1979 with a surplus of $696,500. NARGUS opposes any increase in the license fee beyond $135. Setting a maximum license fee of $135 would enable Congress to retain oversight of the PACA program concurrently with review of the license fees in three or four years. NARGUS opposes setting the maximum above $135since a higher limit, such as tripling the fee to $300, would tend to postpone periodic Congressional oversight.

NARGUS continues to believe that the perishable Agricultural Commodities Act is unnecessary government regulation so far as the Act extends to food retailers purchasing perishable agricultural commodities solely for retail sale from a PACA licensed wholesaler. The licensing of food retailers buying from licensed wholesalers is unnecessary for government regulation designed to protect growers and shippers. Retailers have continuing daily commercial relations with their wholesalers that do not require government control.

NARGUS strongly urges that if the maximum PACA fee is raised from the current $100 that the Subcommittee appropriately raise the retail exemption to at least $175,000. The current PACA license is not required if the invoice cost of a retailer's PACA purchases do not exceed $100,000. Since 1969, when the retail exemption was raised from $90,000 to $100,000, the wholesale food price index for fresh and dried fruits and vegetables has increased approximately 68.4 percent. Just to keep up with the rapid rate of inflation the retail exemption should be increased to at least $175,000.

On February 4, 1976 the Department of Agriculture testified in opposition to H.R. 10988. NARGUS supports U.S.D.A.'s position for fundamental reasons. H.R. 10988 would expand governmental regulation to unworkable limits, requiring additional administrative personnel and rules that would cost far more than the benefits hoped to be derived. NARGUS believes the need to expand the scope of the Perishable Agricultural Commodities Act as proposed under H.R. 10988 has not been clearly established.

H.R. 10988 would expand the coverage of PACA to frozen potato products. The inclusion of frozen potato products would cause invoice cost increases that would further erode the value of the retailer exemption. The more products included the less the retail exemption would retain its original worth. The inclusion of frozen potato products would serve as a precedent for requests to have other frozen processed food products covered under PACA. The result would be more government regulation not less.

Section three of H.R. 10988 prohibiting unjust or unreasonable preferences in connection with perishable agricultural commodities would be unworkable. The perishable agricultural commodities market and product conditions fluctuate weekly, daily, and hourly. Supply and demand vary as the day progresses. Buyers must be free to bid higher and lower because of deterioration in quality, freshness, and supply. Distress sales to move perishable products are frequent. Section three would be a broad expansion of government regulation into the terms of a contract. PACA should remain primarily concerned with contract performance.

Section four would permit the Secretary of Agriculture to withhold a complainant's name from disclosure. An accused certainly should be afforded the right to know who his accuser is in order to adequately defend himself. Further, in order to remedy a complaint the name of the accuser is absolutely necessary to assure that the relief offered is appropriate. Section four poses questions of due process and is opposed.

Section five is unnecessary. Currently. PACA licenses are subject to revocation or suspension. Revocation of a license puts an operator out of business and is more effective than any burdensome auditing procedure.

In conclusion, NARGUS opposes H.R. 9288 and H.R. 10988. NARGUS supports the power of Congress to set the maximum PACA license fee. NARGUS urges that the PACA license fee increase be limited from the current $100 to $135. A PACA license fee of $135 would enable the program to function_through 1979. Congressional oversight could be conveniently held at that time. In conjunction with increasing the PACA license fee, NARGUS believes the retailer exemption should be raised to at least $175,000 to compensate for inflation.

Hon. JOSEPH P. VIGORITO,

NATIONAL FOOD BROKERS ASSOCIATION,
Washington, D.C., February 18, 1976.

Chairman, Subcommittee of the House Agriculture Committee on Domestic Market and Consumer Relations, Cannon House Office Building, Washington, D.C.

DEAR SIR: The National Food Brokers Association was represented in testimony before your committee in regard to H.R. 9288, dealing with the Perishable

Agricultural Commodities Act. NFBA President Emeritus Watson Rogers testified on our behalf on December 4, 1975. As your committee is continuing its hearings on PACA, this time on H.R. 10988, we wish to expand our statement for the record as follows, and to reaffirm the position outlined for us by Mr. Rogers. We want to discuss the provisions of H.R. 10988 as follows. In regard to Section 2 of the bill, the NFBA recommends that there be no expansion of products covered by the PACA. In our opinion there is no justification to include frozen potato products under PACA. In the first place we do not believe any substantial need has been established to require such a major change from the well established and clearly defined list of covered fresh (and frozen) fruits and vegetables. We believe the Congress would want to be reluctant to add new products to the scope of the law unless there is a clear need for such additional regulation-such need clearly established to be in the general public interest. We do not believe that this has been clearly established.

It is our understanding that the U.S.D.A. has come out against such additional coverage. We believe their position is the correct one. We should also point out that any additional coverage would require additional manpower and this could further aggravate the financial position of the department in needing additional funds to administer PACA.

Further, we believe that to add frozen potato products could be the first step toward requests to include other frozen prepared food products which have as their base perishable agricultural commodities. With such a precedent there is no limit to the broad coverage to which this could lead-all in distinct contravention of the basic propose of the Act. As Congress wisely decided when it passed the Act it is to cover fresh fruits and vegetables only, whether in fresh or frozen form.

We also view as a dangerous and unwarranted expansion of regulation the Sections 3, 4, and 5 of H.R. 10988. These, we believe, go beyond the compliance powers needed by the U.S.D.A. to enforce the Act. We repeat the statement made by Mr. Rogers in his previous testimony, in that we have every confidence in the integrity and the devotion to duty of the present personnel in U.S.D.A. who administer the law. However, Congress must also plan for future contingencies. The kind of power proposed in this bill could, in the wrong hands, prove disastrous to the very people the provisions of the law are supposed to protect.

Section 3 of H.R. 10988 treats discrimination or preferential actions as a violation of the Act. We believe this section is totally unnecessary. The present PACA fully covers the area of discriminatory and disruptive practices in contractual performance by buyers and sellers. U.S.D.A. officials themselves have testified that their responsibility under PACA is to promote contractual performance.

The constantly changing conditions in the fresh fruit and vegetable industry force buyers and sellers to follow closely pricing patterns which are established by supply and demand conditions, in accordance with the practices in the marketplace. There are clearly established laws of commerce and antitrust which apply to any violations. It would not be proper to establish still another agency within the Executive Branch to duplicate this kind of enforcement effort. This again could lead to the need for additional personnel and still higher fees for an agency which already is in need of additional funds just to maintain its present responsibilities. The same problems exist for Sections 4 and 5 of H. R. 10988 which would create still further administrative burdens for PACA. They are not staffed for such activities, even if the need for them were clearly established, which it is not. The U.S.D.A. has gone on record as being opposed to these Sections.

While your Committee is considering PACA and the need for change, we strongly recommend that the Committee amend the law to increase the present $100,000 exemption coverage of frozen food brokers to a minimum of $175,000 (Section 1, Paragraph 7). This increase in the exemption is made necessary by the nflation in wholesale fruit and vegetable prices that has taken place since the time the present exemption figure was established. This increase would be in keeping with other actions by Congress to provide for the inflat onary rise in prices. Congress has wisely recognized that statutory standards based on a constant dollar mount should be adjusted to take cognizance of the current inflationary affect on hat standard.

At present for the smaller frozen food broker with a volume of frozen food prodcts at the minimum the license is a burden. The result tends to discourage such rokers from selling frozen food products. This could hurt the smaller and regional rozen food packer in obtaining adequate sales representation. It also could make t more difficult for local distributors both wholesale and retail to obtain the variety of frozen food products their consumer customer would desire.

We want to emphasize again the statement made by our President Emeritus, Mr. Rogers, in which he pointed out the many reasons why frozen food brokers logically should not be covered under this Act in the first place. The processors for whom they act solely as sales agents are already licensed. Frozen food brokers are in this respect no different than the salaried sales people of the processors, who do not require such a license.

In closing we want to refer again to H.R. 9288, which relates to the PACA license fees. As we pointed out previously we believe Congress should set these fees, not the U.S.D.A. In regard to a fee increase, the U.S.D.A. presented income and expense projections. In their revised testimony on December 4, 1975 they stated that annual license fees of $135.00 would enable them to operate through 1979 with a reserve fund of $696,500.00.

Accordingly NFBA opposes a PACA license fee set in excess of $135.00, for the period ahead. If in later years there is a need to revise this fee, U.S.D.A. should then be required to come back to Congress with proper documentation. This would provide Congress with the required oversight control which it alone should have, and periodically exercise.

Again Mr. Vigorito, we want to congratulate you and your associates on the Committee for your careful analysis of all of the factors as they relate to PACA. We are confident that your deliberations will result in fair and meaningful attention to the problems outlined.

Sincerely,

MARK M. SINGER,

President.

SUPPLEMENTAL STATEMENT OF DOYLE BURNS, EXECUTIVE DIRECTOR, THE NATIONAL POTATO COUNCIL, DENVER, COLO.

Since most of the testimony in the February 25th hearing which was in opposition to H.R. 10988 quoted freely from the previous testimony of Mr. Hedlund from U.S.D.A., we feel a closer examination of certain parts of that statement should be further analyzed.

The comments with regard to Section 2 are not in agreement with our understanding of that Section. It is our contention that only the fresh perishable potatoes sold to a freezer-processor should come under the Act. To require the finished product, namely frozen french fries, to come under the Act would be the same as putting potato chips or canned potatoes under the Act. It is not our desire to bring the frozen product under the Act, only the first transaction of fresh potatoes from grower to processor.

Under Section 4 of the Bill, the reparations complaint must have the name of the complainant. We have agreed to that as indicated in earlier testimony. Disciplinary complaints are different. This is where the anonymous complainant can help head off bankruptcies by limiting the licensee. As soon as he sees he is headed for bankruptcy he will take in as much product as he can get even offering to pay higher prices.

In Section 5, the cost of this function has been exaggerated. There were 938 firms against whom complaints of slow pay were settled. Many and possibly most of these were settled with a telephone call or letter. No investigation was undertaken. If they were not investigated there would be no actual charge of violation, nor technically would there be a violation. Thus, you can readily see we are not talking about 938 inspections but probably no more than 100 to 300. Only the PAC Office could provide that figure. Secondly, the testimony chooses to disregard the language of Section 5. The amendment calls for an inspection, not an audit. The inspection would be no more than an informal review of the licensee's accounts payable. The only determination that needs to be made is whether slow pay is being continued or not. That would take no more thad one to three hours of time.

The key difference is an inspection as compared to a complete audit. Such audit would take 52 to 56 hours and cost $1,000 per audit as compared to an inspection that might cost as much as $50.

No consideration whatsoever was given to the possible reduction in the work load. It is certain there would be far fewer alleged violations if the violator knew his conviction would result in two years of accountability.

We honestly feel the cost of administration could be substantially reduced as soon as the PACA started using this new tool.

[Following is an attachment to Mr. Burns' statement:]

Hon. EARL L. BUTZ,

REXBURG, IDAHO, February 18, 1976.

Secretary of Agriculture, United States Department of Agriculture, Administration Building, Washington, D.C.

DEAR MR. SECRETARY: I would like to express my appreciation to you for the opportunity you have afforded me to serve on the Perishable Agricultural Commodity Act Advisory Committee for the past three years. I am aware that my appointment came about as the result of the National Potato Council's efforts to get growers represented on this Advisory Group.

It was the feeling of the Council, and rightly so, that growers should have a voice in the decisions relating to the PAC Act.

However, after attending these meetings for three years I feel I cannot continue to serve. The manner in which the meetings are manipulated and the methods used to draw out committee recommendations indicate to me the Advisory Committee is a farce. It is something I feel I can no longer lend my name to. If it suits the pleasure of the PAC administrator, Committee recommendations are followed; if not, they are ignored.

It has been repeatedly demonstrated in the meetings I have attended that the PAC Office has no sympathy for the growers problems and even if they did have a desire to help, I don't see how anyone could expect a favorable recommendation from an Advisory Committee loaded with people from the broker and receiver end of the business.

I am fully aware that as a farmer I am not a licensee, but this should not mean I am some kind of second-class citizen. The purpose of the Act is to suppress unfair and fraudulent practices wherever they occur, and I feel farmers should have relief from their particular problems under the "Act" in a like manner as anyone else. It appears to me that the PAC Office is only interested in catering to the wishes of the licensees.

Mr. Secretary, I hope some changes can be made in the administration of this Act. If such changes are not forthcoming, it is my honest opinion we will eventually lose what could otherwise be a useful marketing tool for the entire fruit and vegetable industry. Changes have been proposed and are now before the Congress for consideration. These proposed changes have been attacked by the PAC Office with a vengence for exceeding even that of the brokers and receivers. It is deplorable and my feeling at this point is one of disgust with the way it is being pursued. Perhaps I am wrong but I do not feel it is either proper or legal for the Administrator of PACA or PAC officials to take an active and aggressive position on pending legislation beyond stating the Administration's position.

I have written this letter expressing my sincere feelings on the matter because I want to help. It is not my intent to hurt or discredit anyone but at the same time, I feel the need for changes over-rides all other considerations.

My association with the Secretary's Office has been rewarding. I personally feel you have done an outstanding job as Secretary. My best wishes for the future.

Sincerely,

BILL WEBSTER,

STATEMENT ON BEHALF OF POTATO CHIP INSTITUTE INTERNATIONAL

(By Melville Ehrlich, Counsel)

This statement is submitted on behalf of the Potato Chip Institute International (PCII) and its members. PCII is a non-profit trade association of potato chip manufacturers with its principal office at 26250 Euclid Avenue, Euclid, Ohio 44132. The members of PCII account for well over 90 percent of the domestic production of potato chips.

It should be noted at the outset that PCII is not a perennial objector to legislative or regulatory action. As a matter of fact, PCII supports the presently pending H.R. 9288, which proposes to increase fees paid by dealers, including PCII members, to keep the administration of the Perishable Agricultural Commodities Act (PACA) on a self-sustaining basis. We support it, that is, unless actions taken under H.R. 10988 affect it to the extent that it can become unnecessarily burdensome, as will be later pointed out.

But PCII on behalf of its members, vigorously and strongly opposes H.R. 10988. H.R. 10988 takes a giant step, but in the wrong direction-backward.

The whole trend of government today is for government in the sunshine, for open dealings, for governmental operations to be openly conducted in the light of day. But now comes H.R. 10988, taking a giant step in the direction of the nameless, faceless accuser, the secret complainant who refuses face to face confrontation.

Even today, Congress is turning the spotlight on the most secret operations of such government agencies as the FBI and the CIA, for the whole world to see. And these spotlighted operations are presumably in the public interest, so that no longer are even public interest operations shrouded in secrecy. But now come the proponents of H.R. 10988 and propose that an operation of private interest, not public interest, may be conducted in secrecy at the behest of a nameless, faceless, secret accuser.

Let us consider for a moment what the secret accusation permitted by H.R. 10988 really entails. A complaint may be made by an unwarrentedly disgrunteled grower. But whether warranted or not, if an investigation is to be made of a secret complaint, obviously the investigation cannot be limited to the account of the secret complainant because that would immediately remove the cloak of secrecy with which the complainant has wrapped himself. To protect the identity of a nameless, faceless, secret accuser, the Secretary would, of necessity, have to undertake such a broad investigation of the dealer that the identity of the nameless, faceless, secret complainant would be hidden by the very magnitude of the investigation or examination. It can readily be foreseen and anticipated that in many instances a complete audit of a dealer may become necessary to protect the identity of the nameless, faceless, secret accuser.

We have made great progress in our legislative and regulatory operations since the ill-fated days of McCarthyism. But H.R. 10988 reincarnates the late unlamented nameless, faceless accuser.

In addition, although as already stated, we generally support H.R. 9288 to keep the administration of PACA on a self-sustaining basis, we cannot be so naive as to say that we support the increased costs to dealers even if they may be substantially increased by extensive investigations to protect the identity of a complainant shrouded in secrecy, particularly when the secrecy requires the investigation to be unusually abnormal and broad.

PCII must also take vigorous and strong objection to another provision of H.R. 10988. The bill provides that if a dealer, for example, has once been determined to have violated the provision for prompt payment, the Secretary shall (must) inspect the dealer's accounts, records and memorandums at least once every three months for a period of two years.

This is an incredible provision. It makes such examinations mandatory regardless of any complainant and even if each examination shows super-meticulous compliance. Has any thought been given to or estimate made of the cost of administering this provision? No such estimate has come to our attention. But what a number of mandatory examinations of such scope and frequency can mean, in terms of augmented PACA staff, staggers the imagination. And for what? What are really the benefits and to whom, from such a staff build-up?

As we have said, we support H.R. 9288 in general, but again we cannot endorse H.R. 9288 without limit on the size of the bureaucracy to be built up and charged to licensees. We do not have figures on the cost of administration of the provisions of H.R. 10988. Obviously, the costs will be tremendous. We trust that governmental agencies will advise this Subcommittee of the estimated costs for administration as compared to the benefits, if any, received by anyone.

The members of this Subcommittee are, of course, aware that the President has called for legislative and regulatory action to be examined in the light of cost against benefit. We urge this Subcommittee to consider this factor.

In summary, we oppose passage of H.R. 10988 for the reason that it revives the principle of the nameless, faceless accuser, shrouded in a cloak of secrecy, with no opportunity for face to face confrontation; for the reason that such secret accusation can cause extensive and expensive administrative investigations, eventually to be paid for by the licensees; and for the reason that the mandatory minimum quarterly audits are completely unnecessary and extremely expensive, without corresponding benefits, and again at the expense of the licensee as now being proposed by H.R. 9288.

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