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(The present Rubber Order R-1 insures the use of chemical rubber only by restricting the use of natural rubber. If a "Rubber Act" becomes law, containing authority to require the use of chemical rubber but not of natural rubber, Rubber Order R-1 would have to be revised. This would require consultation with technical committees from industry and could hardly be done adequately between now and March 31. It is not now foreseen that there will be need to control use of natural rubber, except to tide over the period of time required to redraft Order R-1. The authority to control natural rubber in this interim, however, would contribute to a proper revision of Order R-1.

It is also necessary to include authority covering rubber products, to insure against any possible interpretation of the law as not authorizing specifications controls in products manufactured of rubber.

It is noted that the Rubber Manufacturers Association statement of February 24, 1948, proposes deletion of reference to rubber "products," on the ground that "retention of such language would permit the Government to allocate end products or control their inventories in some future situation for purposes other than intended by this act."

It is believed that the opening phrase of this section, "To effectuate the policies set forth in section 2 of this act" adequately limits the exercise of the authority by the President.

Also, note suggested change in page 3, line 10, below.

(10) Page 2, line 21: Strike "of synthetic" and insert "over natural and chemical".

(11) Page 2, line 22: Strike the second "and" and insert "or".

(12) Page 2, line 22: Change the semicolon to a comma, and add "notwithstanding any changes in the estimated supply of natural rubber or chemical rubber";

(Under the Second War Powers Act, title III, the President was given the power to allocate (which includes specification and inventory control) only upon his finding that the material was in short supply. While there is no such limitation on the use of the world "allocation" in the present bill, it seems desirable to negate the suggestion that allocation, specification, and inventory control powers could be used only in the event of short supply.)

(13) Page 3, lines 1-2: Strike "in transportation items such as tires, camelback, and flaps,"

(In the event of a substantial decline in tire production, it might be necessary, in order to maintain the required use of chemical rubber, to require its use in products other than the so-called transportation items. While there is no immediate prospect of this, it is believed that it would be unwise policy to be limited to "transportation" items.)

(14) Page 3, line 4: Strike "in pneumatic inner tubes".

(Same reasoning as above.)

(15) Page 3, lines 4-7: Strike "The synthetic rubber used to satisfy the mandatory consumption provided by (a) and (b) of this section shall be produced by the Government or for the Government account."

(This is transferred to sec. 5, which would seem to be the more logical place to include this provision.)

(16) Page 3, line 10: Insert after "rubber in" the words "the minimum".

(Additional insurance against regulations requiring consumption in excess of the quantities necessary to carry out the policies of the act.)

(17) Page 3, lines 10-13: (It is noted that no minimum quantities-for example, one-third of the total capacity quantities specified in sec. 5—are included. As a matter of administrative practicality, the inclusion of such minima (as was done in H. R. 5317, sec. 3, p. 3, 1.21-25) would definitely be preferable.) (18) Page 3, line 20: Strike "of" and insert "issued under".

(19) Page 4, line 6: Use of word "rated" apparently inadvertent.

(20) Page 4, lines 11-13: Strike all of subsection (c), for the reasons stated in the RMA statement. Insert in lieu thereof: "(c) The chemical rubber used to satisfy the mandatory consumption provided in section 3 of this act shall be produced by the Government or for the Government account".

(This is the transfer of the sentence presently in sec. 3, referred to above.) (21) Page 5, line 9: (It is noted that the RMA statement recommends changing "may" to "shall". We do not agree with this recommendation. Expense in connection with research and development can be and normally is a proper item of cost in establishing the price for any product. Should the Congress appropriate funds specifically for this purpose, however, the present wording would permit the paying of such expenditures from such appropriated funds.)

(22) Page 6, lines 6-8: Strike "including the component materials thereof during the period of stock piling of natural rubber".

(We concur in the RMA statement in this respect.)

(23) Page 6, line 23: Strike "section 9 of this" and insert "this or any other". (24) Page 7, line 2: Strike “(a)" and insert “(1)”.

(25) Page 7, line 6-13: Strike all of subparagraph (b) and insert in lieu thereof: "(2) lease, for a period not exceeding one year, Government-owned rubber-producing facilities for private purposes if such lease contains adequate provisions for the recapture thereof for the purposes set forth in section 7 (b) of this Act and if such lease prohibits the production in the leased facilities of chemical rubber or component materials for use in the production of chemical rubber for private purposes;".

(The purpose of this change is to provide in this sec. 7, which is entitled "Operation of Rubber Producing Facilities by the United States Government," only for leasing which relates to operations, and to transfer to the section pertaining to disposal (9), provision for leasing which is, in fact, a disposal. The above paragraph also prohibits short-term (less than 1 year) leasing for speculative purposes.)

(26) Page 7, line 14: Strike "(c)" and insert “(3”.
(27) Page 7, line 19: Strike "(d)" and insert "(4)".

(28) Page 7, line 22, to page 8, line 7: Strike all of paragraph (e) and insert the following:

"(e) The price at which chemical rubber and component materials are sold pursuant to section 7 (b) of this Act shall be determined in accordance with generally accepted commercial accounting practices so as to return the entire cost of manufacture and distribution without loss to the United States: Provided, however, That the cost of placing facilities in stand-by condition and maintaining such facilities in adequate stand-by condition shall not be included as an item of cost in the determination of the prices for which chemical rubbers and component materials are sold. The department, agency, officer, Government corporation, or instrumentality of the United States designated pursuant to section 7 (a) to make such sales shall make an annual report of operation of Government-owned facilities to the President and the Congress disclosing the accounting methods used to establish its selling price for chemical rubbers." (This suggested change is intended to clarify the pricing policy, and to provide for separate pricing determination of distinct types of chemical rubber. We most emphatically cannot concur in the RMA recommendation regarding this paragraph. It would be completely impractical to provide for separate cost accounting for each of the four hundred-odd subtypes of chemical rubber. We believe that the above suggested phraseology provides the proper basis for pricing on a sound business basis, and at the same time does not attempt to incorporate into legislation details of cost-accounting practice which are properly an administrative matter. The suggested change also would provide for an annual, rather than a semianual report. In the interest of efficiency and economy in Government it is highly desirable to reduce the frequency of statutory reports.)

(29) Page 9, line 4: Strike "shall" and insert "may".

(This change is intended to permit but not require payment of such expenses from appropriated funds. The matter of exclusion of such costs from the price of chemical rubber is covered in the suggested new par. 7 (e) above. It should be noted, however, that it might be appropriate to charge as a cost of chemical rubber the expenses of reactivating facilities for regular production purposes.)

(30) Page 9, line 16: Insert after "facilities" the words "other than those authorized to be disposed of pursuant to section 9 (c) of this Act".

(31) Page 9, line 18: Add a new sentence after line 18, as follows: "On or before January 1, 1950, the President shall recommend to the Congress legislation with respect to the disposal of the Government-owned rubber-producing facilities other than those authorized to be sold, leased, or otherwise disposed of under the provisions of section 9 (c) of this Act, together with such other recommendations as he deems desirable and appropriate."

(This new paragraph is desirable in order to provide for the initiation of legislative consideration of specific disposal authorization of "basic block" plants, as well as other phases of the legislation which should be considered prior to the termination date of the act.)

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(32) Page 9, line 18: Insert after line 18 the following new paragraph:

(b) Notwithstanding the provisions of this or any other Act, the department, agency, officer, Government corporation, or instrumentality of the United States designated by the President pursuant to section 7 (a) of this Act may lease for the production of chemical rubber for private purposes, for a period of more than one year but not extending beyond the termination date of this Act, Governmentowned rubber-producing facilities not being employed in connection with Government operations, if such lease contains adequate provisions for the recapture thereof for the purposes set forth in section 7 (b) of this Act, and if such lease provides that any chemical rubber or component material as may be produced by the leased facilities shall not be used to satisfy mandatory requirements established under section 3;".

(This is a slightly amended version of the paragraph authorizing leases which are in fact a disposal, rather than a part of normal operations, transferred from sec. 7, as noted above in comment 25.)

(33) Page 9, line 19: Strike "(b)" and insert "(c)".

(34) Page 9, line 19: Strike "section 9 (a)," and insert "this or any other Act,”. (35) Page 9, line 24: Insert a comma after the word "facility", and insert the words, "including such facilities as have been declared surplus pursuant to the Surplus Property Act of 1944, as amended,".

(36) Page 10, line 1: Insert after "Act" the words "upon such terms and conditions as it may determine,".

(37) Page 10, lines 5-15: Change the colon after "Act" to a period, and strike the remainder of the paragraph.

(In light of the present and prospective status of neoprene rubber, it is not believed that these limiting provisions are necessary to national security. On the other hand, if it should prove feasible and desirable to dispose of these or any other plants not in the "basic block" with some form of the "national security clause" attached, at a reasonable cost (sacrifice of return) to the Government, the disposal agency should have the authority to attach such restrictions. The language of this section, if revised as suggested above, would provide sufficient flexibility to permit such restricted disposal.)

(38) Page 11, lines 7-9: Strike "The President is authorized to cause a corporation to be organized for the purpose of producing and selling synthetic rubber." and insert the following:

"The President is authorized to cause a corporation to be organized for the purpose of producing and selling chemical rubber. Any such corporation so organized shall be authorized, subject to the Government Corporation Control Act and to pertinent provisions of law affecting Government corporations, to sue and be sued, to acquire, hold, and dispose of property, to use its revenues, to determine the character of and necessity for its obligations and expenditures and the manner in which they shall be incurred, allowed and paid, and to exercise such other powers as may be necessary or appropriate to carry out the purposes of the corporation. The Secretary of the Treasury is authorized, out of appropriations made for that purpose, to subscribe to the capital stock of such corporation."

(This sentence is necessary under the provisions of the Government Corporation Control Act to give the corporate powers required, so as to make possible the implementation of the first sentence of this section 10 (c), if and when the President determines to consolidate the functions and if such consolidation involves the transfer of the business-type functions of producing and selling chemical rubber from the RFC to a department of the Government or other agency of the Government.)

(39) Page 12, line 5: Strike "a seminannual" and insert "an annual".

(In the interests of efficiency in Government, it is highly desirable to reduce the number of statutory reports to the essential minimum.)

(40) Page 12, line 21: Insert "and" after the word "program".

(41) Page 12, line 22; Insert after "Act" the number "(1)" and indent as a subparagraph.

(42) Page 13, line 2: Change the period to a comma and insert after line 2 the following:

"(2) make available to and preserve for the Government, and others, information, and unrestricted, unconditional patent licenses and immunities under the patents, now or hereafter covered by or exchanged under such pools or agreements or developed under operating agreements or arrangements with the Government; "(3) maintain and encourage the competitive development of technology for the advancement of the chemical rubber industry."

(These safeguards are essential (a) for the protection of the Government's patent rights, and (b) to provide maximum freedom to others to enter the field of chemical rubber in the interest of stimulating the competitive development of new and improved types of chemical rubber. This also assures that the Government may make available to the public the benefits which accrued from the wartime agreements in the rubber field.)

(43) Page 13, lines 3-9: No change suggested but it is understood comment is desired.

(Sec. 11 (b) assures the operating agency the benefits of the act of 1910, as amended. This act, in brief, permits the United States to use an invention without license from the owner, and the remedy of such owner is by suit against the United States in the Court of Claims for the recovery of his reasonable and entire compensation for such use and manufacture. Thereby Government's freedom from injunction is extended unquestionably to the operating agency.)

(44) Page 16, lines 18-19: (The RMA statement suggests elimination of this sentence. We disagree with this suggestion, inasmuch as this language is customarily used for the protection of the United States in court proceedings.) (45) Page 17, line 10: Strike "of" and insert "to".

(46) Page 19, line 7: After "or not, and", insert "except as used in section 13”. (47) Page 19, line 18: Strike "or agency" and insert "agency, officer, Government corporation or instrumentality of the United States".

PART II

All of the suggestions in part I are equally applicable to part II, except the comments numbered as follows: 15, 20, 30 to 37, inclusive.

In lieu thereof, the following suggestions are offered:

(48) Page 3, lines 4-7: Strike "The synthetic rubber used to satisfy the mandatory consumption provided by (a) and (b) of this section shall be produced by the Government or for the Government account."

(Under this approach, which contemplates setting up a continuing disposal procedure, it would not be practical or appropriate to exclude the purchasers of Government-owned plants from participating in the sale of rubber for mandatory

use.)

(49) Page 9, line 9, to page 10, line 15: Strike all of section 9 and insert in lieu thereof the following:

"SEC. 9. (a) Such department, agency, officer, Government corporation, or instrumentality of the United States, whether or not existing at the date of enactment of this Act, as may be designated by the President, pursuant to section 7 (a) of this Act, is authorized to dispose, in accordance with this section 9, by sale or lease, of rubber-producing facilities owned by the Government, including such facilities as have been declared surplus pursuant to the Surplus Property Act of 1944, as amended.

"(b) Any Government-owned rubber-producing facilities not designated under section 5 (d) of this Act as necessary to maintain the capacities specified in section 5 (a) of this Act may be sold, leased, or otherwise disposed of to private persons upon such terms and conditions as the department, agency, officer, Government corporation, or instrumentality of the United States designated by the President pursuant to section 7 (a) may determine.

"(c) Any Government-owned rubber-producing facilities designated under section 5 (d) of this Act as necessary to maintain the capacities specified in section 5 (a) of this Act may be sold, leased, or otherwise disposed of to private persons, subject to the provisions of this and the succeeding subsections of this section 9. The department, agency, officer, Government corporation, or instrumentality of the United States designated by the President, pursuant to section 7 (a) of this Act, shall prepare a disposal plan for any such facilities for consideration by the President and, upon approval, submission by the President to the Congress. Any such plan shall contain a general statement of the conditions of the proposed disposal, and a declaration that such disposal is consistent with the policies of this Act.

"(d) No proposal for the disposition of Government-owned rubber-producing facilities, included in section 9 (c) of this Act, shall be submitted unless it shall provide adequate safeguards for national security and consumers of chemical rubber, including, but not limited to:

"(1) A recommendation by the President stating that the proposed disposition, by sale or lease, is consistent with the requirements of national security and common defense;

"(2) A condition of sale or lease that the facility sold or leased may be required to produce a specified quantity of chemical rubber, or the component materials thereof, to the extent needed to meet the requirements for the production and consumption of chemical rubber as determined by the President pursuant to section 3 of this Act.

"(3) A condition of sale or lease providing for the sale and availability of products of the facility on a fair and nondiscriminatory basis to all persons.

"(4) A condition that the terms of sale or lease of any such facility shall include such terms, conditions, restrictions, and reservations as will be adequate to assure its continued availability in a national emergency: Provided, That the terms of any such sale or lease shall provide that such facility shall be maintained so that it shall be physically capable of producing the product or products, or product or products similar thereto, which such facility was capable of producing at the time of the sale or lease, within one hundred and twenty days after the declaration of a national emergency by the President. "(e) Any sale or lease of a rubber-producing facility shall be made so as to encourage, in every way possible consistent with the objectives of this Act, the establishment of free, independent and competitive private enterprise in the chemical rubber-producing industry, to discourage monopolistic practices, and to foster the development of new and competitive technology and multiple, competitive sources of supply.

"(f) Any such proposal for disposition transmitted to the Congress shall bear an identifying number. The delivery to both Houses shall be on the same day and shall be made to each House while in session. Any such proposal so submitted to the Congress shall become effective upon the expiration of the first period of thirty calendar days of continuous session of the Congress, following the day upon which the plan was transmitted to it. The continuity of session shall be considered as broken only by an adjournment of the Congress sine die. The computation of the thirty-day period shall be determined as provided by title I, section 6 (b) (2) of Public Law 263, Seventy-ninth Congress (59 Stat. 613).

(50) Page 19, lines 24-25: Insert a period after "1948" and strike the remainder of this section.

Senator BRICKER. I wonder if you gentlemen will all come up: Admiral Braine, Mr. Hadlock, and Mr. Kennedy. Please come up around the table here, so we may discuss this more or less informally. STATEMENTS OF H. B. McCOY, DIRECTOR, OFFICE OF MATERIALS DISTRIBUTION, DEPARTMENT OF COMMERCE; EARL W. GLEN, CHIEF, RUBBER DIVISION, OFFICE OF MATERIALS DISTRIBUTION, DEPARTMENT OF COMMERCE; JOHN CASWELL, ASSISTANT TO THE CHIEF, RUBBER DIVISION, OFFICE OF MATERIALS DISTRIBUTION, DEPARTMENT OF COMMERCE; EVERETT G. HOLT, RUBBER ADVISER, DEPARTMENT OF COMMERCE; ADMIRAL C. E. BRAINE, MUNITIONS BOARD; G. B. HADLOCK, OFFICE OF RUBBER RESERVE; DONALD B. KENNEDY, STATE DEPARTMENT; AND L. F. WALSTON, CHIEF COUNSEL, OFFICE OF RUBBER RESERVE, RECONSTRUCTION FINANCE CORPORATION, WASHINGTON, D. C.

Mr. McCoy. May I offer a statement now, Mr. Chairman?
Senator BRICKER. Yes, sir.

Mr. McCoy. My name is H. B. McCoy. I am the Director of the Office of Materials Distribution, which administers controls over rubber as authorized in Public Law 24. I should like to emphasize briefly the last point in Mr. Steelman's letter, with respect to the desirability of long-term in preference to interim or stopgap legislation. Such legislation should, in our opinion, extend over a sufficient time period to

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