II, SECTION 2(c) oF THE AGRICULTURAL ACT OF 1961 Section 2 of the Agricultural Act of 1961 (75 Stat. 294; 7 U.S.C. (supp. IV) 1282 note), declares it to be "* ** the policy of Congress to

"(c) expand foreign trade in agricultural commodities with friendly nations, as defined in section 107 of Public Law 480, 83d Congress, as amended (7 U.S.C. 1707), and in no manner either subsidize the export, sell, or make available any subsidized agricultural commodity to any nations other than such friendly nations and thus make full use of our agricultural abundance *

The adoption of this declaration of policy followed the announcement by the Department of Commerce in June 1961 of a change in existing export licensing policy to permit the sale of subsidized surplus agricultural commodities to the Eastern European Soviet bloc. The announcement indicated that consideration would be given to approval of export licenses for shipment of such commodities, including commodities acquired directly or indirectly from Commodity Credit Corporation stocks, to the Soviet Union and other Eastern European countries, provided the commodities were sold for convertible currencies (hearings before the House Select Committee To Investigate and Study the Administration, Operation, and Enforcement of the Export Control Act of 1949, and Related Acts (87th Cong., 1st sess.), p. 109).

Section 107 of Public Law 480 (Agricultural Trade Development and Assistance Act of 1954 (68 Stat. 457; 7 U.S.C. 1707), referred to in the declaration of policy, defines the term "friendly nation" to mean "any country other than (1) the U.S.S.R., or (2) any nation or area dominated or controlled by the foreign government or foreign nation controlling the world Communist movement." Public Law 480 authorized, inter alia, export sales for soft currencies and for long-term credits. See United States Code 1701, 1731. Sales of this character are authorized only with respect to "friendly nations," as defined in the act, but no restriction is imposed on commercial sales for cash or short-term credits.

During consideration by the House of the bill which became the Agricultural Act of 1961, Representative Latta, referring to the change of policy announced by the Department of Commerce, proposed adding to the declaration of policy already contained in section 2(c) the language: "and in no manner either subsidize the export, sell, or make available any subsidized agricultural commodity to any nations other than such friendly nations." He objected to selling subsidized agricultural commodities to the Soviet bloc-even sales not involving any element of assistance under Public Law 480-because sales at the world market price would, in his view, give bloc countries the benefit of subsidies paid by the Commodity Credit Corporation to American producers and exporters. He urged that this was objectionable "in view of the world situation." After some debate as to the meaning and desirability of the amendment, it was adopted (107 Congressional Record 13746-13748). The conference committee accepted the amendment (H. Rept. 839, 87th Cong., 1st sess., p. 28).

It is clear that the policy declaration contained in section 2(c) does not have the legal effect of prohibiting commercial sales of subsidized agricultural commodities to bloc countries at world market prices for U.S. dollars, gold, or convertible currencies. Declarations of policy in legislation, like preambles and other introductory material, do not alter specific operative provisions of law. Sinclair Refining Co. v. Atkinson, 370 U.S. 195, 202 (1962); Lauf v. E. G. Shinner & Co., 303 U.S. 323, 330 (1938); Price v. Forrest, 173 U.S. 410, 427 (1899); Yazoo R. Co. v. Thomas, 132 U.S. 174, 178 (1889); Sutherland, Statutory Construction (3d ed.), section 4820. This rule is particularly relevant where, as here, the declaration of policy was not contemporaneous with the enactment or amendment

2 Under sec. 407 of the Agricultural Act of 1949 (63 Stat. 1055, as amended; 7 U.S.C. 1427), the Commodity Credit Corporation is authorized to sell subsidized agricultural commodities owned or controlled by it for export at less than the domestic price. Representative Latta stated that under the Department of Commerce proposal "the American taxpayer will now [be] picking up the difference between the world price and the domestic price. *** The exporter would charge this difference to the taxpayer." 107 Congressional Record 13746-13748. In fact, as noted by Chairman Cooley of the House Agriculture Committee in debate on the floor of the House, since the commodities in question are surplus, the American taxpayer in each case has already "picked up" not merely the difference between the world price and the domestic price, but the entire amount of the domestic price. Export transactions can be said to involve a "subsidy" only because the losses Încurred in maintaining the domestic price support program are not deemed realized until a sale occurs. The net result of export transactions, therefore, is to reduce the loss to the taxpayer by the amount of the world market price (id. at 13747).

of any of the basic pertinent statutes: the Export Control Act, the Agricultural Act of 1949, and the Commodity Credit Corporation Charter Act.3

I have examined the history of the declaration with care and find no indication that Congress itself viewed the amendment as more than an expression of its policy, to be given consideration by the Executive in making decisions within the framework of authorizations and prohibitions established by prior law. Representative Latta, who sponsored the declaration, himself stated that its purpose was to have the Department of Commerce know "what the sense of this Congress is" with respect to the transactions in question (107 Congresisonal Record 13746). And Representative Hoeven, one of its supporters, pointed out that the amendment "pertains only to the policy section of this bill" (id. at 13747). At no point in the legislative consideration of the declaration was any effort made ot revise or to repeal the statutes that would have to be deemed amended if the policy were to be given binding legal effect.

The Congress could, of course, have embodied its policy in a provision of positive law to which the executive branch would have been bound to adhere. That it did not choose to do so is significant, not only in establishing that section 2(c) is without legal effect but in determining its proper interpretation and application as policy. Congress evidently contemplated that situations might thereafter arise in which the considerations of policy to which it was directing attention should not be decisive; that it would be necessary for the executive to consider and appraise the policy thus declared and to determine whether its application would serve the national interest in particular situations. Both Congress and the courts have traditionally sought to avoid restricting the executive unduly in matters affecting foreign relations because of the need for flexibility in this area and the fact that the Constitution entrusts the external affairs of the Nation primarily to the executive. United States v. Curtiss-Wright Export Corp., 299 U.S. 304, 319-321 (1936); Chicago & S. Air Lines v. Waterman S.S. Corp., 333 U.S. 103, 111-114 (1948). If, therefore, the executive branch should determine that permitting the sales in question would serve the national interest at this time, its action would not only be lawful but consistent with the intention of Congress as to the manner in which section 2 (c) was to be interpreted and applied.

III. THE BATTLE ACT

I agree with the Under Secretary that the Mutual Defense Assistance Control Act of 1951 (65 Stat. 644, as amended; 22 U.S.C. 1611 et seq.) (the Battle Act), presents no legal obstacle to sales of agricultural commodities to Eastern European bloc countries. The Battle Act was designed to supplement the Export Control Act of 1949 (63 Stat. 7, as amended; 50 U.S.C. App. 2022-2032), which authorizes the President to "prohibit or curtail the exportation from the United States *** of any articles, materials, or supplies * * * except under such rules and regulations as he shall prescribe." Pursuant to the Export Control Act, a comprehensive system of export licensing was set up to control the shipment of commodities from the United States to foreign countries. See House Report 318, 82d Congress, 1st session (1951). The Battle Act added to this system of regulation a mechanism for inducing other countries to embargo the shipment to the Soviet bloc of "arms, ammunition, and implements of war, atomic energy materials, petroleum, transportation materials of strategic value, and items of primary strategic significance used in [their] production." See Senate Report 698, 82d Congress, 1st session (1951). The act provides (sec. 103, 22 U.S.C. 1611(b)) for the termination of all military, economic, or financial assistance to any nation upon the recommendation of the Administrator of the program, subject to review by the President in certain instances, if it "knowingly permits the shipment to any nation or combination of nations threatening the security of the United States, including the Union of Soviet Socialist Republics and all countries under its domination," of any of the embargoed materials. The act contains a further declaration of policy regarding the export, by countries receiving assistance, of other commodities "which in the judgment of the Administrator should be controlled." Section 201, 22 U.S.C. 1612. If a country receiving assistance

3 Export Control Act of 1949 (63 Stat. 7, as amended, 50 U.S.C. App. 2021 et seq.) (authorizing the President to regulate exports, including their financing, transportation, and other servicing); Agricultural Act of 1949, sec. 407, supra (CCC authorized to sell agricultural commodities for export at less than support prices); Commodity Credit Corporation Charter Act, sec. 5, supra (CCC empowered to procure agricultural commodities for sale to foreign governments, and to export such commodities, or cause them to be exported, and to aid in the development of foreign markets for these commodities).

from the United States does not effectively cooperate in controlling exports of such commodities, all military, economic, or financial assistance is to be terminated upon a determination by the President of noncooperation. Section 203, 22 U.S.C. 1612b.

As indicated by the above summary of its provisions, the Battle Act did not purport to regulate private U.S. shipments to Soviet bloc countries, which were already subject to regulation under the Export Control Act. The Battle Act relates, rather, to trade with the Soviet bloc by countries receiving aid or assistance from the United States. Moreover, the transactions to which this opinion relates would be purely commercial in nature from the standpoint of the purchasing countries, and would therefore not involve "economic or financial assistance" within the meaning of the Battle Act. The Commodity Credit Corporation assists exports of agricultural products through the payment to U.S. exporters of subsidies designed to eliminate the impact on such exporters of the domestic price support program and thereby enable them to compete on an equal basis with foreign exporters. However, as the Under Secretary's letter states, the only "assistance" involved in the payment of such subsidies redounds to the benefit exclusively of U.S. producers and exporters.*

As to both points, the following colloquy between Senator Sparkman, the floor manager of the Battle Act in the Senate, and Senator Kem, who advocated a more stringent bill, is instructive (97 Congressional Record 10675):

"Mr. SPARK MAN. I should like to say that it does not make any difference what the United States is receiving [from the U.S.S.R.]. That is not the question. The question relates to trade between Soviet countries and countries to which the United States intends to extend help.

"Mr. KEM. Exactly.

"Mr. SPARKMAN. Either economic or military. It has nothing to do with trade between the United States and Russia or any other country.

"Mr. KEM. I did not intend to imply anything else."

Accordingly, it is clear that the act has no application to the contemplated transactions.

IV. THE EXPORT CONTROL ACT

The Under Secretary's letter properly states that in any event the export of agricultural products to the Soviet Union and to bloc countries would require the issuance of licenses in accordance with the export control regulations promulgated pursuant to the Export Control Act of 1949, supra.

I am not aware of any other Federal statutes relevant to the problems involved. Accordingly, it is my opinion that the transactions described in your letter could be accomplished in conformity with the laws of the United States.

Sincerely,

ROBERT F. KENNEDY,
Attorney General.

EXPORT-IMPORT BANK OF WASHINGTON,
Washington, D.C., November 15, 1963.

MEMORANDUM FOR THE SENATORS ATTENDING CONFERENCE IN SENATE CONFERENCE
ROOM ON NOVEMBER 15, 1963, ON EXPORT-IMPORT BANK GUARANTEE OF GRAIN
SALES TO THE SOVIET BLOC

The Export-Import Bank has announced it is prepared to guarantee U.S. commercial banks on "commercial credits" established by these banks to finance the sale of U.S. wheat and other grains to the U.S.S.R. and other countries within the Soviet bloc. The conditions of any such guaranteed credit transaction are to be these: the buying country must pay at least 25-percent cash prior to shipment. The balance of 75 percent can be payable over an 18-month period, with

This view is supported by my recent opinion to the Secretary of Agriculture of Aug. 29, 1963, regarding the applicability of the Cargo Preference Act to export sales on long-term credit negotiated by the Secretary of Agriculture with domestic exporters under title IV of Public Law 480. While the opinion concludes that the Cargo Preference Act applied because the purpose of the title IV long-term credit program was in substantial part "to assist" the foreign economy, it was stated that if the Department of Agriculture should sell surplus agricultural commodities to a domestic exporter for export purposes under a program designed to dispose of the goods on the best possible terms and conditions, "the resulting export is a purely commercial transaction * **and, hence, not subject to the Cargo Preference Act even if the United States advances credit to the exporter and the ultimate purchaser is a foreign government."

equal payments to be made each 6 months. The credit will carry interest at 5 percent per annum. To date, Export-Import Bank has issued three guarantees aggregating $4.5 million covering sales of corn to Hungary.

The Export-Import Bank has offered to guarantee these transactions because it has been found that the U.S. commercial banking system is not prepared to grant credit (even for a term shorter than 18 months) in the amounts necessary to finance the proposed grain sales without the intervention of the Export-Import Bank in the form of a guarantee. Thus, although the Export-Import Bank is not in position to judge whether the grain will be sold for spot cash if no credit is available, the Bank is convinced that if any credit (even 30 days) is necessary to effect the sale, the credit will not be available from the commercial banking system without the guarantee of the Export-Import Bank.

Under these same circumstances, in the case of many non-Communist-bloc countries, the Export-Import Bank has frequently given the same full all-risk guarantee to U.S. commercial banks. Newspaper accounts to the effect that the proposed guarantees to the Soviet bloc are a departure from normal more limited Export-Import Bank guarantees are inaccurate.

Although the Export-Import Bank has never guaranteed or financed a transaction with the U.S.S.R., it has since its creation in 1934 been legally empowered so to do. The Board of Directors of the Bank believes it would be unwise to deny the Bank the authority to guarantee or finance legitimate commercial trade between the United States and the U.S.S.R. whenever the national interest may call for such trade.

It might be mentioned that the counterpart governmental agencies of the Export-Import Bank in Canada and Great Britain have been guaranteeing exports from their coutries to the U.S.S.R. for some time now. In the case of Canada, in fact, credit for sales of wheat is being guaranteed on terms of 3 years for certain of the bloc countries and 18 months for the U.S.S.R. and others. In Great Britain, guarantees are being offered in the case of the export of British-made capital goods and equipment to the U.S.S.R. and other bloc countries on terms at least comparable to those granted on sales to non-Communist countries.

WALTER C. SAUER.

EXPORT-IMPORT BANK OF WASHINGTON,
Washington, D.C., November 16, 1963.

MEMORANDUM FOR THE SENATORS ATTENDING CONFERENCE IN SENATE CONFERENCE ROOM ON NOVEMBER 15, 1963, ON EXPORT-IMPORT BANK GUARANTEE OF GRAIN SALES TO THE SOVIET BLOC

In accord with the agreement reached by the undersigned with the Senate conference group, Bank officials, immediately following the announcement of the understanding in the Senate, began advising (by telephone) interested grain dealers and the commercial bank involved that the Export-Import Bank was not prepared to issue further guarantees in connection with grain sales to Soviet bloc countries. As stated in the first sentence of the memorandum given to the Senators at the conference by the undersigned, the Bank had made a prior general announcement that it was prepared to guarantee U.S. commercial banks on wheat and other grain sales to the U.S.S.R. and other countries within the Soviet bloc. It developed in the conversations with the U.S. grain dealers that, acting in good faith on the Export-Import Bank announcement as well as on export licenses received by the sellers from the U.S. Department of Commerce prior to November 15, they had proceeded to engage ocean shipping space with respect to grain sold under contracts entered into prior to November 15 and had otherwise proceeded to carry out such contracts. The reason why U.S. sellers took the foregoing steps even though the Export-Import Bank had not issued guarantees (except in 3 cases for $4.5 million) with respect to the transactions involved was that shortage of shipping space made it necessary that the grain sellers act speedily.

All of the contracts in question involve grain sales to Hungary. It appears quite certain that no contracts have been entered into nor export licenses issued prior to November 15 to the U.S.S.R. The U.S. exporters are Cargill, Inc., Continental Grain, and Garnac. The precise amount of the shipments involved is impossible to state but it can be said that the amounts will be in the range of $25 million.

34

The Board of Directors of the Export-Import Bank is advised by its General Counsel that he concurs with the U.S. grain dealers that the Bank had at least an oral commitment to issue guarantees in connection with the contracts already entered into in good faith by U.S. sellers of grain and which they had proceeded to implement after obtaining an export license from the U.S. Department of Commerce. Accordingly, the Bank will proceed to issue its guarantee in the cases involved and will do with the conviction that it is acting in full compliance with the spirit of the agreement reached by the undersigned with the Senate conference group that the Bank "from that time on and for at least a period of about 2 weeks would not approve further guarantee commitments with respect to grain sales to the Soviet bloc."

More specific details of the contracts covering the sale of grain to Hungary which the Bank must meet under the foregoing commitment are listed on the attached sheet.

WALTER C. SAUER.

Nov. 5.

Nov. 9.

The CHAIRMAN. As I have said, S. 2310 seeks to prohibit guarantees by the Export-Import Bank or any other Government agency of payment of obligations of Communist governments, and we will also consider Senator Mundt's amendment that I have just discussed.

This bill is based on Senator Mundt's amendment to the Foreign Aid Act. By unanimous consent an agreement was reached last Friday, and Senator Mundt withdrew his amendment to the foreign aid bill, and introduced it as a separate bill what is now before us as S. 2310. Under the unanimous consent agreement, we must consider the bill and report it back to the Senate on next Monday, the 25th. On that account the chairman could not refer the bill to the subcommittee headed by the distinguished Senator from Pennsylvania (Senator Clark) as he would ordinarily have done. We may not even have time to have these hearings printed so that those interested would have a chance to read the testimony and know the pros and cons and also have an opportunity to make some comments if they wish for the record. Although we are going to have hearings today and tomorrow and Friday-Saturday if necessary, but we hope that won't be necessary, because we are trying to get these hearings printed. There is bound to be a minority and a majority opinion. We know that in advance because of the vote in the Senate on the question of tabling Senator Mundt's amendment to the foreign aid bill as to the propriety of selling grain to the Communist countries on credit.

I say that the unanimous consent agreement is really flattering to our committee because, with all due deference, no other committee in the Senate has acted any more expeditiously than we have.

Senator CLARK. Or more responsibly.

The CHAIRMAN. Well, from the standpoint of some, yes. With all due deference to those who were in the majority on the mass transportation bill, we did report the bill out. The chairman didn't like it,