loss to them as far as profits are concerned, because a lot of this Government equipment that is bought is bought on bid, and the manufacturers in order to keep their capacity up in their plants, will take this business at very little profit to themselves.

Senator GRUENING. But you attribute the decline in your business to a highly competitive situation; you do not attribute it to any other Government policies, do you?

Mr. MAYER. Well, the decline of our business is due to a number of things. Certainly there is a greater supply than there is a demand. That is No. 1. No. 2 is the fact that there is so much used equipment in the hands of the contractors today that when they purchase new equipment they have always got one or two items of used equipment that they must trade in; and we distributors seem to be the ones that have to fall heir to this equipment. Then, when this equipment is resold, oftentimes we get just a small percentage of what we actually allowed for the equipment in resale. If we are going to share in any volume of business, we are required to overvalue trade-ins.

As far as cash business is concerned, we are also suffering because it is as competitive as the automobile industry.

Another thing that hurts us is the Government domestic surplus. sales. A lot of this equipment is falling into the hands of governmental agencies like the soil conservation districts and people of this nature municipalities, counties who would normally buy either new or used equipment from the distributors. But if they are able to get this surplus for just the handling and transporting charges, naturally they do not provide any market for us.

Senator GRUENING. Well, that is a saving for the taxpayers, though,

is it not?

Mr. MAYER. That is a saving for the taxpayers, provided this equipment is properly used and not lent by some of these agencies, as it has been done in the past. They say: We have the equipment, but we have no way to maintain it. So we will lend it to John Doe over here, a contractor, and he can use it in exchange for the maintenance of it. So this gives John Doe some equipment at practically no cost to him other than maintenance. This has happened a number of times. Senator GRUENING. Well, you are really pointing to certain weaknesses in the free enterprise system, are you not? Is not competition supposed to be the life of trade?

Mr. MAYER. So far as competition is concerned, I think we distributors know what competition is. We are working under it. Some of us are not doing as well as we would like to do.

I think the main difficulty is that a good many of us overestimate what business to expect. As far as last year and this year are concerned, we overshot the mark. Business has not been as great as we had anticipated. And going into 1960, it is not picking up any. We are retailoring our operations to live within the available business. But having the hard times as we have today, we just do not want to face any more burdens by having a lot of additional equipment brought in and dropped down in our lap as additional competition to what we are trying to do.

The distributor, particularly in the West-and I am sure the same is true in the Middle West and in the East--has very large stocks of used equipment today, larger stocks than we have ever had before;

and it is necessary, of course, that we dispose of these large stocks of equipment.

Senator GRUENING. Well, thank you very much, Mr. Mayer. We will be glad to hear from Mr. King.

The hour is getting late and I was wondering if you would summarize your statement and then submit it in full for inclusion in the record.

STATEMENT OF JOSEPH T. KING, GENERAL COUNSEL, ASSOCIATED EQUIPMENT DISTRIBUTORS

Mr. KING. I will try to make my remarks as brief as possible, Mr. Chairman.

Previous witnesses have commented on the difference between the language adopted by the House, the language of the bill before the committee, and the language recommended by the Department of Commerce. They are practically all the same, and it is our position that none of them are subject to interpretation or administration. In net effect, each would, for all practical purposes, nullify the present control.

I think the best way to prove our point if I may take the committee's time, is to refer to what the House committee report says.

May I quote that?

Senator GRUENING. Yes. We have that available.

Mr. KING. The statement I am referring to starts on page 7, Report No. 1638. I will analyze that statement.

Senator GRUENING. Go ahead.

Mr. KING. Note that the committee makes it clear that it expects the Secretary to take into account

not only the significance of the importation to the importer and to the industry immediately concerned but also the effect on employment and production in other industries, including possible beneficial effects to the importers.

In other words, when an application is received, the Secretary of Commerce must determine the benefits of the particular importation to the importer, the customer, the implication being that the customer would purchase at a lower price than he could at the retail market; and, three, the Federal Government through monetary realization resulting from the sale of the surplus for sale on the domestic market. (This would apply only where it could be proved that the importer would pay more than would be realized on the foreign market.) Against these benefits the Secretary must weigh the detrimental effects of the importation which could result in (1) loss of production and employment in manufacturing industries where surplus competes with new products, (2) loss of sales to wholesalers and retailers of new and secondhand products, (3) unequal competitive advantages between users of nonsurplus products and users of surplus products, and (4) Federal, State, and local losses of tax revenue caused by lower production and employment. Also, the Secretary of Commerce would be required to measure the effect of surplus sales against other industries not directly engaged in the sale or manufacture of the commodity.

If the Secretary is to weigh all the above-mentioned factors and then make "prompt determinations on all import applications" and deny them "only where there is valid evidence demonstrating that the

importation would in fact result in undue loss of production or employment," he would have to be far wiser than Solomon.

We respect fully submit, Mr. Chairman, that the language of S. 3154 or the alternate proposal language of the Department of Commerce or the language in H.R. 9996 would, for all practical purposes, destroy all semblance of control over the disposal of foreign excess property on the domestic market.

Senator GRUENING. Thank you very much, Mr. King.

Mr. KING. Thank you, sir.

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

STATEMENT OF JOSEPH T. KING

Mr. Chairman, I will try to make my remarks brief, and I only intend to comment on some of the legal aspects of the legislation.

The bill S. 3154 would amend the present criteria used by the Department of Agriculture and the Department of Commerce to determine whether they will license the importation of foreign excess property for sale on the domestic market. Under the present law, such importation is prohibited unless the respective Secretaries make a determination "that the importation of such property would relieve domestic shortages or otherwise be beneficial to the economy of this country."

This law was enacted in 1949 to protect production and employment from being adversely affected because many of the military items were the same, or similar to goods produced and used in a normal economy. Congress wisely decided that these products should not be brought back to this country unless they were needed to relieve a domestic shortage or the importation would otherwise be considered to be beneficial to the economy of the country. Although the term "otherwise beneficial to the economy of this country" is vague and its origin is obscure, I think it is reasonable to conclude that Congress was merely leaving the door open in case some situation developed which at the time Congress could not anticipate.

The proposed bill would amend this language to provide that such importations would be prohibited only in the event the respective Secretaries make a predetermination "that the importation of such property would be injurious to the economy of this country." While the proposed change in the criteria would not constitute a declaration of congressional policy to permit unrestricted importation of foreign excess property, the net result under such broad language would be the same.

To prove that the importation of any given quantity of goods would be “injurious to the economy of this country" would be an impossible task. The Secretaries would have to first determine what constitutes an injury to the economy of this country and, even if this could be determined, they would then have the problem of deciding the degree of the injury resulting from 1, 50, 100, or 1,000 shipments. I would assume that the term "injury to the economy of this country" would have to be interpreted broadly and the fact that it had an adverse effect on the segment of the economy, a particular industry, or a geographic area would be of little or no consequence.

The Department of Commerce and the House Committee on Government Operations have alternate proposals. The Department of Commerce suggests that the language should be "that the importation of such property would not have an injurious impact on domestic production or employment in the United States." The House Committee on Government Operations suggests that it should read "that the importation of such property would not result in undue loss of production or employment in the United States."

The only substantial difference between the language suggested by the Department of Commerce and that approved by the House Government Operations Committee is the word "undue." I know of no better way to explain the dilemma the respective Secretaries will find themselves in under this language than to read an excerpt from the House report (pp. 7, 8, H. Rept. No. 1638, 86th Cong., 2d sess.) which accompanies the House bill, H.R. 9996:

"(c) By 'undue loss of production or employment in the United States' the committee has sought to somewhat liberalize existing law, develop criteria which will be susceptible to some precision, and also give the Secretaries a reasonable

discretion in making determinations. The Department of Commerce as well as the economic interests involved were agreed that the present criteria of relieving domestic shortages or otherwise being beneficial to the economy were very difficult to establish and gave very little discretion or flexibility in making determinations. The committee wishes to make clear, however, that the Secretaries' findings should take into account not only the significance of the importation to the importer and to the industry immediately concerned, but also other industries, including possible beneficial effects of the imports.

"The committee noted the positions taken by the Bureau of the Budget in support of the bill, particularly its statement contained in its report (see appendix):

"We would be opposed, however, to any criterion which would be construed so that the decision would be based solely upon the interests of a single group of producers, distributors, or surplus property dealers without regard for the interests of other groups, including the general public and the Government.'

"The committee believes the Secretary of Commerce will recognize the necessity for making prompt determinations on all import applications and that applications will be denied only where there is valid evidence demonstrating that the importation would in fact result in undue loss of production or employment."

Note that the committee makes it clear that it expects the Secretary to take into account "not only the significance of the importation to the importer and to the industry immediately concerned, but also the effect on employment and production in other industries, including possible beneficial effects of the imports." In other words, when an application is received, the Secretary of Commerce must determine the benefits of the particular importation to (1) the importer, (2) the customer (the implication being that the customer would purchase at a lower price than he could on the retail market), and (3) the Federal Government through monetary realization resulting from the sale of the surplus for sale on the domestic market (this would apply only where it could be proved that the importer would pay more than would be realized on the foreign market).

Against these benefits, the Secretary must weigh the detrimental effects of the importation which could result in (1) loss of production and employment in manufacturing industries where surplus competes with new products, (2) loss of sales to wholesalers and retailers of new and secondhand products, (3) unequal competitive advantages between users of nonsurplus products and users of surplus products, and (4) Federal, State, and local losses of tax revenue caused by lower production and employment. Also, the Secretary of Commerce would be required to measure the effect of surplus sales against other industries not directly engaged in the sale or manufacture of the commodity.

If the Secretary of Commerce is to weigh all the above-mentioned factors and then make "prompt determinations on all import applications” and deny them "only where there is valid evidence demonstrating that the importation would in fact result in undue loss of production or employment," he would have to be far wiser than Solomon.

We respectfully submit that the language of S. 3154 or the alternate proposed language of the Department of Commerce or the language in H.R. 9996 would, for all practical purposes, destroy all semblance of control over the disposal of foreign excess property on the domestic market.

Senator GRUENING. It is now 10 minutes past 1 o'clock, and I suspect the witnesses are getting hungry.

Is there anyone who will not be able to testify this afternoon? If so, please indicate.

If not, then we will resume the hearings at 2:30 and hope to conclude them this afternoon. We will hear from Mr. Leslie V. Dix; Mr. Robert C. Moot; Lt. Col. John F. Rey, Chief, Surplus Property Disposal Branch, Department of Defense; Mr. James A. Garvey, Assistant Commissioner, Office of Utilization and Sales, GSA; Mr. Chester B. Lund, Director, Office of Field Administration, Department of Health, Education, and Welfare; Mr. Wendell Gray, Chief, Surplus Property Utilization Division, HEW; Mr. Manuel Miller, Office of the

General Counsel, HEW; and Mr. Walter G. Rhoten, past president, of the National Association for State Agencies for Surplus Property. And if there is anyone else who wishes to testify, we will be glad to hear him.

We will meet again at 2:30.

(Whereupon, the committee was adjourned, to reconvene at 2:30 p.m., the same day.)

AFTERNOON SESSION

Senator GRUENING. The committee will please come to order.
Is Mr. Leslie V. Dix here?

Mr. Dix. Present, Mr. Chairman.

Senator GRUENING. Would you be kind enough to come up and testify?

Mr. Dix, you are the Chief of Defense-State Relations, Office of Assistant Secretary of Defense for Manpower, Personnel, and Reserve. That is a very impressive title.

STATEMENT OF LESLIE V. DIX, CHIEF OF DEFENSE-STATE RELA-
TIONS, OFFICE OF ASSISTANT SECRETARY OF DEFENSE (MAN-
POWER, PERSONNEL, AND RESERVE)

Mr. Dix. It just represents work, Mr. Chairman.
Senator GRUENING. I am sure it keeps you very busy.

TESTIMONY ON S. 3489

Mr. Dix. I am only going to testify, Mr. Chairman, on the Department of Defense-sponsored bill, which your committee has introduced, S. 3489. This is our own proposal as distinguished from those bills that my colleagues, Mr. Moot and Colonel Rey, will comment on.

Senator GRUENING. Have you a prepared statement?

Mr. Dix. A very short one, sir, which amplifies the Department of Defense letter we submitted to the committee.

Mr. Chairman, as you have said, I am Leslie V. Dix, Chief of Defense-State Relations in the Office of the Assistant Secretary of Defense (Manpower, Personnel, and Reserve). The responsibility for the establishment of criteria and the designation of activities of special interest to the armed services within the meaning of the Federal Surplus Property Act has been delegated to this office by the Secretary of Defense since the early part of 1956. I represent the Department of Defense in expressing, as requested by this committee, the views of the Department with respect to our sponsored bill, namely, S. 3489.

Mr. Chairman, at this point I request permission to insert into the record, as part of this testimony on S. 3489, the August 28, 1959, report of the Department of Defense which advocates the enactment of this legislation.

Senator GRUENING. It will be done.

Mr. Dix. Thank you, sir.

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