THE WHITE HOUSE, Washington, August 10, 1950.

Hon. HUBERT H. HOWARD,
Chairman, Munitions Board,

Washington 25, D. C.

DEAR MR. HOWARD : Reference is made to certain provisions of the Buy American Act of 1933 which by specific reference in the Strategic and Critical Materials Stockpiling Act of 1946 were made applicable to purchases of strategic and critical materials for the national stockpile.

When the President approved the Stockpiling Act he commented upon the possibility that application of the Buy American Act would hamper the effective achievement of the purposes of the Stockpiling Act. It was and continues to be his feeling that the single purpose of the Stockpiling Act, national defense preparedness, should not be confused or diluted by bracketing with the objectives of the Buy American Act. He stated as a matter of policy that stockpile purchasing should not be used as a means of generally subsidizing domestic producers of strategic materials.

In order to provide a criterion for the application of the rules of the Buy American Act to purchases involving both foreign and domestic bids, the general rule has been followed since 1934 that a differential of 25 percent in favor of domestic purchasing should apply. The purpose of this rule was to supply a ready test of reasonableness under that section of the Buy American Act which exempted from its operation items which if purchased domestically would involve unreasonable costs.

In my letter of February 6, 1947, to the executive chairman of the Army-Navy Munitions Board, I pointed out that the 25 percent differential was not intended to operate as a premium generally available to domestic producers. Whether in a particular case the payment of more than a foreign bid or world price for domestic strategic and critical materials is reasonable as to cost and consistent with the public interest cannot be determined by rule of thumb.

Cases may arise in which procurement of a material in the United States serves a public interest of such weight as to justify a price differential in excess of 25 percent. Thus, strategic urgency of procurement for the stockpile of some highly essential material should be considered justification for that flexibility in price policy necessary to protect the national security. In this connection, the insufficiency of a material may be actual or anticipated.

However, this policy should not be considered a mandate for general price increases or premiums for materials being stockpiled. In assessing implications of this procedure with respect to stockpile procurement for national security, due consideration should be given to the possible curtailment of low-cost production that may result from stimulation of marginal production through competition for labor, facilities, and equipment. Each instance of the payment of a price in excess of 25 percent above market price should be justified in terms of urgent national security need.

It is requested that you arrange with the Administrator of the General Services Administration to make such changes in the Federal Supply Services Circular Letter B-61, dated October 1, 1947, as are necessary to carry out this policy. Sincerely,

(S) JOHN R. STEELMAN, The Assistant to the President.

Mr. REGAN. Mr. Baring.

Mr. BARING. Mr. Chairman, I am sorry I did not get back from the West until last night, but I would like to ask Dr. Boyd a few questions. Dr. Boyd, we have just conducted hearings in Ely, Nev., and Phoenix, Ariz. Both meetings were well attended. The man in the field is not asking for hand-outs. They just want to be treated half as well as the overseas program was treated by this country.

I have an article here from the San Francisco paper, "$10,000,000 requested for minerals share."

Can you tell us whether that $10,000,000 is available right now? Dr. BOYD. It has not been finally made available, Mr. Baring; however, the regulations, procedures, and forms are all worked out and

we are now printing the forms. We will have the papers out to the field soon as the final clearance comes from the Bureau of the Budget. Mr. BARING. The Bureau of Budget has approved the amount? Dr. BOYD. Yes.

Mr. BARING. And no forms are available at the moment?

Dr. BOYD. No, they are being printed at the moment. We just got the clearance from the Bureau of the Budget a day or so ago.

Mr. BARING. There are the manganese cases and the tungsten cases. We found out through our hearings there is quite a bit available and quite a demand.

Dr. BOYD. Yes, particularly tungsten.

Mr. BARING. Can you tell us how many cases have been approved by the DMA on either one?

PROPOSED TUNGSTEN PROGRAM DISCUSSED

Dr. BOYD. In the case of tungsten, we have been attempting to get a broad program which would not require individual negotiation of contracts; consequently, we proposed a program for establishing a relatively high floor under the price of tungsten, much higher than it has ever been. That floor price is now recommended at $63 per short-ton unit. We expect and we discussed this with tungsten industry-we had them down here-that by placing a floor under the price for 5 years it will encourage individual producers to go in on their own. That will obviate the necessity of a lot of individual negotiation with small people, and people won't have to come to Washington. That has been approved by DPA and certified to GSA. They are the procurement agency. They will notify the public that the Government will accept all tungsten that cannot be sold above the price of $63 and the Government will pick it up and purchase it. That means that we have attempted to put a floor under that, price. If there are low-grade tungsten producers that cannot meet that, then we will have to enter into individual contracts with them. There has been one contract negotiated on tungsten which began a long time ago. That one was approved last week and I believe that they will be ready to sign that contract this morning. That is the Tungsten Mining Co. of North Carolina. I think Mr. West was down here and signed it this morning, and it is all finished up.

MANGANESE CONTRACTS BEING NEGOTIATED

In the case of manganese, we have a little different problem. The manganese supply at the moment is not in the serious situation that tungsten is. The supply available to the American markets is greater than the consumption and there is a substantial amount flowing into a stockpile, so we have a longer range program involved there; but we have a little delicate balance at the moment and we desire quick production from probably high-cost producers in the West.

To accomplish that, we are negotiating contracts in Butte and Phillipsburg, Mont. They have been submitted to companies and they have been approved just this last week. We expect to have those. contracts out in a very short period of time.

In the case of the Southwest, we are setting up procurement depots. People in Phoenix and Ely are setting up depots. We used to refer to

them as stockpiles but that is conflicting with the stockpile program. It is a little complicated to get somebody to do this for us under the present law, but they are well along and we should be able to announce that shortly.

Mr. MURDOCK. Will the gentleman yield for a question?

Mr. BARING. Yes.

Mr. MURDOCK. Did I understand you to say that the procurement of manganese is now in excess of the demand?

Dr. BOYD. The supply of manganese is in excess of the current commercial demand, not the stockpile that we would like to have, but there is a substantial amount now flowing to stockpile, over and above commercial consumption.

Mr. MURDOCK. Is that from domestic or foreign sources?

Dr. BOYD. Ninety percent foreign sources. That is the reason we feel we must develop a domestic industry as rapidly as we can and we are working on that at a number of different points. We are trying to create in a short period of time a very large industry in this country, which has been attempted through two wars and it wasn't done in the last two wars, except on a very small scale.

We are now trying to do it in a very few months.

PROCESSING OF APPLICATIONS DELAYED BY LACK OF SKILLED HELP

Mr. BARING. On March 20, you wrote a letter to Senator Murray in which you stated there were over 525 applications to DMA, none of which had been approved.

Now, as I understand from Congressman Engle, it is now over 900. Dr. BOYD. That needs explanation, Mr. Baring.

There are over 900 actions that have been docketed in the Defense Minerals Administration. A great many of those are such that they will require an answer to an applicant. They are not firm requests for loans. Many are tax amortization contracts. We have already approved 61 of those. I think there are 209 applications altogether. Mr. BARING. That is in your department?

Dr. BOYD. That is right. We recommend those to DPA and they certify the tax-amortization certificate.

Mr. BARING. Is the DMA the next step in the procedure?

Dr. BOYD. No, we process the recommendation. It goes directly to DPA and they certify it. That is all it takes. There are a number of loan applications which we have not processed. We haven't passed on any one loan yet, and the main reason for that is that most of the loan applications are for exploration projects and it will be simpler to do it under the program which is completed but not finally announced. We are processing the loan applications and as soon as this is announced, we can send them out to the companies and get them finalized very quickly.

Mr. BARING. The program has been in order since last September. I have a letter from Mr. Harrison, Deputy Administrator of DMA and he mentioned the fact that you were short on help. Is that true with your DMA and your Bureau of Mines and GSA?

Is that true that you do not have proper help to set this program in motion to get this in operation?

Dr. BOYD. That is always the case in setting up a program of this magnitude. You have to recruit and get the right people and train

them for the job. We have a great shortage of secretarial help. There isn't that much secretarial help in Washington. It takes time to build that staff up.

Mr. BARING. Do you think that the bill that Congress passed last September is adequate for the manganese?

Dr. BOYD. I think it is.

Mr. BARING. It is of wide enough scope?

Dr. BOYD. It is quite broad in its authority. It is a question of turning the authorities of the bill into mechanics that are operable for the particularly small operator. You have to make it simpler for them and the simpler a thing becomes the harder it is to work under it. You realize that.

Mr. BARING. I am sorry the notes have not been transcribed from the two meetings I attended. We had a representative from your office and several from the field offices with us.

Are you familiar with Senator Murray's bill?

Dr. BOYD. I have just read it. I am not familiar with it in detail.

EDITORIAL FROM PHOENIX, ARIZ., GAZETTE

Mr. BARING. At this time, I would like to read an editorial that appeared in the Phoenix Gazette, as of March 28.

Mr. REGAN. No objection, you may proceed.
Mr. BARING (reading):

Small dormant mines are among the best sources of strategic metals in America but mining is a specific business to get into and the small-mine owners of the State cannot reactivate their properties without help from the Government. That is what members of the congressional subcommittee learned at hearings held in Phoenix this week. They also discovered that most mine owners, operators, and prospectors in the State believe that the Murray-Baring bill, now before the Congress, will solve most of their problems.

The Government has a mining-aid program in operation now. It is difficult for a small-mine owner to obtain a loan, however, and the present program makes no provision for advancing funds for exploration.

Moreover, those applying for Government aid are required to fill out a monumental 12-page form, which one operator had to fill out, at the Phoenix hearings. They Murray bill would simplify the procedure for obtaining Government help. Even more important it would provide money for the purpose of prospecting. In copper mining, it is the small prospector in many cases who finds ore body which is later developed by one of the big companies. Minerals produced under provisions of the Murray-Baring bill would automatically go into the rational stockpile, so there would be no question of expending public funds to Jroduce metal for anything but national defense. The bill provides the more efficient operation, the more money the mine will be permitted to make.

That is it right there.

Mr. REGAN. That is the end of the quote.

Mr. BARING. Yes.

FIELD HEARINGS INDICATED MINERS DISSATISFIED WITH PROGRAM

Mr. ENGLE. Would the gentleman care to summarize in a few words. the impressions that he received from the hearings held in Phoenix, Ariz., and at Ely, Nev.

Mr. BARING. I Would say very conscientiously, 99 percent of the men are behind the bill, which is a premium price bill.

Mr. ENGLE. How do they feel about this current program? I am speaking of miners in the field who attended these meetings, are they satisfied and happy in this program?

Mr. BARING. They are not a bit happy with the present program. Mr. ENGLE. Do they feel it is doing the job?

Mr. BARING. No, sir.

Mr. ENGLE. You had a large meeting in Phoenix, did you not? Mr. BARING. We had over 400, I imagine. We had to change the hearing from the courthouse to the Adams Hotel to get a larger room. Mr. ENGLE. You had another large meeting at Ely, Nev.?

Mr. BARING. That is right. I talked to 200 there.

Mr. ENGLE. Those people are interested in mining and are all miners?

Mr. BARING. Yes.

Mr. ENGLE. Did you hear one word of praise of the current program?

Mr. BARING. I certainly did not.

Mr. ENGLE. They didn't come around to say to the congressional committee there, "We think the Defense Minerals Administration is doing a good job and we want to say a word for them," did they?

Mr. BARING. They certainly did not. The 50-50 loan basis, they laugh at. They say if they had that much money they would start digging right away.

Mr. ENGLE. You are referring to the proposed exploration program. Mr. BARING The $10 million loan.

Mr. REGAN. Your bill H. R. 2862 is going to ease up that?

Mr. BARING. Yes, and it will not injure the present position of the DMA, and so forth.

Congressman D'Ewart was with me in Phoenix and I believe he can substantiate what I have said.

Mr. D'EWART. I reported on that meeting yesterday since I was the only one present here who attended the meeting and I gave a report at the opening of this committee meeting.

NEED FOR PREMIUM PRICE PLAN DISCUSSED

Mr. ENGLE. May I ask Dr. Boyd a question about the bill Mr. Baring is referring to, which I think is more or less the same bill as the one which Senator Murray and I had in this last Congress; isn't that correct?

Mr. BARING. Yes.

Mr. ENGLE. It has been reframed a little. But as a matter of fact, the authority under the Defense Production Act of 1950, is so broad, is it not, that you can take the old mining bills we had before this committee, or for that matter, S. 2105, and write it as a directive and make it the operating mechanism for this minerals program; couldn't you?

Mr. BARING. That is correct; yes.

Mr. ENGLE. In other words, it isn't necessary for Congress to pass a bill in order to get this job done, because the delegation of authority in the Defense Production Act of 1950 is so broad that you can take the exact language of Mr. Baring's bill, Senator Murray's bill, or the one we had in the preceding Congress, and write it in the nature of an Executive order under the Defense Production Act of 1950; is that correct?

Dr. BOYD. That is correct. That is quite correct.

Mr. ENGLE. Well, why don't you do it?