United States during such quarter equals the quarterly import quota established for such article under this title.

"(b) Import quotas for manufactured lead articles or manufactured zinc articles established under provisions of this title shall terminate effective on the date of termination of quotas for lead metal and lead ore or zinc metal and zinc ore as provided in section 103 (e), 203(e), or 405 of this Act.

"(c) Any quota established in accordance with this title shall become effective on a pro rata basis the first day of the month following the month in which the Secretary determines that the conditions set forth in this title are met."

Senator JORDAN. Thank you, Mr. Mack, for your statement. Yugoslavia has not gotten into the strip zinc business yet; is that

correct?

Mr. MACK. We have not seen any imports of strip zinc from Yugoslavia. To some extent, the uses to which strip zinc and zinc in sheets may be placed are interchangeable. Since zinc in sheets is a higher labor content item, a consumer is not likely to use zinc in sheets, if strip zinc will serve his purpose. However, in Yugoslavia, where they get people to work for 27 cents an hour, there really is not much inducement to shift manufacturing from zinc in sheets to strip zinc. Particularly since they can import zinc in sheets into the United States at 1 cent pound, which is equivalent to only a 3- or 4-percent ad valorem rate, against a 19-percent rate on strip zinc. There is considerable inducement however, for other countries, such as the United Kingdom, to ship strip zinc to the United States. Canada ships strip zinc to the United States.

Senator JORDAN. Thank you. Your statement points up one of the problems that beset us as we move toward a freer trade in this commodity. Thank you very much.

The next witness is Mr. Henning.

STATEMENT OF GUSTAV E. HENNING, PRESIDENT, HENNING

BROS. & SMITH, INC.

Mr. HENNING. Mr. Chairman, members of the committee, I have no prepared statement. I will just respectfully submit the facts to the committee.

I am Gustav E. Henning, president of Henning Bros. & Smith, Inc., located in Brooklyn, N.Y.

Henning Bros. & Smith is an independent alloyer of zinc-based, diecasting metals. Special high grade slab zinc is our raw material, and I will speak on this metal.

Henning Bros. & Smith has always purchased from both domestic producers and importers special high grade slab zinc for the manufacture of its die-casting metals, which it supplied to the die-casting industry, primarily, in the northeast section of America. We are greatly concerned with the supply to us of special high grade slab zinc, and I will say-without revealing any company secrets, inasmuch as we are a small family-owned corporation-1964, Henning Bros. & Smith was severely curtailed in its raw material special high grade slab zinc. The latter part of 1964 saw the beginning of what resulted in 1965 in a very serious shortage of this raw material to us, and a very serious loss of sales to our die-casting customers.

We have not yet recovered from this serious loss of sales, and that is why I am here today.

I do not know the answers for the domestic producers of zinc. I only know that Henning Bros. & Smith is gravely concerned with the supply of its raw material. Special high grade slab zinc is a necessary commodity. We sell not only the automotive industry, but we sell a diversified range of industries, electronics and others.

I believe that my industry, the independent alloys, can benefit most from a free supply and demand situation, and I respectfully, therefore, submit this to the committee.

Thank you.

Senator JORDAN. I take it, then, your position, or the position of your company would be in opposition to S. 289.

Mr. HENNING. As it now stands, sir, yes.

Senator JORDAN. Would you have any suggestions as to how it might be improved to fit your needs?

Mr. HENNING. Unfortunately, sir, I do not. I only was made aware of this bill through a publication in the American Metal Market, and subsequent letters of mine to both Senator Javits and a response from Senator Gruening. I have never received a copy, nor did I request one. I have not a copy of the proposed bill, so I could not adequately go point by point in opposing or supporting, but I just therefore present to the committee the facts of the raw material situation to an independent alloyer, such as we, of these special high grade slab zinc situations.

Senator JORDAN. I appreciate your comment. If you would like, we will hold the record open. If you would like to be supplied with copies of the bill or any other information we have, you may submit a statement at a later date.

Mr. HENNING. I thank you, sir, and if there are questions that we as a company and an independent alloyer can supply the committee, we would be more than happy to do so.

Thank you, sir.

Senator JORDAN. Thank you.

Is Mr. Barnard here?

Mr. FRENCH. He didn't request time, Senator.
Senator JORDAN. Did he file a statement?

Mr. FRENCH. Yes.

Senator JORDAN. It will be included at this point.

(The statement referred to follows:)

STATEMENT OF ROBERT C. BARNARD, REPRESENTING THE ANTIKNOOK COMPOUND

PRODUCERS

This statement in oposition to S. 289 is submitted on behalf of three producers of antiknock compounds, the Ethyl Corporation, E. I. du Pont de Nemours & Co., and the Houston Chemical Corporation. The antiknock compound industry accounted for over 19% of lead metal consumption in the United States during 1966. The current employment of the three producers submitting this statement is in excess of 5,400 workers at 5 manufacturing locations in the states of Louisiana, Texas, California and New Jersey.

As diversified corporations, the antiknock compound producers are well aware of the problems domestic industries face due to imports. These producers are not opposed to a reasonable degree of protection against foreign competition when economic conditions require that import restrictions be imposed. In any event, import restrictions must be proportionate to the economic threat posed by imports. The stringent import quotas provided for in S. 289 are, in our view, unnecessary and unreasonable. S. 289 would, in effect, grant to domestic producers the power to control domestic prices and supply.

The most objectionable administrative provision in S. 289 is its use of a stocks-to-shipments ratio as a triggering mechanism. Section 103(a) includes stocks "elsewhere" in the calculation of total primary producers' stocks. So long as a producer has not parted with title to lead metal, his stocks are "elsewhere" (including stocks in outside warehouses, on consignment or in transit). During the past year, nearly one-third of lead metal stocks fell into the "elsewhere" category. A stocks-to-shipments ratio triggering mechanism will place a premium on primary producers' increasing stocks at critical periods since this will lead to triggering the quotas.

In addition, we oppose this particular quota bill for other reasons. Economic conditions do not justify its severe restrictions. The quota once triggered steadily decreases; although the quarterly quota for ore is fixed at not less than 30,000 tons, the lead metal quota can decrease to below that level. Stocks of refined lead and antimonial lead are compared with shipments of refined lead only in determining whether a quota should be triggered. Finally, the bill contains no mandatory reporting requirements and no governmental machinery is suggested for determining when quotas should be triggered or terminated.

For the foregoing reasons, we respectfully submit that this Subcommittee should not favorably report S. 289.

Senator JORDAN. Mr. Kenneth W. Green?

Mr. GREEN. I am here.

Senator JORDAN. Do you wish to testify, or will you file a statement? Mr. GREEN. I have filed a statement, sir.

(The statement referred to follows:)

STATEMENT OF KENNETH W. GREEN, REPRESENTING THE ASSOCIATION OF
AMERICAN BATTERY MANUFACTURERS, INC.

PREFACE

I, Kenneth W. Green, Director of Purchases of The Electric Storage Battery Company, have been delegated by the Board of Directors of the Association of American Battery Manfacturers (AABM), to express the opposition of AABM to the "Lead and Zinc Act of 1967," covered by S. 289.

According to the 1963 Census of Manufactures, the storage battery industry is composed of 252 establishments employing 17,524 people, whose shipments were valued at over $515 million. It is estimated by the Census Bureau that employment by this industry in 1966 exceeded 20,000 people.

The storage battery industry is the largest class of lead users and, in 1966, accounted for 35 percent of the total lead consumption.

Since our industry is concerned mainly with lead, all remarks or comments will be confined to the sections of the bill related to lead.

"CAST OF CHARACTERS"

The "Lead and Zinc Act of 1967" does not specifically mention all of the groups of people that are involved. It is well to enumerate them and to keep in mind the part each plays as the plot unfolds :

1. U.S. Government

(a) Executive Branch

(b) Legislative Branch

2. The Industry

(a) Miners and Smelters

(a-1) having modern low-cost mines, mills and smelters

(a-2) having high-cost marginal mines

(b) Custom Smelters

(c) Secondary Producers or Smelters

3. The Importers

(a) representing foreign Countries

(b) representing foreign Companies

(c) branches of U.S. Companies with operations outside of the U.S.

(d) traders of odd lots from any point of origin

4. The Consumers

One thing the bill accomplishes. It establishes quite clearly that consumers are not a part of the lead industry. In this "Act," the consumer plays the role of the "forgotten man," and the fact that he must buy all the lead which the industry chooses to produce, also seems to have been forgotten.

HISTORICAL RÉSUMÉ

Since the opening of the 90th Congress, a number of bills have been introduced in the Senate and House, all with the same citation and verbiage. In the Congressional Record-H 111,* Mr. Aspinall's opening remarks included, "the leadzinc industry has perhaps the longest and most consistent record of any metal for continuing effort with the Congress and with the executive departments to achieve a minerals policy." This was sixteen years.

This suggests the review of certain facets of the commerce in lead for that period that are pertinent to the bill. Exhibits are shown, including graphic charts that begin with 1950, because this period includes the Korean War, three primary price cycles, and three troublesome cycles of stock accumulation.

On many occasions, the Executive Branch has been criticized for not having a minerals policy, without any one defining what the nature or form such a policy should take. In our democracy, any durable goods industry is free to produce at will and each must bear the responsibility of meeting the demands of the market, and face the danger of overproduction. If we are to cherish and protect that freedom, we should not expect the Executive Branch to formulate a policy that will guarantee freedom from trouble and rescue when we get into trouble.

Granted that there may not be a formal mineral policy expressed in words, but, it seems to me, the Executive Branch has recognized earlier troubles and endorsed Congressional Acts for acquisition of an emergency stockpile. To relieve excessive world stocks, they have on several occasions made purchases of foreign lead for addition to the stockpile that contains over a million tons of lead, or more than two years' production by the primary producers.

Stockpiling by the Government is not the answer to the problem of overproduction. It is only a palliative that delays the day of reckoning. When, in 1958, industrial production dropped markedly, it was reflected in the lead industry by a 150,000 ton drop in consumption from 1957. Primary producers' stocks rose sharply to 215,000 tons, but the mines and smelters continued to work 7 days per week. It is concede that metallurgical processes can not be throttled at will, but why should it take 18 months to do something about it? A similar situation has prevailed in the case of zinc.

Beginning in May 1957, the lead price dropped 5.25¢ in 15 months' time. Highcost marginal mines had to drop out of the picture. The clamor for relief increased in intensity and there began a series of plans and proposals to provide sliding scale tariffs or quotas. A popular tariff cut-off point was 17¢ which seems to indicate protection for the marginal mines.

There was no easy solution. The miners proposed outright quotas. The custom smelters, who use foreign as well as domestic raw material, complained that they cannot be deprived of necessary intake and that they employed large numbers of workers. With little chance of success to pass a favorable bill, they turned to the Tariff Commission for remedy under the Escape Clause provision of the present law. The Executive Branch recognized the findings of injury but sought a different remedy, perhaps because an increased tariff would be difficult to rescind after normal economic conditions had returned.

The President proclaimed a quota on imports, effective October 1, 1958. Perhaps it is coincidental but at this time the price rose 24 per pound, and the increase could not be sustained because of low consumption. Over the next three years, the price eroded to 9.54. In August 1962 the price on the London Metal Exchange began to climb, and the U.S. price rose "in sympathy." In fact, the L.M.E. price increase surpassed the U.S. price, forcing custom smelters to raise the domestic price in order to buy the necessary foreign ores. That is how we got up to a 16e market. A violent plunge in the L.M.E. price did not, however, produce a similar effect in the U.S.

A rising market for two years; a good price of 16 cents; crystal ball forecasts of better days to come; a change in Missouri land laws; and everyone wanted to be in on the "fishing" at a place stocked with fish. History repeats, and like the days of Noah when the animals entered the ark two by two before the flood, we now have eight companies entering the "ark," two by two, before the flood. Having committed themselves beyond the point of return, it was timely for them to make a sober appraisal of the future. The press has quoted a prominent authority as saying that when the expansion programs have been completed, mine production in Missouri will increase to 600,000 tons from a recent average of

Jan. 11, 1967.

130,000 tons. Discount this optimist by 100,000 tons, add the average production of the remaining States, and we face a domestic mine production of 675,000 tons of recoverable lead. Add 150,000 tons of ore imports to custom smelters, and secondary production of 575,000 tons, and we have a total of 1,400,000 tons "feed" for a 1,325,000 ton "appetite."

All of this narration leads us to the main point of contention-a bill (or bills) of restraint, obviously conceived, prepared, and written by an industry with selfish motives, without regard to or consultation with their most important objective-the consumer. If I were asked to characterize this bill in one word, I would say it is "iniquitous."

COMMENTS ON THE BILL

Sko. 103, Par. (a). "If for any period of three consecutive calendar months, the stocks of refined soft lead and lead content of antimonial lead owned by the U.S. primary producers, at their own plants and elsewhere, at the close of each month exceed 250% of the average monthly domestic shipments of refined lead by such producers during the same three-month period, ..." (Italic is the writer's to indicate point of reference.)

The word "any" is ambiguous. It can mean any time before a quota is in effect, any time while a quota is in effect, or even one calendar quarter before the time limit (3 years) has been reached. This places quite a responsibility upon the Secretary of the Interior.

Sponsors of this bill have repeatedly referred to "the ratio of metal stocks to metal shipments" which would ordinarily denote an inventory ratio used in common business practice. But such is not the case in this bill. Two different physical materials are in this ratio, and the deviation from good practice tends to increase the numerator or decrease the denominator. This has the effect of triggering the quota earlier and suspending it later.

I presume the statistics involved will have to come from the Bureau of Mines. Reporting to the Bureau is on a voluntary basis and normally takes eight to ten weeks to gather, compile and distribute. This delay could be serious in suspending a quota if producer stocks are falling fast. The Bureau of Mines does not segregate producer stocks between those located in their own plants and "elsewhere." The American Bureau of Metal Statistics (A.B.M.S.) does separate the stocks.

A.B.M.S. define stocks held "elsewhere" as those stocks located in outside warehouse, afloat, or in transit, or in consumers' plants, which are still owned or controlled by the reporting smelter or its agent or distributors. Presumably, this could be anywhere in the World. It can include lead on consignment, which is practically off the market and should not be included in these stocks. In Exhibit A it will be noted that in 1966 the producer stocks held "elsewhere" amounted to an average of 32.8% of their total stocks.

The triggering ratio is further accentuated by having the denominator limited to domestic shipments. Foreign shipments by domestic producers, should they become sizable, would improve the lead balance and might alleviate the need for quota protection.

Why should antimonial lead even be included in the ratio when it is such a minor part of primary producer business? Over the past 16 years, antimonial lead production amounted to 8.9% of their total production, and only 5.9% since 1960. In contrast, antimonial lead stocks were an average of 15.9% over 16 years, and in 1966 this ratio rose to 28.2%. The possibility of manipulation is present by increasing the inactive or "dead” stocks.

SEC. 103, Par. (b) and (c). The import quota of lead ore shall be a minimum of 30,000 tons, and the allocation of lead ore shall be 50% of the total quota. The points made are stated in reverse logical order. The importance assigned to this guaranteed minimum might be interpreted to mean that this is a smelters' bill.

Since 1950, the imports of ores and concentrates have averaged only 32.3% of the total imports; in 1966 this ratio was 33.8%. What justification is there to usurp 50% for ores, unless it be to throttle the remainder in metal imports available for consumers? In fact, one might ask the question whether any quota should be allocated for ores, in view of the developing situation of self-sufficiency in domestic ores.

HYPOTHETICAL QUOTA CASES

Suppose S. 289 had been operative since 1950. An examination of inventory ratios (See exhibit F-1, F-2) would indicate the necessary condition