B-962, MARCH 11, 1939, 18 COMP. GEN. 703

B-962: Mar 11, 1939

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EMERGENCY RELIEF APPROPRIATION ACT OF 1938 - LOANS TO RURAL REHABILITATION COOPERATIVE ASSOCIATIONS - STATUTORY EXISTING INDUSTRIES COMPETITION PROHIBITION WHERE A MILL OR FACTORY ESTABLISHED ON A COOPERATIVE ASSOCIATION NEEDY- PERSON-REHABILITATION BASIS IS ENGAGED IN PROCESSING FROM AGRICULTURAL PRODUCTS A PRODUCT WHICH DOES NOT COMPETE WITH EXISTING INDUSTRIES. - AND THE PLANT WAS ESTABLISHED PRIOR TO THE PROVISION IN THE WORK RELIEF AND RELIEF APPROPRIATION RESOLUTION OF FEBRUARY 4. " THERE IS NO LEGAL OBJECTION TO THE GRANTING OF AN ADDITIONAL LOAN. THE QUESTION WHETHER THE QUOTED STATUTORY PROVISION WOULD PRECLUDE THE USE OF THE SAID FUNDS TO ESTABLISH OTHER SIMILAR AGRICULTURAL PRODUCT PROCESSING PLANTS IS A MATTER FOR CONSIDERATION OF THE FACTS OF EACH PARTICULAR CASE.

B-962, MARCH 11, 1939, 18 COMP. GEN. 703

EMERGENCY RELIEF APPROPRIATION ACT OF 1938 - LOANS TO RURAL REHABILITATION COOPERATIVE ASSOCIATIONS - STATUTORY EXISTING INDUSTRIES COMPETITION PROHIBITION WHERE A MILL OR FACTORY ESTABLISHED ON A COOPERATIVE ASSOCIATION NEEDY- PERSON-REHABILITATION BASIS IS ENGAGED IN PROCESSING FROM AGRICULTURAL PRODUCTS A PRODUCT WHICH DOES NOT COMPETE WITH EXISTING INDUSTRIES--- A MILL OR FACTORY CLEARLY DISTINGUISHABLE FROM THE CLASS OF MILLS CONSIDERED IN 18 COMP. GEN. 508--- AND THE PLANT WAS ESTABLISHED PRIOR TO THE PROVISION IN THE WORK RELIEF AND RELIEF APPROPRIATION RESOLUTION OF FEBRUARY 4, 1939, PUBLIC RESOLUTION NO. 1, 53 STAT. 507,"THAT NO FUNDS APPROPRIATED IN THE EMERGENCY RELIEF APPROPRIATION ACT OF 1938 OR HEREIN APPROPRIATED SHALL BE USED BY ANY FEDERAL AGENCY, TO ESTABLISH MILLS OR FACTORIES WHICH WOULD MANUFACTURE FOR SALE ARTICLES OR MATERIALS IN COMPETITION WITH EXISTING INDUSTRIES," THERE IS NO LEGAL OBJECTION TO THE GRANTING OF AN ADDITIONAL LOAN, IN FURTHERANCE OF THE PROJECT, FROM FUNDS APPROPRIATED IN THE 1938 RELIEF APPROPRIATION ACT, BUT THE QUESTION WHETHER THE QUOTED STATUTORY PROVISION WOULD PRECLUDE THE USE OF THE SAID FUNDS TO ESTABLISH OTHER SIMILAR AGRICULTURAL PRODUCT PROCESSING PLANTS IS A MATTER FOR CONSIDERATION OF THE FACTS OF EACH PARTICULAR CASE, AND NOT ONE FOR DETERMINATION GENERALLY.

ACTING COMPTROLLER GENERAL ELLIOTT TO THE SECRETARY OF AGRICULTURE, MARCH 11, 1939:

I HAVE YOUR LETTER OF MARCH 4, 1939, AS FOLLOWS:

UNDER THE PROVISIONS OF SECTION 1 (3) OF THE EMERGENCY RELIEF APPROPRIATION ACT OF 1938, THE FARM SECURITY ADMINISTRATION OF THIS DEPARTMENT HAS MADE SEVERAL LOANS TO COOPERATIVE ASSOCIATIONS, IN ORDER TO AID IN THE REHABILITATION OF THE LOW-INCOME MEMBERS THEREOF, BY ENABLING THEM TO SUPPLEMENT THEIR INCOMES THROUGH THE COOPERATIVE PROCESSING AND MARKETING OF AGRICULTURAL PRODUCTS. A TYPICAL LOAN OF THIS KIND WAS ONE MADE TO A COOPERATIVE ASSOCIATION AT LAUREL, MISSISSIPPI, FOR THE PROCESSING AND SALE OF STARCH FROM SWEET/POTATOES.

AN APPLICATION HAS BEEN RECEIVED FROM THIS COOPERATIVE FOR AN ADDITIONAL LOAN TO ENABLE IT TO ENLARGE ITS PRESENT PLANT. IN ADDITION, TENTATIVE PROPOSALS HAVE BEEN SUBMITTED TO THE FARM SECURITY ADMINISTRATION, WHICH WOULD INVOLVE THE MAKING OF LOANS TO ENABLE THE ESTABLISHMENT OF SIMILAR PLANTS FOR THE PROCESSING OF OTHER AGRICULTURAL PRODUCTS, SUCH AS, THE PROCESSING OF PECTIN FROM CITRUS FRUITS.

THE QUESTION HAS ARISEN, HOWEVER, WHETHER THESE APPLICATIONS MAY BE CONSIDERED AND SUCH LOANS MADE, IN VIEW OF THE LAST PROVISO IN SECTION 1 OF THE ACT OF FEBRUARY 4, 1939, MAKING AN ADDITIONAL APPROPRIATION FOR WORK RELIEF AND RELIEF FOR THE FISCAL YEAR ENDING JUNE 30, 1939, WHICH READS AS FOLLOWS:

"PROVIDED FURTHER, THAT NO FUNDS APPROPRIATED IN THE EMERGENCY RELIEF APPROPRIATION ACT OF 1938 OR HEREIN APPROPRIATED SHALL BE USED BY ANY FEDERAL AGENCY, TO ESTABLISH MILLS OR FACTORIES WHICH WOULD MANUFACTURE FOR SALE ARTICLES OR MATERIALS IN COMPETITION WITH EXISTING INDUSTRIES.'

YOUR DECISION IS RESPECTFULLY REQUESTED AS TO WHETHER YOUR OFFICE CONSTRUES THE PROVISIONS OF THE ABOVE-QUOTED PROVISO AS APPLYING TO THE PROCESSING OF AGRICULTURAL PRODUCTS, FOR SALE SO AS TO REQUIRE YOU TO OBJECT TO THE MAKING OF LOANS FOR THE PURPOSES DESCRIBED ABOVE.

IT APPEARS THAT THE STARCH PLANT OPERATED BY THE SWEET POTATO GROWERS, INC., A FARMERS COOPERATIVE ASSOCIATION, WAS ESTABLISHED IN 1934, AT LAUREL, MISS., HAVING BEEN FINANCED AT THAT TIME BY AN ALLOTMENT OF $150,000 FROM THE FEDERAL EMERGENCY RELIEF ADMINISTRATION. IT IS UNDERSTOOD THAT THE TITLE TO THE PLANT IS VESTED IN THE MISSISSIPPI AGRICULTURAL EXPERIMENT STATION, A BRANCH OF THE MISSISSIPPI STATE COLLEGE, AND THAT THE PLANT WAS LEASED TO THE SWEET POTATO GROWERS, INC., UNDER AN AGREEMENT THAT THE CORPORATION WOULD NOT PERMIT MORE THAN 49 PERCENT OF ITS MEMBERS TO BE PERSONS NOT RECEIVING AID FROM THE EMERGENCY RELIEF ADMINISTRATION--- THIS CONDITION APPARENTLY BEING FOR THE PURPOSE OF QUALIFYING THE PROJECT AS ONE FOR REHABILITATION OF NEEDY PERSONS. SUBSEQUENT AGREEMENT EXECUTED OCTOBER 29, 1937, A LOAN OF $28,000 WAS MADE TO THIS ASSOCIATION FOR ALTERATIONS, REPAIRS, EQUIPMENT, AND OPERATING CAPITAL. BY AGREEMENT OF SEPTEMBER 6, 1938, ERA6-FSA-17, AN ADDITIONAL LOAN OF $90,221.17 AND A GRANT OF $40,000 WERE MADE TO THE ASSOCIATION. IT IS STATED IN THE HEARINGS BEFORE THE HOUSE COMMITTEE ON APPROPRIATIONS ON THE DEPARTMENT OF AGRICULTURE APPROPRIATION FOR 1939 THAT THIS IS THE ONLY PLAN OF ITS KIND IN THE UNITED STATES; THAT IT DOES NOT COMPETE WITH OTHER STARCH PLANTS, ITS PRODUCT TAKING THE PLACE OF IMPORTED STARCH PRODUCTS. THE FACTS WITH RESPECT TO THE ESTABLISHMENT AND PURPOSE OF THIS PLANT CLEARLY DISTINGUISH IT FROM MILLS OF THE CLASS CONSIDERED IN MY DECISION OF DECEMBER 6, 1938, A 97878, 18 COMP. GEN. 508. ASIDE FROM ANY QUESTION AS TO WHETHER THIS PLANT IS A MILL OR FACTORY WHICH MANUFACTURES FOR SALE MATERIAL "IN COMPETITION WITH EXISTING INDUSTRIES," IT APPEARS THAT THE PLANT WAS ESTABLISHED AND IN OPERATION PRIOR TO FEBRUARY 4, 1939. THEREFORE, I HAVE TO ADVISE THAT THE USE OF OTHERWISE AVAILABLE FUNDS APPROPRIATED IN THE EMERGENCY RELIEF APPROPRIATION ACT OF 1938 FOR THE MAKING OF A LOAN TO ENABLE THIS COOPERATIVE ASSOCIATION TO ENLARGE ITS PLANT WOULD NOT BE IN CONTRAVENTION OF THE PROVISION IN THE JOINT RESOLUTION OF FEBRUARY 4, 1939, 53 STAT. 507, QUOTED IN YOUR LETTER, SUPRA.

WITH RESPECT TO THE QUESTION AS TO WHETHER THE QUOTED PROVISION WOULD PRECLUDE THE USE OF THE APPROPRIATION INVOLVED TO ESTABLISH OTHER PROCESSING PLANTS SUCH AS REFERRED TO IN YOUR LETTER, THE ANSWER THERETO WOULD DEPEND UPON THE FACTS IN EACH PARTICULAR CASE; THAT IS, AS TO WHETHER SUCH PLANTS ARE IN FACT MILLS OR FACTORIES AND WHETHER THEY WOULD MANUFACTURE FOR SALE ARTICLES OR MATERIALS IN COMPETITION WITH EXISTING INDUSTRIES. ACCORDINGLY, A DEFINITE ANSWER TO YOUR GENERAL QUESTION RELATIVE TO SUCH PLANTS CANNOT BE MADE ON THE BASIS OF THE PRESENT SUBMISSION.