REVISING LEGISLATION ON THE IMPORTATION OF FOREIGN EXCESS PROPERTY

TUESDAY, MARCH 1, 1960

HOUSE OF REPRESENTATIVES,

EXECUTIVE AND LEGISLATIVE REORGANIZATION

SUBCOMMITTEE OF THE COMMITTEE

ON GOVERNMENT OPERATIONS,

Washington, D.C. The subcommittee met, pursuant to notice, at 10:05 a.m., in room 1501-B, New House Office Building, Hon. William L. Dawson (chairman) presiding.

Members present: Representatives William L. Dawson (chairman), Dante B. Fascell, Neal Smith, Clarence J. Brown and Robert R. Barry. Staff members present: Elmer W. Henderson, counsel, Phineas Indritz, counsel, and Earle Wade, staff member.

Also present: Lt. Col. John F. Rey, Chief, Surplus Disposal Branch, Office of the Assistant Secretary for Supply and Logistics, Department of Defense; Robert T. Davis and Robert Griffin, Federal Supply Service, General Services Administration.

Chairman DAWSON. The subcommittee will kindly come to order. These hearings are being called to consider H.R. 9996, to revise present legislation dealing with the importation of foreign excess property. This, as you know, is property under the control of a Federal agency outside of the continental United States which is excess to its needs and which may be disposed of under the Federal Property and Administrative Services Act which originated with this committee.

(H.R. 9996 follows:)

[H.R. 9996, 86th Cong., 2d sess.]

A BILL To amend section 402 of the Federal Property and Administrative Services Act of 1949, to prescribe procedures to insure that foreign excess property which is disposed of overseas will not be imported into the United States to the injury of the economy of this country

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That section 402 of the Federal Property and Administrative Services Act of 1949 (40 U.S.C. 512) is amended to read as follows:

"SEC. 402. Foreign excess property may be disposed of (a) by sale, exchange, lease, or transfer, for cash, credit, or other property, with or without warranty, and upon such other terms and conditions as the head of the executive agency concerned deems proper; but it shall be unlawful to import such property into the United States after such sale or other disposition if the Secretary of Agriculture (in the case of any agricultural commodity, food, or cotton or woolen goods) or the Secretary of Commerce (in the case of any other property) determines that the importation of such property would be injurious to the economy of this country, or (b) for foreign currencies or credits, or substantial benefits 1

or the discharge of claims resulting from the compromise or settlement of such claims by any executive agency in accordance with the law, whenever the head of the executive agency concerned determines that it is in the interest of the United States to do so. Such property may be disposed of without advertising when the head of the executive agency concerned finds so doing to be most practicable and to be advantageous to the Government. The head of each executive agency responsible for the disposal of foreign excess property may execute such documents for the transfer of title or other interest in property and take such other action as he deems necessary or proper to dispose of such property; and may authorize the abandonment, destruction, or donation of foreign excess property under his control which has no commercial value or the estimated cost of care and handling of which would exceed the estimated proceeds from its sale.

"The Secretary of Agriculture and the Secretary of Commerce may make any determinations, rules, regulations, and orders deemed necessary or appropriate to carry out their respective functions hereunder.

"Property which is imported in violation of this section or any determination, rule, regulation, or order promulgated hereunder shall be subject to forfeiture to the United States. All provisions of law relating to seizure, summary and judicial forfeiture, and condemnation for violation of the customs laws; the disposition of the property forfeited or condemned or the proceeds from the sale theref; the remission or mitigation of such forefeitures; and the compromise of claims and the award of compensation to informers in respect of such forfeitures shall apply to seizures and forfeitures incurred, or alleged to have incurred, under the provisions of this section, insofar as applicable and not inconsistent with the provisions hereof: Provided, That no sale of such seized or forfeited property shall be made except upon condition, supported by appropriate bond, that the property shall be exported to a destination other than the United States or reduced to scrap. Awards of compensation to informers under this section may be paid only out of funds specifically appropriated therefor.

"The importation into the United States of property disposed of as foreign excess property for the purpose of repair, reconditioning, or rehabilitation of such property and its reexportation thereafter, or for the purpose of transit through the United States, shall not be an importation to which this section applies, if the importer of such property shall, prior to such importation, furnish bond for the performance of such undertaking in such amount and on such conditions as the Secretary of the Treasury shall prescribe.

Chairman DAWSON. This subcommittee has been concerned about the problems involved in regulating the importation of foreign excess property for some time. Hearings were held in July of 1958 which resulted in House Report No. 2661 of the 85th Congress. Further hearings were held in July of 1959. As a result of these hearings, there seemed to be a general consensus of opinion that there were imperfections in the present law which should be reviewed.

This bill proposes to change the conditions now in section 402 of the Federal Property and Administrative Services Act which forbid the importation of foreign excess property unless a determination is made that it "would relieve domestic shortages or otherwise be beneficial to the economy of the country." The suggested new yardstick would be that it would be unlawful to import such property only if a determination is made that it would be injurious to the economy of this country. Thus, whereas no foreign excess property may now be imported without prior determination that it would relieve shortages or otherwise be beneficial, under the pending bill it could be imported freely until a determination is made that it would be injurious.

The bill gives the Secretaries of Commerce and Agriculture authority to make the necessary determinations and issue regulations to carry out the law; provides a penalty for violation of the terms of the act, and permits importation under bond for reconditioning and reexport.

Our first witness will be Mr. William A. White, Administrator, Business and Defense Services Administration, Department of Commerce.

Mr. BROWN. Mr. Chairman.

Chairman DAWSON. Mr. Brown.

Mr. BROWN. Before the witnesses take the stand, it is my understanding, and I believe you so explained, that this bill has been prepared by yourself and by your staff and others who worked on this problem for many long weeks and during our hearings last year.

Chairman DAWSON. With conferences with the representatives of the Departments involved.

Mr. BROWN. And did you have the representatives of the Departments sit in on working out this bill?

Chairman DAWSON. Yes, I did.

Mr. BROWN. That is the information I wanted. Now have they approved the measure as it is?

Chairman DAWSON. They have approved it. I understand that they later arrived at the opinion that they would like to make an amendment which will be presented at the hearing.

Mr. BROWN. Was this taken up with the Bureau of the Budget, too? Chairman DAWSON. It was, yes.

Mr. BROWN. Have they cleared it?

Chairman DAWSON. That is right. I think they are present here this morning.

Mr. BROWN. May I ask this question?

In your conferences on this particular bill, which of course deals with surpluses and surpluses only, was there any discussion at all of any kind on the greater overall problem, the things which, of course, brought about these surpluses, created these surpluses, and that is the terribly poor, perhaps I should say, bad procurement practices that exist in connection with the purchases of the goods that have created these surpluses.

Was that discussed at all?

Chairman DAWSON. Mr. Henderson tells me that there was very little discussion on that point between the staff and the representatives of the various Departments.

Mr. BROWN. This committee has of course in the past, as well as the Hoover Commission and other groups, tried to do something about surpluses.

Chairman DAWSON. That is correct.

Mr. BROWN. And in some of our hearings, we have also shown very plainly that many of those surpluses were created just because of, let me say very frankly, very, very poor judgment, to be charitable, on the part of procurement officials.

In my opinion, while it is a good thing to have this type of legislation to control the sale and disposal of surpluses as best we can, we will never cure this situation until we do something about procurement practices, and stop the buying of huge amounts of unneeded goods.

Now there is always bound to be some surpluses, especially in the military, but we have had too much evidence in this committee of overbuying and of waste and extravagance, and I hope that when we get through with this type of legislation, we may again once more

give some attention to the problem of what we are going to do about Government procurement and how we can get action on it.

We have recommended action, this committee, certain things to correct procurement practices that we know are bad as a result of our investigations, and the Hoover Commission recommended different actions to cure these procurement practices.

The President has made recommendations and suggestions to departments and agencies of Government, and still the same old wasteful procurement practices continue, and it seems impossible to get anything worth while done about it.

I want to go on record on that particular phase of this whole problem, because the two are tied together so closely you can't separate them.

Chairman DAWSON. The Chairman is well aware of Mr. Brown's interest in this question. I think we will always remember Mr. Brown's remarks on hamburger and ketchup that caused so much comment all over the United States.

Mr. White.

STATEMENT OF WILLIAM A. WHITE, SR., ADMINISTRATOR, BUSINESS AND DEFENSE SERVICES ADMINISTRATION, DEPARTMENT OF COMMERCE; ACCOMPANIED BY THOMAS E. DRUMM, JR., AND WILLIAM B. BENNETT, BUSINESS AND DEFENSE SERVICES ADMINISTRATION; WALTER W. SCHNEIDER, FOREIGN EXCESS PROPERTY OFFICER; AND JONATHAN B. RINTELS, OFFICE OF THE GENERAL COUNSEL

Mr. WHITE. Mr. Chairman and members of the committee, my name is William A. White, Sr., and I am Administrator of the Business and Defense Services Administration of the Department of Commerce. On behalf of the Secretary of Commerce, I would like to express our appreciation for the chairman's invitation to comment on H.R. 9996.

Chairman DAWSON. Will you introduce the gentlemen with you, please, Mr. White?

Mr. WHITE. Mr. Thomas E. Drumm, Jr., and Dr. William B. Bennett of Business and Defense Services Administration, Mr. Walter W. Schneider, the Foreign Excess Property Officer, and Mr. Jonathan B. Rintels of the Office of the General Counsel, are in attendance today to assist in any possible way.

As the committee knows, the position of the Department of Commerce in providing objective judgments under section 402 of the Federal Property and Administrative Services Act of 1949 has been a difficult one. There are strongly opposed commercial interests which favor opposite interpretations and application of the law. It has been impossible to administer the statute without incurring vigorous criticism and objections from one or the other group.

H.R. 9996 represents a modification of the present law in two major respects: the first is substantive, the second is procedural. I should like to discuss the substantive feature first.

Under the existing section 402, it is necessary that a determination be made whether or not importation of foreign excess property

would relieve a domestic shortage or otherwise be beneficial to the economy of this country. Property may be imported only if the determination is affirmative.

The provisions of H.R. 9996 would make it unlawful to import foreign excess property into the United States if the Secretary of Agriculture or the Secretary of Commerce "determines that the importation of such property would be injurious to the economy of this country."

This represents to a marked degree a reversal of the point of view reflected in section 402 and appears to be a liberalization of policy in favor of importation of foreign excess property.

The Department of Commerce has no objection to the importation of foreign excess property if such importation would not have injurious impact on domestic production or employment. We feel that the language of H.R. 9996 would be more helpful in solving many of the problems which have heretofore confronted the Department if the criterion governing importation of foreign excess property were expressed in these terms.

It is our impression that under H.R. 9996 any property disposed of as foreign excess property would be freely admitted into the United States unless the Secretary having jurisdiction were to make a determination that the importation would be injurious to the economy of this country.

This would, at first reading, appear to eliminate the necessity for analyzing each individual application for import authorization. However, this language might well compel the Department to examine the entire inventory of Government property likely to be disposed of abroad, as well as some that has already been disposed of. This would require innumerable determinations. Moreover, such determinations would have to be updated periodically. Many of the types of property as to which determinations would have to be made might never be offered for importation into this country. Consequently, much of the required activity would be highly unremunerative.

We have serious reservations as to our ability to interpret and apply as broad a standard as "injurious to the economy." While it would appear that the proposed change from the present criteria in section 402 would not constitute a declaration of congressional purpose to permit unrestricted importation of foreign excess property, nevertheless the suggested standard is of so broad a character as to be difficult of implementation. In particular, this criterion fails to specify whether injury to the economy is to be measured in terms of the total economy or some appropriate segment thereof. Additionally, the criterion fails to provide guidance as to the degree of injury which would justify or require a decision excluding the property.

In an effort to supply more specific guidelines without doing violence to the underlying proposition expressed in H.R. 9996, we wish to propose for the committee's consideration the following substitute language in lieu of the present provision commencing on line 2 and continuing to line 9 of page 2:

*** agency concerned deems proper; but it shall be unlawful to import such property into the United States after such sale or other disposition unless the Secretary of Agriculture (in the case of an agricultural commodity, food, cotton or woolen goods) or the Secretary of Commerce (in the case of any other

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