GENERAL SERVICES ADMINISTRATION, Hon. A. WILLIS ROBERTSON, Chairman, Committee on Banking and Currency, DEAR MR. CHAIRMAN: Your letter of April 23, 1962 requested a report on S. 3203, a bill to extend the Defense Production Act of 1950, as amended, and for other purposes. The bill would extend from June 30, 1962, to June 30, 1964, the authority of GSA, among other agencies, to use the powers conferred by titles I, III, and VII of the Defense Production Act of 1950. This would include an extension of the power to make purchases or commitments to purchase under section 303 but would not permit contracts entered into to extend beyond June 30, 1965, except to the extent that the bill would otherwise exempt certain types of contracts from that time limitation. The bill would also amend the Defense Production Act of 1950 in two general areas. The first area would relieve the Defense Production Act borrowing authority from interest charges other than those arising out of transactions involving loans to private enterprises. The second area involves an enlargement of the authority of GSA to make disposals under the act of materials to be sold in markets other than domestic markets at prices prevailing in such other markets rather than at prices prevailing only with respect to domestic markets. The second area of amendments to the act would also permit sales, as well as contracts for processing or refining, to be made over periods of time extending beyond June 30, 1965. This would permit the orderly disposition of excess materials in the Defense Production Act inventories by permitting arrangements that would spread the market effect of such dispositions over a relatively long period of time. It would also provide a basis for upgrading certain materials over an extended period in order to enhance the value of those materials for stockpiling purposes. Although GSA has no expansion program in contemplation, the extension of the Defense Production Act for a period of 2 years is important in connection with sales and contracts for processing or refining. Moreover, it would provide useful standby authority. Also, the other amendments relating to sales and contracts for processing or refining are of considerable importance to GSA, particularly in relation to any disposition of substantial quantities of excess inventories over extended periods of time. The amendments relating to relief from interest charges would provide a sounder basis for the operation of the Defense Production Act borrowing authority and obviate any need for appropriations to pay off obligations for the payment of interest to the Treasury Department. For those reasons, GSA strongly recommends enactment of the bill. The Bureau of the Budget has advised, that from the standpoint of the administration's program, there is no objection to the submission of this report to your committee. Sincerely yours, BERNARD L. BOUTIN, Administrator. U.S. CIVIL SERVICE COMMISSION, Washington, D.C., May 14, 1962. Hon. A. WILLIS ROBERTSON, Chairman, Committee on Banking and Currency, U.S. Senate, New Senate Office Building. DEAR MR. CHAIRMAN: This is in further reply to your request of April 23, 1962, for our views on S. 3203, a bill to extend the Defense Production Act of 1950, as amended, and for other purposes. Except for the extension of the act through June 30, 1964, the bill relates to matters outside the jurisdiction of the Civil Service Commission. The extension of the act will continue in effect subsection 710 (b) (7) which provides that the Chairman of the Civil Service Commission at least once every 3 months survey appointments of persons made under this subsection, report his findings to the President and the Joint Committee on Defense Production, and make any recommendations deemed proper. We have no objection to the extension of subsection 710(b) (7). The Bureau of the Budget advises that from the standpoint of the administration's program there is no objection to the submission of this report. By direction of the Commission. Sincerely yours, JOHN W. MACY, Jr., Chairman. Hon. A. WILLIS ROBERTSON, TREASURY DEPARTMENT, Chairman, Committee on Banking and Currency, U.S. Senate, May 16, 1962. DEAR MR. CHAIRMAN: Reference is made to your request for the views of this Department on S. 3203, to extend the Defense Production Act of 1950, as amended, and for other purposes. Sections 4, 5, and 6 of the bill are the only provisions of the proposed legislation of primary interest to this Department. Those provisions would (1) eliminate the requirment for the payment of interest in the future and cancel accrued interest on funds borrowed from the Treasury for programs under section 303 of the Defense Production Act; (2) authorize cancellation of notes issued to the Treasury for funds borrowed for section 303 programs to the extent of losses sustained and nonrecoverable expenses incurred in the past; and (3) extend the Defense Production Act for 2 years. The Department recommends favorable consideration of the bill insofar as the foregoing provisions are concerned. The Department has been advised by the Bureau of the Budget that there is no objection from the standpoint of the administration's program to the submission of this report to your committee. Sincerely yours, FRED B. SMITH, Acting General Counsel. DEPARTMENT OF STATE, June 6, 1962. Hon. A. WILLIS ROBERTSON, Chairman, Committee on Banking and Currency, DEAR MR. CHAIRMAN: You requested, on May 11, 1962, the views of the Department of State on S. 3203, a bill to extend the Defense Production Act of 1950, as amended, and for other purposes. The Department of State strongly supports section 2 of the draft bill insofar as it exempts sales from the time limitation of June 30, 1965, established in section 303 (b) of the act. In disposing of materials no longer needed in the Defense Production Act inventory every effort is made by all agencies concerned, in accordance with executive branch policy set forth in defense mobilization order V-7 (revised) of December 1959, to avoid serious disruption of the usual markets of producers, processors, and consumers. To accomplish this it may sometimes be necessary that sales be spread over a considerable number of years in order to reduce the impact of the disposal. In the stockpile rubber disposal plan, for example, which affects U.S. relations with a number of less-developed countries whose welfare and stability are of importance to the free world, it was decided to adopt a disposal period of about 9 years. We believe, therefore, that as proposed in section 2 of the draft bill, sales under the act should be exempted from the time limitation. The remainder of the draft bill, including that portion of section 2 which deals with contracts for processing or refining, is of less direct concern to the Department, and we have no comment on it. The Department has been informed by the Bureau of the Budget, that from the standpoint of the administration's program, there is no objection to the submission of this report. Sincerely yours, FREDERICK G. DUTTON, U.S. DEPARTMENT OF THE INTERIOR, Hon. A. WILLIS ROBERTSON, OFFICE OF THE SECRETARY, Washington, D.C., June 14, 1962. Chairman, Committee on Banking and Currency, DEAR SENATOR ROBERTSON: Your committee has requested the views of the Department of the Interior on S. 3203, a bill to extend the Defense Production Act of 1950, as amended, and for other purposes. We recommend that the bill be enacted. The bill provides for (1) three minor changes in phraseology relating to disposal of excess materials, (2) two changes in method of financing the Defense Production Act program, and (3) an extension of the act from June 30, 1962, to June 30, 1964. We urge the enactment of section 6 of the bill which would extend the Defense Production Act of 1950, as amended, for 2 years until June 30, 1964, and insofar as our interests are concerned we have no objections to enactment of the other portions of the bill. The Bureau of the Budget has advised that there is no objection to the presentation of this report from the standpoint of the administration's program. Sincerely yours, JOHN M. KELLY, Assistant Secretary of the Interior. Senator SPARKMAN. Of the original seven titles of the Defense Production Act, only three titles remain. Title I grants related priorities and allocation powers. Title III contains provisions to expand productive capacity and supply-guaranteed V-loans under section 301 and loans and guaranties under sections 302 and 303 and a $2.1 billion borrowing authority under section 304. Title VII_contains a number of administrative and housekeeping provisions. It also contains a number of substantive provisions. Section 708 provides authority to approve voluntary agreements providing exemptions from the antitrust laws. Subsections 710 (b) and (c) provide authority to employ WOC and WAE employees, consultants, and advisers, with limited exemptions from the conflict-ofinterest statutes. Subsection 710 (e) provides authority to establish an executive reserve, with exemptions from the conflict-of-interest statutes. Section 710 establishes the Joint Committee on Defense Production. The act expires June 30, 1962. This bill would extend it to June 30, 1964. In addition to this extension the bill would make a number of amendments to title III of the act. The first agency from which we will hear today is the Office of Emergency Planning, the successor of the Office of Defense Mobilization. Mr. McDermott, the Director of the Office of Emergency Planning, is here to testify along with Col. Justice M. Chambers, the Deputy Director, and Mr. Charles Kendall, the General Counsel of the Office of Emergency Planning. We are glad to welcome Mr. McDermott and Colonel Chambers in their first appearance before the committee on behalf of the Office of Emergency Planning. Mr. Kendall is, of course, a familiar witness on the subject of the Defense Production Act. In fact, as I recall, he appeared in 1950 with Senator Symington, then at NSRB in support of the original bill. Gentlemen, we are glad to have you. We have the prepared statement of Colonel Chambers. Is there one for Mr. McDermott? I understand Mr. Chambers is going to make the presentation. I may remind you gentlemen that your statement will be printed in full in the record. You can proceed as you wish. Read it, talk about it, summarize it, or handle it as you see fit. Senator Capehart? Senator CAPEHART. Might I make a statement? Senator CAPEHART. Mr. Chairman, I think we have a business problem to solve. I am hopeful that we can solve it in a practical way. The brief history of this act is that in 1950 Mr. Symington, who was then the Chairman of the National Security Resources Board, came before this committee and presented the basic bill under which we have been operating since 1950. If I remember correctly, former Senator Maybank of South Carolina introduced the bill. It was felt then, and the Congress agreed, I think all of us, that it was necessary that we increase productive capacity on many items. The legislation was passed, and we proceeded to increase capacity. I believe a formula was established at that time, or later, that we needed sufficient reserve materials for a 5-year war. Later, I think, it was reduced to a 3-year war. Since that time, the Joint Committee on Defense Production, which is a committee composed of House and Senate Members, has issued a yearly report. Mr. Chairman, I do not think those reports should be made a part of the record or printed, but I think they ought to be made available to everybody. Senator SPARKMAN. We have them. Senator CAPEHART. Senator Robertson, who has been chairman of the Joint Committee on Defense Production for many, many years, as well as chairman of this committee, and, in fact, all of us, have repeatedly called to the attention of various administrations, regardless of who they were, that the stockpile was possibly getting too large and that something should be done about it. With your permission, Mr. Chairman, I would like to introduce and have made part of this record some six press releases issued by the chairman of our committee, Senator Robertson, in which he cautions the country and the administration and everybody concerned that this matter required attention by not only the administration but likewise by the Congress of the United States. These press releases, I think, should be printed as a part of the record. The first was released in 1957, there was one in 1958, two in 1959, and there is even one as late as January 9, 1962. I quote from Senator Robertson's press release of January 9, in which he states: An effort consistent with justice to producers should be made to dispose of materials in the national stockpile and the Defense Production Act inventory which are currently beyond any anticipated national needs. The defense stockpiles should not be used as a depository for surplus materials which producers desire to sell to the Government. That has been pretty much the substance of the Joint Defense Production Committee's reports, and pretty much the substance and the tone of the statements of Senator Robertson, the chairman of the committee, over the years. It is a matter that, as I said a moment ago, is a practical one. We have three stockpiles, as you know. We have the defense production stockpile, which is I think known as an inventory. Then we have the strategic stockpile, which has been handled by the Armed Services Committee. And we have a supplemental stockpile. A number of years ago, Public Law 206 was passed, under which. the Government purchased several hundred million dollars worth of materials from domestic producers. I think the author of that act was then a Member of the House, now a Member of this body, Senator Engle. It seems to me the question revolves around whether or not we have more than we need in the stockpile, and, if we do, how best to dispose of the surplus. How best to handle it. Because we do need some stockpiled material. We do not need to carry a surplus but we need some. I ask the chairman if these press releases may be made a part of the record. Senator SPARKMAN. Without objection, the statements will be inIcluded in the record. (The press releases referred to follow :) [PRESS RELEASE FROM THE OFFICE OF SENATOR A. WILLIS ROBERTSON, OF VIRGINIA, SEPT. 6, 1957] Senator A. Willis Robertson, chairman of the Joint Committee on Defense Production, expressed gratification today that agreements had been signed with the Aluminum Co. of America and Kaiser Aluminum & Chemical Corp. whereby they will deduct all of their imports of aluminum from Canada from the amount of domestic output they offer for sale to the Government. The Senator was notified today by Franklin G. Floete, Administrator of the General Services Administration, that the agreements had been signed. The saving to the Government was estimated at between $75 million and $100 million. On July 30 Senator Robertson's "watchdog" committee held a hearing on the contracts entered into in 1950-52 which allowed the aluminum companies to tender to the Government the surplus output of plants constructed or expanded in the defense program for the expansion of the aluminum industry. At the hearing the Senator expressed the view that these contracts were negotiated to encourage the domestic production of aluminum rather than to permit the unloading on the Government of imports from Canada. The hearing revealed that from 1952 through the first 6 months of 1957 Alcoa imported 706,710,000 pounds of aluminum from Canada and Kaiser imported 192,928,000 pounds. Senator Robertson said: "The agreements just concluded, saving the Government millions of dollars, are strictly in line with my position that the Alcoa and Kaiser contracts were designed to build up domestic aluminum production for defense purposes. They were never intended to provide an indirect market for surplus Canadian production." In 1953 the Department of Justice strongly protested the long-term contract between Alcoa and the Aluminum Import Corp., representing Canadian interests, calling for the delivery of 600,000 tons of aluminum from Canada through 1958. The petition of the Government filed in the U.S. District Court for the Southern District of New York was modified by a consent decree entered in 1954 permitting performance of the contract providing there were specified deliveries to nonintegrated users of aluminum. The Joint Committee on Defense Production in a report in June 1952 recommended against proposals for deliveries into Government inventories of aluminum from the Aluminum Co. of Canada and also recommended that as much time and resourcefulness be devoted in the future to the development of the |