STATEMENT OF MICHAEL CARDOZO, ASSISTANT LEGAL ADVISER FOR ECONOMIC AFFAIRS, STATE DEPARTMENT

Mr. CARDOZO. As I understand it, the question was whether we handle the disposition of material becoming excess differently in the new program from the way we did it in the lend-lease program, and the answer is that there are differences, although I do not think in the net result there will be a great deal of difference.

You have quite a different situation because of the war that was going on when lend-lease was active from what you have now when there is not an active wartime situation.

POLICY ON REDISTRIBUTION OF MDAP PROPERTY

At the present time we have a policy on redistributable and excess MDAP property. This policy has been adopted by the International Security Affairs Committee on which the Defense Department, State, and ECA are represented, and it covers all MDAP property other than that which is purchased out of MDAP funds through the ECA.

It does not cover machine tools and raw materials and the like which go through the ECA procedures, because that kind of thing is covered by regular ECA practices and is indistinguishable from ECA material generally.

This policy covers mostly the end-use items, the guns, ammunition, and the kind of things used by forces themselves. And under it we have adopted a policy as to what should be done when a recipient country finds that it no longer needs some item.

They report it to us and our plan is that it will then be sent either to another country where it is needed or back to this country if it is needed here, and under the policy the State Department is to negotiate agreements with the other countries covering this kind of material and following the general policy.

We are moving ahead in the direction of getting such agreements, and the agreement that is in draft form now but has not been sent out as yet is consistent with this policy and also with the provision of the Mutual Security Act, section 524, which requires that material no longer needed by a recipient country for the purpose for which it was originally furnished shall be returned to the United States for proper disposition to other countries or back to the United States.

Mr. LANTAFF. Is that type of clause written into all of the agreements we have with the MDAP countries?

Mr. CARDOZO. We do not have those particular clauses in the agreements now. What we have in the agreements as a protection against any improper disposition of material is the provision that the material will not be disposed of outside its originally intended purposes.

Mr. LANTAFF. In other words before France, for example, could sell 100 trucks that would be given to her under the MDAP as surplus, they would have to get our approval.

Mr. CARDOZO. That is right, and that in fact is in the lend-lease agreements too, a very similar provision.

Mr. LANTAFF. They own the absolute title to that, do they not?

TITLE TO MDAP PROPERTY

Mr. CARDOZO. Under the MDAP title passes at the time it is shipped. Mr. LANTAFF. So there would be nothing to actually prevent them from going ahead and selling them if they wanted to because we have no way of keeping track as to whether they sold or did not sell them, do we?

Mr. CARDOZO. Our military assistance advisory groups observe. Of course you cannot keep your eye on everything all the time.

The fact that title passes is not, I do not think, significant as to whether we have control over that or not, because it always depends on the cooperation of the other governments anyway.

Mr. LANTAFF. What are our policies with reference to those 100 trucks when they are worn out and junked?

Mr. CARDOZO. If they become scrap we have a provision in this statement of policy that we may get it back, too, if we want it. In other words, scrap is recognized as one of the important

Mr. LANTAFF. This policy then follows the amendment which was put into the MDAP bill?

Mr. CARDOZO. Yes, sir; it does follow that, whether it is in usable condition or whether it is scrap.

Mr. LANTAFF. Mr. Chairman, I think it might be interesting for this committee to have that policy set out in the record.

Mr. BONNER. Yes.

Mr. CARDOZO. I have only a marked-up copy.

Mr. ROBACK. We have one copy furnished to us already.

Mr. BONNER. How long has that been in effect?

Mr. CARDOZO. Well, it was adopted in August.

Mr. BONNER. Of this year?

Mr. CARDOZO. This year. That has, I believe, been in effect as a general operating policy longer than that.

Mr. BONNER. Evidently it has not been adhered to back in the past, has it!

Mr. CARDOZO. Well, I imagine that the practice has not been very different from this. I do not know of any case where it has been.

Of course, goods have been going over in increasing quantities more recently. The problem has not become acute even yet, so that you do not have very much excess material because we are only just shipping it now.

PROPOSAL FOR REPURCHASE OPTION ON SURPLUS

Mr. LANTAFF. Where we sell surplus property to a country, do you think it would be a good idea to provide a clause in the contract for sale giving the United States an option to repurchase that surplus at the same price it was sold to the foreign government, provided they had not disposed of it or contracted for the sale of it?

Mr. CARDOZO. I think if you put the proviso in, it probably would be a good idea. You have to recognize that when you are selling surplus, it is presumably something that you think you do not need and you are selling it in the hope that it will go into useful channels. Mr. LANTAFF. We have found that our hopes are not always realized.

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Mr. ROBACK. I have just one question, Mr. Bonner.

Did you say that the State Department was going to become the redistributing agency for that surplus under the MDAP program?

Mr. CARDOZO. No; I do not think that would be accurate. It would not be certainly under the new act. The redistribution would be made by the same authority that decides where the stuff goes in the first instance.

Mr. ROBACK. How will that redistribution policy integrate with the redistribution of the normal service surplus, surplus that is generated by the services in the same area?

I mean, will there be any kind of agency which will be able to coordinate that so that if there is service generated surplus, it can be used for the same redistribution purposes?

Mr. CARDOZO. I think that the services will be responsible for deciding where the stuff goes when it is returned in this redistributable case as well as in others.

(Whereupon, at 4:20 p. m. the subcommittee adjourned to reconvene Friday, October 12, 1951, at 10 a. m.)

FEDERAL SUPPLY MANAGEMENT

(Overseas Survey)

FRIDAY, OCTOBER 12, 1951

HOUSE OF REPRESENTATIVES,

INTERGOVERNMENTAL RELATIONS SUECOMMITTEE

OF THE COMMITTEE ON EXPENDITURES
IN THE EXECUTIVE DEPARTMENTS,

Washington, D. C.

The subcommittee met at 10 a. m. in room 1015, New House Office Building, Hon. Herbert C. Bonner, chairman of the subcommittee, presiding.

Members of Congress present: Herbert C. Bonner, chairman; Cecil M. Harden, Charles B. Brownson, Thomas B. Curtis, and George Meader.

Staff representatives present: Christine Ray Davis, chief clerk; Thomas A. Kennedy, chief counsel; Herbert Roback, staff member; Ray Ward, Bureau of the Budget; and Nathan Brodsky, Munitions Board.

Mr. BONNER. We will hear from Mr. Warner?

STATEMENT OF ROBERT WARNER, SPECIAL ASSISTANT TO THE ADMINISTRATOR, DEFENSE PRODUCTION ADMINISTRATION

Mr. BONNER. Will you please give your full name and title for the record, Mr. Warner.

Mr. WARNER. I am Robert Warner, special assistant to the Administrator in the DPA.

Mr. Roback of your staff told me that you were planning to go to the Far East, and he asked me if I would come up and say a few words on this scrap problem. I told him I would be happy to do so, though I had just gotten into the salvage picture myself.

SCRAP MISSION TO FAR EAST

A mission has just returned from the Far East, and they have not yet submitted a report. They were sent out by the General Services Administration. Three top steel men went with them, one representing the scrap dealers. I think a report will be forthcoming within a day or two, and I will be happy to get a copy to Mr. Roback. Mr. BONNER. We certainly want to have a copy of that.

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