Business meeting on U.S. grain standards act of 1976


Material Information

Business meeting on U.S. grain standards act of 1976 H.R. 12572 ... Public Law 94-582
Spine title:
U.S. Grain Standards Act of 1976
Physical Description:
iii, 482 p. : ; 24 cm.
United States -- Congress. -- House. -- Committee on Agriculture
U.S. Govt. Print. Off.
Place of Publication:
Publication Date:


Subjects / Keywords:
Grain trade -- Law and legislation -- United States   ( lcsh )
Grain -- Grading -- United States   ( lcsh )
Grain -- Grading -- United States   ( lcsh )
federal government publication   ( marcgt )
non-fiction   ( marcgt )


Statement of Responsibility:
Committee on Agriculture, U.S. House of Representatives, Ninety-fourth Congress, second session.
General Note:
Reuse of record except for individual research requires license from LexisNexis Academic & Library Solutions.
General Note:
At head of title: 94th Congress, 2d session. Committee print.
General Note:
Meetings held Oct. 30, 1975-Mar. 17, 1976, on H.R. 12572.
General Note:
CIS Microfiche Accession Numbers: CIS 77 H162-4
General Note:
Meetings held Oct. 30, 1975-Mar. 17, 1976.

Record Information

Source Institution:
University of Florida
Rights Management:
All applicable rights reserved by the source institution and holding location.
Resource Identifier:
aleph - 024556287
oclc - 03604774
lccn - 77604290
lcc - KF49
ddc - 343/.73/085131
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94th Congress COMMITTEE PINT
2d Session CO TTEE



H.R. 12572
October 30 and 31, November 4,7, 10, 11, 13, 17, and 18, Decenber 2,
.. 19
9, and 10 19 75 February 19 (GAO Briefing), 24, 25, and 26,
arh 2,3 4 9 10, and 17, 1976

Pubic Law 94-5 82



Prited fr the uge of the Committee on Agriculture

79-0 WASHINGTON : 1976

THOMAS S. FOLEY, Washington, Chairman
W. R. POAGE, Texa, Vice rman WILLIAM C. WA
E DE LA GARZA, Texas Ranking Minority Member
WALTER B. JONES, North Carolina PAUL FINDLEY, Illinois
ED JONES, Tennessee CHARLES THOE, Nebraska
BOB BtRGLAND, Minnesota EDWARD R. MADIGN, Illinois
GEORGE E. BROWN, JR., California PETER A. PEYER, New York
W1CHARD NOLAN, Minnesota W. HENSON MOORE, Louisiana
JOHN KREBS, California
JOHN W. JENRETTE, Ja., South Carolina
NORMAN E. D'AMOURS, New Hampshire '

FowLER C. WEST, Staff Director
ROBERT M. BOR, o01 l n8
HYDE H. M uWBY, ton-el
JOHN R. K S Counsel
L. T. EASL, Pre Asistant
SDeceased August 3, 1976
SResigned from Committee April 8, 1976
8 Assigned December 17, 1975


Thursday, October 30, 1975-------------- ---------------- -- 1
Friday, October 31, 1975 ---- -- ------------------------ 11
Tuesday, November 4, 1975------------------------------ 35
Friday, November 7, 1975---------------------------------- 61
Monday, November 10, 1975---------------------- 63
Tuesday, November 11, 1975 ------------------- 65
Thursday, November 13, 1975 -------------------------------- 89
Committee Print ------ ------------ ------------- 90
Monday, November 17, 1975 -----------------------------.--------- 141
Tuesday, November 18, 1975-------------------------------- 143
Tuesday, December 2, 1975------------------------------------- 167
Tuesday, December 9, 1975 --------------------------------------193
Wednesday, Decmber 10, 1975--------------------------------- 1
Thursday, February 19, 1976------------------------------------ 201
Statement of Henry Eschwege, Director, Resources and Economic
Development Division, General Accounting Office ---. ------- 201
Tuesday, February 24, 1976 -------------------- ------------ 227
Correspondence from Gilbert H. Vorhoff, president, The New Or-
leans Board of Trade, Ltd., letter of March 3, 1976------- 228
Statement of National Association of Chief Grain Inspectors, Daven-
port, Iowa---------------- ---------------- 230
Wednesday, February 25, 1976------------------- ---------- -- 261
Thursday, February 26, 1976 --------------------------- 291
Tuesday,March 2, 1976------------.-----.---------------------- 311
Wednesday, March 3, 1976---------------------------------- 341
Thursday, March 4, 1976 -------------- -------------------------- 369
Tueay,March 9, 1976 ---------------------------------- 399
orrespondence from Donald E. Wilkinson, Administrator, Agriul-
tural Marketing Service, U.S. Department of Agriculture, letter of
March 2, 1976 ------------- .--- -------------------- 400
Wednesday, March 10, 1976 ---------------- ------------------- 423
Wednesday, March 17, 1976 -------------------------------------- 447
H.R. 12572, a bill to amend the U.S. Grain Standards Act to improve
the grain inspection a weighing system, and for other purposes- 448

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Washingto, D.C. "
The com ttee met at 105 a.m., pursuant to notice, in room 1301,
Longworth House Office Building, Hon. Thomas S. Foley (chairman)
olina, Jones of Tennessee, Mathis, Bergland, Bowen, Rose, Litton,
Breckinridge, Richmond, Nolan Weaver, Baldus, Krebs, Hightower,
Bedell, McHugh, English, Fithian, D'Amours, Sebelius, Findley,
Thone, Symms, Madigan, Jefords, Kelly, Grass'ley, Hagedorn, and

Sta. present: Rolbrt M. Bor and Hyde H. Murray, counsels; John
E. Hogan associate counsel; Steve Allen, staff consultant; Eugene
Moos, sta analyst; Glenda Temple and Mary Jarratt, staff assistants.
The CHATRAN. The Chair anticipates hat this legislation which is
before the full comittee will require several days for narkup..
Accordingly, I have written a letter to the Speaker and the chairman
of the Rules Committee asking that once we dbmplete action on the
bilt be consideredby the Rules omittee,notwittistanding th
Shave o't yet had a. response, naturally, since it has just been deliv-
red. It is not my intention to attempt to complete consideration of this
S, nsiderng the copxity of the issies involved.
I think we will have to give careful attention to the many complex

i ia r ill befor us, althioug the calendar
lists only Senate Joint Resolution 88 and H.R. 9467.
Exactly how many bills have ben referred to this committee

Mr. BOR. Nine.
TheCHAIRMAN. These nine bills represent a number of different leg-
islative approaches to the situation.
The Department of Agriculture has recommended, by communica-
tion with the committee, the bill which Mr. Wampler and I introduced
at its request. That bill retains private inspection while increasing Fed-
eral supervision and adding new, very much tightened conflict of

for Federal inspection at all inspection points in the United States,
rThere are other approaches still.
(1) o
ile e

The Senate, for example, has adopted Senate Joint Resolution 8
which is a specific interim proposal expiring in 1 year. During this t
the Senate intends to consider the investigations which arebeing
"conducted by the GAO and by the Senate committee before w on
a more permanent legislation.
What the Chair uggests that with all the a approaches
implemented in nine different pieces of legislation, it might pve
better for the committee to rst deide which particular policy or
course of action it shl tath av made that decisi
request the staff to present a committee print embodying these deci-
sions for m Jarkp.
Afte t s hs b completed, the committee would p
with the introdtion of a clean bill reflecting the committees judg-
ment. Thatbill would be brought bakl t t o i
action before beg reported.
The Chair would like at this timeto ask the members the
mittee for their comments and uggetins with re to i
Mr. Bergland?
Mr. IBERGLAN. Mr. Chairman, I think that the more logi
approaching this atter would be to consider Senate inte -
tion 88, which is a I-year proposition. It is not a cosmetic bill.
wih many of the are which have pr to in th in
inspection field.
The chairman of the House and Senate committees on the 24th of
June of this year requested the GAO audit of this entire a .
GAO has comnissioned 41 inspectors and they are t
back their findings before February 15.
'The chairman of the Senate committee has requested the
tion of the FBI in the investigation. The Senate has commissio
a staff of investigators of their own inquiring ito e ee
not only at export points, but at certain interior points around the
United States.
To make a long story short, Mr. Chairman, this is a aia
sophisticated study. It is the first of its kind, I think, in the many
years of existence of these grain standards.
I believe, Mr. Chairman, that it would be more appropriate f we
were to take the Senate joint resolution, which is a 1-ye a
to the Secretary to do certain things that he is not now authorized t
do, and await consideration of the permanent change in law pendn
the outcome of these reports that are due in the middle part
This committee could benefit from the results of those investigations
from the GAO and others.
I think it would better prepare us to consider the comp
questions which are before us in the nine bills which have been ref
to thiis committee.
Senate Joint Resolution 88 is a rather complicated proposition, and
I think if we decide to go that route, then we sud prepare to
some time to consider the bill section by seftion There are
provisions witin that bill with which I am in isagreemnt.
I would suggest, Mr. Chairman, that this be considered as the
colirse of action. I do not intend to offer a motion at this time.
The CHAIRIAN. Mr. Wampler.

*:*Mr. WAx Iwould say briefly, Mr. Chairmi, that if iwe take
Senate Joint Rosolution 88 96 the legislative vehicle, then my mind
is till open a to what course of action we shoul take.
Pendin te receipt of the rort of the invt t

might help bridge the gap until such the as we could io i:to greater

.. ..
I favor the continuation of the present system of federally licensed
private and State inspectors.
Ido oppose the complete fedralliation of the system.

ke the gentleman from Minnesota, I have some reservaios about

Senate Joint Resolution 88 but I think it wold help.
The ContiAHNA. Will the gentleman yield?

ing that, rather than proceeding with a markup of one bill, w first
decide, as a policy matter, how the committee wants to proceed from

a ccptual o tandpoint.
That would include deciding whether the committee wanted to move
with permanent legislation or with something of a more temporary

All I am suggesting is that I feel some very broad decision must be
made before we take up one bill or another.
Probably the first question is: Does the committee wish to postpone
consideri more permanent legislation until the results of the investi-

either take u Senate Joint Resolution 88 or one of the other bills and

the Senate probably will postpone acting on. permanent legislation

This belief is reinforced by their action on Senate Joint Resolution
If we were to pursue the markup of permanent legislation, we could
be faced with a parliamentary situation in which the Senate might de-
cine to go to conference until the results of the investigations have
Of course we could still pass a permanent bill but it would probably

not result in fal action until sometime next spring when the investi-

letter to the committee? I do not know whether you have copies avail-
able or not.


Mr. Moos. Mr. Chairmanwe do not have enough copies available
for the members of the committee. Do you want me to read the letter
in its entirety?
The CHAiRKAN. Yes.
Mr. Moos. I might point out that this has not been cleared yet by
MB, nor has it been signed. oes that make any dierence
The CHARMAN. I will read it.
This responds to a request from your staff for our comments on Senate Joint
Resolution 88, the Emergency Grain Standards Amendments of 1975, as passed
by the Senate September 25, 1975.
This Department does not favor enactment of Senate Joint Resolution 88.
We recommend in lieu thereof the enactment of H.R. 9467.
As indicated in the Department's testimony before the Senate Subcommittee
on Foreign Agricultural Policy on June 19, 1975, the Department does not feel
this emergency legislation is necessary.
While we recognize that immediate action must be taken to correct deficiencies
and irregularities in the national grain inspection system, e stronly feel that
any legislation resulting from the extension ongoing investigations, as well as
the hearings of your committee, should give USDA permanent authority. Per-
manent authority is needed in order for the Department to establish an extensive
training program for any revised system for grain inspection.
We believe it would be most difficult to recruit and train competent people on
a 1-year basis to perform inspection or supervisory tasks, particularly when
tenure of employment would be less than 1 year.
Senate Joint Resolution 88 would permanently amend the U.S. Grain Standards
Act to include causing the issuance of false or incorrect certificates under the act
by "deceptive weighing" and falsifying weights of grain shipped in interstate
or foreign commerce as prohibited acts. It also gives the Secretary authority for
1 year to supervise and regulate the weighing and certification of weight of
grain shipped in interstate or foreign commerce and to inspect and test all
weights and scales used for such purpose.
The Secretary would be authorized to enter into cooperative agreements with
the various States for administration of State procedures equivalent to those
prescribed by the Secretary in lieu of enforcing the Federal provisions by
Department employees.
As indicated in our testimony before your committee on September 1975,
we believe it is premature for any recommendations in this area at this time.
The outcome of the GAO study, as well as the Department's finding and recom-
mendations, should provide the basis for future action in this area.
Senate Joint Resolution 88 addresses itself to several of the amendments pro-
posed by the Department in its proposed bill H.R. 9467. Howeer, we feel that
enactment of legislation providing less than permanent authority will not only
subject this Department and the Congress to further criticism, but also could
lead to the further continuation of the deficiencies and irregularities in our
national grain inspection system.
There are several features of S.J. es 88 which are significantly different
than H.R. 9467. These are (1) higher total costs, (2) igher level of Federal and
official inspection agency employment, (3) higher total Federal costs, and (4)
higher total appropriated funds.
The total cost of S.J. Res. 88 is estimated at $49.1 million compared to $30.3
million for H.R. 9467. This compared to $35.7 million for the current grain in-
spection system. Costs for carrying out the provisions of S.J. Res. 88 relating to
weighing and registration constitute almost 60 percent of the higher costs of the
Senate bill.
In terms of total employment, S.J. Res. 88 will require employment of approxi-
mately 3,553 man-years, some 308 Federal employees more than H.R. 9467. The
current system employs 3,069 man-years. Fifty percent of the higher employ-
ment level of S.J. Res. 88 is ttributed to theweighngand registration functions.
S.J. Res. 88 Federal program costs of $19.1 million are more than double those
of H.R. 9467, which are estimated at $9.3 million. Of the $19.1 million .J. Res.
88 Federal program costs, $13.6 million are scheduled to be derived from appro-
priated funds compared to $1.4 million for H.R. 9467. The current system derives
$3.1 million from appropriated funds. Conversely, 85 percent of H.R. 9467 Fed-
eral program costs will be derived from users fees compared to 29 percent for

The Office of Management and Budget advises that e is objection t
the presentaio this repot from the standpoint of the Administration's

That is the Department's position on the bill as far as we know it at
this time.
Mr. THaONEg. Who wrote that?
e. y is not signed, neither is the draft copy.
ass e it ws gned by the Secretary.
Mr. hairman, I am ure that gra inspeion is
being much more prudently handled today than it was 6 or 8 months
The fact of the disclosures has undoubtedly tightened procedures,
whether it be in the hands of Federal employees or federally licensed
private inspectors.
It seems clear t me that a -year bill would be imprudent for sev-
eral reasons. The administration has made a strong case from that
standponit. From our standpoint this would force us to do something
S, or go back to the prior system and let
the emergency bill lapse and goback to the old arrangement.
It would e far better, Iwould think, for us t wait until the studies
are completed with the recommendations in hand, and then deal with
permanent le islation and reform.
Mr. BRGLAND. Would the gentleman yield on that point?
S th that is that is probably going to take until May
or June of next yr to adopt the per nent change in the law. If we
could agree to a versionof Senate Joint Resolution 88, then the De-
artment could proceed toimplement the ew provisions immediately,
and provide the protection which the bill afords.
It would incease the criminal penalties and other things which are
ould gi them leadtime to proeed with the implementation of
thchangeswhichotherwisewould bedelayed for several months.
Mr. FINDLEY. One possible compromise would be to weed out the
extraneous matter and deal only with the criminal penalties but ex-

Mr. BERGLAND. Yu mean the preempting or foreclosing of any
change of any matter ending after we have reeived the reports?
Mr. FINDLEY. No, I would not think it would preclude any change.
The CHAIRMAN. I wonder if the staff would indicate which pro-
visions of the Senate Joint Resolut nt Resoution
88. The second title is the title that provides the Agriculture Depart-
The first title is the title that deals with a change in the laws that
affect criminal penalties for violations of the Grain Standards Act and
for. deceptive weiging. That would be permanent in nature.
The second title is the title which gives the Secretary authority for
Also it would give him authority for 1 year to provide for designa-
tion ofi officialins-ection agencies, and set the standards for desig-

nating oicial inspection agenciesi of private
agencies,asi cified cotifict of interest rules.
is is sretionary with the Secretary under Senate inu-
It also gives interi authority for 1 year to set out edeal
standards for weighing procedures, and for the testing and
of scale s. I
That essentially is the temporary stopgap authorit r 1 r
Title III of the act calls upon theer
a study of the compliance of the predointgraineprters withthe
provisions of the U.S. Grains Staa t a gi t
troller General the authority to have access to books and records that
arecece stu
Some of the language rearding the study is similar to what
Comptroller General i rey th
previously made 'by the chairman this committee, and Sanator
Humphrey of the Senate committee.
But, in that case, the study is supposedto be completd in
and the study that is proded here wold e compleed 1
the enactment of the bill.
Title IV o the bill provides for registration, nd this is a pea
nent feature of the bill. It would provi r egistration
that are engged in grain mercandising and alig igig
or transporti g of grain for sale.
There are certain exceptions here,but te r f te ritti
requirements is that, i if is found at any of those p
engaged in violations of the Grain Standards Act, or cera ci al
provisions, then there would be a u f sbasis r suspending or oking
the registration. In that event they could no longer engage in the
business, as long as the registration ad been revoked r suspended.
The last title of thebil, title V, requires the Secrety of ricul-
ture to make certain re s to Congr es.
One is a continuing requirement regarding complaits at
been made by foreign buyers concerning grain received abroad, f the
Secretar feels hat there is a proper basis fr e
is to be done on a quarterly basis.
Another feature of this bill would require the Secretary to conduct
a study of the grain standards cocerni their adequacy, ad mak
changes that he determined necessary and appropriate to the
standards, and report back to the Congress within mon
enactment of this bill.
Another feature is that the Secretary would coduc su -
cerning the contaminatn and handling of
report back within a year. Similarly there is a rquir t tt he
report back any legislative recommendtions tht he hght have
every 60 days after enactment of this bill, or a 1-ear
That is a brief summary of SenateJoint Resolution 88.
You see that in ece one title gives t S a l
tional authority, but only for 1 year. It not require that he
cise that authority, but that it be discretionary with him.
Then there are provisions which require e e
General, and reports by the Seretay of Agriculture. ee is ~ sb-
stantial chnge made in the crimin earding thviola

ill, there is a provision for registration of grain mehandisrs
Mr. F. Mr. Chairman, t r. omn I w u

itup with the understanding that the term could be extended to 2 or 3
w-' : ..... ..; D a.
y s, then I think that might be all right.

an o a oer vor s Imie-
I thiek the rules would permit that
The CoAmmAi. Any amendment could be ofered as to Senate Joint
Resolution 88. There is no limit on that.

Is there further discussion
Mr. T.e'. Very briefly, Mr. Chairman. As you and I know fromni
the discussion that we had after oaur briefing session yesterday, which

was parley attended and most of the committee meetings were alsoin
add, this is important legislation.
I worked hard on it initially because I was interested in it for agr-
man from Minnesota, Mr. Bergland, sugests that we go with enate

remove what we might feel are extraneous sections, especially

those in the weighine area
seems to hit pretty hard.
If the committee goes with Senate Joint Resolution 88, then $14
million is added to the grain inspection system. Who is oing to pay
for It is ultimately gog to come out of the producer ets and
nowhere else.
Of course, if you go with the federalized program introduced by

thing lke that. l
As Congressman Bedell knows and we just had a discussion on that
feature ven on Neal Smith's bill you would: add costs to the grain
ispection system.
were.go*g to have all kinds of allegations here about how the in-
startle all of us. I have not seen or heard a scintilla of evidence in
I hear it is coming all the time. Congressman Bedel said he had

appropriation bill has gone forth and, as I understand it, there are
Mr. TaON. Will the gentleman yield?

Mr. THONE. I understad the Senate wil not call a conference if
we go on permanent legationWhat are your thoughts on
The CHAImA My view, speaking personally is that there are some
questionable provisions in Senate Joint Resolution 88. It
criminal penalties, for example; but it increases them to corres
with S. 1, which completely rewrites the Fedeal Criminal Code.
We have no assurance at this time that the Congress will adopt
those particular provisions. What we would have is one act lasting
for 1 year which is not consistent with the provisions of the current
Criminal Code of the United States. Under the circumstances, I per-
sonally question the wisdom of our adopting, just for the Grain In-
spection Act, a theory of the revision of the Criminal Code which
the Congress is working on slowly in the Judiciary Committees of
both the House and Senate.
Perhaps it would be wiser to merely increase the present penalties
without introducing new concepts.
Mr. THOME. Mr. Chairman, we could easily changet misde-
meanors to felonies. I think everybody agrees that the penalty sec-
tions of the Grain Standards Act are woefully weak.
But, it does seem to me that we are flying blind in many areas here.
Is there any way, Mr. Chairman-and I even hesitate to suggest
this, but it worked out quite well last year andyou participated in t-
of having some sort of blue ribbon committee of five or seven, or what-
ever, members of this committee sit down and try to work out some-
thing here so that we would have something to go by?
I think you are going to get into much legislative confusion here
without more direction.
Mr. BEDELL. Will the gentleman yield
Mr. THONE. Yes; I will yield.
Mr. BEDELL. I have no great argument with your stament, but I
do not think it was clearly shown in the committee consideration that
necessarily these other methods would be more costly
At least it was argued in that regard, andMr. Smith felt that his
bill would not increase the cost.
Whether he was right or wrong, I am not sure.
Mr. THOE. I have Mr. Smith's statement right here. l e concedes
that, if you adopt the Federal and State system which is the thrst
of his bill, then the cost would be about $40 million.
Sure, there is some shuffling about as to who is oing to pay it, but
he is saying that they are going take it out of the private sector
and totally put it in the governmental sector. This is no right or
Mr. BERGAND. Wuld it be in order to move that we take from
the Clerk's desk Senate Joint Resolution 88 and proceed to consider
that for markup ?
The CHATMAN. That motion would be in order; yes.
Mr. FINmLY. Mr. Chairman, could I offer a substitute to the
The CHA~AN. The motion has not been made yet.
Mr. BERGLAND. I move the committee take Senate Joint Resolution
Mr. THONE. Mr. Chairman, until we make some sense out of this,
we do not have a quorum and I must reluctantly object to the motion


on that basis. I would like to visit with you about this. I feel strongly
about this.
Mr. BGND. If th gentleman would withhold his objection, I
might explain briefly.
I agree with you tat we have nine bills which are highly tech-
nical and complicated. We really do not know exactly what we are
talkng about in that we do not have the benefit of the investigation
that is currently underway.
I hear the rumors about somethin that is going to explode soon in
Illinois or Missouri or some other place. I do not know if it will or
not. I think we ought to buy some time. I do think, Mr. Thone, we
should move now to meet some of the problems that have arisen. I
think we need the passage of a 1-year proposition.
Mr. THONE. I am not totally objecting to that.
ow about a compromise then? How about moving that Senate
Joint Resolution 88 be moved to a subcommittee and let the subcom-
mittee get together again Th Senate bill was reported out, I guess,
last week. I did not see it until yesterday. There are some parts of it
that appeal to me; sme are terrible.
Mr. BE Ido not claim Senate Joint Resolution 88 to be the
gospel. There are elements with which I disagree, but I am looking
for a workhrse so w can proceed and expedite the business.
The CAMA. I have a suggestion since we do not have a quorum
It is now 10 s to 12. The Chair would sugest that we adjourn
the committee at this time and meet again at 10 a.m. tomorrow for the
pof receiving the gentleman from Minnesota's motion and any
subitutes oramendments thereto. At that time we could make the
initial determination of how to proceed in the consideration of this
f thre is no bjection to that procedure, in the absence of a quorum
at the resent time, the Committee on Agriculture will stand ad-
1journed t meet at 10 a.m. tomorrow morning.
1Whereupon at 11: 50 a.m., the committee adjourned.]


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dCo 1rrmr o j v*. o, m vto,
Washtington, D.C.
he crmittee.m a notie, in room 13 01

Longworth House Office Building, Hon. Thomas S. Foley (chairman)
presdi ng.
Present: Representativ es Poage, d la Garza Vigorito, Jones f

reckinridg, Nolan, h e ver Baldus, Krebs ihtower, Bedell,
Also present: Mr. David Galliart, diecoGrainDivio

TheC The Committee on Agriculture will come too
Mr. BERGLAND. Mr. Chairman. .1,

that a quorum is not present and I would urge the names of the absen-

Th. IRMAN. The gentleman from Minnesota makes the point of
orr t a quorum is not present.

[The rollcall follows :]
lina, Joes of Tennessee, Bergland,. Brown, Bowen Brekinridge,

Balus, Krebs, HightowtxBedell, McHugh, Fithian, Jenrette, Thone,

The CiUmmxw. Will the. Clerk please repeat the count'once,

TheCAMAN. The is not counting or is she?

The' CHAman Them being 20'Members- present a quorum, i8 iot!

Mr. BED'ELL. Mr. Chairman.
ThCIs the a, motion to adjourn because a quorum is not


Thank you, Mr. Bedell. The gavel has not yet fallen, so we are not
I note the entry of Mr. Madigan. There are now 21 Members present,
and this constitutes a quorum.
The Chair wishes to announce that, beginning on the fourth of
November, all meetings of the committee will b led to rder at the
appointed time.
Under normal circumstances, this will be 10 a.m. No later than 10
minutes after the appointed time of the meeting, the Chair will recog-
nize a member of the committee for the pupose of requesting a quorum
This procedure, of course, will not be required in the event that a
quorum is present prior to that time.
If a quorum is not present, then the Chair will recognize any member
of the committee who wishes to offer a motion to adjourn.
I hope that we can cooperate in this new procedure. The air is
concerned that members who come at the appointed hour, members of
the press, members of Government agencies, and private parties wih-
ing to observe the committee's activities, are inconvenienced when the
committee has to wait for 40 minutes to establish a quorum.
So, beginning on November 4, at 10 inutes after 10 a..,he
will recognize someone' for thepurpose f having this quorum call.
I expect that this probably will result in a number of times when
the committee will not be able to meet because of a lack of quorum.
Members who are punctual are rightfully complaining about long
delays in getting down to business.
Is there any objection to that proposal ? Is there any discussion of it ?
Mr. BERGLAND. Mr. Chatir mn.
The CHAIRMAN. Mr. Bergland.
Mr. Bi~GLAND. Mr. Chairman, I think that it is a great idea and I
would hope that this will be communicated to the absentees this
I want them to understand the rule.
The CH AIRMAN. It will be sent by memorandum to all members
of the committee.
At this juncture, we will resume consideration of the grain
standards legislation.
The initial decisions of which bill or bills to take up and use as our
main point of focus and what procedures shall be followed are our
primary consideration at this time. On the one hand, there issome opn-
ion on the committee that we should proceed with temporary legisla
tion, Senate Joint Resolution 88.
On the other hand, there are members of the committee who feel we
ought to move directly to permanent legislation, despite the fact that
the Senate is determined to await the conclusion of investigatiois now
in progress. As I mentioned, this brings the likelihood of a joint confer-
ence into doubt. Further, if we cannot assure the Rules Committee that
legislation could be enacted in final form during this session of Con-
gress, then we might have some difficulty in getting a rule or an exemp-
tion from the November 4 cutoff date.
One proposal that has been advanced is that we proceed with the
markup of a permanent bill. Then, if the committee so desired, we
could later extract certain provisions in the form of a temporary bill


hood of a conference with the Senate. I
The advantage of this rocedure is that, by taking permanent legis
lation throu thecommittee we would make clear to the industry and

nent changes should be made, even if they could not be implemented in

Some of us share the concern that temporary legislation might
severely disrupt the industry for a number of reasons. In the first place,
there might be a great deal of reluctance to implement new procedure
when a year later they may be changed completely or the private sector
might be phased out altogether. Then too, we must take into considera-
tion the fairness of having people live with such uncertainty for a year
or more.
We have proposals before us to strengthen the present system while
retaining private inspection, proposals for an entirely Federal system,
and proposals for a mix of Federal and State inspection.
Finally, we have a bill calling for Federal or public inspection at
Ithe port ports and retaining, w*ith increased supervision, private

There is, then, a great range of possible approaches which could
be incorporated into permanent legislation.

it would willing to go forward with the markup of permanent

h byond the reporting of the bill by the committee in this session

Then, we would make a judgment as to whether elements of that
permaent bill or a separate temporary bill, might be framed and
reported by the committee.
Mr. B88r|A" Mrar Chairman.
The, CHYAMAI. Mr. eroglan..
Mr. BRA Thank you, Mr. Chairman. When the committee
adourned just yesterday, I moved that we take from the Clerk's desk
a Sea~te-passed bill, Senate Joint Resolution 88, and have this bill read
and be open to, amendment at any point.
1 think that the wisdom of the chairman has been noted by this
member and others in that if we were to defer action on permanent
legislation and take up a temporary bill, it could lead to considerable

bill. Mr. Chairman, do, however, believe that it woul beincumbent
upon us to report a bill that would be comparable to the S.J. Res. 88.

The hammer may fall at any moment on any pbrt. The Justice

in ny port nd shut it down.
The Secretary has no authority to move in witdire inspection.

may hapipeti# the ensuIing days.

Pleas -of guilty. eneivable that'a port could be completel
closed up.
79-028--76 --2

therefore, think that we ought to report a bill that d o to
the Senate for conference to
currently lacking in l4v
Thue C A-. Thank you, Mr. Berglandf e. 1
the committee approves of this approac. If so, e must then decide
with which of the various pend bills or conpt the
wishes to, proceed.
Mr. Fr;rANv. Mr. Chairman.
The CHARMAN. Mr. Fithian.

We have been, involved in this for some time now. I ve had
*. you, Mr. m +
my st r y ri L:' lm-, 1

correspondence back and forth with the White House

about it.

I think that, give the nature of the mebeship of this ittee,
it is going to take some time to argue
on whether to go: wit Federal inspection system, or
and State inspection system, or some othr al ter
So, I think that w- ought to get on with the busines thrashing
out where this committee stands. We- have that responsibility to the
people who elected us.
I know that the GA isgoing to b ding things and investigators
are going to be reporting prior to additional legislan.,
We can keep that in, mind. If, howbovr, wewait until that is all
done, and then take up the m r a t h th log pross
that we are bound to get into when we try r
selves in what direction we should go, tn wwiiy
a decision on this very important matte.
This would be ver t ea ar
I think that we would do well aa committee to start theprocess
debate and discussion a the earliet possible moment, knowing full.
well that we cannot be definiti. r
n ay event, these philosophical arguments and discussions have
to take place. It is my positio that shoulde doing that now.
Further, I concur with the gentleman from Minnesota. I feel that
if it is necessary to pull out two or the things we can ag
Upon, along the, way because of emergcy situations, then that is
But the basic discussion must take place in this committee.
The mAN. Is there any further disussion o the approach
that has been outlined ?
rNo' response.]
+The CmARMAN All thiose Members who favor proceeding along
that line, please raise your right hand. i
[Show of han"ds.
The CAmA. This is jst i a straw vo t
Are there any opposed? We will, ;then f l tt p er
t seemsto me hath nt question ihow we proced toesole
m th t within the nine dierentbills before us.
T~1~~B ~t~ ~ ~~~~ ~ ~
~;li~?~-io~8-;ta~;;-ta~zU~ie~t ~9~~~ j

We cooose any one othe pending bills and begin to mark
thiat up, or we could make some initial judgments as what type of
Once this has been determined we coulre
eftively on one bill or another v m up
It was always the Ch iothought that we should, not report any
Su tly t the floor but rather ouleither
work from a coor, having marked up a prtilar bll

In this way, we could allow for ponsorship from any committee
wmembes. who wisk this. We would then report that billtothe foor.
The question of authorship, is noti involved, at least as far as the
Chair is concerned.

The M mAN. Mr. Bergland.
Mr. Thank you, Mr. Chairman. I have a parliam ry

Wi the ru of the committee ermit th commtte to consider
the various matters by topi area rather than tAo take a bill and attempt
to amend or wark up that particular vehicle itself ?,
ThebArAn. es, we have doe that in t past. I think that
approach has worked rather efectively in areas such as this where
are philosophical and legislative co
a number of bills.
In this way, when the committee's broad-outlined judgment is
print can be prepared to rflec that policy
judgment in legislative language. Once this is done, we can then
proceed to amend or adopt that legislative language, as the committee
sees fit.
the committee take the catalog tat has been prepared by the staff
I amrering tothe one which has.the title inspection authority"

six, seven pages i length.
The Cm. Is it the material that starts out "issue" on the
left-band column?
.. No, sr, it is the tt has th w s ns -
tion authority" and "registration" on the left-hand side, and across
andSenate Joint Resolu

ntlmn om Minnes referring .
It isabout six or seven pages, Tong and, sa-, "inspection authority"
on the left-hand side of the first page and "registration" on the second.
hi i~ a suci iying what the saf considers to be
Il .; : *
,r ~tyr~


If there is no objection, the Chair would propose that we proceed
with Mr. Bergland's suggestion. Let us use this staff document as a
catalog of the topics for discussion, unless there is some objection?
Mr. HIGHTOWER. Mr. Chairman.
The CHAIRMAN. Mr. Hightower.
Mr.. HIGHTOWER. Thank you, Mr. Chairman.
In briefly reviewing these issues, is it possible that there may be
some that we will have very little disagreement on?
Could we perhaps consider a different arrangement that the one
that is outlined in this staff document?
Or should we proceed in the order that they have cataloged?
The CHAIRMAN. The Chair would be glad to have any suggestions
that members would like to make.
I do not know that there is any particular topic here that is totally
noncontroversial. / *
Probably, the most central of all of these issues, however, is that
of inspection authority since all other issues hinge on that.
If, as a committee, we decide to retain private inspection author-
ity, some of the issues are influenced by that decision.
If, on the other hand, we follow Mr. Mezvinsky's proposal of all-
Federal inspection, we no longer have the problem of setting stand-
ards for private inspectors or licensing private inspection agencies.
Mr. BEDELL. Mr. Chairman.
The CHAIRMAN. Mr. Bedell.
Mr. BEDELL. Thank you, Mr. Chairman.
If we go through these items, then will the staff or someone pre-
pare a bill which can be taken up with amendments or changes
The CHAIRMAN. Yes; as I just said, that could be done once some
preliminary decisions have been made.
I would, however, like to point out that no member need consider
himself permanently bound to a position.
When we begin considering amendments to a proposed bill, mem-
bers may certainly vote any way they see fit.
The purpose of the initial discussion would be simply to provide
some guidance as to what policy the committee intends to pursue.
After those decisions are made, we can have a committee print pre-
pared for use as a working document.
After the preliminary markup is concluded on the working draft
if the committee wishes, it could be introduced in bill form and
brought back for final action.
Mr. BERGLAND. Mr. Chairman.
The CHAIRMAN. Mr. rBergland.
Mr. BERGLAND. I have a parliamentary inquiry, Mr. Chairman.
The CHAIRMAN. Proceed.
Mr. BERGLAND. As we proceed with this conceptual markup, and
we arrive at decisions on, for example, the first issue, inspection au-
thority, will that decision be placed upon the record in the form of
a recorded vote?'
Would it be a straw vote? How is that handled?
The CHAIRMAN. The Chair does not feel that it is technically pos-
sible to bind members until a bill is before the committee in final form.
The whole process of making policy judgment i in effect, a straw

cate the general will of the committee.

Sd d hwever, we couldhave roall es

As you indicate, the inspection authority aspect i vitally impor-
t thw e roeed.
I am thking out loud with you on this. Just to narrow the range
at we ve, would it~ be in order to move at this time for rejection
of the all-Federal proposal envisioped by the Mezvinsky bill?
The. I think it would be in order; but before the ge
eman suggests that, et me add one other thing.
If a vote is very close, and let us say we have 1 members favor
ing one approach and 11 members favoring another one, we may want

sections under each heading.

Mr. F LA.. Caima
The CHrANx. Mr. Fithian.
Mr. FITHIAN. Thank you, Mr. Chairman.
Sobserve something at this time. I have no obj n to
Mr. Thone proceeding with his motion. It would, of course, mean
that u e centr issue st This would e inspection

We are all agreed, I think, that that is the central issue.
Earlier, we were casting about for possible areas of agreement. I
would suggest that the conflicts of interest section and the penalty
section may be shaded slightly one way or the other, but these are
not really controversial or central issues.
Sonly estion is whether we would proceed with Mr. Thone's
motion, whih would have us take up the most controversial issue or
wether it should be' the other way around.
TheCHAIERMAN. Will the gentleman yield?

The CHAIRMAN. Te conflilct of interest provisions become unneces-
sary if you have an all-Federal inspection system. Because the admin-
istration's proposal retains private inspection authority, however,

r r rofthe prate setr. re

be possible with a Federal agency.


of interest provision and then adopt a Federal inspection system, we
will have wasted our time.el

Mr. H HTWER. Mr. Chairman.. .
Mr. HIGHTOWER. Thank you, Mr. Chairman.
n lie with Mr. one's motion, I would suggest that we mo
along with this r I would suggest hat we make se st
judgments for the purpose of getting a arkup bi.
Then I would suggest that, when the up bill ibefo s, we
can proceed more in depth along wit the a me pcess.
The CHAIRMAN. What we will be dealing with initially, ifthe com-
mittee agrees, are basic concepts suh as the basic uthority
and with whom it lies.
The exact legislative wording will be handled in the committee
print; n nc hi is aile, y membe ntnend-
ments may do so.
Our preliminary work will serve as a kind of roadmap to the sta
in developxing a committee print.
Mr. BEDiEL. Mr. Chairman.
'he CH AN. Alr. B ell.
Mr. BEDELL. Thank you, Mr. Chairman.
I certainly do not intend to d this, but, if we were to have straw
vote here and rejected the Federal inspection issue, would it then
preclude a member, if he wishes to do so, from ofering an amendi ent
that would call for all-Federal inspection?
The CHAIRMAN. You might find it all the more dificult to win sup-
port for such an amendment, but you certainly have every rightto
introduce it.
I want to again stress that nothing in a straw vote binds any me-
ber. Each of you can change your mind, move around, or entirely re-
verse your position.
Mr. Thone suggests that we proceed on the inspection authority by
jecting the concept of "all-Federal".
Is there any discussion on that ?
Mr. BRowN. Mr. Chairman.
The CHAIRMAN. Mr. Brown.
Mr. BRowN. Thank you, Mr. Chairman.
If we are going to discuss that now, then I would like to be recg-
The CHAIRMAN. The gentleman from California is rec zed.
Mr. BRowN. I am no1 t an expert a all in this field. The re my
comments tend to reflect philosophical consideratins rather
knowledge of the subject matter.
I hope the committee will udertand that I make these remrks
only because I think that it miht be assumed from y general polit-
ical foloration that I might support all-Federal inspection
I do not.
I think it would be unwise to continue to expand what will be polit-
ically described as the Federal bureaucracy into any moe areas tan
is absoutely mandad by urgen ational Reeds.
While I recognize the importance of this area. I do not think that
it mandates a further, and rather eteinsive. expansion of ~he Federal
bureauqracy in order o achieve a significant goa
My posture, therefore. will be to support what perhaps cold be
described as a mixed system.

inspection procedures with only sufficient Federal involvement to
in'e. theintegrityoftheapstem.
I do n know and could not define for you what tht of

Oit there be e Federal supervisory role.
o hve nade in past or ese we w ld not
have had the frauds which have developed.

system with a minimum degree of Federal supervisory involvement.

The C MAN. Mr. Baldus.
Mr. BA Thank you, r. Chairan.,,
My question is this: Earlier Mr. Bergland raised the point that we
might proceed, using a a onide on, e Jo
lution 88. Is that the Chairs n will elp the

The oAnoAN. sirT, that wasnotour intention.
As I understand it, the committee's intention is, rath, t proceed
with the markup of a permanent bill. Then we might consider pos-
sible temporary legislation consistent with that.
|Mr. BA ThankB dui.
Mr. THaON.E. Mr. Chairman.
|The CHAMANu. Mr. Thone.

SI thin his comas are ound indeed. i
Yesterday, we were advised at the briefng session over at the Capi-

TheMAN. The staff advises at the actual figure is $5
aillion and is incorporated into the appropriation bill for Agricul-
ture. Half of this amount provides training funds for Federal inspec-
to strengthen the system.
Mr. T Well good This was surely needed.

It makes the. ase Mr. Brown made stronger, and I would like to
A jut did ot have te personnel and adequate funds to do the
b 0
LOItS hoe that wll bi e taken care of. I wil now get into federali-
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l~l~l^BhffI IB* | V flif~ ly -.^ 1R^IB fy^^ C* ai* E'I^Nr *fcj~ I'l ~yr~lt'Q I CST ki'^1!"! Ijiiiii^Mhilniid
A X^ IAlllJ iC 51j lJU -y^ 'OU^i ff ,r~ &t tI o" Id t


pretty strong consensus here that we do not want to g
As Mr. Brown indicates, we do want to y with the Federal, State,
and private system.
In your area of Los Angeles, Mr. Brown, the staff just gv m
some information regarding the Federal meat inspection system.
Some people think that by turning this over to Federal inspection,
all problems will be solved.
Well, that has been turned over to them, and in recent months there
have been 15 meat graders indicted in the Los Angeles area.
There were 40 criminal work-related wrongdo by Fed meat
inspectors in the Boston area, not too long ago. Just to make them
Federal employees will not do it.. i
And, who is going to inspect the Federal inspectors
To overreact in this whole field, as H.R. 84 most certainly does,
would be a real step backward.
I have a lot more to say, but I do not think that it is nes un-
less somebody has some questions.
Mr. BRow-. Will the gentleman yield?
Mr. THONE. I certainly would.
Mr. BRowN. If I may elaborate for a moment on the reasons fo my
own conclusions that I very briefly described, I ouldmake the fol-
lowing observations.
I think it would rest upon the very facts that the gentleman cited
that there is no panacea which insures that a Federal inspector, or a
State inspector, or a private inspector, will necessarily be honest and
full of integrity at all.
In each of these situations, there is or there are forces which are
sometimes wholly innocuous which can lead to a distortion.
I am speaking about forces other than the susceptibility to outright
bribes, which, of course, occur with Federal, Ste. local or private
employees, if the bribe is sufficient and integrity is lacking.
It not only happens with people in this business, but it also ens
with bankers or preachers or almost anybody else, as well.
There is no solution to that other than developing a greater sense of
Aside from that type of corruption, there is a corruption which
arises within an institution to protect the role of that institution, and
to maintain one's own job security, and a number of other motives,
which can lead to a distortion of the activities of that particular indi-
vidual or the institution of which he is a part, be it private or public.
In searching for ways to overcome these institutional problems, I
have found that, in my mind. there is no adequate solution until we
have a larger number of people committed to certain basc indivial
values of honesty and integrity and so forth.
This does not come from legislation.
Hence, I have reached these conclusions. It still leaves unanswer a
fundamental problem. How do we achieve a basic elevation in morality
or a basic elevation in what you might call a sense of stewardship for
the public welfare ?
This is very hard to inculcate in individuals or institutions. This is
because we all perceive what we are doing as embodied with a sense of


i the u wefare whether it is or is not, if it onlbe
conducive to our own person al welfare.
This goal is one that I do not know how to achieve. I do not intend
to belabor it re because it is more hilosophial than pragmatic.
Mr. Ti oN. In conclusion, Mr. Chairman, the Assistant Secretary
ified that the cost of this total Federal grain inspection system
would be about $60.8 million.
It w l, further, involve te employment of a Federal staff of ap-
proximately 3,200 additional persons.
Mr. Chair n, unless there are further questions, I would move the
previous question.
SThe CAIRMA. Are there any members who wish to comment on
this ?
Mr. F nTHIA. Mr. Chairman.
I T CHAmMA Mr. Fithian.
Mr. F mrri. Thank you, Mr. Chairman.
As a cosponsor of the Smith bill, I am not now going~toproceed to
argue for the Mezvinsky concept of all-Federal inspectors.
I would observe that during our hearings several members of the
commite see d to be of the blief that we could at least minimize
the t ta upon the individua if, in the case of export trade, and
i re we have an inspection which for whatever reason
s s y for one grain corporaio, then I think it is lear to most
people th this increases the temptation.
If your team works entirely for one grain company, then the temp-
tation isf your only lint must be considerably increased.
re, i this I would not want philosophy that
hasst d ed to> prevail to the point where we would finally
thatamixed system of Federal and State inpection ar-
ang ns ould n in.any y improve the sittion that we now
e. I believe that this will.
STheCHAiMAN. Will the gentleman yield i
Mr. Firrai Yes; I will yield.
TheCHAIRAN I think that it should be clear by now that what
we are about to determine is whether we intend to ate, at
consideration, all-Federal system.
Mr. Frrm N. I understand that. .
Th that avoa ed system, an -private sys-
tem, a system of Federal inspection at the ports, and private inspection
apoints, or publ inspection at these points could all be ex-
pected to vote "aye."
Sw w b v who want to continue
ni F rl T is the iport of Mr. Thone's

Mr. FrrnaA. I understand that and I expect to take that up.
TheAN. Explanations do not affect the otcoe here.
Mr. Fman. I understand that and intend to support Mr. Thone's
motion. I just did not want to see a momentum created in the com-
mittee that would take us to the point where we would say, "Well,
changing and puting more Federal inspectors into the game will not
The ultimate conclusion of the Thone position could well be, "Well,
HEW'~ ~~ ~ ~~~~~~i""" "Wlll iIiiI 9^1^1|l:1!li<~~ '* s' '^'
ww sr *--- gjaBI uii--il fi ^ : *""* ~ '^W s,^ ^ JB@ # ft P .E'U *m E. LV-S M Xm uiS^ "s" w i"'

I would not want toQ siippdrt it, if that were to be the sitution.
The CHAIRMAN. Will the gentl n yid frt
Mr. FITHIAN. 1s :V
The CHAIRMA. Ithink that it should be pointed out that the admin-
istration bill and somQIe of the others anticipate, at least in certain cir-
cumstances, original Federal inspection.
We are not dealing with that in the quti Mr.h has i
Mr THONE. I wuld like to remphasize that, Mr. Chairman. Iay
that by going all-Federal, we are tng in gitive o
its worst. We ough to dispose of that proposal quickly.
The CHAIRMAN. Very well. If there is not other comme, tn
could have a straw vote.
We are not going to record members individually.
How many members would favor putting asde, fr the puof
drafting the committee print, the concept of universal Federal and
sole Federal inspection?
[Show of hands.]
I think the eeling of the cmmittee is clear in this and we can now
We will now turn our attention to thesocalled public system. This
is pretty much the concept of the bill known as the Smith bil
When we say public inspection, we mean either State or Federal.
The Sith bill would retain authority to the States to conduct l
inspections under Federal certification and/or diret F
I will read the brief description. It provides for Federal inspection
but authorizes the Secretary of Agriculture to designate State agency
to provide service and impose Fderl standas. Itls at it
for private inspections. It bans State gcies export
a anmandates ins ion by USDA officials of all export gran.
Mr. POAGE. Mr. Chairman.
The CHAIRMAN. Mr. Poage.
Mr. POAGE. Thank you, Mr. Chairman.
I just do not see how we can deny a Stt the right to have an inspec-
tion system in its own State if it wants to do that.
We can provide that that inspection will not be valid ptor
poses of export or something of that kind, abt we just t
State theright to inspect grain within its own boundaries, a as
I know.
Mr ERGLAD. Mr. Chairman, will the gentemn from Txa
Mr. POAGE. Yes.
Mr. BERGLAND. Under current law, if a State has, operating within
that State, private agencies, does the Federal law preempt thetat
and disallow them the right to take the service over ?
In other words, the State of North kota, for example, has private
inspection firms, is theerral prohibition against the Stat of
North Dakota taking over that service, if the State legislature should
so desire?
The CHAIRMAN. Although I do not know of any State that has
done this, I do not think there is any specific prohibition, p
the Department would like to comment.
Mr. Galliart, of the USDA. We have no prohibition from State
doing that.

s da, est .kmo of aly i
Mr. GAITAN. NIt is not a monopoly
The a"Nt. ThaM, r. C ha e are no States tt he
taken r 3 the enti fu ian'

I a peohig o inspectinggrain within the entire Stat.
Myhreord-i shmsA that there am 23 t that hafve itspection

iTheCAIMAN. It is not a monopoly The State ope inspection

seivise.i p smch States.ra1ioois, bu all dUt exclusively control

Aretahtre 23 Sats that this thea
The CAIRMAN. They do some form of inspection, yes.

agencies toseverate, as such.
State agencies to conduct Federal inspection.

providing inspection services under direct Federal regulations and

I think that it might be useful to define various levels ands points
1;(8~ ,, .~%
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is~i ^ '& it li-~ I1 IC fl, I"-"t*M-i '' *is 't', ""'""! f"M w i .,sf Ii ^ "Js "f s| ^ "p "s "? T


Mr. GALLIAP. PleasPe tel me what it Is that you want to have
The CHAIMAN. Would the staff and the p i
Mr. Baldus an answer to his question :
Mr. BALDUS. I will repeat it. Just so that the
members would have a clear definition ofwhere the points are, I wo
like toas this Thereis anorigial pot w e the fa er
grain to the elevator o or. That is perhaps the end of his concr
with the grain.
There is inspection there and there is a weight given there and there
is a sampling of moisture taken there, and so frt. He gets a grade.
What are the other points that we are ered wi I ask this
so that we can find out what kind of inspection systems there t
be at different points.
Mr. GALLIART. You can have inspection at the elevator point. It is
usually not official, but performed by the operator of the elevator.
Mr. BALDUS. So, there is a question of trust between operator
and the producer.
I note that they use mechanical equipment for testing.
Mr. GALLIART. Yes; they use moisture meters d other of
Mr. BALDUS. They sometimes take a weight sample nd decide how
much is extraneous or foreign material as wel.
Mr. GALIART. That is correct.
Mr. BALDUS. Depending upon what type of commodity we are talk-
ing about.
Mr. GALLIART. Ye. This is is unofficial. It is usually performed by
the country elevator operator.
Mr. BALDUS. Are there some States or some places where ere is
a more formal system ?
Mr. GALLIART. Some of the larger country elevator operators pro-
vide for official inspection. Usually it is a matter of where the inspec-
tion agency is located.
If it is close, they will call for an inspection official to come and
do it. The elevator operator does not conduct an official inspection.
Mr. BALDUS. Do you mean by "official" a State or Federal ency
I mean not one of the two parties involved.
Mr. GALLIART. Yes that is it.
Mr. BALDUS. Mr. Chairman, may I pursue this question ?
Mr. GALLIART. Did you say Federal ?
Mr. BALDUS. I asked if that was one of them, and you said, "no."
Mr. BEDELL. Will the gentleman yield?
Mr. BALDTS. Yes.
Mr. BEDELL. Are you talking about grain that is delivered by the
farmer to the elevator or grain that is shipped?
Mr. BALDUS. At this point I am talking about the point of delivery
from the farmer to the elevator.
Mr. BEDELL. OK, let us keep those separate, because I think that
they are different.
Mr. BALDUS. I arree. Would you please continue, Mr. Galliart.
Mr. GATLLIART. The country elevator operator is the next step in
the line. After the grain leaves him, it goes to a subterminal.

inal and a subterminal. e generally agree that the subterminal is

These subterminals accumulate grain from farmers and from coun-

r. B us. I Minneapolis, ores Moines, C in this

eV r

.."" .. I Y f . . . ... ; .. .....
cMr. GA TART. SOmething leSs tlhan Minneapolis, perhaps. I would

I would say that Minneapolis is a terminal port,
Mr. B DUS.^ What about Mancato
r. GA ART. That depends, of cote ize of the elevator,

It might be 1 or 11/2 million bushel elevator. It is difficult to define
a subte al on the basiof sie. As a matter of fa it is detemined
miiiore by location than by size.
It is a matter of gathering grain from the country elevator oper-
ators or from the farmer. At that point, at the subterminal point, it
is a mix as to whether or not they utilize an oficial inspection agency.
Many official inspection agencies send samplers to grain elevators.
The grain is sample d delivered to the official inspection agency for
Mr. BArDus. Ae we talkig about the elevator operator now? I
mean the country elevator operator who deals with the major firms,
one ol which is Cargill, which might be making a market in the

Is that the deal btween tothat we are talking about?
M~r. CALMART. Yes, Cargill would request the mspection because

Mr. BALus. The major company would then be the one who requests

r. BALD. So that they could know somnihing about the Quait

are talking about carload lots. by this time?
Mr. GALLIART. YeS; it is quality controlled.
But I should not mislead you into thinkinw that girain goes from.
the country elevator to the subterminal and then to the terminal. It is
a mix of this.
You will find that grain can o from- a country elevator to a sub-

the grai.n and theParticulars of the situation.

Mr. GAT.T.TAT Yes.; it could.
AfMr. BAUS. I see.

Mr. GALLIART. That iurse there re very many varia-
tions of -this. If 7the termina point is in Peoriu, for instance, there
is a river close by.
The grain would ileave the terminal point and go downriver. The
same thing is applicable in Kansas City or Omaha. There th
is gathered at a terminapoint, and, in many in ces put on a barge
and shipped downriver to an export termi.
Mr. BALDUS. La Crose is hat way, too, and that is the ason tt
I mentioned it.
Now I will yieldto Mr. Bedell.
Mr. BEDELL. Thank you. It can go directly from the elevator to a
port fciity, an it not? This happens very regularly in my area.
Mr. BEDEL. In fact, they load grain trains to go to the
Mr. BALDUS. Trains
Mr. BEDExL. Correct. Please correct me if I am wrong, but it is my
understanding that this depends upon the cotract arrage s be-
tween the buyer and the seller. If the buyer wants to, then he can
request a certified inspection of that grain.
.e might accept the inection by the seller. The contract can say
that whatever the inspection at the shipper point shows is going
to be the grade for which payment will be made.
Is that correct?
Mr. GAL~MRT. Yes; that is. That is one variatio ).f contracting.
Mr. BALDUS. Are we talking about just point of arrval?
Mr. BEDELL. No, I am talking about point of shipment. It depends
upon the contract. The contract can say that it depends upon the grade
at the point of arrival or it can say that it will be paid acordig to tthe
grade at the point of shipment, as well.
Mr. BALDUS. Are not many of those contracts, oral ontrcts sh
as over the telephone and so forth?
MIr. BEDELL. Will the gentleman from the Deparment please -
ment on that.
Mr. GALLTART. I think so, but I am not sure that I can answer that
with any definitiveness.
I am not an expert on that. I think that much trading is done by
Mr. BALDUS. I see.
Mr. GATLIART. Many times the grain can flow from the country ele-
vator to the port. There are some large hopper car units of 50 to 100
cars which are loaded at the country elevator or at several of them.
Then, from there, they go down to tie ports s aone unit. That does
not mean that you load 00 unit trains from 1 country elevator. They
mi{Tht accumulate grain from several (f them.
Mr. MAplGAN. Mr. Chairman.
The C(IATRMAiN. 1.Mr.1 adg an.
Mr. MADIGAN. I would like to make a point here. There are some
parts of the country where the size of the farms are arge and ~~i
grain farmers today are increasing the on-farm storae which ives


him the poasibility of selling .directly to one of the big grain

oil *]d.... ldi iyfe i su.mtoaba .

IMr. BAe. The inspection of the grain and the agreement upon
quality and moisture content and so rth would be the same, however.
It would be a matter of trut betwn t buyer and th sellr.
Any inspection system would be supplied at that point, is that not
correct? 9
M. Yes; but if there were to be meaningful inspection
there, it would have to take place on the farm.
B s. Or at the dliery point.Areyou saying that itis
mixed in the delivery in such a way that there w-ould be no way to in-
s ct it at the point of delivery?
Mr. M. No; I m sying that it could beinpected at the oint
o delivey to the barge if there were somebody there to do that.
A farmer's 50 tons of grain could be going onto a barge of50 tons

Mr. BAura. When it goes on the barge

gtain in the plce that I am from. We have sold some grain sorghum
not been involved in these heay ran deals.
I do not understand, from at we are being old, just what this
inspection is going to mean or how it means anything.
If the trade buys without regard to inspection, then what diference
does it. malm and can we sit here and should we sit here and deliber-

one will ship them to him ?i,
It seems to me that what you are telling us is that once a shipment of

to Tokyo or Rome or wherever it is gog.
Say that he er bs on the bsis of te ity and qn antity

to the buyr wpphat was shped

pst~on the Main -atthe time it warishipped. I think-that this is what
Mr. BEDELL,. Will the gentleman yield?
Mr. POAGE. Certainly.

Mr. BEDELL. I certainly did not mean to imply that at all. Those
contracts are origin grade. It can be that the grade be deterned
the point of shipment and be epitered into the contract, or the grade
can be determined at the point of delivery.
Mr. POAGE. Yes; I am sure that it could be, but you are telling me,
I understand it, that the practice of the trade is to accept the grade
that existed at the time of the ship ent.
.Is that now what you hae just told us?
Mr. GALLIART. It can happen that way.
Mr. POAGE. Is that not what the gentleman from the Department
has just told us ?
Mr. GALLIART. It can happen that way. If there is an agreement
between buyer and seller that he will accept No.. 2 Yellow corn
Mr. POAGE. I know that. I know I could take the corn green if I
want to. I could agree that I would take it on th stalk. I could accept
it as needing to be harvested, too.
I could, of course, agree to any or all of thse things, but do not
think that we have any right to deny these people theright to agree
to those things.
However, the practice of the trade is tremendously important, it
seems to me. If the grain trade practice is to accet somebody's certifi-
cate at the point of origin then what difference does it make about
inspection at the port? What difference does anything else make if I
have bought something and I have agreed to accept whatever brand
you put on it at the point of origin.
The volume that you claim you loaded at the point of origin is wat
I have agreed to accept. I have agreed to all of that. I have got to take
it, under those terms and conditions, as I see it.
Mr. BADUS. Will the gentleman yield?
Mr. POAGE. Yes.
Mr. BALDUS. The difference is that if you are talking to each other
on the phone and you say, "I am delivering to you No. 2 Yellow," and
what you get is No. 3 Yellow, then there is a breach of contract.
However, you need an arbitrator. This is someone who will sample
it and say that, in fact, what was delivered was No. 3 Yellow and not
No. 2 Yellow.
Mr. POAGE. The point that I am trying to make is that if you are
telling me that a man in Minneapolis says that this is No. 2, and I am
going to get it delivered to Houston, then I have to take it as No. 2,
regardless of what is delivered there.
Mr. BALDUS. Whether it is oral or written, it seems to me that you
have a contract. If what is delivered in the car lots is something differ
ent, then the contract is violated.
Mr. POAGE. Then, what do you mean when you tell me that most f
these grain dealers buy and accept the grade at the point of origin?
Mr. BEDELL. Did somebody say that? I did not hear it.
Mr. POAGE. That is what I understood.
That is what I understood both yesterday afternoon and this
Mr. GALLTART. It can happen that way.
Mr. TiONE. Will the gentleman yield?

Mr. T As far as expert sales are concerned, almost all export
sales, as fr as grain is concerned, are on f.o.b. basis with the U.S.
grade certification accepted.
SMr. GA A. : sllAlmost all.
Mr T This is beause bank creit is being extended to the
exporters, d if e bank annot rely on that certification, then the

M. GA AT. Yes; they use the certificate as part of the negotiation.
Mr. THONE. Part of the reason that they use this procedure is be-
use of the tremendous credit that is needed from the financial insti-
tutions. They cannot get the necessary financing unless they can rely
on the certificate. Is this correct?
SMr. GALLIART. Yes; as you know under the prent statute, it is pro-
vided t if you sell grain by grade for export, then you must have
it inspected.
MNir O AE. Absolutely.
Mr. QALIART. In these documents, the certificate of grade is used
as part of the contract and used as part of the settlement douments.
ourse, this could be chang bycontract. There is no q ion
On that other matter that Mr. Baldus was i nquiing about and to
hi r oe reerred, of cure, all domestic ses have inspec-
tion as being totally voluntary.

Mr. BEiGIAND. Mr. Chairman.
The OinAMAn. Mr. Bergland.
Mr. BERGLAND. I have a proposal Mr. Chairman.
Th CHAIRMAN. Proceed. :p
AN ould i t p t ys-
tem. There are 111 private firms engaged in the bsineof inspecting
grain, 2 States have a State program. There are 47 States ip which
there is an independent private inspection program. There are 41 States
in which boards of trade of various descriptions have inspection

There are, in the private area, currently, 1,600 people employed. In
the Federal area, there are 174 supervisors who train and supervise
t e private inspectors. There are 1,200 State e ployees engaged in
the sampling and inspecting of grain.
This makes a total of 2,970 people in the business.
There are38 export points in the United States, 1 of which have
State supervised inspection, and 16 have private inspection.
It seems to me, Mr. Chairman, that while. I am for a State-Federal
system, I detect a lack of support among the members of this commit-

I think therefore to.bring the issue to a head we might split the issue
into two questions. One of thesewould be w ther or not we want to
federalize the export points, as provided for in the Smith bill.
The second question is whether we want to set up authority for a
State system, or I should say, preempt the private systems in the in-
terior pomints. d



suggested any widespread corruption of malfeasance on the p of
the interior inspectors, be they private or State employees.
We have, however, a record built upon the extent to which there is
malfeasance and corruption in a number of the expot pi
I therefore propose, Mr. Chairman, that we conid
the export points, preempting the 16 States and 16 private agces
that are engaged in the supervision of t s ti proess n tese
points, and that it be taken over by the Feeral Govenent.
The CHAIRMAN. Will the genteman yield to me ?
The CHAUIMAN. What I was going to propose was a slightly
approach. First, we could consider this in some given se ce. If you
will, you can view it as covering a broad spectrum rafrom
most Government cotrl to less Governmet control.
We have disposed of the all-Federal system. Now, I would pr
that we make a judgment on the Smith concept, which i all- Fedral
but allows States to serve as agents of the Fedral Government atall
The next possibility, following along in sequence, would be a
Federal approach in which the States donot necessarily serve as ts
of the Federal Government but once certified operate side-by-ide
direct Federal inspection at all points.
If those concepts are rejected, we would then move to consideration
of all Federal inspection at the export pints. And thus we woul pr
ceed until all possible combinations and approahes had been sid-
ered until agreement is reached.
Mr. MOORE. Mr. Chairman.
The CHAIRMAN. Mr. More.
Mr. MoORE. Thank you, Mr. Chairman.
In this, where would the Federal, State, and private proposalof the
administration bill be
The CHAIMAN. That is a lower level still and has not yet been di-
By lower, I mean, that it entails less direct Federal involve t.
I am trying to begin consideration with the most universal Federal
control and to then work down. Anybody who wants to stop the process
can vote accordingly.
Mr. ENGLISH. Mr. Chairman.
The CHAIRMAN. Yes; Mr. English.
Mr. ENGLISH. Mr. Chairman, I may be suggesting a dangerous thing
here, but I think that Mr. Bergland has certainly found a short cut
to save us a little time.
The CHAIRMAN. The only problem is that I think, in fairness to Mr.
Smith, who spent a lot of time on the bill, we ought to at least have
a vote on whether you want to reject his proposal or accept it.
To bypass it without consideration is not right.
Mr. THONE. Mr. Chairman.
The CHAIRMAN. Mr. Thone.
Mr. THONE. I move that we reject the all-public approach of the
Smith bill, H.R. 8764.
The CHAIRMAN. Is there any discussion ?
I would like to have a straw vote on H.R. 64, and on the on
of Mr. Thone, that we reject this bill.


Mr. BERGLAND.r. Chairman, I have a parliamentary inquiry.
TheCHA rAN. Yes, Mr. Bergland.
Mr*. BaRGAND. If the proposal of the gentleman from Nebraska is
adoed at mea that we are preempted from disussing this?
Mr. Twoet. No.
The A MAN. Mr. Smith's proposal does away with private n-
peio a point in the United States. Further, it says that there
sll be no independent State inspection at any oint in the United
States. What it does rovide for is exclusive Federal inspection at the
expot ponts, and if e Secretary wishes, Stae inspection at the in-
land points under Federal contract.

"tity sati7 n edera* l 'G-o tniti
There is only Federal inspection for eport at inland points, inspec-
tion is still basically Federal, although it may be performed by State
agencies working under contract to the Federal Government.

This actually very close to the Mezvinsky proposal, except here
St agencies can become Feeral subcontractors.
I Under the Mevinsky proposal, no State agency could exist at all.
hat is wheree e are. It oes not preclude all-Federal inspection
strictly at the ports, be e we e now tLaling about a proposal that
afects both ports and inland points.

hope that we would not rush to abandon the concepts of the Smith
bill, which I think are exceptionally carefully drawn.
TheC.For thepresent,weare only talkig about authority

FTHmAN. I unerstand that. We are about to decide whether or
re gong abandn the all-public pector concept which is
t Mr. Thone s est is that we now decide
ether we want to reject or accept the Smith approach for inland

Again, the Smith proposal says that there is to be no private inspee-
tion of any kind, and that there is to be no independent State inspection
of any kind at either inland points or ports. Further, it says that there
S Ftion at ort as well asinland pints.
Sinerior oaion e e e a as the option of contract-
If you favor that precise program, you should vote-no. If you favor

It might be, for example, that you want to apply the Smith pro-
p l to export poit only.

f u do not know what you think, then is it alright
The CIUAIXAN. Of Course.

The CHIARIMAN.Mr. Fithian.
SA A ber the hearings, one of the problems to
Sgentleman from the Department has not referred to is a

rather central issue here. That is, when you inspect at the tor,
in Indiana, and then you weigh at that point and put the grai on a
hopper-car and it goes to a terminal in New Orleans ad people wn
there send back a dockage of 50,000 bus on the shipment, sayi
that it was misweighed in Indiana, there is, at present, no wy of m-
pensating for this.
So, they go back to the railroads and say-You must have
off 50,000 bushels en route.
If the local interior elevator says that some grain as only a certain
percentage of foreign matters in it, and threfr qualifie at a cer-
tain grade, and the inspector, working for a. large grain coproation
in New Orleans, grades it differently and says that it is accepted
but with a new definition of the foreign mnattr, then there is a dock-
age for this shipment.
This dockage is passed back to the elevator operator in Indiana.
-He, then, has to adjust this.
If he is going to stay in business, he will have to adjust this. That
is why you get corn this morning selling in Chicago for $2.80 and
bid in Lafayette, Ind., at $2.20.
It is because they have to make up the difference. That means that
the farmer who produced the grain takes it on the chin.
All of these differences in inspection that occur bring about tempta-
tion. In fact, that is precisely where the temptation comes in.
They do not accept, as the finite definition of that grain, wha the
guy in Lafayette, Ind., tagged on the car. If they did, then we would
have no problem.
Mr. THONE. Will the gentleman yield?
Mr. THONE. All of the bulk grain that is shipped from Lafayette,
Ind., is regulated by the Interstatee o ommission, if it goes
by rail, is it not ?
Mr. FITHIAN. Yes, it is regulated, but thereis nothing at al to keep
the guy at the other end, at the port, from saying, "I do not know how
much you shipped out of Minnesota, but we are short several thou-
sand tons down here and we are not going to pay you for it."
You can go back to the railroad company, under ICC regulations,
but that does not get you compensation.
Mr. THONE. Why not ?
Mr. FrrHIAN. You say to the railroad, "You must have lost this",
and the railroad responds-No; we did not lose it. So, the elevator
who is unable to collect will, in the course of normal business events,
over the year, compensate for this.
He is in it to make a profit. He has to be in it to make a profit.
Mr. BEGLAND. Will the gentleman yield?
Mr. BERGLAND. I think the gentleman makes an excellent point,
however, he is dealing with a weighing question that will come up
in a separate section of the bill. It is really not material to this issue.
Mr. FITIAN. Mr. Bergland, are you saying, then, that the auto-
matic acceptance of the grading in your town in Minnesota goeson,
without question, to Turkey, without anybody down the line doing
something like I suggested ?

Mr. B. If the g lemn will yield further, we have to mke
a distinction betwading standards and grading techniques as

Mr. FrITHIA. I understand that.
Mr. BR ND. It is entirely separate.
Mr. FITmIA. I understand that.
Mr. B r We cannot confse the two. I do not prpos to
federalize weighing in this first section.
Mr. FI A. Specifically, then, do they accept the grade of the
grain t reinspection at terminal port It is my information
that they do not. They both weigh and inspect it before they ship
it off.
Mr. BEmouI. Yes.
Mr. FIrrT Then we are talking about both weight and grade
and that is the whole inspection system.
Te Cu nx. I note the bells for the House.
Mr. FTHIAN. I will close with this, Mr. Chairman. I would be very
reluctant to allow all of the problems t the interior elevator opera-
tor has, and thrugh him, the probles that all of the farmers have, by
simply junking the concept of allowing the State to establish its own
inspection system, which the Smith bill does.
It ows the State to establish its own inspection system.
The only thing that the Smith bill prohibits is that a State at a
terminal port, for export, can be the inspecting agency. It prohibits
i inthe system if a State establishes a system of in-
spection and licenses inspectors as State inspectors.
SAN I think we can clear this up. understanding of
the Smith bill is that it bars all except Federal inspection at the

TheCHAMAN. Furthemore, it bars all private inspection through-
out the system while authorizing the Secretary to designate State
Sion at the inland points under Federal
supervision and regulation.
lly, it authorizes original Federa inspection at the inland

eCHAIMAN. If you agree 100 percent with a proposal, you will
want to vote "no when the motion to set it aside is concerned.
f you agree 99 percent with it, we assume you will vote "aye" and

We i ot rejecting the whole concept of a mixed-public system in
this vote.'It is just that we have a motion to reject the specifics of the

Smith bill, as proposed.
In other words, if the gentleman favors all-Federal inspection at
the export points, and favors the right of States and private agencies
to operate at inland points, if both aresupervisedby the Federal
Government, then he would have to vote to reject the Smith proposal
Srther than he feels is necessary.
Let me reiterate that the Chair is using this approach of proceeding
from issue to issue by straw vote simply in an effort to avoid having
the staff draw up a number of different bills having little or no

In an attempttosimplify matters, the Chair will identify the seven
.or eight different gradations or possibilities for inspection authority.
The resulting list will be sent to each member in the form of a m
,before our next meeting on Tuesday.
Mr. HIGHTOWER. r. Chairman.
The CHAIRMAN. Mr. Hightower.
Mr. H In atipation of this b down, would this ot
be a good time to recess this meeting?
The CHAIR1MAN. That is my intention. If there is no cton, we
will attempt to draw up a document contain we t
main concepts at issue.
In the meantime, if any member wants to communicate ideas th
he feels have not been brought out in the discussions, I hope he will
feel free to do so.
Mr. FITHIAN. May I take 30 second?
The CHAIRMAN. Certainly.
.Mr. FITHIAN. I would much prefer, when we come to this finally,
taking the Thone proposition and dividing it.
Let us first of all determine whether we ae in consensus and ag
ment about terminal facilities at ports. Should ty be all-Fedral?
I can agree with that. Then we will divide it off.
The CHAIRMAN. I will come back to these things.
We have no wish to prevent anyon from seeking support for his
If I may have the members' attention I should like to repeat some
thing I said earlier when some members were out of the room; then
we will adjourn.
You will be informed by memorandum that it is the Chair's inten-
tion to call the meeting to order at 10 a.m. on Tuesday, November 4.
At 10 minutes after the hour, the Chair will recognize a member for
the purpose of moving a point of order that a quorum is not present.
At that point, a record quorum will be taken. If a majority or
quorum is not present, the Chair will recognize member who
wishes to move to adjourn the committee. This will becom normal
committee procedure.
We hope that you will come at 10 a.m. If you are not here at 10 mi
utes after 10 a.m. sharp, then you will not be answering your name on
a quorum call.
In any event, the committee will either be in session or it will
adjourn by 10:15 am.
The Chair will express its appreciation to those members wh have
come today.
The committee will stand adjourned until 10 a.m. on Tue
November 4.
[Whereupon, at 12 noon, the hearing was adjourned to reconvene
at 10 a.m. on Tuesday, November 4.]
'% i"


Washington, D.O.
The committee met at 10:10 a.m., ursuant to notice, in roo 1301,
SHoue O uildi, H s S. F (chairman)
Preent:Representatives Poge, d la Gara, Vigorito, Jones of
, e ee, Ber d, Bowe ose,
Breckinridge, Nolan, Baldus,. Krebs, Hightower, Bedell, McHugh,
English, Fithian, Jenrette, D'Amours, Wampler, Sebelius, Thone,
Symms,Madigan, Peyser, Jeffords, Kelly, Grassley, Hagedorn, and
Also pesent: Robert M Bor and Hde H. Murray counsels; John
E. Hogan, associate counsel; Gene Moos, staff analst; Steve Allen,
Ssss dSusa Bell, sta sst L. T
Easley, press assistant; and John Baie, staf consultant, Subcommit-
tee on Livestock and Grains.
he Clerk reports that we have m qorum.
The committee meets again for consideration of various bills before

eral attitude of the committee members toward various approaches that
might be used to give the staf some direction for preparation of

Mr. Moos do we havi, e the memorandum
Mr. Moos. It should be in the members material.
The CHArMA. There is a mimeographed draft which is two pages

on and is blue color.
The CItAIRMAN. This staff committee memorandum attempts to de-



to designate State inspection services as its agents for inspection. This
is the basic approach of Neil Smith's bill.
We were discussing this particular bill at the time we adjourned.
My thought was that we would go through these various options
from the Mezvinsky proposal down to proposal No. 7. At any time
a majority of the committee can indicate its preference for one of the
proposals, and we can stop and give the staff instructions to prepare
that approach for consideration.
Does everyone understand what we are doing here? Sometimes this
is referred to as "bologna slicing."
Mr. Moos. Mr. Chairman, I would like to point out that No. 5 is the
Department's proposal and No. 7 represents the present situation
which exists under the present Grain Standards Act.
The CHAIRMAN. No. 7 suggests no change, is that correct ?
Mr. Moos. Yes.
The CHAIRMAN. Without objection we will continue discussion on
item No. 2.
Mr. BERGLATND. Mr. Chairman, I am a cosponsor of this bill. I tend
to support the manner in which the Smith bill approaches the wh
concept, but I must confess in the course of hearings at least, I was
not satisfied that we had any evidence of any wrongdoing at interior
I have a hunch that it exists, but we have not found any yet and I
therefore cannot document my position that clearly.
I do believe that we would be better off to have the States operat-
ing under a Federal license to do the inspecting in order to remove all
questions and doubts that may arise with respect to the efficacy of the
grades at the export and interior points.
I therefore, Mr. Chairman, would vote for No. 2.
The CHAIRMAN. Is there any further discussion?
Mr. POAGE. I think No. 2 goes too far. I think those of you who were
in the discussion we had a moment ago will understand that this in-
terior inspection, that is, the country elevator, is not supervised by
anybody at the present time and I do not see how you are going to keep
the farmer a free agent.
He makes a deal with the elevator operator, the elevator man makes
his own decisions as to what grade he gives. The elevator man does the
weighing. Of course, if he is stealing there is recourse for misrepre-
sentation, but as long as the man with a truckload of corn drives up to
much," he makes up his mind whether he will take it or not.
I think we have to have that degree of freedom on the part of the
farmer rather than have somebody coming in to the interior points
and making a decision as to what the grade is.
I know that this discourages the production of the better quality of
grain. Of course, I can grow grain or wheat and probably get just as
much for it as growing something of a better quality, because the ele-
vator man is going to pay me probably upon what he figures is going
to be the average of the community.
There could be an advantage to farmers to grow a better quality by
having strict grading at every elevator. There are over 7,000 country
elevators. To put somebody at each of those elevators becomes quite
costly. It goes into the cost that the farmer must pay, and so it seems
to me that it is more protective than we can afford.


Mr. BERGLAND. The Smith bill, of course, would not propose to estab-
lish Fedal inspectors in every country elevator. I am sure the gentler
man from Texas did not mean to leave that impression.
Mr. P No I thought that is exactly what it was doing. When
you said the interior pints I though you meant the country elevators.
You are justi talking about the subterminal elevators.
Mr. Bin Subterminals; yes. Generally they are at major rail-
rod intersections where grains are collected. As a rule that is where
the inspection points will be.
Mr. PO They do not have anything to do with individual farm-
e. If you make the inspection at subterminals only, you lose all of the
advantage that there is from growing a good quality of grain. I think
you have to have an inspection at the place the farmer delivers his
grain, if you are going to hold out any inducement.
I think it is a good thing o assure a man of a real good quality, that
e an vantage by growing a good quality, but I do not think this
would do it.
Mr. BE D. If the gentleman would yield, the establishment of a
Federal system at every elevator would impose a very high burden
on the industry. I am talking about producers.
This would cost it is estimated 11/ cents a bushel. Frankly, Mr.
Chairman, I do not think that is necessary, because in most country
situations you do have a cleansing effect due to competition.
Th are cmpetig elevators, if not in the same community, cer-
tainly within a driving range that is reasonable.
The element of that competition does protect the integrity of the
grading at the country point~
L have been a director in a grain elevator, and I know something
about the business, having been nneted with farming all my life.
The problem that arises is when the grain leaves the elevator in the
State of Iowa, and is he d for a market in Kanss City, the shipper
of the grain in Iowa does not know whether the grade established when
it arrives in Kansas City is going to be the true honest grade or not.
Therefore, the having of a State grading system at Kansas City
under Federal license would insure that there would be no temptation
for the grader to provide a grade that fvor the buyer of the grain

The fCHAIMAN. Mr. Bedell.
Mr. BEDELL. I would like to get very clear what we are talking about
in the Smith bill.
As I understand it, it does not increase in any way the requiremen~ts
to ask for grading on their grain, is that correct

Mr. BERGLAND. not understand the question, Mr. Chairman.

Mr. BEDELL. Right now, the only place that grading is required is

The CHARMAN. If it is sold by grade. There are some exports that
are sold, however, without a-grade, and these would not require in-

Mr. BEDELL. But am I correct that the Smith bill does not increase

is i-

1;~ *:*;**~~~ia

where the country elevator would have their own man to do the grad-
ing as to whatthe grade would be for the farmer who brought his corn
into the country elevator?

the 111 firms who arthe sins of grading. b
It would authorize a ch in the lw y which t
who are currently working in the privat sector could be switched to
the public payroll.
In other words, the civil service requirements w d be amended s
-that those who were qualified as Federal to could go on the
public payroll. The cost attached to the ing w d be the sme
The CHAMAN. I think the gentleman's question is this: "Doe the
Smith bill require that Federal inspection be performed in a
tory way beyond what the present requs are?" To my knowl-
edge it does not. It changes the character of the inspection as to who
performs it, but it does not change or place requirements or standards
for inspection beyond the present system.
Mr. BEDELL. So, if there were additional requirements in terms of
costs or man-hours, then it would be simply because of the tthat th
Government would not operate it as tly, probably, as the pri
vate grain inspection firms might operate now, is that correct
The CHAIRMAI. That depends on how you allo e the costs.
Mr. BEDELL. The total costs?
The CHAIRMAN. Mr. Smith proposes to collect fees. It is a question
of whether you want the service to be p ormed partiy on a sub-
sidized basis or totally by the fees charged.
If the gentleman will yield further. I would hope that the s
our guests from the Department of Agriculture would feel free to
raise their hands to correct any mistkes of fact that might be made
The Chair would welcome any direction or guidance.
Mr. Bedell ?
Mr. BEDLL. The concern is that if we do go to Federal and State, or
Federal inspection, as it would be now, if someone required inspection
at the elevator to be shipped to the port, and if it done by a pri
individual, then I assume that the port level would have priority
whatever inspection was performed, that is, at the shipper's point of
origin. Is that a fair assumption if we were not to go to the total Fed-
eral-State system ?
The CHATRMAN. The inspection which is performed at an interior
point satisfies the contract relationship between the buyers and s rs
at that point.
The inspection which is performed for export deals with the con-
tractual agreements at the export point.
Is that correct It doe not necessarily override whatever other in-
spection of the material might have taken place. The grain has usually
been mixed with other rains at that point. It does not automatically
rewrite the inspection that was done at the subterminal.
Mr. BEDELL. e trouble some of my shippers have is that they load
grain on a boxcar, they ship it to New Orelans. They think they have
No. 2 yellow corn in that boxcar. They grade it as such. It gets to New
Orleans and then they say, "No it is not No. 2 yellow corn." When that
happens, if we had Federal inspection at the port and private inspec-

tion atthe local level, then how would the result be? Would it be
The Yes, partially. It would also depend on whether
anybody appeals the inspection or asks for a reinspection.
If the party is satisfied with the inspection performed at the sub-
terminal, and does not ask for a reinspection, then that settles the
matter at that level.
Later on, hoever the inpection for export might be different, but
e afct the earlier a m unlss it is appealed.
Mr. BERnoLAx. I think the question is largely academic.
I in the gra on the basis of an
original grade. Nobody in Louisiana s g g to bait on the grad
established at a countryelevator point in, let us say, the Stateof Iowa.
They just do not do it. It opens up too much hassle.
Mr F. Mr. Chairman, let us establish two or three points.
First let me say that I am a cosponsor of the Smith bill I would be
Sthe committtee terminate going down this list at this
T 7.00 county s tat we have been diss are not
going to be affectedy Smith bil Teore, b w are aking abt
300rininl e o, aes, ad 89 export

I" : "
elevators, if I nderstand the briefi is morning. That is

the sole burdeof the Smith bill.f
The decision in the Smith bill would simply be to make those inspec-
tors at those points either Federal, as in the case I presume, of the 89

State inspection system at the 300 terminal elevators.
The cost of this would be borne, in all probability, by those who need
the inspection.
The~~ main thrust of this effort is to remove the temptation which now
exists in the system. That temptation simply is this: When a private
inspecton agency works for agrain corporation, they frequently work
for only one or a very few.
It is the hope of the Smith bill, therefore, that the removal of the
private inspection syste and the deralizing of that system at the
terminal and export elevators, and the Federal approval of State sys-
tems at the reainder of the elevators would, in some way, put a dis-
tance between the civil service employees or State employees working

under the Federal aegis, to remove the temptation to weigh grain at a
different rate or quality than it is done for the private gain that is
involved in all the fraud and everything else that we have heard about
1 would like to establish one other point, and that is this. Fre-
quently we have heard it said that it should not make any difference to
the farmer, as to who inspects it once it is inspected and mixed with

It is because the farmer and the local country elevator has to work
;on a margi n, which takes into account all shortages and all grade dif-
ferentials on down the ie, that you get the spread.
have today between the country elevator and the terminal in Chicago
j^K~~iip^>l,-|^B 3UilllU..Am iD~ WJl/U


That has built up over the experiences of the country elevator, know-
ing that on balance over the year he is going to be graded down or
weighted down a certain amount.
SThis, then, is simply passed along backward to the farmer by reduc-
ing the price that he pays to the farmer, so there is no way that we as
a committee can avoid the reonsibility of knowing that a fraud in
the grain inspection system in New Orleans does result in a reduced
price for the farmer who produced the corn in Indiana.
That is simply a fact of life. I would not like this committee to pro-
ceed under the illusion that somebody upstream at the terminal or the
export elevators eats the losses. They are not eaten upsream. They are
passed back to the original producer.
This whole grain inspection effort that Congressman Smith and
Congressman Bergland, and myself and others, are attempting to
make in the bill, is an attempt to remedy the situation that is clearly
I am not a cynic, but I cannot believe that the grain inspection
scandals which bubbled up in the Kennedy administration and then
were subdued, and now have boiled out into the public in a vigorous
and visible way, are isolated events.
I happen to believe that the slight shifting of grade or weight in
the process of handling thousands and thousands, or hundreds of
thousands of bushels of grain does not have to be very far off. You
do not have to favor your buyeve ry much, in order to make an
enormous difference in the profit that goes to the grain corporation.
I would be very happy, in conclusion, to see this committee termi-
nate, as we go down through this greater to a lesser Federal involve-
ment, at the point we are now which is the Smith bill.
The CHAIRMAN. The Chair recognizes Mr. Hagedorn, then Mr.
McHugh, and then Mr. Hightower.
Mr. HAGEDORN. Does anyone have any information as to the actual
number of private inspectors throughout the country that are em-
ployed by these 111 official grain inspection agencies?
Mr. BERGLAND. If the gentleman will yield, there are 1,200 persons
employed as samplers in the private sector, and 400 employed as
inspectors, for a total of 1,600.
Mr. HAGEDORN. Thank you. What we are talking about is eliminat-
ing the private inspection agencies and the employment of virtually
1,600 people.
If we are to shift over to a State inspection system, would there be
consideration made in hiring the present inspectors, or are we just
going to unemploy 1,600 people throughout the grain inspection
The CHAIRMAN. If the gentleman would yield, I think it is the
intention of the various sponsors that the committee's decision is to
adopt either an all-Federal or all-public system, some language will
be provided to waive Civil Service requirements in order to give pref-
erence in hiring to qualified inspectors. Of course we will want to dis-
cuss this with the Post Office and Civil Service Committee.
If the gentleman will yield further, something we will have to bear
in mind in arriving at our decision is the fact that an all-Federal
system will sharply increase the need for qualified inspectors.


Without a provision for preference in hiring, the transition could
be extremely difult because it would be hard to obtain the kind of
Any change in the law, I think, would probably involv a period
of transition. Otherwise, when private inspection ended, there might
Snot be anthing available for a ti to take its plce. Ts would dis-
advantage the entire trade.
Mr. KF.. W'ill the gentleman yield?

Swoldlike inqui if,n ay oftheseplanswich
intend to Federalize the grain weighing system, there is any regard
for the fact that there are 111 priv ate firms with investors and staff
o have rendered aervi o the inusry who are going to be
arbitrarily wiped out?
This is something conce ab t is a laudable thing to
be concerned about, the 1,600 people who will lose their jobs, but how

evidence that they are crooked; or that they have done anything bad.
To have the Federal Government rollup a bulldozer and smash

Mr. McHu .At issue here, obviously, is the integrity of the private
inspection agencies.
I have a question which at least for me may shed some light on that.

is ni
This goes back to something we talked about in the briefing this

As I understand it, if a person is dissatisfied with the original in-
spection, then he can either ask for a reinspection which, as I under-
by the private gen s. Or
alteatively, he may ask for an appeal which would be handled by
the Government.
SI would like to know this. In those cases where there is dissatisfaec

OMr. TeONE.Wi a g y 05
indicated that in 1974 there were four million initial inspections.
From those inspections there were 21,942 appeals. Of those appeals
80 percent of the initial grades were, sustain2d. Of these appeals 205

many are reinsWections.1

~a~ ~ f~ it

Does anyone have that figure? If nt, can we obtain this
information ?
Mr. KELLY. Mr. Chairman, may I ask a question atti time
that will be fine.
Mr. HIGHTTWE1R. I would be glad to yield.
Mr. KELLY. I want to inquire about this. Is there an evidee that
the private inspection system has been ore defective State and
Federal inspection systems?
Is the corruption ratio higher amo the private concer than it is
among the official orgaizatio?
Mr. HIGHTOWER. Based n information I have from my area, they
know of none throughout the entire history of any sc al orny
charge of any wrongdoing from any of these private groups.
Mr. Chairman, I would like to ask a question, however of whoever
might have the answer. A private ipetor is still f ally
is he not? So, all of the inspectors who ar the employees of the private
inspection agencies are still federal licnsd. Is that not true~
Mr. NOLAJ. That is correct.
Mr. BERGLAND. If the gentleman would yield, the ancy fr whom
he works is not licensed.
Mr. HIGHTOWER. That is right, but if the integrity of what he es,
as he makes that examination and make that ection, is quest d,
then he is still licensed by the U.S. Department of Agriculture to do
that particular thing.
We hear a lot of broad accusations a t wrongdoing and sus-
pected scandals, yet we have certain scandals that have been brought
out in regard to the ports at Houston and New Orleans ad o r
But nowhere have w had anyone make a case against the pr
inspection system. We ought to have enough experience i govern-
ment everywhere to knowtha individals can be corrupted.
is no precedence for saying that, because one is privately ep
one is corruptible, and if one is fedrally em ed then on is
That will not hold water.
Still, to say tht we are going to cure all the problems by throwing
out a system that is working and that is efficient is bad.
I want to address particularly at this point the country elevators.
They say it will not affect the county elevators. My informatin is
that it will affect the country elevators.
You get a Federal employee-and if we get an all-Federal system-
then he will have certain hours and places where he will perform his
assigned duties.
These private groups, which have the responsibility of trying to
serve an area, send their inspectors where they are called to go. They
do go tgoo the country elevators. They do not require the farmer to
haul it in to a certa subterminal. They will inspect it where he nts
it inspected.
I think that is the service that will not be available and if we go into
a strictly structured all-Federal system, it would be at a great dis-
service to the producer and, I believe, will ultimt cost hi a lot


Mr. Noyw. If the genitlemnan will yield, with all due respect to the

St that the inrs are federally licensed
Mr. HI W ERe I asked the q estion.
MrNoIA. That is corret, but the GAO study points t ttt
condition of the license is not the integrity or the quality of the inspec-
tion. It is merely the competency of the inspector to inspect.
Integrity or quality of inspection is not part of the licensing require.'
ments for being licensed.
Mr. HIoOWER. You cannot even bond somebody and guarantee
their integrity. You cannot change their employ and guarantee their
integrit You license their ability.
There is no way that we can put any kind of guarantee as to integrity
whether he is a State employee, a Federal employee, or a private

Mr. NN It cannot be a requirement for licensing.
Mr. H Ifor licensing for a
private groups, too. That is, that they be honest people.
ion or a requfor licenng der
the crent system. That isone of the problems with it
ment of an employee to be -honest for a private agency?

honest, but a condition for licencing, under the current grain inspecti
system, has not that requirement. All they are required to do is to
demonstrate their competency, and there is no effort to insure integrity
or quality of the inspection under the current system
Mr. HIGHTOWER How are you going to change that by changing the

Se e ee ere e e

Certainly, if anyone thinks that would help, we ought to have that

we have finally come upon the solution for everything.

r. No I was not suggesting that they sign an honesty oath,

as just simply asuring the competency of the inspector.

felony is called honest.
Beyond that, the standard would get one into Congress or anywhere

Mr. NOLA. Will the gentleman yield?
Mr. KLY. will in one aoment.

What the gentleman from Texas was trying to do to indicate
that we should not lay waste to a syste that has been generally good,
and arbitrarily destroy an enterprise that has been enga y pri
vate individuals for a long time and has served well, simply in p it
of some sort of change because the Government seal is supposed to
serve better.
The evidence is not that.
I think the system should be devised insuch away that peo would
be encouraged to be honest. Private inspectors would their whole
business and their whole life ground up in the thing being honest, be-
cause this could wipe out a company.
I think they would be very careful about that. It sounds like a good
system to keep them honest.
I think experience teaches that a system to keep people honest is
probably a good caution.
Mr. NOLAN. If the gentleman would yield, one of the things at th
GAO audit points out is that when an inspector is being tested as to
the integrity or quality of his inspection or his grading, he is told be-
fore then, in fact, by the Federal officials that he is now going to be
tested and graded on his integrity and his competency, and his quality.
This is one of the ways to try to measure and test for integrity Yu
could conduct tests when they are not aware of it. You could go in from
time to time after they have done their inspections, and yo could test
the integrity of an inspection.
That would be one simple way that I think we could improve upon
the existing system. We could test for people's integrity, and pehaps
catch a few more of the so-called culprits that we are supposedly
worried about.
There are ways, then, that we can devise the licensing an in spe-
tion procedure to guarantee at least a little higher quality of integrty,
or if not guarantee it, at least catch up with the culprits.
Mr. KELLY. If my time has not expired I would like to say this.
I think the suggestion the gentleman makes it perhaps a good one, but
that is a long way from putting the axe to the present system and
instituting a complete Federal one.
Modifications and improvements on the existing system without
creating a whole new Federal employment pattern is a world of
Mr. FITHIAN. Will the gentleman yield ?
Mr. KELLY. Yes, I will.
Mr. FITHIAN. I was impressed by the argument that there does not
seem to be any evidence that the private inspection is lacking in effi-
ciency and effectiveness, and honesty.
It was my impression, however, that over the past 6 months to 1
year the newspapers have been full of complaints by foreign buyers
of American grain, and that they were getting grain withforeign
matter far above what they had contracted for.
So I would guess that the proof of the pudding is in the eating, and
that perhaps these complaints of foreign buyers are well taken.
When we talk about the loss of integrity of American sales in
foreign markets, then we are talking very much about price. We are
talking about foreign buyers, if they have a choice, buying from the

on th miif in ym
jC dian eat Board instead of term in

ToDe CtHAIRa The time of the gentleman from Florida has

Mr. Moos. I think it would be useful to review the first pariagraph
on the eranum on the grin i nspection s tem .
I apologize if it has been difficult for the members to find. Evidently
it was at the bottom of your pile of material.

Today there are 111 official grain inspection agencies giving service at 183
these 111 agencies, 23 are State operated, 7 are privateownership inspec-
tion agencies and 41 are private inspection agencies operated by some form of
supporting organizations such as Boards of Trade, Grain Exchanges, Port Com-

Sa 41 privat i ect agences were organized to provide
ee a particlar locality, that is, to enhance the grain trade
in that area.the
Mr. C d the st answer a at this point
The CHAIRMAN. Co bt ro i rtainly. r ipe
Mr. FHIAN. I would be curious to know whether or not, as you
S down t tree ategoris of inetin agencies, whether

e no ae iimen and 38 pleas of uilty, just in the
recent efforts. From which of those three categories are these indict-
lments and pleas of guilty coming at this point ?
Mr. Moo. Th r oi oth fro the piate onership inspe
tiongencies as well as the private inspection agencies operated as a
service in a particular area.
Mr Moos. Not to my knowle dge.
Mr. FITHIN. This may be a point well taken here, Mr. Chairman.
Mr. H TOW Will you yield, Mr. Fithiand?
The1CHAIRMA. Others are seeking recognition. The Chair intends
to reco first those members who have not yet spoken. Then, if
any time remains for further discussion, we can continue.
I reognize, Mr. Krebs.

Mr. KREB. Briefly, Mr. Chairman, am vry much concerned
about the elimination of the private sector from the inspection appara-tends

tus, because of the talk concerning corruption. We may possibly have
corruption, as a built-in conflict of interest.
This is what has bothered me about the system which we have been
operating this country.

I do not think that merely because an individual works for the
Federal Government, he or she will necessarily have a higher degree

The crux of the matter is a built-in conflict of interest. I think this
++++++~~11~1 b++ +.. + +++ + +++ + i++ +u:+++ccre++
.. .... ++ + :+++ ++ : ++++:++::+ ;= +++:+ :+;+ + ++++ + +: + ar -
+ + +g + + : .+ + :P ...++ +++ +, + + ,+,+ + ++ + + + +++ ...

i al E +

++++ i++++ ++ +++++++ ; + ++ + ++ ++ +++ ;

The CIAIRMAN. Mr. Enlish.
Mr. ENGLISH. Mr. Chairman, I simply want to emphasize s
the same point that Mr. Krebs was makin g litt di t
and perspective.
It would appear to me and I think that ost of th members of
the committee could agree, that each of the systems--Federal, State,
local, or private-has strengths and weaknesses.
Under those circumstances it wou appear to me that possibly we
should be looking for a combination, stead of g to say Wel,
this system contains all of the virtues and has none of the ills of the
other systems."
It seems to me that this is the weakness of the S th propo
which states that the Federal system of Federal inspectors is going
to cure all the ills, and is going to have none of the handic
We all know from working with Federal agencies that they d
some handicaps, they do have some problems, and they do have me
I would certainly urge the committee to give serious conideraio
to the possibility of m ofa m of some type. I think we shoud cobine
the strong points of the various proposals, instead of trying to rely
oil one single system to do the job,
The CHAIRMAN. The purpose of hese discussions is not to reach a
final conclusion, but, rather, to give some guidance to the staff in
preparing the draft. The members participating in the straw votes
are in no way committing themselves Although I do not want to rsh
members along in their consideration of the isues, the sooner we ave
some broad idea as to thestructure and general thrust of the ~ll, the
sooner we can begin the actual markup.
Mr. THONE. I think Mr. Fithian brought this up with staff member
Moos. I see that Mr. Galliart is here from USDA.
We were discussing this the other day when the committee brke
up. I asked him to break down for me the subject atter o ese
indictments that we have been hearing and reading aout.
I have his compilation before me.
Am I correct in reading this, Mr. Galiart that there i one irect
indictment for a violation of the U.S. Grain Standards Act and al
of the rest had to do with bribery, and perjury, and false staternts,
and violations like that? Do I read this-correctly?
Mr. GALIART. I think that is correct. I do not have the material
with me, but I think that is correct.
The CHAIRMAN. Will the gentleman yield?
Mr. THONE. Yes.
The CHAIMA. Those of us who have hvead some eperience in
criminal practice or in the judiciary, may have learned that itis often
hard to tell from the precise charge what irumstace or legins
sparked the investigation. Prosecuting oficials sometimes mo
on the charge that can be more easily established. It might be a perury
prosecution rather than a bribery prosecution. Perjury might consist
of statements denying bribery.
Mr. THONE.1 Will the gentleman yield back?
The CIIAIRMA1-. Yes.
Mr. THONE. Bribery is one of the toughest of all to convict on, and
I notice that of all of these, 13 of the inictments were based on

But your point is well taken.
I did not have this information until 10 or 15 minutes ago.
I tg about and'hearing about
was a direct violation of the U.S. Grain Standards Act.
Thell yield further, as i r I understand
the U.S. Grain Standa Act, currently violations are cosidered
misdemeanors rather than felonies. I think this is one of the things
met w't it euS r4i-

would not bring it under the U.S. (rain Standards Act, b rather
under the bribery or some other statute that carries a felony.
Mr. KELY.Will the gentleman yie d
Mr. THONE. If I still have the time.
Mr. K I d like to inquire about this. Where does the grain
leave from when it is being sent into foreign commerce? Does it all
go out of New rleans or doessomeof it go out of the Gret Lakes

Mr. Moos. Mr. elly, it goes out of all ports round the United

at is the geographical location of these indictents?

Mr. KELY. That means New Orleans ?
Mr. Moos. New Orleans and the Texas ar

Mr. Moos. Two. .
Mr. K Texas and tisiana
Mr. Moos. Yes.
Mr. Kry. Would that inot seem to indicate that although you
might have one kind of inspector in one locality, it should not be a
blanket indictment of everyone engaged in the business? Jn other
words, all o the indepen i would nt be crooked be

Mr. BOR. or portion of grain that i s exported from the
United States is exported from gulf parts; the larger portion, per-

haps, from the area around New Orleans.

bring forth indictments. The result of what happened in New Orleans

in e vi ene.,
['++ +++ + + + a


Mr. HIGHTOWER. Did any of the indict r as of
an inspection problem at the interior, or were they all along the gulf
coast? Did anything criminal happen at the interior points?
Mr. Moos. Not to my knowledge, no.
Mr. THONE. Let me ask one more question. When do we get the
preliminary briefing from the GAO ?
The CHAIRMAN. It is scheduled for tomorrow morning.
Mr. HAGEDORn. Will the gentleman yield?
Mr. THONE. Yes.
Mr. HAGEDORN. Is it true that most of the private inspectors en-
gaged in inspection are at the export points? What percentage are at
the export points as opposed to the interior points?
The CHAIRMAN. Although there is no original Federal inspection,
there is original State inspection.
Mr. HAGEDORN. Thank you.
Mr. BERGLAND. My record shows there are 38 export points in the
United States. At 16 of these the inspection is performed by a State
agency, and at 16 it is provided by private firms.
I would like to comment briefly on the comment of the gentleman
from Florida. I think he is absolutely correct. Wehave to be careful
that we do not in any way suggest that all persons employed in this
industry are inherently dishonest. I completely agree that that is not
a true statement.
At the same time, I do not think we should be blinded to the reality
of the situation.
The CHAIRMAN. Mr. McHugh?
Mr. McHUGH. I sense the chairman recognizes me reluctantly.
The CHAIRMAN. If there is no other pressing comment, I would like
to take a straw vote on Nos. 2, 3 and 4 after Mr. McHugh has spoken.
Mr. McHuGH. I will be very brief, Mr. Chairman.
I have no precommitment to this area. I am certainly not an expert.
But by way of comment it seems to me that one of the major con-
cerns is the fact that, in the eyes of foreign purchasers of grain ou
system has been substantially compromised.
Therefore, it would seem logical to me that in order to restore the
confidence of the purchasers of grain, it may be necesary to federalize
the export points. At the same time I think that some of the points
made by Mr. Kelly and others are certainly valid, that is, that it may
not be necessary or even reasonable to federalize points in the interior.
First, they are not the primary concern of foreign purchasers, and
second, apparently there is not satisfactory evidence to indicate that
there is widespread corruption there.
At the same time, I think that what Mr. Krebs says is true. The
conflict-of-interest problem is quite real, regardless of the perception
of foreign purchasers.
Therefore, it seems to me that one sensible approach might be to
federalize the export points so as to meet the legitimate concerns nd
perceptions of foreign purchasers. But, with regard to the interior
points, we would not eliminate the private agencies but simply adopt
in the legislation very strong conditions which would get at the on-
flict-of-interest problems which Mr. Krebs has pointed out.
The CHAIRMAN. Thank you. Mr. Madigan is now recognized.


Mr. I might not be abtocontributeanyth I am con-
fused now as to what the straw vote is going to be on.
The CIAmN. The straw vote will occur next on whether we pass
over No. 2 as model for the draft.
Those who wish to pass over it in favor of some modl farther down
the list will vote aye.
Those whosu the Smith proposal andwant to have it be the
model will vote no.
We can do it the other way round if you prefer, but this is the basic
SThe aye vote would be to pass over o. 2 and go farther
down the list which involves less federalization. Those who like No. 2
would vote no.

Mr. MAIN. Phaps this is not the time to say this, but at some
time this has to be said.
The system of establishing inspections at the export point and noth-
ing at the interior point is not going to accomplish anything, because
on a barge, or comes on an Illinois Central freight train or however,
then ifit is not what it is represented to be and if you have established
t of Feral inspection which to reject all of tthis

Stryi to move grai.
d the you gon to have a terri he mess

A point that has to be made right now, I think, is that the farmers
e really saying "How does it get to be that bad "
"Do the rain companies shovel in the stuff Is it mixed up in the
elevator or what happens to it?"
What they fail to rmember is that they have very ba years. The
central Illinois farmers usually have very exceptional years.
Lat they had a year where the spring was very late. The plant-
ing was late. There were rains. The frost was early, and the corn crop
and s o was very inferior. But all that grain was sold. All
of it went somewhere.

do not believe that you can ignore that all of it comes from the interior.
If ou are going to set up a meaningful system there is going to have

TheCAIRMAN. Mr. r- SSy. .
r. Y. Would you review for me last week's and this meet
ing. There is only one.decision that we have made,that is bya straw
vote. That is to pass over the Mezvinsky position, is that correct
The CallAMAN. The gentleman is correct.

What the Chair proposes to do, with the committees concurrance,

and to decide whether to stay with it or pass over it. If we pass over
that, we go on to No. 3 and so on, until the majority of the committee
sant to work with."

Again, I emphasze that these votesre in no way binding, and can
later be changed d ng na a W e t t t
some guidance for drafting of the committee prints.
All those who wish to pass over the Smith propoal, idicte b
raising your right hand.
The CLERK. Eleven.
The CHAIRMAN. Those opposed to passing over the Smithbill, raise
their hands.
The CLERK. Eight.
Mr. NoiLA. I do not know what the procedure is, but if proxies are
allowed in straw ballots Mr. Ric d woul like to be voted no on
the straw ballot.
The CHAIRMAN. Since that was a close vote, let us go with the
idea that the Smith proposal will proably remain bthe com-
mittee in one form or another.

Mr. I think there is a pro e that may if w d
the State and private at the interior, and the Federl at the exort
points that this might be the solution.
The CHAIRMAN. I would like to go to No. 3 next. No. 4 coes pretty
close to the so-called proposal and can be broken down into two p
No. 3, in effect, again puts pri inspection out at both exterior
points and interior points, and provides for a systm of either Fed-
eral or State inspection at both poi
It reflects a bill introduced by Mr. Burlison. If there is no obje
tion, I would like to see how many people favor pa o o. 3
and to proceed further down the list.
The CLERK. Thirteen.
The CHAIRMAN. Those opposed?
We will pass over No. 3.
The next item is No. 4, which we could consider in two .This
item provides for Federal and State inspection at export points, and
private inspection at interior points.
I assume that we would not necessarily be putting the States out
of business at the interior points.
The key to this proposal is that only State and Federal ipection
would take place at the export points.
Is everybody clear on that?
Mr. BERGLAND. I have a question. oes that mean that the State
would be operating a Federal program under a State license compa-
rable to meat inspection ?
The CHAIRMAN. That is something that we would have to eter-
mine. If we wanted to rarefy this a little we h to
decide if there were to be public inspection only, that is State or Fed-
eral, at the export points. Then we would also have to d~ rmie w
States operate at the export points if this approach were adpt
In other words, would the States operate as agents of the Federal n-
spection Service or would they operate a little more independently
We can get into that more specifically if there is strong nest in
this particular model.
Is everybody clear on this point, which represents a rather impor
tant departure.

This would retain in some form State inspectiQn at the export points,

ut would opltelyeliminate private w winspetion there. wi
inspection at the interior points, along with the existing State inspe-
tion systems.l
Original Federal inspection at interior points would not take place
unless there was a lack of private inspection service.
to see that all eport pnts are federally inspeted
Mr. Fr s I understand No. 4, y coud go ahead and retain
the Texas or Louisiana system or any other State system under No. 4.

iThe CHA. What eyou r ally fav of h tot del oin-
spection at the export points and perhaps a mixed system at the

Mr. Frr N.. Yes.
The CHAMrAN. We might refine that approach later.

Mr. Moos. Yes.

p : i A. .. on
really be dealing inte port.
Mr. Moos. Selling directly at export, yes.
Mr. -PAE. New Oricans is a 100 miles from the ocean. It isan in-
TheCAIRMAN. If you are in favor of some restriction on export

then I think you would vote no on No. 4.
The next step down would be Federal, State and private inspection
at export and interior points.
How many people would like to pass over No. 4 ?
How many people would not like to pass over No. 4?
The CLRK. Fi fteen.
TheCHAIRMAN. That definitely is going to be one of the models then.
at the export points.
Mr. BERGLAD. I have a question on that point. I am for Federal in-

The CEAIRMAN. How many people prefer to have the Federal Gov-


Mr. KELLY. I do not understand the last question.
TheCHAIRMAN. The question comes down to how much of a role
the Federal Government should play with respect to certifying the
States to perform export inspections.
Under the Smith proposal, which covered both export and interior
points, the Federal inspection service could designate a State to per-
form Federal inspection at interior points. Another approach would
be to have a qualified State handle inspection.
This is a refinement, but what it really comes down to is to what de-
gree does State inspection exist at the export points and is there Fed-
eral supervision over that State agency?
In the meat inspection business, for example, there are two kinds
of inspection. One is performed by the State when State inspection
agencies are determined to be equal to the Federal inpection. In this
case, however, movement across State lines of inspected meat products
is not permitted.
The other is the so-called TalmadgeAitken plan, where State in-
spection service really is based on a contractual arrangement with the
Federal Government to perform both State and Federal inspection.
Under the Talmadge-Aitken plan, you ave a Federal seal on meat
products inspected by State inspectors under a contract arrangeent
with the Federal Government. This is closer to Federal supervision.
Mr. KELLY. Your question was related to the last sequence?
Very frankly, I think there is some feeling that the Federal export
responsibility should be direct or, at least, a very close contractual
relationship should exist with States, so that if the State agency
performs inspection for the Federal Government, there would be a
close control.
Mr. Moos. Mr. Chairman, just a point of information which goes
back to Mr. Baldus' question about what is considered an export point.
The Department advises me that any export point on the ocean or
the Great Lakes is an export point. Whereas river points are con-
sidered interior points.
The CHAIRMAN. Is anything on the gulf, the oceans, and the Great
Lakes considered an export point while river points are considered
Mr. Moos. Unless identity preserved shipments down river by
The CHAIMRMAN. Could you have a situatioin which private inspec-
tion is conducted in behalf of two parties, one of them being a terminal
at an export location while the grain in question is not necessarily
marked for export?
Mr. POAGE. It would seem to me that if somebody wants to buy
grain from a terminal elevator, and wants to haul it back up into
the interior, and wants to buy it on his own responsibility, then I do
not think the Government ought to step in and say that he cannot
buy it.
But if he is going to export it, then it seems to me that we ought to
require Government inspection if the grain is moved into export at
any time that it is moved.
The CHAIRMAN. I would like to ask Mr. Galliart a question. Sup-
pose we are talking about a terminal that is located at New Orleans.


The grain received in that terminal may be exported to inland ponts
for processing, or it may be shipped out in an export order. Are you
with i me
Mr. GALART. Yes.
The CHAIRMA. If we decide to make export grain sbject to some
edepection would it b pos tat gran in that
export area might not be exported, but instead shipped from a termi-
nal to an inland point, thereby making private inspection valid?
!Mr. GATiART. It would be valid, but it would be very difficult to
have the two inspection agecies working the same elevator.
aThe tAiaAt. Thank you.
Mr. BADUs. Would it be useful to clarify that? Do exporters have
licenses to identify the trade which is going through an exporter to
foreign trade? Do you identify the flow of trade rather than just

If you are ng if there s a license for export, he
answer is no.
Mr. BAUs. Wouldd it be useful if we created that?

If we have registration, then you would hae another
identity which wold e different from interior and exterior. This
would be marked simply for export. If it flowed through the hands
at rd exporter, then it would have a certain kind of

Would that be useful, is my question ?
Mr. Moos. It could very well be. I do not know the complexities of
ss regard to wh is going to nspect exports; a por-
tion ocalls for foreign monitors. I would like to know
whether you favor that portion of the bill.
That is immediately beside the point.
Do you see the two complementing each other, or not necessarily
related at othe, the extent to wchthy ve a more
finspection at the export point, and who is going to do it,
the State or the Federal, or a private agency, and the extenit to which
The CHAIRMAN. My n impression is that foreign monitoring is
more consistent with the continuation of private inspection at the

If the grain inspection serviceis to perform original inspection at

for foreign monitoring is weakened.

monitoring would be to check the validity of the inspection done by
ii t he export ; there if we have Feeral
inspection there would be less need for that. Under the circumstances,
I do not think I would favor theestablishment o foreign monitors.

bill as a matter of courtesy to bring it before the committee. It does
not necessarily reflect our views.

Mr. GRA Then you see the foreign monitoring in the case

without the particpation of the foreign governments concerned.
Such an arrangement could become quite coplex and awkward.
Mr. POAGE. If the Federal Government does the inspection at the
ports-and I for t th the Federarnmet wo t
upon guarantee the delivery of the comy to the orein prs.
If you do that then you ave to have omebo ake the decision a
to whether it actually met the specificatins he irrived at the
foreign port.
The AIMAN. Thepuraser of the gin r ved in for
also inspects it as it arrives. The qsi is whether you feel it i
necessary to have USDA monitors in those foreign ports for addi
tional checking. I think this point is rather independent of the other
Mr. Moos. Mr. Chairman, I think i needs to be pointed out tat
foreign monitoring does not mean foeigin inspection. That is, an
inspection at the receiving point in a country. I is a moitor-
ing device to provide a check.
The CHAIRMAN. In other words, it is a random check
Mr. Moos. There is no way that they could have an accurate inspec-
tion of grain unloaded at the other end, unless they could prbe th
whole ship. It would be more of an ey review of w the situa-
tion is and what the condition of the grain might be at the pointof
It might relate to the s for diferent kinds of varietis which
would be able to survive shipment in a more satisfactory manner and
that sort of thing.
Mr. GRASSLEY. But t i integrally inv with the public el ns
aspect of the whole sale of Amrin ra to foreign countries.
The accusations against so-called bad grain are around.
Mr. Moos. It would be very diicult to establish any of a
positive relationship for legal purposes, because the g tech
niques would be so much different that it would not be representve
as far as the landed quality of that grain as opposed to the loaded
The CHAIRMAN. The Chair is getting some strong impressio of
the committee's views. I do not want to pass over too quickly, 1ut
let me reverse the order now.
Is there any support for the idea of limiting all inspection t both
export and interior points to State ncies only ?
Is there support fo the conept of the administration bill, er-
wise surrepitiously known as the Foley-Wampler proposal Thi
would retain private, Federal, and State inspection at both inteio
and export points with the conflict of interest requirements and so on
Mr. GASSL. This is maintaining private inspection
Mr. WAPLE I think tt ought to be one of our consideration
The CHAIRMAN. Without objection then, the Chair understands at
we will consider about three options: The administration proposal,
the Smith proposal, a proposal to maintain Federal and, under ed-

eral contract, State inspection at the export points while retaining
private -and State inspection at the interior points.
Mh due respect to the chairman of the
and th g e r, I did not see any visible evidenc of suppo
for the administration *proposal.
I a wondering why e are going to continue to consider it.
Mr. Mr. Chairman, was just private inspection at

Te C. Fr or purp o, r. Nolan, the adm stra
propol i already prepared in uhill form. Anybody who wants to move
for the use of a substitute could do so, h owever.
Mr. NoLiAx. I understand.
S. A gh tre w no dramatic spport for the
dministration's proposal, when the ranking minoity member requests
dis sion of it, we should do so. The purpose of our whole dialog was
to determine what the committee supports and what it does not support
So t re d The amii i bill i already prepared
-in draft.
Mr. BERGLAND. At point in time we are going to have to make
a decision of which of these three ormore options we are going togo
for. Am I correct that we are attempting to develop a cus to
instruct the sta to prepare a committee print? Will that committee
Sptio 2nd 5 are alreadybefore us inill
form, the committee print will present option 4. Then we will arrive
at a conclusion as to which one we shall markup.
Mr. JEr It would be helpful to me to know what kind of
Si g to lt from these options. That is why
I supported the administration proposal. If you have oe el tor
an you are shipping to various areas of the country, and you have
private inspectors who are going to be worryi about interior ship-
ments, and Federal inspectors about exterior shipments, then I would
Slication this will lead to This would
be helpful to me in making a decision on the options.
The C. I think it would reduce the duplication at the export
points and would, in effect, have one designated inspetion serviceat
ll the export pointsUnderitem 4 it would be either U.S. Federal
n spection or inspection by the States under contract with
I do not think you would have, for example, both the Federal inspec-
tion service and the State inspection serice at the same export point.
Instead, you would have either diret, original Federal inspection

ewrvice would take all the points in that State.

Mr. JEFFORDs. I follow you, but I am not so sure that you answered

My question is that say for example you have several tons of grain
in New Orleans. Some of it is going to the State of New York, and

The CHAIRMAN. The committee has to make a decision as to whether
it will permit an inspection service for inland shipment of grain
received at export ports, or whether it will just desinate the ports
for all purposes, export shipments or further resh en a
being export for the purposes of the act, therby eliminating priva
inspection at that juncture.
If I were stating my own view, I would have to say that, for
simplification purposes, it would be easier to designate ports a lo-
calities and all inspection in those ports, whether pro s or
shipping inland, or for export, would be done by the Federal Gvern
ment and/or State government at that port.
Mr. JEFFORDS. Thank you.
Mr. BOR. Mr. Chairman, in preparing the committee print question
arises with respect to the treatment of the rivate insction agencies
at interior points. There is the issue of what type of conflict of interest
rules to apply.
Is it your thought that the committee would discuss this further
before a draft would be prepared on that item ?
The CHAIRMAN. I think that is a good suggestion.
The administration bill contains some very rigid conflict of interest
The staff and the USDA representatives prohibit, for example, any
employees or any stockholders of private inspection firms from having
any interest in the sale, merchandising, or transportation of gra
The effect of those conflict of interest requirements, if adopted,
would be to virtually eliminate e the 41 private inspection firms which
are associated with boards of trade or chambers of commerce.
It would seem to me very difficult for those sponsoring agencies to
meet the criteria of conflict of interest recommended in the Depart-
ment's bill.
What counsel is requesting is some indication as to whether the
members favor that rigid limitation on private inspection.
Mr. BERGLKND. Mr. Chairman, I for one do not favor that rigid
restriction. I think the distinction must be made between a board of
trade in which there are members who are buying and other members
who are selling.
You have, by its very nature, a competitive institution built in.
If the inspectors providing a service for that board of trade were
to tilt their judgment in favor of the buyer, then the sellers, who are
also involved as employers, are just going to object obviously. Ifhe
biases it the other way, there will be objection from the buyers.
I think, therefore, that that system is inherently self-leansing.
I frankly find no fault with it, but what I am troubled about is this
In those markets in which there are only buyers or sellers and you
do not have the inherent competitive forces at work, then trouble could
Mr. THONE. Would the provision in Senate Joint Resolution 88 be
satisfactory to the gentleman?
The CHAIRMAN. What the gentleman is referring to is Senate Joint
Resolution 88, which incorporates the standard conflict of interest
language of the administration proposal while eaving it to the iscre
tion of the Secretary as to whether the conflict of interest requirements
should be implemented in the terms of Senate Joint Resolution 88.


I y h a itte trouble with that approach, if the gentle-
man will yie. It seems to tell the Secretary that although these are
good standards for conflict of interest, he can either put them into
If I were the Secretary of Agriculture Iwould be a little uncom-
fortable with that kind of a setup.
Then, too, if we establish good, fair standards for conflicts of in-
terest, why should we allow them to be optional? We should not put
the crer i a stuation of ruling on that
That bill isa 1-year bill, also.
Mr. THONE I think there is a lot to what the gentleman from
Minnesota is saying.
The oof interest question has intrigued me from the first
day.I have alked to Mr. Moos about it. I have talked to everybody
else who hasworked on it. It is tough to get an effective handle on it.
Maybe the chairman has some specific suggestions.
The CHAIRMAN. My personal feeling is this: We could give the
Secretary of Agriulture, through the grain inspection serice, the
authority requested in the administration bill to certify inspection
agencies as well as inspectors. This would, in effect, license agencies as
well as the employees.
Then perhaps we could give the Secretary additional authority to
determine wheer the competency and ability of the inspection agency
are adequate to perform that service, and to verify that the agency
is not dominated by economic ownership or other interests which
might interfere with its ability to provide inspection service in an
objective way. This would leave some latitude.
Frankly, I think that if you have one employee who is connected
with some other form of grain merchandising or activity, thus barring
the entire agency from licensing, this is a rather strict rule.
Mr. HIGHTOWER. The Melcher-Clark proposal does seem to provide
another area of consideration. It provides that it prohibits official
inspection personnel from having any financial interest or being em-
ployed by firms, and from accepting gratuities.
This does not address itself to ownership or stock participation,
or being on a board of exchange, or whatever.
It does prohibit any confict of interest from the personnel employed
by that board of exchange.
SK LY. It would seem me tht the ould prepare some
sort of a chart to how wher these private agencies operate. It might
sound like w are saying, "We will cut them off at the points of export,
Sand permit them at the interior points." Unless you know where
they are involved, then you do not know whether you are cutting off
their toe or everything just below the scalp line.
1 r T* '" r" '!i w
The CIAIs te U.S. Gain tion Service and the
staff could give us by Friday some rundown as to where the various
agencies are involved at the export points.
Mr. KELLY. Yes; that would be good.
If we are to follow the suggestion of the chairman that we are going
to designate, for example, New Orleans as an export point and every-
thing that goes in or out of there would be handled by a single inspec
tion of weighing agency, then we should do that thrughout the coun-
try. The Great Lakes would be included also.

We should know then what would beeft in way
of private agencies throughout the United States.
The CHAIRMAN.Yes; I think that is good.
Mr. Moos. We could refer Mr. Kelly to the second page of the
randum which does give you that.
Mr. KELLY. Is that the one you gave us this morning V
Mr. Moos. Yes.
The C AlIAN. It just says private.
Mr. Moos. It does not give the whole anwer, but it does give an
indication of the type of service within the
The C HAIMAN. We will try to specify that a litte more.
Mr. BEDELL. Could we have a show of hands as how may le
here would fvor legislation which d in effect ds
of trade and grain exchanges from having their own insption
niations, and ow many uld fav leing it as it isi
Mr. KELLY. I have now looked at this and it does not answer
my question.
I want to know if you eliminate the private inspectors fro desig
nated export points, you would then get 99 percent of them or 10 per-
ent of them?
If you were going to permit the private insp s to ate t
interior points, would there be anybody left If the answer is no, that
you have gotten them at the epor pnts, then I think we should act
as though what we are in when we limit their opertion to the
interior points, is to effetively wipe out all the 111 private ies.
W qould know what we are doing.
The CHAIRMAN. The gentleman is asking many of these
compoperate exclusively at export pointsow of
them have inspection services at both export and interior points.
Mr. KEjLT. Yes.
The IRMAN. If company A for example maintains 90 per-
cent of its inspection business at the port a only 10 percet iand
then the getleman feels that that company would be substtially
put out of business by the elimination of privte inspection at the
Mr. KELY. Or, if 90 percent of them only operate or inclue in
their operation a substantial part of their work.
The CHAIRMAN. I think I understand te gentleman's quio
I will work with the stff in that regard.
Veryquickly is there any sentiment here among the membs to
limit private nspection to entrepreneural companis only and to limit
boards oftrae chamers of commerce, and grain ehanges? How
many are in favor of eliminating boards of trade, chambers of
commerce, and grain exchanges?
Ther does not seem to be overwhelming sentiment to do that.
SThat indicates that the particular form o cnfict of interest
the administration bill would have to e modied.
With the permission of the committee, the air wil take some
liberty in wo n with the staff and with rankig minoity
member in trying to prepare an original committee print that includes
Mr. Will that bethe markup vehicle


The If thecommitteeso decides.
The next decision will be between the Smith bill and the committee
Mr. THoNE. The State could not subcontract.
The CHM. N.
Finally, we would have the adminisration bill. Those three vehicles
will be reorted to the commiee; and wewill decide Friday, hope-
fully, which of them will be the primary markup vehicle.
The committee will stand adjourned to meet at 10 o'clock Friday
for further consideration.
[Whereupon at 11:45 a.m., the committee adjourned.]

11[ 1 i i

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Washington, D.C.
The committee met at 10:10 a.m., pursuant to notice in room 1301,
Lonpworth House Office Building, Hon. Thomas S. Foley, chairman,
Present: Reesentatives Vigorito, Jones of Tennessee, Bergland,
, Breckinridge, Nolan, Baldus, Krebs, Harkin, Hightower, Bedell,
Mc gh, Fithian, Wampler Sebelius, Thone, Jeffords, Grassley, and
taf present: Robert M. Bor, counsel; Steve Allen, staff consultant;
Gene Moos, staf analyst; Glenda Temple, staf assistant.
A quorum not being present, the meeting was adjourned.

79-28 -6- -

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ODAY, 10, 1975

Waskington, D.C.
e ttee met at 10:12 a.m. pursuant to notice in room 1301
Longworth House Ofice Building, Hon. Thomas S. Foley (chairman)
Present: Representatives Foley, Poage, de la Garza, Melcher,
Bowen, Weaver, Baldus, Krebs, Hightower, Bedell, McHugh, Eng-
lish, Jenrette, Sebelius, oe, Grssy, Hagedorn, and Moore.
Staff presnt: Robert M. Bor and Hde H. Murray, counsels; Gene
oos staff analyst; Glenda Temple, staff assistant.
A quorum not being present, the meeting was adjourned.

(O8 )


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TESDAY, NOVE 1BER 11, 1975


The committee met at 10:15 a.m., pursuant to notice, in room 1301,
Longworth House Offie ildi Hon. Thomas S. Fole (chairman)
Present: Representatives Poage, Vigorito Jones of Tennessee,
lhe, Begla -Bowen, ose, itton Breckinridge, Richmond,
er, a Krebs, Harkin Bedel, nglish,
Fithian, Jenrette, Dp'Amours Wampler, ebejlius, Thone, Symms,
ohnson, Madigan, Peyser, Jeffords, Kelly, Grassley, Hatgedorn, and
present: Fowler C. West, staff director; Robert M. BorQ0o1m-

Sam-informedby the clerk that a quorum is present.
+ m + ,
it, ; ,; 1 _

The committe meetsfor further consideration of grain gisation.
The staff has prepared and. placedbefore each- member a commit-

n corporated in the committee print.
Is hat correct, Mr. Bor. .?
Mr. Bo. That is righ, sir. Tere ae s aditional paes wI ic
contain criminal provisions which are supplements to the first install-
mnent.. That has been passed around.
A copy of that should also be on the members' desks.
The CHAIRMAN. The staff has also prepared a section-by--section
analysis ..of the comiittee print that is also before each member.
Perhaps we can ask counsel to proceed by briefly going through the

obtain the cmmittee's.judgment as to whether we should take up
the administration bill, the Smith bill, or the committee print as the

Of course, asI Said before, that does not constitute any final or

1owever, Judging from our past opinions as expressed in straw
vote, the administration's proposal, the Smith bill, and the commit-
"" ^ S ^ T ^ I Il|a^;t ^ l *li1 f1 -i. <"" .l l' "< i ..jl, "- ^|.*** .*dc .
.. T;'liBIhWl "t itAiEiT loi ""^ifii y ~i I ifn yfa, jtni'r~f "- i't rivi Tiyfi n i i ir;i^pf


tee print are the three bills on which members wanted some additional
consideration. The committee print is a product of the staff which
attempts to incorporate members' general views.
The administration bill, of course, reflects both the Administra-
tion's recommendations and an approach which largely retains pri-
vate inspection agencies at export ports with incraeed supervision
while providing such addition features as for licensing of inspection
agencies, registration of firms involved in grain trading, and provi-
sion for limited original inspection by the Federal Government.
H.R. 8764 by Mr. Smith would establish Federal inspection at the
export points as well as Federal inspection at the inland points with
the option that the Secretary could contract with State inspection
agencies at interior points. There are a number of differences between
the Smith bill and the administration bill.
At this point, without objection, I would like the staff to go over
the principal features of the committee print .
Mr. MELCHER. I have a question, Mr. Chairman.
The CHAIRMAN. Mr. Melcehr.
Mr. MELOHER. If the GAO report is being awaited by the Senate
prior to their marking up a bill, have we decided-firmly that we want
to mark up a bill here without the advantage of whatever the GAO
report might demonstrate and then just pass it over to the Senate not
to be acted upon until sometime next year ?
Has the committee firmly decided that is the course we would follow ?
The CHATIRMAN. I don't think the committee has firmly decided
anything. I say to the gentleman from ontana, that this is something
that remains subject to review by the committee.
As I understand the committee's feeling last week, it did not n s-
sarily intend to pass a bill at this time. Quite frankly, to get a bill onto
the floor by other than suspension would require an exception to the
Rules Committee's action closing down the rules.
In order to obtain an exception, the Speaker would have to make a
request. Moreover, the standard question asked by the Rules Commit-
tee when considering such emergency requests is whether it is possible
for this legislation to become law in this session of Congress.
If there is little or no possibility, the Rules Committee is reluctant
to grant a rule for consideration.
Therefore, as I said to the press and to the members, I do not antici-
pate we would report a permanent type bill and get it to the floor in
this session of Congress.
However, it seems to me that we could accomplish wo othings by pro-
ceeding with permanent concepts:
We could judge whether we wanted to report a temporary bill,
similar to Senate Joint Resolution 88. which would be consistent with
our judgment on the permanent legislation; and we would give some
indication to the administration, the Senate, the industry, and the
agricultural sectors involved, what our current thinking was about
permanent legislation.
Obviously if the GAO report contains conclusions on recommenda-
tions that radically alter our judgment, it would be easy to simply not
ask the Rules Committee for a rule and to, instead, bring the bill back
for further consideration. .


At least that was my own judgment. Subject to any action the com-
with the drafting of permanent legislation.
Mr. Macidana I thauk the chairman.
The CHAIRIN. The committee has not reached any c u
Mr.[LAWD.Should we attempt at this time to narrow down the
three optio that appear to be open to us deag with the, subject of
insetion authority ?
The CHIRMAN. Yes, the Chair feels that would clearly be the most
ee howevr, i ct to the wishes of the
We s d s o o s as our prin ipal ma kup vehicle, rather
Sup or for bils at oe tme and then proceed
The selection of a markup vehicle does not commit the committe
to anything or everything contained in it. We can always amend the
entir character of the arkup instrument.
It would seem to be more sensible to consider something closer to

spection authority. Isthatcorrect? Or is the committee print nrrowed

own to specific proposals
TheCa N. It isnarroweddown to a genral package of pro-
posals with some additionalternative options expressed as options
'he staff and the Chair were unable tolearly identify which di-
rection the committee wanted to take regarding some of the finer
pitThese morecontroversial areas are dealt with in the various

One example is weighing. The committeb print contains three op-
false wghing a Federal criminl offense without allowing the USDA
ing false weighing a criminal o the
right to verify the accuracy of cales and to regulate weighing pro-
sion of regulatory involvement; and the committee must decide which

eral inspection with the option of contracting with State inspection
agencies at export ports while retaining at inland ports the possibility
inspectio agencies, and ederal insection when necessary

dmixed public and privte.

The committee print, on the other hand, is a combination of all Fed-
eral, with State contracting at the export level and private, State, and
Federal inspection at the interior.
Mr. THomE. Except in effect the administio ilwith i
flib of interest-
The CHAIRMAN. That particular provision ofthe aa
bill, Mr. Thone, seems to elimiateertain kins oat
agencies unless they reorganize some of their -procedures It would b
difficult, for instance, for chambers of commerce a of
to retain sponsorship of inspection agencies.
The committee printhas a suggested appro o the
terest which, in effect, states that the Secretary shall deterintha
officially designated inspection agency shall, by its on t,
have- any conflict of interest problems which woul interfere with b-
jective inspection. It allows the Secretary to make thos determi
tions. ... i.
However, it does not-spell out anything in a -detailed way.
Mr. BERGLAND. It appears the committee printprhaps
what may be a conseusus of the committee thinking and-it would be an
appropriate vehicle on which to consider thee matters. ..
I therefore move that the committee print be considered a a, vohicl
and open for amendment.
The CHAIRMAN. Before I put up that motion, all members are re-
minded becaus e we adopt a markup vehicle, it does ot mean we
to take any provision as positive. : .
Th- gentleman. moves -the committee pint be- mad the marup
vehicle and-draft for consideration.
Mr. FITHIAN. It is with a great deal of reluctance I sug t an a
ternate approach because of my esteem for the: gentleman from
Minnesota. :. ..
- I think perhaps it would be apprpriate to discuss briefly the t df
ferent tangents upon which the committee will embark, de
upon which markup vehicle we
While it is quite correct that no markup vehicle precludes amend-
ments, change, and discussion, I think it does perhaps cause the com
mittee to at least discuss those elements that are in the markup vehicle
and either reject them or accept tihem.
One of the differences, as I perceive, between the up a the
Smith bill is that in many instances the committee markup
more for a study of the situatioini the case of grin stand
vides for a stucdy of adulteration and contamination, whereas the
Smith bilJl atherprecisely puts us to t test in this co itt ofs-
cussing what we wolld do about this specifically. -
I-.Are we going to legislate dockageor insrtin of reign il
Are we going to beef up the criminal statteas the Smith bil
Are we going to examine carefully some of the areas that are in the
Smith bill which are not in the committee print
*With all due rspectI would siggest thatit is easr for the
mitt ee to say in the various points as we dicu the Smith bill t that
goes beyond what we want to do and modify it would'be
of start erecting or constructing into the committee print or whatever


becomes the vehicle for markup some of the concepts which are in the
Smith bill.
I think the Smith bill was drawn very, very carefully. It clearly will
not represent everybody's thinking here, and can, would, and should be
modified as we come to those particular points for which there is not
support, majority support, in the committee.
However, I think we might have a more meaningful and certainly
a more thorough discussion if we were to use the Smith bill as the
markup vehicle because think it is true, is it not, t1at it is easier to
modify away from than it is to build anew in committee discussions?
At least that has been my experience in my brief time here.
Therefore, I would urge that we do two things:
First, that we have counsel, as you started to do some 20 minutes
ago, summarize for us the secton-by-section portion of the committee
print is in error.
If that is the case, then I will support the Bergland motion at that
I would respectfully request now that prior to voting on this motion
that we have the committee counsel summarize for us so that everyone
will be brought up-to-date with what it is we are about to embark upon
as a vehicle, and then pending that discussion by counsel make the
decision, if that is the will of the committee, between the Smith bill and
the committee print.
The CHARAN. If the gentleman will yield, I think there are any
number of members who want to go through the section-by-section
analysis; and we should do so unless the members have read this and
know exactly what is in the committee print without some brief
At that juncture the gentleman could offer any substitute he wishes,
the Smith bill, for example. If that fails somebody else can move to
substituto the administration bill, and so on until we arrive at a
Without objection, will you, Mr. Moos, Mr. Bor, and Mr. Allen, pro-
ceed with the section-by-section analysis as expeditiously as possible.
Mr. THNE. ome of us here. Mr. Chairman-not everybody pres-
ent-have gone through this bill now about three, four or five times.
I would second what you say about expediting this.
I agree with Mr. Fithian that we should know generally what is in
the committee print. However. I would hope it would not be a laborious
explanation which most of us have had, as the staff knows, four or five
times already.
The CHAIRMAN. Mr. Bor?
Mr. BOR. Befre we tart, Mr. Chairman, I would like to introduce to
the committee a new associate counsel who has just joined our staff and
who I am very proud to introduce. He is a distinguished alumnus of
the same institution from which I graduated, the General Counsel's
Office in the Department of Agriculture, where he was a director of the
division in charge of appellate litigation.
He served a number of years in the Department. He has been in
private practice, and he also worked a while with the Department of
Defense. I am sure he will be of great assistance to the members of the

name is Tony Imhof.

79-028 0 76 6


Mr. IMHOF. Good morning, Mr. Chairman and members.
The CAIRMAN. We are very happy to welcome yo to the staff, I
am sure all members will look forward to becoming better acquainted
with you.
*Mvr. IMHOF. Thank you, Mr. Chairman.
The CHAIRMAN. You might want to take your place up at the table
here, Mr. Imhof.
Proceed, Mr. Bor, as expeditiously as possible without rushing.
Mr. BOR. The first section is the title of the bill.
The second section contains changes in definition for the purpose of
the act.
One of the important change in definition is in respect to the term
official inspection-to make it clear that it covers the original inspec-
tion, reinspection, appeal inspection, and also provides authority to
determine the condition of carriers or containers for grain insofar as
it may affect the quality or condition of such grain.
This is to amplify a provision which is currently in the law,
Mr. Chairman and members.
Section three is a critical section of the bill. This section provides,
first of all, that inspection at export port locations would be carried
out by the Department of Agriculture or a State under a cooperative
agreement with the Department of Agriculture.
Official inspection at other locations would be made only by State
agencies and other persons who are designated by the Department of
The CHAIRMAN. Could other persons mean private inspectors?
Mr. BOR. It could include firms which could be private business
enterprises. They could be individual proprietorships, boards of trade,
chambers of commerce, and traditional private-type inspection serv-
ices which have been used for a number of years in this field.
The distinction, however, is that you can operate one of these busi-
nesses only if you have been officially designated by the Department of
Agriculture, and the section sets out what the criteria are for the pur-
pose of designation.
One of the criteria is that you must not have a conflict of interest
which would be in violation of the provisions of the bill.
At the top of page 2 of the summary which has been passed around
there is a brief description of what is considered to be an improper
conflict of interest. This is largely left up to the determination of the
Secretary. It provides that no official inspection agency or any mem-
ber, officer, employee or stockholder shall have such a conflict of inter-
est in any other business as to jeopardize the integrity of its inspection
This, Mr. Chairman, differs from the provisions of the administra-
tion bill which would have ruled out completely the use of chambers
of commerce and boards of trade because of the fact they have mem-
bers who also have a financial interest in grain merchandising firms or
grain warehousing firms.
The theory here is that if you have a chamber of commerce or board
of trade with a proper balance of buyers and sellers that while there
would be a conflict of interest, it might well be that the conflict of
interest would not jeopardize the integrity of the inspection service
because of the fact that the buyer is looking over the shoulders of the
sellers and the sellers are looking over the shoulders of the buyers.


However, the Secretary might determine that in particular cases,
becuause of a preponderance f one or the other, or because of other
special factors, there was such a conflict of interest that the organiza-
tion would not be eligible for designation.
We have a substitute page 3 for the committee print which is being
passed out now which you might add to your committee print.
Designations would be for a period of up to 3 years and could be
renewed. The designated agency would have to pay fees to the Depart-
ment of Agriculture to cover one-half of the administrative and su-
pervisory expenses. The balance of the supervisory and administrative
expenses would be borne by the Federal Government.
This differs from the provisions of the administration bill where
all of the supervisory costs would be paid by fees received from the
designated agencies. The costs would, of course, be passed on in the
form of user fees to the people who make use of these services.
The Secretary would have authority to provide for Federal inspec-
tion at times when there was not a designated agency available, a
private inspection service or a State agency available, to perform
the service. That would be done on an interim basis until a State or
private enterprise is qualified to perform the function.
Another series of sections revises the provisions that deal with
official inspection personnel and provide specific authority for the
Department touse its employees to perform inspection and reinspec-
tion and appeal functions and also to monitor in foreign ports grain
inspected under the act.
This provision for monitoring is contained in the administration
bill and also contained in Senate Joint Resolution 88 and the Smith
bill. The language differs somewhat but the intent is pretty much
the same.
This section also authozesthzehe Secretary to hire official inspection
personnel without regard to civil service requirements if they are
currently licensed under the act so it would enable the Federal
Government quickly to get into the picture as it needs to at locations
where it does not have official personnel available to carry out its
The provision for revocation of licenses has been improved upon
from the present law.
As the chair"an mentioned, there are two options in this committee
print dealing with weighing. The first is an option which would re-
quire' theSecretary to conduct a study regarding weighing procedures
and report bak tthe Agriculture Committee not later than 6 months
after the effective date of the act with recommendations for the
strengthening of the service.
The other option provides for the Secretary to prescribe procedures
for weighing and certification of weight and to supervise the weighing
being conducted on grain moved in interstate and foreign commerce.
It also provides that these activities can be carried out through
coonerative agreements with the State.
This was largely drawn from Senate Joint Resolution 88 which
authorizes this same type of activity but for only a 1-year period.
This option provides it on a permanent basis.
A similar type provision is contained in the Smith bill.


There is another provision which relates to weighing which should
be considered in this context. It will be discussed in more detail a
little later in connection with the criminal provisions of the act.
If you ask for a study and do not give the Secretary immediate
authority to prescribe weighing procedures, there still remains a
question as to whether you want to make it a Federal crime for
falsification of weights. You could, for example, provide for a study
and at the same time strengthen the Criminal Code by providing that
it is a Federal crime to engage in intentional falsification of weights.
Another section deals with registration of firms that are engaged
in the business of buying grain for sale and in the business of han-
dling, weighing, or transporting of grain.
This provision would require these firms, grain mechandisers essen-
tially, to register with the Secretary of Agriculture. It provides that
if you prove to be a bad actor by having violated the provisions of
the act, your registration could be suspended or revoked. That would
terminate your ability to engage in this work.
Mr. BERGLAND. IS it proper to ask questions as we go through this ?
The CHAIRMAN. Certainly.
Mr. BERGLAND. What about an instance where an employee of a
firm is engaged in an illegal activity for which he is subsequently
convicted ? Is that employer then in trouble under this provision?
This employee is acting without the employer's knowledge. Can an
employee put the parent company in trouble under this section?
The point is that some of these outfits have employees working
in remote stations with little or no supervision. These people can get
a company in big trouble very fast.
Mr. BOR. The answer to that depends on the extent to which the
employee has a position of responsibility. If your employee, for
example, holds a management position, then I would imagine that
would be imputed to the grain firm.
If your employee is a subordinate official and it is not within the
knowledge of the responsible officials of the firm, the answer then
would be different.
You will notice that in the case of some of the criminal indictments,
they were brought not merely against the employee but also against the
firms and the firms were charged with criminal offenses. I think the
answer again would be pretty much the same as would be the case in the
bringing of a criminal indictment.
This registration section is contained in Senate Joint Resolution 88
as a permanent feature and not merely under the section which gives
the Secretary 1 year interim authority. It is also contained in the
Smith bill It is not contained in the administration proposals.
There are some slight differences betwen the Smith bill and the
Senate Joint Resolution 88 in respect to registration. The Smith bill
has stricter provisions than Senate Joint Resolution 88 on this particu-
lar feature.
Mr. BALDUS. Would you identify where you are? I have lost you.
Mr. BOR. I am at the bottom of page 2 of the section-by-section
Mr. BALDUS. All right.
Mr. BOR. Going now to page 3.


The next provision is entitled refusal of inspection and civil penal-
ties. This relates to additional authority which would be given the
Secretary whereby it can take administrative sanctions against firms
which have violated the provisions of the act.
For example, it strengthens the provisions of the current act which
allow the Secretary to refse official inspection to a firm which has
violated the act.
Secod: It would allow the Secretary to impose civil penalties of
up to $50,000 upon any person who has violated the provisions of the
The provisions as to civil penalties could be an alternative to criminq1
sanions or it could be in addition to criminal sanctions.
These civil penalties could be impoed only after a hearing had bee
provided to the person against whom these were to be assessed.
The next section deal with recordkeeping. It strengthens the recort
keeping requirements of the act, and specifically authorizes USDA
officials to have access to grain elevators or other facilities for the han-
dling of grain so that they can better carry out their investigative and
auditing functions.
The next section is drawn from Senate Joint Resolution 88 and pro-
vides for a study to be conducted by the Secretary concerning contami-
nation, transportation, and handling of agricultural products and for
submission of a report within 1 year after the effective date of the act.
As pointed out in Senate Joint Resolution 88, it points out all agri-
cultural products and is not limited to grain.
Following that e have a section which provides for a study of grain
standards. This would require the Secretary to conduct a study of the
adequacy of grain standards, make such changes in the standards as the
Secretary determines necessary, and wiin 6 months submit a report to
Congress setting forth his findins.
This is also drawn from Senate Joint Resolution 88, a bill passed and
adopted by the Senate.
The Smith bill has stronger provisions and mandates certain changes
which would have to be made in the grain standards by the Secretary of
Following that there is a section which provides for reports of com-
plaints by the Secretary of Agriculture to the agriculture committees of

seas to foreign buyers. The purpose of this is to give the committees a
better understanding of the problem areas which are being addressed
to the Secretary's attention with respect to grain shipped overseas.
There are a few sections which relate to the criminal provisions. They
are designed to strengthen the provisions currently in the code which
deal with violations of the act.
First of all, a change is made in the U.S. Criminal Code to extend
the protection of the code against assault, intimidation, and death
to any employee of the USDA assigned to perform investigations,
inspections or law enforcement functions.
Shis is a retty imprtant provision, Mr. Chairman. At the moment
it is not a Federal crime to assault, intiidate, or kill any of the
ment ffical engaged in these activities. It is a Federal crime
if this occurs to emloees of other Departments of the Govern-


ment but not to the officials and employees of the Department of
This statute has grown like topsy throughout the ears.
Earlier this year the Agriculture Department has suggested this
change to both Houses of Congress. Senate Joint Resolution 88 went
part way in meeting the request. The way the committee print has
been drafted is to extend the protection not merely to investigative
officials and inspection personnel dealing with the Grain Inspection
Act but also if such personnel are carrying out functions under other
acts of the Department.
The committee print also strengthens the penalties for certain pro-
hibited acts under the Grain Standards Act. At the moment violations
are misdemeanors punishable by slight penalties. The more objection-
able violations are taken out of the ambit of the Grain Standards Act
and are made subject to the general provisions of the Criminal Code
so that offenses such as bribery, intimidation, assault, and death are
subject to felony provisions of the Criminal Code and not to the mis-
demeanor provisions of the Grain Standards Act.
The other offenses are set out in a fashion so that you have slightly
more stringent penalties for second and subsequent offenses than is
now the case.
Mr. KREBS. When you say slightly more stringent, first of all, what
do you mean by slightly, and if so, why slightly?
Mr. BOR. The other offenses are characterized as misdemeanors. The
current Grain Standards Act provides for a small fine for violations.
What this bill does is to increase the penalty so that the fine would
be a larger amount and there could be imprisonment for a period
of up to a year.
Mr. KREBS. If I may pursue this, Mr. Chairman.
The CHAIRMAN. Yes, but the idea here is to touch on topics. Each
section is subject to amendment and further discussion later.
Mr. KREBS. I withdraw my request.
Mr. THONE. Most of the violations of section 13 can be made mis-
demeanors ? I understand what you said generally.
Mr. BOR. All of them are now misdemeanors.
Mr. THONE. I understand that.
Mr. BOR. Three of them would become felonies by being made sub-
ject to the general Criminal Code. The balance would continue to be
misdemeanors but subject to more stringent fines and prison terms.
Mr. THONE. Why keep them misdemeanors and why not make them
all felonies ? Is it punitive ?
Mr. BOR. I guess it is a matter of judgment. Strangely enough, the
bills I looked at, with the exception of Senate Joint Resolution 88,
continue to characterize those offenses as misdemeanors.
I might mention Senate Joint Resolution 88 has restructured crim-
inal provisions so as to provide for different levels of fines dependent
on the nature of culpability and has drafted them after the provisions
of the revised Criminal Code as contained in a bill which is before
the Judiciary Committees of both Houses of Congress.
We thought it would be premature to borrow those provisions before
the Judiciary Committees had had an opportunity to work their will
on those bills.
We also asked the advice of the Department of Justice. Their advice
was the same--they thought it was premature.


TheC MAN. If I may interrupt, I should like to mention that
the Judiciary Committee is considering new ways of ndling culpa-
bility in criminal offenses.
iUd the committee print we will, therefore, keep the present struc-
ture of the criminal law and raise misdemeanors to felonies. If the
committees later passes those bills, we can then consider that in this
However, if we wee ee to take it up now when the Judiciary Commit-
tee has not acted, we would have the only situation in the Criminal
Code where culpability would be involved. It would exist nowhere
else in the Criminal Code.
Mr. BALDUS. On that point, then, and relating to the question
Mr. Bergland asked, we have several examples where following the
beneficiary of a misdeed-in other words, if an inspector responded to
bribery he would be the beneficiary of that. The company he worked
for might actually be the losers.
Is it anywhere considered, maybe triple jeopardy, on the amount of
gain that either the individual or the company were to get from this?
Is that being considered anywhere in here so it is not simply a matter
of a set fine because to a large company that is not very much?
The CHAIRMAN. The civil provisions provide for up to $50,000 in
civil p lties after a hearing for every violation of the act. Therefore,
it would be possible to proceed against an employee under the criminal
penalty. If his actions were in concert with the company and there
were 10 different offenses, the company could be fined up to $500,000.
Mr. JoHnso For each offense
Mr. BALDUs. On a shipload that might be one fine.
Mr. CHAIRMAN. What the bill does is t extend the felony offenses
to cover any bribery action under the statute. My personal experience
suggests that corporate officers do not like to be indicted for felony

If there were absolute culpability on the part of a company as a
conspirator or coconspirator and all the officers had knowledge of it,
they would be subect to prosecution.
What the committee print also does to make private inspection
agency peesnnel subjt tto prosecution when they are conducting in-
spection as public officials.
Normally you cannot proceed against an individual for bribery
unless he hos a public office. However, for the purpose of this act,
private inspectors, samples, and so on, would be considered within the
scope of the bribery statute.
all day talking about these particular sections.
What we are trying to do here is to get an overview as to whether
or not we should amend the statute. We will discuss it in greater detail

Mr. BOR. i would like to reinforce what the Chairman has said.
There is a series of actions that can be taken against malfactors-one
Scriminal action;another is civil penalties up to $50,000 for each
firm can be refused official inspection so that it has
cuy oratin in inrstate and foreign commerce.


Second, it you adopt the registration provisions it could mean you
could not engage in the business of merchandising grain if the offense
was great enough.
There is a section in the bill which would authorize the Secretary to
require installation of sampling and monitoring equipment at gram
elevators and would also give him the authority to improve the condi-
tion of carriers and containers for transporting or storing grain.
There is an authorization for appropriations.
The final provision would make the bill effective 30 days after enact-
ment but provide for phasing out of existence over a period of not
to exceed 2 years, agencies which could not qualify under the provi-
sions of this bill.
The CHAIRMA.rA Are there any questions at this point, gentlemen ?
Again, I have no wish to cut off discussion of general questions, but
as to fine tuning, I feel this should occur after we have chosen a vehicle
for markup.
Counsel, does the committee print incorporate any features of the
administration bill, the Smith bill, or Senate Joint Resolution 88?
Mr. BOR. Yes.
The CHAIRMAN. Does the gentleman from Indiana want to move to
substitute the Smith bill?
Mr. FITHIAN. If it is appropriate at this time. Mr. Chairman, I
would renew my suggestion that in many ways the cohesion of the
Smith bill and the rather broader proliferation of the committee print
would make it much more expeditious and we would take up more
topics, I think, in a meaningful way if we use the Smith bill for the
markup vehicle.
I move that as a substitute motion.
The CHAIRMAN. The gentleman from Indiana moves that the Smith
bill, H.R. 8764, be substituted as the committee markup vehicle.
Mr. POAGE. I am not objecting to this from a parliamentary stand-
point. We should use our own, however, rather than the Smith bill
as the basis of consideration at least.
I feel we should follow something we at least know rather than
going in a different direction from what the committee voted. It
seems to me this would be going at it backwards. We could do a whole
lot better to proceed to mark up our own bill rather than marking up
a bill which we felt was not in line with what we wanted.
The CHAIRMAN. What I would like to do today, if possible, is to at
least reach some conclusion as to which of these bills we will use for
Although the committee last week expressed some support for both
the Smith bill and the administration bill, there appeared to be even
greater support for the concept put forth in the committee print.
We now have three bills before us, each of which has gained sub-
stantial support.
If the gentleman from Indiana does not object, we will proceed
with his motion.
If that is carried the Chair will bend the rules a bit if someone else
wants to suggest that we substitute the administration bill.
Without objection, we will proceed to decide whether to use the
Smith bill for the markup vehicle. Again, let me emphasize that this


does not tie anybody to any provisions of any of these proposals but
is merely a means of arriving at something which reflects our thinking.
Mr. BEDELL. I do not want to cause difficulty, but I don't really
know what the differences are, whether we mark up from the com-
mittee print or the Smith bill.
The CHAIRMAN. It would seem to me that to proceed with markup
of a bill containing very few features on which we agree would un-
necessarily overload the amendment process. However, you pick what-
ever you want.
If you think the Smith bill is closest to where you want to go, I
would vote for the Smith bill.
Mr. BEDELL. Thank you.
The CHAIRMAN. On the other hand, if you think the committee
print is the closest to where you want to go, it would be appropriate
to make that the markup vehicle.
This is merely an attempt to avoid more radical markup efforts.
Mr. FITHIAN. Just one moment, Mr. Chairman.
I think we ought to keep in mind that in numerous places the com-
mittee print simply asks or suggests that the Secretary of Agriculture
conduct some kind of study and report back to us.
The CHAIRMAN. Yes; that is true.
Mr. FHN. This clearly negates respsibility for about a year
or a year and a half hence to get at the problems that all of us clearly
understand today exist in the grain inspection system.
If we want to go that way as a committee that is fine, but I think
it is clear that in case after case in the committee print it asks or sug-
gests only that the Secretary of Agriculture conduct a study, or do
this or that. It does not define the standards. It does not come to grips
with the problems facing this country today.
If the committee wishes to confront those head on and make the
kind of responsible decision we should, then I think we have to divert
from the committee print and philosophy of the committee print.
The' CHAIRMAN. Of course, you would have to deviate from any
markup vehicle in order to change any part of it.
For example, if you like the specifics of the Smith bill but do not
like the Federal inspection at certain points, you might propose the
Smith bill and then make a change.
The gentleman can always ofer a substitute. Every time the com-
mitee print calls for a study, he could offer a specific amendment to
change that.
I am forced to reiterate that in adopting one of these vehicles no
one is tied to whaver it does. We are merely trying to expedite this
Mr. POAGE. I would like to comment on that matter of these studies.
Most of the mebers know more about grain than I do, but I have
attended all of our meetings. I know many of the members have not

Swhy there is any problem here. I thinkwe
have to have some studies before we can make intelligent decisions on
a number of these questions. Personally there is a- lot to be understood
about this matter. To me it seems a good idea to have studies regard
meg some of these problems.


The CHAIRMAN. All those in favor of the Fithian substitute that we
use as a markup vehicle the provisions of H.R. 8764, by Mr. Smith of
Iowa and others, raise your right hands.
The CLERK. Five.
Mr. KREBS. Six.
The CHAIRMAN. Those opposed?
The CLERK. Eleven.
The CHAIRMAN. There being 6 ayes and 11 noes, the substitute is
not agreed to.
Mr. THONE. I move the previous question, Mr. Chairman.
The CHAIRMAN. Does anybody want to move to substitute the ad-
ministration bill ?
[No response.]
The CHAIRMAN. If not, then the question occurs on the motion of
Mr. Bergland, to use the committee print as the markup vehicle for
All those in favor raise your right hands.
The CLERK. Eleven.
The CHAIRMAN. Opposed raise your right hands.
The CLERK. None.
Mr. KELLY. I would like to be recorded as voting in the affirmative.
The CHAIRMAN. Did you include Judge Kelly in that ?
The CLERK. I shall, Mr. Chairman.
The CHAIRMAN. All right, we shall use the committee print as the
markup vehicle.
The intention of the Chair at subsequent meetings of the committee
will be to proceed to read the committee print for markup without
foreclosing on amendments at any point.
Without objection, the committee print will be considered before
the committee and open for amendment.
Mr. BERGLAND. Was it your intention we proceed with markup this
The CHAnrAN. Again I shall listen to the committee's wishes.
Would the members prefer to adjourn the meeting at this point in
order to give ourselves an opportunity to study the committee print
a little more thoroughly before proceeding with the markup
Mr. BERGLAND. At the risk of causing a problem when we have a
quorum, we have had such difficulty, this member would like over-
night to read this committee print in detail. I need time to prepare
amendments. I am not ready at this time, Mr. Chairman.
I would hope we can do it tomorrow.
The CHAIRMAN. Tomorrow we have subcommittees meeting.
The Chair, therefore, would intend to call the next meeting on this
subject Thursday, at 10 o'clock, so as not to interfere with subcommit-
tee work.
Mr. POAGE. I have no objection to Mr. Bergland's request.
I wonder, while we are in session, we can do this-unfortunately the
other day when we met with members of the Department on this mat-
ter I had a subcommittee hearing and did not hear all of that
Frankly, I was greatly disturbed by the discussion which took place,
the portion I heard.


It seems to me we do not need any bill or any inspection service. I
say this n the hope somebody who knows these things will give me a
real reason for an inspection service at the ports.
The CAIRMANw. If the gentleman would yield.
Mr. PoAG. Yes. This didn't bind anybody, didn't guarantee any-
thing, didn't do a thing except make somebody think the U.S. Gov-
ernment had inspected and approved this grain when we had done

:Mr. THON. So this is clear, Mr. Poage, you said Department offi-
cials. Yo referred to the briefing we got from GAO.
Mr. POAGE. That is correct. I did not hear all of it.
I would just like to carry that a little further.
The CHAIRMAN. I think it is a good suggestion. I wonder whether
the committee would have any objection to using the remaining 45
minutes for general discussion of any of these matters which are pres-
ently before us, without proceeding to read the bill until Thursday
morning, at which time we shall go over it section by section for
e mTh m e e will not adjourn at this point with the understand-
ing that no members will be disadvantaged if they have other pressing
We shl proceed on that ground. We will continue with discussion
by Mr. Poage.
Is there any objection ?
[No response.]
The CHAIRMAN. When we met with the General Accounting Office
and Department officials earlier, the question came up, of what serv-
ices the grain inspection system provided.
As I recall, the Grain Standards Act began in its present form in
916. Is that correct We have Mr. Galliart and Mrs. Prokop here
today to help us out.
TheCHAIRMAN. Apparently that legislation came about because of
a demand within the industry for an official umpire of sorts to provide
grain inspection.
As i recall, it was stated that many of our purchasers abroad are
upt when there is a dispute over the grade, weight, or quantity of
grai, and, further, that the United States does not have the au-
thority to rovide any adjustments or arbitration of those complaints.
Haing certified grain inspection, it does not then, in the sense of
a private company, stand behind its inspection service.
at fct pted Mr. Poage's question-why not let the buyers
and sellers deal with one another without involving the good faith
Scredibiliy of the Federal Government in tnctions in which
Si l tback up what it does through arbitration in he event
Srecognize the gentleman from Texas.
Mr. POAG. The Chairman has expressed my concern better than

Are we achieving anything with this inspection at export ports?
If so, what is it? Is it worth anything when t gets to the point of


I understand that grain, unlike cotton, does not go in a closed
bundle and necessarily arrive in the same shape it lef the port. I can
understand why it is impossible to say that this will arrive the num-
ber of pounds that will be in it when it arrives, how much dirt will
be in it when it arrives, the number of kernels that will be cracked
when it arrives.
I can understand that the inspector cannot at the American port
certify what this grain will look like in Tokyo or in Rotterdam.
If we put an inspection on that and say this grain is of a certain
quality and of a certain weight when it is shipped-I don't know they
certify as to the weight, but they do as to the quality-why say what
the quality is when you have no way in the world of knowing whether
it will remain that quality during the voyage, and that when it arrives
your certificate, it seems to me, will be bound to create some problem
and if it has any weight at all it will influence the buyer.
Yet the U.S. Government puts the Seal of the Government there
that this was so and so when it left New Orleans. Why put it there?
That is the question that comes to my mind. Why put it there ?
It will not be delivered on that basis. Nobody will receive it simply
on the basis that the United States said it was a certain quality when
it left New Orleans.
Of course fraud can be practiced. I don't care whether it is American
or Japanese or whatever. If you are going to ship that several thou-
sand miles and have an opportunity to lower the quality there will be a
problem, and unless there is a way of checking up on it there are
people who will do it. However, the United States has lost all of its
control over that grain.
We ship cotton the same way. The U.S. grades the cotton. However,
the cotton is in a bale. It would be obvious if it had been opened. You
could not change the quality of the cotton in the bale, anyway, so the
American grading of cotton does carry some validity.
The CHAIRMAN. In the event there is some complaint about cotton
grading, the purchasers have to obtain whatever recourse is available
to them through the seller. Is that right?
Mr. POAGE. Yes, through the Board of Arbitration, and the Cotton
Shippers Association in the United States has arbitration boards in
many of the places to which they ship cotton, that is in Western
Europe and in Japan. There are boards available made up of buyers
and sellers who will arbitrate.
We always ship cotton with the understanding it is subject to
The CHAIRMAN. Is that not the essential difference? With grain
inspection the law provides that, where it is sold by grade, grain must
have the final inspection certificate. However, the contract arrange-
ments provide that the inspection shall be final if it is graded at point
of shipment. Am I correct ?
Mr. POAGE. Yes.
The CHAIRMAN. There is a different contractual arrangement be-
tween the shipment of cotton and the shipment of wheat or grains
of any kind. The trade could provide for boards of arbitration similar
to those of the cotton shippers.
At any rate, the United States has no way of responding if those
arbitrations are not honored.


Mr. POAGE. That is right. The only problem is tha the company
loses its standing among the people with whom it does business and it
ultimately goes out of business if it gets that kind of reputation.
I am asking again why should the United States subject itself to the
indignity of having its inspections so often and so often found to be
I am not saying they are wrong as of the time they were shipped,
but I say the opportunity does exist in the shipment of grain to change
the character of the grain before it arrives at the final destination,
and that that opportunity is taken advantage of from time to time.
It leaves the United States open to the criticism that our Govern-
ment has issued certificates which are false on their face. I do not see
any advantage that the Government gains. I see a great deal of dis-
advantage to our country in issuing that kind of certificate. I can see
no reason why we should not say to the trade:
If you want to buy this you can send your own inspectors here and we will
make a place for yo at the ports where you can inspect it yourself.
The buyer, then, can inspect if he wants to at the American port.
Then your transaction would be final at the time at left the American
port. Whatever happened to it from then on is up to the buyer.
Why should be continue to embarrass the U.S. Government?
Mr. BALDUS. Is the question you pose that everything is all right
so we ought not to do anything-or is it that there is nothing we can
do about it ?
The basic understanding is that we are in a situation where com-
panies deal with countries. Therefore it is not that same kind of con-
tractual arrangement you talk about.
We are also in a situation where our country is having it said that
if we have a choice we prefer not to deal with grain coming from
your country because the inspection system is not valid enough. There-
fore they discount the prices at the port. That is important to me and
my district. That is the compelling reason for our bringing our stand-
ards up to Canadian standards, Australian standards, and European
standards. If we do not do that it is our fault. It is our responsibility
to do that.
As far as damage occurring on carriers, there are ways of telling if
damage occurred on a carrier. If it picked up water that is apparent.
I don ink very many ships stop and pick up a lot of dirt on an
island en route. If so that would be apparent.
I think some damage might be anticipated by a carrier. However,
when that is soit is identifiable if an honest way is put forth to find it.
Mr. POAGE. If u have an entire shipload which moves from New
Orleans to Rotterdam, for example, you would be undoubtedly cor-
rect as to identifying this and there is not much opportunity to
adulterate the grain.
However, if you have a shipment going on the west coast of South
ca m eone deivery at Lima, another to Santiago, another
to Valparaiso, there is no way the world of knowing how that was

Mr. BALD. When a cargo is seale, and if that seal is broken before
re, s rea enoug question the former inspection.
That is true on a carload and shiload.
I "1 * * * *


If they stopped en route ad adulterated it the original seal would
be broken. Then obviously the original inspection would be in doubt.
That is the responsibility of the carrier, it seems to me.
Mr. POAGE. I don't know how much is carried that way. I have seen
some carried that way, where the ship stops at several ports, unloads
some and unloads more elsewhere.
I guess the larger part of it is carried in solid shiploads to
Mr. BALDUS. It should be the master's responsibility to deliver that
in the condition it was received.
Mr. POAGE. Sure. I am not able to understand why the United
States should in effect guarantee this.
Mr. BALDUS. Because we are getting hurt.
Mr. THONE. This whole thing has bothered me considerably, and
more and more as we go along. There is a lot of wisdom to what
Mr. Poage now says.
According to the GAO report, the most common violation in the
New Orleans area is bribery, with inspectors being offered money or
other advantages to pass favorably on the cleanliness of the ships to be
I discussed this the other day. There has been one conviction so far
down there for a violation of the Grain Standards Act. All the rest
have been bribery and all these other extraneous matters.
Mr. BALDUS. What was the purpose of the bribery and who was the
beneficiary of the act ?
Mr. THONE. I didn't understand you.
Mr. BALDUS. What was the purpose of the bribery and who was the
beneficiary of the act ?
Mr. THONE. The bribery was the uncleanliness of the ships. The
beneficiary, I assume, would be the exporter. I am not quite that
familiar, but I am sure that is the way it would be.
Another thing that troubles me, and you touched on it before, staff
member Moos mentioned this the other day, with the added Federal
supervision, and all elements of the industry agree it has been damn
well needed, that the Federal supervision has just broken down
We have gone from an export business of $2 billion and we are
skyrocketing to $21 billion on agricultural products, and $11 billion
on grain in the last year. Therefore, the Federal supervisory per-
sonnel could not do the job anymore.
I asked about whether the Department with the additional $5
million had the tools to do the job. His response was affirmative.
Mr. Moos also indicated the additional supervision has delayed the
chain down to the gulf ports 10 or 20 percent because they are getting
a little more careful, which is excellent. This may in itself reinstate
this inspection credibility overseas which I think the entire GAO
report cries out we need.
However, when you get to this final certificate business, and I don't
know whether I understand it yet-and it is not compulsory though
most of the grain is handled that way because of financing require-
ments and others-the Federal Government does not stand behind that
certificate and cannot stand behind it, as you well know becausein


America the companies own the grain, the Government does not. Other
countries do not have that problem.
Again there was a strong feeling on the part of the people who re-
ported to us the other day, and it is included in the GAO digest, that
generally these countries like to deal with America and its system of
export because it is easy access, the price is right, and the price is right
because we do no a lot lo of this redtape.
This is not an exact science. We all concede to that. You have to
have some leeway here. You cannot screw it down too tightly or the
whole thing will collapse.
What the chairman said is a good point. Just because we centralize
these inspectors at the gulf ports does not mean, as I see it now-and I
was leaning strongly that way-will not solve the basic problem here.
Excuse me. I have talked too long.
SMr. BALDIT. Are you saying there is no problem or, if there is, there
is nothing we can or should do about it?
\Mr. THONE. There is a wide-scale problem obviously. I think the
whole GAO report reflects that.
The first thing we can and have done about it is souped up the Fed-
eral supervisory force here on the inspectors. They just were not having
any inspection at all is what I was told. They were going around them
left and right.
Mr. B;AMU. Then it seems to me it is our responsibility to pursue
it. e chairman has taken the most responsible way he can find cor-
rectively to pursue it.
To stop now would seem to me to be a matter of gross irresponsibility.
Mr. TIIoNE. I am inclined to agree.
One more thought. First, increased Federal supervision was tre-
mendously essential.
Second, most of us concede that the USDA needs some original
inspection authority.
Third, I think the agency responsibility, as the chairman has pointed
out, has to be pinned down in many respects.
All of these criminal penalties have to be beefed up considerably.
That is why I interrogated Mr. Bor regarding that. I am satisfied
as to that.
SThe CHAIRMA. I think what Mr. Poage has said is important. Ap-
rently plaintave been received from foreign buyers that when
th question the validity of our inspections, there is no governmental
rcour for the very reason Mr. Poage pointed out. The Government
does not own the grain, and there is no other provision for settlement.
Therefore, to summarize Mr. Page's argument, if we proceed to
have n Federal inspection at the export points, it could easily
put the. Gvernment in an even more direct position of responsibility
over the inspection of the grain.
he in ction process is not improved dramatically by that
action, Mr. Poage could say, "What have we done We have gotten
te G ernment closer to te inspection process and yet there remains
no methd of arbitration on a government-to-government basis or on
a purchaser-to-government basis."
It is he theory of those supporting Federal inspection that there
would be much tighter supervision resulting in much more satisfactory
inspection with fewer complaints.


That, of course, remains to be seen.
Mr. POAGE. I came into these hearings sometime ago as a strong
believer we should greatly increase the power of the Gover ent in
these inspections, and we wanted to do all these things.
I suppose I am still of that opinion. I suppose I will still vote that
way because I have not seen any other recourse.
However. I am seriously shaken when I learn tht our Government
is certifying the quality of something over which it does not have
control. Its certification means nothing.
I am not prepared to say we ought to have the Government guar-
antee the safe arrival of this grain. That may be the only answer to
it. I would not be ready this morning to go that far.
However, I do not like to have my Government say tht this is 100
percent good when it may be rotten. I don't like my Government to
issue certificates, even without fraud, which may not be valid
I would like my Government, when its says tis is truethat it in fact
be true.
Unless there is some strong and compelling reason for doing I
cannot see why we should issue these certificates unless we ar getting
a substantial advantage by issuing them.
I certainly agree with Mr. Baldus that an breakdown in the quality
of our grain exported ultimately comes back to the producer. That is
the only reason I am interested in trying to pass legislation which will
prevent the exportation of low quality grain under a high quality
Certainly the producer has to pay for that over the years. I think
we all understand that. We must keep up our quality.
However, when they are not keeping it up, or when part of it is not
being kept up, why should the Government inect itself in there and
have the embarrassment of saying that the U.S. Government says
this is perfect when everybody knows it is not?
That is the point I wonder about. What advantage is there to having
this Government certificate?
I know the advantage to the financier. I know that nobody c pay
his draft until he knows what somebody is willing to receive.
We are probably now in the position we never were before. We are
perhaps in the position now of requiring the foreign buyer to pay at
the American port. We are perhaps in a position where he would be
willing to do that now. It might very well be a good opportunity to
change some of thee practices.
Of course the practice comes up that if the Australian ships on credit
and Rotterdam and the United States will not, of coure the Dutch
and German buyer will buy from the supplier who will deliver it to

However, we have about reached the point where most of these sup-
pliers cannot deliver it to them and perhaps we are in a position to
chang he t practice of payment. It is the payment proposition which
requires these certifications as to what goes on aboard the ship. I under-
stand it is not the foreign buyer but a matter of gettin payment on
the draft.
The CMLtAT xA. Mr. Bedell?


Mr. BEDELL. I hould say that as a former businessman who sold
a product, I really get disturbed when we start to talk about what we
can require the customer to do.
As a businessman who sold a product; the customer is right. You
had better try to do everything you can to make that customer buy
your product.
I was aghast when I found out in the GAO report there were coun-
tries who would prefer to buy grain from other countries than America
because they felt quality was better.
We are maybe in a position where we can do that but we will not
necessarily always have a seller's market.
I think we should do everything we can to cause every buyer to want
to buy American grain.
If we are to put a certificate on it, which I think we should, then I
think we should give the Federal Government inspectors whatever
power they need to see that that inspection confirms what they find
the quality of that grain to be.
The reason they do not have any confidence in those certificates now
is because the Federal inspector is putting a stamp on something that
he does not know whether or not it is really that quality. Anybody
shipping any product can only ensure the quality of the product he
I submit if you give an inspector complete authority to reject a
product that he then does have control over the quality of the product
it ships, and we are giving our people that authority.
I submit I am much less concerned about embarrassing the Govern-
ment than I am concerned about being sure we have a product which
we will sell on the market which will enable our producers, our farm-
ers if you will, to get the best price and maintain this strong market.
To me I am of the strong opinion we should do whatever we have
to at the port level to see we are giving those foreign buyers all the
confidence we can in the product we are shipping them.
The CHAIRMAN. I would like to suggest two or three things briefly.
Obviously the Government has an interest in selling as many of its
agricultural products as possible. This is a balance of payments fact;
and, in addition, the Government always takes its share of the profits
in grain exports.
I suppose the real question Mr. Poage raises comes down to what
the attitudes of the buyers would be. Would they be more inclined to
purchase with a overnent-inspection certificate, even though that
was not backed up by Government arbitration, or by simply contract-
ing the responsibility to private firms where they, the purchasers, must
maintain their own inspection. I finally think it comes down to that.
If it appears that purchasers of grain abroad would be more likely
to purchase American products with some form of private contractual
agreement, where they were able to put their own inspectors in our
ports, that is something we should consider seriously.
Mr. POAGE. I agree.
Mr. BEDELL. I es we had that in soybean meal. Soybean meal
importers said they would prefer not to buy from America because
they were not confident in the quality of the soybean meal they were

79-028 0 76 7


The CHAIRMAN. That is a different question, Mr. Bedell, having to
do with the protein level.
Mr. BEDELL. That is not what I say. In soybean meal there are at
this time no requirements there be any certificate and it is left om-
pletely up to the shippers and buyers to negotiate.
At least in the hearing I attended in the Senate they told us they
preferred to buy their soybeans from Brazil rather than from America.
Mr. THOE. The answer is that it is because of the protein content.
Mr. BEDELL. But the soybean meal people I heard said it was not
because of the protein content but becaue of the quality of the meal
and the material in the meal being not what they expected it to be.
Mr. THONE. Look at page 9. However, there is also something in
what you say.
The CHAIRMAN. Mr. Fithian?
Mr. FITHIAN. I am mindful of Chairman Poage's comments. I think
he put his finger on it, and that is essentially what we are dealing with
I say it even goes far beyond his concern that we slap a USDA seal
on a foreign shipment saying it is of a certain grade when we don't
know it is of a certain grade.
In addition, as the GAO points out, 50 percent of our country ele-
vators don't trust the inspection system, either.
If those two elements are not enough to prompt us to get on with
the business of really establishing something which is firm, I am not
sure what it takes to get legislative action.
Clearly in the Canadian system, where they make a final sample
automatically before the ship leaves the port, that is a tremendous
advantage to the buyer at the other end. They can resample
If there is an error they catch that and it is backed up. If it is not
No. 2 corn but No. 3 corn, right then and there it is done.
With a 3-percent factor of Federal inspection there is no way you
can do that, especially under the conditions of the GAO outline.
The key to our operation here ought to be to seek out the kinds of
thincs that would make that certificate meaningful.
If that means final inspection by a Federal inspector at the port
of export, then that is what we ought to do.
If it means-and no one has mentioned this-you empower the
Federal Government with the authority to make good a claim of a
foreign buyer upon reinspection that we sold them something they
didn't get, then make claim on the seller for having adulterated the
grain, or having sold No. 3 rather than No. 2, there are dozens of
ways or options open to us.
Our goal should be the restoration of confidence and assurance on
the part of the foreign buyer that when he buys a certain grade and
a certain weight from the United States, that is what he is gettin.
I admit it is easier to do on cotton. However, a long time ago they
said it could not be done on meat. We solved that problem.
We say now we cannot do it on grain. Canada solved that problem.
The Japanese have figured out even with our sloppy inspection
system how to get around it. They automatically reinspect it.
If the Japanese-good buyers that they are-figured it out, cer-


tainly we should figure out a way of making this uniform across the
The stration of confidence in assuring commercial markets is
tremendsly important to the farmer who sells his grain out in
Indi It just is. It costs him thousands, if not millions, of dollars
a year. That is what I am concerned about.
The 4CAIMAN. I think we can also look at it from the standpoint
expressed by Mr. Poage. What would happen if we took the alterna-
tive an simply eliminated Federal involvement, either by certifying
sction agencies or limiting direct Federal inspection?
It is my feeling personally that that would destabilize the market
f a time rather dramatically. Furthermore it would perhaps lower
confidence until some other system came into effect, It might have a
serious impact on our sales if, in fact, we were not in the seller's
market we have today.
Mr. FITHIAN. Wen we get to the place where foreign buyers do
not even any more i any substantial way complain to the USDA
beuse the track record is that nothing happens with the complaint,
and then they complain to the seller and nothing happens with that,
if that inde is the se, as the GAO says it is, then I think we simply
have to make substantive changes.
The CHAIRMAN. I think that is what they reported the foreign
buyers have told them.
Mr. FrrITHIAN. In my discussion with them this was corroborated
ight down the line. If they had their choice they would buy else-
where, where it is guaranteed they get what they pay for.
Mr. POAGE. Is it guaranteed in other countries? Can you buy from
Australia guaranteed?
Mr. FITHIAN. I uderstand the Canadian inspection system to be
such that it is. I am less familiar with the Australian system.
Even the Brazilian system, and we think of that as a developing
country, they will turn to the Brazilian system to purchase soybeans.
Mr. BALDUS. I think what we want to develop-and I apologize to
Chairman Poage for not precisely understanding his question, per-
haps, but I think in the final analysis we want to do what will enhance
free flow of commerce.
Ultimately we want to develop a system so when I say No. 2 yellow
corn over the telephone to you, you know exactly what I am talking
Mr. POAGE. That is right.
Mr. BALUS. You can be confident it will be that way in my mind
and yours. If something happens in between, that is something we
both have to worry about.
It seems to me that if that is our
TheCHAIRMAN. If I may say something for the record and for the
press at this juncture in order to avoid confusion.
There is no GAO report. There have been discussions with the GAO
which were oral in character. We have no physical document which
constitutes a written GO report at this point.
Althouh members have been referring to the GAO report, what
they are in fact talking about are briefings and conferences with the


General Accounting Office rather than an official report of the GAO.
There is also a series of staff memos on this subject.
That should be stated for the record because it t lead visitors
to assume there is something stamped "GAO Report," which is a
physical, written report, when, in fact, there is no such document.
The other comment I would like to make at this point is that there
are many factors which have affected our grain sales such as price,
quality, access to markets, and so on.
Before the inspection service came into existence in 1916, the volume
of sales was very low. Things have changed substantially since then.
Before we absolutely declare that Federal Government involvement
in the inspection process is bad, it could be argued that the system has
to some extent justified itself in historical terms. We have become the
largest exporters of grain in the world by such overwhelming amounts
that other factors become involved.
The point Chairman Poage raised is interesting. I am as nervous
as he is about what would happen if we simply eliminated the Federal
supervisory inspection process at a time when we have a very im-
portant market.
I think everybody on the committee agrees that our efforts should
sustain and expand the market rather than create circumstances
which would shrink it.
The gentleman from Texas moves that the committee now adjourn.
All those in favor signify by saying aye; opposed no.
The committee will stand adjourned to meet at 10 o'clock on
[Whereupon, at 11:55 a.m. the meeting adjourned.]



Washington, D.C.
The committee met at 10 a.m., pursuant to notice, in room 1301,
Longworth House Office Building, Hon. Thomas S. Foley (chairman)
Present: Representatives Foley, Poage, de la Garza, Vigorito, Jones
of Tennessee, Melcher, Bergland, Bowen, Rose, Litton, Breckinridge,
Richmond, Nolan, Weaver, Baldus, Krebs, Harkin, Hightower, Bedell,
McHugh, English, Fithian, Jenrette, D'Amours, Wampler, Sebelius,
Thone Symms, Madigan, Jeffords, Grassley, Hagedorn, and Moore.
Staf present: Fowler C. West, staff director; Robert M. Bor and
Hyde H. Murray, counsels; William A. Imhof and John E. Hogan,
associate counsels; Steve Alen, staff consultant; Gene Moos, staff
analyst; James E. Springfield, food programs specialist; L. T. Easley,
press assistant; Glenda Temple, Susan Bell and David Wright, staff
The CHAIRMAN. The Committee on Agriculture will come to order.
The Chair wishes to inform the committee that a quorum is present.
Without objection, the Chair considers that the committee print is
before the committee and open to amendment at any point.
Is there objection?
Hearig none, the committee print is open for discussion or amend-
ment at any point.
[The committee print follows:]

i ..' i .i i ." " s I s' f is ^ !i i


NovEMBER 12,1975


Mr. ---------introduced the following bill; which was referred to the Com-
mittee on -------

To amend the United States Grain Standards Act to improve
grain inspection and operations of official inspection agen-
cies, and for other purposes.
1 Be it enacted by the Senate and House of Representa-
2 tives of the United States of America in Congress assembled,

3 That this Act may be cited as the "United States Grain
4 Standards Act of 1975".
6 SEC. 2. Section 3 of said Act (82 Stat. 761, 7 U.S.C.

7 75) is amended by changing subsection (i) defining the
8 term "official inspection", subsection (j) defining the term

9 "official inspection personnel", and subsection (m) defining


Sthe term "official inspection agency", and adding a new
2 subsection (v) to read, respectively, as follows
3 "(i) The term 'official inspection' mean the determina
4 tion (by original inspection, and when requested, reinspec-
5 tion and appeal inspection) and the certification, by official

6 inspection personnel, of the kind, class, quality, or condition
Sof grain, under standards provided for in this Act, or the

8 condition of vessels and other carriers or containers for trans-
9 porting or storing grain insofar as it may affect the quality

1 or condition of such grain; or, upon request of the interested
11 person applying for inspection, the quantity of sacks of grain,

12 r othr facts relating to grain under other criteria approved
1 by the Secretary under this Act (the term 'officially in-
14 spect' shall be construed accordingly).
15 "(j) The term 'official inspection personnel means per-

16 sons licensed or otherwise authorized by the Secretary pur-
17 suant to section 8 of this Act to perform all or specified
is functions involved in official inspection, or in supervision of
9 official ispection, or in oitoring activities n foreign ports

20 with respect to grain officially inspected under this Act.".
21 (in) The term 'official inspection agency' means any
.2 State with which the Secretary has a cooperative agree-

23 ment under subsectio. (e) or any State or local govern-
24 mental aor any person, designated by the Secretary

1 pursuant to an agreement under subsection (f) of section 7

2 of this Act for the conduct of official inspection.".
3 "(v) The term 'export port location' means a commonly
4 recognized port of export in the United States or Canada, `as
5 determined by the Secretary of Agriculture, from which grain
6 produced in the United States is shipped to an area outside
7 the United States.".
8 SEC. 3. Section 7 of said Act (82 Stat. 763, 7 U.S.C.
9 79) is amended by changing subsections (e) and (f) and
10 adding new subsections (g), (h), and (i) to read, re-
11 spectively, as follows:
12 "(e) The Secretary shall cause official inspection to be
13 performed at export port locations, for all grain required or
14 authorized to be inspected by this Act, by authorized em-
15 ployees of the Department of Agriculture or other persons
16 under contract with the Department as provided in section 8,

17 except that the Secretary is authorized to enter into a co-
18 operative agreement with any State for the conduct of all
19 or specified functions involved in official inspection (other

20 than appeal inspections) at such locations within the State
21 if the State establishes to the satisfaction of the Secretary

22 that it meets the criteria of subsection (f) (1) (A) of this
23 section. The Secretary may provide that grain loaded at an'
24 interior point in the United States into a rail car, barge, or



Sother container as the final carrier in which it is to be
2 transported from the United States shall be inspected in
3 the manner provided in this subsecti subseion subsection (f), as
4 the Secretary determines will best meet the objectives of
5 this Act.

6 "(f) (1) With respect to official inspections other than
r7 at export port locations the Secretary is authorized, upon
8 application and payment of the fee required by this section
9 by any State or local governmental agency, or any person,
0 to desi te such agency or person as an official inspection

11 agency for the conduct of all or specified functions involved
12 in oficial inspection (other than -appeal inspection) at lo-
13 cations at which the Secretary determines official inspection
14 is needed, if:
15 (A) the agency or person shows to the satisfaction
16 of the Secretary that such agency or person:
17' "(i) has adequate facilities and qualified person-

18 nel for the performance of such official inspection
10 functions;

24 instructions thereunder;
I':|' y, "* t.. *..; it' (;*) foiH g and provide

"; :.. pesnne as are necessary


1 "(iii) will not charge official inspection fees that

2 are discriminatory or unreasonable;
3 "(iv) does not have a conflict of interest pro-
4 hibited by section 11 of this Act;

5 "(v) will maintain complete and accurate
6 records of its organization, staffing, official inspec-
7 tions, and fiscal operations, and such other records
8 as the Secretary may require by regulation;
9 "(vi) will comply with all provisions of this
10 Act and the regulations and instructions thereunder;
11 (vii) meets other criteria established in regu-
12 lations issued under this Act relating to official in-
13 spection agencies or the performance of official
14 inspection; and
15 "(B) the Secretary determines that the applicant

16 is better able than any other applicant to provide official
17 inspection service.
18 "(2) Not more than one official inspection agency for

19 carrying out the provisions of this Act shall be operative at
20 one time for any geographic area as determined by the
21 Secretary to effectuate the objectives stated in section 2 of
22 this Act, but this subsection shall not be applicable to pye-
23 vent any inspection agency from operating in any area in-
24 which it was operative on August 15, 1968. No .Stateor