transactions are required in lieu of usual marketing assurances on the basis that such transactions will maintain or expand the country's purchasing power. In countries in a relatively good financial position having a history of dollar imports from the United States, not only must the barter transaction be bilateral or multilateral but also the Department must reasonably satisfy itself that the proposed transaction will not result in replacement of dollar sales or unduly disrupt world market prices. Where such countries do not have a sizable record of dollar purchases of the agricultural commodity, the only limitation is that the barter transaction must be bilateral or multilateral. In those cases where the Department must be reasonably satisfied that a proposed barter will not replace dollar sales (additionality), the Department has established the following guidelines: (1) In countries where a title I, Public Law 430 program exists, the Department attempts to reach an understanding with the importing country that any barter commodities would not apply against U.S. usual marketing requirements established under title I. The importing country is requested to notify its importers of this requirement which obviates the need for individual importer assurances. However, there are very few title I sales agreements with countries in relatively good financial positions. (2) In cases where the government of the country importing barter commodities is in position to assure that such imports will not replace imports for dollars, documentation from the government of such country to this effect is obtained whenever possible. Such documentation is similar to a usual marketing requirement developed under a title I agreement. (3) In cases where there are no title I agreements or where governmental assurances cannot be obtained, individual importers are invited to submit documentation demonstrating that barter imports will be additional to their regular dollar purchases from the United States. The documentation generally includes the importer's historical imports from the United States and other countries, quantities, exclusive of barter, that the importer has purchased and plans to purchase from the United States during the current year and reasons why imports under barter would be additional to imports for dollars from the United States. These data are evaluated by comparing them to the firm's past dollar purchases, the country's past dollar purchases, and the Department's estimate of the country's dollar purchases of the commodity in the current year. Such other factors as may be appropriate are also taken into consideration. In the case of wheat, additional consideration is given to preserving the normal trade patterns of wheat exporting countries signatory to the International Wheat Agreement. As approved by the Additionality Committee on July 23, 1959. Mr. HEIMBURGER. Will you give us a table showing the use to which these foreign currencies are put, what percentage of these foreign currencies we are receiving in payment for surpluses are actually being used or planned to be used to replace dollars which would otherwise be spent. That is one of the questions asked every time the committee considers this matter, and we have never had any satisfactory figures on that. Mr. IOANES. That would be otherwise spent by the U.S. Government? Mr. HEIMBURGER. By the U.S. Government, that is right. How much of this soft currency is actually going to replace dollars which it would otherwise appropriate and spend. Mr. MILLER. That is all uses, Mr. Heimburger-foreign aid programs, military expenditures? Mr. HEIMBURGER. All operations of title I. Don't get into ICA and the rest of it. Confined to all possible uses of title I currency. Mr. O'LEARY. That involves the question of how much more money would have to be spent for defense purposes in Pakistan if we did not have the title I currency being used to support Pakistan forces. It involves how much larger would the mutual security program be in many countries if we did not have title I funds to use for those purposes. Mr. HEIMBURGER. I will leave up to you the criteria that you use use in determining what is a saving of appropriated dollars. That is the reason we are asking for the information. We do not know the answer. The CHAIRMAN. May I interrupt just a minute. What you must show is that the entire American economy profits by the use of these foreign currencies in places where we otherwise would spend dollars. Is that right? Mr. HEIMBURGER. That is right. I do not mean a dollar saving necessarily to the Department of Agriculture. (The information requested follows:) DOLLAR SAVINGS RESULTING FROM PUBLIC LAW 480 OPERATIONS During the recent hearing, the committee expressed an interest in the amount of dollar savings to the U.S. Government as a result of the availability of foreign currencies under title I of Public Law 480. There is no precise answer to this question. In the case of some currency uses dollar savings can be shown. In some instances indications of dollar savings can be shown but there is no statistical method or even a good basis for estimating the amount of such saving. And in still other cases there is no dollar saving. The difficulty in answering this question stems basically from the difficulty of coming to a judgment as to how much additional dollar funds executive agencies of the Government might have requested and the additional amount of dollar funds that the Congress would have provided in the absence of the availability of foreign currencies. Take, for example, the use of foreign currencies under section 104(a) of title I of the act. Funds are provided under this subsection for use in agricultural market development abroad. Prior to the availability of the funds under this subsection, this Department carried on market development activities through the use of section 32 funds allotted by the Secretary of Agriculture. The amount of funds requested for this purpose and for payment of agricul tural attaché expenses during the current fiscal year is $7,442,000. The law requires that a minimum amount of 10 percent of foreign currency proceeds under each agreement must be made available for sale by the Treasury of the United States unless this requirement is waived by the President. As of June 30, 1959, a total of $566.7 million had been made available for such sale under this subsection. As of May 31, 1959, Treasury sales had amounted to $295 million. These dollars are returned to the Commodity Credit Corporation. The amount returned may be less than the amount sold by the Treasury, due to exchange losses. In a strict technical sense these are not dollar savings to the entire U.S. Government but they certainly are dollar savings to the Commodity Credit Corporation since the return decreases the need for appropriations by the Congress to the Corporation to restore its capital structure. There are potential dollar savings to the Defense Department as the result of Public Law 765, 83d Congress, as amended, which authorizes the use of not in excess of $250 million worth of foreign currencies generated by title I or other transactions of the Commodity Credit Corporation for the construction, rent, or other acquisition of U.S. military family housing and related community facilities in other countries. This legislation provides that CCC shall be reimbursed from appropriations otherwise available for the payment of quarters allowances to the extent the housing is occupied. As of March 31, 1959, $110.9 has been allocated for the construction of 6,775 housing units utilizing title I foreign currencies, of which 1,511 units have been completed and occupied in the United Kingdom and 1,582 almost completed in Spain and 1,313 in Japan. An additional 140 units are under construction in Morocco, 493 in Italy, and 819 in the United Kingdom. Initially, the Defense Department attempted to use foreign currencies obtained under this authority for the entire cost incurred in obtaining housing abroad. It was possible to do so in some instances but not in others. The Defense Department has been authorized to use appropriated dollars together with foreign currencies in their family housing program abroad. Such dollar use is limited to 25 percent of the total cost of the project. It is assumed that the housing is only being obtained in those areas where the Defense Department has an essential requirement they would otherwise have to meet if foreign currencies were not available. Therefore, it is entirely probable that the Defense Department would have had to increase its dollar appropriation requests for military family housing abroad if foreign currencies were not available to them. Another use of foreign currencies accruing from title I, Public Law 480 sales that has some attributes of dollar saving is to procure military equipment, materials, facilities, and services for the common defense. This use is handled as a grant under section 104 (c). A total of $279 million equivalent in foreign currencies has been used or set up for use for this purpose since the beginning of operations under title I. If these funds had not been available for this purpose some portion of this amount might have been required from dollar appropriations. This, however, would be contingent upon the priority of the program when viewed in terms of worldwide objectives of the mutual security program. For other uses of foreign currencies accruing from title I, Public Law 480 sales it is equally difficult to state to what degree dollar savings have been achieved. Loans and grants of foreign currencies for economic development make an important contribution to the economy of the countries and to U.S. foreign policy interests. It is not possible, however, to make a reliable estimate of the amount of additional dollar appropriations which would have been required or made had these foreign currencies not been available for these purposes. The same is true for other uses of the currencies which are authorized by Public Law 480, such as international educational exchange activities. Availability of foreign currencies for the purposes authorized by the law permits the conduct of very useful and effective programs of great interest to the U.S. Government and to the governments of countries where these programs are undertaken. Again, however, it is not possible to say to any reliable degree to what extent dollar appropriations might have been made to conduct these programs if foreign currencies resulting from sales under Public Law 480 had not been available. Mr. HEIMBURGER. To get back to the subject Mr. Cooley was talking about just a moment ago, suppose that under a title I sale an exporter in this country-and let us use cotton just as an example-a cotton exporter in this country makes a sale under one of your title I agreements and purchase authorization. He makes this sale to a subsidiary or a branch of that same firm in the purchasing country. For some reason—and one reason might be that that country has a freeze on the export of its currency earned in that country, or another reason might be that there is a substantial difference between the exchange rate in your Public Law 480 agreement and the actual street rate in the foreign country-the subsidiary or branch of this exporter in the foreign country has a substantial amount of the currency of that foreign country which it wants to convert into dollars, but cannot because of certain restrictions. Suppose this exporter under the title I agreement certifies to you that he has exported X number of bales of cotton with a value of $150 a bale, for which he will receive reimbursement. Suppose he has actually exported cotton of a value of $125 a bale-in other words, a lower grade cotton than the manifest calls for. Obviously there will not be any complaint from the branch office in the purchasing country because the net effect of that will be to move foreign currencies from that country to the United States for redemption in dollars at the rate stipulated in the agreement. My question is, What procedure for check do you have on the quality of the cotton shipped and the quality of the cotton actually received to prevent that sort of thing from taking place? Mr. O'LEARY. You want that answered for the record, do you not? Mr. HEIMBURGER. Yes. (The information requested follows:) Where it is indicated that sales may be made by a U.S. exporter to an importer who is also an affiliate of the exporter, special provisions have been provided in the purchase authorization. The purchase authorization provides for documentation of the initial purchase price of the commodity, the actual or average cost of any processing and handling, and any markup regularly charged. As to actual or average costs of any processing or handling and any markup regularly charged by such an affiliate, CCC has the right under the purchase authorization to require the affiliate to substantiate its costs and markup and to audit its books and records in this regard. Title I regulations currently are being revised. The revised regulations will provide that the special provisions referred to above will automatically become part of each purchase authorization. In connection with the discussion of price review and profits of U.S. exporters, the Department is furnishing a list of claims undertaken as a result of price review. The list shows claims for excessive price and excessive or improper commissions, listing the U.S. supplier, the amount, nature of the claim, and disposition of the claim. This information was furnished to the Governmental Operations Subcommittee as reflects operations through January 30, 1959. Claims for excessive price and excessive or improper commissions under title I, Public Law 480 |