AMENDMENTS TO THE WAREHOUSE ACT

MAY 1, 1929.-Committed to the Committee of the Whole House on the state of the Union and ordered to be printed

Mr. CLARKE of New York, from the Committee on Agriculture. submitted the following

REPORT

To accompany H. R. 7)

The Committee on Agriculture, to whom was referred the bill (H. R. 7) to amend sections 4, 6, 8, 9, 10, 11, 12, 25, 26, 29, and 30 of the United States warehouse act, approved August 11, 1916, having considered the same, report thereon with a recommendation that it do pass.

The bill reported herewith reads as follows:

H. R. 7, Seventy-first Congress, first session

A BILL To amend sections 4, 6, 8, 9, 10, 11, 12, 25, 29, and 30 of the United States warehouse act, approved August 11, 1916, as amended

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That section 4 of the United States warehouse act, approved August 11, 1916, as amended (U. S. C., title 7, sec. 244), is amended to read as follows:

"SEC. 4. That the Secretary of Agriculture, or his designated representative, is authorized, upon application to him, to issue to any warehouseman a license for the conduct of a warehouse or warehouses in accordance with this act and such rules and regulations as may be made hereunder: Provided, That each such warehouse be found suitable for the proper storage of the particular agricultural product or products for which a license is applied for, and that such warehouseman agree, as a condition to the granting of the license, to comply with and abide by all the terms of this act and the rules and regulations prescribed hereunder." SEC. 2. That section 6 of the United States warehouse act, approved August 11, 1916, as amended (U. S. C., title 7, sec. 247), is amended to read as follows: "SEC. 6. That each warehouseman applying for a license to conduct a warehouse in accordance with this act shall, as a condition to the granting thereof, execute and file with the Secretary of Agriculture a good and sufficient bond to the United States to secure the faithful performance of his obligations as a warehouseman under the terms of this act and the rules and regulations prescribed hereunder, and of such additional obligations as a warehouseman as may be assumed by him under contracts with the respective depositors of agricultural products in such warehouse. Said bond shall be in such form and amount, shall

have such surety or sureties, subject to service of process in suits on the bond within the State, District, or Territory in which the warehouse is located, and shall contain such terms and conditions as the Secretary of Agriculture may prescribe to carry out the purposes of this act, and may, in the discretion of the Secretary of Agriculture, include the requirements of fire and/or other insurance. Whenever the Secretary of Agriculture, or his designated representative, shall determine that a previously approved bond is, or for any cause has become, insufficient, he may require an additional bond or bonds to be given by the warehouseman concerned, conforming with the requirements of this section, and unless the same be given within the time fixed by a written demand therefor the license of such warehouseman may be suspended or revoked."

SEC. 3. That section 8 of the United States warehouse act of August 11, 1916, as amended (U. S. C., title 7, sec. 250), is amended to read as follows:

"SEC. 8. That upon the filing with and approval by the Secretary of Agriculture, or his designated representative, of a bond, in compliance with this act, for the conduct of a warehouse, such warehouse may be designated as bonded hereunder; but no warehouse shall be designated as bonded under this act, and no name or description conveying the impression that it is so bonded shall be used, until a bond, such as provided for in section 6, has been filed with and approved by the Secretary of Agriculture, or his designated representative, nor unless the license issued under this act for the conduct of such warehouse remains unsuspended and unrevoked."

SEC. 4. That section 9 of the United States warehouse act, approved August 11, 1916, as amended (U S. C., title 7, sec. 248), is amended to read as follows: "SEC. 9. That the Secretary of Agriculture, or his designated representative, may, under such rules and regulations as he shall prescribe, issue a license to any person not a warehouseman to accept the custody of agricultural products, and to store the same in a warehouse or warehouses owned, operated, or leased by any State, upon condition that such person agree to comply with and abide by the terms of this act and the rules and regulations prescribed hereunder. Each person so licensed shall issue receipts for the agricultural products placed in his custody, and shall give bond, in accordance with the provisions of this act, and the rules and regulations hereunder affecting warehousemen licensed under this act, and shall otherwise be subject to this act, and such rules and regulations, to the same extent as is provided for warehousemen licensed hereunder."

SEC. 5. That section 10 of the United States warehouse act, approved August 11, 1916, as amended (U. S. C., title 7, sec. 251), is amended to read as follows: "SEC. 10. That the Secretary of Agriculture, or his designated representative, may charge, assess, and cause to be collected a reasonable fee for every examination or inspection of a warehouse under this act when such examination or inspection is made upon application of a warehouseman, and for each license issued to a warehouseman or to any person to classify, inspect, grade, sample, and/or weigh agricultural products stored or to be stored under the provisions of this act, the Secretary of Agriculture, or his designated representative, may charge, assess, and cause to be collected a reasonable fee. All such fees shall be deposited and covered into the Treasury as miscellaneous receipts.'

SEC. 6. That section 11 of the United States warehouse act, approved August 11, 1916, as amended (U. S. C., title 7, sec. 252), is amended to read as follows: "SEC. 11. That the Secretary of Agriculture, or his designated representative. may upon presentation of satisfactory proof of competency, issue to any person a license to inspect, sample, or classify any agricultural product or products, stored or to be stored in a warehouse licensed under this act, according to condition, grade, or otherwise and to certificate the condition, grade, or other class thereof, or to weigh the same and certificate the weight thereof, or both to inspect, sample, or classify and weigh the same and to certificate the condition, grade, or other class and the weight thereof, upon condition that such person agree to comply with and abide by the terms of this act and of the rules and regulations prescribed hereunder so far as the same relate to him."

SEC. 7. That section 12 of the United States warehouse act, approved August 11, 1916, as amended (U. S. C., title 7, sec. 253), is amended to read as follows: "SEC. 12. That any license issued to any person to inspect, sample, or classify, or to weigh any agricultural product or products under this act may be suspended or revoked by the Secretary of Agriculture, or his designated representative, whenever he is satisfied, after opportunity afforded to the licensee concerned for a hearing, that such licensee has failed to inspect, sample, or classify, or to weigh any agricultural product or products correctly, or has violated any of the

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provisions of this act or of the rules and regulations prescribed hereunder so far as the same may relate to him, or that he has used his license or allowed it to be used for any improper purpose whatever. Pending investigation, the Secretary of Agriculture, or his designated representative, whenever he deems necessary, may suspend a license temporarily without hearing."

SEC. 8. That section 25 of the United States warehouse act, approved August 11, 1916, as amended (U. S. C., title 7, sec. 246), is amended to read as follows: “SEC. 25. That the Secretary of Agriculture, or his designated representative, may, after opportunity for hearing has been afforded to the licensee concerned, suspend or revoke any license to any warehouseman conducting a warehouse under this act, for any violation of or failure to comply with any provision of this act or of the rules and regulations made hereunder, or upon the ground that unreasonable or exorbitant charges have been made for services rendered. Pending investigation, the Secretary of Agriculture, or his designated representative, whenever he deems necessary, may suspend a license temporarily without hearing."

SEC. 9. That section 29 of the United States warehouse act, approved August 11, 1916, as amended (U. S. C., title 7, sec. 269), is amended to read as follows: "SEC. 29. That in the discretion of the Secretary of Agriculture he is authorized to cooperate with State officials charged with the enforcement of State laws relating to warehouses, warehousemen, weighers, graders, inspectors, samplers, or classifiers; but the power, jurisdiction, and authority conferred upon the Secretary of Agriculture under this act shall be exclusive with respect to all persons securing a license hereunder so long as said license remains in effect. This act shall not be construed so as to limit the operation of any statute of the United States relating to warehouses or to warehousemen, weighers, graders, inspectors, samplers, or classifiers, now in force in the District of Columbia or in any Territory or other place under the exclusive jurisdiction of the United States."

SEC. 10. That section 30 of the United States warehouse act, approved August 11, 1916, as amended (U. S. C., title 7, sec. 270), is amended to read as follows: "SEC. 30. That every person who shall forge, alter, counterfeit, simulate, or falsely represent, or shall without proper authority use, any license issued by the Secretary of Agriculture, or his designated representative, under this act, or who shall violate or fail to comply with any provision of section 8 of this act. or who shall issue or utter a false or fraudulent receipt or certificate, or change in any manner an original receipt or certificate subsequently to issuance by a licensee, or any person who, without lawful authority, shall convert to his own use, or use for purposes of securing a loan, or remove from a licensed warehouse contrary to this act or the regulations promulgated thereunder, any agricultural products stored or to be stored in such warehouse, and for which licenses receipts have been or are to be issued, shall be deemed guilty of a misdemeanor, and upon conviction thereof shall be fined not more than $10,000, or double the value of the products involved if such double value exceeds $10,000, or imprisoned not more than ten years, or both, in the discretion of the court, and the owner of the agricultural products so converted, used, or removed may, in the discretion of the Secretary of Agriculture, be reimbursed for the value thereof out of any fine collected hereunder, by check drawn on the Treasury at the direction of the Secretary of Agriculture, for the value of such products to the extent that such owner has not otherwise been reimbursed. That any person who shall draw with intent to deceive a false sample of, or who shall willfully mutilate or falsely represent a sample drawn under this act, or who shall classify, grade, or weigh fraudulently, any agricultural products stored or to be stored under the provisions of this act, shall be deemed guilty of a misdemeanor, and upon conviction thereof fined not more than $500, or imprisoned for not more than six months or both, in the discretion of the court.'

This bill amends sections 4, 8, 9, 11, 12, and 25 of the present act by merely inserting after the words "the Secretary of Agriculture" the words "or his designated representative." In the law as at present, the Secretary is charged with accepting and approving bonds, signing licenses, and suspending, canceling, or revoking licenses. As the determinations of the facts upon which the Secretary must act involve a great many details and must be made by subordinates and as the Secretary is charged with the administration of quite a number

of regulatory statutes, it becomes impossible for him to personally perform many of these duties which are more or less administrative detail. Therefore, the committee recommends that authority be given the Secretary to designate a representative to perform such acts as accepting and approving bonds furnished by warehousemen and the issuance, suspension, cancellation, and revocation of licenses.

One of the amendments proposed to section 6 of the present act is to insert the words "or his designated representative" following the words "the Secretary of Agriculture." The same reason applies in this case as mentioned in the preceding paragraph. Under the present law, section 6 requires that a warehouseman desiring a license under the law shall file a bond with the Secretary of Agriculture to secure the faithful performance of his obligations as a warehouseman "under the laws of the State, District, or Territory, in which he is conducting such warehouse," as well as under the Federal warehouse act. It is proposed to eliminate that part of section 6 of the act which requires that the bond cover obligations of the warehouseman under State laws. Frequently a warehouseman may be operating more than one warehouse. To meet the demands of certain depositors, he may want to license one of the warehouses under the Federal law. As the law now stands, he must file a bond with the Secretary of Agriculture before a license could be granted him, and this bond would not only cover his obligations under the Federal law but would apply equally to obligations under State laws, though the particular obligations in question may have been undertaken in a house which is not licensed under the Federal law. Of course the Federal Government has no jurisdiction over the nonlicensed house; neither has it authority to enforce the State laws. The result might, therefore, very easily develop that a warehouseman commits some illegal act in the warehouse which is not under the Federal act, but the bond which was furnished for the protection of depositors storing their products in the federally licensed warehouse might be exhausted under the State law. In fact, a recent decision in one of the State courts has held that the bond furnished under the Federal act was liable for receipts not issued by the warehouseman under the Federal act.

Under section 10 of the present law, the amount to be charged for a warehouseman's license is fixed at $2. No charge is authorized for issuing licenses to inspectors, weighers, graders, or samplers. Under the proposed amendment to this section, the Secretary would be authorized to charge such a license fee as he deems reasonable whenever a license is issued to either a warehouseman, a sampler, inspector, weigher, or grader.

Under section 29 of the law as at present, if the Federal act in any way conflicts with the State law, the Federal law becomes subservient to the State law in so far as there is a conflict. The result is that the Federal law can be negatived by State legislation. This condition has worked against Federal warehouse receipts attaining that degree of usefulness for collateral purposes in the financing of agricultural products which Congress had intended they should attain. Bankers generally have recognized the worthy purposes of the warehouse act, but when they are approached to loan large amounts they view section 29 of the present law with considerable

misgiving. To make the law accomplish the real purpose of Congress, it should be independent of any State legislation on the subject. The amendments proposed to section 29 of this bill aim to make the Federal warehouse act stand on its own bottom.

It is believed that the amendments embodied in this bill will give the warehouse receipts issued under the Federal warehouse act such collateral value as to command the confidence of all bankers and will place this law on a firm foundation. In view of the fact that most of the big cooperative organizations of growers that are obliged to store their products are using warehouse receipts issued under the Federal warehouse act as collateral to loans, the amendments proposed are in the interests of orderly marketing of agricultural products both by the individual farmer and cooperative organizations.. Inasmuch as these large cooperative growers' organizations require millions of dollars to adequately finance them during the marketing period, the committee feels that nothing should be left undone in perfecting the Federal warehouse act so that it will accomplish to the maximum the intent of Congress.

The Federal warehouse act has been in operation since 1916, and has exerted a helpful influence in the marketing of farm products. Warehouse receipts issued under the act have been favorably recognized and accepted by bankers in all parts of the country, as well as by the Federal reserve banks and intermediate credit banks. The need for storing farm products under the most favorable conditions will be materially increased as a result of the farm relief legislation now receiving the attention of Congress. Although the act was amended in 1919 and again in 1923, experiences of the past five years have demonstrated the desirability of further amending the act. The present legislation therefore was introduced in the seventieth session of Congress at the request of the Department of Agriculture, favorably reported by the committee, and passed by the House on February 25, 1929. The committee believes that the further amendment of the act, as herein indicated, will facilitate its administration and further extend its usefulness in the marketing of farm products.

[The language in brackets represents existing law to be eliminated. The language in italics represents the new matter proposed by the bill]

"SEC. 4. That the Secretary of [Agriculture is] Agriculture, or his designated representative, is authorized, upon application to him, to issue to any warehouseman a license for the conduct of a warehouse or warehouses in accordance with this act and such rules and regulations as may be made hereunder: Provided, That each such warehouse be found suitable for the proper storage of the particular agricultural product or products for which a license is applied for, and that such warehouseman agree, as a condition to the granting of the license, to comply with and abide by all the terms of this act and the rules and regulations prescribed hereunder."

"SEC. 6. That each warehouseman applying for a license to conduct a warehouse in accordance with this act shall, as a condition to the granting thereof, execute and file with the Secretary of Agriculture a good and sufficient bond to the United States to secure the faithful performance of his obligations as a warehouseman under [the laws of the State, District, or Territory in which he is conducting such warehouse, as well as under] the terms of this act and the rules and regulations prescribed hereunder, and of such additional obligations as a warehouseman as may be assumed by him under contracts with the respective depositors of agricultural products in such warehouse. Said bond shall be in such form and amount, shall have such surety or sureties, subject to service of