EXHIBIT 3 3. RESOURCES NEEDED FOR ADEQUATE SUPERVISION A. MAINTAINING INSPECTION ACCURACY The inspection accuracy on export grain is at the 98-percent level. It is believed that this is an acceptable level. It is also believed that the level can be maintained with the presently available resources in manpower and money. (NOTE. The inspection accuracy on nonexport grain is at the 88-percent level. It is believed this may be adequate. In fiscal year 1973, see Attachment 3-C, we plan to determine what inspection accuracy levels are adequate on export and non-export grain and what staffing is needed to maintain such levels.) B. SURVEILLANCE FOR DECEPTIVE PRACTICES At present we are performing "on-site" surveillance on approximately 2 percent of the sublots in export grain shipments and are receiving about 18 complaints per year on the quality of the shipments. This is at the rate of about one complaint per 300 shipments. It is believed this is an acceptable rate. For "peace of mind" and in keeping with past "on-site" surveillance practices, some of our staff would like to perform "on-site" surveillance on the sampling and grading of about 3 percent of the sublots in export shipments, and, in addition, make independent reviews of the licensed inspector's file samples on about 7 percent of the sublots in export shipments for a total of 10 percent. To perform surveillance at the 10-percent level, it is estimated we would need an additional 14 Federal graders and an additional annual appropriation of $198,000. It is estimated that at the 10-percent surveillance level, we would still receive about 18 complaints per year. As an alternative to performing surveillance at the 10-percent level, we would prefer to increase surveillance at the known problem elevators in the New Orleans circuit by transferring additional Federal graders from other Field Offices to the New Orleans Field Office and make such other changes in staffing as may be needed to accomplish about 10-percent surveillance on each shipment made by the problem elevators. (See Attachment 3-D). We have adequate funds this year for such surveillance. On the basis of this investigation, I have taken the following action to improve our operations: Cautioned the Grain Inspection Branch to do a more adequate job in briefing prospective foreign buyers about the U.S. grain standards, the characteristics of U.S. grain, expected variations in quality, and steps the buyers can take to further assure that they will receive the quality of corn they want and need. Requested the Grain Inspection Branch to promptly establish a priority schedule for performing on-site surveillance at the problem elevators in the New Orleans circuit. Cautioned the Board of Appeals and Review to include adequate disclaimer statements with samples representing grades of U.S. grain. U.S. No. 2, white corn weevily. • U.S. sample, grade mixed corn. Note: Samples representing the top of a U.S. No. 2 grade, the bottom of the U.S. No. 2 grade, the destination and origin samples are available for review. B. ESTABLISHING AN ACCEPTABLE LEVEL OF INSPECTION ACCURACY, AND A STAFFING GUIDE TO MAINTAIN THAT Level Under the U.S. Grain Standards Act and the Agricultural Marketing Act of 1946, the Division is responsible for coordinating and supervising the official inspection personnel (employees of State Departments of Agriculture, trade groups, or self-employed). The supervising is performed, in large part, by making "supervision inspections." In general, supervision inspections are performed on an "as time permits" basis. As a result, the level varies by location and by work periods. A recent increase in requests for grain appeal inspections and in rice inspection in the South has resulted in fewer employees being available for supervision inspections. Although we do not have established guidelines for the supervision inspection work, we have helped-through interpretive line samples, visual aids, "over-theshoulder" supervision, and seminars-licensed inspection personnel maintain what is considered to be an acceptable level of inspection accuracy, ranging from a high of 99 percent in the Stuttgart, Arkansas, circuit to a low of 80 percent in the Omaha, Nebraska, circuit. In order that we may maintain an acceptable level of inspection accuracy nationwide, we need to but have not determined: 1. What level of accuracy is adequate for both domestic and export inspections. (Because of the difficulty in requesting appeal inspections after loading, a higher level is considered warranted for export shipments.) 2. What supervision methods are most effective in maintaining adequate levels of inspection accuracy. 3. Using the best supervision methods, what resources are necessary to maintain an adequate level of inspection accuracy? 4. How best can the effectiveness of supervision be measured? 5. What changes in staffiing, if any, are needed in each field office to maintain an acceptable level of inspection accuracy at the acceptable level. We plan by January 1974 to complete a study on 1 through 5 above and initiate any action that may be warranted as a result of the study. ATTACHMENT 3-D PRINCIPAL PROBLEMS EXPECTED DURING THE PERIOD JANUARY-JUNE 1973 A. MOVING PEOPLE AND CLOSING OFFICES TO MEET CHANGING WORKLOADS Grain appeal inspections, rice inspections in the South, and grain and processed products supervision inspections are performed by Grain Division employees. During the past 10 years-1963-73, our grain inspection workload has changed as follows: 1. Requests for grain appeal inspections have decreased from approximately 30,000 to less than 20,000 per year. 2. The volume of rice inspected in the South has increased from an estimated 40 million to 70 million cwt. per year. 3. The number of grain supervision inspections has decreased from approximately 170,000 to less than 65,000. 4. The number of processed product supervision inspections has decreased from approximately 50,000 to less than 35,000 per year. To meet these changing workloads, we have reduced the number of our field offices from 48 to 35 and our "inspection" personnel from 300 to 220. We have also transferred employees and vacancies from low volume inland field offices to high volume export field offices and to rice inspection offices in the South. To date, we have satisfactorily provided needed grain appeal, rice inspection, and supervision services; however, the current grain appeal inspection workload at New Orleans and Baton Rouge, Louisiana, and the current workload in the rice inspection offices requires frequent use of overtime and detailing of our employees. To better meet the continued heavy workloads at New Orleans and Baton Rouge, we plan by January 1974 to: 1. Close five domestic field offices (to free personnel for other locations). The activities and staff (or vacancies) will be transferred to nearby field offices, to New Orleans or Baton Rouge, or to rice inspection offices in the South. 2. Transfer three to six other employees from domestic to export field offices (to locate personnel where they are most needed). 3. Review the need for a change in management in the New Orleans Field Office (to determine whether the present system and staffing meets today's needs). 4. Promulgate established tolerances for use in performing appeal inspections. (Any tolerance system would tend to substantially reduce the domestic appeal workload.) 5. Actively seek ways with FAS to improve the image of inspection accuracy in the New Orleans circuit (to further reduce the volume of appeal inspections). 6. Further expand the use of file samples for appeal purposes. (When concurred in by the applicant for an appeal inspection, the samples that are maintained by licensed inspectors will be used for appeal purposes rather than new samples obtained by Federal employees.) 7. Seek trade agreement whereby shiphold appeal inspection service would be limited to dockside inspection. (The service is now generally performed when the ship is anchored in midstream.) We anticipate trade opposition to 1 above because local trade groups usually object to losing the prestige of having a field office within the local trade area. Further, we anticipate that many employees who do not wish to leave the local area will be opposed to the transfers mentioned in 1 and 2 above and will encourage the trade to object to our actions, particularly the closing of the offices. Senator CLARK. Didn't the action taken in response to this complaint come more than a year later? Mr. PETERSON. Senator Clark, I began discussions with the then leadership of the Grain Division seeking improvement in division operations and directed our Deputy Administrator for Management to closely monitor it in terms of its management, of its discharge of responsibilities, and in summary, out of all of that activity came a reorganization of the Grain Division, and new leadership in the Grain Division. Senator CLARK. So that leadership change, and those other changes, were in direct response to the Nicaraguan complaint? Mr. PETERSON. They grew out of that, in part. There were some other matters that are not particularly germane to this hearing, but that was one of the triggering factors. And over that period of time, dealing with Civil Service questions, and all of the rest of it, and all of the mechanics we go through in reorganizations, out of that has stemmed a reorganization of the Grain Division and a change in its leadership. Senator CLARK. Let me ask, Mr. Campbell, or Mr. Peterson, whomever might wish to respond, just a little bit more about the Browning report. It has been described as a low-level report, but as I understand it, Mr. Browning was the Chairman of the Grain Division Board of Appeals and Review, and he made this report listing a great many of the problems which Senator Humphrey outlined in his opening statement. Is there any indication that anyone in the Department responded to this report? Mr. PETERSON. Senator Clark, I never heard of the report until I read it in the paper. It had never been brought, by anything I can find out, to the attention of the agency, at the agency level, or at the secretarial level. When I inquired immediately of the Grain Division for it I was told there was no record of it in the Grain Division. It was finally obtained from Mr. Browning, who is now retired and lives in Portland, Oreg., because he had a copy in his file and was good enough to furnish it to us. Senator CLARK. According to the report, it went to Howard Woodworth, the Chief of the Inspection Branch. Why would he not have a copy of it? Mr. PETERSON. I have no idea, Senator. Senator CLARK. Mr. Chairman, I would like to make a copy of the Browning report a part of the record. Senator HUMPHREY. It will be included, as well as the audit report, in the proceedings of the committee today-the full text of both reports. [The above referred to material follows:] U.S. DEPARTMENT OF AGRICULTURE, CONSUMER AND MARKETING SERVICE, GRAIN DIVISION, AGRICULTURAL RESEARCH CENTER, Subject: Report by John A. Browning as a member of the U.S. Corn and Sorghum Situation Team visiting the United Kingdom and Western Europe, January 7 to 23, 1969 To: H. H. Woodworth, Chief Inspection Branch Members: Herman T. Holmes, President, U.S. Food Grains Council, Clayton W. D. G. Nelson, executive Vice President, Grain Sorghum Producers Samuel H. Sabin, Vice President, Continental Grain Company The team had two objectives: 1. Trade policy by EEC actions on feed grains and by-products as it affects marketing of United States feed grains in Western Europe; and 2. The quality of the feed grains received overseas compared with the grade stated on the inspection certificate. My part of the team action was confined solely to the operation of the United States Grain Standards as they affect the export of grain. At every meeting the complaint on the quality of grain received was very similar. It was (1) The corn received was full of broken particles and dust in amounts greater than that stated on the grade certificate; (2) the moisture in parts of the shipments was higher than 15.5% when they contracted for No. 3 Corn on broken corn and foreign material with moisture not to exceed 15.5%; (3) that the blending of corn of different moistures caused the corn to arrive out of condition and the United States should pass a law to stop blending corn of different moisture; (4) that the inspection system was subject to bribery or fraudulent issuance of certificates; and (5) what could they do to obtain redress when shipments did not coincide with their expectations of what the certificate called for. These questions came at the end of the presentation of my paper. They were answered in the following general terms: (1) We did not dispute the claim that the corn contained more broken corn and foreign material than the certificate called for because most of the complaints we had received were on smaller portions of transhipped corn than was shown on the original certificate; that the certificate only applied to the grain at the time of loading aboard the vessel and only covered the grain in the carrier identified on the certificate; that corn harvested at a moisture content above a safe keeping range had to be dried and dried corn |