We

world price $2 and not give anybody 10 cents for selling it. would rather have the $2, but if it takes $1.90 to move it, we are awfully glad to see it moved. All the farmer is getting is the support price anyway.

The CHAIRMAN. Mr. Andresen?

Mr. ANDRESEN. I would like to yield to Dr. Dixon for a short question.

The CHAIRMAN. Mr. Andresen, I could have yielded to Dr. Dixon. Mr. ANDRESEN. Let me ask a question first and then I will yield. The CHAIRMAN. You say Dr. Dixon wanted to be yielded to. I would be glad to yield to him.

Mr. ANDRESEN. I would like to get a comment on this barter business. I think that I and other members of this committee visualize a barter transaction as a very simple thing. For instance, something comes up from Texas and goes to Minnesota. Somebody may pick up a Holstein cow and trade that cow for a mule down in North Carolina. The man gets a commission probably on both ends, so he has made some money and he would not be in that unless he could make some money.

From what you have told us here this morning these barter transactions are thus in name, but not in fact barter transactions. correct?

Mr. BERGER. That is correct.

Is that

Mr. ANDRESEN. I do not know how you are going to work a barter transaction unless you deal with individuals in a country or with the Government itself in accepting commodities from our surplus commodities here for a strategic material in a particular country. As it is now, and the way it has been operating until you closed down on it, we do not know which country was going to get our surplus agricultural commodity and we did not know where that manganese was going to come from either, except that it was bought on the world market. If I am wrong in that, I would like to be corrected.

Mr. RAWLINGS. We did not make that requirement. We do not always know where the materials come from. Sometimes we would give a firm the opportunity of taking bismuth out of France or England but in those cases we always know the origin of the material grown on the bill of lading. We do know that it came from a friendly source and was within certain specific ground rules, for instance, in the ODM directive. In most instances we did know where the material was coming from. It varies from material to material.

Mr. HAGEN. Would the gentleman yield?

You not only knew but it was required to come from that country?
Mr. BERGER. In a number of cases it was absolutely required.
Mr. ANDRESEN. That was my understanding.

Mr. BERGER. On the agricultural commodities we let them have a free rein.

Mr. ANDRESEN. Any country except a country behind the Iron Curtain, and then some of those countries?

Mr. BERGER. No, sir.

Mr. ANDRESEN. I want to yield for a moment to Dr. Dixon.

Mr. DIXON. Did the ODM stop buying lead and zinc from you? Mr. RAWLINGS. The only lead and zinc which the ODM authorized us to procure by barter has been for the supplemental stockpile. Mr. DIXON. I do not know what that means.

Mr. RAWLINGS. There are two stockpiles. One is the supplemental stockpile which was established by Public Law 480 and that stockpile is sort of additional insurance. It is not acquired under the national stockpile, which is the minimum amount required to

Mr. DIXON. What about the supplemental stockpile?

Mr. RAWLINGS. In this case, we transferred title to the material to the supplemental stockpile and we asked Congress to be reimbursed. Mr. DIXON. Why did you temporarily stop the barter on lead and zine?

Mr. RAWLINGS. We did that at the time we took this look prior to putting in the new program.

Mr. BERGER. We did not stop it on lead and zinc as lead and zinc. We stopped all of it until we had a chance to look this over and come to a decision as to what we should do.

Mr. DIXON. In other words, because you could not get the money from your lead and zinc and the cost of the barter program was defeating the purpose of the act

Mr. BERGER. That is correct.

Mr. RAWLINGS. That is correct.

Mr. DIXON. Will the new program resume barter on lead and zinc? Mr. RAWLINGS. We are glad to take lead and zinc right now on the new basis.

Mr. BERGER. Is that on the supplemental list?

Mr. RAWLINGS. Yes.

Mr. DIXON. Do you have any prospects of satisfactory contracts on the new basis for lead and zinc?

Mr. RAWLINGS. I do not have any firm offers that we have already accepted, but there has been interest expressed rather recently by contractors. So far, I do not have a firm offer on the new basis.

Mr. DIXON. Where you can make the exchange without damaging the market for agriculture?

Mr. RAWLINGS. That is right.
Mr. DIXON. Thank you.

The CHAIRMAN. Mr. McIntire?

Mr. McINTIRE. Could you just answer one question? Do I understand correctly, Mr. Berger, that the program within the framework of the law within which these transactions were being made is not sought? You have changed the rules somewhat but you do have a program in effect now? You have new rules laid down?

What are the specific differences, if you could enumerate them briefly, of change of rules?

I think perhaps you do not need to go back to the old program, but just what are the major points in which the new program differs from the old program?

Mr. BERGER. I would like to say

Mr. MCMILLAN. Could you explain how the deal worked on the old program?

Mr. McINTIRE. You may want to follow up with an example, but first give me the specific points wherein the rules are changed.

Mr. BERGER. Tom has them right here.

Do you want to go down them, 1, 2, 3?

Mr. MELAIN. I have a copy of that before me, too.
We already have them in the record.

Mr. McINTIRE. I would appreciate their being put in the record. I notice that in this press release it says that the program as revised contains the following principal provisions. When I read through this the thought occurred to me that I would like to ask just what differences are there from the previous program?

Mr. RAWLINGS. The first point is the main point, that we have to be satisfied with is some showing that each transaction would mean a net increase in United States exports. In other words, that it will not displace regular dollar sales.

In order to make the program more workable, under the second point, we have provided a list of countries which is attached to the press release and which will be revised quarterly. Any country not on that list is assumed to be an area in which a sale of the specified commodity may be assumed to be additional business. The next point is

Mr. DIXON. In other words, if it is on the list, you would not deal with them?

Mr. RAWLINGS. If it is on the list, you must have a showing that it will be additional business. In other words, you could send cotton to Australia but you must show that it is additional business and not a displacement of normal sales.

Mr. McINTIRE. In this list, on page 2 of your release, it states:

The lists of countries to which specified commodities may not be exported under barter contracts without a special showing that the proposed transaction will result in a net increase in United States exports of the commodity are as follows:

Let's take cotton.

In other words, if an exporter or an importer, or the individual firm here which proposes a transaction with the Department, wanted to ship cotton into Cuba, then he would have to specifically show how this transaction increased the volume of cotton in Cuba over and above the normal sales to Cuba.

Mr. RAWLINGS. Yes, sir.

Mr. McINTIRE. By the same token it is presumed that any country which is not on this list

Mr. RAWLINGS. Take Spain under cotton, for example.

Mr. McINTIRE. Spain is not listed.

Mr. RAWLINGS. We are not requiring proof of increased exports in that instance.

Mr. McINTIRE. Any transaction which this trader might initiate which would result in cotton shipped to Spain would be without question and a transaction which is permitted?

Mr. RAWLINGS. Yes, sir.

The third point is that there must be a specific designation of the agricultural commodity involved. They must say what they want to ship-cotton, wheat, feed grains, and so on.

Mr. McINTIRE. You are limiting this within inventory of Commodity Credit Corporation, to a specific commodity?

Mr. RAWLINGS. Yes.

Mr. McINTIRE. You say, "We want to trade cotton."

Mr. RAWLINGS. Yes, sir.

Mr. McINTIRE. What other changes?

Mr. RAWLINGS. The fourth point, if the contractor desires delivery of the agricultural commodities prior to the time he is going to deliver the material to us, he must pay us interest for the time that

he has that money prior to the delivery of the strategic material. After all, he sold his commodities and he has free use of those funds. Mr. McINTIRE. Do I understand if he comes in with a proposition, and the schedule for delivery on that will begin January 1, 1958, he will take cotton?

Mr. RAWLINGS. Now.

Mr. McINTIRE. He can take it and he will take cotton for delivery September 1?

Mr. RAWLINGS. Yes, sir.

Mr. McINTIRE. You are going to charge him interest on cotton taken out of Commodity Credit inventory for the time when that value was outstanding and not replaced by similar credit of manganese delivered to you up to that point?

Mr. RAWLINGS. That is right.

Mr. HAGEN. How does that man have dollars? That country he is selling to does not have dollars; is that right?

Mr. RAWLINGS. When a man takes cotton in September, he will not take it unless he has a sale for it.

Mr. HAGEN. He sells it into a country which does not have dollars; is that right?

Mr. RAWLINGS. Under this program we will require him to show us where it is being sold. He gets something for it, either dollars or dollar equivalent, or he would not sell the cotton.

Mr. McINTIRE. If I understand it correctly, he comes in with an offer to sell ferromanganese to the Commodity Credit Corporation. He says specifically that he will take cotton.

He proves two things, one of which he already proved to his satisfaction.

But if we pick the country of Spain, then he has only to satisfy himself that when that cotton goes to Spain he will get paid for it in currency which he can use.

However, if he were to pick Finland, for example, to sell that cotton to, then he has to satisfy the Department that his transaction is over and above the normal trade.

Mr. RAWLINGS. That is right.

Mr. HAGEN. In most of these instances the purchaser is in a country which does not have dollars. I don't see how the broker in this country gets anything until he gets the commodity he will deliver to you and receives payment.

Mr. RAWLINGS. When he gets the commodity delivered to us he would have to pay for that in some way. Normally, he would have a sale or he would not take the cotton out of storage.

Mr. McINTIRE. Another point as to the difference between these new rules and the old ones.

Mr. RAWLINGS. Under the fifth point, the contractor must provide assurance to the CCC that the agricultural commodities will not be transshipped from the proven country of destination.

Mr. McINTIRE. In other words, if he is going to sell to Spain he has to assure you that that cotton is not going to be moved from Spain over to Denmark?

Mr. RAWLINGS. That is right.

Mr. McINTIRE. What further changes?

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Mr. RAWLINGS. The sixth one is that material delivered under barter contract may not be produced or processed in the United States but must be a foreign-produced material.

Heretofore we did accept foreign-produced material which might be processed in the United States, provided the processing did not exceed 50 percent of the value of it.

In some cases prior to that we had taken some with a much higher percentage.

Mr. McINTIRE. By this do I understand, holding to the example of ferromanganese, that you will insist that the ferromanganese ore which you bring in will not have to be upgraded in this country in order to make it eligible for delivery to you?

Mr. RAWLINGS. That is correct.

Mr. McINTIRE. In other words, it has to come into this country in a grade acceptable to the strategic stockpile requirements?

Mr. RAWLINGS. That is right.

Mr. McINTIRE. And not reprocessed or upgraded in this country? Mr. RAWLINGS. That is right.

Mr. McINTIRE. Or downgraded, for that matter?

Mr. RAWLINGS. That is right.

Mr. McINTIRE. What other changes?

Mr. RAWLINGS. Each barter contract for strategic or other material must designate the country of origin of the materials. In other words, we want to know the exact country which it is from and not give any leeway as we did in some cases in the past. We want to know out of which country it is coming.

Mr. McINTIRE. He is coming in with an offer to sell you ferromanganese and he has to specify it is coming out of Brazil and not Africa?

Mr. RAWLINGS. That is right.

Mr. McINTIRE. You have to be satisfied, before you feel that that contract has been fulfilled, that that ore originated in the country he specified in his contract?

Mr. RAWLINGS. That is right.

Mr. McINTIRE. Any others?

Mr. RAWLINGS. Those are the main things.

Mr. McINTIRE. Thank you very much, Mr. Chairman.

Mr. SMITH. Last week I read in a reliable newspaper that the International Harvester Co. was selling their tractors and other equipment to Mexico and they were required to take cotton in exchange for their products. Do you gentlemen know anything about that? Mr. BERGER. I do not.

Mr. SMITH. How is International Harvester Co. going to sell the cotton it gets in trade from Mexico?

Mr. MCLAIN. Mr. Poage can answer this question. In general I know what is happening because of the cutrate prices we have on our exports of cotton. This is a step that the Mexican Government is taking to assure the Mexican Government that certain amounts of cotton will be exported out of Mexico. Because International Harvester brings in certain materials from the United States, one of the requirements they have, and other countries have, is that they must agree to get so much cotton exported out of Mexico.

Perhaps Mr. Poage can tell you why.

Mr. POAGE. Cotton does not move back into the United States except in transit. Just as wheat moves through Minneapolis in