It certainly would be a very unjustifiable proposition where two different answers were arrived at for the same particular words.

Finally, in our point No. 6, we have noted that the appeal lies finally with the Tax Court under the present law. We feel that the contractor should have the way open for appeal to the courts of appeal of the United States. We feel that that is part of our Government, and it should follow, and we believe that it will demonstrate the good faith of the Government and will result in a much better attitude on the part of the contractors.

That is the extent of my statement.

The CHAIRMAN. Are there any questions?

Senator MARTIN. No questions.

The CHAIRMAN. Thank you very much for your appearance, sir. Mr. FOREMAN. Thank you, sir.

The CHAIRMAN. Mr. Schaffner, will you come forward?

You may be seated, if you wish.

Will you identify yourself for the record, please?

STATEMENT OF GEORGE SCHAFFNER, ELECTRIC EQUIPMENT REPRESENTATIVES ASSOCIATION

Mr. SCHAFFNER. My name is George Schaffner. I am a member of the Electric Equipment Representatives Association.

With your permission, I would like to read this short statement. The CHAIRMAN. Very well.

Mr. SCHAFFNER. Our association is not opposed to the principle of renegotiation. We believe that, if we are to be renegotiated at all, it should be on an over-all valuation of our efforts by renegotiation boards. Payments made to us by our manufacturers should be allowed 100 percent to them as costs in their own renegotiation. We understand that section 2 (d) (2) of the bill before your committee so provides.

This means that we will be free from nongovernmental renegotiation. or, in other words, from the hazard of being asked by individual manufacturers that we represent to return some part of the payments made to us. Such a demand might be made-it has been in the pastupon the ground that the manufacturer was not allowed to take that payment as an item of renegotiation cost in his own renegotiation proceedings.

This type of demand results in our members being in effect renegotiated without the value of their own services ever being determined directly by the renegotiation board. Consequently, our efforts should be reviewed in our own direct renegotiation proceedings, not through those of the different manufacturers we represent.

The bill before your committee follows, in the main, World War II renegotiation standards. It particularly reestablishes the $25,000 gross income test for manufacturers' representatives. Your committee probably knows that this type of renegotiation at that dollar level was first adopted by the Congress in 1943, because of the earlier disclosures of easy and large procurement fees which were earned by so-called brokers, or 5-percenters. This backgronnd was a handicap in all World War II renegotiation proceedings affecting our members. For a long time the renegotiation agencies would lump our type of representative with such sales brokers. It took us much time and

cost us hard-earned profits before we were able to educate the agencies to recognize the difference.

We ask that your committee now recognize that difference so that we will not have to reeducate the new renegotiating personnel.

Almost all of our members are graduate or registered electrical engineers. They employ in their own organizations the same class of professional personnel. Their principal service is to engineer the electrical requirements of the customers of their manufacturer. These relate to complex, specialized electrical installations and equipment which are not standard electrical items. Sales procurement by itself is not their major effort. A broker or 5-percenter is concerned almost exclusively with procurement. He generally is not equipped to do more than that.

The Congress has said again and again that the interests of small business must be protected in the expansion of defense production. All of our members represent a segment of such small business in two ways: First, their own organizations, being professional in nature, are small; second, the manufacturers that they represent are small or medium size businesses. The large corporations of this country generally do not use independent representatives. Instead, they open expensive branch offices.

Government procurement pays for a good share of that expense. Our members save the small manufacturers they represent the cost of such outlays. This saving is also reflected in Government purchases. By representing a number of smaller electrical manufacturers at the same time, we make it possible for such manufacturers to reach defense production areas with their products when that otherwise would be an economic impossibility. This benefits Government procurement because it broadens the amount of possible competitive bidding for Government work, and brings to the Government the added engineering skills of organizations of our type and the type of manufacturer we represent.

Our association believes that the renegotiation agencies should give effect to the professional nature of the services performed by our members. Such agencies should do this by allowing a higher profit percentage than that permitted other classes of representatives whose work consists solely of procurement and similar effort. The agencies should be required to recognize the assistance given to small businesses by our efforts.

In conclusion, may I ask the committee if any Senate Member disagrees with any of my statements? My purpose in asking this question is to take advantage of my appearance here on behalf of the association to answer any committee inquiries as to the position of our association.

The CHAIRMAN. Is there anything else you wish to add?

Mr. SCHAFFNER. That is all I wish to say. Thank you very much. The CHAIRMAN. Are there any questions?

Senator MARTIN. No. I have it very clearly.

The CHAIRMAN. Thank you very much for your appearance, Mr. Schaffner.

Mr. SCHAFFNER. Thank you.

The CHAIRMAN. Mr. Riggle.
Mr. RIGGLE. Mr. Chairman.

The CHAIRMAN. You may be seated, if you wish to.

Mr. RIGGLE. I will stand, if you please, sir.

The CHAIRMAN. Very well.

Will you identify yourself for the record?

STATEMENT OF JOHN J. RIGGLE, ASSISTANT SECRETARY, NATIONAL COUNCIL OF FARMER COOPERATIVES

Mr. RIGGLE. I am John J. Riggle, assistant secretary of the National Council of Farmer Cooperatives, 744 Jackson Place NW.

The CHAIRMAN. You may proceed.

Mr. RIGGLE. Our council is made up of farmer cooperatives in all the States of the United States handling most of the commodities produced by farmers as marketing agencies and also buying supplies for farmers. It has perhaps in its representation some 4,500 local farmer organizations.

Our organization has not asked for a renegotiation bill, but assuming that perhaps there is going to be some legislation on that subject, they did last January at the annual meeting pass a statement of policy, which is as follows:

In any new legislation considered by the Congress, agricultural products in their first marketable or natural state, which are traded in the public markets, where prices are widely reported and become common knowledge, should continue to be exempt from renegotiation of contracts for their purchase by the Government.

The factor of cost only enters indirectly into the pricing of agricultural products. The pricing of agricultural products on the exchanges of the country is public and the prices arrived at are open and widely known.

It has been a tradition, of course, in the public exchanges trading in commodities that those prices are firm prices, and any contract based thereon would of necessity have to be a firm contract. Anything that would be done to upset that, to renegotiate it, would be to destroy the authority and the authenticity of that pricing system.

The pricing on the public exchanges of these products is a most democratic procedure, where perhaps more minds meet as between buyers and sellers to set the price range for any particular period of time, an hour or day or week, than in pricing any other goods or services; so that anything that disturbs the functioning of the public exchanges and the pricing thereon would, in our opinion, be a considerable step toward control of prices ultimately by governmental edict and authority.

As a matter of fact, the pricing of the raw materials and commodities on the public exchanges enters into the pricing of a lot of the processed and manufactured products because the prices of those products are based upon the raw material prices which are set in these public exchanges.

So we have a feeling that this would permeate the whole field of pricing if this firm pricing on the exchanges were subject to renegotiation, and therefore we think that we should be considerably concerned about that inclusion in this law, for if the Government is going to procure some 18 percent of the production of the country for purposes of defense, and they could upset pricing on the commodity exchanges, they would in effect control the pricing throughout the whole economic system. And that pricing, as I say, is derived principally from the pricing of these commodities on the public exchanges.

Now, that is recognized, as you gentlemen no doubt have observed, in section 11 (e) of the new pricing regulation, wherein they refer to those commodities which are traded regularly upon commodity exchanges operating under the jurisdiction of the Commodity Exchange Authority and the Sugar Exchange Act.

But in addition to those exchanges, there are other Governmentsupervised exchanges where livestock is traded, as under the Packers and Stockyards Act, and the Perishable Agricultural Commodities Act of 1930, where fresh fruits and vegetables, and so forth, are exchanged. That is in addition to these others. And, of course, a good many of our livestock products, like eggs and poultry and cheese and butter and so forth are traded on exchanges where the prices are publicly and openly arrived at.

For that reason, we would agree to the amendments which have been proposed, that on line 22, page 24 of the bill passed by the House, the amendment is proposed to delete the words, "but only if such contract or subcontract is with the producer of such agricultural commodity," because as long as these prices are arrived at openly and publicly, it does not make any difference who trades in them at that level; and secondly, the producer very rarely sells directly to the Government any considerable amount of his product. In very rare instances is he a large enough producer to participate in a Government

contract.

He does, however, as has been suggested, participate as a sub

contractor.

Now, another statement of policy passed by our organization in January is to this effect:

Any Government contracts with farmers' cooperatives for purchase of processed or manufactured products should provide for exemption from renegotiation after a specified time from date of delivery under the contract, in order that final settlement with producer-members for their products involved will not be delayed

because in these processing cooperatives, for instance, packing corn and beans, they make an advance settlement with the producer for a portion of the price expected to be received from the product at the time of delivery. And then as the product is marketed, they may make an additional settlement and finally a final settlement after the costs of the processing and handling are deducted.

Now, usually that settlement is within the first quarter after the end of the fiscal year, and if they are not in a position to make a final settlement, because they are going to be renegotiated, it makes considerable delay in their final settlement with the producer, and secondly, it ties up funds which the producer may have allowed to be allocated for operating expenses for the next year subject to this contingent liability which the Government may impose.

So we are suggesting that in your consideration of these time limitations, they be made for the initiation particularly of the renegotiation procedure as short as possible after the time of delivery under the contract.

I think, Mr. Chairman, those are perhaps the main points that we wish to make in connection with this bill.

Senator BUTLER of Nebraska. Mr. Riggle, in connection with the packers' dividend-do you call it that?

Mr. RIGGLE. The packers' refund, yes.

Senator BUTLER. Where you speak of the necessity of avoiding renegotiation to prevent that payment's being made according to custom, would not the same argument apply to independent dealers who have, say, 6, 8, 10 or more members of a company handling agricultural products?

Mr. RIGGLE. I think, perhaps, Senator, that that would apply to most small businesses, particularly.

Senator BUTLER. Most small businesses of that kind are handled, in the first place, as partnerships in my country, and a partnership in a way is no different from a cooperative.

Mr. RIGGLE. That is correct, sir.. I refer to cooperatives because that happens to be our particular concern. But I think the same principle applies to particularly small businesses generally where the necessity of handling operating capital and reserves on a limited basis is a real concern.

Senator BUTLER. I appreciate that your comments apply to business generally rather than just the one group.

Mr. RIGGLE. Yes, sir.

The CHAIRMAN. Are there any further questions?

Senator MARTIN. No questions.

The CHAIRMAN. Thank you very much, Mr. Riggle.

Mr. RIGGLE. Thank you.

The CHAIRMAN. Mr. Rushlight, will you come forward, please? You may be seated if you wish to.

Mr. RUSHLIGHT. Thank you.

The CHAIRMAN. Will you please identify yourself for the record?

STATEMENT OF W. A. RUSHLIGHT, W. A. RUSHLIGHT & CO., PORTLAND, OREG.

Mr. RUSHLIGHT. My name is W. A. Rushlight, and I am appearing here on behalf of W. A. Rushlight & Co., a copartnership.

The CHAIRMAN. You may proceed.

Mr. RUSHLIGHT. Senator George, members of the Finance Committee, first let me say that I am very much in accord with the testimony given by Mr. Alvord this morning, of the United States Chamber of Commerce. There is only one particular matter which he testified on, in connection with which I would like to offer my views and thoughts, and that is in connection with the matter of providing in the renegotiation laws a provision for carry-back and carry-forward of profits.

Our little company of W. A. Rushlight & Co. has a very particular problem just in point, which I felt would show this committee how the law as it now stands, or as it is now proposed and as it previously stood actually operated in the case of small contractors, such as ourselves.

The CHAIRMAN. What is your line of business, Mr. Rushlight? Mr. RUSHLIGHT. We are building contractors, Senator.

We established the W. A. Rushlight Co., a copartnership, in the year 1942 for the purpose of assisting in the war effort. At that particular time the Government was having difficulty getting sufficient numbers of contractors to undertake the program that had to be undertaken on the coast.