absolutely cannot be said that buyers can purchase only from the United States through AID. They can buy from other countries and sales representatives-as outlined during the panel discussions are obviously going to push the lines which give them the best commissions. During an earlier part of the meeting under the topic "Additionality," it was stated by government representatives that the Foreign Assistance Program through AID is designed-so far as it can be done to foster and develop long-term markets. As Mr. Burton aptly pointed out during the AID panel it is essential to this concept for exporters to develop and maintain sales organizations which can carry on in the long term. This concept of long term to develop our exports pervaded the meeting. We must not only maintain, but must strengthen our sales organizations if we want continuing expansion of exports. (Incidentally Korea was another country mentioned during the meeting where AID is tapering off, following along the lines of Formosa.) Proper compensation to representatives carrying the ball for U.S. exporters is essential to maintain this aim. Conversely, the payment of commissions only in local currencies defeats this purpose. One party stated from the floor that his sales representative had reported that in some cases local authorities, when the time came to pay commissions, alleged that he did little or nothing to get the order and would either cut down or completely refuse the commission justly due him! For our own part when we reorganized some ten years ago we retained as principal overseas agents a firm in London, with a staff of some 150 people experienced in the world-wide marketing of Borates, as our principal overseas selling agents on a contract commission basis. They carry the major sales responsibility, do world-wide traveling, pay for advertising, providing technical services and support to local sales representatives, screen orders, credits, etc., and subject to our supervision with a small staff, handle our export sales much less expensively and with their experience more efficiently-than could have been done by building up a whole new organization here. Here again we pay them no more and no less under AID than we pay out of our own pocket on regular commercial transactions, because it is good business for us to do so; and thye are entitled to the same remuneration when they serve us in a competitive market on AID financed sales. We again reiterate our request that the prohibition against payment of dollar commissions be repealed. I called at your office, Mr. O'Leary, when I was in Washington earlier this year but unfortunately had to forego the pleasure of meeting you because you were out with the flu. I did discuss the problem then with some of your associates and have discussed it with various others in AID. We hope that with this further more detailed explanation-following the meeting last week-that we will be granted appropriate relief. I hope to be in Washington toward the end of this month and if that works out will endeavor to see you and answer any further questions you may have. Very truly yours, T. R. STETSON, Manager Export Services. OCTOBER 19, 1967. Mr. PATRICK M. O'LEARY, Office of Procurement, Agency for International Development, Washington, D.C. DEAR MR. O'LEARY: Just a few lines to express my sincere thanks to you for taking time from your busy schedule on Friday, October 13th, to discuss the AID Policy put into effect in given countries of the world, which I strongly maintain will ultimately injure exports from the United States. I felt that it was my civic duty to bring given points to your attention, as I feel that these points will have a definite effect on our overall United States Export Program, and I want you to know that I sincerely appreciated your taking the time to review these points with me. Some of the points we discussed being as follows: PAYMENT OF SALES REPRESENTATIVE'S COMMISSION UNDER A.I.D. FINANCING I have constantly maintained, that there are only two ways on a cost of sales basis for the United States Manufacturer or Exporter to sell their products in the foreign markets which are, (a) with the use of a salaried employee stationed in each country of the world and (b) the use of a Sales Representative when one cannot afford the services of a salaried employee. The Export Division of the large United States Corporation can afford to station salaried employees in each country of the world to sell their products, and under the present AID Regulations, the Export Division of the large United States Corporation is permitted to pay their salaried employes, their salary, travelling expenses, entertainment expenses in U.S. Dollars, under AID financing. The Export Division of the medium size or small United States Exporter cannot afford to place salaried employees in every country of the world, and they must rely upon the services of a Sales Representative, to whom we refer as a Manufacturer's Representative in domestic business transactions. These Sales Representatives must live off the sales commission which we pay them for their services, paying their own travelling expenses, entertainment expenses, etc. The medium size and small United States Exporters have been paying their Sales Representatives' sales commission in U.S. Dollars for many years, and AID is upsetting a normal business practice when enforcing a policy that these Sales Representatives must be paid in local currency under AID finance transactions. As explained during my pleasant visit with you, the local banks in the given countries who establish the letter of credit in favour of the United States Exporter under AID business transactions, have relayed to the customer who established the letter of credit, the amount of commission paid to the Sales Representative for his services. The customer immediately requests this commission as a Trade Discount, which is a constant source of trouble. If any manufacturer or exporter passes on to the customer the margin of profit to support a sales organization (Sales Representative or salaried employee) as a Trade Discount, until there is no margin left to support the sales organization, he has lost his business. All United States Manufacturers and Exporters include in their selling prices a given margin of profit to support a sales organization which should not be given away as a Trade Discount, until nothing is left to sell the product. If the large United States Corporation can include a margin of profit within their selling prices to pay their salaried employees in dollars under AID financing, then surely the medium size or small United States Exporter can include a margin of profit in his selling prices to pay his native Sales Representative his sales commission in U.S. Dollars. As mentioned to you during our pleasant visit, the medium size and small United States Exporter must continue to do business in a given country under commercial financing when AID no longer assists the country with AID financing. The Government of Chile has taken the AID forms and with the use of same, have passed their own laws pertaining to the payment of the Sales Representative's Commission in local currency. Other countries will no doubt follow this procedure, which will ultimately injure the United States Export Program for many years to come. As you know, many countries of the world have an official rate of exchange and a free rate of exchange, and the native Sales Representative will lose up to 30% of his income when he is forced to accept payment of his commission at the official rate of exchange. We have already received indications that some of our Sales Representatives are securing manufacturers in Europe and in Japan to represent, whereby these countries do not interfere with the payment of their sales commissions. As an active member of the Los Angeles Regional Export Expansion Council and the Western International Trade Group, I am keenly interested in playing my part to increase exports from the United States to given countries of the world, and I sincerely hope that my comments will serve a worthy purpose. Very truly yours, INDUSTRIA AMERICANA & CO. INC., MARCH 4, 1968. CONGRESSMAN JOHN E. Moss, Chairman Government Operations Committee, House of Representatives, Washington, D.C. Reference: Agency for International Development rules and regulations Subject: Payment of sales representative's commission under A.I.D. financed transactions DEAR CONGRESSMAN MOSS: Our firm serves as Export Sales Manager on behalf of a group of United States Manufacturers, where we invest our funds on a cost of sales basis to sell the manufacturers' products in the export markets, we place firm orders with the manufacturer, we effect payment to the manufacturer and we offer interest free financing terms to the Foreign Distributor purchasing our manufacturers' products up to 180 days from date of shipment of given manufacturers' products. We use the services of native Sales Representatives in each country of the world to sell our manufacturers' products, and I am deeply concerned over the AID Rules and Regulations which prohibits our firm from paying our Sales Representatives their duly earned sales commissions in Dollars in specific in specific countries of the world. This AID regulation is injuring the small or medium size United States Exporter and I suggest strongly that you should take action to change this regulation. As a member of the Western International Trade Group, Los Angeles Regional Export Expansion Council, Foreign Trade Association of Southern California and the Overseas Automotive Club, Inc., this subject has been discussed at all meetings which I have attended and has been brought up to the attention of the Agency for International Development, U.S. Department of Commerce, etc., with no action taken up to this date. Attached you will find, photostat copies of the following items for your review: (a) Photostat copy of a Western International Trade Group panel discussion which took place on Stptember 27-28-29, 1967, on this subject, of which I was a member on this panel. (b) Photostat copy of letter dated October 6, 1967, written to Mr. Patrick M. O'Leary, of AID, by Mr. T. R. Stetson, Export Manager of U.S. Borax. (c) Photostat copy of my letter dated October 19, 1967, written to Mr. Patrick M. O'Leary of AID. (d) Photostat copy of letter dated October 20, 1967, written to Mr. Patrick M. O'Leary of AID, by Mr. Justin H. Smith, of FMC Corporation. (e) Photostat copy of letter dated November 28, 1967, written to Mr. Lawrence C. McQuade, of the U.S. Department of Commerce, by Mr. L. E. Coppersmith, President of the Foreign Trade Association of Southern California. I have just returned from attending the International Automotive Service Industries Show in Las Vagas, Nevada, where I attended a meeting of the Overseas Automotive Club, Inc., as a Regional Director of the OAC Club. All 280 members of the Overseas Automotive Club, Inc., consisting of Export Sales Managers of 500 Manufacturers of Replacement Automotive Parts, and who export from the United States approximately one billion dollars worth of replacement automotive parts, strongly protested the AID Regulation which prohibits us from paying our Foreign Sales Representatives their commission in U.S. Dollars under AID financed transactions. It is my desire to find out who is responsible for establishing the AID Regulation, which prohibits the small and medium size exporter from paying their native Sales Representatives their duly earned Sales Commission in U.S. Dollars, while at the same time permitting the large United States Public Corporation to pay their salaried employees in U.S. Dollars on an AID financed transaction. I am seeking your advice and assistance on this matter, as this AID Regulation is injuring our overall United States Export Program and can cause us to lose our Sales Representatives, which has taken us twenty to thirty years to secure to sell our manufacturers' products. All manufacturers include in their selling prices a given margin of profit to support either (a) a salaried employee to sell their products, or (b) to support the services of a sales Representative to sell their products. All sales agreements which we issued in favor of our Sales Representatives are subject to the Laws of the State of California in case of litigation, and this AID Regulation which does not permit payment of the Sales Representative's Commission in U.S. Dollars has negated all of our Sales Agreements. This same condition exists with all small and medium size exporters in the United States. It is hard for me to believe, that the Agency for International Development would establish a policy of this nature which inquires our overall United States Export Sales Program, and which could eventually cause us to lose our Foreign Sales Representatives and ultimately lose our sales in given countries of the world. The Country of Chile has now copied the AID Regulation pertaining to payment of the Sales Representative's commission in local currency and when AID is no longer financing in this market, we are stuck with this regulation for ever more. I will sincerely appreciate it, if you will investigate matters as to why AID has established this regulation which is detrimental to the United States Export Program, and I will be looking forward to your reply in this regard. Thanking you for your assistance in this regard, I remain, Very truly yours, INDUSTRIA AMERICANA & CO. INC., INDUSTRIA AMERICANA & CO. INC. Most of the countries where AID has applied restrictions against the payment of dollar commissions, have strict foreign exchange control regulations which limit their nationals' right to earn and accumulate foreign exchange. The AID restrictions are applicable to all types of suppliers of AID-financed sales and not just to small and medium size firms, as might be inferred from Mr. Keeler's statement. We regret the problems which the imposition of these restrictions has created for American suppliers and their overseas agents. We believe they are justified, however, as a means of: 1. Assisting aid recipient countries to prevent the accumulation of foreign exchange by their nationals to the detriment of the countries' own balance of payments position, thus lessening their need for external assistance. 2. Curtailing U.S. dollar outflow to foreign nationals, thereby improving the U.S. balance of payments position. 3. Promoting more efficient use of AID funds by reserving for commodity procurement, dollars which would otherwise be used for commission payments. 4. Preventing foreign importers from obtaining rebates from suppliers by acting, through concealment, as sales agents for their own purchases and receiving dollar commissions for themselves. The latter condition was found to exist, particularly in Vietnam, and was the subject of recommendations contained in the 42nd Report dated October 12, 1966, and the 4th Report dated August 25, 1967, of the House Committee on Government Operations which advocated the elimination of financing of agents commissions by AID. INDUSTRIES OF AMERICA, INC. INDUSTRIES OF AMERICA, INC., HOUSE SMALL BUSINESS COMMITTEE, 2361 Rayburn House Office Building, Washington, D.C. Att: Rep. Joe L. Evins, chairman of the House Small Business Committee DEAR SIR: I was certainly pleased to read your bulletin dated May 1, 1969 regarding the subject in reference. Our experience as a small business trying to procure AID financed purchases from abroad has been most discouraging. We have repeatedly participated in A.I.D. bids and never have even received a courtesy reply. In one instance AID granted a loan to Colombia under AID Loan #514-L029 and we requested plans and specifications from Buck, Seifert and Jost, consulting engineers of New Jersey. After setting up a letter of credit Bid Bond for $3600.00 and spending more than $300.00 in preparing this bid we never received a reply from neither the consultant engineers nor the recipient of the loan regarding the results of the bid. In short, I'd like to call your attention to the fact that these practices are most frustrating for small businesses and in my opinion the American small firms are not getting a fair share of our tax dollars. I will be glad to submit any information as well as evidence on projects where we have participated. I strongly urge that a thorough investigation be conducted regarding the policies of AID as I believe that competitive bidding is not taking place. Respectfully yours, INDUSTRIES OF AMERICA, INC., INDUSTRIES OF AMERICA, INC. Consultation with Buck, Seifert and Jost indicates that the specific case referred to was apparently for the purchase of Crane and Hoisting equipment. Buck, Seifert and Jost acted as consulting engineers for the purchaser, EMPRESAS MUNICIPALES de CALI, of Cali, Colombia. The engineer informs us that three bids were received as follows: C. E. Halaby Co----. American Chains & Cable Co.... $13, 679.52 29, 750.00 37, 905. 00 The engineer advises that they recommended to the buyer that the low bid be accepted and assumed that the buyer would inform the unsuccessful bidders when the award was made. Apparently this was not done. When U.S. Government agencies procure under formal advertising procedures, it is standard practice to inform unsuccessful bidders of the results of the bidding. 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. Since the procurement in question falls in the latter category, it is understandable that the purchaser did not notify the unsuccessful bidders of the results of the bidding. AID is, however, currently considering the practicability of periodically publishing notices of awards, for the information of all suppliers. |