SOUTHERN CROSS ENGINEERING & FOUNDRY WORKS SOUTHERN CROSS ENGINEERING & FOUNDRY WORKS, Subject: Your circular May 1, 1969-hearings on AID financed goods. AID loan to Colombia 514-L-049-Sale of two used 1957-60 models sugar centrifugals machines to Ingenio Balsilla Ltda., Cali, Colombia-AID Reference 23746. Representative JAMES C. CORMAN, Chairman, Hearings on in Connection with Small Business Participation in AID Financed Goods, Room 2359, Rayburn House Office Building, Washington, D.C. GENTLEMEN: We refer to your circular dated May 1st. regards hearings that are to be conducted in connection with AID financed purchases which are to be probed by the House Small Business Committee. We wish to offer testimony as appears in this letter of our particular case and the rather sordid manner in which we feel our case was expedited throughout. We had participated in a Commercial Mission to Colombia sponsored jointly by the U.S. Department of Commerce and the local Puerto Rican Commonwealth Government Department of Commerce. We had the Hon. Sandy Trowbridge who was then U.S. Secretary of Commerce, here in Puerto Rico who give us the orientation and charges regards such mission. As a result, I was in Colombia (Bogotá, Cali) for approx. 10 days October 14-24, 1967. The Mission move was spearheaded mainly as a result and in connection with a $1,000,000,000.00 AID Loan to Colombia at that time No. 514-L-049. As a result of such Mission, we were able, that is our Company was able to foment business with a Cali Sugar factory located in the Cauca Valley for two used American manufactured Western States 1957-1960 Models 40" x 30" Semiautomatic Fliud drive Sugar Centrifugals, which had been taken out of service here in Puerto Rico, in excellent working condition, to make way for completely automatic continuous units, in order to eliminate the operating cost of same. This was the reason for their being taken out of use, nothing more as an economy measure. It cut personnel from 3 to 1, which was the sole idea in replacing these semiautomatic models with completely automatic continuous. During our sojourn in Colombia in October 1967, we were able to officially tie up this business for the sale of two of these used, in excellent operating condition. models with Ingenio Balsilla Ltda, for the sum of $8,500,000 each or $17,000.00 both FOB Ponce, Puerto Rico. A new unit FOB factory todays costs approx. $16,000.00 each. After my return, Ingenio Balsilla Ltda. the buyer, our prospective customer informed us during December 1967 that they were going to apply for an AID financed Loan for the purchase of these 1957-1960 Models under Loan 514-L-049. Immediately, we wrote to Hal Ryerson, Commercial Attache in the U.S. Embassy in Bogotá requesting information on the procedures to be adopted in order for this matter to qualify for AID financing. Eventually in February we were referred to a Mr. Hall, Aid Capital Development Office in the U.S. Embassy in Bogotá, who later on referred us to a Mr. Richard Bogardus of AID in Washington, who was to handle this application. It is fitting to note here that back in May-June 1966, we had a Puerto Rican Licenced Engineer, Mr. Juan Torres, a Sugar Consulting Specialist, check out these models, while they were operating under full power and usual working conditions in the sugar factory, where they were located in Puerto Rico. Mr. Torres has a very reputable sugar consulting business in Cali, Colombia called Torres, Bou & Cia. Ltda. These U.S. manufactured machines are used for refining the sugar and taking out the greater quantity of molasses out of the sugar crystals or unrefined sugar. It is also fitting to mention here that Mr. Torres business in Colombia has been responsible for the complete relocation of three complete sugar factories to date besides unlimited amounts of miscellaneous sugar machinery. They have been established 19 years in Cali, Colombia, serve all Latin America and have an irreproachable record of distinction. Mr. Hall, AID Development officer in the U.S. Embassy in Bogota finally indicated in February 1968 the various measures we would have to adopt in order for these two Models to qualify for AID financing. The main requisite of AID, was an inspection of the equipment, by an impartial qualified engineer, acceptable to both importer (Ingenio Balsilla Ltda.) and exporter Southern Cross and of course approved by AID. We submitted the name of Engineer Juan Torres, as being in the best position to certify as to condition and operational efficiency of both these units, pointing out to AID, that Torres had inspected the machines in June 1966 under actual normal operating conditions, checking out production, all efficiency figures and related matters, the only inspection that is really worthwhile. Result-AID would not accept the certification of Mr. Torres. Their excuse was that this inspection had taken place in mid-1966 and that as the centrifugals had been taken out of service in late 1966, was not current. We did take them out of service in late 1966, all were carefully checked, cleaned throughout and preserved all parts subject to deterioration each unit placed complete with all its electrical mechanical effects in its 5' x 8' x 6' corresponding carefully prepared box, with all its attachments firmly bolted crated in extra heavy duty wooden crates, suitable for overseas shipment, all parts oiled greased against any possible rusting or deterioration. These units were then carefully stored in a dry weatherproof warehouse. AID were carefully informed of these measures, yet refused to accept this Mid 1966 certification explaining as an excuse that this excuse was made too long before (approx. 18 months) and that parts subject to storage could have been subject to deterioration approx. 18 months after. Even though we explained to AID that we had dried out electrics in an oven, immersed them in an emulsion, that would not let humidity enter the windings, etc. to preserve same. Also units when dismantled, taken out of service were subject to reconditioning changing of bearings, etc., a preventative general maintenance measure we adopted, that in the long run builds reputability for our firm and establishes a satisfied ever returning clientele internationally. AID were informed of all these measures being taken yet they refused to accept Mr. Torres initial Certification 15-18 months later. That is in early March 1968, they refused to recognize this June 1966 inspection by Mr. Torres. Finally we were able to agree on an impartial inspection engineer some 4-5 months in June-July 1968 later, after AID had referred one to us in the meantime, that is a fierce competitor of ours and as a result of this, we refused to accept same. Then this inspector Puerto Rican licensed engineer, Mr. Arsuaga certified that the machinery was in the same good condition we had pointed that it was from the beginning back in early 1968 as was also confirmed originally by Mr. Torres inspection in Mid 1966. Then AID requested that Mr. Arsuaga also appraise these two machines which according to the original requirements as set forth by them, was not one of the necessities. The final appraisal value of the machines was some $6.600 some $2,000.00 less than our agreed on selling price to Ingenio Balsilla Ltda., that is the price set upon for the machines was $6,600.00 by Mr. Arsuaga. Although we offered proof we had sold identical machines from the same battery to Ecuador for $9,500.00 each some 12-18 months before and Central America-San Salvador in October 1968 for $8,000.00. AID would not OK any more than this amount of $6,600.00 for financing. Candidly speaking, one obstacle was being put in our path after another during these first 6 months. Our continual requests to AID in Bogotá, were left unanswered and ignored until we were informed, by Banco de la República in Bogotá, that distributed funds for AID loan 514-L-049 had been exhausted in their letter dated August 8th., 1968. This was finally after the both machines had been passed inspection, putting an end to our application so to speak. We cannot but feel that on several occasions our correspondence was pigeonand finally in September 1968 were informed by AID officer Mr. Hall in Bogotá that arrangements were being made that an L/C was being opened in our favor. Nearly 12 months after our first official contact with importer Ingenio Balsilla Ltda. this was in September 1967 and 9 months after we had officially initiated our first request for AID financing on these Centrifugals. We cannot but feel that on several occasions our correspondence was pigeonholed and candidly speaking this is pretty sordid treatment of a nature, wherein it took until December 1968 to get the merchandise on board ship in time to qualify with the terms of the L/C. It was some two months before the L/C was opened from the time we had received official word from AID Bogotá. We very nearly missed out due to the dock strike which as you are aware, started December 20th., 1968 and lasted 4-6 months. Centrifugals are finally being delivered to Colombia this week by Lykes Line to the Port of Baranquilla as a result. In other words, the repeated setbacks by AID took approx. from Ag. 1967-May 1969 to deliver. We have substantiating documents to corroborate all the foregoing copies of which would be available in the event you consider so necessary. This letter is not written in a derogatory form, however, it is written with a sole view of constructive criticism, airing these grievances with the sole aim to correcting these failings, that thwarted our many attempts at rapidly expediting this matter and eliminating the burocracia that existed in our particular case and no doubt still exists, that often left our entreaties unanswered to your AID office in Bogotá and took literally speaking, one whole year for this so simple an operation to be complemented. Also the letter file alone is some 4" thick as proof of our continual follow ups and entreaties. It will be near impossible for me to testify at your hearing due to the time element principally and geographical location, but if this letter can rectify in some manner the frustrating short comings, that we suffered in our particular operation, it will have served the purpose for which it was destined and written. It has been a pleasure to serve you and we assure you of our genuine interest in all your pragrammes and operations. We do hope to be favoured with your corresponding acknowledgment accordingly. Very truly yours, SOUTHERN CROSS ENGINEERING & C. A. HOURSTON, Administrator. SOUTHERN CROSS ENGINEERING It is AID policy to finance the purchase of used equipment only under safeguards which will establish that an acceptable level of operational life can be expected; that spare parts are available; and that the price to be paid is fair. To accomplish this, AID requires that appropriate inspection, testing, and appraisal be performed by independent inspectors agreed to by both the buyer and the seller, and acceptable to AID. We believe tha tthese safeguards are prudent and, in light of earlier experiences in financing used equipment, are essential to assure the proper expenditure of appropriate funds. These conditions were made known to Mr. Hourston following receipt of an application from the purchaser for AID financing. The inspection performed by Mr. Juan Torres nearly two years earlier did not meet these conditions and Mr. Hourston was so advised. Mr. Hourston contested our decision on this matter and several months passed before an acceptable inspection and appraisal was agreed to and performed. We regret the delay in consummating this sale. We believe, however, that the prudence of finally agreed inspection, which resulted in a substantially reduced selling price, speaks for itself, and that the delays referred to by Mr. Hourston were basically of his own making. The amount of the loan was, incidentally $100 million and not $1 billion. THE SPAT CO. THE SPAT Co., Stamford, Conn., May 5, 1969. Representative JOE L. EVINS, House Small Business Committee, 2361 Rayburn House Office Building, Washington, D.C. DEAR SIR: Thank you for your notice dated May 1, 1969, relative to the coming probe of AID Financed Purchases. Permit me to add my comments, as a small businessman who has attempted to secure some of this business (quoting on chemicals, electrical instruments, bearings, and yarn). Having ignored the warnings of an associate who had tried to get some AID business and failed, I proceeded to make several bids without result, and finally reached the same conclusion as my associate, to wit: it's a frustrating, unrewarding experience. There are two major complaints: (1) Many bids are badly prepared, with inadequate specifications, and with no ready means provided to get any clearer definition. (2) Once having submitted a bid, one does not get either the courtesy of a reply, nor a copy of the results of the bid opening. It is hard to guess whether one is even in the ball park, much less closely competitive. The net result is that one rapidly becomes discouraged, and unwilling to invest the time and effort in bid preparation. There is always the nagging suspicion that it is a "closed corporation," with bids predestined for favored suppliers. Incidentally, as a result of the above feeling, one is obviously reluctant to pay for some of the bid sets, as they require. In short, if you really want the small businessman to compete for this business, (1) Make the bids explicit, and provide means for clarification to be readily available (2) Make the bid results public information, at least to those who have taken the trouble to enter the competition. I sincerely hope the above comments prove helpful. Yours very truly, MELVIN SPAT, P.E., President. THE SPAT Co. A very high percentage of the items which appear in the AID Small Business Circulars represent proposed purchases by private foreign importers who are soliciting offers or quotations for procurement through normal commercial channels. The description of the items to be purchased, and their specifications are prepared by the foreign importers-not AID. Since these purchases are not made under formal Invitations for Bids (which would require precise specifications in order to determine the lowest bidder), we believe that less detailed specifications are appropriate and are acceptable under normal commercial practice. We believe, moreover, that the descriptions given are generally considered adequate by experienced U.S. exporters. 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. Hon. JOE L. EVINS, STEINBERGER BROS., INC. House Small Business Committee, STEINBERGER BROS., INC., New York, N.Y., May 13, 1969. 2361 Rayburn Office Building, Washington, D.C. Re AID financing hand knitting purchases-wool yarn. DEAR REPRESENTATIVE EVINS: With reference to Form released dated May 1st, 1969, we are extremely glad that you are conducting these hearings in order to assist American business in pursuing effective commercial relations under AID. As per your request, we are writing you with our comments. Recently, AID has invited as guests of the U.S. Government, representatives of the Vietnam government (Director of Commercial AID and Assistant Minister of Commercial AID) in order to discuss post-hostility trade and development opportunities in South Vietnam. This shows that AID has been working in the right direction. Representatives of the U.S. Department of Commerce have also assisted us and been very helpful. We have been receiving some business through direct correspondence in Vietnam since 1966 and through a New York City exporter. Regarding AID Small Business Circular, which is issued regularly, the following should apply: Within 45 days of the bid date, there should be a central bureau in Washington in order to know the cost prices quotes by successful U.S. firms and this knowledge published or readily available for reference. In our experience, the AID Small Business Circular was not useful in obtaining direct business even when the quotations and samples were submitted in time. We very rarely received answers to our proforma invoices or specifications. The only way we were able to consummate business was through direct lengthy correspondence with consignee through submission of quotations, specifications and samples prior to the publication of AID Small Business Circular. As soon as letter of credit has been given, AID usually approves under Form 11 within one week or sooner, which is very prompt. Services rendered by the U.S. Dept. of Commerce and the AID organization have been very helpful, but the Small Business Circular has not proven successful from our point of view. We were never able to consummate business based on the Small Business Circular even though we sent out hundreds of samples and mail over the years, as well as quotations in order to see if we would get results through the circular. Thanking you most kindly for your attention, we remain, Very truly yours, (372) STEINBERGER BROS., INC., |