CONTENTS Garthoff, A. A., International Wheat Agreement Staff, Production 38, 115, 160 Higman, W. E., Chief, Division_of Classification, Entry and Value, Bureau of Customs, Treasury Department- Kirvan, L. Roger, Assistant Chief, Office of Investigations, General Murphy, E. J., Deputy Director, Grain Branch, Production and Marketing Administration, United States Department of Agri- Piper, Burke G., Assistant Director, Division of Audits, General Ac- Sarrapede, Stephen S., Assistant Chief, Office of Compliance and Investigation, Production and Marketing Administration, United States Department of Agriculture_- Smith, Norman S., Assistant Chief, General Investigations Division, Office of Compliance and Investigation, Production and Marketing Administration, United States Department of Agriculture. Underhill, Wingate E., Assistant to the Assistant Administrator for Commodity Operations, Production and Marketing Administration, United States Department of Agriculture_. Weitzel, Frank H., Assistant to the Comptroller General, General Miscellaneous documents: Letter, dated January 12, 1953, from the Department of Agriculture, Letter to collectors of customs, dated March 13, 1935, relative to Telegram, dated April 26, 1951, from the collector at Duluth, Minn., to the Commissioner of Customs, relative to importation of frost- Telegram, dated April 30, 1951, from Collector of Customs, Duluth, Minn., to Hallet & Carey Co., relative to importation of frost dam- Letter, dated January 29, 1953, from the Department of Agriculture, relative to diversion of feed wheat imported from Canada into export under the International Wheat Agreement.. Transcript of telephone conversation, September 19, 1951, between H. J. Solomon of the Dallas PMA Office and William McArthur of the Grain Branch, PMA, Washington, relative to mixing Cana- dian wheat with domestic wheat at public elevators, Houston, Tex. Disposition of Canadian wheat entered by Transit Grain Company, Letter to H. L. Ziegler, Inc., Houston, Tex., from H. J. Solomon, Assistant Director for Programs, PMA Commodity Office, Dallas, Tex., relative to possibility of Canadian wheat being in CCC Letter, dated April 22, 1931, relative to interpretation of paragraph Footnote to section 13.2 of the Customs Regulations of 1943, relative to importation of molasses not to be used for extraction of sugar or Miscellaneous documents-Continued Telegram, dated April 27, 1951, to collector of customs at Duluth, Statement filed by Roy F. Hendrickson, executive secretary, National Page 162 162 162 IMPORTATION OF FEED WHEAT THURSDAY, JANUARY 29, 1953 UNITED STATES SENATE, COMMITTEE ON AGRICULTURE AND FORESTRY, Washington, D. C. The committee met, pursuant to call, at 10: 15 a. m., in room 324, Senate Office Building, Washington, D. C., Senator George D. Aiken of Vermont presiding. Present: Senators Aiken (chairman), Young, Thye, Hickenlooper, Williams, Welker, Ellender, Johnston, and Anderson. The CHAIRMAN. The committee will be in order. Inasmuch as we are likely to need all the time we have this morning we will not wait any longer before starting this hearing, and we will get under way. This hearing is called as a result of a report from the General Accounting Office made late last year of their investigations of the importation of wheat, a certain grade of wheat, from Canada. We permit the importation of a limited amount of first class wheat from Canada for milling purposes each year. We also permit unlimited importation of wheat designated as unfit for human consumption which can be used in mixed feeds for chickens, hogs, or other farm animals. It appears that large quantities of wheat have been imported during the last 2 years from Canada, ostensibly for feed purposes, and at the very low tariff rate of 8 cents a bushel. It also appears that a good deal of this wheat has been diverted from the feed mills to milling and export purposes. This committee is interested, very much interested, in the effect that these large importations, amounting to in the vicinity of 60 million bushels in the last 2 calendar years, may have on our own price levels, our own price structures, and the effect which these large importations may have upon our farm price support programs. It is obvious that if 50 million bushels or 40 million bushels of wheat are imported from Canada for feed, paying the Canadians a feed price, and then diverted to the mills for milling purposes, for manufacture of flour or for export, that each bushel of that must be displacing a bushel of good, sound, United States wheat in some way. We are supporting wheat at a rate of about $2.22 a bushel. If we figure that each bushel of this wheat forces a bushel of American wheat to be taken over by the Commodity Credit Corporation, the costs to the United States Government and the taxpayer reaches very sizable proportions. I will not go on any further with that myself but will ask Mr. Weitzel of the General Accounting Office to take the witness chair and tell the committee what the results of their investigations into 1 this importation of unfit wheat have been, what they have found, and to summarize the report which had previously been referred to the committee, and give us any further information which the General Accounting Office may have accumulated since that time. Senator YOUNG. Mr. Chairman ? The CHAIRMAN. Senator Young. Senator YOUNG. The importation of Canadian feed wheat, oats, and barley in the last calendar year has exceeded 90 million bushels. Previous to the heavy imports of oats, about a year ago the price of oats was considerably above support levels, the price was approximately 25 to 30 cents a bushel higher than it is now. But as the importation increased the price of oats dropped steadily to where for the past 6 or 8 months it has been constantly below price support levels. In my own State of North Dakota the cash price of oats for the last 3 months has ranged from about 57 to 65 cents a bushel, which is approximately 8 cents a bushel below support levels. The CHAIRMAN. The Committee is concerned, of course, with the level of prices of all our farm products, not only because of the effect on the national economy and our agricultural economy, but for the effect upon our support programs. If support programs do not support at the level required by law, it is something that we ought to find a reason for. Mr. Weitzel? STATEMENTS OF FRANK H. WEITZEL, ASSISTANT TO THE COMPTROLLER GENERAL; BURKE G. PIPER, ASSISTANT DIRECTOR, DIVISION OF AUDITS; AND L. ROGER KIRVAN, ASSISTANT CHIEF, OFFICE OF INVESTIGATIONS, GENERAL ACCOUNTING OFFICE Mr. WEITZEL. Mr. Chairman and members of the committee: The Comptroller General asked me to expres his regret that he is unable to appear here today to discuss the report concerning the importation of low-grade wheat, which he transmitted to the Congress November 19, 1952, while the Congress was in recess. Mr. Warren instructed me to tell you that he appreciates the interest which you have taken in the report. He considers furnishing reports on the audits and investigations made by the General Accounting Office to the Congress and its committees among the most important responsibilities of the General Accounting Office. He has been especially gratified by the alertness of the Senate Committee on Agricultural and Forestry to consider the information contained in his communications to the Congress on matters that come within the committee's jurisdiction. During the last session of the Congress extensive hearings were held by this committee on the commodity storage and processing activities of the Commodity Credit Corporation which resulted in a unanimous report concerning irregularities in the grain-storage program. The commendable report with its findings and recommendations should improve the operations of that program. The General Accounting Office is pleased that its special reports on grain storage, wheat purchases, transportation contracts and related activities of the Commodity Credit Corporation played an important part in the committee's study. The General Accounting Office is an independent agency in the legislative branch for checking on the financial transactions of the Government-including all agencies and bureaus of the Department of agriculture and most of the Government corporations under the Department's jurisdiction. It is a pleasure to report that the new Secretary of Agriculture, Hon. Ezra Taft Benson, has already established personal contact with the Comptroller General. Mr. Benson has stated his determination to increase economy, efficiency, and effectiveness of operations in his Department. We have pledged him our full cooperation in the attainment of that goal. The President is authorized by section 22 of the Agricultural Adjustment Act, as amended (7 U. S. C. 624), to limit importations if he finds it necessary in order to prevent interference with agricultural commodity and production programs administered by the Department of Agriculture. Under this authority, the importation of wheat, except that classified as unfit for human consumption, was limited by Presidential proclamation in May 1941 to 800,000 bushels annually. The proclamation did not limit the amount of wheat that could be imported into the country classifiable as unfit for human consumption. The duty on quota wheat is 21 cents a bushels-that is a specific rate which has been lowered under international trade agreements-and the duty on-nonquota wheat is approximately 8 cents a bushel. That is an ad valorem tax of 5 percent a bushel. Wheat containing 30 percent or more by weight of damaged kernels is the Customs Bureau's standard for classifying wheat as unfit for human consumption. Senator THYE. What was the price of the wheat that came in as nonedible in relation to the edible wheat? Mr. WEITZEL. Subject to checking by our audit staff here, I believe that the declarations stated the price was around $1.60 a bushel on the Canadian wheat that came in. I believe some of the edible wheat at that time was around $2.60 at export shipping point. Senator THYE. So it was $1 less. Then at $1 less it was the poorer quality of wheat, it was the nonedible. As the chairman stated, when it came in it got mixed into the so-called edible wheat and it went out at a price $1 higher than what it actually came in at. Is that correct? Mr. WEITZEL. I should state for the record that it was classified as nonedible but apparently, for all practical purposes, owing to recent developments, it is edible when blended with higher grade wheat or used for certain purposes, but it did come in at the $1.60 price, it was blended to upgrade other wheat, and it was used in commercial processing of foods for human consumption. Senator THYE. And it came in at a lesser duty. Mr. WEITZEL. It came in at 13 cents less, I believe it was. Senator THYE. Thirteen cents less duty, and then it enjoyed about a dollar higher price once it became blended. That is nice manipulation, Mr. Chairman, if you can be the recipient of that excessive profit. The CHAIRMAN. Although Mr. Weitzel said the wheat may have been edible, yet it did not meet the specifications for high-grade milling wheat; did it? Mr. WEITZEL. It certainly did not, in that it had 30 percent or higher damaged kernels. |