1B. Persons performing weighing and inspection functions.-Question 1B concerns persons who perform the functions of inspection, grading, sampling and weighing. The answer to that question with respect to weighing of grain and for inspection of grain for purposes of the U.S. Warehouse Act has been covered under question 1A. In summary, weighers and inspectors licensed under the U.S. Warehouse Act usually are employees of the warehouse but they may be employed by independent supervisory agencies. Applicants are required to give five character references, a 10-year work résumé and must demonstrate their ability to properly inspect and weigh. No direct supervision is made of their daily operations by USDA personnel.

1C. Authority and responsibility.-It is a violation of the U.S. Warehouse Act to weigh fraudulently or to misgrade any grain stored or to be stored under the provisions of that act. Failure to weigh or grade correctly under the act can result in suspension or revocation of licenses and could lead to criminal prosecution of the act.

1D. Conflicts of interest.-There is potential for conflict of interest on the part of inspectors and weighers licensed under the U.S. Warehouse Act. This is especially true where the licensee is an employee of the warehouse. It is less true on the part of licenses employed by independent supervisory agencies. The conflict could result from the vested interest an employee has in his job for which he is paid by an employer as opposed to his obligation as a Federal license holder. There should be no significant potential for conflicts between licensees and grain shippers except where the shipper is the warehouseman.

BACKGROUND INFORMATION ON THE WAREHOUSE ACT 1

The U.S. Warehouse Act was passed by Congress in 1916 to improve this country's agricultural warehousing industry. When the act was created, storage facilities were inadequate, warehousemen lacked proper control, warehouse receipts were not uniform and not universally accepted, and there were few uniform standards for grading and classification of agricultural products.

One of the most beneficial results of the act was the establishment of warehouse receipts that are uniformly dependable and acceptable in financial circles as reliable collateral for loans.

The present system of warehouse licensing, bonding, and inspection assures receipt holders that their products will be delivered when they surrender receipts and pay storage charges.

Each depositor's goods must be stored in such a way that he may recover the same product if the warehouse receipts call for separate storage, or the same amount of product of the same grade or better if stored commingled with like products of other depositors.

The U.S. Warehouse Act authorizes the Secretary of Agriculture to license public warehousemen who voluntarily apply for a license and who are found to qualify.

The act is administered by the Warehouse Service Branch of the Transportation and Warehouse Division, Agricultural Marketing Service, USDA, headquartered in Washington, D.C. At the Division's National Warehouse Service Center in Prairie Village, Kans., exami

1 Prepared by: Information Division. Agricultural Marketing Service, U.S. Department of Agriculture, Washington, D.C. 20250, June 1975.

nation reports are reviewed, bonding and licensing are controlled, and technical aspects of the program are handled. Warehouse examiners operate under the supervision of seven area offices located in Atlanta, Ga.; Minneapolis, Minn.; Omaha, Nebr.; Indianapolis, Ind.; Memphis, Tenn; Temple, Tex.; and Portland, Oreg.

The 215 persons assigned to the branch spend about half their time. in administering the U.S. Warehouse Act and the other half on programs of the Commodity Credit Corporation. Currently licensed under the act are 316 cotton warehouses, 1.477 grain elevators and 20 warehouses storing other agricultural commodities. These represent about 60 percent of the commercial cotton storage capacity and about 40 percent of the commercial grain elevator space in this country. At any given time, the aggregate value of warehouse receipts-representing the actual stored products in federally licensed warehousesmay be $7 billion or more.

To qualify for a license, a warehouseman must have a suitable and properly equipped warehouse; a good business reputation; and a minimum net worth computed according to warehouse capacity and the type of commodity stored. He must furnish an acceptable bond in an amount fixed by USDA; have qualified personnel with knowledge of how to weigh, inspect, and grade agricultural products; have adequate equipment to properly grade and weigh; apply on a prescribed form signed by an authorized officer; and pay initial inspection and license fees.

To the extent of their capacity, licensed warehouses are required under the act to receive for storage agricultural products of the kind customarily stored, which are tendered in the usual manner in the ordinary and usual course of business and in a suitable condition for warehousing. They must not discriminate between persons desiring to avail themselves of warehouse facilities.

The act requires licensed warehousemen to issue receipts for all stored products as evidence to the depositor that his products are in storage. All such receipts, printed under Government contract, must be ordered from USDA.

A warehouse receipt may be issued only when the products are actually received in the licensed warehouse. Negotiable receipts must be surrendered to the warehouseman and canceled by him before the products may be delivered.

Each licensed warehouseman is required to post a tariff or schedule of charges setting forth the amount he charges for receiving, delivering, storage, insurance, conditioning, and all other warehousing services. Copies must be furnished to USDA and are subject to disapproval if exorbitant or discriminatory. Before making any changes in rates, amended tariffs must be submitted to USDA, and are also subject to disapproval.

Receipts issued under the U.S. Warehouse Act are supported by inspection and weight certificates issued by warehouse inspectors and weighers licensed under the act. Licenses are now in effect for 7,570 inspectors and weighers who are usually employees of the licensed warehousemen, but can be employees of an independent agency. Their "service licenses" enable them to perform duties only at the facilities of the licensed warehouseman. No direct supervision is made of their daily operations by USDA personnel. The certificates they issue are

not valid for purposes of the U.S. Grain Standards Act (under which grain is inspected and graded) unless they also hold a grain inspector's license under that act.

Applicants for service licenses are required to furnish five character references, a 10-year work resume and must demonstrate their ability to properly inspect and/or weigh. Grain inspectors licensed under the U.S. Grain Standards Act may be licensed under the U.S. Warehouse Act upon application without being required to further demonstrate ability.

The U.S. Warehouse Act is administered mainly through a program. of comprehensive warehouse examinations-about twice each year on an unannounced basis. Examiners review the warehouseman's obligations to depositors as represented by outstanding warehouse receipts, scale tickets, and accounts. They inventory all commodities on hand, comparing this to the record of obligations.

They also review a warehouseman's recordkeeping, housekeeping practices, sanitation, insurance coverage, and check the quality of the product in store. When minor discrepancies or adverse conditions are found, warehousemen are asked to bring operations into compliance within 15 days. When considered serious, the warehouseman's license may be suspended. The act provides for penalties of up to 10 years in prison and up to a $10,000 fine for improprieties in connection with warehouse receipts or inspections and weighings.

Question 2. Secretary Campbell, in your testimony on June 19, you indicated that the following actions have been taken to correct deficiencies in the grain inspection system:

(a) Reorganization of the Grain Division of the Agricultural Marketing Service in 1974 and installation of new leadership.

(b) Initiation of a training and recruiting program to hire and upgrade present personnel.

(c) Shifting of personnel to meet changing workloads on a continuing basis.

Would you explain, in detail, the change in procedures made by each of these three steps? Explain any improvement in the Grain Division that has resulted from these changes.

Answer. See attachment.

2A. The AMS Grain Division was reorganized in 1974 as follows: 1. The Commodity Inspection Branch and Grain Inspection Branch consisted of two separate branch headquarters who utilized the same force of Federal field inspectors. In 1974, these two branch headquarters were combined into a single branch headquarters responsible for inspection of commodities made from grains, rice, dry peas, dry beans, dry lentils, and the various grains.

2. A Board of Appeals and Review-Rice (BARR), located in New Orleans, and a Board of Appeals and Review-Grain (BARG), located in Beltsville, Md., were directly supervised by the Chief of the Commodity Inspection Branch and the Chief of the Grain Inspection Branch. In the 1974 reorganization, the BARR and BARG were combined as the Board of Appeals and Review, located in Beltsville, Md., and placed under supervisory control of the Chief, Standardization Branch.

3. The Standardization Branch was reorganized to consist of a

Standards Section, an Equipment and Methods Section, and the Board of Appeals and Review.

4. A Training and Recruiting Unit was created.

5. An additional Deputy Director position was authorized. New leadership was established in the form of personnel changes in the following positions: Director, Deputy Directors, Assistant to the Director (Training and Recruiting), Inspection Branch Chief, Inspection Branch Assistant Chief, Inspection Branch Section Heads, and Standardization Branch Chief.

2B. A training and recruiting program was initiated to upgrade present personnel and to infuse the work force with new employees of high potential.

The organization of the new Inspection Branch permits more uniform, coordinated control of all inspection operations. Most importantly, it placed the field inspection force under one Federal headquarters office rather than two as under the previous organization. This is beginning to result in better communications between field and headquarters personnel and allowing for more efficient utilization of field personnel.

The Board of Appeals and Review (BAR) is no longer subordinate to the Inspection Branch Chief and, as a staff rather than line unit, can perform its appeal function with considerably less option for bias. Additionally, the Board is now in position to closely collaborate with the Standardization Branch grade-standards specialists in effecting closer interpretations of the U.S. standards for grain quality. Because of the constant expert employment of grading equipment and standard grading methods, the Board is also now in position to more closely collaborate with Standardization Branch equipment and methods specialists in their never-ending quest for more efficient grading devices and faster grading methods. Already, in the short time since the reorganization, this close working relationship has paid off with a revolutionary new visual grading aid device. This device is now in use by all Federal graders and effectively depicts close grain quality cutoff points at the grading table.

The reorganization of the Standardization Branch allows for closer concentration on the separate and distinct areas of: (1) Promulgation of new and revised grade-standards, (2) effecting new inspection devices such as timesaving infrared protein analyzers and more accurate moisture testing machines, and (3) Board of Appeals and Review activities.

The new Training and Recruiting Unit has embarked upon concentrated programs designed to: (1) Upgrade performance of present personnel in technical, supervisory, and managerial areas; and (2) recruit college graduates, with agricultural backgrounds, showing potential to first become professional Federal inspectors and later enter the supervisory and managerial ranks. Immediately after its initiation, this unit drew up a 2-year training plan for present employees (see enclosure) and put it into effect. This plan covers each individual employee and will be extended on a year-to-year basis. A national training conference for the Inspection Branch supervisory force was held early in 1975, and another is planned for 1976. A program to purchase or create specially tailored audiovisual training aids such as narrated color slide series and training films on technical inspection subjects has been initiated. Several of these efficient training packages have al

ready been distributed to Inspection Branch field offices for use in training technical personnel. Courses in group communications and professional inspection techniques have been given to key inspection personnel, and more are planned. The Training and Recruiting Unit has recruited a number of new Federal inspectors from 18 agricultural universities. These new employees will be given a preplanned, concentrated training course, during their year of employment, in the form of classroom training and closely supervised on-the-job training. Those showing satisfactory performance will, at the end of their first year's training, be transferred to different areas so as to obtain a wide experience base in working at terminal markets and at interior points and working with the different grains. These second-year trainees will attend grading schools taught by the Board of Appeals and Review. During their second year, these trainees will be given additional responsibility and work under somewhat less stringent supervision. Successful participants will, at the end of their second year, be promoted to the journeyman inspector level. They will receive more training by the Board of Appeals and Review in the analysis and grading of grains. They will be constantly scrutinized for their potential as supervisors and managers. Those showing this potential will be given selected training and understudy assignments to prepare them for roles as supervisors and managers. This program of recruiting and training will be repeated yearly until sufficient trained manpower are available to the Division. This program is especially essential for the pending replacement of retirees. We estimate that, in the ensuing 5 to 10 years, about 75 percent of our current supervisory force will retire. Before the establishment of a Training and Recruiting Unit, there were no organized training and recruiting activities in the Grain Division.

2C. Personnel were shifted from areas of declining inspections as marketing structures of grain changed. As exports expanded, personnel were transferred into those markets with expanding workloads. These employees were utilized to perform supervisions and appeals at export locations. In addition to the physical relocation of some employees, the tours of duty have been changed from the standard Monday through Friday 8 to 5 workweek, to provide more flexibility in the use of personnel. The more flexible tours allow for possible around-theclock supervision with available Federal personnel any day licensed personnel are performing inspection activities. The ability to utilize Federal personnel at times other than daylight hours has resulted in observing licensees in wrongdoing and making the licensees more aware that supervision may be performed at any time.

Question 3. For fiscal year 1976 and the 6 previous fiscal years, supply the following information:

(a) The amount of funds and the manpower requsted by the Chief of the Grain Inspection Branch to the Grain Division;

(b) The amount of funds and manpower for the Grain Inspection Branch requested by the Director of the Grain Division to the Administrator of the Agricultural Marketing Service;

(c) The amount of funds and manpower for the Grain Inspection Branch requested by the Administrator of the Agricultural Marketing Service to the Secretary;

(d) The amount of funds and manpower requested for the Grain Inspection Branch by the Secretary to the Office of Management and Budget;

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