it wouldn't be advisable to do that, because it might injure the domestic economy.

Mr. FASCELL. I appreciate that, Mr. White.

Mr. WHITE. That is what you get into.

Mr. FASCELL. But look here. Don't you have a greater injury because of domestic surplus? I mean all the testimony this morning is that this foreign excess property importation is infinitesimal compared to domestic disposal.

Mr. WHITE. What you are saying is that one is greater than the other.

Mr. FASCELL. Yes.

Mr. WHITE. We can't argue that point.

Mr. FASCELL. If you want to protect, it would seem to me you would want to apply the protection to the point of the greatest injury, not to the point of the least injury.

Mr. WHITE. We aren't talking about that. What we are talking about specifically is to take care of this part. I agree with what you

say.

Mr. FASCELL. If we are going to be logical, we might as well say if we are going to protect here we ought to protect all the way across the board.

Mr. WHITE. I can't argue that point at all.

Mr. FASCELL. I am just wondering whether or not uniformly it shouldn't work both ways. I am just inquiring out loud.

Mr. BARRY. Will the gentleman yield?

Mr. FASCELL. Yes.

Mr. BARRY. I am on the Donable Property Committee, which is a subcommittee of the full committee here. We have under discussion at the present time the further extension of giving of property away-foreign excess property. There are certain objections. Mr. FASCELL. You mean to eligible users.

Mr. BARRY. That is right. And it may be that the amount of property is so small we could eliminate the difficulty by seeing to it that it is all given away-since we are getting so little when we sell itonly 7 percent of $15 million from which must be deducted the value of all the time you have indicated that has been spent on this, plus warehousing and legal expenses.

Mr. FASCELL. Legal? Why I bet the departmental time on this can't be computed in the amount of dollars and cents to the taxpayers, the effort that they have put in trying to administer this law, which is, they admit, almost impossible of administration.

Mr. BARRY. If the gentleman from the Defense Department, Colonel Rey's figures are correct, there would only be 7 percent of $12 to $15 million or about $1 million accruing to Uncle Sam from all this property. Mr. Chairman, Mr. McCormack, who is the chairman of the Donable Property Committee, might be willing to accept the suggestion that we make arrangements to give this all away in order to eliminate this complex problem.

Chairman DAWSON. We will take that up in the future. Did you have another question?

Mr. INDRITZ. One last question. Mr. Rintels, wouldn't your problem be minimized if you adopted your suggested procedure of having a decontrolled list and a prohibited list, with the use of the word "if" and not "unless."

Mr. RINTELS. I think it would be made complicated rather than simplified, I must say, because I believe we would still be under the compulsion of examining all categories of property which we would not be required to do under the Commerce Department proposal. May I add just a word to the discussion of a moment ago. I think that there are two or three other points which perhaps merit some consideration.

Mr. FASCELL. Good.

Mr. RINTELS. One is that this property of course is for the most part property produced in this country, and if it does return, it therefore returns free of duty as returned in American goods.

Now this is not universally true. It would not be true of property which represents offshore procurement. But it would be sustantially

true.

Another thing is that while the figures which have been given as to the quantities of property which are brought in by buyers for importation into this country may reflect the current practice, there is no assurance, I think, that those figures would be firm if this law were to be lifted from the books entirely, because that would provide a very marked stimulus to American purchasers or purchasers for this market to buy with the intention of bringing the property into this country.

Now how much that would lift the level is impossible to say from $15 or $20 million of property a year, but it would undoubtedly lift it very considerably.

Mr. FASCELL. You mean the American bidders would be able to bid a higher price overseas, is that what you are getting at, and therefore would be more successful than they are now in obtaining the property at disposal sales?

Mr. RINTELS. I am not thinking so much that they would be able to bid a higher price, but they would have more incentive to bid. Mr. DRUMM. We think there would be greater participation by American bidders in foreign excess property sales.

Mr. RINTELS. Yes.

Mr. DRUMM. We think the number and extent of participation would increase perhaps very substantially.

Mr. RINTELS. I think it would increase very substantially.

Mr. FASCELL. I can see that as a possibility. But if you are going to go into that, you would have to admit also that this increased activity would have a tendency to raise the total prices.

Mr. RINTELS. Yes, it would.

Mr. FASCELL. This would then also have the possibility of increasing income.

Mr. RINTELS. Yes.

Mr. FASCELL. You have to take that into consideration, too.

Mr. RINTELS. I think in an overall policy sense what you say is true, Mr. Fascell. But that does not go to the policy of

Mr. FASCELL. No.

Mr. RINTELS. This act, which is aimed at some measure of protection to the domestic economy.

Mr. FASCELL. I appreciate that, and the only thing that I am concerned about now is that in dealing with this thing we have put all of our efforts legally and administratively on the minimal aspects of the problem, if we are talking about domestic production.

Mr. RINTELS. This is true. According to the figures which we have seen, and over a period of years, foreign excess property has ranged from about 10 to about 15 or 16 percent of the total DOD disposals. It will go up a little or down a little from year to year. Now we could be accused of straining at gnats and swallowing camels. Mr. FASCELL. Thank you for saying it.

Mr. RINTELS. And I think that is a problem which the committee may want to consider. But it may be à problem in a somewhat different framework.

Mr. FASCELL. I am inclined to join my colleague from Ohio, and say that we had better put the committee effort and the departmental effort on tightening down procurement, rather than trying to work on the other end of the scale.

Mr. RINTELS. As Mr. Drumm pointed out earlier, the arrangement that we have with the Defense Department in terms of domestic surplus disposals is by way of agreement. It is not a statutory arrangement.

Chairman DAWSON. Do you have a question, Mr. Smith?

Mr. SMITH. Yes. I would like to get a little bit more specific about your interpretation of your amendment here in the example of these tire chains you are talking about.

Suppose there is a shortage of log chains, and this industry I take it produces both log chains and tire chains and could switch production back and forth. Under your interpretation here, would your amendment prohibit the importation of tire chains, even though there is a shortage of log chains at that time? Suppose they are the same kind of steel and there is a shortage of that kind of steel?

Mr. DRUMM. I think we would have to approach this on the basis of whether or not there would be an interference with production under our proposed language here.

Mr. SMITH. So it gets right down to the place under your language where you don't consider the shift that is possible within the industry. Mr. DRUMM. Yes, I think this would be a consideration that would be taken into evaluation.

Mr. SMITH. You don't give much weight to it.

Mr. WHITE. Not necessarily. You might. That would be part of the consideration.

Mr. DRUMM. It would be a factor.

Mr. WHITE. It is a factor certainly.

Mr. SMITH. Then suppose there is a shortage of that kind of steel, but it is a part of a different industry, for example production of wrenches or a tool steel of some kind. Do you consider that also?

Mr. BENNETT. If there is a shortage of the raw materials, of which the tires are made, they could be brought in as scrap and relieve that shortage, and they could come in at the present time under the regulations without an application to the foreign excess property offices. Mr. SMITH. If they are designated as scrap

Mr. FASCELL. If they are designated as scrap.

Mr. SMITH. Under your amendment give me an example of what could be brought in that could not be brought in under the present law?

Mr. DRUMM. I think your approach here is quite different. Under the present law we would have to make an assessment as to whether or not the proposed importation would relieve the existing shortage.

We turn it around now and liberalize it quite a little bit either under 9996 or under our proposal, so that we would have to look here on a given application as to whether or not there is an interference with production, whereas I pointed out before the delayed impact

Mr. SMITH. Is the end result the same though?

Mr. DRUMM. I don't think so. I think this is quite a turnabout.

The other two criteria you recall in 402 were shortage, and demonstrated shortage. If you find no shortage or other benefit to the economy, the application must be denied.

Chairman DAWSON. Thank you very much, Mr. White, for your testimony. Did you have a question?

Mr. BARRY. I just want to say that we have been touching a very small part of the problem that faces one of the other subcommittees. We are preparing in the Donable Property Subcommittee, which is a subcommittee of the Government Operations Committee, to dispose of an average of $10 billion worth of surplus property a year, $10 billion worth a year is the direction in which we are headed. So I am very happy to get some of the thinking here with respect to a small segment of it. Thank you.

Mr. WHITE. We are working on that very point right now, and we are familiar with it.

Chairman DAWSON. Thank you very much, Mr. White.

Our next witness will be Mr. Mullins, of the Bureau of the Budget.

STATEMENT OF GEORGE MULLINS, ASSISTANT CHIEF, OFFICE OF MANAGEMENT AND ORGANIZATION, BUREAU OF THE BUDGET

Mr. MULLINS. Mr. Chairman, I do not have a prepared statement, but I do have a report which I understand that Mr. Henderson has distributed copies of to the members. I will not read that as a statement, unless you wish me to do so.

Chairman DAWSON. We will put your statement in the record. (The document referred to is as follows:)

EXECUTIVE OFFICE OF THE PRESIDENT,

Hon. WILLIAM L. DAWSON,

BUREAU OF THE BUDGET, Washington, D.C., March 1, 1960.

Chairman, Committee on Government Operations,
House of Representatives,

Washington, D.C.

MY DEAR MR. CHAIRMAN: This is in response to your request for a report on H.R. 9996, 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.

The principal effect of the bill is to provide more definite guidelines and authority for administering and enforcing the import restrictions in section 402 of the Federal Property and Administrative Services Act of 1949. The bill would revise the method for determining whether importation of foreign excess property should be authorized, would make importations of such property in violation of section 402 clearly unlawful, and would make the property involved in such violations subject to seizure or forfeiture.

We believe that amendments to section 402 would be helpful in clarifying and strengthening the administration and enforcement of import restrictions under the act. We are advised that the General Services Administration and the Departments of Agriculture, State, Defense, and the Treasury would not object to legislation along the lines of H.R. 9996, although favoring amendments in certain cases.

53267-60-5

We understand that the Department of Commerce favors the provisions of the bill making violations of the import provisions unlawful and subject to penalties of seizure but recommends two changes in the methods and criteria provided in the bill for determining whether to exclude or permit entry of specific property. H.R. 9996 would permit importation of foreign excess property except when such importation is determined to be "injurious to the economy of this country." It is our understanding that the Department believes such language would cause problems of administration and interpretation and that it would prefer language which would (1) exclude property not determined to be admissible, and (2) base its decisions regarding admissibility on the "impact upon domestic production or employment" instead of injury to "the economy of this country" as the bill provides.

The first of these proposals would reverse the determination process from one of general admissibility subject to adverse determinations by the Government, as provided in H.R. 9996, to one of general exclusion subject to favorable determinations by the Government. The Department of Commerce believes the bill might require advance determinations for all property that might become foreign excess, which would be a costly and impractical procedure. If such actions would be necessary, we would agree that the bill should be amended to avoid such a requirement. If the legislation is amended as the Department of Commerce recommends, however, we think it particularly important that the Commerce proposal for a "decontrolled list," a "prohibited list," and an “intermediate category" be implemented.

The second recommendation by the Department of Commerce would provide a more limited criterion than injury to the economy of this country for deterining whether property should be admitted in order to avoid the necessity of a complete analysis of all economic factors bearing on a given case. We would agree that such extensive studies of each case would not be practical, considering the number of applications and the fact that many of them involve relatively small quantities of property. Since decisions to admit or exclude are almost certain to affect adversely one or another of opposing interests, we believe the Department should have guidelines that are as clear and specific as possible. 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 language proposed by Commerce appears to provide a criterion under which consideration may be given not only to the possible effect of an import upon a particular industry but also to other factors such as employment and production in other segments of the economy, including the possible beneficial effects of imports.

We would also have no objection to the provision of H.R. 9996 which would make property imported in violation of section 402 subject to forfeiture to the United States providing that importers would have reasonable means of knowing when they are violating the statute. That would be the case if the Department of Commerce accomplishes its plan to establish a "decontrolled list" and a "prohibited list," together with clear-cut procedures under which determinations may be reached with respect to items not on either of these lists. It would seem that when violations occur under such circumstances, forfeiture would be an appropriate and justifiable enforcement authority if used with reasonable judgment under the general policies already followed by customs officials. Sincerely yours,

WILFRED H. ROMMEL,

Acting Assistant Director for Legislative Reference.

Mr. FASCELL. Are you for or against the bill?
Mr. MULLINS. We support the bill as drafted.

I might also add that in the process we contacted other agencies who we thought would be concerned, including those from which the committee asked reports, and I believe I can state the general consensus is in agreement with the bill with a few reservations on some amendments, most of which I would class as not being of a substantive nature. Mr. FASCELL. Those amendments are set forth in your report, are they?