where a man is integrated in his operation to the point where we have to determine a value at a point prior to the place where there is a ready market. And this language suggested that the depletion line is that point.

In addition to these mandatory exemptions, this section also makes provision for certain permissive exemptions which may be granted by the Board, in its discretion, either individually or by general classes or types of contracts or subcontracts. All of these permissive exemption categories were contained in the World War II statute, with the exception of the following additional category: Any contract or subcontract the renegotiation of which would jeopardize secrecy required in the public interest. The categories carried over from the former law are as follows:

(1) Any contract or subcontract to be performed outside the United States.

(2) Any contract or subcontract where the profits can be determined. with reasonable certainty when the contract price is established. (3) Any contract or subcontract where the provisions are considered otherwise adequate to prevent excessive profits.

(4) Any subcontract where it is considered not administratively feasible to determine and segregate renegotiable profits from profits attributable to nonsubject activities.

Section 107. Renegotiation Board

The Renegotiation Board is created as an independent establishment in the executive branch of the Government and is to be composed of five members appointed by the President by and with the advice and consent of the Senate. Not less than three members of the Board must be appointed from civilian life. The President is to designate one member to serve as Chairman. Each member is to receive compensation at the rate of $12,500 per annum. No member may engage in any business, vocation, or employment other than that as a member of the Board. Three members of the Board are required for a quorum.

The CHAIRMAN. Going right back to these contracts that are not renegotiated by the Board, in the discretion of the Board, I observe that this bill omits section (4) (D):

Any contract or subcontract for the making or furnishing of a standard commercial article, if in the opinion of the Board, competitive conditions affecting the sale of such article are such as will reasonably protect the Government against excessive prices;

*

Was that intentionally omitted, or for any reason?

Mr. ROBERTS. Yes; it was omitted at the request of those of us appearing for this bill, because, in the administration of that particular provision, under the wartime operation there were a great many administrative burdens raised, and a great many applications were received, requesting exemption. Due to the large increase in the procurement on the sale of such items, the fact that they are standard and have an established market price does not preclude the making of excessive profits under their sale. Those were the reasons, Mr. Chairman, that we asked that it be omitted.

There is another omission to which I would like to draw attention. The CHAIRMAN. I was going to draw attention to that. That is (e). Mr. ROBERTS. Yes, sir.

The CHAIRMAN (reading):

Any contract or subcontract, if in the opinion of the Board competitive conditions affecting the making of such contract or subcontract are such as are likely to result in effective competition with respect to the contract or subcontract price and

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Was that omitted for the same reason?

Mr. ROBERTS. It was; yes, sir. There is a further omission, Mr. Chairman.

The CHAIRMAN. Yes, sir.

Mr. ROBERTS. The tax-exempt operation.

The CHAIRMAN. Yes, sir.

Mr. ROBERTS. Those are the only ones, I believe.

The CHAIRMAN. Yes, I see, looking at the comparative print, that seems to be the only additional one.

If I may go back to what I was talking about a while ago, and what Senator Martin also had in mind when he was talking about the pig iron, and so forth, in the old law we had this provision:

In the case of a contractor or subcontractor who produces or acquires the product of a mine, oil or gas well, or other mineral or natural deposit, or timber, and processes, refines, or treats such a product to and beyond the first form or state suitable for industrial use, or who produces or acquires an agricultural product and processes, refines, or treats such a product to and beyond the first form or state in which it is customarily sold or in which it has an established market, the Board shall prescribe such regulation as may be necessary to give such contractor or subcontractor a cost allowance substantially equivalent to the amount which would have been realized by such contractor or subcontractor if he had sold such product at such first form or state.

Mr. ROBERTS. The present bill has an identical provision to that, but it stops right there.

The CHAIRMAN. You stop at the producer?

Mr. ROBERTS. That is right.

The CHAIRMAN. You cut out the "acquire"?

Mr. ROBERTS. That is correct, sir.

The CHAIRMAN. I give the House committee full credit for writing a good bill, but it does seem to me that it narrowed this bill on these points to a point where you are really undermining the main primary purpose of nearly everything we do to meet an emergency. And, also, you are adding terrifically to the burdens of the negotiators. It looks to me like you have an expanding agency down there.

Mr. ROBERTS. I hope not.

The CHAIRMAN. I do, too, but I have been reading some of the tentative set-ups on price controls and wage controls and the number of offices that are added all over this country. I just wonder where we are going to get the manpower for all of this.

Senator MARTIN. That is the thing that is worrying me. We want peace, and we can have peace in the world; but it is not the number of tanks and planes and divisions that America can produce, but it is the potential-it is the potential divisions.

The CHAIRMAN. Exactly.

Senator MARTIN. And the potential equipment.

The CHAIRMAN. You can never produce enough to meet all of your possible needs, and if you produce them this year they are inadequate later.

Senator MARTIN. Or probably obsolete.

The CHAIRMAN. Yes; obsolete.

Senator MARTIN. What I am getting at is this

The CHAIRMAN. But, if your potential is there, why, you can always produce.

Senator MARTIN. Manpower, I think, is very important. One of the greatest things General Marshall has done so far is forming two divisions out of housekeeping soldiers. I had hoped he would make it six or eight.

The CHAIRMAN. I had hoped he would, too.

Senator MARTIN. We have to save manpower in America. You cannot have a push button in war. Just think what those Chinese have done, without equipment, but with manpower. You see, our fighting power is about 20 percent. And the men that you tie up in government for spervision and administration takes them out of the field. That is what is worrying me. We in America have to show a great potential manpower force to the rest of the world in order to preserve peace, because that is what they recognize. They do not recognize argument or justice, or anything else. We have got to work these things out so that we can save manpower in America. That is what this thing all hinges on.

The CHAIRMAN. All right, Mr. Roberts, you may proceed. You invited us to ask you these questions.

Mr. ROBERTS. I did, sir, and I am happy to have your observations. Three members of the Board are required for a quorum.

The Board is authorized to delegate in whole or in part any function, power, or duty to any agency of the Government, and to permit successive redelegations. The Board cannot, however, delegate its power to promulgate regulations and rules.

In respect of the composition of the Board, H. R. 1724 differs from the proposed draft of bill originally submitted to the House by the Government agencies concerned with this legislation and also to this body. As so submitted, the original draft provided for a Board of seven members. Of these, three members were to represent the Department of Defense and were to be officers or employees of the Departments of the Army, the Navy, and the Air Force, and were to be appointed by the Secretaries of the Army, the Navy, and the Air Force, respectively, with the approval of the Secretary of Defense; one was to be an officer or employee of the General Services Administration and was to be appointed by the Administrator of General Services; one was to be an officer or employee of the Department of the Treasury and was to be appointed by the Secretary of the Treasury; one was to be an officer or employee of the Department of Commerce and was to be appointed by the Secretary of Commerce; and the other member, who was to be the Chairman, was to be appointed by the President with the advice and consent of the Senate.

I am informed by the Bureau of the Budget that a Renegotiation Board constituted in either of these two ways is acceptable to the executive branch of the Government.

Subsection (e) describes the operating procedures of the Board, both with respect to the initial conduct of cases, either by the Board itself or by a division or delegatee of the Board, and with respect to the review by the Board of determinations made in cases not initially conducted by it. On review, the Board is given power to determine excessive profits in an amount less than, equal to, or greater than the amount of the determination reviewed.

Subsection (f) requires the Board to accept and perform such renegotiation powers, duties, and functions as may be delegated to it under any other renegotiation law. This enables functions under the Renegotiation Act of 1948 to be transferred to the Board.

That provision is to insure that we do conserve manpower, and we do not preserve two sets of renegotiation officials.

Section 108. Review by the Tax Court

This section provides that any contractor or subcontractor aggrieved by an order of the Board determining the amount of excessive profits received or accrued by him may, within the time limitations prescribed in the section, file a petition with the Tax Court for a redetermination thereof; that the court shall then have exclusive jurisdiction, by order, to finally determine the amount, if any, of such excessive profits received or accrued by the contractor or subcontractor; and that such determination shall not be reviewed or redetermined by any court or agency. The court may determine as the amount of excessive profits an amount either less than, equal to, or greater than that determined by the Board. The proceeding before the Tax Court is to be a proceeding de novo.

It is provided that the filing of a petition in the Tax Court shall stay the execution of an order of the Board if within 5 days the petitioner files a bond with the Tax Court in such amount as may be fixed by the court. It is also provided that, where under an order of the Board there has been collected an amount greater than the amount of the final determination made by the Tax Court, the excess is to be refunded with 6 percent interest thereon.

REMAINING PROVISIONS OF TITLE I

The remaining sections of this title make certain necessary formal provisions, including, in section 109, a provision that the Board shall have authority to make appropriate rules, regulations, and orders. Also included, in section 113, is a provision that certain specified provisions of law shall not prevent any person by reason of service prior to January 1, 1954, in performance of duties required by the bill, from acting as counsel, agent, or attorney for prosecuting any claim against the United States after such person is no longer employed in a Department or the Board, if the subject matter of the claim does not involve any subject matter directly connected with which such person was employed.

TITLE II-MISCELLANEOUS PROVISIONS

Section 201. Functions under World War II Renegotiation Act

This section abolishes the War Contracts Price Adjustment Board created by the World War II reneogtiation statute. All of the functions of that Board relating to the payment of renegotiation rebates and other refunds are transferred to the Administrator of General Services. All other functions of that Board are transferred to the new Renegotiation Board created by this bill.

Section 202. Period of limitations for Renegotiation Act of 1948

This section provides a statute of limitations for proceedings under the Renegotiation Act of 1948, which does not now contain any such limitation.

Section 203. Amendment of section 3806 of the Internal Revenue Code

This section amends section 3806 of the Internal Revenue Code, which provides the tax credit allowed to a contractor in the elimination of excessive profits, in order to make the appropriate references therein to the Renegotiation Act of 1948 and the Renegotiation Act of 1951.

Section 204. Separability provision

This section provides that, if any provision of this act or the application of any provision to any person or circumstance is held invalid, the validity of the remainder of the act and of the application of its provisions to other persons and circumstances shall not be affected thereby.

That concludes my statement. I shall be happy to attempt to supply any information the committee may desire.

The CHAIRMAN. Are there any questions by any member of the committee?

Senator MARTIN. I do not have any further questions.

The CHAIRMAN. Let me draw to your attention-and I do so in order that you may have it-a suggested amendment for paragraph 3, section 106, as follows-you will note the added language:

Any contract or subcontract for the procurement of a mine, oil or gas well— and this is new in the amendment

plant for physically separating natural gasoline, butanes, propanes, and residue gas from natural gas, from any oil or gas well

That is the new part of it, and I will not read the balance of the section. It occurs additionally about midway in that section, where, after the words "mine, well", the word "plant" is inserted. In the same line

or deposited from which such product is produced new or separated. Do you see the purpose of that amendment?

I ask you to give some thought to it, because it is an amendment that will be presented to the committee.

And from various sources a suggestion with respect to raw products, particularly agricultural products, an amendment that will strike the words:

but only if such contract or subcontract is with the producer of such agricultural commodity.

I presume similar amendments may be offered with respect to other raw products; that is, minerals and timber.

I had these amendments already presented, and I know they will be pressed. That is the reason I am directing your attention to them.

Mr. ROBERTS. May I make one observation, Mr. Chairman: that if the committee does adopt the amendments, striking that limited to a producer or to one who acquires such product, that there will be necessary some other provision to go into the bill."

The CHAIRMAN. That would be true; yes, sir. I recognize that is true. Are there any further questions?

Senator HOEY. I do not have any.