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standard quality wheat for milling and food purposes. Seed wheat was left free from quota limitations. Likewise, wheat classed as “unfit for human consumption," used mainly for animal feeds, was exempt from quota. Import duty rates for standard grades of wheat and for certified seed wheat were 21 cents per bushel. A 5-percent ad valorem rate applied to wheat unfit for human consumption. These proclamations had been in effect for several years before GATT was organized in 1948. The treaty nations knew of these quotas and duty rates on wheat and continued to observe them until 1953.

Circumventing long-established practice and distorting the clear meaning of the Tariff Act and the section 22 proclamation, foreign producers began artificial treatment of wheat to make it unfit for human consumption. This made possible entry of imports at the 5-percent ad valorem duty rather than the 21-cents-perbushel rate. Since there are no quota limitations on seed wheat, the only purpose was to avoid the payment of the legitimate import duties on standard or better quality wheat.

This distortion of our law makes it impossible for the American seed wheat farmer to make a profit. It deprives the United States of proper customs revenues. It makes a fiction of the effective operation of the escape clause of the Agriculture Adjustment Act. Finally, it opens the way for lowering the quality of seed wheat imports into the United States.

The import duty of 42 cents per bushel on wheat provided in the Tariff Act of 1930 was reduced to 21 cents under the reciprocal trade agreements program. Seed wheat was admissible at the same duty rate as standard-grade wheat. These import duty rates did not recognize the specialized production costs of the seed-wheat producer. His costs for special planting practices, certified seed, inspection, and testing average about 50 cents per bushel more than for standard grades of wheat.

The entry of seed wheat at 5 percent ad valorem duty has destroyed any margin of income the American seed wheat farmers had to meet his extra production costs. He is actually in a worse position than the producer of commercial grain who is protected not only by quota limitations but by an import duty 100 percent higher than paid on seed wheat at the present price levels.

In the case of Canada, the import quota on wheat is set at 795,000 bushels. By avoidance of proper classification and duty payments, about six times the quota allowance is entering the United States, mostly at substandard duty rates. This means that the duty collected is about one-half what it should be and the United States loses the corresponding customs revenues.

Section 22 of the Agriculture Adjustment Act was enacted by the Congress to protect the American farmer and to make possible the operation of the Nation's farm program. Once a proclamation under this section is issued, it has the effect of law. It is not subject to alteration by GATT. The avoidance of such proclamation or the distortion of its clear intent, as in this case, can become a precedent for other evasions of the intent of the Congress and the Executive. American seed wheat farmers are facing unfair competition. Previously their certified seed was in competition with imports of certified seed. Imports of seed wheat, to be eligible for entry outside of quota, had to qualify at entry as certified seed wheat. Under the device being used, there need be no showing that the wheat is certified seed. It need qualify only as "unfit for human consumption." Prior to 1953, the customs service knew accurately the volume of certified seed wheat entering the country. Today, there are no accurate records indicating the quality of such imports. If it is not already the case and some farmers are complaining about it-wheat farmers may be buying seed wheat of doubtful quality.

This loophole in our import duties must be very profitable to foreign producers. Prior to 1953, imports of seed wheat were negligible and the American seed wheat grower supplied most of the domestic market. Since 1953, seed wheat imports have jumped from a little more than 6 million pounds to more than 250 million pounds at the rate for the present fiscal year, an increase of more than 4,000 percent.

In view of these developments and these facts, we can consider carefully the almost prophetic warning sounded by the Tariff Commission in 1942. In its recommendations on the proposed suspension of seed wheat from import quotas, the Commission observed that the exemption might prove satisfactory "provided sufficient safeguards against abuse of suspension were provided,” in the proclamation which was later issued.

Adequate safeguards do not now exist. The Department of Agriculture, in its favorable report on this bill, the seed wheat producers of Michigan and elsewhere, and, I am sure, the members of this subcommittee recognize that this proclamation has been abused. The enactment of the pending bill will close the import duty loophole, provide some safeguards and stop the abuse. Such action would be in the interest of justice under the law, of fairness to the American farmer, and of national integrity between this country and its neighbors. I trust that the committee may report this legislation favorably at an early date so that Congress may complete action during this session.

In recent weeks, I have had hundreds of letters commenting on my bill to restore import duty rates on seed wheat imports, H. R. 10205, pending before the Ways and Means Committee. The following extracts apply equally well to the bill before us today, H. R. 3360, which I wholeheartedly support:

"I heard about the bill you introduced in the House in regard to Canada shipping seed wheat into Michigan and destroying our seed wheat market. I raised certified wheat until this year and quit because I could not compete with the cheap Canadian wheat.

"GEORGE WENDLING, North Branch, Mich."

"We certainly appreciate your efforts in behalf of Michigan certified seed producers. *** Michigan producers have been forced to meet this competition of Canadian imports. Elevators claimed because of the threat of competition between retailers of seed wheat, they have been forced to take on the cheaper line, although they know that Michigan standards are higher and producers' costs are higher. The legislation should make the necessary legal correction for the importation at substandard duty rates. To continue as in the past will only result in a lack of interest in the production of high-quality seed wheat and a surrender of our markets to outside growers.

"E. THOS. LEIPPRANDT, Pigeon, Mich."

"As a certified seed grower, I am having a difficult time to stay in the seed business. We are facing unfair competition through imported seed from different countries which do not comply with standards of certification.

"We are gratful very much that you introduced the bill which would remedy this inequality ***"

ERMINE FINKBEINER, Saline, Mich.

**this situation makes it clear that the intent of the law is being circumvented and I heartily endorse the legislation you have introduced.

"To me, there is considerable difference between wheat unfit for human consumption as a result of the hazards of farming and wheat deliberately made unfit for human consumption but obviously treated to improve its quality as seed."

J. F. TANTON, Sebewaing, Mich.

"I produce about 5,000 bushels of seed wheat a year and it is a very important crop to me.

"In the past 3 years it has been a marginal crop. In the past 2 years I haven't been able to sell my seed wheat at a marginal price until most of the imported seed wheat is sold. If the legislation fails to pass, more seed wheat will be imported. Our Michigan seed wheat producers will then have to sell at a loss to compete with our good neighbor to the north."

LOREN GETTEL, Pigeon, Mich.

"I am writing in regard to our certified seed problems ***. I think we have more trouble with wheat than other seeds. It is quite a lot of work to prepare ground or fields for this seed. The fields have to be cleaned free from weeds: then the fields of grain have to be inspected. Then the grain has to be inspected again in the bin, then cleaned and graded and pass a very stiff inspection * *. "When we call on the jobber or wholesale market, we find them filled up with Canadian wheat and they tell us they can buy Canadian wheat much cheaper than our jobber or wholesale price. As a result, our wheat goes unsold and we derive no profit from all of our hard work. There should be something done about this situation. We, the certified wheatgrowers, are looking to you for some help."

FRANK E. RICHARDSON, Concord, Mich.

The

"I have been a certified seed grower for over 20 years ** It was the fall of 1955 when I first noticed that several elevators had imported some Canadian certified wheat. Obviously I had to drop my price to get any orders. same in 1956 and 1957 only many more dealers sold Michigan wheatgrowers wheat at 20 cents under our certified costs."

JESSE E. TREIBER, Unionville, Mich.

Mr. MCINTOSH. Mr. Chairman, I just wanted to add my own comments to those previously made. I represent the Seventh District of Michigan which although it is a mixed district has some substantial agricultural production and three of my counties have in the past had an outstanding participation in the certified wheat program.

As my statement indicates, in recent years due to the use of the techniques of chemically treating the wheat, the general certified seed grower in my three counties is in a position now that the market price that he can realize on seed wheat is not equal to the cost of production of the certifying it over the normal production cost of wheat.

So we have a situation in my district which is quite clearly developing where the men that are now substantial and active certified seed wheat growers are in a position of having to withdraw because of this competition, and in my statement I cite some letters of men who are in a position where it is just not worth their time and effort to continue.

I would echo the comments made by Mr. Bentley.. I introduced a bill at the request of the certified seed people in my area, which is a little different although it is designed to accomplish the same thing and it is now pending in the Ways and Means Committee.

I appeared here this morning to express my personal concern and to urge the committee to give serious consideration to this problem because, as has been detailed in previous testimony it really is an inadvertent situation which developed when the Canadian producer discovered that by chemically treating the wheat they could bring it in under a tariff section which was designed to take care of this seed wheat and so we have a novel situation of a premium rate wheat taking advantage of an exclusion which is designed to allow animal feed to be brought in at a cheaper rate and the effect of that, without qualification I might say in my own area, represents one of the most active certified seed areas in the Midwest, is that we are rapidly approaching the position where we have got either to give some degree of protection to these men or they are going to quit operating as seed wheat growers. I think that that would be bad in the sense that we should have at least some certified seed production here in the United States.

I have no desire to belabor the subject too much. I think my statement is comprehensive.

Mr. ALBERT. We thank you for your statement and your comments. Are there any questions?

(No response.)

Mr. ALBERT. If not, the committee appreciates very much your coming here this morning.

I would like before we adjourn to decide whether to have witnesses from the State Department so that we can get their side of the story before we attempt to consider this legislation.

(Discussion off the record.)

Mr. ALBERT. Is there any other business?

22856-58-pt. 1-11

(No response.) Mr. ALBERT. If not, the subcommittee stands adjourned until Friday, to allow the State Department to be heard, at 10 o'clock. (The following letter was submitted to the subcommittee:)

AMERICAN FARM BUREAU FEDERATION,
Washington, D. C., March 25, 1958.

Hon. CARL ALBERT,

Chairman, Wheat Subcommittee,
House Agriculture Committee,

House of Representatives, Washington, D. C.

DEAR CONGRESSMAN ALBERT: This is with reference to H. R. 3360 which the Wheat Subcommittee of the House Agriculture Committee is now considering. After an inquiry into the facts of Canadian seed-wheat imports, we have concluded that some corrective action would be desirable. We agree that wheat for seeding purposes which has been treated with poisonous substances should be subject to the full tariff rate under paragraph 729 of the Tariff Act rather than the reduced rate applying to wheat unfit for human consumption. We also agree that treated seed wheat should be included in the import quota established under Proclamation No. 2489, issued May 28, 1941 pursuant to section 22 of the Agricultural Adjustment Act of 1933.

We feel it would be desirable to avoid classifying poisoned wheat as “fit for human consumption." We also feel that it would be better for the executive branch of the Government to amend Proclamation No. 2489 so as to include treated seed wheat within the quota than for Congress to deal with this problem legislatively.

We believe that the objective of making treated seed wheat subject to the full rate of duty under paragraph 729 of the Tariff Act could be accomplished by language providing that the phrase "unfit for human consumption" appearing in paragraph 729 of the Traiff Act of 1930 is hereby amended by adding at the end thereof, the following: "other than wheat for seeding purposes which has been treated with poisonous substances."

We have requested the Department of Agriculture to institute action to bring treated seed wheat within the quota established by Proclamation 2489. We request this letter be made a part of the record.

Very truly yours,

JOHN C. LYNN, Legislative Director.

(Whereupon, at 10:45 o'clock the hearing was recessed, to recon

vene at 10 a. m. Friday, March 28, 1958.)

WHEAT-TREATED FOR SEEDING PURPOSES

FRIDAY, MARCH 28, 1958

HOUSE OF REPRESENTATIVES,

COMMODITY SUBCOMMITTEE ON WHEAT
OF THE COMMITTEE ON AGRICULTURE,

Washington, D. C.

The subcommittee met, pursuant to notice, at 10: 10 a. m., in room 1310, New House Office Building, Hon. Carl Albert (chairman of the subcommittee) presiding.

Present: Representatives Albert, Jones, Watts, Belcher, Smith, and Dague.

Also present: Gustave Burmeister, Assistant Administrator, Foreign Agricultural Service, United States Department of Agriculture; Mabel C. Downey, clerk; John J. Heimburger, counsel.

Mr. ALBERT (presiding). The committee will please come to order. We have met today pursuant to the last adjournment to consider certain bills the purpose of which is to remove wheat for seeding purposes which has been treated with poisonous substances from the "unfit for human consumption" category for the purposes of section 22 of the Agricultural Adjustment Act of 1933.

One of our colleagues, on the committee, is the author of one of these bills, H. R. 4663, introduced by Congressman Krueger and without objection I will submit for insertion into the record at this point a statement on his bill by the gentleman from North Dakota, Mr. Krueger.

(The statement referred to is as follows :)

STATEMENT OF HON. OTTO KRUEGER, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NORTH DAKOTA

Mr. Chairman and members of the committee, I appreciate the opportunity to present at this time my views on the need for the enactment of the seed wheat imports legislation, as provided in H. R. 11581. This measure, introduced by Mr. Bentley, of Michigan, is similar to H. R. 4663 which I introduced last year, but includes certain amendments suggested by the Department of Agriculture and the Treasury Department.

There are two primary reasons this legislation should be enacted. First, it will close a loophole which has brought nothing less than disaster to the United States seed wheat producer and has directly added to American wheat surpluses. Secondly, it has been done at a loss of roughly 11 cents a bushel to the Government because of the lower duty which has been paid on the imported seed wheat.

I believe the committee is fully aware of the history of this matter. Until recent years, there was no problem for the law seemed adequate in all respects. Then, foreign producers began treating seed wheat with substances which made it unfit for human consumption, but not for seed. As a result, it came into this country at a 10 cents a bushel duty rather than the established 21 cents a bushel duty. Since there are no quotas on seed wheat, the purpose was obvious--to escape the payment of the legitimate import duties.

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