The law does not provide explicit objectives for the export sales reporting system. A careful analysis of the legislative history also fails to reveal specific objectives for the system. 11/ But a review does suggest the following implicit objectives: (1) To provide information to the Government for (2) To provide producers information to help in their (3) To improve performance of U.S. commodity markets by From its review of the reporting system, the committee has determined that the primary purpose should be to provide USDA with timely information on export marketings as part of an "early-warning" system designed to benefit all market participants, including consumers and producers. It further believes that reported data should be issued promptly to the public in summary form. 12/ The committee believes these determinations are consistent with the original implied objectives of the program. Recognizing the cost of collecting and disseminating information, the committee believes that USDA has sought to reach an optimal combination of data collection and dissemination methods to assure compliance with the law, while minimizing administrative and operational costs. The committee, however, finds there is confusion about the function of export sales reports. Some tend to mistakenly confuse export sales reports with export forecasts. Export sales reports alone are not a reliable basis for forecasting quantities or levels of exports or prices of U.S. agricultural commodities, either to an individual country or in total. Export forecasts are a prediction of expected exports over some future time period. Export sales reports indicate sales commitments that have been made and are therefore only one of many sources of raw information useful in the forecasting process. 13 For example, if the sales report shows unexpectedly large sales to a particular country whose import demands are difficult to forecast, it may provide a basis for reevaluating the export forecast. Under present law, businesses located in the United States which supply wheat, wheat flour, feed grains, oilseeds, cotton, rice, and related products for export must file weekly reports showing all export sales activity completed in the previous 7-day period. In addition, businesses consummating sales and related export activity for wheat, feed grains, soybeans, and soybean meal in excess of 100,000 metric tons in a single day or 200,000 metric tons in one week are required to report such sales to USDA by 3 p.m. the next business day. A similar daily reporting requirement applies to soybean oil sales in excess of 20,000 metric tons daily or 40,000 metric tons in one week. Performance of the Present System The committee believes that the current system is performing reasonably well in light of the present congressional mandate. However, this is not to suggest that there are no problems. For instance, some U.S. exporters assert that the current system, which allows foreign firms to escape prompt reporting requirements, discriminates against U.S. firms which have no foreign affiliates or causes those U.S. firms which do have affiliates to increasingly use them for export sales. As indicated earlier in this report, another alleged problem with the current system is the apparent overreporting of sales during periods of tight supplies and underreporting during periods of abundant supplies. However, this may not be as much a fault of the export sales reporting system as it is the judgement and market behavior of foreign buyers, whose reactions to various supply-demand situations are simply reflected in the current reporting system. The committee concludes that, given the current statute, the present system is functioning adequately. (1) Few, if any export sales by U.S. firms go unreported. (See Appendix E for further discussion.) 14/ (2) Sales by U.S. firms are reported promptly. It appears even verbal commitments are reported if they are considered final by the seller. 15/ (3) Information provided in the export sales report is (4) The reporting requirement has had no significant (5) It was not objectively demonstrated that the lack of additional export sales reporting information caused any significant economic loss. (6) Export sales reports have not represented a major (7) Auditing procedures and frequency of audits of export firms are considered adequate. 17/ Scope of the System In discussing possible changes in the export sales reporting system, the committee finds it useful to differentiate between the four basic types of firms involved in international trade of U.S. commodities. They are: (1) (2) (3) (4) those businesses, whether totally controlled by U.S. or foreign persons, located in the United States which export agricultural commodities; those firms located outside the United States which are affiliates or subsidiaries of U.S.-based parent companies; those firms located outside the United States which those firms located outside the United States which are neither controlled by nor in direct control of any U.S. commodity marketing firm. The committee concludes that while the present system provides accurate and timely information on export sales of U.S. firms (category (1) above), it does not require foreign firms (categories (2), (3), and (4)) to report sales of U.S. commodities. Thus, any foreign firm, including foreign affiliates of U.S. firms and foreign based firms with U.S. affiliates, can sell U.S. commodities without legally being required to report such sales. Of course, these sales are eventually reported by the U.S. business which supplies the commodity for delivery against the original sale. 48-499 O - 79 - 3 The effect is that foreign buyers or sellers desiring to avoid immediate public disclosure of their transactions can achieve that objective by trading with or through non-U.S. firms or foreign affiliates of U.S. firms. As noted above, a sale is eventually reported when the foreign firm contracts with a U.S. firm to obtain supplies to fill the order. But, in the meantime, most of the participants in the marketing system may not have information about the export sale. This information could have affected their marketing decisions during this time. In fact, the following data indicate that some foreign buyers and exporters have recognized this fact and adjusted their behavior accordingly. During the period October 1, 1976, to September 30, 1977, 65 percent of the wheat and corn sold to the Soviet Union by U.S. firms (category (1) as defined above) was through direct sale to Exportkhleb, the Soviet buying agency, while 35 percent was sold through foreign firms (categories (2), (3), and (4) above). For a similar period in 1977-78, U.S. firms (category (1)) sold only 8 percent of the total directly to Exportkhleb. And in the current year, again virtually all sales of U.S. wheat and corn for delivery to the Soviet Union thus far have been made through foreign firms. The committee recognizes, however, that these percentage changes may have occurred because firms with foreign affiliates chose to increase sales through their affiliates. The data above do not reveal whether the principal cause of the shift in business practice originated with the seller or the buyer. 18/ Continuation of the Present System The committee discussed the question, "Should the export sales reporting system by continued?" Several committee members suggested the reporting system might be eliminated without detrimental effects under current abundant supply conditions. Several public witnesses also made this suggestion. On the other hand, other witnesses urged that the reporting system be continued, even in abundant supply situations. Thus, while several committee members might prefer total elimination of the reporting system, the consensus is that the current system or some modification of it should be continued. The committee then discussed the question "Should the present system be modified?" There are sharp differences on this issue. Some argued that the present system, since it only provides information of sales made by U.S. firms, does not provide an accurate reflection of sales at the time they are really made by foreign firms. They suggest that until that deficiency is corrected, the information is imperfect and could be misleading. Other members disagree--noting that the current system is working reasonably well and expressing concern that requiring foreign firms to promptly report all sales might cause buyers to turn to non-U.S. sources of supply, assuming they are available. Possible Loss of Sales The possible loss of export sales as a result of requiring foreign firms to promptly report sales of U.S. commodities was discussed at length by the committee and by most public witnesses appearing before the committee. Exporters unanimously warned that U.S. exports could be reduced. Virtually all farmer representatives expressed the opinion that additional information might be useful but they would not ask for it if total exports were likely to be affected. However, no objectively verifiable evidence was presented to the committee to either support or refute the contention that U.S. exports might be reduced by more complete and timely export sales reporting. 19/ RECOMMENDATIONS While several members expressed views and much testimony was heard to seriously question the advisability of any substantial changes, the following recommendations are made with the belief they will improve the reporting system without posing a threat to U.S. exports or market shares. Without specifying exactly what legislation, if any, would be required, the committee recommends that: (1) USDA should continue to operate the export sales reporting system as such information is logically part of the Department's responsibility to collect and disseminate agricultural supply and demand information. 20/21/ |