Subcommittee No. 2 of said committee, appeared before this committee in support of H. R. 5470 and presented their committee report. The President has placed the administration of export controls in the Department of Commerce. Prior to the enactment into law on December 30, 1947, of section 3 (b) above-referred to there was no agreement among Government counsel as to whether or not the Government already had the power to use price criteria in the licensing of exports. Mr. Bruce, Assistant Secretary of Commerce, testified before the committee that it was not until January 2, 1948, that price was used as one of the criteria for issuing export licenses and then only to a limited extent in connection with certain items on the positive list which includes some 400 items in short supply. Other criteria used in licensing exports are the historical basis of exports with adjustment for new business, the end use basis, the channeling of exports to assist the economy of one country as compared with another, and the consideration of exports necessary to a given area to obtain imports of items in critically short supply in this country.

It is of interest to note that when Mr. Bruce was before the committee he was asked if the Department of Commerce was opposed to the bill. Mr. Bruce replied:

No, sir; the Department takes no position on it. If the Congress repeals the section, we will operate in another manner.

The committee frankly recognizes that it is extremely difficult to administer export controls, particularly on items in short supply, in a manner that would be fair to all exporters. However, witnesses appearing before the committee raised certain objections with respect to the use of price as a criterion for export license control. The argument was made that use of price criteria tended to drive the so-called merchant exporters out of business for the reason that a prime producer could quote a lower price than the merchant exporter. The prime producer would be selling goods only whereas the merchant exporter would be selling both goods and services. While this condition has always existed yet the fact that merchant exporters were able to do business in a period when there were no export controls would indicate that both importers and manufacturers found use for the specialized services which the merchant exporters provide. Merchant exporters in the past and again in the future will play an important role in developing and maintaining important foreign markets for American business.

Another objection raised to the use of price criteria was that it was difficult if not impossible to assemble a staff administering the controls that would be competent to pass on price-quality-efficiency relationships. Two specialized machines to perform the same type of work might vary considerably in price due to the fact that quality of materials or efficiency of operation in the one fully justified a marked difference in price due to savings in maintenance or operating costs. An example was given the committee of the technical problems that arise, such as for instance in the case of silicon steel, which is a technical steel used in the production of motors or transformers. Silicon steel for building precision transformers would be priced about double that used for armatures in motors. Technical knowledge on the part of the licensing authority would be necessary to recognize a justifiable price differential such as this. The difficulty of assembling a staff

versed in the multitude of technical problems that would be encountered, is readily apparent.

Certain exporters from the Midwestern States pointed out that use of price as a criteria in the granting of export licenses, worked to the disadvantage of interior shippers due to the fact that the pricing system used was on a free-alongside-ship basis. When transportation costs were added to the product costs of the interior producer or exporter, the free-alongside-ship price would be higher than that of a competing firm in business on the seaboard with much less transportation costs to be added to the product costs.

It was also pointed out that use of price criteria would tend to disrupt established importer-exporter relationships. These relationships had been built up over the years through the confidence which the importer had found he could place in the service and reliability, as to quality and delivery, of the exporter with whom he did business. The importer may be perfectly willing to pay a reasonable price differential to such an exporter over and above the lower price that might be asked by some less experienced firm with an unproved record of performance or even by a fly-by-night operator who might be successful in getting export licenses on a price basis because he has few, if any, of the legitimate expenses of conducting a sound export business.

As previously noted, export control authority was extended for 1 year in the legislation to aid in stabilizing the economy of the United States, which became law on December 30, 1947. In exercising this authority, the Department of Commerce is charged with the responsibility of balancing export demands against the stability of our own domestic economy. Of necessity, the Department could not grant export license applications involving prices completely out of line with prices to the domestic economy or reflecting obvious blackmarket-price considerations. To do otherwise would be directly contrary to the responsibility of the Department of Commerce to protect the stability of our domestic economy.

CHANGES IN EXISTING LAW

In compliance with paragraph 2a of rule XIII of the Rules of the House of Representatives, changes in existing law made by the bill, as introduced, are shown as follows (existing law proposed to be omitted is enclosed in black brackets, existing law in which no change is proposed is shown in roman):

[PUBLIC LAW 395-80TH CONGRESS]

EXPORT CONTROLS

SEC. 3. (a) Section 6 (d) of the Act of July 2, 1940 (54 Stat. 714), as amended, is amended by striking out "February 29, 1948" and inserting in lieu thereof "February 28, 1949".

[(b) Notwithstanding any other provision of law, the President in the exercise of the powers, authority, and discretion conferred upon him by such Act of July 2, 1940, as amended, is authorized to use price criteria in the licensing of exports either by giving preference among otherwise comparable applications to those which provide for the lowest prices, or, in exceptional circumstances, by fixing reasonable mark ups in export prices over domestic prices.]

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80TH CONGRESS 2d Session

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HOUSE OF REPRESENTATIVES

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REPORT No. 1546

AUTHORIZING THE PRINTING OF ADDITIONAL COPIES OF PARTS 4 AND 5 OF THE HEARINGS RELATIVE TO REVENUE REVISIONS, 1947-48, HELD BEFORE THE COMMITTEE ON WAYS AND MEANS

MARCH 10, 1948.-Referred to the House Calendar and ordered to be printed

Mr. LE COMPTE, from the Committee on House Administration, submitted the following

REPORT

[To accompany H. Con. Res. 142]

The Committee on House Administration, to whom was referred the resolution (H. Con. Res. 142) authorizing that, in accordance with paragraph 3 of section 2 of the Printing Act, approved March 1, 1907, the Committee on Ways and Means be, and is hereby, authorized and empowered to have printed for its use 1,000 copies each of parts 4 and 5 of the hearings relative to revenue revisions, 1947-48, held before said committee during the first session of the Eightieth Congress, at a cost of $3,838.71, having considered the same, report favorably thereon without amendment and recommend that the resolution do pass.

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