ADDITIONAL STATEMENTS FILED FOR THE RECORD

STATEMENT OF RALPH T. JACKSON, EXECUTIVE VICE PRESIDENT, AMERICAN SOYBEAN ASSOCIATION, HUDSON, Iowa

While Senate Joint Resolution 88 contains several provisions which the American Soybean Association (ASA) fully supports, ASA cannot support the resolution as a whole because it does not go far enough.

First of all, ASA believes that any legislation dealing with the grain handling problem should be on a permanent rather than a temporary emergency basis. To make some temporary changes now and possibly a completely different set of changes a year from now would simply add more chaos to our country's already troubled grain handling system. What is needed is a well thought out, permanent set of revisions that will not only solve our current problems but also provide a viable system for years to come. We believe it is possible for Congress to come up with a good, permanent solution without unduly prolonging the correction of our immediate problems.

ASA's second major objection to Senate Joint Resolution 88 is that it contains no revision of the grain grading standards system. There are many inequities to the farmer under the present grading system, and ASA believes the entire system should be revamped. Our subcommittee on grade standards will be meeting this month to make specific recommendations for revising the grading system so that it will be more equitable for the farmer who sells his grain. ASA hopes Congress will use these recommendations, when they become available, in formulating a permanent solution to our country's grain handling problems.

Among the provisions of Senate Resolution 88 that ASA does favor is the provision for placing federal grain inspectors at major foreign ports of destination for U.S. grains. ASA proposed this action in May and fully supports its inclusion in any permanent legislation on the grain problem.

STATEMENT OF J. T. BUTLER, CHIEF GRAIN INSPECTOR, MEMPHIS BOARD OF TRADE, MEMPHIS, TENN.

Recently, there has been a great deal of publicity regarding problems in the grain industry. Specifically, there have been allegations of iregularities in the inspection of grain at some port facilities. The Memphis Board of Trade feels compelled to offer the following statement in an effort to clarify and put this matter in perspective.

The Memphis Board of Trade was organized in 1883 and is one of the oldest grain exchanges in the country. Its membership includes commercial grain merchandisers, grain processors, soybean and cottonseed processors, feed manufacturers, brokerage and commission merchants, banks, railroads, and country shippers. Both buyers and sellers of farm commodities are members of the Memphis Board of Trade.

The Memphis Board of Trade established a grain and hay inspection department and standards of quality for grain and other commodities in 1885. When the Congress passed the U.S. Grain Standards Act in 1916, our inspection department became a designated official inspection agency under that Act. In 1962, a modern and efficient grain inspection station was built on Presidents Island at a cost of almost $100,000. This was financed entirely by the Memphis Board of Trade.

The Board of Directors of the Memphis Board of Trade appoints a Chief Grain Inspector, a highly skilled professional, who has complete autonomy in the staffing and operation of the inspection department. The present staff of inspectors have an average of twenty-six years' experience in grain inspection. They have been individually tested and licensed by the USDA, and are re-examined every three

years for competence. Their tenure is based solely on their performance as insspectors, with no regard given to their political affiliations.

The inspection department performs approximately 30,000 official inspections annually, on barges, rail cars, trucks, and submitted samples. Official inspection is furnished to anyone who desires it. We currently inspect grain for approximately 240 accounts, about equally divided between shippers and receivers of grain. Service is provided seven days a week, twenty-four hours a day during harvest periods. The operation is completely financed from fees charged for the service. These fees are very modest since the department operates on a non-profit basis. The territory serviced by our department includes the heavy grain and soybean producing area of eastern Arkansas as far west as the White River, and all of West Tennessee.

Our licensed inspectors are supervised by employees of the USDA, who grade samples behind our inspectors daily to make sure they are accurate. Also, any interested party may appeal an inspection, and have the lot re-inspected by the USDA. In the last two fiscal years, there has been an average of 178 appeals per year called on our grades. This is about six-tenths of one per cent.

This system of official inspection has worked remarkably well in the Memphis market and in other markets throughout the country, in providing expert, unbiased grading of grain to whoever desires it, whenever they desire it. It is a voluntary service accepted by the buyer and seller, not required to be used by any law or regulation in our market. The Memphis Board of Trade has never had any scandal or charges of any kind lodged against its inspection department in the ninety-one years of its existence.

The Congress is now conducting hearings to determine whether this system of grain inspection which has worked so well for so many years should be dissolved and replaced by state or federal employees. The Memphis Board of Trade and other grain exchanges throughout the country originated grain standards and sponsored indepenent inspection departments as a public service long before the federal government entered grain inspection. The grain exchanges helped the USDA formulate uniform standards when the U.S. Grain Standards Act was passed, and have faithfully applied these standards with an enviable record through the years. Of the approximately 2,800 licensed inspection personnel throughout the country, only a relative handful have been charged with improper conduct. Present federal laws call for heavy fines and prison sentences for violators of the U.S. Grain Standards Act. No one needs fair and impartial grain inspection more than our members.

We do not feel that federal inspectors can do the job any better, or more honestly than licensed inspectors currently performing this vital function. As noted before, the present system provides for initial inspection by the Board of Trade under USDA supervision. Thus, two separate agencies are involved. Under a federalized system there would be only the USDA with no separate agency to supervise the inspectors as we now have. There is no doubt that it would take many additional government employees to inspect grain. It is also logical to assume that official grain inspection would not be as readily available throughout the country as it is at present, and the cost might be much higher to the grain trade and/or to the taxpayer under a federalized system.

One might make the point that certain private, or "Board of Trade" inspection departments have failed in some instances to provide fair and impartial inspections. One might also conclude that these failures occurred while under the supervision of the USDA. But no one has found fault with the vast majority of private and Board of Trade inspection systems, like ours, that have provided fair and impartial inspection service in an efficient manner. We wonder why these inspection departments should be considered for elimination when they are the parties who have performed without fault.

We know the present system has worked in Memphis, and we are confident that it will continue to work. We simply need more diligent supervision by USDA, which is already provided for in the present law.

STATEMENT OF GILBERT H. VORHOFF, PRESIDENT, NEW ORLEANS BOARD OF TRADE, NEW ORLEANS, LA.

Gentlemen, The New Orleans Board of Trade. Ltd., a non-profit organization made up by civic and business leaders, has offered grain inspection services for more than 60 years. Its members give their time and talents without any form of remuneration.

The Board was organized in 1880 to promote commerce and trade of this area and the midcontinent with other nations. Since its inception, our Board of Trade has taken the lead in providing facilities and services to build trade with other nations through the Port of New Orleans. We work to keep this port competitive to attract and to increase the flow of cargo.

The New Orleans Board of Trade, Ltd., is the only non-profit inspection service in the Gulf region. We serve two elevators-the New Orleans Public Grain Elevator and the Continental Grain Elevator at Westwego, La. Only the staff of the Board of Trade and those hired to perform grain inspection services are paid. This is the way it has been throughout our long history. In fact, Article III of the Charter of the New Orleans Board of Trade reads as follows "This corporation shall be and forever remain a non-profit corporation as defined in Revised Statutes (1950) 12:101 (8). No pecuniary profit or gain shall accrue to its shareholders or members, except reasonable compensation or salaries for services rendered, and no dividends or other pecuniary remuneration shall be paid to its shareholders."

Until recent indictments, there had been no charge of serious wrong doing by any employee of the Board. Two of the 22 hourly paid grain samplers have been indicted and found guilty in recent months. Both have been fired. One grain inspector has been charged with altering records of one of the elevators. He pleaded innocent. We have suspended him pending outcome of his trial.

We have offered excellent grain inspection services throughout the years, and we are presently providing quality service.

We have established safeguards to protect against violation of the laws. In August 1974, we added to our staff, Stewart Wallace, who has had considerable experience in port operations, to supervise and tighten our controls over the various grain inspection services.

We believe that grain inspection services should be provided by non-government third parties, who are separate from and independent of both the buyer and the seller of grain.

We believe that the U.S. Department of Agriculture needs additional qualified personnel to supervise grain inspection services and to work more closely with us. We believe that The New Orleans Board of Trade, Ltd., has the experience, the expertise and the personnel to properly maintain standards in the grain trade. We appreciate the work and leadership of Senators Humphrey and Huddleston in their endeavors to protect the farmers and the consumers through Senate Joint Resolution No. 88.

However, we urge the Committee not to throw away the baby with the dirty bath water.

We urge the Committee not to abandon a system that can work exceedingly well with improved cooperation between the inspecting services and the U.S.D.A. I can assure you for The New Orleans Board of Trade, Ltd., that we are working diligently to make certain that American grain producers and those who buy American grain are treated fairly.

We are a people in this port area who live by foreign trade so we are everconscious of the importance of building foreign trade and commerce by offering quality products.

Thank you for permitting The New Orleans Board of Trade, Ltd., to offer these comments for the record and for your deliberations.

STATEMENT OF CLYDE M. WEBBER, NATIONAL PRESIDENT, AMERICAN FEDERATION OF GOVERNMENT EMPLOYEES

The American Federation of Government Employees, representing over 675,000 Federal employees and thousands of Agriculture Department employees, welcomes the opportunity to present this statement on grain inspection irregularities to the Senate Subcommittee on Foreign Agricultural Policy.

According to recent public reports, the Secretary of Agriculture plans to propose to the Congress a cooperative Federal-state inspection system in an attempt to eliminate alleged corruption and conflicts-of-interest in the grain export trade of the United States. These same reports state that the grain division of the Department of Agriculture would prefer to federalize the inspection system. There appears to be general agreement on the need to change the present grain inspection system, under which grain is inspected and graded by inspectors employed by private or state agencies. This system has allegedly lent itself to conflicts-of-interests, bribery, and improper influences on inspectors. It is easy to see why this is so.

The American Federation of Government Employees has had a long and intense concern with the issue of "contracting-out" traditional Federal functions to private business. The Senate and House Post Office and Civil Service Committees have a similar concern.

There are a great many factors involved in a decision as to whether or not to contract-out to a private contractor a function (or a type of function) heretofore performed by government employees. Depending on the function involved, e.g., whether it is a service to the public, a regulatory activity, or service the government provides to itself to meet its own internal needs, the applicable factors may differ.

Some of these factors to be weighed and balanced are: the comparative costs of performing the function in-house or by contract; the comparative quality of performance; the degree of day-to-day government supervision or control desirable; the probable presence or absence of conflicts-of-interest and attempts at fraud or bribery, the importance of a primary commitment to the general public interest as against the primary desire or need to make a profit on the contract; the importance of clear-cut program management accountability to the Congress and the public for policies established, decisions made, practices followed, monies spent, and results achieved; the impact on, and fair treatment of, employees affected; the long-term viability and quality of the Federal career civil service; the commitment to employment preference for war veterans; the commitment to equality of employment opportunities for members of minority groups; stability of government employment; continuity of government operations; the temporary or continuing nature of the work to be done; deadlines to be met; the existence of present capacity; the support of private enterprise in appropriate areas; manpower ceilings and budget constraints on the workforce of a Federal agency; harmonious labor-management relations; and, above all, government integrity in serving the public's interest.

A number of these factors are importantly involved in making a decision as to the nature of the future grain inspection system and I could devote many pages to analyzing them. I would like, however, to stress just two of them.

The first is the matter of the importance of clear-cut program management accountability to the Congress and the public. In our opinion, the grain export trade is important enough, and the inspection of grain entering that trade is clearly enough a Federal government responsibility, so that inspection program management accountability should be retained within the Federal government structure. When the grain inspection function is partly carried out by private agencies, partly by state government agencies, and partly by the Federal government, it becomes most difficult, as a practical and political matter, to pinpoint accountability for breakdowns and deficiencies in the system and accountability for correcting them. Indeed, it becomes difficult to correct them with any speed and dispatch. Each party naturally wants to shift ultimate responsibility to the other-and things may proceed to the point where numerous criminal indictments and a whole-sale emergency reorganization of the entire system eventually become necessary, frequently after rumors and disclosures in the public press force one or more of the parties to act.

This may be contrasted with a system of Federal inspections, where the Secretary of Agriculture sets merit qualifications standards for inspectors (in consultation with the U.S. Civil Service Commission); selects inspectors, trains them, assigns them and promotes them on merit; where the Secretary sets both work performance standards and conflict-of-interest standards for inspectors; where he is responsible for their day-to-day supervision and discipline; where he can build up a tradition of integrity and dedication to the public interest; where he can determine the number of inspectors needed to do an adequate job; where he can work for adequate pay and working conditions to attract and retain highly competent persons with a real stake in a career in government; and where he testifies before, and is held accountable by, Congressional legislative, appropriations, investigative, and oversight committees for all aspects of the grain inspection system-and cannot beg off or plead ignorance or non-responsibility on the grounds that certain essential operations are carried out under private contracts or by State agencies and, therefore, the Agriculture Department is not fully informed on, or responsible for, them.

The second factor I want to stress is that of the importance of a primary commitment to the general public interest, when a Federal government function is involved, as against the primary desire or need to make a profit on a contract

with the government or others. It is our opinion that a person or an organization usually does a better job when the job is not done for money alone but involves a moral commitment.

When private inspectors are paid by the amount of grain they inspect, this places a great temptation on such inspectors to put money first in their scheme of things. When millions of dollars depend on the grading and weighing of the grain, or the approval of ships for shipping the grain, this places a great temptation on the grain and shipping companies to bribe the inspectors for favorable decisions. As a result, money-not the public interest-tends to take first place. By contrast, the one characteristic that stands out above all others in the typical Federal career civil servant is his primary commitment to the general public interest and of satisfactory service to the public. I think this has been proven by the general conduct of career civil servants during the unhappy Watergate period, and by the particular risks that numerous civil servants have taken to "blow-the-whistle" on improper activities in their respective agencies.

The Federal civil service system is more than competitive merit civil service exams, politically non-partisan operation of programs, and equal opportunity for minority groups-important as these are. It is the tradition of honest public service which comes to fruition in the well-managed Federal agency, made up of a lifetime orientation of concern for the general public interest, of pride in one's organization and program, and of one's desire for the esteem of one's respected peers. It is time we recognized that an individual, who isn't interested in making money, only a decent living, and in serving his country and the public as a Federal career employee is one of this nations most valuable resources. He deserves commendation, not the daily derision he is often subjected to. He represents no special interest, he sees himself as the servant of the people, as directly bound by laws and rules which he must apply equally and fairly to all. He or she, in short, is at the core of governmental integrity, and is the means by which acts taken in the public interest are kept in the hands of public servants. To invest private profit-oriented companies with the execution of government functions is contrary to law, policy, our theory of government and common sense. The grain scandals are but another manifestation that this is so.

I think we can all understand this attitude. A Congressman has a commitment, not to money alone, but to the welfare of his district or state and of his country. We all applaud, and we in AFGE strongly supported, the recent efforts of the Congress in the areas of control of the national budget, initiation of legislation on critical issues, the revitalized oversight function, foreign and defense policy, and others—to recapture the responsibilities and accountabilities rightfully belonging to the Congress, but perhaps to some degree previously abdicated to the Executive branch. (We, in AFGE, feel some what the same about abdicating government functions to private business.)

A good doctor has a commitment to the health of his patient, a good lawyer to the problems of his client, a good teacher to the development of his student, and a good civil servant to the general interest. Lacking that kind of commitment, and being interested in money alone, leads one to situations like that of certain commercial nursing homes hastily established to milk Medicare and Medicaid, with little concern for the people to be cared for in such establishments.

In conclusion, we feel that if the function is properly a Federal government function—whether of providing services to the public (as in the case of old age social security pensions), of regulating business or labor (as in the case of regulating the grain export trade, the stock market, or unfair labor practices), or of providing internal services to meet its own needs (such as fiscal accounting or physical security)-the best assurance of protecting the primacy of the general public interest is by having the function performed by career Federal civil servants under the supervision of directly accountable officials of the Federal government.

Private enterprise, with all of its many values, cannot accept a full commitment to the public interest when such a commitment would conflict with its need to make a profit on a contract with the government. Labor is part of the private enterprise system-we have a deep interest in its vitality and growth. But there are many functions of government that must be kept separate from profit oriented business practices, which must be performed with, above all. equity, fairness, and honesty. We believe grain inspection is such a function and we strongly urge it to be totally Federalized and kept under strict public control.