Mr. GUINANE. Will you read the last half of the last paragraph? Mr. VAUGHAN. The last paragraph?

Mr. GUINANE. Yes.

Mr. VAUGHAN (reading):

Importer now advises that one carload approximately 1,500 bushels this importation sold to Minneapolis milling concern for experimental milling purposes pending. In view of development that this low-grade wheat will be used in minor proportions with other wheat for milling purposes and is thus actually fit for human consumption, should importation be classified as wheat, and made subject to quota restrictions.

Mr. GUINANE. At the time you sent in this wire what did you have in mind? Did you think the wheat unfit for human consumption or did you have contrary ideas?

Mr. VAUGHAN. When the Bureau of Customs first made their ruling in T. D. 47577 we should have classified it as "wheat unfit for human consumption" when it contained 30 percent or more of damaged or frosted kernels by weight. They stated in a decision which was formulated on a basis of the decision from the Department of Agriculture which stated at that time that it was not commercially suitable or feasible to mill this low-grade wheat except in minor proportions. In 1938 the Bureau came out with another letter.

Mr. GUINANE. By Bureau you mean the Bureau of Customs in Washington; don't you?

Mr. VAUGHAN. Restating their policy, but stating this:

If, however, such wheat should be imported in substantial quantities, you are requested to obtain such information as may be available as to the intended use of these importations and to report to the Bureau any developments indicating that wheat which you are now authorized to admit at the rate of 10 percent ad valorem as wheat unfit for human consumption is commercially suitable for the production of human food.

Senator THYE. Mr. Vaughan, did you ever notify the customs officials in Washington of the volume that was coming in?

Mr. VAUGHAN. Oh, yes, yes.

Senator THYE. You did?

Mr. VAUGHAN. After we had received about a million bushels I called it to their attention.

Senator THYE. Now the other question is that, in the first carload of wheat you refer to here you have the words experimental which would indicate, and if the Bureau also indicated that there was a load that was going to be used for experimental purposes there would be no restrictions or restrictive measures when it was in the process of being used for such experimental purposes.

Then it happens that carload after carload rolls off the docks.
is when you notified Washington of the amount coming in here?
Mr. VAUGHAN. Yes.

Mr. GUINANE. You have that letter and that reply, don't you?
Mr. VAUGHAN. Yes, sir.

Then

Mr. GUINANE. Do you want that read in the record, sir? Or do you have any further questions to ask?

Senator THYE. Present the letter which you wrote to Washington and then the reply.

Mr. VAUGHAN. There is a little history that should lead up to that first.

Senator THYE. Then you may proceed with the history.

Mr. VAUGHAN. May I

Mr. MOSKOVITZ. Senator, may I add something at this point? Senator THYE. Yes; we are trying to make a good record and if you can clarify the record you may do so.

TESTIMONY OF IRVING MOSKOVITZ, COUNSEL FOR BUNGE CORP., NEW YORK, N. Y.-Resumed

Mr. MOSKOVITZ. I think it was overlooked by the Customs Bureau in Washington that it was notified that it was for experimental purposes, but also notified for other orders pending; so it was not just one carload.

Senator THYE. Is that in the letter?

Mr. VAUGHAN. I read that, sir.

Mr. GUINANE (reading):

for experimental milling purposes, and other orders for milling purposes pending. Mr. VAUGHAN. I might mention that this terminology used as experimental, that that was the terminology used by Mr. Henderson. Senator THYE. He used that terminology in Washington, did he? Mr. VAUGHAN. I framed it after he left my office.

Senator THYE. Was it your interpretation that other companies would use it for experimental purposes and would use it for mixing it in with other wheat for milling purposes?

Mr. VAUGHAN. I couldn't tell. But what I wanted to know was whether they were going to admit using it for human consumption. Senator THYE. The question was whether or not it should be classified as usable wheat. What was your opinion?

Mr. VAUGHAN. My opinions don't count.

Senator THYE. What did you think about it?

Mr. VAUGHAN. Personally, I didn't think it was right.

Senator THYE. That is the reason you labeled it as "unfit for human consumption" when it was sent out from the port of entry? Mr. VAUGHAN. After we had the ruling from the Bureau that it could be milled the volume started to grow. And through the balance of that grain season of 1950 they hauled in this wheat until the very last minute.

Well, about that time, in our office we heard rumors that they were not only milling this wheat into flour, but they were mixing it with domestic grain and immediately the thought came to our minds that they might mix it with domestic grain and mix it into the wheat and wheat-flour exportation program.

So I called him in and had a little talk with him. That is Theodore Svensson, the customhouse broker in Duluth, and told him that there was something funny about these importations and if I were you I wouldn't handle them, I would make the importers file them. and use their own name.

Well, Mr. Svensson wired the Bureau and wanted to know how they would advise him. I will read his telegram:

Clearing large amounts wheat excess 30 percent damaged as unfit for human consumption. Please advise collect if restricted for milling or mixing for export after entry.

34117-53-pt. 27

19:

He showed me the answer he received from the Bureau on January

Retel 17th concerning damaged wheat. Submit inquiry through collector of customs with request that he let Bureau have expression of his views.

Under date of January 23, 1951, I wrote the Commissioner of Customs as follows:

* Mr. Theodore W. Svensson, customs broker at this port, has shown this office copies of the following telegrams to and from the Bureau:

"January 17, 1951. Clearing large amounts wheat excess 30 percent damaged as unfit for human consumption. Please advise collect if restricted for milling and mixing for export after entry.

"Bureau reply of January 19, 1951. Retel 17th concerning damaged wheat. Submit inquiry through collector of customs with request that he let Bureau have expressions of his views."

The broker has reference to the Bureau's decision contained in telegram to this office dated October 13, 1950, with reference to the classification of Canadian wheat containing more than 30 percent by weight of damaged or frosted kernels as wheat unfit for human consumption following the principles of Treasury Decision 47577 notwithstanding that it was being used for milling purposes. The Bureau also advised in said telegram that even if so used, this type of wheat was exempt from the current quota restrictions.

The Bureau's ruling has become generally known to the grain trade in this area, and has resulted in increased importations of this type of wheat at this port. It is believed similar importations have occurred at Portal, N. Dak.; Port Huron, Mich.; and Buffalo, N. Y. The quantities imported at this port during the period September 1, 1950, to this writing are as follows:

September 1950, 62,138 bushels; October 1950, 172,014 bushels; November 1950, 334,143 bushels; December 1950, 408,671 bushels; January 1-22, 1951, 64,500 bushels.

All of the above wheat has not been entered for consumption at this port. Large quantities are being held under general order, and some of the wheat has been forwarded in bond to Minneapolis and Houston, Tex.

The local customs broker is aware that much of this low-grade wheat is being used for milling purposes where it may be mixed in minor proportions with good domestic wheat, and that the millers have complained bitterly that this grain has been shown on customs manifests as "wheat unfit for human consumption." Further, persons in the grain trade have advised that this low-grade wheat may now be advantageously mixed in minor proportions with a good domestic grade without a consequent loss of grade, and can possibly be sold for export and subsidies claimed under the wheat and wheat flour export program.

The broker is reluctant to use his term consumption bond in clearing these importations for consumption and has required the importer to make entry in their own name, furnishing their own bonds, as he fears that redeliveries might be demanded under his bond if a reversal of the Bureau's decision occurred. Apparently, he now desires the Bureau's assurance that he is running no risk in clearing these importations under his own bond.

It may be that conditions in the domestic wheat market have changed since the publication of the Bureau's classification in Treasury Decision 47577 of March 13, 1935, and that a reexamination of those conditions should be made. The Bureau replied to that letter under the date of January 31, 1951, and is addressed to the collector of customs, Duluth, Minn.:

Reference is made to your letter of January 23, 1951, relative to the tariff status of wheat containing more than 30 percent by weight of damaged or frosted kernels as wheat unfit for human consumption. You advise that Mr. Theodore W. Svensson, a customs broker at your port, desires confirmation of Bureau telegram of October 13, 1950, holding such wheat to be unfit for human consumption, because of the risk involved should a reversal of the Bureau's decision occur. At the present time there is no active reconsideration by the Bureau of its ruling in this matter, However, if such should occur, notice of a contemplated change in practice would be required to be published in the Federal Register followed by a change of practice notice under section 315 of the Tariff Act published in the weekly Treasury decisions. It would appear that this should afford the broker ample opportunity to safeguard his interests.

After we received such Bureau letters the customs brokerSenator THYE. In your own mind do you think the Bureau's attitude displayed in the Bureau's letters and decision was absolutely contrary to the act and the public law relating to the imports of grain and the quotas that had been granted a foreign country?

Mr. VAUGHAN. I don't like to express my opinion or criticize the Bureau of Customs, but due to the volume of importations I would think so.

Senator THYE. I won't hesitate in saying so.

Mr. VAUGHAN. I think it is contrary to the spirit.

Senator THYE. It is more than the spirit, it is contrary to the act itself.

Mr. VAUGHAN. As I stated before the importers continued to clear these importations under their own names under their own bonds.

Now, as I mentioned in the letter they were requesting us to get away from the saying of that—of the term "unfit for human consumption."

Mr. GUINANE. When was that first taken up with you?

Mr. VAUGHAN. That was very early because I mentioned it-I don't know the exact time schedule but I think I mentioned that in the letter to the Bureau on the date of January 23, 1951, and that continued or that pressure continued to take off those terms until Mr. Vosika made a trip up and called on me at the office. That was on the 26th of April, 1951.

Now, as I said we have handled importations of this type of wheat and it has always been carried in our records as "unfit for human consumption" so we could readily differentiate between the two. Most of our importations are by vessel coming in and is unloaded at an elevator. We do not know what disposition is going to be made of the grain, so it is officially sampled at the time of being unloaded.

We received a portion of that official sampling as that makes our determination of the tariff classification. So we ultimately make our tariff determinations at the time the grain is unloaded at Duluth, whether it is going to go under customs or warehouse or transported, because that is the best time to get our sampling and it saves us a lot of work later on.

Mr. GUINANE. Saves you a lot of work later on in the event that wheat after being transported in bond is later entered for consumption at some other point.

Mr. VAUGHAN. That would be

Mr. HENDERSON. May I make a statement, sir?

Senator THYE. Yes; you may.

TESTIMONY OF ROBERT J. HENDERSON, VICE PRESIDENT AND MANAGER, BUNGE CORP., MINNEAPOLIS, MINN.-Resumed

Mr. HENDERSON. That gentleman says he receives a sample and then he determines also that that coming under the basis of 30 percent damaged or frosted kernels, I don't believe that is correct. That determination is made

Mr. GUINANE. I think we are wasting time, because he didn't say that.

Senator THYE. The fact of the matter is, I was going to let him complete his statement.

Mr. HENDERSON. The only statement I want to make is that he is not in position to determine whether this wheat is 30 percent damaged or not. That is determined by the inspection port in Duluth.

Senator THYE. I know something about this grain business because I happened to be in the Department of Agriculture for many years and in the grain inspection department.

I will say to you, sir, that while the customs officials do not go out and take samples, they are responsible for what is coming in and what type of label is applied. They are agents of the Government and therefore he is speaking with the authority as working for the Govern

ment.

Mr. Vaughan is right in his statement because he has a way of getting those samples and when the Department of Agriculture reports to Mr. Vaughan the kind and quality of grain, he has a means of getting the information. Now you may proceed.

Mr. VAUGHAN. Well, as I have said, early in 1951 the customs broker at Duluth advised our office that his clients wanted their type of wheat forwarded under transportation and entry described as "wheat in excess of 30 percent damaged" in lieu of "unfit for human consumption."

I said we insist that this be described in the terms we have always used, so as to let the collector at the destination know its status.

I believe it was about that time that Mr. Vosika of Hallet and Carey called and he wanted the description of this grain changed on the entries. Also a Mr. Jensen, Norman Jensen, called, Mr. Jensen of Minneapolis called long distance and asked as a favor that I permit these transportation and entry forms to be accepted as duty in as much as it was on wheat that was in excess of 30 percent damaged or frosted kernels. I refused that request.

Mr. GUINANE. Will you tell us of the conversation that took place between you and Mr. Jensen?

Senator THYE. Just a minute. Congressman Roy Wier has just come in. Congressman Wier, we are glad to see you.

Mr. WIER. Thank you, I'm glad to be here.

Senator THYE. I will be glad to have you come up and sit alongside of me.

Mr. WIER. Thank you. That is an honor I must say.
Senator THYE. You may proceed.

Mr. VAUGHAN. Well, Norman Jensen called up and says:

Davey, I have never asked you for a personal favor in my life, but I would like to have you take off those words, "unfit for human consumption" when the grain goes out of Duluth. I am asking that with tears in my eyes.

Mr. GUINANE. Did he say who suggested it to him?

Mr. VAUGHAN. No, he didn't. On April 26, 1951, Mr. Vosika made a personal visit to my office and he gave me a lot of reasons why they wanted to change the terminology on our customs manifests. Mr. GUINANE. What were the reasons that you recall, Mr. Vaughan? Mr. VAUGHAN. Well, one reason was that railway employees were seeing these customs manifests and they were gossiping. They were seeing this "unfit for human consumption" wheat, going to reputable firms and the consignees were complaining about it and that was the reason they wanted to use a different term.

He mentioned several things but it was the only thing that I could see that did seem valid and that was that the railway officials or