(After the close of the hearings, information was received by the committee describing the activities of the Fouke Co. with regard to the Alaska fur seals. The information follows:) CHAPMAN, DUFF AND LENZINI, Washington, D.C., September 29, 1971. Re hearings on Ocean Mammal Protection Bills; H.R. 6554, H.R. 10420. Hon. JOHN DINGELL, DEAR MR. CHAIRMAN: On behalf of The Fouke Company, Greenville, South Carolina, I wish to submit the following information for the record in connection with the above-referenced bills. The Fouke Company and its predecessors have processed Alaska fur sealskins under contract with the U.S. Government for over fifty years. Accordingly, the Company is interested in the hearings which have been held on the above-referenced bills. The issues before the Subcommittee involve finding the best means of conserving and protecting valuable marine mammal resources. We would support a bill along the lines of H.R. 10420. With respect to the Pribilof Island program, the annual harvest represents the management control phase of the overall fur seal program. Qualified marine mammal scientists have declared and the history of the Pribilof program demonstrates that the annual harvest results in a healthy, productive population. Since the Alaska fur seal is a commercially valuable animal, we believe that no purpose is served by denying the rational use of a valuable product of nature. With respect to operations of The Fouke Company which may be of interest to the Subcommittee we desire to submit for the hearing record the following information: 1. Compensation. Pursuant to the agreement (U.S. Government Contract No. 14-17-0007-1111) entered into between the Bureau of Commercial Fisheries and the Fouke Company on February 13, 1970 covering the processing and sale of U.S. harvested and owned Alaska fur sealskins from the annual Pribilof harvest for 1968, 1969, and 1970, the Company is compensated on a per skin basis for each category of sealskin sold in accordance with a contractual formula. For the last seven auctions the Company has received the following compensation from sales of the U.S. share. Under both the current and prior contracts the compensation to the Company is based upon the ultimate sales price at which skins are sold. Thus the Company's compensation can increase or decrease because of favorable or unfavorable economic conditions. During the last two auctions conducted under the prior contract, poor economic conditions resulted in the Company's compensation being less than its cost. The prior contract formula was calculated on a base amount (which was less than cost) plus an increasing rate of participation as sales prices increased. Under the current contract a formula was devised whereby the Company's break-even point is lower but in return it receives a decreasing rate of participation as sales prices increase. Total net proceeds of the past two sales have been substantially reduced due to lower volume of skins available and adverse economic conditions. 2. Advertising. The current processing agreement and past agreements with the U.S. Government have for many years required that The Fouke Company develop the market for processed sealskin through use of but not limited to merchandising and promotional work including recognized methods of advertising and means designed to stimulate interest and sponsorship of fashion designers, couturiers and editors, in this country and abroad. (Agreement, Art. 7.) The Company's general program of advertising and promotion is, pursuant to Article 7, reviewable by the Contracting Officer upon request and the annual promotion and advertising budget is subject to prior approval of the Contracting Officer. In addition to sealskins owned by the U.S. Government, the Company also receives for processing sealskins owned by the Governments of Canada, Japan and the U.S.S.R. as well as sealskins from South Africa and Uruguay. Audited advertising and promotion expenditures for the past five years and projected expenditures for 1971 are as follows: Neither the U.S. Government nor any other government subsidizes the advertising program. Advertising, like every other operation of the Companyprocessing, research, auction-is paid for from the Company's share of moneys generated through the sale of skins. The company receives raw skins from all its shippers having a low value and for which there is little demand and produces a finished skin having a high value because of the quality of the processed skins and the demand therefor. It is from the increased value that the Company's overhead items, including advertising. are covered. Advertising and promotion are essential to maintain the image of Alaska fur seal as a fashionable fur. The market for the finished product is dependent on women's fashions and strong competition exists in the market among producers and processors of mink. persian lamb and chinchilla to maintain an image. Every fur group gives advertising or promotional support to retailers. Retailers will advertise only if assured of support at the retail level and the backing of national and international advertising and promotion. Were mink, persian lamb and chinchilla advertised but not Alaska fur seal, it is inevitable that the latter wou'd quickly lose its position as a fashionable fur. Despite the contractual requirement that the Company develop the market for processed sealskin the agreement itself also specifically provides that the minimum number of sealskins is guaranteed. Article 1(a) of the Agreement provides: Consistent with the proper conservation and development of the fur seal herd or herds under its administration, subject to many factors not within the control of man, and with a view to promoting the optimum utilization of such fur seal herds as a natural resource, the Government each year harvests in the Pribil of Islands or elsewhere such numbers for fur seals as are consistent with the purposes of the [Fur Seal Act of 1966] Act. Because of fluctuations in size of annual harvests, a minimum number of sealskins is not guaranteed, and the failure to harvest any particular quantity of fur seals shall not constitute breach of contract. 3. Processing in Alaska. Processing of fur seal by The Fouke Company is a there-month operation involving many steps not commonly used on other furs. Such steps include unhairing, dehairing with highly specialized machinery, and dyeing, the total process involving permanent de-kinking of the natural curly fiber as well as imparting of luster. At Greenville the Company employs 239 individuals, well over half of whom fall into categories of skilled, semi-skilled, supervisory, research, and managerial personnel. A study by a reliable management engineering firm in 1962 indicated that establishment of a processing plant in Alaska would be totally impractical. First, the skins after processing must be transported from Alaska to the lower states anyway. most for delivery in New York City where the skins would go to coat manufacturers or be transshipped to European buyers. Cost of shipment of high value finished skins would, in fact, be substantially higher than the cost of shipping raw skins. Second, bulky supplies needed in large quantity for the Fouke process are not available in Alaska and would have to be shipped at great expense from sources mostly in the Eastern United States. Third, labor costs in Alaska would be substantially higher. These factors would greatly increase the cost of processing the skins, and other governments whose skins are now processed by Fouke would probably not want their skins processed in Alaska at such increased costs. As a result, a plant in Alaska would process less than half the skins now being handled by Fouke at its Greenville plant. Nevertheless, the same number of supervisors would be required for the Alaska plant and, because of the necessity of close supervision of the process, management personnel would have to move to Alaska. As a result, the operating costs per skin would be substantially higher than the present costs. Loss of such volume from the Greenville plant would, of course, greatly increase the per skin cost of processing there and would probably render operation of that plant uneconomical. 4. South African Skins. The Fouke Company does not now nor has it ever processed skins of baby seals. Neither does the Company process harp seals or any other hair seal. In addition to North Pacific fur sealskins, South African and Uruguayan fur sealskins are processed although Uruguayan skins are less significant in number. The Secretary of the Department of Industries, Republic of South Africa, through the local Embassy, advises that fur seals within the jurisdiction of that country have been protected by law since 1891 and that sealing operations are subject to strict government supervision. The Secretary advises further that baby seals are not knowingly killed in the annual harvest nor are unweaned pups and females harvested. The number harvested annually amounts to less than one-third of the annual recruitment plus five-thousand surplus bachelors. According to the Secretary, the present South African seal population is estimated at one million and this population has been increasing. We hope the foregoing information will be useful to the Subcommittee. Sincerely, PAUL A. LENZINI, Attorneys for The Fouke Company. Mr. DINGELL. Let us switch to another point. Mr. DINGELL. How many natives are employed in the taking of the fur seal and how many mainland Alaskans are employed in the taking of the fur seal and how many from the contiguous 48 are employed in the taking of the fur seal? Mr. POLLOCK. Just a moment, Mr. Chairman. Mr. DINGELL. I am informed that sources of recruitment for sealskin operations, this is according to information submitted to Mr. Potter of the committee and I note here in 1967 there were a total of 78 people involved. Of this total involved, 37 came from the Pribilofs, six from the Aleutians, 27 from the mainland of Alaska and 18 from the United States. Since that time there has been some adjusting of the figures. In 1968 there were 24 people from the Pribilofs who got employed in this taking, four from the Aleutians and so it was a drop in each instance. 32 from the mainland of Alaska and 12 from the contiguous 48. In 1969, it went to 26 from the Pribilofs, three from the Aleutian: 28 from the mainland of Alaska, and 12 from the contiguous 48. In 1970, it was 22 from the Pribilofs, six from the Aleutians, 13 from the mainland of Alaska, and 24 from the contiguous 48 out of a total of 63. How are you benefiting the people from the Pribilofs which I suppose this bill is supposed to benefit because you cited the second section relating to the help to the Pribilof Natives, but of the 65 employed in 1970, only 22 were from the Pribilofs: one-third. In 1969 people employed were only 26 from the Pribilofs. Mr. POLLOCK. Our figures do not agree with yours. Mr. DINGELL. I cite your own report. This is marked "for administrative use only, Annual Reports, 1970, from the Pribilof Islands, Alaska, prepared by the staff, Mammal Resource Program, 1970." If you have different figures, I would be delighted to see them. Mr. POLLOCK. I have in front of me employment for July 1969. We have Pribilof residents, 176, 40 permanent, temporary 136. We have other Alaskan Natives, temporary 30—well, it is another 35. Other than Alaskan Natives, we have 69. We have estimated earnings for fiscal year 1969, Alaskan residents, Pribilof residents, $846,700 and other Alaskan Natives, $905,900. Mr. DINGELL. You paid other Alaskan Natives more than the Pribilovians. How do you explain that? They are your figures, not mine. Mr. POLLOCK. Excuse me. There is a correction. Other Alaskan Natives was $59,200 and $846,700 for the Pribilovians, for a total of $905,900. Mr. DINGELL. How about mainland U.S. folks? How much did you pay them? Mr. POLLOCK. I do not have that figure here. Mr. DINGELL. Are they listed as being from the Pribilofs, too? Mr. DINGELL. Before there be any further response, I will ask you if you will please give us the official figures. I assume that your report here was official, but I guess maybe that is not so. Give us some official figures and we would be very appreciative. Mr. DINGELL. I just read the title, "Annual Report of Sealing, 1970, Pribilof Islands, dated December 31, 1970 for Administrative Use Only." It is done by the Department of Commerce, NOAA, Seattle Building, Washington. Mr. KIRKNESS. I think the figures you are referring to are only the persons hiring for the blubbering and sealing operations. Mr. DINGELL. Well, I am reading here and this does not say blubbering. This says Annual Report on Sealing Operations. Mr. KIRKNESS. Those are the figures and the blubbering is done primarily by nonresidents of the islands for several reasons. One is that the people of the island get first crack at the jobs and the blubbering is the least desirable job, so they do not want to be a blubberer. Mr. DINGELL. Who gets the blubbering job? Mr. KIRKNESS. You need a taller person because you have to reach way over and the blubbering jobs are primarily filled by mainland Alaskans and some outsiders. I think the figures that you have there are the actual blubbering and sealing crews. Mr. DINGELL. I can only assume, I tell you that when you folks give us information, you file your officials reports, I only assume that you are filing them correctly. I may be in error, but I have always assumed that your in-house figures are correct and there is no qualification in the information I have been reading. Mr. KIRKNESS. Mr. Chairman, I think those figures are correct, but they only give you one part of the operation which is the actual sealing and blubbering. Mr. DINGELL. I am going to insert this whole report in the record and I am going to ask that you submit us such additional information, explanatory in character, of the apparent disagreement in figures that we have here before us. In any event, it becomes indisputable to me that you folks are not putting as much into the Pribilofs as you should be under the statute, if this statute is to be interpreted as having consideration given to the well-being of the Pribilovians. (The material follows:) ANNUAL REPORT OF SEALING OPERATIONS, 1970, PRIBILOF ISLANDS, ALASKA (By Staff of Marine Mammal Resources Program) INTRODUCTION On October 3, 1970, the Bureau of Commercial Fisheries was transferred from the Department of the Interior to the Department of Commerce. The Bureau was renamed the National Marine Fisheries Service and a function of the National Oceanic and Atmospheric Administration. Since 1962, when the pay plan was last revised to put the Pribilof Island Aleuts on a fully competitive basis, one of the primary aims of the former Bureau of Commercial Fisheries had been to provide training in all fields sufficient to allow the residents to conduct their own affairs. As a result, no full time non-resident administrator for the Bureau has been on duty on St. George since 1965, nor on St. Paul since 1968. In each case, the island resident foreman has been in charge and no unusual or abnormal problems have arisen. Under the provisions of the Fur Seal Act of 1966, St. Paul residents may become eligible to own their homes if certain specified conditions were met. Accordingly, an economic and social study was completed by the University of Alaska, and the Bureau of Land Management surveyed and platted the townsite. The Community of St. Paul has long operated under a corporate charter which has allowed the members to enter into various business activities. In recent years the residents have been encouraged to incorporate at a fourth class city under the laws of the State of Alaska. 1 1,599 special skins (Aulson Blubbering Machine) are included in this total and are to be included in the total commercial pack. 2 62 immature and 58 mature females were inadvertently taken during the season and packed in barrels containing male skins. Identification strings were left attached. FEMALE HARVEST No female seals were deliberately killed this year with the exception of 21 white-whiskered cows that were taken for Dr. Daniels, University of Colorado, in connection with delayed implantation research. Aside from these, 110 females on St. Paul and 10 on St. George were inadvertently killed and included in the harvest. They were distinctly marked with the appropriate twine through the flipper holes designating immature and mature females and barreled along with the males. |