisfactorily.

Senator GRUENING. How much of this excess property sold abroad would be usable by health, education, and civil defense agencies in the United States?

Colonel REY. Well, Senator, there, again, I might mention-maybe I misinterpret what you are saying. Do you say how much of what we are disposing of overseas would be useful in the United States? Senator GRUENING. Yes.

Colonel REY. Well many of the types of property that we are disposing of are similar to what we are disposing of in this country. However, the cost factor of bringing this property back to the United States may be a deterrent to its utilization.

Senator GRUENING. When you ship this property back to the United States, is it shipped in American bottoms?

Colonel REY. We are not shipping to the United States

Senator GRUENING. But when it is shipped back, is it shipped in American bottoms or shipped in foreign bottoms?

Colonel REY. I am not qualified to answer that question, Senator. Senator GRUENING. Occasionally we read reports in the press about the destruction of surplus property abroad. Have you any figures on that, or any information on the subject? Whether any of this property is unused?

Colonel REY. Senator, thus far this fiscal year we have abandoned or destroyed property having an acquisition cost of $6,422,000. Senator GRUENING. What kind of property is that?

Colonel REY. Well one good example of the type of property I know that was abandoned is where we had some ammunition that was dangerous in Morocco and it was sea dumped. We have had some toxic gases that are in cylinders that have become leaky, and have been dangerous, and they have been either destroyed or sea dumped. That is the type.

Senator GRUENING. In other words, it is the kind of property that would not be useful to anyone else?

Colonel REY. Yes, sir. This is the type that is normally dangerous. Now as far as abandoning, there are a few isolated areas-and Thule, Greenland, is one-and some remote stations up in northern Canada, where property having no economical value has been abandoned. There are policies out which prescribe the conditions under which such property may be abandoned. But that is property normally that we cannot give away or that no one will buy.

Senator GRUENING. What would you abandon in Thule, for instance? What sort of thing? Would they be quonset huts?

Colonel REY. It might be some old metal, for example. Scrap metal would be one type of property that may not be economic to ship back to a place that could use it. That is the type of thing that might be abandoned in a place like Thule.

Senator GRUENING. That does not amount to very much, does it? Colonel REY. No, sir. Worldwide it only amounts to $6 million worth-at acquisition cost-of property.

Senator GRUENING. Would you be kind enough to submit for the record those figures that I asked you about, showing the different types of property that you dispose of, and about what you get for it? Colonel REY. I will get them for you.

Senator GRUENING. We are interested in new property. I doubt whether we can get any fair approximation of the value of used property because, obviously, it depends upon how much it has been used. But there is a good deal of disposable property that is new, that has not been used because of change of policy, or one thing or another, and those are the figures we would like to get.

Colonel REY. We will have to get that from the oversea commands. I will get that for you, Senator.

Colonel REY. Yes, sir.

Senator GRUENING. Under what circumstances?

Colonel REY. We hold auction sales when we have sufficient quantities of property generated of a wide commercial nature.

Senator GRUENING. Where have you held some of these auctions? Colonel REY. We have held-during fiscal year 1959 there were 61 auction sales held within the Department of Defense.

Senator GRUENING. How many of those were held overseas? Colonel REY. There have not been too many overseas, Senator. I would not know the exact figure, but I would say it is probably somewhere less than five.

Senator GRUENING. Would you be kind enough to supply for the committee a list of those auctions, the amount of property that was sold, what was realized from it, and what its original value was and to whom it was sold? I think that is a fairly large order

Colonel REY. To whom they were sold? For each item?

Senator GRUENING. I mean in what countries.

Colonel REY. Oh, in which countries they were sold. Yes, sir.
Senator GRUENING. I think that is all.