BALTIMORE CHAMBER OF COMMERCE, Hon. THOMAS S. FOLEY, Chairman, OFFICE OF THE PRESIDENT, DEAR CONGRESSMAN FOLEY: As an agency now inspecting grain under the authority of the Department of Agriculture, we request the inclusion of the following in the record of hearings on bills to amend the Grain Standards Act: The Baltimore Chamber of Commerce, now inspecting grain in the Port of Baltimore under the authority of the United States Department of Agriculture and the United States Grain Standards Act was founded in 1853, as the the Corn and Flour Exchange of the City of Baltimore. The name of the organization was, in 1896, changed to the present Baltimore Chamber of Commerce. Because of the Baltimore fire in 1904 our past records are incomplete but we know that the Exchange operated a Grain Inspection Service as far back as 1879 and has done so continuously to this date. The Chamber has always jealously guarded the reputation our Grain Inspection Department has established for itself over the years for objectiveness, honesty, and efficiency. We have in the past instituted and enforced our own regulations pertaining to the handling and blending of grain in our local export elevators and used our inspectors to police elevator operations. This extra effort was discontinued in the mid 1950's upon the direction of the U.S.D.A. which claimed it was not permitted under its interpretation of the Grain Standards Act. Our motivation was simply to make Baltimore a preferred market for grain in the export trade. In the matter of conflict of interest pertaining to grain inspection we have always constituted our Board of Directors so that such members having a direct interest in the grading of grain would remain in a minority. Our present Board of seven, has only one member representing a grain elevator and three members with no financial interest in the grain business whatsover. The elevator representative is the only member with a direct interest in grain inspections, but we feel his presence is necessary for technical advice as a direct user of the inspection services. It is also interesting to note that, as the official weighing and inspection agency for grain in the Port of Baltimore, we have received no complaints from foreign buyers relative to weights or grades of grain shipped from this port for well over five years. An investigator from the Senate Agriculture Committee informed us that the U.S.D.A. had received two complaints on vessels loaded at this port; one in 1972 and the other in 1975. While we did not investigate the 1972 case, we did discover that the cargo loaded in 1975 was Soybeans that carried a Federal Appeal Grade. We wish to make it clear that we in no way condone any misrepresentation or falsifying of weights or grades as some individuals have been so accused. However, it should be noted, these accusations and subsequent indictments represent a very small segment of the industry, both with respect to principals and inspectors. Further, it should be noted that these misdeeds have occurred in an area that has experienced a virtual explosion in the grain exporting in recent years and is more likely to happen under these circumstances than in an area where a grain inspector, through years of tradition, is recognized as a member of an honored profession. We must further note that a person or group of persons bent upon committing some misdeed will not be deterred by the name of the organization by whom he might be employed. We are distressed and concerned by the manner in which certain members of the U.S.D.A. and the Congress, and the News Media have by innuendo and implication cast a pall upon the integrity of an entire vital industry based upon charges against fewer than eighty individuals. This, along with many of the corrective measures proposed, will only serve to destroy the splendid relationship the industry has enjoyed with their foreign customers and lead to consequences in the future, inimical to the interests to the United States. We believe that the U.S.D.A. does not have the capability to render the efficient inspection service required to maintain the large volume of grain exports from this country. We resent the implication that the integrity of U.S.D.A. personnel is superior to that of our employees. Eight of our thirteen inspectors, each enjoy in excess of fifteen years experience. We believe our record cannot be matched by any other organization. We have worked hard to accomplish this and will continue to do so. We believe the U.S.D.A. should continue its overall supervisory function, not, however, as a police organization, but in the spirit of constructive cooperation as intended by the original Grain Standards Act. Much of the proposed reforms are merely a poorly disguised attempt to establish a bureaucratic empire. We feel it is the responsibility of the Congress to proceed carefully. We ask the Committee, in any legislation it might propose, to maintain the present system of agency grain inspections under the over-all supervision of the U.S.D.A. excepting wherein an individual agency, after due hearing, has been found to be incompetent, corrupt, or fails to deal promptly with any improbity found among individuals within its organization. Thank you, Mr. Chairman, for acknowledging our request. C. PHILIP MANGER, President. THE MENNEL MILLING Co., Hon. THOMAS S. FOLEY, U.S. House of Representatives, Washington, D.C. DEAR MR. FOLEY: Although I am a member of the Chicago Board of Trade, a director and past president of the Toledo Board of Trade; a director and past president of the National Soft Wheat Association; a director and chairman-elect of the Millers' National Federation; a former director of the National Grain Trade Council; and a member of the Grain or Grain Grades Committees of the National Grain and Feed Association, the Millers' National Federation and the National Soft Wheat Association, I am writing you today as an individual and president of one of the larger independent flour milling companies, not as a spokesman for any of the above organizations. You may remember that I have, in the past, represented the National Wheat Association before your committee a number of times. My concern is with the grain inspection system and the current hearings. I have studied the GAO report, the report of the Comptroller General and have read many of the presentations made in recent weeks to your committee. The apparent direction of the proposals, I believe, is diametrically opposite to the welfare of this nation. The federalization of the grain inspection system of this company will be a disaster. I have been a buyer of cash grain for more than 25 years and have yet to document evidence of illegal, immoral or irresponsible grain grading or weighing, and I have bought grain from every major grain center in the eastern half of the United States. Certainly there have been times that I did not agree fully with a grade or a weight, but there has never been a time when I have been unable to work out amicably with the seller a settlement based upon a reasonable approach to the problem. The same cannot be said of my relationships with the many segments of Federal government. Of course, the Federal appeal system including Board appeals makes settlement simpler. To whom do we appeal a questionable original Federal inspection? The real essence of the matter is that a board of trade is a gathering place of highly competitive, highly aggressive individuals and firms, and as long as this competitive nature is maintained, misdeeds do not occur. To cite a specific case, the Toledo Board of Trade for many years has been operated by a board of directors representing exporters, terminal elevators, commission merchants and processors with a reasonable balance maintained between the segments. I find it impossible to believe that I, as a buyer, either would condone or be ignorant of any malfeasance on the part of any of the others whether they were selling to me or not. This is enlightened self-interest that is the backbone of the grain trade. A law to require such a balance of interests might be very workable. The examiners and investigators sent out by the GAO were not knowledgeable; they were naive, young, inexperienced and well trained in Nader-like thinking. I find many examples throughout the report where the bias of the examiner was obvious and facts were skewed or omitted accordingly. Foreign buyers were able easily to lead them astray. We must be wary of replacing the tried and true axiom of "caveat emptor" with "caveat vendor." This would not only greatly increase costs but also destroy_relationships of long standing between seller and buyer, both foreign and domestic, to the detriment of all and benefit of none other than those added to the Federal payroll. I hope sincerely when all the publicity has cooled and the elections are over for awhile a reasonable, workable law can be enacted that will keep grain inspection in private hands where it has worked so well for over 100 years. I concur strongly with strict supervision by knowledgeable Federal supervisors, but it is not reasonable to kill a workable system to correct what may have developed through unwise budgetary restraints of the Federal supervisory system in the past. I just heard that your committee has revised the conflict of interest somewhat. This is a step in the right direction. I hope sincerely that reason will prevail. Very truly yours, D. M. MEN NEL HOUSTON MERCHANTS EXCHANGE, INC., Houston, Tes. Hon. THOMAS S. FOLEY, House Committee on Agriculture, Sir: The Houston Merchants Exchange is appreciative of this opportunity to question relative to the Government accounting Office report favoring federalization of Grain Inspection. The summary of the report indicates that the present Federally Supervised Grain Inspection System in the United States is so plagued by conflict of interest and/or indicted corruption that it must be eliminated and "is made to be a failure". We feel we have the right to know precisely what was uncovered in Houston to warrant such indictment of the Houston Merchants Exchange. The inspection agencies of Brownsville, Corpus Christi, Beaumont, et al in Texas and Norfolk, Va. and Albany, N.Y., et al in the United States have a right to know who is guilty of these charges. At Houston we have to consider the memory of the two Houston Merchants Exchange employees who died in an elevator explosion in February 1976. At the time of their death they were coincidentally performing the sampling and inspection functions of the Exchange. Their memory deserves better than what has been charged to them by vague allusions to their dishonesty, accusations of being party to conflict of interest and other items of the GAO report. The report has been likened to the hypothetical situation wherein a distant relative commits a crime in Louisiana so the solution is proposed to wipe out all relatives everywhere in the United States. We again appreciate this opportunity to describe the Inspection Agency for Houston-the Houston Merchants Exchange. This organization was formed 57 years ago in Houston. The Exchange employees 37 grain samplers, all members of International Longshoreman's Association Local #1836 labor union. There are 11 inspectors presently plying their trade under the supervision of the Federal Government, as they have over the years. The above numbers do not include the two employees who died while performing their sampling and inspection duties. Also not included are the five inspectors who were accused by one man in the spring of 1975 of taking money to pass ships as clean for grain. (To our knowledge no accusations have been made regarding the sampling or inspection of grain.) These men have repeatedly requested a trial to prove their innocence. Through the summer of 1975 and until today the U.S. Attorney has asked for continuances each time the trial is scheduled thereby denying every man's right to face his accuser, to prove guilt or innocence. When these men were accused their licenses to inspect grain were revoked by the United States Government thereby denying them rights of innocence til guilt is proven. In any case these men were and are denied speedy trial so their names can be cleared in the ship inspection matter. In summary, sir, we feel, for the above mentioned reasons, that we have the right to know specific accusations that have been made regarding our Federally supervised grain grading there in Houston per the Government Accounting Office Report. And further to know how in our free society five men can be accused and not brought to trial. This has left our company short of personnel and done irrepairable damage to the reputations of these men who ask only for the right to be heard in a court of law. We feel the above to be reasonable statements and questions. BAIRD L. SIBLEY, General Manager and Chief Grain Inspector. COOPERATIVE EXTENSION SERVICE, UNIVERSITY OF ILLINOIS AT URBANA-CHAMPAIGN, March 1, 1976. To: The Illinois Grain Trade and Cooperative Extension Service Advisers, Because of the general interest in the quality of export corn, the inspection problems at the ports and the proposed revision of grade standards, we are taking two steps to inform Illinois grain dealers and farmers about the situation. They are: 1. A progress report by the research staff on a shipment of 1974 crop corn from Toledo to Rotterdam. (Copy enclosed) 2. Discussion of the problems on March 17, 7:30 P.M. over the U. of I. Cooperative Extension Service telephone network (TeleNet). This system permits two-way communication. The discussants will be: (1) Jerry Cotter, Chief of Grain Ispection Branch, USDA, Washington, D.C. (2) L. D. Hill, B. L. Brooks and L. F. Stice, University of Illinois Department of Agricultural Economics. Contact your County Extension Adviser in Agriculture, for the location of your nearest TeleNet center. Sincerely, L. F. STICE, Extension Economist in Grain Marketing. GRAIN QUALITY LOSSES BETWEEN ORIGIN AND DESTINATION (By Lowell D. Hill, Marvin R. Paulsen, and Bruce L. Brooks 2) AE-4399 Department of Agricultural Economics, Agricultural Experiment Station, College of Agriculture, University of Illinois at Champaign-Urbana Much of the recent publicity on grain quality has focused on the complaints of foreign buyers about the condition of the grain at its destination. There have been charges and countercharges in an attempt to establish responsibility for quality loss. The increased intensity of complaints during the past year has been attributed to many causes: The rapid drop in prices has encouraged buyers to break their earlier contracts; the weather conditions of 1974 resulted in quality considerably below average; federal investigation of inspec 1 The authors are indebted to several grain firms for their cooperation and assistance in this study, including The Andersons, Maumee, Ohio, and Schouten, Giessen. The Netherlands. The assistance and advice of John Marshall, AMS, USDA, was essential in obtaining the data. Financial support was provided by the Ohio State Development Fund, Illinois Agricultural Association, Illinois Grain Corporation, National Corn Growers Association. The Andersons, and Schouten International, Inc. 2 L. D. Hill and B. L. Brooks are professors of agricultural economics, and M. R. Paulsen is research associate in the Department of Agricultural Engineering, University of Illinois at Champaign-Urbana. tion procedures and the associated congressional activities provided foreign buyers with stronger arguments that quality losses are the responsibility of U.S. exporters. All of these causes point to a short-term problem of recent origin that might disappear when the good-quality 1975 corn crop enters foreign markets. However, the problem of quality has a long history, and a review of previous experiences indicates that companies of foreign buyers are not unique to the 1974-75 crop year. "The dealers in Europe have suffered excessive losses through the purchase of grain from America by its not grading up to the standard given in the inspector's certificate in kind, quality, or condition when received. Wheat, sold as good winter wheat is often found to be new wheat mixed with old and often wormy wheat. I am informed that such conditions have become worse; that the purchaser here does not receive what he buys, and that no reliance can be placed on the inspector's certificate. Grain received from South America, Russia, or Rumania arrives in good condition, that from the United States alone being bad." Although this reads much like a current report on our system of grading and inspection for export, it carries the date of 1908. This report and others of a similar tone followed an investigation of destination quality by E. E. Boerner, a special agent of the Bureau of Plant Industry, Grain Standardization Department of the U.S. Department of Agriculture. Boerner spent over six months sampling grain at destination and concluded that the quality of U.S. shipments had created a ". . . feeling among the European dealers that all American exporters and inspectors were dishonest and unfair." Similar concerns and attitudes have been found in other studies of export quality conducted over the past 40 years by various trade groups and government agencies. Given the frequency of complaints and the publicity aecorded them, it is important to develop a broad perspective on the problem of quality at destination. Four facts are often overlooked in the debate over cause and effect of low quality. 1. Under our present system of exporting, the buyer purchases on the basis of origin grades and weights, and the exporter is not responsible for quality past the point of inspection prior to loading. In fact, the buyers' acceptance of the origin grades ("certificate final") for purchases of U.S. grain is an indication of the reliability of the U.S. grading and inspection system during the past century of exports. 2. Because the United States supplies such a large proportion of total world grain exports our exporters have significant market power in negotiations over price and quality. 3. Quality may be of relatively minor importance in choosing a source of grain in a complex marketing system. Price, foreign exchange rates, ocean freight rates, credit arrangements, timeliness of delivery to users with little storage capacity, and resale to several intermediate buyers make quality relatively less important to a buyer in choosing a source of grain. 4. The extent of quality differences between origin and destination has never been adequately documented, and even less is known as to the cause of quality changes. Buyer dissatisfaction alone is a poor justification for major changes in the U.S. grain marketing system although it may be a symptom of possible problems. Before taking any action to correct such problems, it is imperative that detailed facts be assembled and the problem carefully identified and measured. The answers to several important questions are still subject to heated debate by informed and sincere people. (1) Is it possible that grain that is properly inspected according to federal regulations and handled in the normal manner during export can arrive at final destination one or two grades below the grade shown on the inspection certificate? (2) Do the reported quality losses include the entire ship or sub-lots? (3) Is the variability of quality among final buyers taking sub-lots out of a single shipment the result of uneven loading, segregation during transport, or segregation during unloading? (4) If there are quality losses between origin and destination, how much of the total loss occurs at each point in the process of transfer? |