MARCH 24, 1969. AGENCY FOR INTERNATIONAL DEVELOPMENT, Department of State, Washington, D.C. (Attention of Mr. Carl J. Nelson, Thailand Desk) DEAR SIRS: Enclosed herewith please find a copy of a letter we received from Mr. David W. Porter, Manager of our office in Bangkok. The gist of this letter is that all American pump manufacturers, with the exception of Fairbanks Morse and Peerless, are being prevented from now on in participating in public tenders, on merchandise financed by AID. Such information comes to us as a great surprise, and we wonder if it is correct. Our company has supplied a great many deep well turbine, submersible, and all types of centrifugal pumps to Thailand, under AID financing. These pumps were sold under competitive bidding, as your files will undoubtedly indicate. Furthermore, we never have received any complaints about the quality or functioning of our equipment. We maintain a branch office in Bangkok to service our distributors, and we have trained our distributors and their staff in order to enable them to provide efficient service, and furthermore, they have invested in an important stock of spare parts. It is incomprehensible to us that AID would condone such an arrangement, and we request you to confirm whether there is any truth to this. Of course, in the affirmative we will exert all efforts to appeal such a decision. Trusting to be favored with your early reply, we remain. Very truly yours, Mr. M. I. HAMILTON, IRRIGATION & INDUSTRIAL DEVELOPMENT CORPORATION, M. I. HAMILTON, President. DEPARTMENT OF STATE, AGENCY FOR INTERNATIONAL DEVELOPMENT, Irrigation & Industrial Development Corporation, New York, N.Y. DEAR MR. HAMILTON: Your letter of March 24, 1969, to the attention of Mr. Carl J. Nelson, Thailand Desk, has been referred to this office. The decision to standardize on certain Fairbanks Morse and Peerless' pumps was made on the basis of prudent and economic reasons judged to be in the best interests of the Thailand and U.S. Governments. I believe that you can readily understand the need for standardization, in certain instances, whether for governmental or industrial use. However, while standa.dization in this instance affects you adversely, I am confident there are other instances to your benefit. Thank you for your participation and interest in the AID program. ADOLPH J. BENNETT, Director, Office of Procurement Management Bureau for East Asia. IRRIGATION & INDUSTRIAL DEVELOPMENT CORPORATION We believe that the attached copies of a recent exchange of correspondence with the Irrigation & Industrial Development Corporation makes clear that the standardization action referred to was for a limited number of pumps for a single project in Thailand. Mr. M. I. HAMILTON, DEPARTMENT OF STATE, AGENCY FOR INTERNATIONAL DEVELOPMENT, Irrigation and Industrial Development Corporation, New York, N.Y. Dear Mr. HAMILTON: Pleaes refer to our letter of April 17, 1969 which responded to your inquiry about pump procurement in Thailand. In reviewing that correspondence in connection with subsequent inquiries, we find that we did not make an important point clear. AID approved the proprietary procurement of only 176 pumps in connection with only one project. AID has not approved a standardization for Thailand country-wide nor for any other project in Thailand. I hope the above will clear up any misunderstanding you may have. Sincerely your, ROBERT A. CAHN, Chief, Logistic and Material Procurement Division, Office of Procurement Management, Bureau for East Asia. IRRIGATION & INDUSTRIAL DEVELOPMENT CORPORATION, DEPARTMENT OF STATE, Agency for International Development, Washington, D.C. (Attention of Mr. Robert A. Cahn, Chief Logistics and Material Procurement Division Office of Procurement Management Bureau for East Asia) DEAR MR. CAHN: Thank you very much for your kind letter of July 29. We are pleased to hear that AID has not approved standardization for other projects in Thailand, and we are advising Mr. David W. Porter, our Area Manager, and our distributors accordingly. Very sincerely yours, M. I. HAMILTON, President. DAVID KOETSER CO., INC. DAVID KOETSER CO., INC., SUBCOMMITTEE ON GOVERNMENT PROCUREMENT, GENTLEMEN: We are exporters specializing in commercial kitchen equipment and we negotiated a sale in the amount $5,377.30 under AID loan no. 515-L-018-01 to Costa Rica as a result of our participation in the American Exhibit at the El Salvador International Fair in San Salvador last November, 1968. Our customer opened a credit with the Banco Anglo Costarricense for that amount on January 30, 1969. The Chase Manhattan Bank New York issued its covering letter of credit on April 11 stipulating on board bill of lading not later as April 30 from San Francisco. We must order the equipment from five manufacturers located in Chicago, Shreveport, La., Los Angeles (2) and San Francisco, two of which require at least three weeks to deliver. We need two months between the date of receipt of advice opening L/C and on board bill of lading date. After consultation with Chase Manhattan we asked our customer to initiate a request for extension of on board of lading date. We were told that May 30 would be absolute deadline with June 30 last day of payment by Chase Manhattan. While the customer acted immediately upon our request, this is actually useless, because of the 30 May "absolute" deadline. Two and one half months bickering between AID and Chase Manhattan is resulting in our loss of the order, on which considerable time and expenses was wasted. Respectfully yours, DAVID KOETSER CO., INC. GRAHAM & JAMES, ATTORNEYS AT LAW, Hon. JAMES C. CORMAN, DEAR CONGRESSMAN CORMAN: In connection with the hearings which you are carrying on at present with a view to broaden the participation of small businesses in the procurement of goods and services financed by AID funds, we would like to draw your attention to a situation in which AID practices and policies, or lack of them, is hindering participation of one small business in AIDfinanced foreign trade. We refer to the situation of David Koetser Company, Inc., who have we believe also addressed a letter to you on this subject. That company obtained an order from a Costa Rican buyer as a result of participation in the American Exhibit at the El Salvador International Fair in San Salvador, November, 1968. The Costa Rican purchaser timely opened its credit with its bank, the Banco Anglo Costarricense on January 30, 1969. However, the Chase Manhattan Bank, New York, did not issue its letter of credit until April 11, 1969, and that letter of credit required on board bills of lading dating not later than April 30th. David Koetser Company, Inc., as well understood by all parties, must arrange for its suppliers, in this case five different manufacturers located in four different cities, to fill the order. It must wait to place its orders with its suppliers until the payment therefor is assured by opening of the letter of credit in its favor. As a small business, it is not in a position to place orders with its suppliers bearing the risk that a firm order will not result, or, as a small business, is it in a position to carry such stock in inventory. Therefore, it needs a period of about two months between the date of the letter of credit and the date of shipment. Because of the long delay between the opening of the credit with the Costa Rican bank on January 30th and the confirming letter of credit opened by the Chase Manhattan Bank on April 11th, there was not sufficient time before the April 30th shipping date. David Koetser Company, Inc.'s request for an extension of the shipping date was answered by an extension to May 30th, which still does not leave sufficient time to arrange with suppliers for fulfillment of the order. Apparently, the reason for both the initial delay in opening of the letter of credit by Chase Manhattan Bank, and the refusal to extend the shipping date beyond May 30th both result from policies or decisions of AID. It seems to us clear that this situation illustrates a case in which AID's approach is not sufficiently flexible, and does not sufficiently take account of the needs of small exporters operating on limited capital. Such small exporters cannot place procurement orders with their suppliers until they are assured by the opening of letters of credit that they will receive payment for the goods ordered. AID policies or practices, like those shown in this case, which prevent the opening of letters of credit, or their amendment, so as to give small businesses the necessary assurance they need are really shutting such small business exporters out from participation in AID-financed trade. It seems that such policies call for investigation and correction, and we join in the request of David Koetser Company, Inc. that you look into this subject during your hearings. Very truly yours, GRAHAM & JAMES, DAVID KOETSER COMPANY, INC. AID loans are made to the governments of the recipient countries. One of the means of exercising control over loans by AID is to specify in each loan agreement a date by which shipment of goods under the loan must be made. Loan 515-L-018 to Costa Rica, executed on January 4, 1968, specified a terminal shipping date of April 30, 1969. In order to accommodate sales made at the International Trade Fair at San Salvador in November 1968, AID agreed to expand the list of items eligible under the loan to include those sold by the Koetser Company, and to also extend the terminal shipping date from April 30, 1969 to June 30, 1969. The Central Bank of Costa Rica, as agent for the government of Costa Rica, did not request AID to authorize those changes for letters of credit issued by the Chase Manhattan Bank until March 5, 1969. AID's authorization to Chase Manhattan was issued March 18, 1969. This accounted for the original delay in issuance of the letter of credit to the David Koetser Co. We have been advised that the original letter of credit was subsequently amended to permit shipment by the extended date and that the Koetser Company was paid $5,377.30 on July 9 to complete the transaction. LAFAYETTE TRADING CO. LAFAYETTE TRADING CO., Lafayette Hill, Pa., May 10, 1969. HOUSE SMALL BUSINESS COMMITTEE, 2361 Rayburn House Office Building, Washington, D.C. GENTLEMEN: We thank you for your notice of the hearings that will be held beginning May 15, 1969. At present we represent seven textile mills for both spinning and dyeing wool and synthetic fibers. All of our yarns are going to Vietnam under the AID program, and we have been involved for the past three years. Our mills are small business firms, and they ask us many questions in reference to prices, quality and competition, and we cannot always give them their answers. We, ourselves, have many questions to be answered and would appreciate it if we could testify in these hearings. The writer has been to Saigon, Vietnam, twice in the past two years at our own expense. These trips were made to study their textile needs and visit their plants, and also to investigate complaints which they had in regards to quality. We await your earliest reply. LAFAYETTE TRADING CO., CHARLES P. HOFFNER, Sr. SELECT COMMITTEE ON SMALL BUSINESS, 2361 Rayburn House Office Building, Washington, D.C. (Attention of Mr. James C. Corman) LAFAYETTE TRADING CO., Lafayette Hill, Pa., June 26, 1969. GENTLEMEN: Thank you very much for your reply to my letter requesting a hearing at your Subcommittee Hearings. We haven't had the time to give you a full statement, but will state a few items and enclose a copy of a letter received the other day from Saigon, which we will explain to you. As we stated before, we represent many Textile Mills, who are Small Business, and export through Lindner, Cox & Hacker, Inc., Dover, New Jersey, who have a well staffed office in Saigon. We are presently shipping dyed Wool Hand Knitting and Spun Acrylic Yarns. We have not been able to receive orders for synthetic filament nylon or polyester yarns because the large yarn producers have their own export agents, and they supply the yarn at prices below domestic prices, and have many of their items processed by larger mills than those we represent. There is no way we can compete. Our mills can process all the yarns and give excellent quality, but we must pay a higher price for the raw yarn than our competing exporters. We suggest a set price be made for the raw material from yarn producers, and that they be forced to sell to anyone who wishes to process it for AID export. A final price is set now by the lowest bidder. Processing prices are about the same for all Textile processors, but the raw material is what makes the Small Business plants non-competitive. There are times when orders are taken by a few exporters, who can get the raw material at a low price, but never have it processed for export. They sell this yarn on the domestic market which, in turn, hurts the Textile Industry because they sell at lower prices and still make money on this yarn. More controls should be established to prove that the yarn was processed and shipped under AID requirements. |