Government Operations of the House with some amendments. Have you had an opportunity to study those amendments? Mr. KAMPELMAN. I have Senator GRUENING. What is your feeling about them? Mr. KAMPELMAN. We would be happy with all but one of the amendments prepared by the House. Senator GRUENING. Which one is that? Mr. KAMPELMAN. I would like to refer to that. It is a small change, but we consider it to be a meaningful change. On page 2 of the bill, if you have the bill in front of you, sir. Senator GRUENING. Yes; I have. Mr. KAMPELMAN. You will notice, at least in the copy that I have, on line 4 of that bill the first words are "sale or other disposition", is that correct? We would want to keep the word "if," rather than have the word "unless", which the House committee put in. And as far as line 8 is concerned, eliminate the word "not." In simple matters, therefore, we would want to keep the word “if." The House substituted the "unless not" for "if." And I would like to explain what our concern is in this connection. The Humphrey-Engle bill which is now before you, and the original Dawson bill which it models, provides that- It shall be unlawful to import foreign excess property into the United States if the Secretary of Commerce determines that the importation would be injurious. This is fine as far as we are concerned. We can understand it; it is simple. But what we are bothered by is the change that says: It shall be unlawful unless the Secretary of Commerce determines that it would not * ** You see? It is a kind of reverse negative thrust. It imposes an affirmative the Department must first make an affirmative finding of a negative nature. We are a little bit mistrustful of it, Mr. Chairman, primarily, I think, perhaps because of our experiences with the Department in the past. Senator GRUENING. I think that language might serve as a longtime obstruction. Mr. KAMPELMAN. We think it might serve as a long time obstruction which will cause us administrative headaches constantly. Now, we are told that it really makes no difference meaningfully, substantively. Well, if it does not make any difference substantively, the rest certainly seems simple to us. Senator GRUENING. That is the only question? Mr. KAMPELMAN. That is the only the other change, which we have no objection to, is where the original stated "injurious to the economy of the country," the amendment would substitute for "economy" "production or employment," which is perfectly proper as far as we are concerned-"undue loss of the production or employment." The other amendments which are at the end of the bill are perfectly acceptable as far as we are concerned. They tighten the administrative procedures of the bill. Senator GRUENING. Thank you very much, Mr. Kampelman. Your entire statement will appear in the record at this point. Mr. KAMPELMAN. Thank you very much, Mr. Chairman. STATEMENT OF MAX M. KAMPELMAN Mr. Chairman and members of the committee, my name is Max M. Kampelman. I am an attorney with offices at 1700 K Street, NW., here in Washington. I appear today as counsel for the American Association of Surplus Property Importers. We are grateful, indeed, Mr. Chairman, for this opportunity to appear before your subcommittee and to testify in support of S. 3154, the HumphreyEngle companion bill to H.R. 9996, the Dawson bill now on the calendar of the House of Representatives. Our association is a newly organized group. It has come into being primarily to defend its members against an extremely arbitrary and restrictive interpretation and implementation of a Federal statute by the Department of Commerce. The statute in question is section 402 of the Federal Property and Administrative Services Act, which authorizes Government agencies to dispose of Government surplus property located abroad but which also limits the extent to which such surplus property may be imported into the United States. Before proceeding to a discussion of the immediate problem facing us, I think it would be helpful to tell the committee something about the industry represented by our association. Members of our association are interested in purchasing for resale surplus property disposed of by the U.S. Government. Some of this property is in good condition when offered to us but much of it is in very poor shape when it is sold by the Government and must be reconditioned by our members before it is in turn sold to their customers. Members of our association are interested, I might add, in surplus disposed of by the U.S. Government both in the United States and abroad. The question before us is a limited one, however, so our discussion is limited to surplus property sold abroad. At this point, Mr. Chairman, I wish to note that we are not offered any property for sale until after the Government has disposed of property under the donable program of existing law. We support the donation program as in the public interest. Our only position is that after Congress in its wisdom has established its policy on what is to be donated, where, and to whom, we wish to have the right as American businessmen to bid competitively and fairly for the purchase of the property that remains and to then utilize that property in our normal business activity without being discriminated against. Members of our industry are not interested only in the importation and resale of end products such as trucks, construction equipment, clothing, and other types of soft goods. A substantial portion of our business involves the importation of foreign excess property consisting of replacement parts and components for end-use equipment which is several years old. In many cases, the original manufacturers have ceased producing parts and components for such equipment, and members of our industry, through the acquisition of surplus parts and components, constitute the best, if not the sole, source of supply within the United States. The unavailability of such obsolete parts and components would mean that the end-use equipment would become inoperable. Accordingly, our industry keeps useful and productive equipment in operation. Our industry contributes to the national economy in other ways. First of all, the fact that members of our industry are interested in foreign excess property and bid for purchase of this property means that the Government is able to realize a larger amount of money on its disposition of surplus property. Were it not for the interest of surplus dealers, such as members of our industry, in purchasing this property, the Government would lose many millions of dollars on the sale of surplus property, thus greatly adding to the defense costs and tax bill of the Nation. In addition, the activities of members of our industry provide employment opportunities and business opportunities, which would otherwise not be available, to many thousands of individuals. I should like to describe in very general terms the manner in which the members of our industry fit into the framework of the national economy. It should be emphasized, first of all, that our association is comprised of small business firms. Despite the small size of these firms, their activities give rise to considerable employment through their shipment, reconditioning, and other handling of surplus property. Many of our customers are individuals who may desire to buy surplus items for personal use in camping, hunting, fishing, or ordinary household activities. These customers rely upon the availability of surplus items to meet their particular needs; if surplus items were not available, they would in nearly all cases simply not purchase the item, since they could not afford to pay the new-item price. We also have another classification of customer. A host of small business enterprises has come into being since World War II as a result of the availability of surplus equipment. These small business enterprises have been able to compete in the construction business, for example-against big business because they have equipment which would otherwise not be available to them. It is a delusion to think that such small enterprises would buy new equipment if the surplus were not available; rather they would not buy anything and would not be able to carry on at all. Some of these small businesses become successful and, in turn, larger. In that event, they are no longer interested in buying surplus equipment, but would become new customers for new equipment. This has frequently been the fact. I should like to turn now to a discussion of the specific difficulties our members have been experiencing in connection with the Commerce Department's administration of section 402 of the Federal Property and Administrative Services Act. Section 402 reads, insofar as pertinent with respect to foreign excess property, as follows: "*** but in no event shall any property be sold without a condition forbidding its importation into the United States, unless the *** Secretary of Commerce *** determines that the importation of such property would relieve domestic shortages or otherwise be beneficial to the economy of this country ***” "Foreign excess property" is defined elsewhere in the act to mean property under the control of any Federal agency which "is not required for its needs and the discharge of its responsibilities" and which is located outside the United States. It is worth noting that such property is really not "foreign" in any sense other than its being situated outside the United States. In every other sense it is thoroughly American-American-made, American-bought, Americanowned, and possessed and held by agencies of the U.S. Government for purposes of the U.S. Government. It would be useful, I believe, to summarize briefly the history of section 402 and the reasons why the legislation now before this subcommittee has become necessary. It is clear from the legislative history of section 402 that the Congress never intended to prohibit or unnecessarily curtail imports of surplus property purchased by Americans from the U.S. Government at oversea bases. Quite to the contrary, Congress clearly intended this provision only as a safety valve to avoid the serious repercussions which might result from "substantial imports" of foreign excess property in the event of an economic depression. Everything in the legislative history suggests that a flexible, reasonable policy, in the light of actual economic circumstances, was contemplated, and this is the manner in which the Department of Commerce administered section 402 from the time of its enactment in 1949 until the last several years. In 1958, without any change in the statute, the Department of Commerce took it upon itself to reverse complete its interpretation and implementation of the law. The Department adopted an extremely restrictive and inflexible policy resulting in an almost absolute embargo on importation of foreign excess property. This new policy was adopted largely as a consequence of the hearings held by a subcommittee of the House Committee on Government Operations in July 1958, and that committee's subsequent report on the hearings. Although the House committee was concerned only with what it regarded as slipshod administration of section 402 by the Foreign Excess Property Office of the Department of Commerce, the Department prodded by the representatives of certain of the original manufacturers of surplus property, wrongly interpreted the committee's attitude as a directive to the Department to prohibit all importation of foreign excess property. Thus, during the first 6 months of 1959, the Foreign Excess Property Officer authorized importation in only 2 cases out of 73 applications submitted. I might say, by the way, that many potential importers, recognizing that the cards were stacked against them, did not even bother to submit applications. Last July, our association went before the same House subcommittee which had investigated administration of the foreign excess property program in 1958, and we reported to that subcommittee on what had transpired in the year since their original hearings. The bill now before you was originally drafted by Chairman Dawson of the House Committee on Government Operations as a direct consequence of the extended hearings held by the committee last July on the issues which we raised. It reflects the judgment of that committee based on its extensive study of this problem over a period of 3 years, including three extensive hearings. The Department of Commerce has issued detailed regulations, setting forth its interpretation of section 402. Let me very briefly summarize those specific aspects of these regulations which cause us grave concern. 1. The burden of proof is placed upon the small businessman who seeks to bring foreign excess property into the United States. He is required, despite his limited resources, to demonstrate that the importation would relieve domestic shortages or otherwise benefit the domestic economy. In this connection he is required to submit supporting evidence including, for example, supply-demand data, production and consumption statistics, statements of inability to obtain the type of property domestically, statements of manufacturers that production has been discontinued and no substitutes are reasonably available, and the like. This is clearly an unreasonable burden to place on a small businessman in his application to the Department of Commerce with its own vast storehouse of business and economic data. 2. The present regulations sharply restrict the statutory standard of "beneficial to the economy of this country." Although it is conceded in the regulations that "every importation presumably confers some benefit upon some segment of the economy," a showing that "an importation would not be harmful" is not adequate. Similarly, the regulations torture the statutory term "beneficial" to mean "special benefits over and beyond any benefits to be derived in the marketplace by an added supply of goods and materials." 3. The regulations completely rule out the consideration of low price for domestic sales of foreign excess property as an adequate benefit to the economy or as evidence of domestic shortage. This might be a valid position and a reasonable interpretation of the law to the extent that surplus property is directly competitive with domestic supply, but it has no validity where there is actually a separate and distinct market for surplus property created by the price differential. In effect, it is as if the Department is stating that the availability of Cadillac automobiles at $6,000 apiece would be regarded as evidence that there is no shortage of automobiles, even if no automobiles were available in the $2,000 price range. The regulations completely ignore the fact that the market for a Cadillac is a separate and distinct market as compared with the market for a Chevrolet. We all know that a person who is in the market for a Chevrolet isn't normally interested in buying a Cadillac instead, or vice versa. 4. The regulations provide that a product will not be considered to be in short supply "if alternative usable grades, qualities, or dimensions are domestically available." As this provision is administered, it would be determined that no shortage of trucks exists for use in the rugged terrain of California if trucks specifically designed for use on flat terrain in Indiana were available. 5. The regulations provide that shortage must be determined on a national and not on a local basis. This means, in effect, that someone desiring to import foreign excess property must go far beyond his own market area, far beyond his own sources of supply and his competitors', to ascertain whether or not domestic supply is available. It means that he must be prepared to refute and disprove ofttimes vague and erroneous rumors as to availability of the items in distant parts of the country. This is not only ludicrous as a result of the burden it imposes, but the criterion is ridiculous when we consider that the high cost of freight frequently makes it economic idiocy to think that equipment in Alaska is competitive with that in Alabama. Representatives of our association have testified at very considerable length before the Dawson committee as to the problems they have been encountering under the present law, and as to the necessity for a change in the law. Rather than take the time of this committee with a repetition of this testimony, I would like, with your permission, to summarize the principal points made in this previous testimony. Let me say, however, that most of the gentlemen who testified in the earlier hearings before the Dawson committee are present today, and are in a position to expand on what I say, or to respond to any questions, if the subcommittee so desires. In many cases the form and usefulness of foreign excess property are substantially altered before the property is sold to the ultimate user. For example, Mr. Ray Groban of Chicago told the Dawson committee at pages 16-18 of the 1959 hearings about how his company, Groban Supply Co., has imported surplus hydraulic traversing mechanisms originally used as part of the tracking gear in 40-millimeter antiaircraft guns, and converted these mechanisms into hydraulic transmissions for midget automobiles with gasoline engines made for children. In this case, the mechanisms, which otherwise would have been sold for scrap at 75 cents a piece, were purchased by Groban Supply Co. for $5 apiece. Thereafter, Groban spent an additional $15 per unit converting them into transmissions. Subsequently, when Groban's competitors saw how it was done, they bid $12 per unit for the next lot of the mechanisms offered by the Government as surplus. Thus, the return to the Government on its sales of this surplus, was dramatically increased. Sometimes the surplus equipment is converted by the importers' customers. For example, Mr. Orville Dick of Paramount, Calif., told the Dawson committee at pages 49-52, that his company purchases surplus trucks from the importers, spends approximately $1,000 per truck in reconditioning them, and mounts water tanks on each truck at an additional cost of $1,750 to $2,500 per truck, depending upon size. These trucks are then used to provide vitally needed water for construction projects in California, in areas which have virtually no water otherwise available. This company spent $351,000 in the first 9 months of its last fiscal year for labor and material incident to the production of these water trucks. Surplus trucks are the only kinds of trucks desired by contractors for this purpose, and they are the only kind of trucks which it is economically feasible to use for this purpose. Surplus World War II vintage trucks have a special added ruggedness and utility for this kind of work. This added ruggedness enables users of the surplus water trucks to haul at least 10 percent more water in each 8-hour day than could be hauled by newer model trucks. In addition, the maximum life of a water truck used in California does not exceed 3 years, and no contractor wants to buy costly equipment for such short-term use. Another example concerns forklift trucks. Connell Motor Truck Co. of Fresno, Calif., purchase a special kind of surplus forklift truck from the importer. This particular item is known as a "plane loader" and is used for loading aircraft. The Connell Co. modifies this equipment for use in agriculture to obviate a shortage of field labor. No other kind of equipment is satisfactory for this purpose. Mr. Seymour Green, president of our association, testified at page 147 that his company, Green Truck Sales, Inc., of Los Angeles, sold surplus trucks to a contractor at $1,900 apiece, which enabled the contractor to bid on a Brazilian contract, which he could not have thought of bidding on if he had to buy new trucks at $20,000 apiece. This contractor, by the way, spent at least $10,000per truck modifying them for use as cement mixers. Mr. Jack Ellis of Los Angeles told the Dawson committee that his company spent over $500,000 in 1956, 1957, and 1958 to American steamship companies for transporting foreign excess property to the United States, and in these years also spent an additional $100,000 per year in reconditioning and handling this equipment. Thus, it can readily be seen that the importers of surplus property play a major and highly useful role in certain areas of the economy. The present virtual embargo on importation of surplus property not only is threatening to put the importers out of business, but is seriously affecting many areas of the economy, and is depriving numerous individuals and companies of the opportunity to acquire items that they want and need. For example, the Dawson committee hearings showed that contractors in water-hungry California are faced with a desperate shortage of water trucks; that farmers in labor-short California who urgently require converted plane loaders cannot obtain them; that users of World War II vintage trucks and equipment cannot obtain parts and components necessary to keep their trucks and equipment in operation; that a contractor constructing a vitally needed pier at Long Beach, Calif., faced a long delay in completing the pier because he could not obtain a surplus rock crusher; that users of trucks and other vehicular equipment were com pelled to mismatch tires, because the matching tires they need and want were available only as foreign excess property which could not be imported; that the YMCA in Pittsburgh was deprived of the opportunity to buy a stage-lighting |