In order to insure that prompt payment provisions of section 2(4) of the act is being complied with, the amendment directs that the Secretary or his duly authorized agents shall, and this is an important word. The department has no way to misinterpret, there's no two ways on interpreting "shall," I don't believe. The agent shall inspect at least once every 3 months for a period of 2 years the accounts, records, and memoranda of any commission merchant, dealer, or broker, determined pursuant to section 6 of the act, to have violated such provision.

The Secretary may require a surety bond if in his judgment it would be necessary for assurance that the business will be conducted in accordance with the act.

If we had this amendment in effect through the years, the farmers in Maine would not be owed in excess of $5 million by one processor today.

If a licensee is complained against, found guilty and there is no followup to determine if he has corrected his errors, he may continue in his old ways and the result may be eventual bankruptcy. The provision in this amendment could be compared to a court putting someone on probation. I would be hopeful that licensees not complying with the act might be forced to realize that a license is a privilege to do business under the terms of the act not a license to steal.

I cannot see why any licensee would object to this amendment if they are complying with the act. The percentage of license es who are not complying with the act is very small, therefore, isn't it fair to assume that the legitimate licensee will welcome this amendment? I submit to this committee that if this amendment has favorable action, it will aid all the fresh fruit and vegetable industry in eliminating some of the undesirables and make for fair competition for the legitimate operator.

With the cost of production spiraling, it is imperative that farmers and shippers be paid for what they grow and ship.

I favor the amendment providing for an increase in licensing fees. If this act is to be enforced, it has to be properly funded. Both the National Potato Council and Maine Potato Council are on record as favoring a licensee fee based on volume. We consider this the most equitable method.

Regardless of how additional funding is secured, I think it should be coupled with faster service and a determination of the department that licensees be made to realize that a license is a privilege to do business under the terms of the act.

Thank you, Mr. Chairman. That concludes my statement.

Mr. VIGORITO. We wish to thank you, Mr. Fox, for being here, and Mr. Smith. We will give your testimony due consideration. It runs in line with the other three producers that preceded you so the questions would be merely repetitious.

Thank you very much.

We have one more witness today, Mr. Stephen Tavilla, president of the P. Tavilla Co., Inc., Boston, Mass.

Mr. Tavilla.

STATEMENT OF STEPHEN TAVILLA, PRESIDENT, P. TAVILLA CO., INC.

Mr. TAVILLA. Mr. Chairman and members of the committee, my name is Stephen Tavilla. I am president of the P. Tavilla Co., Inc., of Boston, Mass. and Miami, Fla. Our firm is engaged in the production and wholesale distribution of fresh fruits and vegetables. We have operated successfully under PACA since its beginning 45 years ago.

I might also add not to confuse anyone else, I was a potato grower in Maine for 9 years.

I have previously testified on bill 9288 and still support that bill. My position on that remains unchanged.

Today I would like to comment on bill H.R. 10988.

In section 2, I see no conflict in the definition change as amended, as to whether processors are in or out.

In section 3, our industry continues to run on supply and demand. Consequently it would not be possible to sell a product at only one price in our terminal. When there is an oversupply, you cannot hold back sales. The sales price must be lowered in order not to have your product deteriorate and run the risk of its being unsaleable. A set price would strangle trading by attempting to fool with supply and demand. This would also kill incentive for the daily challenges within this industry. It would tempt anyone to file a claim for discrimination or favorable treatment, which would immediately involve investigation.

One of the prime concerns would be if you sold your own merchandise at a certain price. For example, $5 per case of cabbage, and then you had some consigned cabbage later in the day. Perhaps you could get $6 per case for this cabbage, as the demand got stronger. It would be discriminatory to sell the farmer's cabbage for a higher price than for what you sold your own. Because of this, it would be unfair to the farmer who gave me his merchandise to sell to the best of my ability.

Section 4, I could not concur with the complaints filed by Mr. X. When someone files a complaint against a firm, the firm has the right to know his accuser.

Section 5, anyone filing a complaint against a firm with a finding of no prompt payment should not be allowed access to the firm records every 3 months for a period of 2 years. This ruling makes absolutely no sense. A firm would be obliged to increase its office staff which in turn would slow down the business and cause unnecessary increases in overhead.

Furthermore, it would require PACA to hire over 300 additional people to process, investigate and resolve these claims, which would add to the cost of a company's PACA license by five or six times. The ones most hurt by this process would again be the small man. Slow pay is an individual responsibility. An attempt to force an industry to adopt a 10-day period or else at a nationwide level, could have tragic repercussions.

In conclusion, PACA evolved as a means to eliminate unfair practices. To this end, it has been extremely successful. This has been because the law has always provided that buyer and seller could

make whatever contract they wanted to. PACA only came into the picture when a question arose as to whether someone was doing what they agreed to do.

It now appears that some individuals would prefer that it become a sophisticated collection agency, protecting sales to people who cannot or do not wish to pay for their produce.

I wish to thank this committee for the opportunity to present my views here today.

Mr. VIGORITO. Thank you for your presentation here today. Mrs. Heckler, do you have any questions?

Mrs. HECKLER. Yes. Mr. Tavilla, I want to welcome you. You happen to be the first witness from Massachusetts that we have had since I have been on this committee. It is a very rare experience that I speak with a witness who happens to come from my own State. I certainly can see why you advocate that the accuser be known and I think that many of the statements in your presentation are valid and I think only simple justice.

I am very interested in this whole question of the process of the farm to retail procedures, the chain of delivery for all commodities, and all goods in the agricultural sector.

I want to hasten to add that I am very much in favor of the profit motive. I believe in free enterprise and I believe everyone should make a profit. I was a little horrified to find out however that the difference between the farmer's return and the consumer cost amounts to a 100 percent markup. That goes beyond what I consider a reasonable profit. The difficult thing is to try to track down where the bulge in cost occurs in the whole system.

I wonder if you can help me with this? Since I have been on the Agriculture Committee, I have spoken with many farmers. I just spoke with a group of farmers from California who told me they produce lettuce at 2 cents a head and we all know what the price is in the supermarkets in Massachusetts.

Can you enlighten me as to where the enormous profit is going? What is causing this? And what is the procedure whereby you as the broker determine what you are going to pay for a truckload or trailerload of fresh goods?

Mr. TAVILLA. Our whole industry is pretty much based on supply and demand. I am a grower, I am a broker.

Mrs. HECKLER. May I ask what you grow?

Mr. TAVILLA. I grow tomatoes. I grew potatoes in Maine for 9 years and I switched to tomato farming in Florida. We have two brokerage offices, one in San Francisco and one in Homestead, Fla. We have produce terminals that we sell from in Miami and in Boston. And I am also involved in a retail operation in West Athens. So I pretty much go down the line and I think I have access to a lot of this information.

I don't quite agree with a hundred percent markup. Maybe from the price a farmer gets, like the 2 cents a head, which is kind of low. In California, I don't think they sell anything for under 8 cents a head for lettuce. But I keep hearing about all the middleman profits. Usually it costs more to get the lettuce from the west coast to the east coast per head then the actual lettuce cost before it even hits a terminal.

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Mrs. HECKLER. Well, let's talk about some other commodity then where the transportation costs are not so high.

Mr. TAVILLA. If you are talking about potatoes from the State of Maine, for instance, there are two bases for prices, one is the cash markup for supply and demand and the other is the commodities exchange that the potatoes are sold on. If that is very high, the farmers are a little reluctant to sell. If that is off, they all seem to want to sell at one time.

So, usually, from a supply and demand, we can usually establish a price. We know if it is $8 a hundred today it might be $8.25 a hundredweight tomorrow or $7.75. It goes along with how the movement is. The Government report comes out on the 10th of the month with what is left on hand and there are other factors that determine the ups or the downs.

Mrs. HECKLER. May I ask you something? You have a terminal in Chelsea, is that right? Chelsea, Mass.?

Mr. TAVILLA. Right.

Mrs. HECKLER. When does it open? How many people will be out there? What is the byplay? What is the exchange between the farmer and your representative who is going to decide what he is going to pay for a truckload of whatever?

Mr. TAVILLA. We bring produce into our terminal. At 5 o'clock the gates are open to the buying public and they come around and they shop at different places and ask prices for produce and

Mrs. HECKLER. Who are the buying public?

Mr. TAVILLA. These are supermarket chains, roadside stands, Government institutions, purveyors to hotels and restaurants, a combination of buyers. And they will walk around the market and get the best product for the best price for that day. And there again we have a market report that's put out by the Government as to what the sales were the previous day and this is a guide for them, or they know just by——

Mrs. HECKLER. Is this published some place?

Mr. TAVILLA. Yes. It is published right in the Chelsea area, a daily sheet from the market news service.

Mrs. HECKLER. The news service, who publishes that?
Mr. TAVILLA. That's from the Department of Agriculture.

Mrs. HECKLER. And this lists the prior price in our region or other regions or nationally or what?

in

Mr. TAVILLA. Well, basically, it gives the prices on the terminals the previous day. Sometimes it will also give what prices are on an FOB basis in different shipping areas, maybe out of Florida or out of California.

Mrs. HECKLER. So there is really very little bidding. I've heard so much about the bidding on carloads, et cetera. Where does the bidding procedure come in? If your price is pretty much what you've seen the day before, received the day before, then what is the area in which you can perhaps get more for the products?

Mr. TAVILLA. Well, for instance, somebody may have an order to export some potatoes on a large order and he may call up to Maine and try to buy these potatoes. And if a man wants to move a large block of potatoes, maybe 10 or 20 carloads or truckloads, he'll negotiate a price with them. It may be a little higher than the day before if

there is a great demand. If there's not much demand, a broker may come and say, for 25 cents a hundredweight less than yesterday, I can place five loads of potatoes in different areas. Do you want to take the order?

And depending on his supply on hand and his workload for his crews, he may say yes or he may say no or he may say-I'll take two of them. It's back and forth daily negotiation.

Mrs. HECKLER. How many do you have representing your interest there?

Mr. TAVILLA. In Boston, we have about five salesmen.

Mrs. HECKLER. Five salesmen?

Mr. TAVILLA. In our Boston office.

Mrs. HECKLER. And how many buyers would there be?

Mr. TAVILLA. During the day, there may be 200 to 300 buyers come in each day.

Mrs. HECKLER. Do you service all of Boston or are there other terminals in Boston?

Mr. TAVILLA. The New England Produce Center and the Boston Market Terminal really serve most of New England except the part that is close to New York City. And the maritimes, part of the Canadian section.

Mrs. HECKLER. And what is your relationship with other brokers along the way? One of the men who just testified today said that the products or commodities could go through 10 hands. What is your relationship with those at an earlier stage in the process?

Mr. TAVILLA. Well the 10 hands is an unusual case. But it's not unlikely that it can happen to go through two or three hands. A broker may have five loads of potatoes that he has picked up at one price and may have a chance to sell them at a little higher price to another broker who has just received a large order and can't get it filled. And that may mean going to a second hand and then on to the terminal.

Now we sell loads of potatoes for farmers directly to people who can use full loads and then we bring in trailerloads to our terminal to people who want than full truckloads. And we try to make a markup that will keep us going. On the loads that are sold directly, we try to make a brokerage fee on it or a small markup equivalent to a broker's fee.

Mrs. HECKLER. I happen to know a family in which the father was in the food brokerage business. When he passed away suddenly, the oldest daughter took over the business. She was able to maintain it and they were making a profit. But it was a very low profit. When the oldest son was old enough to take over the business, he did. And he became a millionaire within 2 to 3 years. How did this happen? What is going on in this marketplace? What are the opportunities that one can have?

Mr. TAVILLA. This business will always give you a good living. I left school when I was 14 as the second oldest of 10 children to work for my dad. That was 37 years ago. I'm not a millionaire. I have no complaints. Working hard will get you there. It's a very good business and throughout all the bad spots of the ups and downs on the stock market, people may not want to trade their car in or buy a new suit, and if they can't afford beans or broccoli they can always buy some