Major HUNT. We do have at Masan a large reclamation center run by the Ordnance engineers and Quartermaster. Mr. CURTIS. They are doing a lot of recapping there; are they? Major HUNT. Yes, sir; There are not enough facilities in Korea for any type of major manufacturing operation of any kind. Mr. CURTIS. But most of the rubber you do get comes back from Japan rather than from this country. Are we shipping much rubber tires and things from this country, or do you usually depend on the Japanese economy more or less? Major HUNT. I would say both, because they would be different types of vehicles. For instance, the vehicles we get from Japan we would depend on Japan to supply. Mr. CURTIS. Yes. Major HUNT. Also, there is some tire fabrication done in Pusan, but not a great deal. Mr. CURTIS. Then I have one other general question. I think I know the answer. Of course, the steel industry behind the North Korean and the Chinese movement is in Manchuria, which is pretty well developed; is that not true? Major HUNT. At the present time; yes, sir; although North Korea had some steel industry of its own prior to this. Mr. CURTIS. That is where they are taking their scrap? Major HUNT. Presumably, yes. Mr. BONNER. Mr. Meader? Mr. MEADER. No questions. Mr. BONNER. Are there any further questions? (Discussion off the record.) Mr. BONNER. Thank you very much, gentlemen. We will go into an executive session now. (Thereupon, at 11:04 a. m. Friday, October 19, 1951, the subcommittee proceeded in executive session.) WASHINGTON, D. C.-BRIEFING EXHIBIT 1 (Additional material on scrap situation submitted to the subcommittee:) Memorandum for the Chairman, Munitions Board. Subject: Korean Scrap Mission. 1. As instructed in letter orders of August 8, 1951, the undersigned escorted the four GSA consultants to Japan, reported to FECOM, and contacted Mr. Hamilton Morton of the Emergency Procurement Service, GSA, in Tokyo. After all necessary military headquarters were visited, and our mission explained, we left Japan for Korea, where the mission covered approximately 2,100 miles by air, jeep, boat, and rail. Appropriate arrangements on a V. I. P. status were made throughout the tour and every assistance was given these consultants to enable them to carry out their assignment. Protocol was carefully observed and relations with military and civilian contacts were friendly and cooperative in every case. We believe that the trip of this mission has cleared up the confusion regarding Republic of Korea scrap and has uncovered a valuable source of supply of United States-owned scrap which can be returned to the United States upon the determination of the proper authorities. 2. Copies of the consultants' preliminary report were air-mailed to you and Mr. Walsh of GSA by the mission's chairman, Mr. A. W. Snyder. Also being This boy tenenperp khod to miche Swimsir hana 700703 $20 reme for Pe Noven perun vast Üznes States milis Låve as või, beer uns^le to savy 4. Wind regard to paragraph 3 7 above, it should be stated that the voltage and pestation program of the Ordnance, Engineers and Quartermaster, spitsiye in Japan has resulted it tremendous savings and has restored to combat på mant thousands of tracks, jeens, tractors, tanks, and equipment, ere, without which we might well have lost Kores 5. In conclusion, it is our opinion that- a The best interests of the United States well be worved # the 30 000 tons of avaliable Republic of Korea serap finds its way to Japan for me them, inasmuch as the U. N. forces in Korea are receiving lange amounts of Jap anese fabricated steel products which are of inestimable value to the Korean campaign. b. All battlefield- and Army-generated scrap, both in Iorea and Japan, above the needs of FECOM, should be brought back to the I nited Niatna in MSTS ships, since the price of the scrap, and the eot of moving it, cạn ba set so as to permit its sale in the United States at OPS ceiling prices Offiffe E. Thomar, Colonel, GNC Major HUNT. We do have at Masan a large reclamation center run by the Ordnance engineers and Quartermaster. Mr. CURTIS. They are doing a lot of recapping there; are they? Major HUNT. Yes, sir; There are not enough facilities in Korea for any type of major manufacturing operation of any kind. Mr. CURTIS. But most of the rubber you do get comes back from Japan rather than from this country. Are we shipping much rubber tires and things from this country, or do you usually depend on the Japanese economy more or less? Major HUNT. I would say both, because they would be different types of vehicles. For instance, the vehicles we get from Japan we would depend on Japan to supply. Mr. CURTIS. Yes. Major HUNT. Also, there is some tire fabrication done in Pusan, but not a great deal. Mr. CURTIS. Then I have one other general question. I think I know the answer. Of course, the steel industry behind the North Korean and the Chinese movement is in Manchuria, which is pretty well developed; is that not true? Major HUNT. At the present time; yes, sir; although North Korea had some steel industry of its own prior to this. Mr. CURTIS. That is where they are taking their scrap? Major HUNT. Presumably, yes. Mr. BONNER. Mr. Meader? Mr. MEADER. No questions. Mr. BONNER. Are there any further questions? (Discussion off the record.) Mr. BONNER. Thank you very much, gentlemen. We will go into an executive session now. (Thereupon, at 11:04 a. m. Friday, October 19, 1951, the subcommittee proceeded in executive session.) WASHINGTON, D. C.-BRIEFING EXHIBIT 1 (Additional material on scrap situation submitted to the subcommittee :) Memorandum for the Chairman, Munitions Board. Subject: Korean Scrap Mission. 1. As instructed in letter orders of August 8, 1951, the undersigned escorted the four GSA consultants to Japan, reported to FECOM, and contacted Mr. Hamilton Morton of the Emergency Procurement Service, GSA, in Tokyo. After all necessary military headquarters were visited, and our mission explained, we left Japan for Korea, where the mission covered approximately 2,100 miles by air, jeep, boat, and rail. Appropriate arrangements on a V. I. P. status were made throughout the tour and every assistance was given these consultants to enable them to carry out their assignment. Protocol was carefully observed and relations with military and civilian contacts were friendly and cooperative in every case. We believe that the trip of this mission has cleared up the confusion regarding Republic of Korea scrap and has uncovered a valuable source of supply of United States-owned scrap which can be returned to the United States upon the determination of the proper authorities. 2. Copies of the consultants' preliminary report were air-mailed to you and Mr. Walsh of GSA by the mission's chairman, Mr. A. W. Snyder. Also being submitted to you, under separate cover, is a "secret" staff study by Mr. W. S. Whitehead, Office of the Comptroller, Department of the Army, which covers various phases of the disposal of Army-generated and battlefield ferrous scrap and expended brass shell cases within FECOM. Mr. Whitehead accompanied, but was not part of, the mission. Answers to the questions set forth in our orders are contained in enclosure 1; enclosure 2 is a map showing the area covered in Korea by the mission. 3. Briefly, the facts on Republic of Korea scrap and battlefield- and Armygenerated scrap in Korea and Japan are as follows: (a) Republic of Korea scrap.-The Republic of Korea has approximately 150,000 tons of scrap, but only about 50,000 tons might be purchased by the United States Government, since 100,000 tons are already committed to the Pacific Island Scrap Corp., which intends to make deliveries to Japanese mills. It is unlikely that any of the remaining 50,000 tons will reach the United States. In the first place, the Republic of Korea has indicated an unwillingness to negotiate further sales until May 1952, when its contract with the Pacific Island Scrap Corp. is completed. Secondly, the competitive price has been established by this contract at $38.23 per metric ton, f. o. b. vessel, Pusan. Scrap, therefore, could only be landed on the west coast for sale at a price considerably above the OPS ceiling price in San Francisco. This would be true even if shipments were made in MSTS vessels at "out of pocket" expense, although in this case scrap might be landed on the west coast at a price United States mills can pay. (b) Battlefield and Army-generated scrap in Korea and Japan.-There are 20,000 to 25,000 tons of battlefield ferrous scrap and approximately 19,000 tons of battlefield brass in Korea available for return to the United States after collection and proper preparation. In Japan, the Army has on hand 25,000 tons of ferrous scrap that could be shipped immediately to the United States upon directive from higher authority. This scrap in Japan is part of the residue from the Pacific Island "roll-up" program, other accumulations in the past having been sold to Japanese buyers. In addition to the 25,000 tons on hand in Japan, Army sources estimate that about 3,500 tons per month will continue to be generated by the Army Engineer and Ordnance depots in Japan which rebuild vehicles that have been returned from the Pacific islands, or that are being returned from Korea. The Army also has a potential 40,000 tons of scrap in Japan in the form of vehicles, tractors, etc., which are part of the Pacific island "roll-up" program. These vehicles for which most parts are no longer obtainable, are 8 to 10 years old and are carried on the books as class D material (restorable at considerable expense). If authority were obtained from the Department of the Army, we understand that these vehicles could be scrapped without, in any way, endangering the campaign in Korea. However, in all fairness to the officers of the Engineers and Ordnance in charge of the reclamation program, with whom we discussed the shortage of scrap in the United States, it must be stated that they felt that a large part of the scrap being generated by the "roll-up" program should be used in Japan. This because the Japanese mills had furnished and are furnishing certain badly needed steel items for the Korean campaign which United States mills have, as yet, been unable to supply. 4. With regard to paragraph 3 (b) above, it should be stated that the salvage and reclamation program of the Ordnance, Engineers, and Quartermaster services in Japan has resulted in tremendous savings and has restored to combat use many thousands of trucks, jeeps, tractors, tanks, and equipment, etc., without which we might well have lost Korea. 5. In conclusion, it is our opinion that (a) The best interests of the United States will be served if the 50,000 tons of available Republic of Korea scrap finds its way to Japan for use there, inasmuch as the U. N. forces in Korea are receiving large amounts of Japanese fabricated steel products which are of inestimable value to the Korean campaign. (b) All battlefield- and Army-generated scrap, both in Korea and Japan, above the needs of FECOM, should be brought back to the United States in MSTS ships, since the price of the scrap, and the cost of moving it, can be set so as to permit its sale in the United States at OPS ceiling prices. OLLIFFE E. THOMAS, Colonel, GSC. WASHINGTON, D. C.-BRIEFING EXHIBIT 2 ANSWERS TO QUESTIONS REGARDING THE KOREAN SCRAP SITUATION (a) Question.-How much scrap does the Republic of Korea own (by types; i. e., heavy melting, etc.)? Answer.- The Republic of Korea has about 150,000 tons of ferrous scrap broken down as follows: Railroad, 60,000; Korean dealers, 60,000; industrial and marine, 20,000; and rubble, 10,000. About 80 percent of the total is unprepared scrap and about 70 percent is heavy scrap which can be prepared as No. 1 heavy melting steel. (b) Question.- Is the Government of Korea willing to sell its scrap to EPS at a price EPS can pay? Answer.-Not at the present time. Representatives of the Republic of Korea stated that their Government would not negotiate any further sales of scrap until its contract for 100,000 tons with the Pacific Island Scrap Corp. was completed. This would not be until May 1952. The Republic of Korea policy was stated as favoring shipment of their scrap to the United States, but their desire to obtain the highest possible price was also stressed. Obviously, were the Republic of Korea willing to sell additional scrap, the competitive price would be $38.23 per metric ton, stowed aboard ship in Pusan, Korea-or the same price paid by the Pacific Island Scrap Corp. (c) Question.-If EPS is successful in purchasing Republic of Korea scrap, can satisfactory arrangements be made with commercial scrap firms to collect and move scrap aboard ship? Answer. The Koreans lack necessary equipment and know-how to prepare scrap properly. The mission believes that satisfactory arrangements could and should be made with a United States commercial firm or firms, under Government contract, to collect, prepare, and move Republic of Korea scrap to seaboard. Equipment and technical and supervisory personnel would have to be brought in, but Korean labor could be used to do the actual work. (d) Question. If ROK scrap is sold to commercial firms what difficulty would be presented with respect to CINCFE? Answer. There is no legal way that the Army can assist these firms. For example, if a commercial firm purchased scrap-where is, as is-it would have to collect, prepare, move, and load its scrap without the benefit of available Army services, such as docks, cranes, trucks, stevedore supervision, etc. Any equipment brought in by the firm to accomplish the job probably would be subject to confiscation by the ROK Government at the termination of the contract. In addition, commercially owned scrap would have a low priority for movement in rail cars, the allocation of which is controlled by the Army. If a commercial firm purchased ROK scrap f. o. b. vessel, Korean port, it would more than likely encounter the same difficulties that the Lipsett Co. did when it lifted 7,500 tons from Pusan in a chartered vessel. In this case, the scrap was poorly prepared by the Koreans; barged to the ship because dock space was, and still is, reserved for military and civil assistance cargoes; and badly loaded for lack of proper supervision. The loading took 41 days and resulted in high vessel demurrage. (e) Question.-What is the status of the Pacific Island Scrap Corp. contract? Is contract finalized? Are they moving scrap? What is their estimated schedule of movement? Answer. The contract between the Pacific Island Scrap Corp. and the Government of the Republic of Korea for the purchase of 100,000 metric tons of scrap at $38.23 per ton has been finalized and is attached for reference. Among its more important stipulations are: (1) All equipment (furnished by the buyer for use in the collection, preparation and shipment of scrap) except oxygen bottles, becomes after completion of the contract, property of the seller. (2) Material is to be delivered (by the seller) within 10 months from July 5, 1951. After the first 3 months the minimum delivery in any 1 month is to be 8,000 metric tons. (3) Seller agrees to prepare material in such a way that it will stow flat in the hold of vessels at a maximum of 50 cubic feet per 1 metric ton. (4) Seller will load all vessels, guaranteeing to load per day 500 tons at Pusan and 300 tons at all other Korean ports. (5) The buyer warrants that the countervalue of the scrap purchased will be sold in the form of finished steel products to the United States only for |