negligence, if you will, on the part of the Congress and the USDA in the broad sense. I do not suggest that anyone has intentionally tried to cover up anything.

Senator HUMPHREY. I did note that there was a new law passed in August 1968, which does give the Secretary additional powers over what he had before, of revoking licenses and overall supervision.

Senator DOLE. Right. There was a story in this morning's Washington Post about American aid to an ailing grain firm in Korea. Is there any official comment on that at this time?

Mr. CAMPBELL. No. I have not seen that, Senator. I would have to read it to know what is in it.

Senator DOLE. You do not have to read it all. It indicates their
Mr. PENCE. I have not seen this report.

Mr. CAMPBELL. Would you take a look at it and see whether or not you have any comment?

Senator DOLE. The reason I raise the question, there are going to be all kinds of stories cropping up, and the best way to find out the facts is to address the question to the Department.

Mr. CAMPBELL. Sure. Yes.

Senator DOLE. Publicly.

Mr. CAMPBELL. I will be very happy to get a reply to this as soon as we can analyze it.

Senator DOLE. The article indicates that the USDA has favored some subsidiary of Cargill in South Korea. There have been other reports about unpaid lobbyists from South Korea who wine and dine Members of Congress in certain areas in Washington, who have shipping interests, and maybe interests in grain trade. It seems the best way to put some of those stories to rest, or to expose whatever may be there, is to have the facts from the Department.

I think I know the answer, and maybe Senator Humphrey has already raised the question, but did you become aware of these abuses through your own investigation or through other agencies?

Mr. CAMPBELL. We have had complaints, we have had complaints in the Department all across the board. We have it in the food stamp area, the school lunch, we have it in the Forest Service and our Office of Investigation regularly checks out the complaints as best they can. But, we did not actually have any tied down information of the seriousness of this situation until the FBI and the Inspector General both began their investigation back in September 1973, which culminated in indictments in August of 1974 and later prosecutions. So that we did not really have the real information until we ourselves dug it out with our investigative unit.

Senator DOLE. Right, and then

Mr. CAMPBELL. We had complaints, but we did not have any information. We did not have any real evidence. The only evidence we got was after our investigation.

Senator DOLE. When the indictments were handed down, was that public information?

Mr. CAMPBELL. Yes, that is correct.

Senator DOLE. And that was in August of 19

Mr. CAMPBELL. August 1974, yes, indictments were returned on six licensed inspectors before the grand jury, and as I said in my statement, Secretary Butz conferred with Attorney General Saxbe, and

also he had a meeting with the attorney down in New Orleans that was in charge of the case.

Senator DOLE. What was the chronology after the indictments were handed down as far as the Department's investigation?

Mr. CAMPBELL. Well, we continued the investigation because these indictments, were just the beginning. We continued the investigation and additional indictments were handed down in Houston. We are continuing our investigations at the present time, and we are not nearly finished with the investigation.

Senator DOLE. That probably is an area in which you are getting into criminal indictments, and I am not certain whether we have any role to play in that. What we want to do is to tighten up the law and prevent it from happening again.

Mr. CAMPBELL. We appreciate very much, the committee's interest in this, and we, as I have said, will come forward with proposed, full strength permanent law in order to totally correct this.

Senator DOLE. In addition to grain inspectors, is it fair to ask if you are investigating any other areas? There has been some reference to company officials. Are there any other areas?

Mr. COLLINS. We are looking into the terminal elevators.

Senator DOLE. To what?

Mr. COLLINS. We are looking into the export elevators now. How far it goes up through the elevator top management I cannot say right now, but we are looking into the individual terminal elevators in the major ports.

Senator HUMPHREY. Terminal elevators?

Mr. COLLINS. Terminal, yes, Sir.

Senator DOLE. Are these the major ports that the Secretary announced a couple of weeks ago, seven or eight?

Mr. COLLINS. Right. Yes, Sir.

Senator DOLE. New York City, and Boston, I think, and Baltimore? Mr. COLLINS. Albany, Duluth-Superior, Baltimore, Philadelphia. We have started, and we are going in full force just as soon as we get our teams together.

Senator DOLE. What happens when you get into the terminal elevator? What do you do? What are you looking for there?

Mr. COLLINS. Well, sir, I would rather not say right now. But, when we have developed enough evidence on irregularities, we will then go to the U.S. attorney with our information.

Senator DOLE. That is your standard procedure?

Mr. COLLINS. Yes, sir.

Senator DOLE. That is what you are required to do under the law I assume?

Mr. COLLINS. That is right. Yes, sir.

Senator HUMPHREY. Are you examining all terminal elevators at ports of shipment?

Mr. COLLINS. We expect to. We cannot do it all at one time.
Senator HUMPHREY. No, I understand that.

Mr. COLLINS. We will go wherever we feel there is a need to go, yes, sir.

Senator HUMPHREY. I think that need should be based upon the volume of shipments that move out of a particular port facility. Mr. COLLINS. That is right. Yes, sir.

Mr. CAMPBELL. Senator; in that respect New Orleans does handle, from the figures I have seen, a third of the shipments.

Senator HUMPHREY. How about Galveston?

Mr. CAMPBELL. I do not know.

Mr. COLLINS. I do not know the percentage, but we are into Gal

veston now.

Senator HUMPHREY. Duluth-Superior?

Mr. COLLINS. About the same as Galveston, but we will go into the major ports.

Senator DOLE. Is that the limit of your investigation at this point?" Do you have any other limits?

Mr. COLLINS. We expect, sir, to move inland into the interior warehouses on this thing eventually.

Senator DOLE. Which interior warehouses?

Mr. COLLINS. The larger ones that ship, bring the grain in from the farmers, and then ship it out either for export or for internal sales. That is a long-range project, and we have to finish up first with the export elevators.

Senator DOLE. Would that be the last logical step?

Mr. COLLINS. I could not say, sir. It all depends on what we develop as to how far we will have to go.

Senator DOLE. Is there any indication that any foreign nationals. may be involved in any of these?

Mr. COLLINS. Foreign nationals? Not to my knowledge, sir.
Senator DOLE. There has been no evidence?

Mr. COLLINS. We have had complaints from foreign countries, and we are considering these complaints that we have gotten from foreign countries in our investigative activities.

Senator DOLE. But the complaints from those countries have been as to the grade received?

Mr. COLLINS. The quality, and the quantities.

Senator DOLE. Quality and quantity. Now, as I understand, the act of 1968 was requested by the Department. I think that is correct. Senator HUMPHREY. Secretary Freeman.

Senator DOLE. The only reason I raise that is to indicate there had been this concern in the Department. I do not know whether or not we failed to give that Secretary enough latitude, or whether the incoming Secretary did not properly implement the law. Perhaps that will be developed in the hearings.

I do not want to take a great deal of time, but I have a number of questions, and I will just submit those to Secretary Campbell to answer for the record. But the record should indicate when a foreign buyer makes a purchase of grain, who guarantees the quality of the grain delivered?

Mr. CAMPBELL. Well, we issue the certificate on the grade. I mean, the licensed inspector does and he is licensed by us. He is the one that issues the certificate.

Senator DOLE. But you are not responsible?

Mr. CAMPBELL. We, the Department, do not issue the certificate. Senator HUMPHREY. Yes; but the licensed inspector is under your supervision, and you have the ultimate responsibility.

Mr. CAMPBELL. That is correct, and that is why we started this investigation, Senator.

Senator HUMPHREY. Yes; I understand.

Senator DOLE. Is that the same as far as any guarantee of the quantity of grain delivered?

Mr. CAMPBELL. Quantity? The authority is not quite as clear on that. If Mr. Peterson, the Administrator here, can answer that question on the quantity, the weighing?.

STATEMENT OF ERVIN L. PETERSON, ADMINISTRATOR, AGRICULTURAL MARKETING SERVICE, U.S. DEPARTMENT OF AGRICULTURE

Mr. PETERSON. Under the U.S. Warehouse Act, licenses are issued to persons called licensed weighers. These are privately employed individuals usually working in grain elevators. The issuance of the license in my opinion is a paper exercise. There is no enforcement procedure which can be associated with it. There is no supervision over the performance of the licensee. Furthermore, I do not know how supervision could be exercised over those individuals unless it were possible to officially scrutinize them at all times while they are actually weighing grain.

Furthermore, the weighing equipment has to be properly calibrated so that it functions properly, and even properly functioning equipment can be manipulated by a knowledgeable person to give false weights. I know of no way that that weighing can be controlled except by federally employed or publicly employed weighers who would be placed in the houses and issue certificates that the Government could possibly stand behind.

This system we have now makes no guarantee of the accuracy of the weight of the lot or lots of grain covered, Senator.

Senator HUMPHREY. But you could have severe penalties for fraudulent performance?

Mr. PETERSON. Yes, sir. If you could provide the fraudulent performance, Senator, obviously there are penalties applicable.

Senator HUMPHREY, Also State laws. States do have laws.

Mr. PETERSON. Indeed they do.

Senator HUMPHREY. This is the type of cooperative action I think is so necessary with the Department and the State commissioners or secretaries of agriculture.

Mr. PETERSON. Senator, the State weights and measures capabilities vary very widely between the States. Some have very excellent capabilities, and others have practically none. The variation is very wide. I was a State director of agriculture, as was Secretary Campbell, and while I do not know about Georgia, in Oregon, we had a very large weights and measures division. We checked all weighing and measuring devices in the State. I think that I can speak from at least some general knowledge of the complexity of this kind of a problem to which Senator Dole now alludes in his questioning.

Senator DOLE. What is the most common grade of corn delivered to country elevators by corn growers?

Mr. CAMPBELL. No. 2 corn.

Senator DOLE. What about wheat?

Mr. CAMPBELL. Same.

Mr. GALLIART. Farmers in Kansas deliver a lot of No. 1 wheat to country elevators.

Senator DOLE. I know, but you do get some from Oklahoma.
Senator HUMPRHEY. A lot of it is from Minnesota.

Senator DOLE. About what percent of foreign material is allowed?

STATEMENT OF DAVID GALLIART; DIRECTOR, GRAIN DIVISION, AGRICULTURAL MARKETING SERVICE, U.S. DEPARTMENT OF AGRICULTURE

Mr. GALLIART. In wheat? Under the standards, the limit for foreign material for No. 1 wheat is five-tenths of 1 percent.

Senator DOLE. What about corn?

Mr. GALLIART. I am sorry, I do not recall the specific limits in the standards for corn.

Senator DOLE. I think it is best that I furnish some of these questions so that you may respond for the record.

Mr. GALLIART. The maximum limit for No. 1 corn is 2 percent. Senator DOLE. What is the most common grade of corn purchased by export customers, and the same with reference to wheat?

Mr. GALLIART. The common grade of corn purchased by export customers is No. 3. It varies in wheat between the No. 2 and No. 3 grades.

Senator HUMPHREY. What is the tolerance on grade 3, between 2 and 3? This is where you really, I think you get what you need.

Mr. GALLIART. Of course, the tolerances depend on the factor itself, but let's take the broken corn and foreign material factor which is the one we are talking about. The maximum limitation for broken corn and foreign material for No. 2 corn is 3 percent. For No. 3 corn the limitation is 4 percent.

[The following material was subsequently received for the record:]

GRAIN DIVISION REPLIES TO QUESTIONS ASKED BY SENATOR DOLE Question. What is the most common grade of corn delivered to country elevators by corn growers?

Answer. At harvest time approximately 30 percent of the corn inspected near production areas graded U.S. No. 2 and 30 percent graded U.S. No. 3.

Question. What is the most common grade of wheat delivered to country elevators by wheat growers?

Answer. At harvest time, approximately 69 percent of the Hard Red Winter Wheat inspected near production areas graded U.S. No. 1 and 26 percent U.S. No. 2. Soft Red Winter graded 40 percent U.S. No. 1 and 32 percent U.S. No. 2. Hard Red Spring 70 percent graded U.S. No. 1 and 23 percent U.S. No. 2. Durum Wheat graded 54 percent U.S. No. 1 and 32 percent U.S. No. 2. White Wheat graded 60 percent U.S. No. 1 and 26 percent U.S. No. 2.

Question. What percent of foreign material is allowed?

Answer. See Table No. 1.

Question. Does that include cracked or broken kernels?
Answer. Yes, see corn and sorghum on Table No. 1.

Question. Are the most common grades delivered by the grower the most common grades purchased by export customers?

Answer. No, for example: (1) The grower delivered only 60 percent of the White Wheat harvest (1969-1973 average) as U.S. No. 1. Eighty-one percent of those harvests were exported as U.S. Ño. 1; and (2) Eighty-six percent of the Durum Wheat harvested (1969-1970 average) graded U.S. No. 2 or Better while only 23 percent of those crops were exported as U.S. No. 2 or Better. Question. What is the most common grade of corn purchased by export customers?

Answer. The most common grade of corn purchased by export customers is U.S. No. 3.