that the U.S. beet molasses market will be flooded and disrupted again this year and that without corrective action the same disruptions will occur in future years.

Evidence of the disruption that these large increases in imports have had in 1968 and 1969 is the fact that returns realized per ton of molasses sold in 1968 and 1969 by the processors I represent declined more than 30 percent from the average level of the preceding 5 years.

What has caused these sharp increases in imports?

Our experience is that two factors are chiefly responsible: (1) Export subsidies on French and Italian beet molasses in 1968 and on French molasses in 1969; and (2) most important, socalled triangular trading in Cuban molasses by countries otherwise friendly to the United States.

In 1968, export subsidies were granted by France and Italy of 85,000 metric tons of beet molasses. The U.S. market that year bore the full brunt of these subsidized sales with imports from these two countries of approximately 88,000 metric tons.

In late June of last year, 1969, the French Government awarded export subsidies on 70,000 metric tons of beet molasses, with export licenses to be valid until June 30, 1970. U.S. Government reports of molasses imports from June 1969, when the subsidy was granted by France, through February 1970, show that only some 10,000 tons of such subsidized molasses have thus far entered the United States. It was learned late last month (May 1970) that the owner of the unexported part of such 70,000 metric tons of such molasses was applying for extension of the export license beyond June 30, 1970.

U.S. law, section 303 of the Tariff Act of 1930 (19 U.S.C. 1203), calls for the levy of a countervailing duty upon the importation into the United States of any commodity upon which an export subsidy is paid by a foreign country. Since early April 1970, the U.S. Treasury Department, Bureau of Customs, has had underway an investigation under this law. Of this investigation and our part in it I shall say more in a moment.

In order to obtain all possible information concerning the thus far unexported part of such 70,000 metric tons of subsidized French. molasses, which threatens further disruption of U.S. beet molasses markets, we have talked directly with the French Government. On June 5, week before last, we were informed by Monsieur Rool, the French Government official in charge of sugar and molasses export subsidies, that the export license for the subsidized French molasses has been extended to September 1, 1970.

Monsieur Rool also told our representative in an interview in Paris that of such 70,000 metric tons of subsidized molasses, 40,000 tons will have been exported from France by July 1, 1970, and the remaining 30,000 tons will have been exported by September 1, 1970. We cannot be positive that all such molasses will be imported into the United States. We know from the owner of such molasses, however, that a substantial quantity, if not all, of such subsidized molasses will enter the United States.

When knowledge of these French export subsidies on molasses was officially obtained by the U.S. Government in April this year, the Treasury Department, Bureau of Customs, initiated an investigation under the U.S. countervailing duty statute. The American sugar beet

growers and processors I represent, by letter of April 20, 1970, set forth to the Commissioner of Customs the fact of these subsidies and asked the Commissioner to take all necessary steps to levy a countervailing duty as quickly as possible. By letter of May 27, when we learned of the application to extend the French export license, we informed the Commissioner of such fact. On June 5, the same day we learned from Paris of the actual extension of the export license to September 1, we informed the Commissioner of Customs of this fact, as well as of the fact that a substantial additional quantity of the subsidized French molasses would definitely enter the United States. We urged the Commissioner to act with all possible dispatch, pointing out that the clear purpose of the countervailing duty statute would be frustrated if the subsidized molasses entered the United States before a countervailing duty is levied.

The French and Italian export subsidies to which I have referred are described in an official report dated March 23, 1970, made by the United States Mission to the European Communities, Brussels. I hereby offer a copy of this report and ask that it be included as an exhibit in the record of this hearing.

Mr. GIBBONS. Without objection, it will be so included in the record of the hearing.

(The report referred to follows:)

U.S. MISSION TO THE EUROPEAN COMMUNITIES, BRUSSELS, MARCH 23, 1970

MOLASSES-EXPORT SUBSIDY PROCEDURES

Molasses first became subject EEC market regulations July 1, 1968. As a by product of sugar production, it undoubtedly benefits indirectly from the high price supports for sugar. Hence direct support for molasses is minimal. There is no market intervention. There are variable import levies, and there are two procedures for granting export subsidies. Export subsidies under either procedure are subject to export licenses and are eligible for reimbursement from FEOGA (European Agricultural Guidance and Guarantee Fund). Under the first procedure the EEC Commission each month establishes and publishes an export subsidy rate for molasses based on the difference between EEC prices and world market prices. To date, this subsidy has always been fixed at zero. Thus under this procedure-regarded as the "normal" one-exports have in fact received no direct assistance.

However, the second-or "exceptional"-procedure has accounted for most exports since the end of 1968. According to the Commission, even though the EEC is a net importer of molasses,* the sugar support system prevents any substantial difference in molasses prices between producing and importing areas of the Community. As a result, intra-Community trade is impeded, surpluses build up in producing areas, and the Commission must authorize an "exceptional" export subsidy valid only for these surplus areas (parts of France and Italy). Under the "exceptional" procedure, the Commission authorizes the Member States in question to grant an export subsidy on a specific quantity of molasses, to be exported from specific ports. The amount of the subsidy is established by tender, but is subject to a maximum rate fixed by the Commission.

According to the Commission, this "exceptional" authority was used once in

1969:

In June 1969, the Commission authorized France to export 70,000 metric tons (about 13 million gallons) of French beet molasses with a maximum subsidy of $0.75 per 100 kilograms (about 4.0 cents per gallon). The notice of tender was published June 14, 1969 (Enclosed). Bids had to be submitted by June 24, 1969. Exports could be made under this authority any time until June 30, 1970.

(1968 imports 153,000 tons; exports 109,000 tons).

We have no way of knowing how much of this 70,000 tons has been exported so far, or exactly when.

In addition to the 1969 tender, two similar tenders were authorized by the Commission on November 14, 1968:

*

France was authorized to export 35,000 tons (6.6 million gallons) with a maximum subsidy of $1.80 per 100 kilograms (9.6 cents/gal), and Italy was authorized to export 50,000 tons (9.4 million gallons), with a maximum subsidy of $2.25 (12.0 cents/gal) for 48,000 tons and $1.00 (5.3 cents/gal) for the remaining 2,000 tons. Bids in both cases had to be submitted by December 10, 1968. Exports could be made under this authority until May 31, 1969. In these two cases the maximum amount of the subsidy was not decided until December 11, after all bids were in. In the 1969 tender the maximum subsidy was published in the notice of tender.

The total of the 1968 and 1969 tenders amounts to 155,000 tons (29 million gallons). According to the Commission, since July 1969, licenses issued for exports of molasses by the normal procedure-without subsidy-amounted only to 6,675 tons for France through February 11, 1970, nothing for Italy, and only small quantities for the Netherlands. It is reasonably clear, therefore, that most exports have been by the tender procedure.

Since beet sugar production in the Community is provisionally estimated at a record of 7 million metric tons for the current 1969/70 season, it can be assumed that the supply of molasses available for export will also be very high. Exports the years 1966, 1967 and 1968 are shown on the enclosed table.

TENDER OF THE "FUND FOR INTERVENTION AND REGULARIZATION OF THE SUGAR MARKET, PARIS"

NOTICE OF TENDER FOR THE EXPORT OF FRESH BEET MOLASSES TO THIRD COUNTRIES (NO. 1/1969)

I. Purpose of the Tender, Periods to be Observed and Maximum Amount of the Subsidy

1. A public tender shall be undertaken for the export to third countries from the ports of Le Havre, Rouen and Dunkirk of 70,000 tons of French beet molasses falling under Tariff position 17.03 of the Common Customs Tariff.

2. The tender shall be carried out according to the provisions of Article 6, paragraph 2, of Regulation No. 766/681, to the provisions of Regulation No. 839/68 and to the provisions which follow:

(See O.J. Nos. L. 279, 11/16/68; L 302, 12/18/68; and C 128, 11/30/68.) 10.J. No. L 143 of June 25, 1968, p. 6.

2 O.J. No. L 151 of June 30, 1968, p. 47.

3. The present notice of tender invites all interested parties to submit bids concerning the subsidy necessary to exportation. The bids, accompanied by an affidavit for a bank guarantee or for a proof that the tender surety has been established, must be sent sealed in two envelopes, at the latest by Tuesday, June 24, 1969 at 10 hours to the following address, placed on the outside envelope: "Fund for Intervention and Regularization of the Sugar Market (FIRS) 46, Ave Victor Hugo, Paris XVI"

The following notation must appear on the inside envelope, also sealed: "Bid presented according to Tender Notice for Export of Beet Molasses to Third Countries, No. 1/1969".

If the bid is sent by mail, it should be sent by registered letter.

4. The maximum amount of the subsidy in the sense of Article 5 of Regulation No. 839/68, shall be fixed at 0.75 u.a. per 100 kgs of beet molasses.

II. Conditions for the Bid

1. The bid must show :

a) the name and address of the bidder;

b) the declaration that the product which is to be exported is molasses, of sound, true commercial quality, having a total sugar content of at least 48%, falling under Tariff Position No. 17.03 of the Common Customs Tariff and produced from beets harvested in France;

c) the subsidy necessary for exportation expressed in units of account per 100 kgs of beet molasses.

2. A bid shall be valid only:

a) if it concerns at least 1,000 tons of French beet molasses;

b) if it is accompanied by a declaration of the bidder by which he obligates himself for the quantity of product for which he may become the awardee, to request an export certificate and to establish the surety required for it;

c) if it is accompanied by a proof that the bidder has established a tender surety;

d) if it includes all the information referred to in point I, para 1 above. 3. A bid may state:

a) that it is not to be considered as submitted unless the tender award concerns the entire quantity bid;

b) that it is to be considered as submitted only if the tender award decision takes effect June 25, 1969.

4. The bid, as well as the declarations and proofs referred to in points 2 and 3 above, are to be written in French.

5. The bids not meeting the conditions of the tender, or containing conditions other than those provided for, shall not be taken into consideration.

III. Surety

1. The tender surety shall amount to 0.98 French francs per 100 kg. of beet molasses.

2. The surety shall be established in cash or in the form of a guarantee given by a credit establishment in favor of the Fund for Intervention and Regularization of the Sugar Markets (FIRS).

3. The tender surety shall be cancelled for the quantity for which the bidder: a) has not become the awardee, or

b) has obtained an export certificate on the basis of the tender award. 4. The tender surety shall be forfeited for the quantity for which the bidder: a) has withdrawn the bid before the decision of award of tender, or

b) has not requested after the award of tender an export certificate and has not deposited the export surety in the period referred to in point IV, paragraph 2 below.

5. However, the tender surety shall not be forfeited to the extent that, as a result of circumstances to be considered as case of force-majeure, and when there exists a request for taking this circumstance into consideration, the awardee has not been able to satisfy the obligation referred to in point IV para 2 below.

IV. Award of tender

1. The tender shall be awarded to each bidder whose bid does not exceed the maximum amount of the surety.

2. The tender shall give rise to:

a) the right to the issuance of an export certificate, mentioning the subsidy fixed in the bid, for the quantity for which the tender was awarded; b) the obligation to request an export certificate for that quantity.

The export certificate shall be valid June 30, 1970.

That certificate shall be valid only for a transaction carried out in France. The right and the obligation arising from the award of tender are not transferable. They may be exercised or fulfilled only within a period of two weeks beginning from the day of receipt of the communication referred to in point 3 below.

3. The awardees shall be informed of the result of the award of tender by a declaration of award of tender.

The declaration of award of tender shall indicate:

a) the identification of the tender procedure;

b) the quantity for which the tender is awarded;

c) the subsidy to be granted for the quantity referred to in sub-para b. Mr. REEVE. We strongly believe, and no reason to the contrary has been cited, that the statute calls for the levy of a countervailing duty. Such a duty would provide, as intended by the statute, a measure of protection against the unfair competition of subsidized imports, if the duty is levied in time.

We must recognize, however, that the countervailing duty would provide only partial, even though valuable relief, from the injury being suffered by U.S. growers and processors. This is because the duty would apply only to imports from the one or two countries which have granted specific export subsidies, while much of the excessive and injurious importation comes from several other countries. Of the reasons for this, I would like to speak now.

Even more important and fundamental, in our view, as a cause of the direct and substantial injury being suffered by American sugar beet growers and processors is the so-called triangular trading with Cuba by countries otherwise friendly to the United States. For the past several years, while the U.S. prohibition on trade with Cuba has continued in effect, one British company is reported to have bought virtually the entire Cuban cane molasses production.

This Cuban molasses, according to our information, is shipped largely to the European area. By using cheap Cuban molasses instead of locally produced beet molasses, European area countries can and do release local beet molasses for export to the northeastern United States where beet molasses, because of its particular constituents, is in special demand by a few large corporate buyers for use in making citric acid, yeast, and pharmaceutical products.

It is revealing to look at exports of sugar beet molasses from the United Kingdom to the United States in the recent past. During the 5-year period, 1960-64, except for an insignificant quantity in 1963, the United Kingdom exported no beet molasses to the United States. During each of the most recent 5 calendar years, 1965-69, the United Kingdom was a major exporter of sugar beet molasses to the United States, with the heaviest exports on record in 1969. Yet, according to our information, during the entire 10-year period, 1960-69, there was relatively little change in the United Kingdom's production of beet molasses. It appears that the molasses traders of the United Kingdom have found a marked economic advantage in substituting cheap Cuban cane molasses for local beet molasses in domestic uses and exporting beet molasses to the United States. We believe the same thing has