HLH PRODUCTS AID dollar financing of commodities is generally limited to commodities which cannot be obtained with local currency. Further, certain categories of commodities are excluded from AID-financed commercial import programs because the aid-receiving country does not deem them sufficiently high in priority to warrant the expenditure of scarce foreign exchange for their importation, or because AID regards them as luxury items in relation to the economic strata of the country involved. Aid-receiving countries are for the most part agricultural economies. Assistance provided is normally designed to expand their domestic crop production and may also seek to establish modest but viable industrial bases. Food needs are met largely from indigenous production plus essential imports of basic foods such as cereal grains and oils. Canned or bottled food products generally fail to meet AID's commodity eligibility or suitability standards and are rarely authorized for procurement under any commodity import programs financed by the agency. Each agreement with an aid-receiving country for the financing of commodity imports includes a list of items authorized for procurement. Such lists reflect the needs of the countries involved. They normally do not include all commodity categories that AID is prepared to finance. Should the Government of Pakistan so request, liquid paraffin would be included in its commodity import program, since that item is not ineligible for financing. HOMELITE HOMELITE, Post Chester, N.Y., May 6, 1969. Hon. JAMES T. BROYHILL, Washington, D.C. DEAR SIR: I received a notice from the House Small Business Committee dated May 1, 1969 concerning hearings on AID Financed Purchases that will open on May 15, 1969 and requesting firms to write expressing their views on the matter. Our Company is not considered small business. However, we do receive the AID Procurement Information Bulletin and in the past have submitted quotations to contractors listed in the Bulletin. To my knowledge we have never received any confirmation from the contractors or from AID that our quotations were received or what action was taken regarding the proposed procurement. This is discouraging, to say the least, and in my opinion, not in the best interest of the AID Program. I would recommend to you and to the members of the Committee that all companies submitting quotations on AID Financed Purchases be notified in some manner the name of the company receiving the contract award and the price paid by the purchaser. This could result in more interest by more firms in the AID Program and more competitive prices afforded to the potential purchaser. The above recommendation should in no way reflect on the employees of the AID Program in Washington as I have always found them extremely cooperative and most helpful to me in every way possible. Thank you very much for your interest and I look forward to visiting with you on my next trip to Washington. Very truly yours, FRANZ F. HOLSCHER, HOMELITE We can appreciate the desire of American firms which have made offers or bids to foreign importers to learn the outcome of the procurement action. While the dissemination of such information is customary when U.S. Government agencies are procuring under formal Invitation for Bid, this is not necessarily the practice in the case of commercial buyers in the United States, and is probably rarely so in the case of foreign purchasers, particularly when procurement is based on the informal solicitation of offers or quotations. We believe that it would be an unreasonable burden on foreign importers, many of whom themselves are small business firms and must pay for their purchases in full, to require that they inform each responding American supplier of the outcome of their procurement action. We hope to be able to fill this information gap ourselves, however, by periodically publishing award information in the near future. (289) INDUSTRIA AMERICANA & CO. INC. Hon. JOE L. EVINS, INDUSTRIA AMERICANA & CO. INC., Chairman, House Small Business Committee, 2361 Rayburn House Office Building, Washington, D.C. DEAR MR. EVINS: I have received your bulletin dated May 1, 1969, advising me of the hearings which will take place on May 15th at 9:00 A.M., in Room 2359, Rayburn House Office Building, pertaining to American small business participation in the procurement of goods and services financed with AID funds, and I wish to register my complaint pertaining to the AID policy of restricting the small and medium size United States Exporters from paying their duly appointed Sales Representatives their rightful sales commission in U.S. Dollars in given countries of the world on AID financed transactions. Attached you will find, the following items for your review on this important subject: (1) Copy of a Western International Trade Group Agenda setting forth points for a panel discussion, of which I was a member, at a Western International Trade Group meeting held on September 27th, 28th and 29th, 1967. (2) Copy of a letter dated October 6, 1967, written to Mr. Patrick M. O'Leary of A.I.D. by Mr. T. R. Stetson, Manager Export Services of U.S. Borax. (3) Copy of my letter dated October 19, 1967, written to Mr. Patrick M. O'Leary of AID. (4) Copy of my letter dated March 4, 1968, written to Congressman John E. Moss, Chairman Government Operations Committee, House of Representatives, pertaining to this AID Policy. The A.I.D. policy which restricts the small and medium size United States Exporter from paying their duly appointed Sales Representatives in given countries of the world their rightful sales commission in U.S. Dollars, on orders they have booked on behalf of the small or medium size Exporter or Manufacturer, has injured our sales in the export markets. I will sincerely appreciate your discussing this subject at your forthcoming hearings as this policy should be discontinued by AID. Very truly yours, INDUSTRIA AMERICANA & Co. INC., WESTERN INTERNATIONAL TRADE GROUP, SEPTEMBER 27, 28, 29, 1967: PANEL ON AID FINANCING AND PAYMENT OF SALES COMMISSIONS TO SALES AGENTS/NATIVE MANUFACTURERS' REPRESENTATIVES SALES REPRESENTATIVES IN U.S. DOLLARS SECTIONA Introduction and brief resume of problem by moderator (a) Manner in which large U.S. Public Corporations effects sales in the international markets by means of a salaried employee stationed in each country of the world. (b) Manner in which medium size and small U.S. Exporter effects sales in the International Markets using the services of a Manufacturer's Representative/ Sales Representative who is paid a Sales Commission for his services. (c) Sales Agreement entered into by U.S. Exporter with the Sales Agents/ Manufacturer's Representatives/Sales Representative in the international markets. SECTION B Clarification by AID spokesman as to definition of Sales Agent and services performed by Sales Agent. SECTION C I. Prohibition against payment of dollar commissions in certain countries is detrimental to the foreign commerce of the United States. (a) A large portion of U.S. Exports depends upon the services rendered by Sales Agents native Manufacturer's Representative/Sales Representative selling in competition to producers of similar goods in other countries. Native Manufacturer's Representative/Sales Representative must be sustained by the U.S. Exporter in the AID country markets against the time when trade reverts to private financing (Taiwan, and largely Brazil, have gone to private financing.) (1) In many cases foreign competitors may have more favorable freight rates, and/or may be able to offer more favorable credit terms, so the American Exporter needs every weapon he can command-particularly the loyalty and enthusiasm of his overseas Agent/Representative. (b) Potential loss of income by native Manufacturer's Representative/Sales Representative when Sales Commission is paid in local currency. (1) Sales Agents/Representatives can often legally realize more in real income from a dollar remittance than from payment in local currency. Obviously, they are going to work hardest on lines on which they get the best remuneration. This sets up a potential loss of U.S. Exports when native Manufacturer's Representative/Sales Representative refuses to sell United States manufactured products where Sales Commission is paid to him in local currency. (2) Some overseas Representatives would prefer to leave their dollar profits in the United States-where permitted by their countries' regulations-for purchasing other U.S.A. goods; thus assisting our export trade and balance of payments. (c) Although commissions paid by local banks in local currency are supposed to be confidential, there are leaks. Native Distributors/Buyers are advised by local banks as to the Sales Commission paid by the U.S. Exporter to his native Manufacturer's Representative/Sales Representative and native Distributor then requests the Sales Commission as a Trade Discount. Reasonable selling expense is normal part and parcel of doing business, and buyers should not be so invited to strangle sales organizations which are of benefit to them, as well as seller; in having someone available in their own baliwick to assist with any problems. (1) Service, as well as sales, is part of the Representative's job. (i) Sales Agents/Representatives assist buyers (and serve sellers) in procuring import licenses, helping with Customs clearances, with technical information and service, etc. (ii) The native Sales Representative acting on behalf of the medium size or small U.S. Exporter must pay his own salary, his own traveling expenses, his own entertainment expenses, when selling the U.S. Exporter's products, while the large U.S. Corporations pay their salaried employee his salary, traveling expenses, entertainment expenses, etc., in U.S. Dollars from the home office. Why does AID discriminate against the sales arm of the Medium Size or Small Size U.S.A. Exporter forcing them to pay their native Manufacturer's Representative/Sales Representative in local currency, while the large U.S. Corporation can pay their salaried employee in U.S. Dollars? (d) Agency for International Development urges Exporters to take advantage of AID facilities to expand or maintain markets; and says that normal commercial channels shall be used to the fullest extent. At the same time it negates this by prohibiting payment of dollar commissions to the people in the field who carry a very heavy burden of promoting U.S.A. exports. (1) AID Reg. 1, as most recently revised, seems to prohibit dollar commissions anywhere, but apparently this is a "permissive" restriction, it can be implemented or not, as AID Bureaus may decide. So far, it has been implemented only as to ten countries: (i) SBM 67-1-1/27/67 India, Pakistan, Turkey, Ceylon, Afghanistan, Israel, Laos, Republic of China, and Viet-Nam. (ii) Republic of the Congo added later, but apparently no official bulletin issued. (iii) We understand AID is contemplating implementing this prohibition in Tunisia, Indonesia, Morocco, and Korea. (e) If sales organizations are broken up as result of this policy, for the sake of saving up to a theoretical $45,000,000 in foreign remittances, this policy could cost the United States to lose several billion dollars in export trade. II. Such prohibition is discriminatory. (a) The services rendered by the native Manufacturer's Representative/Sales Representatives substitutes the salaried employee which the Medium Size and Small Exporter cannot afford when competing with the large U.S. Public Corporation who can afford a salaried employee in each country of the world. (1) Such compensation does not have to be reported on AID 282. (b) Small organizations, or those trying to keep cost of sales on a more economical bases, are precluded from so compensating their salesmen. III. Such prohibition may be illegal. (a) It has forced exporters, retroactively, to renege on valid contracts, entered into before any notice was given of this prohibition-and as to sales made in good faith before anyone knew of these regulations. (1) Formal publication did not take place till long after the restriction began showing up in letters of credit. IV. Conclusion. (a) It is for the best interest of the United States Export Trade and balance of payments for the long pull, that U.S. Exporters should be permitted to pay their duly appointed Manufacturer's Representative/Sales Agents/Sales Representative in U.S. Dollars.. Panelists: T. R. Stetson, Justin Smith, Homer Keeler, LA; Peter Geithner, AID; Robert L. Hirschberg, Department of Commerce, C. L. Burton, Seattle. U.S. BORAX, Los Angeles, Calif., October 6, 1967. Re 141.2-commissions to sales representatives/sales agents. Mr. PATRICK M. O'LEARY, Office of Procurement, Agency for International Development, DEAR MR. O'LEARY: I presume that by now Mr. Peter Geithner has reported to you on the panel discussion of the above at the Western International Trade Group meeting in Oregon last week. Enclosed is a copy of the Panel's prepared written presentation. This was of course greatly amplified during the detailed discussion and we feel it worth commenting to you further. It was clearly demonstrated during the discussion, not only by the panelists but by others from the floor, that prohibiting payment of dollar commissions to sales representatives/agents is detrimental to the export commerce of the United States. We again request that AID Regulation 1 be amended to rescind this prohibition. Unfortunately, Mr. Geithner came into the meeting with one serious misconception, gained during some various conversations at diner the previous evening; and while I believe this was put straight during the official panel, I must also cover it here. In his opening remarks he said he had gained the impression that exporters, through AID, were trying to gain some kind of an unfair advantage over their competitors. This is absolutely and categorically wrong. What is being sought is to continue under AID financing the same practices as under commercial financing, which have enabled United States exporters to compete successfully with other suppliers, both foreign and domestic. Commissions are paid on private sector sales for the good, sound reason that they are good business-that we get our money's worth because representatives so compensated bring us business. We seek no more where AID financing is the temporary order of the day than we were paying out of our own pockets prior to AID and are prepared to continue paying when financing reverts from AID to commercial as, for example, in Taiwan and Brazil. Panelists listed below must meet competition in the products in which they deal, such as automobile parts, pumps, freezer equipment, etc., from other industrial countries, such as Germany, Japan, U.K., etc.-to name a few--as well as from the United States. While the United States is presently supplying a good percentage of the world's Borax requirements, there is a lot of it coming from Turkey and more becoming available from Italy, Bulgaria, China, etc. So it |