A-66418, NOVEMBER 21, 1935, 15 COMP. GEN. 429

A-66418: Nov 21, 1935

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ARE NOT AVAILABLE FOR PAYMENTS OF EXPENSES. AS FOLLOWS: IT IS PROPOSED TO PUT INTO EFFECT A PROGRAM TO OPERATE UNTIL THE END OF THE PRESENT FISCAL YEAR (JUNE 30. THIS PROGRAM IS PROPOSED PURSUANT TO THE PROVISIONS OF SECTION 32. WHICH READS AS FOLLOWS: "THERE IS HEREBY APPROPRIATED FOR EACH FISCAL YEAR BEGINNING WITH THE FISCAL YEAR ENDING JUNE 30. IN SUCH AMOUNTS AS THE SECRETARY OF AGRICULTURE FINDS WILL TEND TO INCREASE THE EXPORTATION OF AGRICULTURAL COMMODITIES AND PRODUCTS THEREOF. THAT NO PART OF THE FUNDS APPROPRIATED BY THIS SECTION SHALL BE EXPENDED PURSUANT TO CLAUSE (3) HEREOF UNLESS THE SECRETARY OF AGRICULTURE DETERMINES THAT THE EXPENDITURE OF SUCH PART PURSUANT TO CLAUSES (1) AND (2) IS NOT NECESSARY TO EFFECTUATE THE PURPOSES OF THIS SECTION: PROVIDED FURTHER.

A-66418, NOVEMBER 21, 1935, 15 COMP. GEN. 429

PRUNE EXPORTATION AND DIVERSION PLAN - AGRICULTURAL ADJUSTMENT ADMINISTRATION FUNDS MADE AVAILABLE BY SECTION 32 OF THE ACT OF AUGUST 24, 1935, 49 STAT. 774, FOR PAYMENT OF BENEFITS AND INDEMNITIES IN CONNECTION WITH A PROPOSED PLAN FOR EXPORTATION AND DIVERSION OF SUBSTANDARD PRUNES FROM THE NORMAL CHANNELS OF TRADE, ARE NOT AVAILABLE FOR PAYMENTS OF EXPENSES, SUCH AS ADMINISTRATIVE AND OVERHEAD COSTS OF OPERATION, OF A PRIVATE CORPORATION ORGANIZED FOR THAT PURPOSE.

COMPTROLLER GENERAL MCCARL TO THE SECRETARY OF AGRICULTURE, NOVEMBER 21, 1935:

CONSIDERATION HAS BEEN GIVEN YOUR LETTER OF OCTOBER 14, 1935, AS FOLLOWS:

IT IS PROPOSED TO PUT INTO EFFECT A PROGRAM TO OPERATE UNTIL THE END OF THE PRESENT FISCAL YEAR (JUNE 30, 1936), TO ENCOURAGE THE EXPORTATION AND DOMESTIC CONSUMPTION OF PRUNES AND PRUNE PRODUCTS. THIS PROGRAM IS PROPOSED PURSUANT TO THE PROVISIONS OF SECTION 32, PUBLIC, NUMBER 320, 74TH CONGRESS, APPROVED AUGUST 24, 1935, WHICH READS AS FOLLOWS:

"THERE IS HEREBY APPROPRIATED FOR EACH FISCAL YEAR BEGINNING WITH THE FISCAL YEAR ENDING JUNE 30, 1936, AN AMOUNT EQUAL TO 30 PERCENTUM OF THE GROSS RECEIPTS FROM DUTIES COLLECTED UNDER THE CUSTOMS LAWS DURING THE PERIOD JANUARY 1 TO DECEMBER 31, BOTH INCLUSIVE, PRECEDING THE BEGINNING OF EACH SUCH FISCAL YEAR. SUCH SUMS SHALL BE MAINTAINED IN A SEPARATE FUND AND SHALL BE USED BY THE SECRETARY OF AGRICULTURE ONLY TO (1) ENCOURAGE THE EXPORTATION OF AGRICULTURAL COMMODITIES AND PRODUCTS THEREOF BY THE PAYMENT OF BENEFITS IN CONNECTION WITH THE EXPORTATION THEREOF OR OF INDEMNITIES FOR LOSSES INCURRED IN CONNECTION WITH SUCH EXPORTATION OR BY PAYMENTS TO PRODUCERS IN CONNECTION WITH THE PRODUCTION OF THAT PART OF ANY AGRICULTURAL COMMODITY REQUIRED FOR DOMESTIC CONSUMPTION; (2) ENCOURAGE THE DOMESTIC CONSUMPTION OF SUCH COMMODITIES OR PRODUCTS BY DIVERTING THEM, BY THE PAYMENT OF BENEFITS OR INDEMNITIES OR BY OTHER MEANS, FROM THE NORMAL CHANNELS OF TRADE AND COMMERCE; AND (3) FINANCE ADJUSTMENTS IN THE QUANTITY PLANTED OR PRODUCED FOR MARKET OF AGRICULTURAL COMMODITIES. THE AMOUNTS APPROPRIATED UNDER THIS SECTION SHALL BE EXPENDED FOR SUCH OF THE ABOVE-SPECIFIED PURPOSES, AND AT SUCH TIMES, IN SUCH MANNER, AND IN SUCH AMOUNTS AS THE SECRETARY OF AGRICULTURE FINDS WILL TEND TO INCREASE THE EXPORTATION OF AGRICULTURAL COMMODITIES AND PRODUCTS THEREOF, AND INCREASE THE DOMESTIC CONSUMPTION OF AGRICULTURAL COMMODITIES AND PRODUCTS THEREOF: PROVIDED, THAT NO PART OF THE FUNDS APPROPRIATED BY THIS SECTION SHALL BE EXPENDED PURSUANT TO CLAUSE (3) HEREOF UNLESS THE SECRETARY OF AGRICULTURE DETERMINES THAT THE EXPENDITURE OF SUCH PART PURSUANT TO CLAUSES (1) AND (2) IS NOT NECESSARY TO EFFECTUATE THE PURPOSES OF THIS SECTION: PROVIDED FURTHER, THAT NO PART OF THE FUNDS APPROPRIATED BY THIS SECTION SHALL BE USED FOR THE PAYMENT OF BENEFITS IN CONNECTION WITH THE EXPORTATION OF UNMANUFACTURED COTTON.'

IN THE UNITED STATES THE COMMERCIAL PRODUCTION OF PRUNES IS CONFINED TO THE PACIFIC COAST STATES, WITH THE MAJOR PRODUCTION IN THE STATE OF CALIFORNIA. A NORMAL CROP, IN TERMS OF DRIED TONNAGE, IS ABOUT 200,000 TONS. ALL BUT A NEGLIGIBLE PART OF THIS CROP IS NORMALLY MARKETED AS NATURAL DRIED PRUNES.

DRIED PRUNES ARE A STAPLE FRUIT FOOD WIDELY DISTRIBUTED IN DOMESTIC AND FOREIGN MARKETS. UNTIL THE CROP YEAR OF 1934-35, APPROXIMATELY 50 PERCENT OF THE TOTAL DOMESTIC PRODUCTION WAS EXPORTED. THIS FOREIGN MARKET, HOWEVER, WAS CONSIDERABLY CURTAILED, BEGINNING IN 1934, WITH THE MOST SEVERE CURTAILMENT RESULTING FROM EXCHANGE RESTRICTIONS, PARTICULARLY IN THE GERMAN MARKET. DURING THE FIVE-YEAR PERIOD OF 1929-1933, INCLUSIVE, THE AVERAGE ANNUAL SHIPMENTS TO GERMANY WERE APPROXIMATELY 28,000 TONS. DURING THE CROP YEAR JUST PAST, THE TOTAL SHIPMENTS INTO GERMANY WERE LESS THAN 5,000 TONS. THIS DECLINE IN THE GERMAN AND OTHER FOREIGN MARKETS HAS THROWN ON THE DOMESTIC TRADE A LARGE QUANTITY OF SUBSTANDARD AND SMALL- SIZE PRUNES WHICH WERE FORMERLY MARKETED ALMOST EXCLUSIVELY ABROAD. THE EFFECT OF ATTEMPTING TO MARKET THESE SUPPLIES ON THE DOMESTIC MARKET HAS BEEN TO DEPRESS THE PRICES OF ALL CLASSES OF PRUNES MARKETED, BOTH AT HOME AND ABROAD. PRICES BEING PAID TO GROWERS CURRENTLY ARE ABOUT 60 PERCENT BELOW THE 1910-14 PARITY PRICE LEVEL AS DEFINED IN THE AGRICULTURAL ADJUSTMENT ACT.

THERE ARE AT THE PRESENT TIME BETWEEN 20,000 AND 25,000 TONS OF SUBSTANDARD PRUNES AVAILABLE FROM THE 1934 AND 1935 CROPS. THE SUBSTANDARD PRUNES FROM THE 1934 CROP ARE BEING HELD FOR THE ACCOUNT OF PRUNE GROWERS BY THE PRUNE MARKETING AGREEMENT CONTROL BOARD ESTABLISHED PURSUANT TO MARKETING AGREEMENT NO. 53 AND LICENSE NO. 87, UNDER THE AGRICULTURAL ADJUSTMENT ACT. PRACTICALLY ALL OF THE SUBSTANDARD PRUNES FROM THE 1935 CROP ARE STILL IN THE HANDS OF PRUNE GROWERS, EXCEPT FOR SMALL QUANTITIES WHICH HAVE BEEN PURCHASED BY PACKERS. NO MARKETING AGREEMENT IS IN EFFECT FOR THE 1935 CROP. UNLESS THIS LARGE QUANTITY OF SUBSTANDARD PRUNES CAN BE PERMANENTLY REMOVED FROM THE NORMAL CHANNELS OF TRADE IN PACKED PRUNES AND DIVERTED INTO EXPORT AND BYPRODUCT CHANNELS, THE EFFECT OF THE MARKETING OF THESE SUBSTANDARD PRUNES WILL BE TO DEPRESS SUBSTANTIALLY THE PRICES RECEIVED BY GROWERS FOR ALL OF THEIR 1935 CROP PRUNES. ON THE OTHER HAND, IF THESE SUBSTANDARD PRUNES ARE REMOVED FROM THE NORMAL CHANNELS OF TRADE IN PACKED PRUNES IT WILL NOT ONLY IMPROVE THE MARKET FOR 1935 STANDARD PRUNES BUT IT WILL ALSO ENCOURAGE THE DOMESTIC CONSUMPTION OF PRUNES BY MAINTAINING THE QUALITY OF PRUNES MARKETED IN THE NORMAL CHANNELS OF TRADE.

IN ORDER TO ENCOURAGE THE EXPORTATION AND THE DOMESTIC CONSUMPTION OF PRUNES IN ACCORDANCE WITH THE PURPOSES OF CLAUSES 1 AND 2 OF SECTION 32 OF PUBLIC, NO. 320, QUOTED ABOVE, REPRESENTATIVES OF THE PRUNE GROWERS OF THE PACIFIC COAST HAVE TAKEN STEPS TO ORGANIZE THE PACIFIC PRUNE PRODUCTS ASSOCIATION, A NONPROFIT CALIFORNIA CORPORATION. THIS ASSOCIATION WILL PURCHASE SUBSTANDARD PRUNES FROM THE 1934 AND 1935 CROPS FOR THE PURPOSE OF DIVERTING SUCH PRUNES INTO EXPORT AND BYPRODUCT CHANNELS IN A MANNER WHICH WILL PREVENT THEIR BEING USED IN THE NORMAL CHANNELS OF TRADE FOR PACKED PRUNES. IT IS EXPECTED THAT THESE SUBSTANDARD PRUNES WILL BE DISPOSED OF IN APPROXIMATELY THE FOLLOWING MANNER:

1. TWENTY-FIVE TO THIRTY-FIVE PERCENT WILL BE EXPORTED IN A MACERATED FORM WHICH WILL PREVENT EVENTUAL SALE IN THE REGULAR CHANNELS OF TRADE AS PACKED PRUNES.

2. ABOUT TWENTY-FIVE PERCENT WILL BE SOLD FOR CONVERSION INTO ALCOHOL.

3. ABOUT TWENTY TO TWENTY-FIVE PERCENT WILL BE DIVERTED INTO THE MANUFACTURE OF MIXED LIVESTOCK FEEDS.

4. THE REMAINDER WILL BE SOLD TO DOMESTIC PACKERS WHO ENTER INTO CONTRACTS TO DIVERT THEM INTO SUCH BYPRODUCTS AS PRUNE CONCENTRATE, PITTED PRUNES, PRUNE BRANDY, PRUNE JUICE, PRUNE BUTTER, AND A NUMBER OF OTHER MISCELLANEOUS OUTLETS WHICH ARE RELATIVELY INSIGNIFICANT AT THE PRESENT TIME BUT WHICH PROMISE TO BECOME IMPORTANT OUTLETS FOR SUBSTANDARD PRUNES.

IT IS CONTEMPLATED THAT THE PACIFIC PRUNE PRODUCTS ASSOCIATION WILL PURCHASE SUBSTANDARD PRUNES FROM GROWERS AND OTHERS FROM TIME TO TIME ON THE BASIS OF SCHEDULES OF PRICES APPROVED BY THE SECRETARY OF AGRICULTURE. THESE SCHEDULES OF PRICES WILL REPRESENT THE MINIMUM PRICES FOUND NECESSARY TO DIVERT THESE GRADES OF PRUNES FROM THE NORMAL CHANNELS OF TRADE TO THE ASSOCIATION. SOME PACKERS NOW FOLLOW THE PRACTICE OF MIXING SOME SUBSTANDARD PRUNES WITH STANDARD PRUNES, WITH THE RESULT THAT DEBASED PACKS INJURIOUS TO THE PRUNE INDUSTRY AS A WHOLE ARE SOLD IN COMPETITION WITH PRUNES PACKED EXCLUSIVELY FROM STANDARD PRUNES. IN SUCH INSTANCES, HOWEVER, PACKERS FREQUENTLY PURCHASE THE BETTER GRADES OF SUBSTANDARD PRUNES AT PRICES WHICH ARE NOT COMMENSURATE WITH THE QUALITY OF THE PRODUCT. IN ARRIVING AT A SCHEDULE OF PRICES FOR THE PURCHASE OF SUBSTANDARD PRUNES, HOWEVER, IT WILL BE NECESSARY TO KEEP IN MIND THE NECESSITY OF ATTRACTING TO THE ASSOCIATION PRACTICALLY ALL OF THE SUBSTANDARD PRUNES IN ORDER THAT THEY MAY NOT BE MIXED IN PACKS OF STANDARD PRUNES.

FUNDS FOR SUCH PURCHASES OF SUBSTANDARD PRUNES WILL BE OBTAINED BY THE ASSOCIATION FROM ADVANCES MADE TO THE ASSOCIATION BY THE RECONSTRUCTION FINANCE CORPORATION. AFTER THE PRUNES HAVE BEEN PURCHASED, IT IS CONTEMPLATED THAT THE ASSOCIATION, WITH THE PRIOR APPROVAL OF THE SECRETARY OF AGRICULTURE, WILL MAKE OFFERINGS OF THE VARIOUS GRADES OF SUBSTANDARD PRUNES IN SUCH MANNER AS TO ASSURE ENCOURAGEMENT OF THE EXPORTATION OF THESE PRUNES IN MACERATED FORM OR THE ENCOURAGEMENT OF DOMESTIC CONSUMPTION IN OTHER THAN THE NORMAL CHANNELS OF TRADE. THOSE WHO PURCHASE PRUNES FROM THE ASSOCIATION WILL BE REQUIRED TO ENTER INTO A CONTRACT REQUIRING THAT SUCH PRUNES BE UTILIZED IN SUCH MANNER AS THE SECRETARY FINDS WILL ENCOURAGE THE EXPORTATION OF THE PRUNES OR ENCOURAGE DOMESTIC CONSUMPTION BY DIVERSION FROM THE NORMAL CHANNELS OF TRADE. IS ALSO CONTEMPLATED THAT AT THE TIME SUCH OFFERINGS ARE MADE AND ACCEPTED, THE SECRETARY OF AGRICULTURE WILL ENTER INTO A SPECIFIC AGREEMENT WITH THE ASSOCIATION TO MAKE A PAYMENT TO THE ASSOCIATION EQUIVALENT TO THE DIFFERENCE BETWEEN THE AMOUNT WHICH IT RECEIVES FOR SAID PRUNES AND THE AMOUNT REPRESENTED BY THE COST OF THE PRUNES TO THE ASSOCIATION IN THE FORM OF THE ORIGINAL PURCHASE PRICE AND ACCRUED CHARGES FOR ADMINISTRATION, STORAGE, INSURANCE, TRANSPORTATION, MACERATION, AND OTHER INCIDENTAL HANDLING CHARGES. THE ASSOCIATION WILL THEN UTILIZE THE PROCEEDS FROM THE SALE OF THE PRUNES AND THE PAYMENTS RECEIVED FROM THE SECRETARY OF AGRICULTURE TO REIMBURSE THE RECONSTRUCTION FINANCE CORPORATION FOR FUNDS ADVANCED TO THE ASSOCIATION BY THE RECONSTRUCTION FINANCE CORPORATION.

FOR YOUR INFORMATION, THERE ARE ATTACHED THE FOLLOWING FORMS AND DOCUMENTS, ALL OF WHICH HAVE BEEN DRAFTED WITH A VIEW TO PROVIDING THE MACHINERY NECESSARY TO EFFECTUATE THE DECLARED PURPOSE OF THE PRESENT PROPOSAL:

1. AGREEMENT BETWEEN THE SECRETARY OF AGRICULTURE AND THE PACIFIC PRUNE PRODUCTS ASSOCIATION.

2. ARTICLES OF INCORPORATION OF PACIFIC PRUNE PRODUCTS ASSOCIATION.

3. BYLAWS OF PACIFIC PRUNE PRODUCTS ASSOCIATION.

4. SUBSTANDARD PRUNE PURCHASE CONTRACT.

5. SUBSTANDARD PRUNE SALES CONTRACT.

IN MY OPINION, THIS PROPOSED PROGRAM WILL BE EFFECTIVE IN ENCOURAGING THE EXPORTATION OF SUBSTANDARD PRUNES AND WILL AID THE REESTABLISHMENT OF OUR NORMAL EXPORT TRADE IN STANDARD PRUNES. IN ADDITION, THIS PROGRAM WILL ENCOURAGE THE DOMESTIC CONSUMPTION OF PRUNES BY DIVERTING THE SUBSTANDARD PORTION OF THE CROP INTO RELATIVELY NEW AND UNIMPORTANT BYPRODUCTS AND AWAY FROM THE NORMAL CHANNELS OF TRADE. OF EQUAL IMPORTANCE, PERHAPS, IS THE FACT THAT THE ELIMINATION OF SUBSTANDARD PRUNES FROM THE NORMAL CHANNELS OF TRADE WILL ENCOURAGE THE DOMESTIC CONSUMPTION OF STANDARD PRUNES BY REASON OF THE IMPROVEMENT IN THE QUALITY OF PRODUCTS WHICH WILL BE OFFERED IN THE NORMAL CHANNELS OF TRADE.

IN MY LETTER OF SEPTEMBER 9, ADDRESSED TO YOU, ESTIMATES WERE SUBMITTED AS TO THE PROBABLE MAXIMUM EXPENDITURES PURSUANT TO CLAUSES (1) AND (2) OF SECTION 32. IN MAKING THESE ESTIMATES, CONSIDERATION WAS GIVEN TO THE POSSIBILITY OF UTILIZING A PORTION OF THE FUNDS APPROPRIATED BY SECTION 32 FOR THE ENCOURAGEMENT OF THE EXPORTS OF PRUNES, AND IN CONNECTION WITH THE PURCHASE OF PRUNES FOR DIVERSION INTO RELIEF OR OTHER NONCOMPETITIVE TRADE CHANNELS. IT IS EXPECTED THAT, IN CONNECTION WITH THE PROPOSED PROGRAM OUTLINED HEREIN, NOT MORE THAN APPROXIMATELY $600,000 WILL BE REQUIRED, WHICH SUM IS SUBSTANTIALLY LESS THAN THE QUANTITY PREVIOUSLY ESTIMATED AS A MAXIMUM AMOUNT WHICH MIGHT BE UTILIZED FOR THE ENCOURAGEMENT OF THE EXPORTATION AND DOMESTIC CONSUMPTION OF PRUNES.

YOUR OPINION ON THE QUESTION OF THE AVAILABILITY OF FUNDS UNDER CLAUSES (1) AND (2) OF SECTION 32 IN THE ACT OF AUGUST 24, 1935, FOR DISBURSEMENT UNDER THE PROPOSED PLAN AND YOUR APPROVAL OF THE ENCLOSED FORMS IS RESPECTFULLY REQUESTED. IN VIEW OF THE FACT THAT THE PRESENT CROP OF PRUNES IS NOW BEING HARVESTED, AN EARLY REPLY WILL BE GREATLY APPRECIATED; AND IF IN ANY WAY YOUR DETERMINATION MAY BE FACILITATED BY DETAILED STATEMENTS IN SUPPORT OF THE FINDINGS AND DETERMINATIONS WHICH HAVE BEEN BRIEFLY DESCRIBED HEREIN, OR IN ANY OTHER MANNER, THE DEPARTMENT WILL RENDER ANY ASSISTANCE WHICH YOU MAY REQUEST.

WHILE THE OBJECTS SOUGHT TO BE OBTAINED APPEAR WITHIN THE PURPOSES, (1) AND (2), FOR WHICH THE APPROPRIATION WAS MADE--- SECTION 32, ACT OF AUGUST 24, 1935 (49 STAT. 774), THE PLAN OF OPERATING THROUGH A PRIVATE CORPORATION RAISES QUESTIONS GOING TO THE LEGAL AVAILABILITY OF THE APPROPRIATION FOR PARTICULAR USES WHICH THE DETAILS OF THE PLAN SUGGEST AS CONTEMPLATED. FOR INSTANCE, THE ADMINISTRATIVE AND OVERHEAD COSTS OF OPERATING THE PRIVATE CORPORATION, THE PACIFIC PRUNE PRODUCTS ASSOCIATION, WITH WHICH YOU PROPOSE TO CONTRACT. IT IS TO BE NOTED THAT UNDER PURPOSE (1) OF SECTION 32, ENCOURAGEMENT MAY BE GIVEN BY THE SECRETARY WITH RESPECT TO EXPORTATIONS BY THE PAYMENT OF "BENEFITS" OR "INDEMNITIES FOR LOSSES INCURRED," AND THAT UNDER PURPOSE (2) HE MAY ENCOURAGE DOMESTIC CONSUMPTION BY DIVERTING COMMODITIES FROM THE NORMAL CHANNELS OF TRADE "BY PAYMENT OF BENEFITS OR INDEMNITIES" OR "BY OTHER MEANS.' THUS ALL PAYMENTS MUST BE FOR "BENEFITS" OR "INDEMNITIES" HAVING IMMEDIATE RELATION TO EXPORTATION OR TO DIVERSION FROM NORMAL CHANNELS OF TRADE. CONNECTION WITH TRANSACTIONS BETWEEN THE GOVERNMENT AND PRODUCERS INVOLVING EXPORTATIONS OR DIVERSIONS FROM NORMAL CHANNELS OF TRADE IT WOULD SEEM LESS DIFFICULT TO DEFINE THE LIMITS OF THE TERMS "BENEFITS" AND "INDEMNITIES" THAN WHERE, AS IS PROPOSED, AN INTERMEDIARY IS TO BE UTILIZED--- A PRIVATE CORPORATION. CLEARLY IT WOULD BE AN UNAUTHORIZED USE OF THE APPROPRIATION TO PAY EXPENSES OF THE CORPORATION HAVING NO DIRECT AND IMMEDIATE RELATION TO THE PURCHASE AND EXPORTATION OR THE PURCHASE AND DIVERSION, OF THE COMMODITY INVOLVED. THE PLAN PROPOSED SEEMS TO CONTEMPLATE THERE WILL BE SUPERVISION OF SUCH ADMINISTRATIVE AND OVERHEAD CORPORATION COSTS BY OR FOR THE SECRETARY, APPARENTLY WITH A VIEW TO THEIR BEING DULY LIMITED, BUT SUCH ARRANGEMENT WOULD MAKE FOR CONFUSION AS IT IS NOT AN ADMINISTRATIVE MATTER BUT A RESPONSIBILITY OF THIS OFFICE TO DETERMINE THE LEGAL AVAILABILITY OF THE APPROPRIATION FOR PARTICULAR PAYMENTS. IT WOULD SEEM HIGHLY DESIRABLE TO HAVE THE RIGHTS AND RESPONSIBILITIES OF THE RESPECTIVE PARTIES, SO FAR AS USES OF THE APPROPRIATION MAY BE INVOLVED, CLEARLY DEFINED IN ADVANCE.

INASMUCH AS THE PLAN IS PRIMARILY IN THE INTEREST OF THE GROWERS OF PRUNES, THE PURPOSE BEING TO ENCOURAGE THE EXPORTATION AND THE DIVERSION FROM USUAL CHANNELS OF TRADE, OF SUBSTANDARD PRUNES, TO PROVIDE A GREATER MARKET AND LARGER RETURNS FOR STANDARD PRUNES, THUS REBOUNDING TO THE BENEFIT OF THE MEMBERS OF THE PRUNE INDUSTRY, AND INASMUCH AS THE CORPORATION HAS BEEN OR IS TO BE ORGANIZED BY AND MANAGED BY MEMBERS OF SUCH INDUSTRY, IT WOULD SEEM THAT THE INDUSTRY SHOULD CONTRIBUTE TO THE EFFECTUATION THEREOF BY CHARGING TO THE INCREASED RETURNS RECEIVED BY THEM FROM THEIR STANDARD PRUNES ALL ADMINISTRATIVE AND OVERHEAD EXPENSES IN THE ESTABLISHMENT AND OPERATION OF THE CORPORATION. THAT IS TO SAY, THE ONLY EXPENSE WHICH APPARENTLY SHOULD BE BORNE BY THE UNITED STATES IS THE DIFFERENCE BETWEEN THE PRICE PAID BY THE ASSOCIATION FOR THE SUBSTANDARD PRUNES, TOGETHER WITH NECESSARY AND ACTUAL INCIDENTAL COSTS, AND THE PRICE AT WHICH THE ASSOCIATION MAY SELL SUCH SUBSTANDARD PRUNES FOR EXPORT OR FOR DIVERSION TO OTHER THAN USUAL DOMESTIC CHANNELS OF TRADE AND COMMERCE- -- THE PURCHASE AND SALES PRICES IN EACH INSTANCE TO BE SUBJECT TO CONTROL BY THE SECRETARY OF AGRICULTURE, ACTING PERSONALLY OR THROUGH AN OFFICIAL REPRESENTATIVE. THE FORM OF CONTRACT SHOULD BE ADJUSTED ACCORDINGLY.

WITH RESPECT TO INCIDENTAL COSTS THERE WOULD SEEM PROPER FOR INCLUSION THOSE NECESSARY AND HAVING RELATION TO EACH TRANSACTION SUCH AS TRANSPORTATION, STORAGE, INSURANCE, HANDLING CHARGES, AND POSSIBLY- - IN EXCEPTIONAL CASES--- REASONABLE INTEREST ON AMOUNTS WHILE ACTUALLY AND NECESSARILY INVESTED IN PURCHASES AWAITING SALE OR OTHER DISPOSITION. ACCORDINGLY, IT IS SUGGESTED THAT THE TERM "NET SALES PRICE" AS DEFINED IN PARAGRAPH 9 (C) OF THE PROPOSED DRAFT OF AGREEMENT BE CHANGED TO READ AS FOLLOWS:

THE TERM "NET SALES PRICE" AS USED IN THIS AGREEMENT SHALL BE DEEMED TO BE THE "SALES PRICE" LESS THE COSTS OF STORAGE, TRANSPORTATION, INSURANCE, INTEREST, AND ANY OTHER INCIDENTAL HANDLING CHARGES PROPERLY APPORTIONABLE TO THE PARTICULAR LOT OF SUCH SUBSTANDARD PRUNES SOLD.

THERE APPEARS NOTHING IN THE FORMS OF PURCHASE AND SALES CONTRACTS TO WHICH THIS OFFICE IS REQUIRED TO OBJECT AND THIS OFFICE IS NOT NOW CONCERNED WITH RESPECT TO THE TERMS OF THE PROPOSED ARTICLES OF INCORPORATION OR THE BYLAWS OF THE CORPORATION.