condition were programed, it is possible that the condition changed in some cases during the storage period.

Based on the original classification indicated on the programs for approximately the first 20,000 tons of quartermaster goods, about 90.5 percent was class 1, (new and unused), 1.5 percent, class 3, (unserviceable, economically repairable to condition 4), 1.6 percent class 4 (serviceable, issued in lieu of class 1), 6.4 percent class 5 (serviceable but not suitable for issue to troops). Grouping class 55, uniform and personal clothing, class 98, rehabilitation clothing for liberated countries, and class 99, resale items of clothing for overseas shipment, 80.6 percent were class 1, 5.3 percent class 3, 3.9 percent class 4, and 10.2 percent in class 5.

Quartermaster items included 160,000 pairs of boots, 347,000 pairs of shoes, 189,000 pairs of overshoes, 1,739,000 shirts, 3,666,000 pairs of trousers, 3,244,000 jackets and coats, 2,218,000 pairs of underdrawers, 1,396,000 undershirts, 2,361,000 pairs of socks, 123,000 towels, 319,000 blankets and comforters, and 9,302,000 yards of cloth. Approximately 200,000 duffle bags were obtained on the SIM program for the Berlin coal airlift. Approximately 400,000 pounds of twine of various types were received, most of which was used in food sacking operations along with 200 tons of approximately 20,000,000 wire bag ties. Further there were approximately 1,411,000 packages of smoking tobacco, 880,000 packages of chewing tobacco, 12,976,000 cigars, 174,539,000 cigarettes, plus 526,000 pipes, and about 20,000 cases of matches.

The matches delivered on the SIM program, plus those acquired from theater supplies, had grown to such volume that in August 1948, the German Department of Economics requested that no more matches be programed for SIM, based on the complaint of the German match trust. Claiming similar complaints from the German tobacco industry, the Department of Economics in September 1948 requested that no more tobaccos be programed.

Some of the cigarettes and cigars received were damaged in shipment or had become moldy from long or improper storage. However, the amount was not abnormal considering the circumstances. STEG was able to have the damaged cigars successfully reworked and it was sold for pipe tobacco for DM. 2 per 50 grams. The cigarettes were also successfully reworked and sold in 50-gram packages for DM. 1.25 each. Both of these tobaccos were sold under the name "Magnolia Steg," the steamship Magnolia having made the first delivery of these tobaccos to Bremen.

During most of 1948 these American cigarettes had a retail price of 30 pfennigs each, of which 24 pfennigs was customs tax, the wholesaler and retailer getting 1.8 pfennigs each, and STEG receiving the balance, or 3.4 pfennigs. This was a very profitable business for all concerned, since the deferred charge for these cigarettes was approximately 1 pfennig each. It also indicates why there was a great incentive for illegal traffic in untaxed American cigarettes in Germany. It is of interest to note that the German cigarette industry originally demanded that these American cigarettes be sold at a retail price of 40 pfennigs to prevent competition with their own German cigarettes, and the German finance authorities demanded RM. 1 each to increase their tax revenues. Since August 1948 the retail price has been 20 pfennigs with a tax of 55 percent.

The SIM tobaccos were part of the miners' incentive programs, approximately 27,000,000 cigarettes being furnished for the second incentive program in December 1947 and 1,490,000 cigars, plus 298,000 packs of pipe tobacco, for the third incentive program in February 1948. About 30,000,000 of these cigarettes were furnished in Berlin duty and tax free in July-August 1948, via Hamburg, and another 36,000,000 in November 1948 via Frankfurt on the Berlin airlift.

The medical supplies furnished included 840,000 packages of bandages of gauze, muslin, or canton flannel in various widths and lengths, 543,000 packages of iodine swabs, 4,611 pounds of sodium bicarbonate, 10,500 pounds of magnesium sulfate. 60,192 gallons of liquid petrolatum, 24,360 pounds of white petrolatum, 24,349 bath robes, 20,000 baby blankets, 121.641 mattress covers, 16,080 pajama coats, 95,181 dermal sutures, 168,900 yards of silk sutures, 608,720 yards of cotton thread suture, and 2,496,000 compound cathartic pills. As recommended in the United States Tuberculosis Committee Report of March 5, 1948, 48,315 bed sheets were obtained on the SIM program and distributed direct to the tuberculosis hospitals. All other sheets obtained on either the medical or quartermaster SIM program were distributed in accordance with the normal textile rationing system. The deferred charge for the SIM goods was based on $1,680 per net long ton for the quartermaster supplies, and $1,089 per net long ton for the medical sup94756-52-73

plies. The quartermaster price represents 60 percent of the weighted average cost price of all classes shipped, from equipage at $1,073 per net long ton to clothing at $4,655 per net long ton. The final net long tons received were 1,459 medical and 33,932 quartermaster, resulting in a deferred charge of $58,594,334. The packing, handling, and freight charges delivered Bremen were reported finalized at $4,941,431. The total of these charges was then $63,535,765 or DM. 266,850,213. It was originally agreed that the Joint Export-Import Agency would do the deferred charge pricing of the SIM goods based on a correction factor for condition applied against the unit Army catalogue purchase price. It was later realized that the condition classifications originally made at depot of origin in the United States, were unfair to the Germans because of the long storage and varying degrees of deterioration of the items. Further, the reduction in JEIA personnel would not permit the undertaking of such a major task.

It was decided that the OMGSTEG Branch BICO (Bipartite Control Office) would endeavor to have STEG personnel do the job, using their own condition classification. This proved to be inadvisable, not only because of the time and expense involved, but it was found that, after several months of classification of the quartermaster goods by STEG personnel at Bremen, they were following a general policy of downgrading the items, which would reduce the deferred charge. STEG could sell these goods more favorably on this basis, and still make good profits for the wholesalers and retailers. Further, the STEG classification into A, new; B, serviceable; slightly worn; C, serviceable, worn and scrap in four classes without regard to new or worn, i. e. S-1, requiring minor repairs; S-2, requiring medium repairs; S-3, requiring major repairs; and S-4, true scrap, were not comparable to United States Army serviceability standards. After suitable repairs were made on the first three classes of scrap, these items were reclassified into A, B, and C. Further, the demilitarization of outer uniform clothing, i. e., the dyeing operation and removal of buttons and insignia, damaged a certain amount of clothing, resulting in a lower grade of classification. Also, the classification of nonclothing items was difficult for the STEG employees to align with United Army serviceability standards.

STEG was required to deposit in the Bank Deutscher Laender the net proceeds from the sale of all SIM goods. From the beginning of the SIM program until currency reform, June 20, 1948, STEG had deposited with this bank a total of RM 24,741,589 and from currency reform through July 1, 1950, STEG had deposited DM 60,220,436, or a grand total of RM./DM. 84,462,025. An unknown amount was held back by STEG as reserve for final liquidation and 10 percent customs duty charges. As of July 1, 1950, there were unknown quantities of SIM goods in STEG depots and especially in the 63 STEG retail stores.

The expenses of STEG have been unusually high for this program. Before currency reform the expenses averaged 28.7 percent of gross sales, and from currency reform to November 30, 1948, the expenses average 21.4 percent with an over-all expense of both periods of 23.6 percent of gross sales.

The distribution of SIM goods was first made by STEG, Bremen, to each of the laender in the Bizonal Area on a population basis with shipments generally being made to the other STEG Branch offices direct. After receipt of the goods and inventory check, each STEG Branch office presented the lists of the items which were still rationed to the Laender STEG Advisory Committee who decided what wholesale firm or group, was to get the goods. The committee consisted of representatives of the Landeswirtschaftsamt (state economic offices), tradeunions, cooperatives, wholesalers, retailers, housewives' unions, refugee groups and charities. Sometimes, as in the case of tobaccos and matches, the goods were shipped direct from STEG, Bremen, to the wholesaler in each land. The nonrationed items were sold on the free market by each of the STEG Branch offices direct to the wholesale trade or other organizations within the land,

The German prices for all rationed SIM goods were fixed by the German De partment of Economies and include STEG's wholesale and retail prices. The prices of unrationed SIM goods were determined by STEG in cooperation with the price control authorities and the trade. It was not easy to establish prices on either class of SIM goods. Many of the items were new to the Germans or hot directly comparable to German items. The quality was generally high and the designs or styles different. Further, various organizations, especially the labor unions, demanded that the prices be at the lowest possible to satisfy the purchasing ability of the impoverished working groups. The wholesale and retail groups also made their desires felt and the prices finally established on the rationed SIM goods represented a compromise of all interested parties,

FEDERAL SUPPLY MANAGEMENT

(Overseas Survey)

WEDNESDAY, NOVEMBER 21, 1951

HOUSE OF REPRESENTATIVES

SUBCOMMITTEE ON INTERGOVERNMENTAL RELATIONS

OF THE COMMITTEE ON EXPENDITURES
IN THE EXECUTIVE DEPARTMENTS,
Giessen, Germany.

The subcommittee met Wednesday, November 21, 1951, at Giessen, Germany, Hon. Herbert C. Bonner, chairman, of the subcommittee, presiding.

Members of Congress present: Herbert C. Bonner (chairman), Harold D. Donohue, W. J. Bryan Dorn, Bill Lantaff, Cecil M. Harden, Charles B. Brownson, and Thomas B. Curtis.

Staff members present: Christine Ray Davis, chief clerk; Thomas A. Kennedy, general counsel; Herbert Roback, staff member; Annabell Zue, minority clerk; Ray Ward, Bureau of the Budget; Nathan Brodsky, consultant, Munitions Board; John Elliott, State Department escort officer; Brig. Gen. Clarence C. Fenn, Department of the Army escort; Robert Cartwright, General Accounting Officer, and Lee Seymour, General Accounting Office.

Representatives of the European Command present: Maj. Gen. W. H. Middleswart, Chief Quartermaster, European Command; Lt. Col. E. P. Flynn, Commanding Officer, 7856th Quartermaster Requirements and Distribution Group; Maj. D. E. Whalen, Chief, Logistics Compilations Section, 7856th Quartermaster Requirements and Distribution Group; Maj. P. C. Dean, Chief, Stock Control Division, Munich Quartermaster Depot; Col. W. E. Barksdale, Chief, Supply Branch, Quartermaster Division; H. A. Abersfeller, Chief of the Supply Policy Section, Supply Branch, Quartermaster Division; Lt. Col. D. F. Slaughter, Supply Branch, Logistics Division, Headquarters, European Command; Lt. Col. R. T. Morgan, Chief, Clothing and Equipage Section, Supply Branch, Quartermaster Division; Lt. Col. W. E. Harper, Jr., Chief, Subsistence Section, Supply Branch, Quartermaster Division; Col. C. O. Bennett, Chief, Area Petroleum Office, European Command; Lt. Col. M. L. Tribe, Assistant Chief, Supply Branch, Quartermaster Division; Lt. Col. J. T. Bankus, Assistant Chief, Field Service Branch, Quartermaster Division; Col. S. F. Silver, Commanding Officer, Giessen Quartermaster Depot; Capt. Eileen R. Ware, Assistant Chief, Supply Control Section, 7856th Quartermaster Requirements and Distribution Group;

NOTE.-Asterisks denote classified material deleted for security reasons.

Brig. Gen. F. A. Henning, Deputy Director, Logistics Division, European Command; Franklin K. Eberhart, Chief, Quartermaster Catalog Branch, European Command; Lt. Col. E. J. Gelderman, Chief, Budget and Fiscal Section, Comptroller Branch, Quartermaster Division; W: J. Holland, Chief, Maintenance and Reclamation Section, Field Service Branch, Quartermaster Division; and Col. M. Matisoff, Assistant for Supply Operations, Munich Quartermaster Depot.

STATEMENT OF MAJ. GEN. W. H. MIDDLESWART, CHIEF QUARTERMASTER OF THE EUROPEAN COMMAND

Major General MIDDLESWART. Mr. Chairman and members of the subcommittee, General Handy asked me to express his regrets that he is unable to be here this morning, as he is on a trip with General Eisenhower to Holland and to Bremerhaven. Major General Noce, Chief of Staff of the European Command, stated that, inasmuch as General Handy is absent it would be necessary for him to remain in Heidelberg; however, if the chairman desired, he would catch a plane and come down today.

I am glad to welcome you to a quartermaster depot, and hope that when you have completed your investigation, you will have a more complete understanding of our activities. I have asked members of my staff to make available to you, any and all information. If the data is not available here, we will see that it is furnished to you as promptly as possible. As an aid to orientate the committee, I will take about 5 minutes to high light the quartermaster's operation in EUCOM.

QUARTERMASTER RESPONSIBILITIES IN EUROPE

The quartermaster's main responsibility is to feed, clothe, and furnish gasoline and oil to the troops in Europe. We also furnish certain services, such as laundry and dry cleaning, maintenance and repair of equipment, graves registration and disposal of property after it has been declared excess, and surplus to the need of forces over here. The map you see to your right is an outline map of Germany and France, and shows the existing and planned quartermaster deThe blue line is the Rhine River. You are now at Giessen

* **

*

Depot. This depot has the responsibility for supplying nine installations and troops in the area shaded, or outlined, in green. Munich Quartermaster Depot has the job of supplying eight installations and troops in the area shaded in red.

We are now building a new depot at Nahbollenbach, Germany, 35 miles west of the Rhine. When this depot is ready, it will serve the green cross-hatched area, with four posts and approximately troops. This depot will also serve all France. You will hear more about the line of communications when you are in France; however, we have, or will have, quartermaster installations and stocks located at Metz, Ingrandies, Perigueus, and La Pallice. In addition, we have, in France, strategic stocks of gasoline and oil at the points indicated by the funnels surrounded by the circles. We also have 3,000,000 rations in Cherbourg, brought in at the time of the airlift. These

more than is needed. Members of my staff will try to high light this need at the right spot, and we must make sure that we don't order be rock bottom, but adequate to do the job. We must have what we agement job, and exercise real stewardship. Our requirements must components-Army, Navy, and Air Force-must do an effective manAmerican taxpayer down, the Department of Defense, each of the we will withdraw shortly. I realize that to keep the cost to the

for you.