But that is in the past. We are now here to begin work on permanent legislation to restore the credibility and integrity of our inspection system, and the reputation of American grain in world markets. Although the U.S. farmer is the major supplier of food and fiber to the world, he does not hold that distinction by mere accident. American grain exports are the greatest in the world because somebody worked hard to make that happen. That someone is the American farmer. I want legislation to come out of this Committee in the next few weeks to make certain that the American farmer's predominant role as the supplier of first-resort is never again questioned. We owe him-and the American economy-no less. NATIONAL GRAIN & FEED ASSOCIATION, Washington, D.C., March 15, 1976. Hon. HUBERT H. HUMPHREY, Chairman, Subcommittee on Foreign Agricultural Policy. Chairman, Subcommittee on Agricultural Production, Marketing and Stabilization of Prices, Committee on Agriculture and Forestry, U.S. Senate, Washington, D.C. DEAR SENATORS HUMPHREY AND HUDDLESTON: The National Grain and Feed Association respectfully requests that this letter be made a part of the hearing record on S. 3055 and related bills. The National Grain and Feed Association is nationwide in scope, and has 1200 members covering every aspect of the grain and feed marketing industry. In addition there are 47 State or regional grain and feed associations which are affiliated with the National Association which represents upwards of 10,000 firms. The National Association and its members are vitally interested in the integrity of the grain inspection system. Our members are users of the inspection service and pay for the service. No inspection agency, board of trade or exchange is an active or voting member of our association. The National played a large role in the enactment of the U.S. Grain Standards Act of 1916 which was designed to resolve inter-market differences in grain grades and to facilitate the efficient marketing of grain. A major effort of the National from 1965 to 1968 was to work for changes in the Act to bring it in line with changes in the grain marketing system. We also appeared before appropriations committees supporting funds for research for a device or devices which would make the grading of grain more objective. Despite the expenditure by USDA of $3.3 million to date, no tangible results have been forthcoming. We have also signed a memorandum of understanding with USDA setting up an early alert system whereby scientifically selected country elevators send samples of newly harvested commodities to USDA for inspection to determine any unusual or unexpected quality problems and to advise warehousemen and producers of any conditions requiring special consideration. This gives USDA an indication of crop quality before it gets to an official inspection agency. We share the concern of your Subcommittees in the irregularities that have been revealed in the grain inspection system and appreciate the effort being made to determine the full extent of the irregularities and to correct them. We would hope that there will be no overreaction in the corrective action taken which would seriously affect or destroy the fine grain marketing system which places the American farmer's grain and soybeans into the four corners of the world and greatly enhances our balance of payments. We would hope that your Subcommittees will act promptly to amend the U.S. Grain marketing system with respect to exports. We would caution the Subcommittees that actions not be taken which will impede the inspection of grain and slow down the marketing system. Speed, accuracy and reliability of inspection are absolutely necessary to move our bountiful harvests and move the grain into export channels. The system must not be overburdened to the point that it is no longer economically feasible to inspect grain at interior points. Sec. 4 of S. 3055 would establish within the USDA a Federal Grain Inspection Agency. We do not believe that a separate agency is necessary. Sec. 5 would permit the Administration to investigate weighing of grain and establish standards for weighing with which we concur. Sec. 6 requires all export grain to be officially inspected. We consider that where the grain is exported as an intra-company move that the expense of inspection is not justified. We do concur in the weights being certified on the inspection certificate. Sec. 8 (e) requires official inspection at export elevators and major inland terminals and authorizes the Administrator to cause grain loaded into a rail car, barge or other container at any interior point for export to be inspected. We do not consider that there has been specific evidence presented which would require the federalization of inspection at interior points. Furthermore, the authorization of official inspection of containers of grain is impracticable as barges and rail cars can be sold after leaving the loading area or diverted and eventually end up in the export trade. Sec. 8 (h) deals with conflicts of interests and appears to be unduly harsh. There are many, and we believe most, honest and efficient official inspection agencies which provide a necessary service to the agricultural community, including producers. Where the inspection agency is properly supervised by USDA as required by the Act and Regulations the validity of the inspection results should be ensured. We believe that the proper solution is to require the Secretary where there are appearances of irregularities to conduct an immediate investigation and hearing to determine if any law has been violated. Sec. 9 provides for official supervision of weighing and certification of weights in which we concur. Sec. 15 (d) requires extensive records for a period of 5 years. This would be a tremendous burden on all elevators and in particular on country elevators and would serve no useful purpose. As the grain received is commingled it would be difficult to trace any particular receipt of grain to determine what had been done to it before it was shipped out. If additional records are needed it would appear to be more practical to give the Administrator authority to prescribe what records are to be kept. Sec. 17 increases the maximum penalties in the Act in which we concur. We believe that the increased penalties will go a long way in reestablishing the integrity in the grain marketing system. Sincerely, GEORGE M. WOOD, Chairman, Grain Grades Committee. STATEMENT OF THE NEW ORLEANS BOARD OF TRADE, NEW ORLEANS, LA. Gentlemen: The New Orleans Board of Trade, Ltd., an official inspection agency since 1916, submits this statement relative to legislation to amend the Grain Standards Act. This is in addition to our position paper of September 23, 1975, offering recommendations to improve the inspection and weighing supervision system. Since then, the General Accounting Office has filed a report after investigating the present grain inspection system, and the USDA has had an onportunity to respond to that report. The two agencies differ importantly in only one respect: that is, in GAO's recommendation for, and USDA's opposition to, a virtually all-federal inspection and weighing system. The GAO apparently believes that only the federal government is trustworthy, while the USDA believes that best results can be obtained by cooperative effort of governmental and private sectors, properly regulated. History clearly shows that there have been numerous cases of federal employees and officials who have been found guilty of violating federal laws. Assigning all grain inspections to the federal government would not generate honesty. The record now before Congress and the Courts shows that some grain companies have dishonestly evaded the grain inspection and weighing supervision agencies. It appears that in past years both the USDA and the official inspection agencies were not alert to the seriousness of the situation. If the government's controls and laws were inadequate in the past, then the private agencies could be expected to be little different from their supervisors. It is now agreed that the grain trade needs further policing not just routine inspection and weighing supervision. To say that only the government, through the USDA, can correct the situation is to ignore the past and to throw out the expertise and present motivations of the good private inspection agencies and their trained personnel. They can make, and are making, a real contribution to strict and careful inspection and weighing supervision. The New Orleans Board of Trade believes that the USDA's viewpoint and recommendations for corrective legislation should be adopted by the Congress in all essential respects. Remedial steps in the most important areas have already been initiated by the Department on a permanent basis in the case of grain regulations and on an interim voluntary basis in the case of Affirmative Action Programs. In response to the publication or proposed regulations which appeared in the Federal Register (Vol. 41, No. 30, February 12, 1976), The New Orleans Board of Trade has gone on record in support of the proposals, aimed at tightening controls over the present system. If these proposed regulations are implemented, the Department would be armed with authority to safeguard export quality, even in advance of passage of additional legislation. USDA and GAO concur in several recommendations for improvements in training, standards and equipment. Such improvements can be attained without legislation through administrative action and research, properly funded. GAO's conclusion, however, that the present system should be replaced does not appear to be well-documented, in some instances. For example, GAO attributes high "error" rates to private agencies in grading grain, compared with AMS appeal and supervision results. The report concedes, however, that "attaining a high degree of accuracy in grading depends somewhat on refining grain standards and improving grading technology". The GAO report cites a 26 per cent "error" rate for private agencies on inspections appealed in New Orleans in fiscal 1975. This agency has had time to review its records for the period only on export appeals, certainly the most important category. Our export shipment grades were appealed 83 times, and our certificates sustained in 78-all except five cases-a difference of only six per cent. Because some grading factors are matters of judgment and others affected by sample and testing apparatus variances, it is not certain that our graders made mistakes, even in those five cases. We believe that GAO's section on foreign complaints lacks convincing substantiation. There is a tendency to assume the foreign buyer is always right. Weight loss and damage to grain occur during each handling from farm to end user in foreign countries, not the least of which is caused by foreign handling methods. Certainly, all possible steps must be taken to improve export quality and to assure integrity. GAO's section on foreign complaints, however, does not support its conclusion that private inspection agencies should be eliminated. One would be remiss in arguing against the need for uniformity and accuracy in grain grading. A need for uniformity of standards is also apparent in making stowage examinations as well as in personnel administration. The New Orleans Board of Trade is in complete agreement that personnel rotation should be incorporated in the system. The Board, independent of any government regulation, has such a rotation system in effect for grain inspectors. Most of the twelve suggestions The New Orleans Board of Trade made in its initial statement for improvement in the inspection and weighing system were included in either the Department's or the GAO's report, or both. We would now modify one recommendation, the one that suggests that all weighing of grain at terminal and export elevators be performed by official inspection personnel rather than elevator weighers. Recognizing that grain merchants have the same primary obligation for performance of contracts as any other private business, we now believe that equally good results could be obtained by requiring that all weighing be done by elevator weighers but that official supervision should be on the Class I standard of the American Association of Railroads, applied to all inbound and outbound grain. Class I means 100 per cent supervision. We note with some pride that The New Orleans Board of Trade was asked by the USDA, after an examination of our operations and records by its Office of Investigation, to assume the duties of another inspection agency who license was revoked last autumn. We are pleased that we were able to provide the needed service efficiently on extremely short notice. This is because we have consistently maintained a conscientious stage of grain inspection and weighing personnel, willing to devote the extra hours necessary to perform at the new location, and also to train new samplers as fast as possible. Our experience in accepting just one new assignment on short notice during one of the busiest grain export seasons in history illustrates a point made in our first statement to the Congress. We expressed at that time our belief there would be no way an all-federal inspection service could be activated rapidly unless the government would hire most of the 800 inspectors and many of the samplers and weigh-masters of the private inspection agencies. We learned last fall that no capable new grain inspectors were available except those we had prepared by our own on-the-job training, plus a few federal retirees. Our analysis does not imply that the Congress should forego correction of the deficiencies of the grain inspection system. Principle should never give way to expediency. We submit, however, that only a small number of official inspection personnel has been involved in wrongdoing-fewer than twenty out of a work force of more than 3,000. Most violations have been committed by employees of grain companies. The grain scandals have been complex, and many people confuse the grain companies with the inspection agencies. Deficiencies in the system have been pin-pointed. Some do not involve impropriety or incompetence but are traceable to the need for grain handling research and modernization of grading standards. Those deficiencies, requiring regulatory or legislative remedies, can be cured within the present organizational framework. This is a practical solution and the only one that will avoid creation of another large and expensive federal bureaucracy, operating without truly independent checks and balances. We are convinced that the retention of a grain inspection system that utilizes the resources of both the private sector and the federal government can work in the best interests of the nation and the people. The free enterprise system must be given every chance to work. Thank you for allowing us to share our views with you on this important issue. Sincerely, GILBERT H. VORHOFF, President. HON. HERMAN E. TALMADGE, AMERICAN FARM BUREAU FEDERATION, Chairman, Committee on Agriculture and Forestry, DEAR MR. CHAIRMAN: Within recent weeks three of the AFBF Advisory Committees have met and discussed the matter of grain inspection. The following recommendations of these committees concerning grain inspection legislation were approved by the AFBF Board of Directors at their March 3 meeting: GRAIN INSPECTION Background-Numerous abuses have been revealed in connection with the operation of the present grain inspection system. Farm Bureau favors amendments to the Grain Standards Act to improve the integrity of the present system. Others have proposed that the present system be replaced with an all federal system. Recommendations.-The Committee recommends that Farm Bureau support legislation to amend the U.S. Grain Standards Act to provide authority for the USDA to: (1) Prohibit any entity that is in any way affiliated with a grain company from being designated as an official inspection agency. (2) Impose adequate requirements on official inspection agencies to ensure that they meet their designated responsibilities such as training, staffing, supervision, and reporting requirements. (3) Suspend or revoke designations of official inspection agencies. (4) Provide for triennial designation of all official inspection agencies. (5) Withhold inspection from grain firms found in violation of the Act; e.g., improperly influencing official inspection personnel, forcible assault, and bribery. (6) Provide for access to grain company records for purposes of checking for violations of the U.S. Grain Standards Act. (7) Perform original inspection on an interim basis during suspension or revocation proceedings against an official inspection agency. (8) Install visual monitoring systems in export elevators to help maintain the integrity of official samples. (9) Provide additional manpower to assure adequate supervision of official inspection agencies. (10) Complete the development of computer systems which would monitor grading accuracy. The Committee further recommends that Farm Bureau emphasize the statement in Farm Bureau Policies for 1976 which favors strict criminal penalties for violations of the Grain Standards Act. In addition, the U.S. Department of Agriculture has proposed amendments to the Grain Inspection Regulations. We are enclosing a copy of the Farm Bureau letter filed with USDA for your information. Sincerely, Enclosure. JOHN C. DATT, Director, Washington Office. AMERICAN FARM BUREAU FEDERATION, Park Ridge, Ill., March 3, 1976. Re Proposed Amendments to the Grain Inspection Regulations issued under the U.S. Grain Standards Act, as published in the Federal Register, pages 6265-6268, February 12, 1976. HEARING CLERK, U.S. Department of Agriculture, Washington, D.C. DEAR SIR: Farm Bureau appreciates the opportunity to present its views on the Department's proposed changes in grain inspection regulations and commends the Department for initiating these proposals. Since the proposed changes are designed to implement the purposes of the law which are to promote and protect interstate and foreign commerce in human food and animal feed by providing "for an official inspection system for grain, with the objectives that the grain may be marketed in an orderly manner and that trading in grain may be facilitated,” Farm Bureau supports these changes. It certainly is in the best interests of producers, merchandisers, warehousemen, processors, and consumers of grain and the general welfare of the people of the United States that action be taken promptly to correct the abuses that have occurred in the inspection of grain. As we indicated in our letter of May 23, 1975 to the Department, Farm Bureau was hopeful that remedial proposals would have been offered many months ago. In order to place Farm Bureau's interest in grain inspection in the proper perspective, we repeat here the essence of a portion of Farm Bureau's testimony at a hearing held by the House Agriculture Committee five months ago: Farm Bureau is the largest general farm organization in the United States with a membership of 2,505,258 member families in forty-nine states and Puerto Rico. It is a voluntary, nongovernmental organization representing farmers who produce virtually every agricultural commodity that is produced on a commercial basis in this country, including products destined for export markets as well as domestic consumption. American farmers have a huge stake in international trade. In the coming year U.S. producers will export almost 60 percent of their wheat crop, around 25 percent of their corn crop, and about 50 percent of their soybeans. Pro 70-654-76- -9 |