price for this strategic material. After the terms of a contract, including a price not above that given us by GSA, have been agreed upon, a barter contract is written up and signed. After that the barter contractor usually goes to some grain exporting firm or some cotton exporting company and makes an agreement to have them sell the agricultural commodity he is to receive under the contract. The barter contractor is paid in dollars for the value of the agricultural commodity less any agreed-upon commission. The exporting company goes and sells the commodity in the world market. Up to the time we changed the barter regulations our surplus commodities could be sold under barter in any friendly country.

Mr. HARVEY. It could not be said then that the barter program was in any sense bypassing or replacing the regular sources or channels of trade?

Mr. BERGER. It was not replacing the regular channels of trade, that is true, but neither was it what you might term a true barter in that the agricultural commodities were not being moved into the same country which furnished the strategic materials.

Mr. HARVEY. I would be particularly interested in knowing what Japan or West Germany could have of a strategic nature that we would consider desirable.

Mr. BERGER. We did take some material from Japan, did we not? Mr. RAWLINGS. Yes.

Mr. BERGER. We had a small amount from West Germany. We will put both of those in the record.

(The data referred to follows:)

1 Years beginning July 1.

Contracted for by CCC against the ODM supplemental stockpile procurement directives to USDA for kinds, quantities, and specifications. Materials to be transferred to ĜSA as provided by sec. 206 of the Agricultural Act of 1956,

Materials, goods, and equipment for other Government agencies.

Small additional commitments may be made after June 30, 1957 to take care of additional deliveries of materials within the contract tolerances.

Agricultural commodities delivered from July 1, 1954, through June 30, 1957.

West
Germany

Japan

15, 853

8,556

26, 265

86, 163

Mr. HARVEY. Were those what you call direct trades or did they eventually have to involve multilateral agreements in order to work it out?

Mr. BERGER. I am going to let Mr. Rawlings answer that for you because he has been working in this field.

Mr. RAWLINGS. In the case of Germany, we took some ferromanganese at roughly $20 million in 1 contract. In that case it so happened that the wheat did go back to West Germany. West Germany had not been buying wheat from us at the time but had been getting their wheat from Turkey and other countries.

In the case of Japan, I remember one contract in particular was for titanium, which we got from Japan. I do not recall that the agricultural commodities necessarily went to Japan. They went to other countries of the world as well, but some did go back. You have also iodine, which we have taken from Japan. There has been some cadmium from Japan. There has been ferromanganese from Japan and a little ferrochrome. Some of the agricultural commodities moving out under these contracts probably went to Japan.

Mr. HARVEY. What have been the countries to which the bulk of this barter trade has gone?

Mr. BERGER. Do you mean where the strategic material originated? You get two sides of this. One is where we have sold it. Do you want me to tell where the materials have come from?

Mr. HARVEY. Yes.

Mr. BERGER. Can you give the list of countries?

Mr. RAWLINGS. We have a long list, but to answer your question briefly, quite a quantity has come from Africa which, as you know, has a number of various strategic materials; some from Brazil; some from India; some from Japan; and some from Western Europe.

Mr. POAGE. Have West Germany, Belgium, and those countries brought in these strategic materials from Africa and used their own currency in bringing them and therefore found that it was advantageous, and that they could bring in the commodities more easily than they could get dollars with which to buy our commodities? Is that the reason that they were trading with us, in order to be able to use their own currency?

Mr. RAWLINGS. I do not think the currency comes into it quite that strongly. The strategic materials and other kinds of materials

follow the same trade channels whether or not barter is involved. We deal with United States firms only. Those firms are the ones that in the past have been selling to the stockpile and sell to American industry today as in the case of your chrome and manganese. They are getting materials from the regular sources of supply where these materials are produced. The United States firm normally pays dollars or dollar equivalents to the suppliers. The United States firms, as Mr. Berger stated, are versed in the field of ores and know nothing about wheat or cotton or corn or feed grains. Therefore, they hire or employ or contract with a commodity firm, either a grain firm or cotton firm. These commodity firms are versed in the commodity field, and for a small percentage or under some other arrangement they sell the commodities to which the ore firms are entitled under their barter contracts. They sell these commodities anywhere in the free world where they can find a purchaser.

For instance, you take chrome ore from Rhodesia, which is a very small country. In that case the reason we had not changed earlier is because the ability of Rhodesia to consume, say wheat, is very limited. Perhaps it could use one shipload of wheat in a given period of time. The value of chrome coming from Rhodesia would equal the value of many shiploads of wheat. Therefore, we had either to permit the export of the wheat to countries other than Rhodesia or limit the size of the contract for Rhodesian chrome to the value of wheat which Rhodesia can consume.

Mr. POAGE. Does the actual barter take place in the United States? Mr. RAWLINGS. All the contracting is done in Washington.

Mr. POAGE. The actual transfer of title takes place in the United States and not abroad, is that correct?

Mr. RAWLINGS. The title to material passes to us when it arrives in a United States port and is inspected.

Mr. POAGE. When do you lose title to the commodity?

Mr. RAWLINGS. When it goes into the ship. When we turn it over to the United States firm. In the case of grain, title passes when the grain is going out of the loading spout.

Mr. POAGE. You lose title in the United States?

Mr. RAWLINGS. On the agricultural commodities.

Mr. POAGE. And you take title in the United States?

Mr. RAWLINGS. Yes.

Mr. POAGE. So, as far as you are concerned, your actual barter takes place in the United States and not abroad?

Mr. RAWLINGS. That is right.

Mr. POAGE. As soon as the title passes there are no limitations upon the use of the agricultural commodity that you exchange except that it must be sold in the free world.

Mr. BERGER. In friendly countries. That is the way it was before we made the change.

Mr. RAWLINGS. We have another restriction. Barter commodities may not be sold for any United States appropriated funds that have been specifically designated for acquiring United States agricultural commodities.

In other words, ICA funds under the foreign-aid program specifically designated for moving United States agricultural commodities-in the past you had something like $300 million-those funds could not be used by the recipient country to purchase commodities moving

under barter. If Yugoslavia was importing barter commodities they could not pay for them with ICA funds. They would have to use free dollars.

Mr. ALBERT. This does not sound like barter to me.

Mr. RAWLINGS. It is not true barter, sir. What happens is that they agree to deliver a certain quantity of a strategic material and accept payment in agricultural commodities.

Mr. ALBERT. Do they actually accept the payment? They do not do that directly. You say you can sell this anywhere in the free world market.

Mr. RAWLINGS. Let's take a United States ore firm. We have a contract with them. They agree to deliver materials at a certain price not to exceed fair market value on a delivery schedule. They agree to accept equivalent value in agricultural commodities which they are required to export to the free market over a specified period of time. They take those commodities at our regular sales price with no discounts and then they are obligated to move them. They are the principal. We hold them liable, but they do have the right to hire an agent to move them. When the commodities are moved they have met their obligation.

Mr. ALBERT. I see.

Mr. POAGE. But you buy and sell at the world price.

Mr. RAWLINGS. Yes, sir.

Mr. POAGE. In other words, the agricultural commodity moves at the world price.

Mr. RAWLINGS. From us it moves at the CCC price, which is the same as the sales price. Whatever they sell it for is up to them.

Mr. POAGE. When you say, "at the CCC price"-let us find out what that is. The CCC price is 105 percent of your acquisition cost? Mr. RAWLINGS. The export price.

Mr. POAGE. But you are selling in the United States.

Mr. BERGER. We sell it at the same price for export under the barter contract as if we were selling it for cash on the same day.

Mr. POAGE. Which is the competitive world price.

Mr. BERGER. That is correct.

Mr. POAGE. And you pay for the commodity that you acquire at a competitive world price?

Mr. BERGER. That is correct.

Mr. POAGE. In dollars.

Mr. BERGER. That is right.

Mr. ALBERT. The Commodity Credit Corporation loses then the difference between the world price and support price; is that right? Mr. BERGER. Definitely.

Mr. POAGE. You bought this and could have used dollars and bought it for the same price, except that you unloaded these agricultural commodities at the same price at which you would have unloaded them in the world market. Just what is the advantage of the program?

Mr. BERGER. I mentioned one of the big advantages in my opening statements here. The revised barter program has changed this. In other words, we are talking about something where we finally saw what the real incentive was. The real incentive was that the exporting company who was shipping out our agricultural commodities would take delivery from us before they had delivered any strategic

materials to us and sell the commodities as rapidly as they possibly could. In order to get the commodities the exporting company had only to furnish us with a letter of credit from a good sound American bank. It could buy such a letter of credit at much less than 1 percent, sometimes one-half of 1 percent to three-quarters of 1 percent. The exporting firm would get its money for the grain immediately, and then it would have the free use of this money until it delivered the strategic materials to us. There was the big advantage.

Mr. POAGE. I can see the advantage to that exporter, but I don't see what advantage the Government got out of the deal.

Mr. BERGER. We didn't. That is why we decided that we needed to tighten up on this, Mr. Poage.

Mr. ALBERT. Except it was just another way to move more surplus commodities.

Mr. POAGE. But they did not move any more surplus commodities? Mr. BERGER. That is the question in my mind, personally. It possibly helped some.

Mr. ALBERT. You had two programs instead of one working.

Mr. BERGER. That is right. It gave exporters some opportunity to cut price a little on our agricultural commodities abroad against competition. It may have given a little more freedom in working out foreign exchanges of different types of currencies that they were selling the commodities for and things of that kind.

Mr. POAGE. It probably encouraged a few private citizens to get into the business and probably the more people in the business the more total you move.

Mr. HARVEY. Mr. Chairman, will you yield?

This involves an individual instance. If you will recall when we were in Bolivia and Chile there was a great deal of interest at that time in the extended and expanded use of the barter program so that those countries could sell more tin and copper. Now, I noticed in your list of strategic materials that we have acquired under this program that you did not mention Bolivia or Chile. Has there been any considerable increase in the amount of strategic materials coming to us from those countries because of the barter program?

Mr. RAWLINGS. In the case of Bolivia we have, first, taken no tin under the entire program. There was an agreement. First, the Government had a considerable quantity of tin on hand in the national stockpile. We have been confining ourselves to those materials needed for stockpiling.

Secondly, there was some type of Government arrangement whereby the smelter in Texas was receiving tin and having it smelted here. That production was going to the stockpile and the ODM did not put tin on the list. They did put it on once but at that time the market was not right and we did not go into barter acquisitions of tin.

We did get a little lead from Bolivia. We have taken no copper except in the oxygen free, high conductivity type. That only came from Canada.

Mr. POAGE. What agricultural products did we sell to Canada? We did not sell it to Canada, did we?

Mr. BERGER. It went some place else.

Mr. RAWLINGS. In the last few months some cotton could have moved to Canada but prior to that time there has been no agricultural commodity going to Canada.