NEWHALL REFINING CO. [Telegram] Hon. JAMES C. CORMAN, NEWHALL, CALIF., May 15, 1969. Chairman, Subcommittee on Government Procurement, Rayburn House Office Building, Washington, D.C.: We respectfully call to the attention of your committee the manner in which some government agencies and AID in particular are procuring petroleumasphalt and related products in Southeast Asia. We understand that substantial amounts of AID funding for highway construction in Vietnam and Korea is being spent through U.S. contractors such as R.M.K. B.R. Thus giving the appearance of money being spent on the U.S. These companies, however, are buying substantial amounts if not all of their asphalt requirements from sources in Taiwan and Japan at prices no better than those available in the U.S. This type of procedure would appear to be defeating the purpose of the AID program, U.S. dollar conservation, and the congressional intent to assist U.S. small business. We indorse and commend the interest and actions of your committee. Mr. KING T. KENNY, Vice President, Newhall Refining Co. NEWHALL REFINING CO., Vice President. HOUSE SMALL BUSINESS COMMITTEE, DEAR MR. KENNY: This is in response to your recent telegram expressing views regarding procurements of petroleum asphalt in Southeast Asia under the Agency for International Development program. The information you furnished appears to be appropriate for this Subcommittee's study of small business participation in AID financed procurements. If agreeable to you, the Subcommittee will present your position to the AID Administrator, request his comments thereon, and include your letter and his response in the record of our hearings. It will be helpful if you would provide your written approval for this before we resume the hearings on July 10. Your interest and cooperation are appreciated. Chairman, Procurement Subcommittee. JAMES C. CORMAN, M.C. NEWHALL REFINING CO., INC., Newhall, Calif., June 26, 1969. Hon. JAMES G. CORMAN, Chairman, Procurement Subcommittee, MY DEAR CONgressman CoRMAN: Thank you for acknowledging receipt of our telegram relative to procurement policies of AID as they may relate to small business in the U.S.A. You may indeed include our correspondence (including this letter) as a matter of record in your hearings. We would also suggest that your Committee look into a government proceurement of several hundred portable steel tanks currently being used for transporting asphalt from Taiwan to South Vietnam. The idea of transporting asphalt in portable tanks was presented to RMK/BRJ in 1968 by our customer and associate, Transit Tank International. It now appears that RMK liked the idea to such a degree that the U.S. Government was encouraged to contract for and buy the tanks in Taiwan. The tanks are being used by RMK to transport asphalt from Taiwan to hot plants in South Vietnam. Additionally, if our information is correct, the asphalt being purchased for shipment in these government-owned tanks is priced in the range of $28.00 per ton, F.O.B. Taiwan. Purchases under similar conditions in the United States (West Coast) would approximate $16.00 per ton. Of course, shipments from the West Coast would be in U.S. Flag vessels and I am not sure this is the case for shipments out of Taiwan. I feel quite sure that U.S. small refiners and in the aforementioned case, steel fabricators, can offer competitive prices when they are given the opportunity to quote. Thank you for the interest and concern of your Committee. NEWHALL REFINING CO. TELEGRAM K. T. KENNY. The RRK/BRJ contracts referred to are not AID contracts. Presumably they are contracts which were entered into by the Department of Defense, and over which AID has no jurisdiction. NEWHALL REFINING CO. LETTER The RMK/BRJ contract referred to is not an AID contract. Presumably it is one which was entered into by the Department of Defense, and over which AID has no jurisdiction. NIAGARA MACHINE & TOOL WORKS NIAGARA MACHINE & TOOL WORKS, Hon. JAMES C. CORMAN, House Small Business Committee, SIR: We were interested in the News Release dated Thursday, May 1, 1969 indicating that certain hearings will be held designed to broaden American small business participation in the procurement of goods, financed by AID. As a frequent bidder for AID financed requirements, I would like to bring to your attention a requirement of certain AID financed transactions that presents a definite road block for a large majority of small American business firms. I am referring to the prerequisite on some jobs of furnishing first, a bid bond and then, for the successful bidder, a performance bond. I am sure you are aware of the fact that this is a completely foreign way of doing business for the average medium to small U.S. business firm and the establishment of bonds oftentimes presents sufficient red tape and complications as to completely discourage bidding on a given transaction. In addition, of course, establishing these bonds essentially penalizes the American supplier by tying up his valuable funds with a subsequent loss of interest for varying periods of time. Also, the preformance bond is generally held until after equipment has been delivered overseas and the average American supplier is somewhat at the mercy of his overseas customer in that if the customer wishes to take objections to any equipment supplied, he can, without recourse to the American supplier, collect against the performance bond. Specifically, we have encountered this requirement in southeast Asia and in Korea; however, this practice may be in existence in several other areas. We would suspect that this is a requirement established by the foreign government; however, since AID funds are being utilized to finance the transaction, it would appear to us that AID should be in a position to establish the terms. We are completely willing to do business with overseas firms on the same basis as their American counterparts; however, we fail to see why penalties of this nature should be invoked which obviously will discourage participation by U.S. small firms. Very truly yours, C. G. BOGARDUS, Assistant Sales Manager. NIAGARA MACHINE & TOOL WORKS The requirement for bid and performance bonds has common usage among U.S. Government procuring agencies and is authorized by Part 1-10 of the Federal Procurement Regulations. We believe that their use by foreign purchasers is not only prudent, but is particularly desirable as a safeguard against possible nonperformance by bidders who are located thousands of miles away and against whom the possibility of recourse is otherwise remote. There have, unfortunately, been too frequent cases of U.S. suppliers reneging on delivery promises, shipping poor quality products, and demanding increased prices after a sale has been consummated. (330) NORTH AMERICAN ROCKWELL CORP., CARVER COTTON GIN DIVISION Hon. JOE L. EVINS, House Small Business Committee, NORTH AMERICAN ROCKWELL CORP., Rayburn House Office Building, Washington, D.C. DEAR SIR: As a native of Memphis, Tennessee, it is interesting to note that you are Chairman of the House Small Business Committee and are conducting hearings to try to broaden small business in the procurement of goods and services financed with AID Funds. We at Carver do a relatively large volume of export business. For instance, in fiscal 1968, 77% of our business was outside of the United States. Export marketing is, at times, frustrating and we now have another problem which adds to our frustration, which is the AID Form 11. This form is an application for approval of commodity eligibility and we certainly have no objection to the use of this form as we certainly think AID should give approval of the use of AID Funds are put to. Our objection is, however, that this form is being called for at the wrong time. Currently we receive a request for this form with the irrevocable Letter of Credit. In international business, the irrevocable Letter of Credit is supposed to be the final word but the new requirement by AID requests that the Form 11 be sent in after we have received the Letter of Credit. In essence, this makes the Letter of Credit no longer irrevocable. To give you an example of our problems, when we are doing business with the countries overseas and obtain signed orders in competition with the Europeans, we have to promise a delivery date. Most of the time when the orders are signed, we have no idea whether the financing for the machinery will be through EXIM Bank, World Bank, free foreign exchange within the country, or AID Funds. When competing with the Europeans and promising a certain delivery date, we have to begin manufacturing the equipment immediately upon signing of the order in order to make delivery when promised. In the past, when we accepted orders on this basis, we had the shipment ready to go to the docks and when we received the irrevocable Letter of Credit we made shipment. Now we are in the precarious position that we have the machinery ready for shipment and the Letter of Credit comes in, and if it involves AID Funds, we have to hold up shipment to get approval from AID Washington on the Form 11. We recently had a rejection by AID because the commodity was not included in the AID loan. Fortunately this happened to be a small repair order, but we can visualize American companies being badly hurt by AID refusing to honor an irrevocable Letter of Credit because of rejection when the AID Form 11 was sent in. Some of our orders run as high as $300,000 and you can see the difficult position this puts such companies as ourselves in in that we could have the machinery completed and have AID cancel the Letter of Credit at the last minute. We have approached the AID Offices and reminded them that through the years the projects were always approved by the AID Mission in the country and AID, Washington before the Letter of Credit could be opened. AID's answer is that Congress forced them to have a final commodity eligibility clearance with the final transaction, which is the opening of the Letter of Credit. I believe you can see, Congressman Evins, that it simply will not work to have a request for the AID Form 11 at the end of the business transaction instead of at the beginning. 33-611 0-70- -22 We are all aware of the need of American business to expand their export marketing to help improve our balance-of-payments situation. This poor judgment in the timing of the AID Form 11 will certainly not help American businessmen increase their overseas marketing. We are aware that AID Funds do not particularly help our foreign exchange position, but we also wish to make clear to you that when we are negotiating business and are unaware of what means of financing the customer is going to use, we are very much afraid that if the customer ends up using AID financing and AID has the power to cancel an irrevocable Letter of Credit, we are reluctant to compete with our European competitors by promising specific delivery dates. In essense, this bad timing in requiring the AID Form 11 at the last minute is bound to cost American businessmen, and in turn the U.S. Government, export sales. We simply cannot take the calculated risk of having AID rejecting our financing at the very last minute. If Congress are responsible for asking for this last minute approval after the Letter of Credit is opened, we are sure they did not anticipate the problems they would cause the American businessmen and we will certainly appreciate your trying to get this poor decision rectified. Yours very truly, CARVER COTTON GIN DIVISION, Vice President and General Manager. |