(2) authorize the Secretary to collect fees to cover total costs of Federal inspections;

(3) authorize the Secretary to hire additional personnel to be stationed at foreign ports to inspect United States grain upon entry;

(4) authorize the Secretary to revoke the designation of an official inspection agency when, after a hearing, the Secretary determines that the agency has failed to comply with the Grain Standards Act;

(5) authorize the Secretary to temporarily suspend the designation of an official inspection agency, without hearing, whenever the Secretary deems such action to be in the best interest of the official inspection system;

(6) authorize the Secretary to revoke the designation of an official inspection agency owned, controlled, or operated by those engaged in merchandising grain or those who own or operate grain elevators or warehouses;

(7) authorize the Secretary to have Federal employees perform original inspection or reinspection on an interim basis;

(8) authorize the Secretary to require that all grain shipped in export be graded and that no clearance be given to any vessel unless the owner or shipper has a certificate of grade for the grain in the vessel;

authorize the secretary to issue regulations with regard to improved sampling equipment in export elevators and with regard to installation of electronic monitoring equipment in export elevators;

(10) authorize the Secretary to establish standards and procedures for loading export grain; and

(11) require the Secretary to report to the Senate Committee on Agriculture and Forestry and the House Committee on Agriculture every 60 days on steps to strengthen the grain inspection system.

Senator HUMPHREY. It is certainly not the intention of this subcommittee to create waves for the American farmers or the export market; however, we also must avoid the possibility of any coverup or whitewash.

It has become clearer as the information of the investigation has unfolded that we are looking at a problem of long standing. We also have been informed that many of the practices which brought about this investigation, or should I say brought about the problems and this investigation, are longstanding and for many parts of the world the standard way of doing business.

We will need to draw from the ideas and suggestions of those people who have knowledge and background in the grain business, particularly the grain exporting business. While the hearing today will involve Government witnesses exclusively, we will certainly need to draw on outside expertise at a later date. We will be calling in the representatives of the major companies, the exporting companies and organizations to discuss all of these matters relating to grain inspection including the weighing and grading of grain, and other related matters.

We will definitely want the witnesses today, as well as those who appear subsequently, to examine Senate Joint Resolution 88 and give us their assessment and suggestions concerning this proposed legislation.

Are the authorities provided to the Secretary of Agriculture within Senate Joint Resolution 88 adequate and appropriate, and will they enable him to deal with this problem in an expeditious fashion? Are there additional authorities which should be provided?

Finally, are the increased penalties included in Senate Joint Resolution 88 adequate to serve as a deterrent to the continuation or the future resurgence of this problem?

Since the inspection problem was detailed as early as 1969 in the Browning report and the current controversy surfaced well over a

year ago, I would hope that the Under Secretary would explain what steps have been taken to clear up the problem. Let me emphasize that the information on this problem has been available now for a number of years.

While our main focus to date has been on the issue of grain exports and their inspection, it is clear also that we will have to at some point give consideration to the problem of internal grain shipping and the inspection and handling thereof. It is for that reason that we have asked Senator Huddleston and his subcommittee to join in this cooperative effort.

This responsibility comes under the jurisdiction of the Subcommittee on Agricultural Production, Marketing, and Stabilization of Prices which is chaired as I stated, by Senator Walter D. Huddleston. As I have indicated, Senator Huddleston is here with us today.

Our hearings also will have to look beyond the immediate question of grain inspection and examine the whole grain grading structure to determine whether changes are required to prevent the adulteration of our grain exports. In addition, we will need to look carefully at the process by which grain is weighed at the various steps along the way to the purchaser.

The grading and the weighing are areas in which there are reported malpractices and in which there are reported activities of trying to cheat the market, so to speak.

While our grain export system has suffered a serious blow, and make no mistake about it, it is a serious blow, I am hopeful that these hearings can be helpful in dealing with the problem. I would suggest restraint by all parties involved with the problem so that we can get down to the very serious business at hand in finding answers to problems which are before us. There is too much at stake for all of us than to do otherwise.

The Federal law enforcement authorities have been pursuing active investigations in this field for some time. U.S. Attorney Gallinghouse in New Orleans has been particularly successful in obtaining indictments and convictions. This subcommittee will in no way compromise these investigations and prosecutions. I hope all other committees of the Congress will restrain themselves from seeking easy headlines on this issue.

However, I do hope that the committee staff can work with the FBI, the U.S. attorney's office, and the Justice Department on a continuing and confidential basis. I can assure you that any information provided to the staff will be kept confidential, except when it is needed to be used for purposes of new legislative authority.

I should add that the committee has had two investigators in the field for 2 weeks. We have also received authorization from the full committee to add an additional investigator, and also a lawyer that understands criminal law, and therefore, can be of help to us in designing legislation.

I have further asked the General Accounting Office to conduct its own investigation and in great detail. We will be examining all ports of shipment where any export of grain, where any export of grain takes place. Presently the emphasis has been upon the Port of New Orleans. I can assure you that all ports where grain shipments are made will be under careful scrutiny, and we will dispatch appropriate

staff of the committee to coordinate our work with the Federal Bureau of Investigation, the Grain Inspection Service of the Department of Agriculture, and other law enforcement agencies.

This morning we have as our witness Mr. J. Phil Campbell, who is the Under Secretary of Agriculture. I might add that we had hoped to have Secretary Butz, but he had to go to Venezuela. We were unable, because of the debate concerning the New Hampshire Senate seat, to adjust our schedule for his, and he was unable to change his for ours. I think he would have changed his schedule if I had pressed him—I want to say in all fairness-but I felt his journey and trip were important, and we ought not to try to change it.

So, we have Mr. Campbell with us.

Senator Clark, do you have a statement?

Senator CLARK. I think Senator McGovern may have one.
Senator HUMPHREY. Senator McGovern?

STATEMENT OF HON. GEORGE MCGOVERN, A U.S. SENATOR FROM THE STATE OF SOUTH DAKOTA

Senator McGOVERN. Mr. Chairman, very briefly, I want to commend you and Senator Huddleston for opening this investigation. The revelations of Bill Robbins of the New York Times and Jim Risser of the Des Moines Register have been startling to say the least. They ought to be disturbing to every farmer, every elevator operator, every grain trader, and in fact, every American who is concerned about this country.

It seems to me that there are three points, and I will just sketch them very briefly, with which we must be concerned.

The first is the extent of the bribery and the corruption and the conditions which caused it. In other words, are these a few isolated instances that have been brought to light, or is it a part of a broader pattern?

Second, beyond the inspection problem, and the associated problem of blending and short-weighting, is the whole set of grain standards, the whole question of the limitations of foreign matter in exported grain. For example, what impact does that have on the quality of our grain which we made available to others?

Third, it seems apparent that we have to examine our whole grain transportation mechanism from the farm field to the foreign dock. We need to see whether our technology is modern enough and adequate to handle the massive movement of grain exports that we have developed in the past few years.

As the chairman knows, the value of those exports now has reached about $20 billion. That is about the equivalent of what we expect in farm income this year, so in a sense, we are depending on our domestic market to cover the overhead of producing food, and we are depending on our export sales for whatever profit evolves.

Finally, I think it is time that we looked at the whole foundation of our grain trade, the question of whether or not it is prudent and wise for a handful of grain companies to dominate a business that is not only as large as this, but one that is so vital to the well-being of this country. I am hopeful that out of this investigation these and other concerns can be fully examined.

Senator HUMPHREY. I thank you, Senator McGovern, and I can assure you that those guidelines are exactly the ones that we intend to follow.

Senator Clark?

STATEMENT OF HON. DICK CLARK, A U.S. SENATOR FROM THE STATE OF IOWA

Senator CLARK. Mr. Chairman, there is widespread corruption in our present grain inspection system. U.S. grain standards are at best difficult to determine and at worst a means of encouraging the concealment of inferior grain. Those who are suffering the most are the ones who least deserve it-the American farmer and consumer, and those foreign countries which are the major recipients of American food exports. That includes those with whom we trade and those whom we aid.

Simply put, Mr. Chairman, the American farmer has never produced a higher quality grain, and yet foreign buyers have increasing complaints about the deteriorating quality of our grain on delivery. Obviously, something is happening to the grain along the way. I suspect three or four things are occurring: (1) our inspection system is faulty and corrupt; (2) our grading standards are antiquated; (3) our grainhandling methods need revision; and (4) six major grain companies so monopolize the grain trade and all its aspects that effective regulation can be thwarted by their sheer size and political influence.

The purpose of these hearings, as you have outlined, is to look into the corrupt practices to see how they evolved and what steps can be taken to avoid any occurrence in the future. This committee is primarily a legislative committee, and we will focus on the action which Congress must take to insure reliability and honesty in our inspection system.

In doing so, it would have been most appropriate that the subcommittee begin its hearings with the Secretary of Agriculture, Mr. Butz, as its leading witness, as you have indicated. Mr. Butz has responsibility for the administration and enforcement of U.S. grain standards and inspection. In his position, he must be held accountable for any failure on the part of the Department of Agriculture to investigate allegations of graft in the inspection system. I regret that the Secretary is unable to appear at this time, and I look forward to his testimony as these hearings progress.

In the meantime, Mr. Campbell is most qualified to respond with authority to this inquiry. Mr. Campbell has been Under Secretary since 1969, which puts him in the unique position of having served under two Secretaries of Agriculture. He has held his post during the period when charges were made by both United States and foreign government officials about corruption in the handling and inspection of American grain. Given his position, and the continuity of his service with the Department, we would expect him to be able to respond in detail to the Department's role with respect to allegations and disclosures of corruption in the grain trade.

More specifically, Mr. Campbell's testimony has been solicited to help clarify questions concerning bribes accepted by federally licensed

private inspectors, the payment of bribes by major shipping companies, the allegations of payments of bonuses by the large grain exporters to elevator operators running the huge terminal elevators they own, the short-weighing, misgrading, and stealing of grain, the conflict of interest of private inspection agencies, and the complaints of foreign companies about U.S. grain shipments.

Mr. Campbell's candor and cooperation today can assist the subcommittee through a full disclosure of these practices and a frank assessment of any errors and omissions made in the past. Thank you, Mr. Chairman.

Senator HUMPHREY. Senator Huddleston?

STATEMENT OF HON. WALTER D. HUDDLESTON, A U.S. SENATOR FROM THE STATE OF KENTUCKY

Senator HUDDLESTON. Despite the balance-of-payments problems created by higher oil prices and sluggish economic activity around the world in the last half of 1974, U.S. farm exports were at a recordbreaking level of $22 billion-up 25 percent from 1973 in terms of value.

The first forecast of U.S. agricultural trade in fiscal year 1976 puts exports at around $18 billion. With farm product imports forecast_at around $9 billion for the next fiscal year the agricultural trade surplus could fall to $9 billion.

I have suggested the hypothesis that with liberal trade policies, U.S. agricultural exports could substantially offset the trade deficit that will be created by the impending rise in fuel imports.

To accomplish this the United States is better endowed with resources for agricultural production than any other country. With only 7 percent of the world's land mass, we have more than 12 percent of the cultivated land and nearly 9 percent of the pastureland. More importantly, in roughly the Corn Belt, we have about half the world's farmland with long summers of adequate rainfall. And in the old Cotton Belt-across the Southern States-we have a third of the world's humid semitropic farmland.

Combinations of temperate climates and fertile soil make these two regions suitable for the production of many crops, especially feed grains and soybeans-the crops most in demand. Together with other productive agricultural areas such as the upper Prairie States, where short summers of adequate rainfall provide abundant grain harvests, and the dry Southwestern and Rocky Mountain States, provide the base for extensive cattle operations-these regions give the United States an absolute advantage in agriculture that parallels the Middle East's advantage in petroleum.

Apparent recent corruption in the grain trade with respect to inspection and grading is placing our farmers at a competitive disadvantage in the world marketplace. Agriculture is the central sector of our economy. We must not allow U.S. farm product integrity to be compromised if economic stability or growth are to be achieved. My Subcommittee on Production, Marketing, and Stabilization of Prices certainly is interested in this subject. I think as Senator Humphrey has pointed out, the ground work is laid for a very serious and intensive study of this problem.