York, and the Lankro Chemicals Group of England. Fallek-Lankro is currently investing $15 million for the construction of a modern, up-to-date, herbicides plant in Tuscaloosa, Ala. This plant is scheduled to become operational in the third quarter of this year, and will add significantly to the U.S. production capability of agricultural chemicals.

The herbicides to be manufactured and sold by Fallek-Lankro are phenoxy herbicides, which have been long used for the growing of cereal grains throughout the world. However, it is our intention to concentrate especially our marketing efforts on the two herbicides 2-methyl-4 chlorophenoxyacetic acid (MCPA), and 2-(chloro 2-methyl phenoxy) propionic acid (MCPP). Both MCPA and MCPP require, in our process, PCOC as a basic intermediate in their manufacture.

It was originally intended that Fallek-Lankro produce most of the intermediates required in the production of the herbicides, including PCOC, as well as the herbicides themselves. While this is still our goal, it was concluded as we moved forward with the project planning that available capital and technical support for the project would be stretched too thin if an attempt were made to construct simultaneously the herbicides plant and the additional facilities for manufacture of PCOC and other intermediates. Therefore, it was decided to build first the herbicide plant, and procure the required PCOC and other intermediates from other sources, and then, at a later date, when the company had established itself, build the intermediates plant. The construction of this latter plant would make Fallek-Lankro self sufficient in PCOC and give the United States its first domestic production facility for this chemical.

Of all the intermediates we require, PCOC is unique in that it is not produced in the United States, and to the best of our knowledge, it is not now being used in the United States by any other manufacturer. In the past small lots of PCOC, on a very intermittent basis, have been imported, but at present we know of no ongoing importation of PCOC.

Because of the lack of production of PCOC in the United States, we have had to go outside the United States and make our own arrangements to secure a supply of the required PCOC. This we have done and importation of the chemical is scheduled to coincide with our anticipated third quarter plant start-up. Now that the investment has been made and our plant is almost complete, and the problems generally associated with the start-up of a new business are being ironed out, we are faced, with a serious situation involving the cost of our most important raw material, PCOC. This is a result of there having been an almost continual erosion in the prices of agricultural chemicals for the last several years, with no corresponding decrease in the raw material or operating costs for producing these chemicals.

While the price for PCOC, together with the logistical costs of importation and the customs duty have generally held their 1975-76 level, the market prices for MCPA and MCPP have decreased substantially (app. A). The result of all this is to make the production of these products economically unjustifiable.

Based on our anticipated production, the relief in duty payments H.R. 5551 would grant, if passed, amounts to approximately $350,000 per annum for FallekLankro over the next 3 years. This would be a significant factor in rectifying the problem of the relationship of the cost of PCOC and the sales prices of MCPA and MCPP. As it now stands, the duty alone is approximately equal to 25 percent of the cost of the raw materials used in the production of PCOC-obviously a meaningful amount. Under present market conditions, without duty suspension, the production of MCPA and MCPP would otherwise have to be curtailed. Since these two herbicides are the primary products in our product line, the economic consequences of such a curtailment is to place the viability of the project in doubt.

If our project were to fail, then not only the investment of time, money and effort we have made would be lost, but significant economic benefits to the Tuscaloosa area will also be lost. These benefits such as increased employment and money being spent in the local economy are being realized already and their withdrawal from Tuscaloosa would be indeed unfortunate.

Further, the plant site on which Fallek-Lankro's facilities are being built are adjacent to a related company, Alabama Western Chemical Corp., which produces cresylic acids for general industrial uses and salt cake for the local paper industry. When the construction began on Fallek-Lankro's facilities, an investment of some $1.3 million was also committed by Alabama Western for a process enhancement so that the cresylic acids it produces will be usable in the herbicide production of Fallek-Lankro. The most important of these acids is orthocresol, the basic constituent of PCOC. This, therefore, ties the continued

success of Alabama Western to the success or failure of Fallek-Lankro. This is particularly significant in view of the fact that Alabama Western employs some 35 persons, and the plant site it occupies was until 1975 vacant owing to the bankruptcy of its former owners.

When the Fallek-Lankro plant is completed and the Alabama Western process improvement is finished, some 95 people will be employed by both companies. Further, if Fallek-Lankro succeeds and the plant to produce PCOC is built, then we can see a further 30 jobs being added to this total. This is the most direct and immediate benefit to Tuscaloosa of the project. However, also felt has been the beneficial impact that the infusion of the capital costs of construction of the two projects has already meant to the area. Down the road, continued economic benefits will accrue as Fallek-Lankro spends dollars to maintain its daily operational needs, and creates the further jobs which are planned for. All in all, the economic benefits seem heavily weighted in favor of sustaining this operation, rather than having it fail.

To summarize, we urge that H.R. 5551 be reported favorably because:

1. It will make it possible economically for the interim importation of an essential chemical intermediate for the production of two important agricultural herbicides.

2. It will result in current substantial new employment in the Tuscaloosa

area.

3. It will result in other immediate, as well as future economic benefits to the local economy through the infusion of money.

4. It will not result in any substantially adverse affect on any U.S. companies, since PCOC is not produced in the United States.

5. It will not result in any significant loss of existing custom duties, since PCOC is not being imported into the U.S. commercially in significant quantities. 6. The suspension of the duty will make it possible for Fallek-Lankro to construct PCOC production facilities in the United States at a later date, thereby creating further jobs, as well as a U.S. source of the chemical.

Mr. VANIK. We appreciate that.

Mr. Jenkins, would you be willing to take the responsibility with Mr. Lamar presenting this question to Commerce and try to get a response by 3 o'clock.

At this point we are going to have to recess the committee.

I thank you, Mr. Jenkins, for taking over during our conference on energy which conflicted with my own schedule.

[The following was subsequently supplied for the record :]

INFORMATION REQUESTED AND SUPPLEMENTAL STATEMENT OF JEFFREY M. BRICKER, FALLEK-LANKRO CORP.

I. ALTERNATIVE MANUFACTURING PROCESS FOR MCPA

At the hearing held on April 27, 1977, Mr. Steiger requested information as to the alternative method of producing MCPA which did not require using PCOC as an intermediate as used by Fallek-Lankro. Mr. Bricker informed the committee at that time, that it would be impossible for Fallek-Lankro to consider the other

method as being a feasible alternative to its PCOC process and would supply an analysis supporting his contention. Herein follows the reasons as to why FallekLankro does not have this method available to it:

The process of taking orthocresol and reacting it with monochloracetic acid (MCA) to obtain a process intermediate which is then chlorinated to produce MCPA, is a process known only in the broadest of terms of the Fallek-Lankro organization.1 The exact method of doing this is not known to them and is not at the present time available to them. Therefore, to obtain the required process information to be able to produce MCPA by this method would require either buying the process from someone who already owned it, in this case, most probably, Rhodia, or developing a process with the Fallek-Landro engineering staff. Since Fallek-Lankro already has a viable process for the production of MCPA, it does not make sense to allocate time and money to develop the alternative process described above. Furthermore, Fallek-Lankro is of the opinion that the process which does not use PCOC as an intermediate is less efficient than theirs and results in the production of a poorer quality material. This supposition is supported by the fact that most other producers of MCPA, if not all, other than Rhodia, use PCOC as an intermediate in their production streams.

Even if the above were not so, there are other factors that would mitigate against Fallek-Lankro Corp. being able to use a non-PCOC method of producing MCPA. These factors are due to the physical reality of what is already built and what would be required to alter what is built to be able to use some other method of production:

(1) The plant is designed to produce three different herbicides on a campaign basis. That is, Fallek-Lankro will produce MCPA for 1 to 2 weeks, shut down the plant, change the chemicals being used and then start the plant up again to produce another herbicide. The process chain for the production of MCPA and the other two herbicides is identical except for the chemicals being reacted. By withdrawing MCPA from this campaign and building for it a separate process facility, would result in a wasteful duplication of effort in that the present facility is entirely adequate to produce MCPA as well as the other herbicides. Further, to use the other process would require a facility with chlorination since this is not presently required by the present process.

(2) It is important to note that the present method of production of FallekLankro Corp.'s herbicide product line requires no chlorination and that the alternative process does.

Chlorination equipment is expensive; it requires sophisticated glass-lined equipment, special storage tanks, and other facilities. None of these are presently owned or operated by the Fallek-Lankro Corp. Most would have to be built to order since this is not "off-the-shelf" equipment. The time that would be required to do so would prevent Fallek-Lankro Corp. from being operational in 1977. In fact, it is doubtful if the Fallek-Lankro Corp. would be operational even by year end 1978 if it started building such a facility today. Therefore, even if the money were found to support the alternative process capital outlay, it would be tantamount to having Fallek-Lankro Corp. withdraw from the production of MCPA for at least the next 2 years. Neither the time nor the money are available for this to be feasible.

(3) If one chlorinates, then the solvent used in the process must be other than water. This means that costly solvent recovery systems will have to be designed and built and installed to prevent atmospheric pollution. None of this atmospheric pollution will, or can, occur under Fallek-Lankro Corp.'s present set-up.

(4) Relatively large quantities of tars results from most chlorinations, and it is assumed the chlorination required in this process will also result in large tar production. This presents a formidable waste disposal problem which does not presently exist.

In summation, it is obvious from the above that technically, economically, or environmentally, it is neither possible nor desirable to pursue the alternative method of producing MCPA. It is certainly not a viable alternative for the FallekLankro Corp. and cannot be considered as such.

II. CONTENTION THAT SUSPENSION IS MORE PROPERLY A TRADE NEGOTIATING ITEM

The argument was made against approval of H.R. 5551 by the Office of the Special Trade Representative, in that such suspension would interfere with the trade negotiations now underway in Geneva.

1 Fallek-Lankro reacts PCOC with MCA and thereby directly obtains MCPA.

We believe that while the general argument can be made that U.S. tariffs can be used as trade-offs for reductions in the tariffs of trading partners, it is not true in the case of PCOC. First, the volume of PCOC being discussed here is so insignificant as to be unlikely to be of any value to a negotiating country. Second, we are seeking a temporary suspension, not a permanent reduction. Therefore, whatever negotiating value this item might have, shall not be affected by the passage of H.R. 5551. Third, it should be noted that PCOC is usually produced for capitive use by most foreign producers of MCPA and MCPP (in England there is some marketing of PCOC, but for the most part this is an exception to the rest of the common market). Therefore, rather than trying to lower the tariff on PCOC, the Europeans generally would not be interested in this since it results in less costly U.S. production of MCPA and MCPP, thereby permitting competition with the MCPA and MCPP they now export.

If the issue were suspension of the duty on MCPA or MCPP we would agree that our trading partners would have an interest-though here again the extent of that interest may be arguable since they now export 100 percent of the MCPP used in the United States and we estimate about 70 percent to 80 percent of the MCPA. Therefore, reductions of these tariffs will only serve to increase their profit margins, without necessarily increasing their percentage of market share. In view of the foregoing, we believe that the very uniqueness of PCOC and the market situation overrides the general policy concerning the trade negotiations. Mr. VANIK. The committee will now stand in recess until 2 o'clock, at which time we will resume the business scheduled for the rest of today.

[Whereupon, at 12:50 p.m., the subcommittee recessed to reconvene at 2 p.m.]

AFTERNOON SESSION

Mr. JENKINS [presiding]. Mr. Evans.

STATEMENT OF HON. THOMAS B. EVANS, JR., A REPRESENTATIVE IN CONGRESS FROM THE STATE OF DELAWARE

Mr. EVANS. Thank you, sir. I know you are extremely busy considering a number of bills before Ways and Means this afternoon. In the interest of time I would like to have my testimony included as part of the record. It relates to H.R. 4018, my legislation to suspend for 2 years the 5-percent tariff on the import of adriamycin, which is one of the drugs that is used in the treatment of cancer.

Cancer is certainly one of the dread diseases we have here in the United States. People who suffer from cancer suffer physically and mentally and also suffer financially.

I know that you are already aware of the fact that the Special Representative of the President for Trade has indicated he has no objection. The State Department has no objection. The Treasury Department recommends enactment of the bill.

Mr. JENKINS. I don't believe there has been any objection registered by any agency of the Government.

Mr. EVANS. There has been no objection. As a matter of fact, there has been approval from the Secretary of the Treasury.

Mr. JENKINS. From where is this commodity primarily imported? Mr. EVANS. From Italy, sir.

Mr. JENKINS. Your entire statement will be included in the record. [The prepared statement follows:]

STATEMENT OF HON. THOMAS B. EVANS, Jr., A REPRESENTATIVE IN CONGRESS FROM THE STATE OF DELAWARE

Mr. Chairman, I first want to thank you for your prompt consideration of H.R. 4018.

I fully realize the great number of bills now before the Subcommittee, and for that reason, I shall be very brief in my remarks.

As we all know, cancer has become one of the most dread diseases in the United States today. Millions of dollars are being spent by the government and private industries for research aimed at stemming the ever-increasing tide of fatalities from this disease.

One of the most promising avenues in the care and treatment of the cancer patient is in chemotherapy treatment by a variety of drugs aimed at preventing the further spread of cancer and hopefully controlling this disease.

One drug introduced into the United States which has demonstrated significant activity in the treatment of cancer is Adriamycin (doxorubicin hydrochloride). Because of its method of manufacture, this drug is classified as an antibiotic and comes into the United States from Italy with a 5 percent tariff imposed under section 437.32 of the Tariff Schedule. My bill would suspend this duty for 2 years. The drug is manufactured in Italy and the U.S. patent is held by an Italian pharmaceutical company.

Mr. Chairman, this drug is used in the treatment of acute leukemias, malignant lymphomas, Wilm's Tumor, soft tissue and bone cancer, and cancers of the breast, lungs, ovaries, bladder and thyroid. Adriamycin is cytotoxic, that it, it kills cells and its activity in killing cancer cells was significant enough to attract the National Cancer Institute as the sponsor for the new drug application approved in 1974. The National Cancer Institute itself is the single largest domestic customer for this material. Because of the toxicity of this drug, it is used solely as an antineoplastic agent and is recommended for use by physicians qualified in the area of cancer chemotherapy. Treatment with Adriamycin requires close observation of the patient and extensive laboratory monitoring.

Adriamycin, although it cannot be considered a breakthrough or a cure for cancer, does occupy a specific and well-received place in the field of cancer patient care. Adriamycin is not produced in the United States and it is not in direct competition in the market place with other antineoplastic agents. Instead, it augments or supplements other forms of treatment and the use of other antineoplastic drugs.

The nature of this drug is such that it is administered periodically over a period as long as 6 months. A course of treatment could cost as much as $1,200 to $1,500. As mentioned, the single largest customer in the United States is the National Cancer Institute. This government contract provides that the National Cancer Institute shall receive a reduction in the price of the drug as of the effective date of any suspension of the tariff.

The domestic distributor also intends to register a general price reduction should the tariff be suspended.

The suspension of the tariff will have a significant and immediate effect on the medical costs, which are placing a heavy burden on many cancer patients. As you know, Mr. Chairman, the Treasury Department has indicated its support of my legislation and both the Department of State and the Special Representative for Trade Negotiations have indicated that they do not object to the enactment of the legislation.

I urge the Committee to take favorable action on this measure.

Mr. JENKINS. I want to thank you on behalf of the committee for making a personal appearance here.

Mr. EVANS. Thank you, sir.

Mr. JENKINS. Mr. Douglas Heydt.

Mr. Heydt, if you would, identify yourself for the record. I shall tell you that your entire statement will be included in the record. you would like to summarize or read it, you may do so.

If

STATEMENT OF DOUGLAS HEYDT, VICE PRESIDENT, WARP KNIT UNIVERSAL, GASTONIA, N.C.

Mr. HEYDT. Thank you very much, sir. I will be very brief. My statement is available for the record, as you wish.

My name is Douglas Heydt, 200 Stanford Ave.. Reading, Pa. I have been associated with the textile machine building industry for