[House Hearing, 105 Congress]
[From the U.S. Government Publishing Office]



 
                  AGRICULTURE, RURAL DEVELOPMENT, FOOD
                  AND DRUG ADMINISTRATION, AND RELATED
                    AGENCIES APPROPRIATIONS FOR 1998

========================================================================

                                HEARINGS

                                BEFORE A

                           SUBCOMMITTEE OF THE

                       COMMITTEE ON APPROPRIATIONS

                         HOUSE OF REPRESENTATIVES

                       ONE HUNDRED FIFTH CONGRESS

                              FIRST SESSION
                                ________

     SUBCOMMITTEE ON AGRICULTURE, RURAL DEVELOPMENT, FOOD AND DRUG 
                  ADMINISTRATION, AND RELATED AGENCIES

                     JOE SKEEN, New Mexico, Chairman

JAMES T. WALSH, New York               MARCY KAPTUR, Ohio
JAY DICKEY, Arkansas                   VIC FAZIO, California
JACK KINGSTON, Georgia                 JOSE E. SERRANO, New York
GEORGE R. NETHERCUTT, Jr., Washington  ROSA L. DeLAURO, Connecticut
HENRY BONILLA, Texas                   
TOM LATHAM, Iowa                       

 NOTE: Under Committee Rules, Mr. Livingston, as Chairman of the Full 
Committee, and Mr. Obey, as Ranking Minority Member of the Full 
Committee, are authorized to sit as Members of all Subcommittees.

  Timothy K. Sanders, Carol Murphy, John J. Ziolkowski, and Joanne L. 
                       Orndorff, Staff Assistants
                                ________

                                 PART 5

FARM AND FOREIGN AGRICULTURAL SERVICES PROGRAMS AND FOOD SAFETY PROGRAMS

                                                                   Page
 Farm and Foreign Agricultural Services...........................    1
     Farm Service Agency
     Foreign Agricultural Service
     Risk Management Agency
     U.S. Agency for International Development--
         Public Law 480
 Food Safety......................................................  667
     Food Safety and Inspection Service

                                ________

         Printed for the use of the Committee on Appropriations
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                       COMMITTEE ON APPROPRIATIONS                      

                   BOB LIVINGSTON, Louisiana, Chairman                  

JOSEPH M. McDADE, Pennsylvania         DAVID R. OBEY, Wisconsin            
C. W. BILL YOUNG, Florida              SIDNEY R. YATES, Illinois           
RALPH REGULA, Ohio                     LOUIS STOKES, Ohio                  
JERRY LEWIS, California                JOHN P. MURTHA, Pennsylvania        
JOHN EDWARD PORTER, Illinois           NORMAN D. DICKS, Washington         
HAROLD ROGERS, Kentucky                MARTIN OLAV SABO, Minnesota         
JOE SKEEN, New Mexico                  JULIAN C. DIXON, California         
FRANK R. WOLF, Virginia                VIC FAZIO, California               
TOM DeLAY, Texas                       W. G. (BILL) HEFNER, North Carolina 
JIM KOLBE, Arizona                     STENY H. HOYER, Maryland            
RON PACKARD, California                ALAN B. MOLLOHAN, West Virginia     
SONNY CALLAHAN, Alabama                MARCY KAPTUR, Ohio                  
JAMES T. WALSH, New York               DAVID E. SKAGGS, Colorado           
CHARLES H. TAYLOR, North Carolina      NANCY PELOSI, California            
DAVID L. HOBSON, Ohio                  PETER J. VISCLOSKY, Indiana         
ERNEST J. ISTOOK, Jr., Oklahoma        THOMAS M. FOGLIETTA, Pennsylvania   
HENRY BONILLA, Texas                   ESTEBAN EDWARD TORRES, California   
JOE KNOLLENBERG, Michigan              NITA M. LOWEY, New York             
DAN MILLER, Florida                    JOSE E. SERRANO, New York           
JAY DICKEY, Arkansas                   ROSA L. DeLAURO, Connecticut        
JACK KINGSTON, Georgia                 JAMES P. MORAN, Virginia            
MIKE PARKER, Mississippi               JOHN W. OLVER, Massachusetts        
RODNEY P. FRELINGHUYSEN, New Jersey    ED PASTOR, Arizona                  
ROGER F. WICKER, Mississippi           CARRIE P. MEEK, Florida             
MICHAEL P. FORBES, New York            DAVID E. PRICE, North Carolina      
GEORGE R. NETHERCUTT, Jr., Washington  CHET EDWARDS, Texas                 
MARK W. NEUMANN, Wisconsin             
RANDY ``DUKE'' CUNNINGHAM, California  
TODD TIAHRT, Kansas                    
ZACH WAMP, Tennessee                   
TOM LATHAM, Iowa                       
ANNE M. NORTHUP, Kentucky              
ROBERT B. ADERHOLT, Alabama            

                 James W. Dyer, Clerk and Staff Director









   AGRICULTURE, RURAL DEVELOPMENT, FOOD AND DRUG ADMINISTRATION, AND 
                RELATED AGENCIES APPROPRIATIONS FOR 1998

                              ----------                              

                                           Thursday, March 6, 1997.

                 FARM AND FOREIGN AGRICULTURAL SERVICES

                               WITNESSES

DALLAS R. SMITH, ACTING UNDER SECRETARY, FARM AND FOREIGN AGRICULTURAL 
    SERVICES
GRANT B. BUNTROCK, ADMINISTRATOR, FARM SERVICE AGENCY
AUGUST SCHUMACHER, JR., ADMINISTRATOR, FOREIGN AGRICULTURAL SERVICE
CHRISTOPHER E. GOLDTHWAIT, GENERAL SALES MANAGER, FARM AND FOREIGN 
    AGRICULTURAL SERVICE
KENNETH D. ACKERMAN, ACTING ADMINISTRATOR, RISK MANAGEMENT AGENCY
LEN ROGERS, ACTING ASSISTANT ADMINISTRATOR FOR HUMANITARIAN RESPONSE, 
    AGENCY FOR INTERNATIONAL DEVELOPMENT
STEPHEN B. DEWHURST, BUDGET OFFICER

    Mr. Skeen. The committee will come to order.
    Today we have the Farm and Foreign Agricultural Services 
programs. We have with us Dallas Smith, the Acting Under 
Secretary; Grant Buntrock, Administrator of the Farm Service 
Agency; August Schumacher, Administrator of the Foreign 
Agricultural Service; Ken Ackerman, Acting Administrator of the 
Risk Management Agency, better known as crop insurance; and Mr. 
Dewhurst, as usual. We can't operate this business without Mr. 
Dewhurst.
    We also have Mr. Len Rogers with the Agency for 
International Development to be available to talk about the 
Public Law 480 programs, and in general, these are agencies 
most commonly linked to farm programs and considered the heart 
of agriculture for the Federal Government.
    Dallas, please go ahead with your introduction and your 
testimony. We're delighted to have you here today. We're sorry 
we kept you waiting so long.

                  Under Secretary's Opening Statement

    Mr. Smith. Thank you, Mr. Chairman. I am pleased to have 
this opportunity to discuss the 1998 budget and program 
proposals for the Farm and Foreign Agricultural Services 
mission area of USDA.
    You've already acknowledged my colleagues from the 
Department, so I will not reintroduce them. Statements by the 
Administrators providing details on their agencies' budgets and 
program proposals for 1998 have been submitted to the 
Subcommittee along with my own prepared statement. I would ask 
that those statements be included for the record.
    Mr. Skeen. It will be done.
    Mr. Smith. I will summarize my own prepared statement, 
after which we will be pleased to respond to any questions you 
might have.
    Mr. Chairman, a fundamental goal of the Farm and Foreign 
Agricultural Services mission area is to secure the long-term 
economic vitality and global competitiveness of American 
agriculture by expanding trade and economic opportunities and 
promoting income growth and development throughout rural 
America.
    We are the production agriculture mission area. How we 
accomplish our mission will in large part be determined by the 
new policies set in place by the 1996 Farm Bill. One of our 
primary tasks this past year has been to implement the policy 
and program changes provided for in the Act.
    As a result of our efforts, nearly 99 percent of eligible 
acres were entered into production flexibility contracts last 
year. Although the new Farm Bill has provided much greater 
flexibility to our farmers in their production and marketing 
decisions, it has also increased the risk inherent in farming 
by reducing the Federal Government's role in supporting income 
and managing supplies.
    Consequently, we remain concerned about the adequacy of the 
safety net for our producers and have been working diligently 
to expand and improve programs which help producers manage 
their price and production risk. At the same time, we have 
continued our efforts to reduce expenses, improve efficiency, 
and deliver responsive quality service to our farm and rural 
customers.
    The Farm Service Agency administers the farm credit 
programs, several conservation programs, and the domestic 
commodity price and income support programs of the Commodity 
Credit Corporation. The farm credit programs administered by 
FSA continue to serve as a vital source of credit for our 
nation's farmers and ranchers.
    The budget continues the trend towards emphasizing 
guaranteed loans, which are made in partnership with private 
lenders and have a low subsidy cost for taxpayers. We remain 
responsive, however, to the continued need for direct loans 
which are targeted to beginning farmers and members of socially 
disadvantaged groups who show promise for success but would be 
unable to obtain credit elsewhere.
    The Conservation Reserve Program is the major conservation 
program administered by FSA. The 1996 Farm Bill reauthorized 
the CRP, set maximum enrollment at 36.4 million acres, and 
switched the program's financing from direct appropriations to 
CCC funding. The 1998 budget assumes a competitive bid process 
will be used to enroll nearly 19 million new and expiring CRP 
contract acres in 1997. Enrollment in subsequent years is 
assumed to gradually increase our total enrollment to 36.4 
million acres by 2002.
    The budget also reflects provisions of the 1996 Farm Bill 
authorizing CCC funding for a number of new conservation 
programs, including the Environmental Quality Incentives 
Program, which replaces the Agricultural Conservation Program--
the old ACP. EQIP is administered by the Natural Resources 
Conservation Service in cooperation with FSA.
    Reflecting the trend for Federal outlays for farm price and 
income support programs, total CCC outlays have declined from 
the 1986 peak of $26 billion to $4.6 billion in 1996. This is 
the first time CCC outlays have dropped below $5 billion since 
1981. Including conservation programs and other programs for 
which CCC funding was authorized by the 1996 Farm Bill, CCC 
outlays are projected to total $7.8 billion in 1997 and $9.9 
billion in 1998, and decline to about $7.6 billion by the year 
2002.
    Changes made by the 1996 Farm Bill have diminished the 
traditional role of farm programs as a buffer against 
fluctuations in production and commodity prices. Our greatest 
challenge is to find new ways to help farmers thrive in an 
increasingly risky environment and yet not be involved in the 
micromanagement of agricultural decisions.
    The budget reflects legislation that we will be proposing 
to the authorizing committees to improve the safety net for 
farmers. Our legislation provides discretionary authority to 
extend commodity loans for 6 months during periods of depressed 
market prices or market disruption, allows haying and grazing 
of CRP acres, increases fruit and vegetable planting 
flexibility for acres enrolled in production flexibility 
contracts, and provides for greater flexibility and the timing 
of contract payments.
    For the salaries and expenses of the Farm Service Agency, 
we are requesting a total appropriated level of $954 million, a 
net decrease of $1.9 million from 1997.
    Our staffing reductions for 1998 continue to run well ahead 
of those projected in the Department's reorganization plan. The 
1998 budget calls for staffing levels of about 5,900 Federal 
staff-years and 9,900 non-Federal county office staff-years--
reductions of about 270 and 1,850 staff-years, respectively, 
from the 1997 levels. We expect to achieve this reduction 
through a combination of about 530 buyouts and a reduction in 
force of about 1,600 staff-years.
    In addition, as a part of the Department's streamlining 
initiative and reflecting changes made by the Farm Bill, the 
budget projects that 500 FSA offices will be closed by theend 
of 1999. This issue of office closures is a very sensitive topic, and I 
want to take a moment to add to my prepared testimony with the hope of 
putting the issue in the proper context. First of all, although there 
are many stories out in the States, and I know that many of you have 
heard from your constituents on this, the Secretary has not yet 
approved any plan for how this might be accomplished, and, in fact, has 
stopped all office closures at this time, except for those that were in 
place per the earlier plan to reduce down to 2,530 offices.
    Second, the Secretary has asked each of the involved 
agencies, including FSA, as well as the USDA Service Center 
Implementation Team, to give their best advice as to how we can 
organize within the budget levels. As you know, the Service 
Center approach means that the number of offices open for our 
customers relates to the budgets of other agencies in addition 
to the Farm Service Agency.
    Third, as USDA develops its approach to meeting the budget 
requirements over time, it will do so in close consultation 
with those that will be most affected. In short, while we have 
made a general commitment that we will reduce the number of our 
service centers, we have made no decisions about individual 
offices. We are committed to working with the Congress as we 
proceed with our review and will keep you fully apprised of our 
plans.
    Moving to the Risk Management Agency, the Risk Management 
Agency and the Federal Crop Insurance Corporation play a 
pivotal role in fulfilling the mandates of the 1996 Farm Bill 
while ensuring that American agriculture remains solid, 
solvent, and globally competitive into the twenty-first 
century.
    To accomplish these tasks, the Risk Management Agency 
intends to refine existing products, create innovative cost-
effective tools, educate farmers and the public, and expand its 
partnership with the private insurance sector and the 
agricultural community.
    The Administration's proposal to make revenue insurance 
available nationwide reflects the strong demand among producers 
that we've seen for the new revenue insurance products such as 
Crop Revenue Coverage, Income Protection, and Revenue 
Assurance.
    In implementing the revenue insurance programs no 
additional premium subsidy has been paid, and the expected 1996 
loss ratio experienced is within the statutory limits and 
comparable to the Risk Management Agency's standard multiperil 
production risk coverage.
    To offset the additional delivery expenses and the expected 
growth involved in expanding revenue insurance nationwide, the 
Administration proposes to reduce the reimbursement rate paid 
to private insurance companies for delivery expenses, as well 
as the loss ratio used to establish the premium rate structure.
    Under this proposal, the reimbursement rate for delivery 
expenses would be reduced from 28 percent under current law to 
24.5 percent of the premium for multiperil coverage. This 
reduction is based on extensive analysis conducted by the Risk 
Management Agency and the General Accounting Office. It would 
reduce discretionary spending for delivery expenses from $203 
million under the current law to $150 million under the 
proposal. Further, our proposal would make a portion of the 
overall reimbursement rate discretionary and subject to 
appropriations, whereas current law treats only the sales 
commission portion of the reimbursement as discretionary. We 
believe this change offers insurance companies more flexibility 
for adjusting to the reduced reimbursement rate.
    The budget provides $68 million in discretionary spending 
to pay RMA's administrative expenses, which reflects a modest 
increase of $4 million for full-time staff positions to adjust 
for recent losses and to improve the Risk Management Agency's 
ability to service participating private sector companies.
    Turning now to the international side of the Farm and 
Foreign Agricultural Services mission area, I'm pleased to 
report that exports of U.S. farm and food products posted 
another sales record in 1996. Exports climbed to $59.8 billion, 
a gain of more than $5 billion from the previous year. With the 
strong back-to-back gains of the last 2 years, U.S. 
agricultural exports have increased by some $19 billion, or 
close to 50 percent, since 1990. As a result, agricultural 
exports supported 1 million jobs, both on and off the farm, 
one-third of which were in rural areas.
    Continued progress in the international arena is crucial to 
the economic security of American farmers and ranchers. The 
changes made in domestic farm programs by the 1996 Farm Bill 
have made U.S. producers more dependent than ever on exports to 
maintain and expand their incomes.
    American agriculture is currently twice as dependent on 
overseas sales as the U.S. economy as a whole, and the sector 
will be two and a half times as export-dependent by the turn of 
the century. It is critical, therefore, that we continue our 
aggressive trade promotion efforts to help U.S. producers and 
exporters take full advantage of emerging export market 
opportunities.
    The 1998 budget continues USDA's commitment to export 
promotion and growth by providing a total program level of just 
under $7.7 billion for the international programs and 
activities.
    For the Commodity Credit Corporation Export Credit 
Guarantee Programs, the budget provides a total program level 
of $5.7 billion. Our proposals continue two initiatives 
designed to increase the utility of the CCC Export Credit 
Programs--supplier credit guarantees and facility financing 
guarantees.
    The budget provides higher program levels for our two 
export subsidy programs--the Export Enhancement Program and the 
Dairy Export Incentive Program. In the case of EEP, we propose 
to make available $500 million, the maximum level permitted by 
the 1996 Farm Bill.
    For the Market Access Program, the budget continues funding 
at its maximum authorized level of $90 million.
    For Public Law 480 foreign food assistance, the budget 
proposes a total program level of $990 million, a reduction of 
$57 million from the current estimate for 1997. Our 1998 
request level is expected to provide for approximately 3.2 
million metric tons of commodity assistance, unchanged from the 
current tonnage estimate for 1997.
    For the Foreign Agricultural Service, the budget proposes a 
funding level of $151 million, an increase of $15 million above 
the 1997 level. Most of the proposed increase will be used to 
help meet the cost of several FAS activities which are 
currently supported with CCC funds made available to FAS 
through reimbursable agreements. These activities include the 
Emerging Markets Program and the operating costs of the CCC 
computer facility, which serves as the Department's collection 
point for international production intelligence and crop 
estimates.
    The budget also includes new provisions to address the 
difficulties in accurately estimating and funding the annual 
operating cost of FAS overseas offices. First, the budget 
requests an advance appropriation of $3 million for 1999 to 
fund documented wage and price increases and/or the exchange 
rate losses incurred during 1998. Second, the budget proposes 
that funds appropriated to FAS in 1998 be available for 
obligation for 2 years rather than 1 year.
    In closing, Mr. Chairman, Members of the Subcommittee, I'd 
like to note that today's budget realities mean that the 
Government must be leaner and more efficient, but the era of a 
responsive and responsible Government is not over. While there 
are things that Government can't do, or shouldn't do, there are 
many legitimate public needs that only Government can meet.
    When it comes to advancing the stability, sustainability, 
and economic vitality of American agriculture and of the 
farmers and ranchers who are the bedrock of our nation's 
agricultural bounty, the FFAS mission area has a vital role to 
play.
    Mr. Chairman, that concludes my statement, and the team 
will be pleased to answer any questions you may have.
    [Clerk's note.--Mr. Smith's written testimony appears on 
pages 325 through 346. Mr. Buntrock's written testimony appears 
on pages 347 through 364. Mr. Schumacher's written testimony 
appears on pages 365 through 385. Mr. Ackerman's written 
testimony appears on pages 386 through 392. Mr. Rogers' written 
testimony appears on pages 393 through 399. Mr. Smith's, Mr. 
Buntrock's, Mr. Schumacher's, Mr. Goldthwait's, Mr. Ackerman's 
and Mr. Rogers' biographical sketches appear on pages 319 
through 324. The Farm Service Agency's explanatory statement 
appears on pages 400 through 508. The Commodity Credit 
Corporation's explanatory statement appears on pages 509 
through 565. The Foreign Agricultural Service's explanatory 
statement appears on pages 566 through 611. The Risk Management 
Agency's explanatory statement appears on pages 627 through 
651. The Public Law 480 explanatory statement appears on pages 
652 through 666.]
    Mr. Skeen.Thank you for your presentation. It's a very 
difficult time because the drawdown is not a fun issue to deal 
with, particularly when it deals with your personnel. However, 
I'd like to ask this first question to Mr. Dewhurst.

                            irm expenditures

    There has been a lot of concern over the Department's 
expenditures related to ADP, automatic data processing, the 
information technologies, and the other related items. I've 
always commented on the importance of information technology 
and the ability of the Farm Service Agency to effectively 
administer its programs.
    Up until now, the Department's ability to carry out an 
effective automation plan has been pretty sorry. In general, 
where do you spend most of the ADP funding?
    Mr. Dewhurst. Okay. Let me give you sort of a quick 
overview, Mr. Chairman, of where we are.
    Mr. Skeen. Please do. We've gone over this several times, 
and we're trying to get you ADP perfect.
    Mr. Dewhurst. Okay. Well, the Department estimates it will 
spend on the order of $1.2 billion in fiscal year 1998 on what 
we call IRM related activities. When you look at our table, you 
will find that 95 percent of that money is spent in about six 
places. So, as you review IRM in the Department and say where 
is the big money, there are six places.
    The largest IRM component in the Department is the Food and 
Consumer Service. About 27 percent of our total IRM budget is 
in that agency. The vast majority of that money is pass-through 
money to the States, and it's being used to implement EBT 
programs for things like Food Stamps. You've had some testimony 
here on EBT.
    Mr. Skeen. Yes, sir, we have.
    Mr. Dewhurst. The second largest component of our IRM 
budget is the U.S. Forest Service, which I realize is not 
within the jurisdiction of this Committee. But the Forest 
Service accounts for 23 percent of the Department's IRM 
spending. The Forest Service manages 192 million acres of 
Federal land. There are 156 national forests. They average 1.2 
million acres in size. Essentially, each national forest is the 
size of the State of Delaware. So, it is a huge management 
responsibility. There is consensus, I think, among the 
Congress, the GAO, the OMB, and the Department that the Forest 
Service needs to vastly upgrade its IRM activities.
    The Farm Service Agency which you have here today is our 
third largest IRM spender--about $210 million in fiscal year 
1998. Most of that money of course translates into the 
equipment and software that our county office people have to 
deliver programs. And I'm sure the folks here can talk to you 
about that.
    Our fourth largest spender is the Natural Resources 
Conservation Service. They are on the conservation side of the 
county office equation. Most of the investment there is in 
things like geographic information systems so that land owners 
and farmers and the NRCS people can work on conservation plans 
and the other things that have to be done on land throughout 
the country.
    Our fifth largest spender is the National Finance Center in 
New Orleans.
    Mr. Skeen. New Orleans?
    Mr. Dewhurst. Yes, sir. We do payroll and personnel work, 
accounting work, for the Department of Agriculture and a 
variety of Federal agencies and the arms of the Congress. And 
they all pay for those services. That's an ongoing operation.
    Mr. Skeen. A very impressive operation.
    Mr. Dewhurst. Yes.
    Mr. Skeen. I think most of us have visited it.
    Mr. Dewhurst. And the sixth largest spender is the Rural 
Development area. Of course, most of that investment has to do 
with a centralized system for the housing programs to improve 
the management of the $34 billion loan portfolio that we have 
in housing.
    The other way to look at this problem is to also understand 
where, exactly, we spent all this money. We spent about 15 
percent of it on equipment. A lot of people think the IRM 
budget is all for equipment. The vast majority of that budget 
is for ongoing operations, for software, maintenance, repairs 
and personnel. So, essentially it's only the top 15 percent of 
the budget that's buying anything new in the system.
    Mr. Skeen. So, the upgrades are not included in there.
    Mr. Dewhurst. If you're not talking about new equipment. 
Sometimes you do an upgrade involving programming and that sort 
of thing.
    Mr. Skeen. In the same vicinity.
    Mr. Dewhurst. Yes. But most upgrades involve new equipment.
    That's in that 15 percent. I think we'd have to say in 
fairness that we have not always done a good job of managing 
that IRM portfolio. Agencies have tended to do a pretty good 
job in designing systems to meet their own individual needs. 
But we have spent perhaps more money than we should have. We've 
not always coordinated very well between the agencies. The 
Secretary is determined to fix that problem. We have a Chief 
Information Officer now who will be appearing before this 
Committee who has overall responsibility for the coordination 
of our IRM program.And there is a series of other actions in 
place, including a current moratorium on major systems acquisition, all 
of which are designed to help us get a better handle on this issue and 
make more effective use of this money.
    Mr. Skeen. Well, I know it's a very difficult thing because 
it covers such a wide area of operations and is so essential to 
your basic operation. I just hope that we can get some 
assurance that we're on the right track with the program you 
have now for handling it.
    Mr. Dewhurst. I think we are. I've watched this for 30 
years.
    Mr. Skeen. We've watched it for about 18 years with you.
    Mr. Dewhurst. I think there is an energy now in getting a 
handle on this that I haven't seen previously. I think we're 
going to get the job done right.

                  effect of limiting fsa adp expenses

    Mr. Skeen. Well, that leads me to the last question in this 
vein, and that is for Mr. Buntrock. What would be the program 
impact on the Farm Service Agency if Congress restricted the 
request for ADP related expenses in the 1998 budget?
    Mr. Buntrock. Well, Mr. Chairman, I'm really kind of glad 
you asked that question. As you know, we do have certain 
restrictions now that we operate under. ADP costs are funded 
two different ways. One of them is through the Commodity Credit 
Corporation in which we have a legislated amount of funding 
that can be used for some of the ADP equipment. We cannot 
exceed that. Then, the other source of funding is our Salaries 
and Expenses account. But let me explain a little bit to give 
you some perspective from an agency standpoint about what all 
this means to us.
    Mr. Skeen. We'd appreciate that.
    Mr. Buntrock. We in the Farm Service Agency have a first-
hand look at the importance of merging all of the ADP systems. 
Right now, we are providing support services for the agencies 
of my associates here at the table with me, the Foreign 
Agricultural Service and the Risk Management Agency. Also under 
the USDA reorganization, we support farm credit activities.
    We are currently operating with legacy systems. We have 
some situations where we are delivering programs with equipment 
that includes some printers that are about 12 years old from 
the old ASCS system. The 3B2 systems, which are no longer 
manufactured, were inherited with the farm credit programs.
    We are currently delivering a lot of programs with these 
legacy systems. I can't overemphasize the importance of merging 
all of these different systems into one unit to administer our 
programs, particularly in view of the budget that we're all 
looking at, which includes a rather significant reduction in 
staff. The merging of this equipment into a more efficient 
system that we can operate with fewer employees than we have 
today is critical if we are to continue to deliver programs in 
the manner we have in the past.
    I might add that we have not been just continuing to rock 
along with the systems that we have. We will dedicate some of 
this requested 1998 funding to studies, analysis, some software 
conversion, and some pilot site work as we move forward to 
merging a lot of this equipment. So, a part of the funding that 
we're requesting for ADP includes this investment, as I would 
like to call it, in future systems through pilot programs, 
studies, and analysis of the current software.

                    state mediation program in texas

    Mr. Skeen. This may be a little different issue. The 
Inspector General has been reporting for over a year that there 
are problems in the Texas State Mediation Program. I'm sure 
you're familiar with that.
    These include improper questionable costs totaling nearly 
$1 million. Two days ago the IG informed us that Texas and 
three other States are refusing the IG full access to their 
records, even though that access is a part of the agreement for 
Federal assistance.
    In spite of all of this, the Department released money to 
Texas for the mediation program. Who authorized this release 
and why?
    Mr. Buntrock. Mr. Chairman, first of all I'd like to 
correct a reference to the release of funds to the Texas 
mediation program.
    Mr. Skeen. Clear that up.
    Mr. Buntrock. We did not release new funds to the Texas 
mediation program. What we did, based on OIG findings in Texas, 
was to determine an amount of funding in Texas that was 
determined to be inadequate. I shouldn't say inadequate; funds 
that were not related to the mediation program.
    Mr. Skeen. I see.
    Mr. Buntrock. So, this amount was identified as ineligible 
or unwarranted spending. What we did was enter into an 
agreement with Texas for them to repay this overpayment to the 
mediation program through mediation services rendered.

                     state mediation program issues

    In reference to the disclosure issue, I would like to give 
the Committee, if I might, the current overview of mediation.
    Mr. Skeen. We'd appreciate that.
    Mr. Buntrock. Okay. We have 22 States today that are 
participating in the mediation program. The mediation program 
was expanded a year ago from credit disputes only to include 
disputes under many other programs administered by USDA.
    States, of course, must meet eligibility criteria to 
receive these grant funds for their mediation programs. 
Unfortunately, State programs did not duplicate each other. I 
shouldn't say unfortunately, but that was just a fact. In other 
words, of these 22 State mediation programs, there are really 
no two alike. The conditions of eligibility to receive these 
grant funds required them to have a certified mediation program 
and matching funds for this grant.
    Now, when it comes to fundamental issues like definition of 
mediation, access to records, and so on, there were many 
variables in these States. And what we learned was that we did 
not have a uniform set of requirements for all States to 
receive these funds.
    We are in the process right now of developing regulations 
that would provide some uniformity, would provide some 
specifics for accountability by each of these individual 
States, and to some degree would address the issue that OIG is 
currently addressing, which is the confidentiality issue. Most 
States in their mediation programs do restrict access to these 
records in accordance with the State laws. Right now, as I 
understand it, the Office of the Inspector General is currently 
exercising Federal authority to have access to these records 
through the subpoena or through the court system. We are 
waiting for the outcome of that.
    In the meantime, our Office of the General Counsel advises 
us that so long as States meet all of the requirements provided 
for in their State-enacted mediation programs and we have 
reasonable assurance that those funds were used for that 
mediation program, we really do not have strong ground to stand 
on to refuse to continue to authorize those funds. So, with 
that in mind, plus strengthened requirements for the States in 
terms of the matching funds and how they're available and how 
they're allocated, we did allocate the balance of funds to the 
States.
    Mr. Skeen. Did you also have a problem in Minnesota, North 
Dakota, and Michigan?
    Mr. Buntrock. Yes.
    Mr. Skeen. They fall under the same umbrella?
    Mr. Buntrock. I think it's fair to say that of the 22 
States that have mediation programs today, North Dakota, 
Minnesota, and Michigan were the three States, Mr. Chairman----
    Mr. Skeen. And then Texas.
    Mr. Buntrock [continuing].----that had the most restrictive 
State laws in terms of access and availability of the records.
    Mr. Skeen. Access.
    Mr. Buntrock. Yes, sir. And we have worked directly with 
them. A good part of the disputes that are mediated involve our 
Federal programs; but some of the cases also include the State 
banks and lending programs that they have. In our programs we 
have provided records of all of the credit portfolios, disaster 
programs, and so on that were mediated. So, we have a pretty 
good record of how that mediation turned out where it was used 
for those particular programs.
    I guess what I'm saying is that for the time being we still 
feel strongly that we need to run this through the court system 
for the accessibility questions to be straightened out.
    We're going to publish the regulations that will provide 
much more uniformity in those guidelines and so on for the 
future.
    Mr. Skeen. Yes, sir.
    Mr. Smith. Mr. Chairman, could I make a general comment 
about the mediation program and its value?
    Mr. Skeen. Yes, sir.
    Mr. Smith. Certainly as an alternative dispute resolution 
tool we fully support the mediation program as a way of both 
cutting costs and avoiding having cases in our system for a 
number of years and going all the way up through the judicial 
system when many times it's a matter of lack of communication 
between the Government and a producer. That's the cost-
avoidance side, because we avoid the litigation costs, which 
are quite expensive.
    But at the same time we are in a learning curve. We have 22 
States that have been approved. We are finding as we implement 
the program that State laws apply differently in different 
States, and that there is a need to have flexibility in the 
program to meet the needs of farm credit and farm program cases 
in the respective areas.
    So, as we go through this, the input that we're getting 
from the OIG involves problems that they are discovering in 
doing a third-party review of our compliance in such areas as 
conflict of interest occurring at the local level. They are 
identifying for us some impediments that we hope to address 
through the regulations and the definition of what constitutes 
mediation and how you evaluate success in a mediation. We can 
work with the report that we've gotten from our OIG and the 
respective States to have a very strong mediation program in 
the future.
    Mr. Skeen. So, what you're doing is you're giving the 
Federal side where you've got clear access and then restricted, 
out of respect to the various local and State laws involved.
    Mr. Smith. For example, in Minnesota, they have very 
specific State laws in terms of the privacy in providing that 
information. And the local officials believe this privacy is 
very important to participation in the mediation process. Yet 
at the same time we have an obligation to make sure that the 
Federal funds are being spent appropriately.
    And at this particular point we have a conflict between 
those two needs. So, it's our intent to work with the Office of 
the Inspector General, work within the agency, and with the 
State officials to attempt through our regulations to define 
exactly how to go beyond this current impasse. And we think we 
can.
    Mr. Skeen. There may be a change in the agreements and 
things of that kind, but it will be across-the-board then.
    Mr. Smith. Yes, sir. In fact, it may be something where our 
contract will recognize in advance that if there are privacy 
laws, what we expect in terms of those privacy laws. There may 
be some third party review. We don't know exactly where it's 
going right now. This will be worked out for that proposed 
regulation that Mr. Buntrock spoke about. There is the issue of 
whether there should be Federal preemption of State law. It 
might not be desirable to do that if it would cause producers 
and local bankers or others in the credit system to be 
unwilling to enter into mediation.
    Mr. Skeen. Could you let us know when you have reached some 
kind of mediation agreement?
    Mr. Smith. Yes, sir.
    Mr. Skeen. We'd appreciate that. Ms. DeLauro.

                        farm loan delinquencies

    Ms. DeLauro. Thank you, Mr. Chairman. Thank you for your 
testimony and for being here today. As a Member of the 
Appropriations Subcommittee on Agriculture in the 103rd 
Congress I was particularly concerned by the delinquency 
problems with the loans that were then administered by the 
Farmers Home Administration, and now overseen by the Farm 
Service Agency.
    At that time, more than $10 billion in bad loans had been 
written off and billions more in bad loans were still carried. 
Can you tell me something about the changes that have been made 
to address the delinquency problems, and in particular to 
ensure that similar problems do not occur in the future?
    Mr. Buntrock. Thank you, Congresswoman DeLauro. Really I 
can address this in two ways: one in the short term and the 
other in the longer term. First of all, I would like to report 
today that we have made some progress in the last fiscal year 
in the delinquency problems.
    You're correct. Delinquencies are just simply too high, 
particularly in the direct loan program. We currently have a 
delinquency rate overall in the direct loan program of 
approximately 19 percent which compares to about 25 percent 
about a year ago.
    I'm not reporting that today as something that we're 
standing on as the bottom line. But I did want to inform you 
that we have made some progress. We've done that in a couple of 
different ways. One of them is just simply dedicating staff 
people to look after these loans that have become accelerated 
or loans that are in danger of becoming delinquent to try to 
address them early on. We've found that it is very important to 
catch these delinquencies early and then follow up with them.
    I can furnish a little more of a breakdown of the profile 
of this total delinquency file. It includes cases that run back 
for many, many years. Loans that have been inactive for as long 
as 15, 20 years are included in this group. In these cases, 
it's a matter, quite frankly, of going through to find what 
security there is or is not and closing the thing out. That's 
just where some of them are. So, within this total package 
there are some delinquent loans where you might get some 
repayments to the Government and some that should be 
foreclosed.
    In the Farm Service Agency, we have a staff that is 
assuming some of these responsibilities that require fairly 
significant training. We've got new managers who are just 
taking over this function in a lot of States. So we have 
planned pretty extensive training and other resources in these 
States in order to give them everything in-hand to address 
these delinquency problems. Of course, we have also set goals 
for each of these States to bring its delinquency rate down for 
direct lending programs.
    What I'm really reporting to you today is that we have set 
up a plan in each of the States to bring the delinquencies 
down. We have set goals in each of these States, and we have 
also set longer-range goals in terms of more resources and 
training in some of these States.
    Another thing that was referred to earlier and that becomes 
very, very important to a manager at the local level is the ADP 
systems that keep track of these loans. Forexample, we have 
found situations where in the past the agency was issuing checks under 
the old ASCS programs to producers who had delinquent loans. There was 
never any merging of ADP systems. We are now taking a comprehensive 
look at active farmers' files, and we have collected some of these 
delinquent payments through that process and plan to look into doing 
more of it.
    Ms. DeLauro. I appreciate the work that's been done. Let me 
recap a little bit here. Again, there is a January 1997 GAO 
report which provides an update on the status of farm loan 
programs. I'm pleased that the amount of outstanding direct 
loans owed by delinquent borrowers has decreased between 1995 
and 1996. However, I think it is worth noting something that is 
a real concern to me. It ought to be a concern to all of us, 
that the amount of outstanding direct loans owed by delinquent 
borrowers is still $10.5 billion and that the outstanding 
guaranteed loans by delinquent borrowers actually increased 
between 1995 and 1996.
    Now, we've got about a $13 billion pot of money that we can 
use for discretionary spending for this entire Committee, as I 
understand it. We've got $10.5 billion in outstanding loans 
that still needs to be collected in some way. Further, the 
report indicates that for borrowers who owed more than $1 
million in outstanding principal, the delinquency rate was an 
astounding 88 percent.
    Again, and I don't know if it's the same answers, but the 
questions here are how does the Department of Agriculture view 
the outstanding loans and loan guarantees? What kind of action 
are we going to take? How are we going to account for the 
delinquency rate for large borrowers? And how does the 
Department intend to collect what these large borrowers owe?
    There are another couple of points in here. It says during 
fiscal year 1996, $1.1 billion in principal and interest was 
lost by reducing or forgiving the debt of delinquent direct 
loan borrowers. And about $45 million in losses was incurred on 
guaranteed loans.
    This is not chump change here. We talk in this Committee a 
lot about fraud and abuse, and in the Food Stamp Program that 
is about $1 billion worth of what we view. And I'm not 
suggesting that we allow this; that we need to deal with it in 
some way. This program serves 23 million people in this 
country.
    I just picked out one of the bad loans, any one of these, 
in terms of the charts in this report, and it happens to be 
Arizona. I just picked it up. It's $98 million in outstanding 
loans. It's 518 borrowers. We're talking about people who owe 
millions of dollars to the Federal Government.
    The question is the question I started with. How and when--
I understand you have them from many years back--how and when 
are we going to collect these loans and these delinquencies so 
that there is the return to the Federal Government?
    We don't want to guarantee bad loans. FDIC guaranteed the 
savings and loans and we know what happened. Why is the Federal 
Government being put in this position and what are we going to 
try to do about it?

                       delinquency of large loans

    Mr. Smith. Let me make a general response to your earlier 
reference to the large loan situation. There has been a number 
of different things done to address the issue of outstanding 
delinquencies, as well as the large loan issue that we are now 
wrestling with.
    As a result of some of the concerns about the million 
dollar loans and the delinquencies on them, Congress has also 
addressed that issue subsequent to the GAO report. Those loans 
are now capped at a much lower level; at $700,000 for the 
guaranteed loans and $200,000 for the direct loans.
    So, we can no longer make those large loans that were made 
earlier. However, we are still working through those loans that 
were made at higher levels earlier, within the regulations and 
within the law. There are many steps that the individuals have 
available once they're delinquent on their loan, including 
multiple appeal rights.
    The Department has been working with those individuals that 
are delinquent to enable them to repay the debt as opposed to 
taking collateral that's inadequate and then writing off the 
balance of the loan. That's not to say there aren't some that 
we've had to foreclose on and take the collateral that's 
available and sell that collateral in order to recover as much 
of that loan as possible.
    But the problem that we were facing with the large loans 
has been resolved by limiting the ability of the Department to 
make those multi-million-dollar loans. So, we're not adding to 
the problem as we're working off the old problems that you 
referred to in the GAO report.
    Ms. DeLauro. Just a final question. I appreciate the steps 
that have been in place. But what is it further that we can do? 
Is there something that we can do to make it possible for you 
to do better on these loans? I'm very serious. What will it 
take for us to recoup this money?
    Mr. Buntrock. I'm not trying to be facetious, but good 
prices in farm country will help facilitate repayment of some 
of these loans. Let me give you a little bit more perspective 
on what we're dealing with, though, in terms of our 
expectations.
    The $1 billion in delinquent large loans you referred to 
are the million dollar-plus loans. By the way, close to half of 
that was interest after a number of years, so that gives you an 
idea of the age of these loans. When we talk about millions of 
dollars, we are talking about interest plus the principal.
    To give you an idea of what kind of results we're getting 
on these cases, from the 515 accounts we've closed so far out 
of 900, we got about $131 million. That was out of a principal 
outstanding of about $566 million. That doesn't count any 
interest. We're getting about 23 cents on a dollar out of these 
old loans that are 10 or more years old. Now, it's all relative 
I guess. That isn't good at all, but we'd estimated getting 
maybe 10 cents on a dollar on this portfolio of very old loans.
    I'd like to add a little bit more to all of this. It's 
true, we do have new provisions in place. There are a lot of 
restrictions. There are a lot more requirements today to get a 
loan or to get an extension and so on than there have been in 
the past.
    On direct loans to producers who do not qualify at the 
bank, we're probably not ever going to get to the point where 
we have a delinquency rate similar to a commercial bank. It's 
probably going to run a bit higher. That doesn't mean that 19 
percent is acceptable.
    In prior years we've had it under 10 percent; as low as 4 
percent and 5 percent in some years when prices were better. 
So, I wasn't being facetious in my remark about crop prices 
because it does follow--farm income and repayment of farm loans 
do correlate.
    My point is simply this. We're generally not dealing with 
individuals who don't pay their bills. We're generally dealing 
with individuals who can't pay their bills.
    Ms. DeLauro. Well, that may be true now, but earlier on, 
there were a lot of television shows about the folks who 
decided you have to take it out of farm income versus non-farm 
income, et cetera, et cetera, et cetera. That's not too long 
ago that we were dealing with that situation.
    Mr. Smith. That's right.
    Ms. DeLauro. There are a heck of a lot of people in this 
category who absolutely have the wherewithal to pay their 
bills, particularly those older loans that you're talking 
about, versus what we may be doing now which is to thegood. But 
nevertheless, we ought to be looking at those people who can, who have 
the wherewithal to pay-up.
    Mr. Smith. I believe it will continue to improve every 
year.
    Ms. DeLauro. That's what my hope is. We will continue to 
talk to you. Thank you, Mr. Chairman.
    Mr. Skeen. Mr. Kingston. Oh, he's gone. Mr. Nethercutt.
    Mr. Nethercutt. I will yield to Mr. Latham.
    Mr. Skeen. Fine. Mr. Latham.

                    Production Flexibility contracts

    Mr. Latham. I guess first of all I just would like to get 
the Administration's position as far as the contracts in the 
Farm Bill, whether you would oppose any kind of reduction in 
the contracts themselves that we have under the FAIR Act. The 
Secretary spoke a little bit to it the other day. I want to 
reconfirm.
    Mr. Smith. Yes. We feel that there is a commitment for the 
7 years on the payments to the producers. And as you know that 
commitment also involves major changes in the historical supply 
management programs. Because of those changes we feel that the 
producers absolutely must be able to depend on these payments 
over the next 7 years.

                       FSA County Office Closings

    Mr. Latham. Thank you. And I'm sure you're well aware and 
you stated here the Department's plans to close the FSA 
offices. That caused a lot of conversations out in farm 
country. I understand your information system is well in place 
because it gets to the offices quicker than anything else gets 
out and around. They have a very good network somewhere anyway.
    In Iowa, the State Director has submitted here to 
Washington, I think, a list of 50 offices for closing out of 
the 100 that we have. Can I get a copy of the list, of the 
proposal?
    Mr. Smith. Let me reiterate my earlier statement with 
regard to the list that many have referred to at the local 
level. We currently do not have any plans that are approved by 
the Secretary to close any offices, other than those that were 
already in the mill per the previous reduction down to 2,530.
    Our budget does refer to reducing or closing another 500 
offices by 1999. And it was in response to the proposal to 
reduce offices by another 500 for 1999 that the Farm Service 
Agency took a look at how it would deliver its programs if in 
the future it had to close another 500 offices.
    So, on the first cut, using geographical distance to travel 
and convenience to the producer, the State offices put together 
a preliminary plan. It was that plan that was distributed as 
being an official plan and as being tied to the 1998 budget, 
and not the 1999 year. It was a very preliminary report and one 
that does not take into consideration all of the factors that 
we believe must be taken into consideration, but it is a good 
start.
    Although we will be reducing about 1,850 employees at the 
county level per the 1998 budget, at this particular point we 
do not anticipate that reduction causing 500 offices to be 
closed. There will be some offices that would have to be 
reviewed as a result of that reduction in employees; but 
certainly nothing of the magnitude that has been discussed at 
the field level.
    Mr. Latham. You're saying that you do not plan to give me 
the list. Obviously your answer is no. I'm not going to get a 
list. I would still like to have the list anyway if we could. 
But you're saying you're not going to close 500 offices as 
proposed in the budget?
    Mr. Smith. We will be looking at closing additional offices 
by 1999. But the concern that we've heard from the field was 
that we were going to close 500 offices by September 30th of 
this year and that the decision had already been made.
    What I'm saying to you is that we have no plans to close 
500 offices by September 30, 1997. The plan I described to you 
was the first cut of a long range plan targeted at January 
1999, not September 30, 1997. And before we move to the second 
phase, it is our intent to evaluate the criteria for closing 
offices that would look at a lot of other things besides 
geographical distance.
    And I would also point out that our field structure is 
moving toward service centers. And those service centers 
consist of three agencies, not just the Farm Service Agency. We 
have Rural Development, the Natural Resources Conservation 
Service, and the Farm Service Agency.
    In many cases they will be colocated in a USDA service 
center. Then there will be instances where you would perhaps 
have the Farm Service Agency and NRCS colocated. And then there 
may be locations where you have only NRCS. The FSA's budget is 
being driven a good deal by changes in the Farm Bill that may 
not have equally affected the other partners in the field. So, 
we will have to revisit our USDA service center plan that we 
have right now which reflects about 2,530 offices, and 
reconsider it in light of the Farm Bill and per budget cuts in 
one of our other partners, Rural Development.
    As we revisit the question of FSA's presence in those 
offices by 1999, might find that we would be at 500 fewer 
locations. That could mean that other partners will still be at 
those locations, but not the Farm Service Agency.
    Mr. Latham. Well, I guess I'm getting a lot of conflicting 
information because I've got a memo here from the State 
Executive Director to all of the State and county employees of 
FSA. This is dated February 20th. He says, according to a fax 
received yesterday, we are tentatively looking at 35 offices 
closing by 10/1/97, and an additional 15 offices by 10/1/98.
    And I just will point out also I think the 500 offices 
would be about 20 percent of the total number of offices. And 
in Iowa you're looking initially at cutting--there are 100 
offices in Iowa; cutting 35 percent of the offices. And then 
next year another 15 to go to 50 percent. Apparently this memo 
is written in response to a fax from you.
    Mr. Smith. I can assure you that it does not reflect the 
policies of the Secretary in terms of where we are right now. 
We're in a planning phase with no plans for cuts of that 
magnitude between now and September 30th.
    Mr. Latham. And maybe that should be communicated to 
somebody rather than responding to what you have faxed to the 
State offices.
    Mr. Smith. Mr. Buntrock and I have plans following the 
hearing today to communicate that.

                        FSA Staffing Reductions

    Mr. Latham. If you can start in Iowa, I would appreciate 
it. In the budget you propose to reduce Federal staffing by 4.6 
percent, and non-Federal, the county staffing, by 18.7 percent. 
It seems a little bit heavy on the non-Federal or the county 
side.
    Has the Department done everything it can to trim the 
Washington bureaucracy here before cutting people out there who 
are actually delivering services?
    Mr. Smith. Let me ask Mr. Buntrock to respond to that.
    Mr. Buntrock. We've heard that one before. Let me assure 
you that that has been our ongoing policy for the last 4 years. 
As you know we've been doing some downsizing over the last 4 
years and have tried our best to keep all of our resources on 
the front lines in the States and counties.
    We have reduced the Washington headquarters staff over the 
last 4 years by about 27 percent. We have reduced the non-
Federal county office field staff by about 22 percent over that 
period. But in terms of the county versus the Federal staffing 
levels, there are three factors involved in that.
    First, our Federal staff includes State employees as well 
as county employees who administer the farm credit programs. 
Most of the people who work with farm credit programs today are 
Federal employees. And of course, as you know, our credit 
programs are funded at a level very close to what it was last 
year. We have not had the reduction in our credit programs that 
we've had in some of the other areas. So, as in the last 
reductions that we made, when we reduce field staff again, we 
will probably reduce fewer people who work on credit programs 
than on others. I'm not saying that they will be left out of 
the reduction, but the number of people who are delivering farm 
credit programs will be reduced proportionately less than 
people who are not, simply because of the workload and what 
they're doing. That's a part of it.
    Another factor that enters into the Federal employment 
level is that a lot of it is made up of the support side. Those 
numbers for our Federal staff include support for the Foreign 
Agricultural Service and Crop Insurance. I'm sure that some of 
my associates here would not be too pleased if we reduced that 
employment, since they're paying us for some of these people. 
That has some bearing, though not a lot, on this number too.
    And the last thing is simply this: that you have fixed 
overhead in some of the support staff such as automation under 
the old legacy systems and other things. We have already cut 
that, as I've said, and it's getting more difficult without new 
automation equipment and some other things to cut that much 
further. But the bottom line is we will continue to put the 
emphasis and priority on keeping field people over headquarters 
people.
    Mr. Latham. Okay. You're going to eliminate I think about 
269, 270 Federal full-time equivalents between the 
headquarters, State, and field offices. Could we get a 
breakdown of where those individuals are--whether it's 
headquarters or whether it's State or whether it's local where 
those Federal employees will come from?
    Mr. Buntrock. We do not have the precise number right now. 
We have a task force working on that now to break that among 
the States, counties, Kansas City, and Washington, DC. It's 
probably going to be minimal percentage-wise in the field 
compared to the total, but I don't have exact numbers. We ought 
to have them in the next couple of weeks.
    Mr. Latham. Could we have that when it is available?
    Mr. Buntrock. Yes.
    [Clerk's note.--There is no list by location of the 
proposed reduction of 269 FTEs in FY 1998.]

                         FSA Operating Expenses

    Mr. Latham. In the budget you have a decrease of $2.75 
million in operating expenses at the county offices, I guess in 
anticipation of the reduction of staff there. There doesn't 
seem to be any reduction on the operating expenses in the 
Federal offices. There is no reduction here. Why is that? In 
the budget there is no reduction as far as operating expenses 
in Washington.
    Mr. Smith. While Mr. Buntrock is looking for that, let me 
make one comment in terms of the Federal, non-Federal issue. It 
used to be when we were referring to non-Federal within the old 
ASCS system it reflected the county office system. However, 
with the combining of the old ASCS and Farmers Home 
Administration into the FSA structure, now when we look at 
reductions in Federal staffing, some of those Federal employees 
are at the county level running the farm credit programs. So, 
we have a situation here where now when we look at the non-
Federal versus Federal we have to realize that some of those 
are at the county level, and that Federal side at the county 
level is not being reduced as much because the Farm Bill 
affected the historical supply management programs that the old 
ASCS ran through the non-Federal system.
    As far as that reduction in operating expenses, what that 
is, stated simply, is that at the local or county level we 
anticipate paying for less space due to this 1,800 staff-year 
reduction that we will have. At the Federal level, you do not 
have those----
    Mr. Latham. On the Federal level here in Washington there 
is no reduction in operating expenses. But you're going to have 
a reduction in staff here also.
    Mr. Smith. The point here is that we're still going to have 
to pay rent for the whole building in Washington. At the local 
level you will have less rent.

                      FSA/NRCS management Studies

    Mr. Latham. You should have that paid for by now. Okay. I 
think both of your testimonies say that USDA may contract for a 
study of FSA and NRCS offices for the proposed closing and 
consolidations. If this independent study is to be 
commissioned, why was the initial internal FSA study done? Was 
there any corresponding study done at the NRCS before? Why 
wasn't it coordinated before? You did an internal study in FSA; 
right?
    Mr. Smith. That's why it's important to put in perspective 
that this office closure issue is one that is beyond September 
30, 1997, because the Department did commit to do an 
independent study. We expect to have the benefit of the results 
of that study, looking at the other partners out in the field, 
in particular NRCS and FSA, prior to having to make a decision 
for the January 1, 1999, date.
    We would not have been able to conduct a study and have 
input into that study prior to October 1, 1997. Nonetheless, if 
we are going to meet a January 1999 date, it's important for 
NRCS as well as FSA to start looking at its own internal 
programs and what the situation is in terms of delivering the 
programs so that information can feed into the multi-agency 
study once it is commissioned. So, the preliminary preparation 
that FSA, NRCS and others are doing, including Rural 
Development, in my opinion would be a part of the overall 
study.

                          FSA IRM Expenditures

    Mr. Latham. I guess, Mr. Buntrock, in your testimony you 
talked about $104 million request for the computer and 
telecommunications which is in addition to, what, $109 million 
in 1997. There is a moratorium. What was the money spent on, 
the $109 million in 1997, knowing that there is a moratorium 
on?
    Mr. Buntrock. Well, a part of this funding was for some 
updating or some changes in terms of software and even hardware 
in the old legacy system to keep going. In other words, what we 
have done in some of these instances is we have replaced 
computers of the System 36. We've upgraded it. But that was in 
1996. I am also informed that we have not spent much of the 
1997 computer money yet because of this moratorium.
    Mr. Latham. How much was spent?
    Mr. Buntrock. We don't have the exact number at hand. Let 
me give a little bit of background on the automation and the 
moratorium. We looked from the standpoint of our agency at 
about 825 USDA service center locations where we know Rural 
Development is going to be with their new system. We're moving 
ahead with installation of wiring and equipment in those 
locations where we know the Farm Service Agency is going to be 
collocated with them because under any proposed plan you would 
want to use, we're going to be there.
    Mr. Latham. Have you made determinations where they're 
going to be for sure?
    Mr. Buntrock. I believe for Rural Development, they have, 
yes. We've started wiring in some States. And I think those are 
all identified, yes.
    Mr. Latham. Okay.
    Mr. Buntrock. And it's from there on that we've got the 
moratorium on how many we can wire. We talked at one time about 
wiring a total of 2,700-something offices across this country. 
We are proceeding up to the 825, and from there we're kind of 
holding. The amount we've spent up to this point I don't have 
available here but we can get it. That's where we're at.
    Mr. Latham. Doesn't that conflict with the moratorium to 
having spent any money? With the moratorium in place, you're 
not supposed to be spending money; right?
    Mr. Smith. Let me see if I can shed some light on what is 
being done. There are provisions even under the moratorium for 
waivers. But those waivers are not given unless the expenditure 
will support the overall concept of service centers.
    With the partnership, Rural Development is expecting to be 
in about 825 locations. Rural Development is expecting that 
they will have a cost avoidance of about $230 million if they 
are able to proceed. The other partner agencies, NRCS, and FSA, 
are in positions where they have to determine whether they will 
be able to collocate with Rural Development at those locations 
in order to allow that agency to move ahead and achieve that 
cost avoidance.
    So, we were able to prioritize areas where FSA was most 
likely to be collocated in service centers, up to the 825 
locations that Rural Development would be in, so that we could 
move ahead with the LAN/WAN system to support their initiative; 
because without the LAN/WAN and without the employees and 
without the funding for it, their programs would have been in 
jeopardy. So, we did look at partial implementation of the 
requirements during the time of the moratorium.
    Mr. Buntrock. Just to add to what Mr. Smith has indicated, 
most all of the work that we're doing now was work that was 
contracted for in fiscal year 1996. The moratorium actually 
applies to new business in 1997, where we're at right now. And 
the work that's going on right now, most of that local area and 
wide area network wiring, was contracted for in 1996.
    Mr. Latham. Thanks. Could we get a list of the 800-and 
something offices that you know are going to be there?
    Mr. Smith. We can give you a list of those that Rural 
Development has identified.
    [Clerk's note.--The information was too lengthy to print 
and has been retained in the Committee's files.]
    Mr. Latham. Okay. I've got some more questions I'd like to 
ask. It'll go faster. You know, we talk a little faster in Iowa 
sometimes than in other parts of the country. Do you want me to 
continue? Mr. Chairman, I yield and let someone else.
    Mr. Skeen. Mr. Nethercutt.

                   Foreign Market Development Program

    Mr. Nethercutt. Thank you, Mr. Chairman. I've been a strong 
advocate of the Foreign Market Development Cooperator Program. 
I think it's a good program, especially from an export State 
like Washington State which I represent.
    I notice that there was a carryover of about $27 million 
from last year. Can you explain for the record why that is?
    Mr. Smith. I'd like to ask Mr. Schumacher to respond.
    Mr. Nethercutt. Sure.
    Mr. Schumacher. Well, Mr. Chairman and Mr. Nethercutt, we 
also feel strongly that the Cooperator Program has since 1954 
performed an outstanding service in promoting our exports 
overseas. I think some of the charts you have in front of you 
give you some of the flavor of the progress we've made with the 
strong support of the Congress during this period.
    Especially in recent years we've done well and we can do 
better. But first, just a little bit of background. We have 
some difficulties this year in the budget. Mr. Dewhurst can 
assist me in this. We have been using funding for some 
activities from mandatory funds--particularly for the Emerging 
Markets Program and the cost of supporting the CCC Computer 
Facility. The President's budget requests funding for these 
activities using discretionary funds.
    That has put a lot of pressure on discretionary funding of 
which the Cooperator Program is an important part. Maybe Mr. 
Dewhurst can explain a little bit more on mandatory and 
discretionary funds because this is certainly going to impact 
the Cooperator Program.
    A part of the need for the carryover is because, in the 
past, the cooperators in overseas offices have long-term leases 
and contracts with staff. The cooperators need to have some 
assurance that if there were really serious problems with 
Cooperator Program funding, they would have some forward 
funding to cover the cost of closing these overseas offices.
    So, they put some in the carryover. That is going to be 
substantially reduced according to this budget. Mr. Dewhurst 
may want to further amplify on the issue of mandatory and 
discretionary funds.
    Mr. Nethercutt. I hear what you're saying. I guess I'm 
looking at the breakdown, actual versus estimated 1994, 1995, 
1996, 1997, 1998, 1999. I see $44.1 million in 1994, a 
carryover balance. And then for fiscal year 1997, $28.7 
million; fiscal year 1998, $27.2 million. I realize there has 
to be some forward funding. I'm just wondering if it is 
necessary to have that much carryover and are we using the FMD 
program to the maximum.
    Mr. Schumacher. Well, these are multi-year programs and 
they're contingent liabilities. The cooperators have done their 
budgeting on a forward funding basis, they need to have some 
forward funding for these contingent liabilities. And as you 
noticed, in the budget, the carryover balance has been reduced 
from $44 million to $27 million. That is a very substantial 
drop in the carryover.
    Mr. Nethercutt. Well, Mr. Dewhurst, do you wish to try to 
add to Mr. Schumacher's remarks?
    Mr. Dewhurst. I don't know that I can add anything to Mr. 
Schumacher's explanation. The program functions with long-term 
commitments. So, you enter a contract at the front end for a 
number of years and then you spend the money over the lifetime 
of the contract. So, you always have an unliquidated balance 
for the program. The question is, what should that balance be? 
Butthe cooperators have always felt strongly they needed some 
assurance of a continuing flow of money through the terms of the 
agreement.
    Mr. Nethercutt. What would be the ideal carryover, given 
the consideration for the obligations of the program?
    Mr. Dewhurst. I'd just have to be honest and tell you I 
don't know that answer.
    Mr. Nethercutt. It would be an arbitrary answer, probably?
    Mr. Schumacher. You know, the cooperators would certainly 
like 6 months for the contingent liabilities. That's been 
dropping quite a bit. So, they are concerned if it drops any 
further.

                              EEP FUNDING

    Mr. Nethercutt. I heard the testimony about export 
enhancement and EEP funding. I know that the request is for 
$500 million. I think we've had $100 million in the past. How 
much has been used this year of EEP; any? I know it's early.
    Mr. Goldthwait. This fiscal year so far we have not spent 
any funding on EEP because of the rather unusual market 
circumstances.
    Mr. Nethercutt. I guess perceptions can differ about how 
much we need to have. I know it's an important program. It's an 
important component of our export enhancement strategy 
obviously, but I guess I wonder why we need $500 million when 
we have used only about $2 million on wheat last year.
    And I understand the differences, I mean, what the market 
conditions dictate. In a time of tight budget, I just wonder if 
this is the best way to spend taxpayer dollars. Maybe $200 
million would be enough.
    Mr. Goldthwait. May I comment?
    Mr. Nethercutt. Sure.
    Mr. Goldthwait. I think the need for having this in the 
budget as a very important deterrent as well as a potential 
expenditure is demonstrated by the current behavior of the 
European Union. They are continuing to subsidize their wheat 
exports under market conditions where they would probably be 
selling just as much without subsidization.
    Today when we have rather limited stocks to sell, European 
subsidization is not hurting us other than on a price basis. In 
other words, they're not constraining our market share.
    But if we see in the new marketing year that we have ample 
supplies, in a number of locations, we very well could be in a 
situation where we would need to draw on the Export Enhancement 
Program in order to maintain market share.
    Mr. Nethercutt. But $500 million is what you feel is 
necessary to draw on?
    Mr. Goldthwait. We believe we need the full funding. That 
level is already considerably below the level we could spend 
under the GATT agreement. If you look at the chart closest to 
you, you will see that the ability of the Europeans to 
subsidize goes far beyond what we would be able to do, in the 
event that they wish to become more aggressive.
    Mr. Nethercutt. I appreciate your answer. We're going to be 
looking at it, watching it and hoping that if it's there it 
will be used under proper circumstances. We don't want to have 
too much or too little. I guess I'm looking for the optimum 
amount.
    One final question in my time. I notice that the President 
wants to take money from Public Law 480. I think it's Title I. 
I think that's what the testimony said to offset supplemental 
requests for WIC. I have a little bit of a parochial interest 
in the subject of Public Law 480.
    But on the other hand, I'm thinking that we do have 
obligations that can be met by American farmers around the 
world through Public Law 480. I'd like to have your comment for 
the record on your justification for the President's proposal 
to take funds from the Public Law 480 program.
    Mr. Smith. Chris.

                       PUBLIC LAW 480 REDUCTIONS

    Mr. Goldthwait. We are not pleased that we have to put 
forward a budget request that suggests a cut in our food aid 
resources. We, unfortunately, must make some trade-offs and 
this is one of the ones that we've found it necessary to 
include in the budget. Perhaps to put it in a little better 
perspective, I would note that the most recent projections 
released by the Economic Research Service suggest that the 
total world need for food aid in the time corresponding to 
roughly fiscal year 1997 will drop by about 5 million tons to a 
relatively low, 9 million tons, because of changes in prices.
    We believe that the total Public Law 480 budget that we are 
suggesting will supply the same level of roughly 3.2 million 
tons that we are able to supply with a little more money in the 
current fiscal year. So, we will in effect be able to meet more 
than one-third of that projected world need with the budget 
that we are proposing despite the reluctantly suggested cut in 
Title I.
    Mr. Nethercutt. Well, thank you. I would urge caution with 
regard to that proposal. I would personally rather see it come 
out of the Food and Consumer Services or something under which 
WIC has some major jurisdiction. Certainly I think it would be 
more advisable. I thank you.
    Mr. Skeen. Mr. Dickey.
    Mr. Dickey. How are you, Mr. Smith?
    Mr. Smith. Fine. Thank you.

                      FSA WORK MEASUREMENT SYSTEM

    Mr. Dickey. The panel. This has to do with the FSA proposed 
cuts. The way they are distributed between the States and 
within the States will no doubt be a great controversy. And 
apparently there will be hearings on the issue at the 
authorizing committee level. In deciding how to distribute the 
cuts, it seems that workload levels should be the determining 
factor. Just exactly, Mr. Smith, how is workload measured?
    Mr. Smith. I'd like to ask Mr. Buntrock to explain that 
system, although I have some general familiarity with it, 
having been in the old ASCS for a number of years. As it 
relates to the new Farm Bill, the change in the mission of the 
Farm Service Agency, and the reorganization of that agency, I'd 
like to ask Mr. Buntrock to respond.
    Mr. Buntrock. Mr. Dickey, the old ASCS for many, many years 
had a pretty sophisticated workload system; one that's been 
recognized at USDA for a number of years. Very simply stated, 
it measures a unit count of work items, which can be anything 
from how many program applications are processed to how many 
farm records are maintained in the county.
    And of course, the workload measured by that system 
reflects a significant impact in terms of geographic 
distribution as a result of the 1996 Farm Bill. Let me explain.
    Mr. Dickey. Say that again.

                              fsa workload

    Mr. Buntrock. I said, the workload distribution has been 
impacted in terms of the 1996 Farm Bill compared to the 1990 
Farm Bill. Without question, the geographic distribution of the 
workload has been impacted, and the changes shown up in the 
system.
    And let me just generally explain. Let me take for example 
the Midwest, where you fundamentally have grain crop 
production. In administering the old commodity programs for 
wheat, feed grains, and soybeans, we had a heavy workload in 
acreage reporting and a lot of other associated work items that 
were performed in the county offices. Under the 1996 AMTA, the 
7-year contracts that we entered into eliminated or reduced 
that particular workload item compared to the old programs. So 
the workload was without question impacted there.
    Mr. Dickey. Is it less or more?
    Mr. Buntrock. Less under the 1996 Act. Now compare that, 
for example, to the conservation workload. Under the old farm 
bill, we had a $75 million Agricultural Conservation Program 
administered by the county offices of the old ASCS. We 
currently have the CRP as well as a role in assisting the 
Natural Resources Conservation Service with a $200 million 
conservation program. So, where you have heavy participation 
and orientation toward conservation in the Northeast and some 
of the other areas, you did not have nearly the significant 
reduction in the workload that you did in some of the other 
areas.
    It's a combination of these things that is going to 
determine the distribution of workload.
    Mr. Dickey. Can it be accurately estimated on a county-by-
county basis?
    Mr. Buntrock. Yes, I think it can be. One of the things 
that I might indicate here is that there are a lot of different 
opinions and different perceptions of what the Farm Service 
Agency is doing today versus what they were doing in the past. 
Most folks of course agree that overall the workload is less 
than it was before. It's the degree of decrease that has been 
the subject of a lot of conversations and a lot of meetings 
that I've held with managers in the agency.
    I'm talking about State directors. I'm talking about county 
office people who are out there. And there is a lot of 
difference of opinion in terms of how that is. And I think a 
lot of it has to do with this regional impact that I've talked 
about and how that affects them.
    So, this is not a real easy budget process, because what 
we're really faced with in FSA in the coming years as I see it 
is not just a matter of reducing across the board, but there 
will be some impact on the distribution of resources in the 
program delivery system.
    Mr. Smith. Mr. Dickey, there is one other point I'd like to 
make too. And that's with regard to the enrollment in the 
Conservation Reserve Program. In our budget baseline we 
anticipated that we'd get 19 million acres enrolled in 1997. 
But we won't know until we complete the signup that began this 
past Monday how many acres will be enrolled during this time 
period.
    And obviously that is a major workload item at the FSA 
county level, to the point that our county offices are going to 
be very taxed with their current resources to be able to 
implement it. Under the previous CRP signups the most that we 
enrolled in any one year was around 9 million to 10 million 
acres. So, if enrollment were to draw out into subsequent 
signups going into additional fiscal years, it's difficult for 
us to pin down at this point what level of workload will be 
there and when it will be there, impacting the 1998 budget or 
subsequent budgets.

                     county office closure criteria

    Mr. Dickey. Okay. Thank you. Compare that reference, the 
workload to the 25, which I think is an arbitrary 25-mile limit 
basis. Can one of you all tell me why the 25-mile limit basis 
is better than a workload comparison?
    Mr. Smith. We do not believe that we can use any single 
entity, workload or mileage, to evaluate----I'm assuming you're 
referring to office closures.
    Mr. Dickey. That's correct.
    Mr. Smith. We cannot limit the criteria to either workload 
or mileage. The report that came in from FSA took an initial 
look at convenience to the producer, and mileage was used as a 
basis of convenience to producers. But in the previous decision 
on which offices to close, there were a number of additional 
factors that we looked at.
    Many of those were derived through consultation with 
Members of Congress and with the public in general. And we 
anticipate that as we establish the criteria for closing 
offices by January 1, 1999, the 500 that we referred to in the 
budget, in addition to the geographical or the mileage 
criteria, there will be additional criteria that will be 
factored in.
    The Secretary has made a commitment that as he develops 
these criteria, they will be developed in conjunction with 
those who are affected, including Members of Congress.
    Mr. Dickey. Okay. I'm going to have to rush. I've got one 
more question. Let me say what I said to Mr. Glickman. He said 
he was going to bring these things up and review them with 
Congress. And I said there was no need to review it with me if 
he was not going to cut any in the Fourth District of Arkansas 
and the same holds true to y'all. You understand, just don't 
worry with me if you're not going to do anything there.

                         fsa county committees

    All right. I need one more comment about replacing the 
county committees. Can one of you gentlemen talk about what we 
would lose or what we gain? I can't imagine any gain, but what 
would we lose by eliminating the county committees that we 
would eliminate in a closure?
    Mr. Smith. Well, one of the recommendations coming out of 
the Civil Rights Action Team review suggested a modification in 
the county committee structure. But I don't believe we have an 
active recommendation to eliminate the county committee 
structure at this point.
    Mr. Dickey. In other words, it's a merger of two; that 
there would be two county committees that would come in there? 
Now, I'm talking about county committees, not area committees.
    Mr. Smith. Right. I understand what you mean now. Perhaps 
you can answer the question, Mr. Buntrock.
    Mr. Buntrock. Let me answer the question this way. And of 
course, I'm going to predicate my comments too on the fact that 
this is all in the discussion stage and there is nothing that 
has been proposed.
    But if, for example, we closed 500 FSA county offices, 
we've still got some options and a choice in terms of county 
committees. We could leave the same number of county committees 
as we've got today and operate as we currently do in offices 
where we've already got two or three counties that we're 
servicing out of one office.
    The 1994 USDA reorgnization legislation provided that we go 
to area committees as opposed to county committees. And there 
has been a mix in terms of how we have done that. We have cases 
now where we have merged two county offices and have one county 
committee, but we've gone from three to five committee members 
in that case. Or if we merge three county offices, we go to 
more members. But we do not necessarily have to go to fewer 
committees if we've got fewer county offices. I think we 
probably would overall go to fewer county committees, but we've 
got discretion in terms of how we do that, depending on 
distance and size of counties and so on.
    Mr. Dickey. Thank you.
    Mr. Skeen. Thank you, Mr. Dickey. Let's go to Mr. Rogers. 
Mr. Rogers, I understand you have a statement that you'd like 
to put into the record. Would you like to abstract it, read it?
    Mr. Rogers. I will summarize the statement.
    Mr. Kingston. Mr. Chairman, would you yield to me one 
minute?

                         market access program

    Mr. Skeen. I will yield to the gentleman.
    Mr. Kingston. I wanted to ask one question that I have in 
writing for the record. But the other one I don't have for the 
record. On page 19 of Mr. Smith's testimony it talks about MAP 
works through State regional trade groups, private companies 
and so forth. One of the biggest criticisms we have as 
supporters on this committee of MAP, and you get bipartisan 
support, is that large private companies benefit from MAP.
    What I would like to see and I think other Members of the 
subcommittee would like to see is what is the breakdown of 
that? How can we combat this corporate welfare charge? That's 
just for the record. If you could reply to the whole Committee 
it would be very helpful.
    [The information follows:]

[Pages 27 - 28--The official Committee record contains additional material here.]


    Mr. Kingston. I have another question, Mr. Chairman, I'll 
leave with you. Thank you and Mr. Rogers.
    Mr. Skeen. We will submit it for the record.

               public law 480--titles II and III food aid

    Mr. Rogers. Thank you, Mr. Chairman, Members of the 
Subcommittee, it's an honor for me on behalf of AID to appear 
today to testify on Public Law 480, Title II and Title III Food 
Aid Programs. If I might, I would like to submit a written 
statement and then just begin with some brief oral remarks.
    Mr. Skeen. It will be done that way.
    Mr. Rogers. Thank you sir. At the outset, I would like to 
express my appreciation for the close and collegial working 
relationship we have with the Farm Service Agency and the 
Foreign Agricultural Service. They are both essential to the 
success of our Title II and Title III programs.
    Mr. Chairman, food aid has always had strong support from 
the American people and bipartisan support in Congress. For 
many years these programs have effectively served important 
humanitarian, economic development, and foreign policy 
interests of the United States.
    Now, we must recognize we are in a period of change. Food 
aid levels have declined sharply. In 1986 total U.S. food aid 
from all sources amounted to 8.3 million metric tons and rose 
to 9.1 million metric tons in 1993. Fully funding the budget 
request for food aid in 1998 will provide, in comparison, 3.2 
million metric tons. A part of this decline results from budget 
reductions. But a significant share comes because section 
416(b) surplus commodities are no longer available.
    These surplus commodities were especially important to our 
overseas disaster feeding programs, supplying over one million 
tons for that purpose in 1993. We have absorbed food aid 
reductions by ending programs in countries where good progress 
was being made on food security. Indonesia, the Philippines, 
and Morocco are examples.
    We have also focused our programs more tightly in the 
remaining countries, concentrating on assisting those most in 
need, especially women and children. However, we've remained 
very concerned about the food security of the poorest countries 
of the world.
    In Africa, the number of chronically malnourished is 
expected to grow to over 300 million people; more than any 
other region. Since Africa is prone to drought and also to 
civil strife, this growing insecurity will place millions more 
vulnerable people at risk.
    Our Title II and Title III programs have a successful track 
record in promoting food security. They remain critical to an 
effective U.S. response to a changing world.
    For Title II, we are proposing $837 million in 1998. This 
is the same level appropriated in fiscal year 1997. Title II 
Programs are the backbone of U.S. humanitarian assistance 
overseas. Title II food reaches over 40 million poor people 
each year. Much of it goes to grassroots development programs 
to support maternal and child health and to improve the 
productivity of small farmers. These programs are run very 
capably by U.S. private voluntary organizations such as CARE 
and the Catholic Relief Services.
    Title II also funds Emergency Assistance Programs. With the 
elimination of section 416(b) surplus commodities, and with the 
growing number of complex disasters we confront, emergency 
feeding under Title II has become increasingly important. Here 
again we are fortunate to have strong partners. U.S. private 
voluntary organizations manage emergency feeding. The World 
Food Program headed by Catherine Bertini is also a major 
implementing partner.
    For Title III, we are requesting $30 million in fiscal year 
1998. This is essentially the same level appropriated in fiscal 
year 1997. Title III is focused on the poorest countries of the 
world where over 70 percent of the population earns its living 
from subsistence agriculture. It is no secret that poor 
farmers, like all farmers, will not produce if their output is 
heavily taxed to support city dwellers or if they can't get 
input like fertilizer at a fair price.
    Title III, which as proven itself very successful in Asia 
and Latin America, helps very poor countries to implement 
needed agricultural policy reforms. To complement these 
efforts, AID is also proposing a multi-year African Food 
Security Initiative to be funded from the Development 
Assistance Accounts.
    I would also like in closing to note our continued strong 
support for the Farmer-To-Farmer Program which funds U.S. 
volunteers to provide short-term technical assistance to 
developing countries. These volunteers, U.S. farmers, and small 
agribusinessmen have come from 49 of the 50 U.S. States. 
Farmer-To-Farmer draws funding from all titles of Public Law 
480 and is budgeted at $11.3 million in fiscal year 1998.
    Mr. Chairman, I'd like to close by stressing again how 
important our food aid programs are to our national interests 
overseas. They are essential to successful humanitarian and 
development assistance programs. As such, they are critical to 
a successful U.S. foreign policy.
    I'd be happy to answer any questions, Mr. Chairman.
    Mr. Skeen. Thank you, Mr. Rogers. I tend to agree with you 
in minute detail because I think this is one of the worst 
things we have going on in this world today, the lack of food 
causes more strife and activities of a warlike nature.

                        food aid to north korea

    I see that the Administration has announced a food aid 
donation to North Korea in cooperation with the World Food 
Program. Now, I understand this is going to come from Title II 
of Public Law 480. Could you give us the details of the types 
of commodities, the tonnage, and the time table and so forth? 
Would you also give us what steps the Administration is taking 
to make sure that the aid gets to the people who need it? I'd 
like the same comment for the distribution in Africa.
    Mr. Rogers. Yes, sir, Mr. Chairman.
    Mr. Skeen. It is a very serious problem. We give all this 
food, but it winds up in the hands of the wrong people or it 
has.
    Mr. Rogers. Sometimes it does. Effective monitoring is 
essential. I would agree with you 100 percent.
    Mr. Skeen. How do we get effective monitoring?
    Mr. Rogers. Well, in the case of North Korea, Mr. Chairman, 
we have followed that situation for the past 2 years. We do 
believe that they are approaching a true famine in North Korea. 
They, of course, have a very authoritarian government. We've 
provided $8.2 million for food last year. We've been very 
concerned that any food we might provide not be diverted to the 
North Korean military in particular.
    Mr. Skeen. Yes, sir.
    Mr. Rogers. And we have been able to convince ourselves, 
from the various resources that the U.S. Government has in this 
regard, that the North Korean military is not bulking up and 
that they are not diverting our food for their purposes.
    Beyond that, we have in North Korea a partner in the World 
Food Program. And that partner has personnel on the ground that 
will monitor our food as it goes to the people who are the 
intended beneficiaries. So, we are convinced that the 
monitoring system is adequate.
    Last year we sent in two separate groups of U.S. Government 
employees to watch the World Food Program as we monitored our 
food and are convinced that in fact our food is reaching the 
intended beneficiaries.
    Mr. Skeen. That's in Korea.
    Mr. Rogers. That's in Korea.

                           food aid in africa

    Mr. Skeen. What about Africa?
    Mr. Rogers. In Africa we follow similar procedures. Africa 
is a very difficult place to work. There is not the same sort 
of discipline that there is in North Korea. And so, as we have 
experienced in the past, we expect that we will continue to 
experience some diversion of our food. We do the best that we 
can by financing monitors and tracking it when we do uncover 
diversions and we attempt to either recover the food or to seek 
out compensation for the food that is stolen.
    Mr. Skeen. How difficult is it to arrange for the on-ground 
transportation?
    Mr. Rogers. In Africa?
    Mr. Skeen. In Africa or in North Korea? I would imagine 
Africa is a far more difficult problem.
    Mr. Rogers. Africa is far more difficult. We do private 
contracting. It's quite expensive of course because the 
logistics in Africa are very difficult for truckers. It's 
expensive to move food to emergencies in places like Rwanda or 
Eastern Zaire, which are land locked countries or land locked 
regions of Africa. The food has to be hauled for a long 
distance over a very difficult logistical course.
    Mr. Skeen. You talked also about some of this food being 
kept by those either transporting it or arranging for the 
delivery and it being siphoned off for personal gain for one or 
many administrators.
    Mr. Rogers. That is one of the concerns that we have to 
monitor, yes sir, Mr. Chairman.

                   food aid to africa and north korea

    Mr. Skeen. It's a very tough and a very difficult problem. 
I hope we can come up with a solution. What types of foodstuffs 
are we sending over there; grain?
    Mr. Rogers. To North Korea?
    Mr. Skeen. North Korea and to Africa.
    Mr. Rogers. In North Korea the World Food Program has 
appealed for 100,000 tons of food. We have decided to 
contribute $10 million. Other donors such as the South Koreans 
have also agreed to make a contribution. Our contribution will 
consist of corn-soy blend, which will be directed at children 
under 5 years of age; a very high nutritional level.
    Rice, 6,000 metric tons and bagged corn, 15,400 metric 
tons. All of these commodities will go in with the standard 
U.S. Government markings, ``This is a gift of the people of the 
United States.''
    Mr. Skeen. Is it coming from American agricultural 
producers?
    Mr. Rogers. Yes, sir.
    Mr. Skeen. All the food?
    Mr. Rogers. The tenders were let out of Kansas City. It's 
expected to be shipped I believe out of Houston.

                    chinese food aid to north korea

    Mr. Skeen. Well, I know there is more corn going through 
the Panama Canal than ever before in history headed for China. 
I didn't know whether China is one of our cooperatives, sending 
in, since they love the North Koreans so well.
    Mr. Rogers. Actually, the Chinese have contributed. They 
don't contribute through the World Food Program. They 
contribute on a bilateral basis. But they have contributed to 
the North Koreans.
    Mr. Skeen. They have.
    Mr Rogers. Of course, they're more interested than anyone 
else in the stability of North Korea. They don't want a 
disaster on their borders either.
    Mr. Skeen. That's a strategic position for them I think.
    Mr. Rogers. Exactly. Yes, sir.
    Mr. Skeen. But at least the folks are getting fed.
    Mr. Rogers. They are starving now is the only way to put 
it. The ration that we believe they are getting now is 100 to 
150 grams of food a day which is about a quarter of what you 
need to subsist. It is less than a fist of rice a day. So, they 
are very hungry people.
    Mr. Skeen. Well, it's a well-intentioned program. We've had 
some trouble in the past, particularly in North Africa and 
other places. We appreciate the hard work you folks do to make 
sure it gets delivered there. I know it's a tremendous 
responsibility. We hope we can help get this situation 
alleviated.
    Mr. Rogers. Thank you, Mr. Chairman.
    Mr. Skeen. Thank you. I'm going to let Mr. Latham chair and 
I'm going to go help out the folks in Interior. Would you take 
over Mr. Latham?
    Mr. Latham. Yes, Mr. Chairman.
    Mr. Skeen. I want to thank all of you for your testimony. 
Your responses have been good. We've kept you on the griddle 
here for quite awhile.
    Mr. Latham is a good man and this is a good way to break 
him in, in taking this responsibility and so forth. One of 
these days he's going to wind up chairing this thing.
    Mr. Latham [presiding]. Thank you, Mr. Chairman.
    We can have real fun now.

                      model farm project in russia

    Mr. Rogers, there is a I think it's called Model Farm 
Project in St. Petersburg in Russia. How long has that been 
going on and how much have we spent on that?
    Mr. Rogers. I confess, Mr. Chairman, I'm not familiar with 
the project.
    Mr. Latham. All right.
    Mr. Goldthwait. That project is actually a USDA project 
which was founded at the suggestion of one of the former 
members of the House Agriculture Committee, Mr. Madigan.
    It has been going on now for years and is currently in the 
last year of its funding. The project started off with the idea 
that we were not going to build ``a showcase model farm,'' like 
most people. Rather, we would take a couple of American farm 
families to Russia and put them on the ground there and let 
them teach small Russian farmers exactly how to manage farms 
and try to be able to do this with the kinds of equipment and 
the kinds of supplies that were available locally in the 
economy without dependence on a lot of input that they would 
not have access to once the American contingent left.
    And as I say, this is probably the last year that the 
American farm families will be working. About 28 of the 32 
farms that were established as a part of this project are 
making it. That is, they are breaking even or making a profit.
    Mr. Latham. How much have we spent on that? Do you know?
    Mr. Goldthwait. I can supply the precise number for the 
record. Probably a couple of million dollars in total.
    Mr. Latham. I guess I've heard estimates higher than that.
    Mr. Goldthwait. It may be somewhat higher. We will supply 
you with the exact number.
    [The information follows:]

                       Cost of Model Farm Project

    The Model Farm Project in St. Petersburg, Russia, began in 
fiscal year 1992 and should be completed by the end of fiscal 
year 1997. We estimate that costs will total $2,470,000 for 
this multi-year project.

    Mr. Schumacher. Jim and I have actually visited the farm in 
November of 1994. And it's rough. The American farm families 
live in very simple housing and they're working very, very hard 
under very difficult conditions. When I was there it was in 
Leningrad. It wasn't St. Petersburg. Thank you.

                          fsa irm expenditures

    Mr. Latham. I want to go back just a little bit on the 
computer and telecommunications. The $104 million in the 
request, is that assuming that you're lifting the moratorium? 
Also, where in the budget is the $104 million?
    Mr. Buntrock. Let me find a specific reference.
    Mr. Latham. Just to get you thinking too; does the Agency 
have an information technology architecture plan in place? 
Could we see it if you do?
    Mr. Buntrock. Let me answer the first part of the question 
first. The $104 million is in the Commodity Credit Corporation 
budget. In other words, it's not an appropriated amount.
    The second part of your question about whether we have a 
specific plan--what we have is a short-term kind of plan for 
ADP support to operate our programs for the next 2 to 3 years. 
Yes, we have that, and we'd be glad to share that with you. 
That does not include contingency operating plans if we do not 
get the merged system in place over the next 2 or 3 years, but 
we've been working on the plan for the merged system.
    Mr. Latham. Are we going to be spending this money and then 
having to do it all over again with the overall plan if it's 
not compatible? Isn't that the problem now that every agency 
has their own system?
    Mr. Buntrock. Let me give you an example. I'll just use one 
scenario. This doesn't directly answer your question. But I 
think I can do that. I made reference earlier to upgrading the 
old legacy system of the ASCS. I'm more familiar with that one. 
We've got the other systems for farm credit and others too.
    We were spending, for example, about $40 million a year to 
maintain the ASCS system. That's just to keep it running; keep 
the doors open; keep things going. We replaced every computer 
in the country in every county office. The cost involved, 
contract and all, we paid for and installed in about 18 months.
    The point is that all of these old systems cost a lot of 
money to maintain, with your contracts, your maintenance, et 
cetera. And then also as you get new programs and new 
responsibilities, you've got to develop new software in order 
to implement them with the old systems.
    What we were in effect doing, I would describe it this way, 
is to take the 3B2's from the farm credit system, the old 
System 36's, some of the AS-400's and some of the other old 
systems and link them together within these existing budgets. 
In answer generally to your question I'm pretty confident in 
saying no, I don't believe that we are spending an unusual or 
unreasonable amount of money on these old legacy systems while 
we are preparing to go to something else. And I think we can 
establish that pretty well. That's been, I know, a concern. But 
I think I can honestly say that we have not.
    I'll give you one other example. As you know the Department 
and the folks in Rural Development have designed the DLOS 
system. We went out and looked at that, and we could see some 
application of that system for agricultural credit; not all of 
it, but some application. I would envision that we would use 
some of that for our programs as opposed to going off on our 
own. That's the kind of planning that I'm talking about. We 
could furnish you some of the actions that we have taken 
concerning our systems and some of the determinations that were 
made.
    Mr. Smith. Mr. Chairman.
    Mr. Latham. Yes.
    Mr. Smith. If I may, let me make a comment about the 
process overall in terms of the moratorium and where we are 
going. We do not anticipate that the moratorium will be lifted 
until we have in place plans to make sure that we aren't 
spending money which can't be justified as contributing to the 
overall USDA system as opposed to the so-called stove-pipe 
systems of the past.
    Currently, we have an Executive Information Technology 
Investment Review Board, which is chaired by the Deputy 
Secretary, and which is in place to help the CIO, whom Mr. 
Dewhurst mentioned earlier, to assist in making sure that 
whatever expenditures we make are consistent with the 
Department's overall architectural change in the 
telecommunications systems.
    One of the things that would certainly be most beneficial 
for us would be to have some stability while we're trying to 
design this new architecture for information systems. As you 
know, the Farm Service Agency has been substantially impacted 
by the Farm Bill. Their mission and the products that they are 
delivering to their clients have been substantially in flux 
since the 1994 reorganization. So, once we have made progress, 
then there are other changes that we must fold in. But having 
said that, we feel we have in place now at the Department, at 
the highest level, with the Deputy Secretary as the Chair, the 
organizational structure to ensure that whatever expenditures 
are made are consistent with the overall objectives of having a 
single support system.
    Mr. Latham. You understand my concern. I think a few years 
ago we spent $115 million to try and get everything put 
together and they finally threw up their hands. And with the 
Secretary here the other day, the fact of the matter is you 
can't e-mail directly from the Whitten Building to the South 
Building. I mean the system is so piecemeal right now.
    And to keep throwing money at that system is not good 
management. I just want every agency to work together and 
finally get the thing coordinated. We've wasted an awful lot of 
money.
    Mr. Smith. I might also add anecdotally, however, that I 
was in South Africa recently and I was able to read my e-mail 
from my hotel room and stay abreast of what was happening back 
here in Washington, which was very helpful.
    Mr. Latham. That's fine if you're not in the South 
Building. It depends on which building you're in if you want to 
talk to each other there.

                        fsa staffing reductions

    I don't want to take a lot of time here. Could you give me 
some idea, just submit it sometime. There is a decrease, I 
think from 196 to 188 in Iowa. Where are those people going to 
come from? Break that down.
    Mr. Buntrock. I don't have a specific answer. I will just 
give you some general background on this. I'm going to refer 
back to just about 8 months ago or less than that.
    When we went through the reduction in Iowa as well as in 
other areas, of course workload was a factor as it is always 
going to be in any downsizing that you're going to be doing. 
But I can tell you that we gave the State directors a lot of 
discretion as opposed to directing from Washington that you 
will use some formula across the board. We did not do that. And 
what we did last time, I suspect, will be done again. You could 
do it under this kind of a scenario involving office closings 
or keeping offices open. It has some bearing on this. Let me 
tell you what I'm talking about.
    We do have some offices with maybe three people in there. 
If you were going to do an across-the-board cut in people and 
take, say, one out of every county office, then in an office 
with seven or eight people that would have one kind of impact. 
In an office with three people, it would have a different kind 
of impact. That's a consideration in terms of why you would not 
exclusively do it across the board, because if you did it that 
way, you might lose one in that three-person office. So, you 
may not want to do that if in fact you wanted to keep an office 
open there, just from the logistics of it.
    I can tell you that we also have made progress in merging 
our farm credit program delivery with the other activities of 
the Farm Service Agency. Under reorganization, during the 
transfer of the farm credit function to this agency, in some 
instances we had adequate staffing who came with the program to 
administer and deliver the program, and in other States, we did 
not. There was a need for cross training. What I'm saying is 
that in some States we may do a proportionate reduction in 
people who are administering farm credit programs as well as 
everything else. In other States we may not be able to spare 
any of them because we're short in terms of the folks that 
we've got with experience and capable of delivering credit 
programs without training.
    I say this to you because it's going to be a combination of 
all of these things. But the bottom line will be that we will 
try to distribute the cuts as broadly as we can. We will go 
through a buyout offer first to find out how many folks want 
it. We will probably offer the buyout across the board as 
opposed to targeting offices that are to close, even though it 
may mean in some offices we may have to fill vacancies. But we 
get more people taking the buyout by offering it across the 
board. It is still less than we have to reduce, and you do not 
get the right distribution to handle the workload, but you do 
get more takers, so that there's less of an impact on people. 
So, it is all of those factors that I'm talking about that will 
be used for this downsizing.
    Mr. Latham. As far as the offices themselves, I guess 
obviously I've got a concern. Thirty-five was the target number 
out of the 100, which is 35 percent of our offices--that's a 
tremendous number of offices to begin with when the overall 
goal is the reduction of 20 percent. It seems disproportionate 
as far as the offices. That's obviously a concern.
    I have a couple of other questions that I'll submit for the 
record.

                    explanation of rma fte increase

    Just one thing more. On the Risk Management Agency, there 
is a request I think for 30 full-time equivalents. In the Farm 
Bill we're going to phase in the private delivery of crop 
insurance. I'm just wondering, how do you justify 30 more 
people?
    Mr. Ackerman. Thank you for asking me a question this 
afternoon.
    Mr. Latham. We've more if you want to stay.
    Mr. Ackerman. We work in a very close partnership with the 
private sector. The small increase for the Risk Management 
Agency is an adjustment. We have gone through a significant 
process of downsizing over the past several years during which 
our program staff has been reduced significantly.
    We want to use these new staff positions to help us support 
the private sector. The Federal Crop Insurance Program has 
undergone a great deal of growth in the past 3 years. It has 
more than doubled in size. Working with the private sector, we 
have introduced revenue insurance this year as a major item.
    There are quite a few expectations that risk management 
will expand both in quantity and quality to fill a lot of the 
gaps left by changes in other farm programs. To do that takes a 
certain amount of staff. And we have found that with the 
reductions we have had in the past several years, we've needed 
to adjust in order to support the workload and to support the 
private sector.
    Mr. Latham. I'm a very big supporter of the revenue 
assurance type of policies and getting them into the private 
sector. Philosophically--I certainly don't want the Government 
competing with the private sector. I guess it's a little 
confusing why if you're moving that out, you need more staff.
    Do you have a good explanation about why you'd need more 
people to do less down the road.
    Mr. Ackerman. Well, for example, approving the revenue 
insurance products that were recently approved this year 
required a significant amount of economic and rating analysis. 
It also required computer reengineering and software 
development to enable our system to work with these new 
changes.
    Mr. Latham. Very good. I've a couple of questions I'll 
submit, but we've been here a long time now. Thank you all very 
much. I appreciate your candor and good answers. Thank you. 
We're adjourned.
    [Clerk's note.--The following questions were submitted to 
be answered for the record:]

                          Farm Services Agency

                                staffing
    Mr. Skeen. We continue to hear from Members of Congress who say cut 
some more money out of the Farm Service Agency. This in general is 
because there have been major shifts in work due to the enactment of 
the Farm Bill. What has happened to the staffing of the FSA in the last 
3 years?
    Response. The FSA and other USDA agencies have made significant 
staffing reductions over the past several years. For the 3 years from 
FY 1995 to the current mid-year FY 1997 level, FSA reduced total 
staffing 11 percent. These reductions reflect an overall 7 percent 
reduction in Federal staff years, including 9 percent at Headquarters, 
and a 13 percent reduction in non-Federal staff years. Since fiscal 
year 1993 through FY 1997 to date, Federal staffing has declined 19 
percent--including 27 percent at Headquarters--and non-Federal county 
staff years have decreased 22 percent. Total staffing is down 21 
percent.
    Mr. Skeen. What happens if we appropriate everything you ask for in 
the President's budget?
    Response. For FY 1998, the President's Budget fully funds an FSA 
staff-year level of 5,877 Federal and 9,879 non-Federal county staff 
years. This represents an additional decrease of 2,119 staff years from 
the current FY 1997 levels of 6,146 Federal and 11,729 non-Federal 
staff years, and would be accomplished through buyouts and RIF's that 
are funded in the budget request.
    Mr. Skeen. Last year, you stated you hoped to reach the proposed 
reductions in staff years through attrition. But we know that you had a 
buyout this year. What are the staff-year reductions you attribute to 
reorganization and which to the Farm Bill changes?
    Response. It is difficult to characterize the precise staff-year 
reductions attributable to reorganization and streamlining and Farm 
Bill changes. However, all of the staffing reductions prior to 1996 
were related to reorganization and streamlining. For FY 1996 and future 
years, the reductions are attributable to a combination of streamlining 
and the programmatic impacts of the 1996 Farm Bill.
    Mr. Skeen. Give us a projection for the next 5 years on FSA 
staffing.
    Response. Following is a table that reflects staff-year estimates 
for FSA for the next 5 years based on the 1998 President's Budget.

                            Farm Service Agency Staff Years--FY 1998 Through FY 2002                            
----------------------------------------------------------------------------------------------------------------
                                                                 FY 1998   FY 1999   FY 2000   FY 2001   FY 2002
                          Staff years                             Est.      Est.      Est.      Est.      Est.  
----------------------------------------------------------------------------------------------------------------
Federal.......................................................     5,877     5,877     5,877     5,877     5,877
Non-Federal...................................................     9,879     8,879     6,879     5,879     4,879
      Total staff years.......................................    15,756    14,756    12,756    11,756    10,756
----------------------------------------------------------------------------------------------------------------

                          equipment purchases
    Mr. Skeen. Would you provide a table for the record, showing the 
amount of CCC funds used for equipment purchases and other ADP related 
costs for the last 10 years, including estimates for fiscal year 1997 
and 1998.
    Response. A table showing the actual amount of CCC funds used for 
equipment and other ADP related costs in support of CCC programs for 
the last 11 years and estimates for 1997 and 1998 follows.

[Page 39--The official Committee record contains additional material here.]


    the farm bill's impact on ccc funding for adp and other expenses

    Mr. Skeen. The Farm Bill proposed a cap on CCC salaries and 
expenses. Tell us how that provision has impacted the agency.
    Response. The final version of the Farm Bill restricted the CCC's 
authority for spending on salaries and expenses and on automated data 
processing (ADP) equipment. The Farm Bill limits spending for ADP and 
CCC reimbursable agreements to definitive levels over the FY 1996-2002 
period. I would point out that CCC spending on salaries and expenses 
was not direct CCC spending for salaries, but rather payments to other 
agencies that assisted in carrying out the Corporation's programs. 
These payments were made under reimbursable agreements.
    Section 161 of the 1996 Act significantly limits the use of CCC 
funds for operating expenses. CCC no longer has authority to purchase 
personal property, except within authorized limitations. CCC spending 
for equipment or services relating to automated data processing (ADP), 
information technologies or related items (including telecommunications 
equipment and computer hardware and software, but excluding 
reimbursable agreements), was limited by the 1996 Act to $170 million 
in fiscal 1996, and $275 million for the 6-year period including fiscal 
years 1997 through 2002, unless additional amounts for such contracts 
and agreements are provided in advance in appropriation acts. The 
amount actually obligated in fiscal year 1996 was $144.0 million. The 
1996 Act also requires that CCC submit to Congress on a quarterly basis 
an itemized report of all expenditures over $10,000, excluding program 
payments.
    Section 161 of the 1996 Act also amended section 11 of the CCC 
Charter Act to limit the uses of CCC funds for reimbursable agreements 
and transfers and allotments of funds to State and Federal agencies. 
Starting in fiscal year 1997, the total of CCC fund uses under that 
section in a fiscal year, including agreements for ADP or information 
resource management activities, may not exceed the total of such 
allotments and transfers in fiscal year 1995. CCC obligations for 
Section 11 activities in fiscal year 1995 were $45.6 million, and 
obligations in fiscal year 1996 were $49.4 million. Obligations for 
Section 11 activities are projected at $41.2 million for fiscal year 
1997 and $35.6 million for fiscal year 1998.
    Mr. Skeen. The one issue that continues to irk some of our 
colleagues, is the spending for computers and equipment. Since the new 
Farm Bill finished, have you had a chance to reevaluate your field 
office computer needs? Are you able to quantify the percent of usage of 
computers for crop insurance, agriculture credit loan activity, and 
farm payments?
    Response. The missions that USDA must execute under the Farm Bill 
and other recent legislation hold promise for increasing service and 
reducing cost to the taxpayer. It is equally true that revised 
responsibilities assigned to the FSA require an on-going infrastructure 
to deliver services. These revised responsibilities include crop 
insurance reform initiatives such as the nationwide non-insured crop 
disaster assistance programand catastrophic insurance coverage in 
under-served States, the Conservation Reserve Program, administrative 
support for the Environmental Quality Incentives Program, and realigned 
farm loan activities.
    With the merger of legacy agencies to form FSA, and the 
consolidation of administrative support, FSA inherited many diverse 
computer platforms of varying ages, software and application systems. 
The former ASCS State and county offices mainly rely on mid-1980 
information technology to deliver program benefits. Farm loan programs 
are supported by 3B2 computer systems, personal computers and laptops. 
The 3B2 computer systems are no longer manufactured. FSA has begun 
converting farm loan applications resident on the 3B2 systems to the 
Advanced/36 Systems. This step is necessary to establish a single 
delivery system for FSA program responsibilities, an absolute must when 
faced with reduced staffing. Recent engineering upgrades to 
minicomputers supporting the remainder of FSA programs have stabilized 
an important piece of the support structure necessary to sustain 
operations required by the Farm Bill. However, workstations in excess 
of 12 years old, along with printers near the end of their useful life, 
increasingly risk disruptions of service to the customers and will need 
emergency attention. The challenge before FSA is to synthesize this 
enormous set of changes into a plan which properly positions the right 
information systems in the right place at the right time consistent 
with congressional intent.
    Efforts are underway to replace this technology through the USDA 
Service Center (SC) Initiative, a collaborative project involving 
several USDA agencies--NRCS, RD and FSA. During the first quarter of FY 
1997, the placement of the technical infrastructure (integrated 
telephone and data communications) needed to support SC's was started. 
Target completion of this phase is December 1997. After all agencies 
complete business process reengineering/improvement projects which will 
streamline and improve program delivery, the next phase will involve 
the establishment of a common computing environment for Service Centers 
supporting those business functions. This common computing environment 
will improve delivery of mission-critical programs to FSA and other SC 
agencies' producers, and advance USDA initiatives of reduced customer 
burden, better customer service, and easier and more timely information 
sharing.
             limits on adp and ccc reimbursable agreements
    Mr. Skeen. Has there been an impact on the ability of FSA to do its 
work because of the limitations placed on expenditures in the Farm 
Bill?
    Response. The legislated caps for CCC spending for ADP-related 
expenses instituted for the fiscal year period 1997-2002 have already 
impacted FSA. The ADP-related amounts in the 1998 Budget needed for FSA 
to support farm credit programs, conservation programs, and CCC 
programs represent significant changes in ADP spending from previous 
budgets. For example, FSA has reduced its planned purchases of digital 
orthophotography of $12 million in each of the fiscal years 1997-1999 
to a total of only $14 million for those fiscal years. The purchase of 
this photography is a cooperative effort with other USDA, Federal, 
State and local agencies to increase efficiency by eliminating 
duplication in acquiring such data.
                  new ccc-funded conservation programs
    Mr. Skeen. There were several new programs authorized in the Farm 
Bill--Environmental Quality Incentives Program, Conservation Farm 
Option, and others. For the record, give us a general description of 
each and the status of implementing rules and regulations for each.
    [The information follows:]
                  new ccc-funded conservation programs

                        Conservation Farm Option

    Conservation Farm Option (CFO) is a pilot program for producers of 
wheat, feed grains, cotton, and rice. The program's purposes include 
conservation of soil, water, and related resources, water quality 
protection and improvement, wetland restoration, protection and 
creation, wildlife habitat development and protection, or other similar 
conservation purposes. Eligibility is limited to owners and producers 
who have contract acreage enrolled in the Agricultural Market 
Transition Act program, i.e., production flexibility contracts. The CFO 
is a voluntary program. Participants are required to develop and 
implement a conservation farm plan. The plan becomes part of the CFO 
contract which covers a 10-year period. CFO is not restricted as to 
what measures may be included in the conservation plan, so long as they 
provide environmental benefits. During the contract period the owner or 
producer (1) receives annual payments for implementing the CFO contract 
and (2) agrees to forgo payments under the Conservation Reserve 
Program, the Wetlands Reserve Program, and the Environmental Quality 
Incentives Program in exchange for one consolidated payment. The CFO is 
funded with CCC funds, and is administered by NRCS.
    Status of CFO: The CFO Request for Proposals for Fiscal Year 1997 
is undergoing agency clearance. The expected date for Federal Register 
Publication is April 1. This request for proposals includes a proposal 
submission form, guidance for completing the form, and a scoring sheet 
by which the proposals will be rated.

                Environmental Quality Incentives Program

    The Environmental Quality Incentives Program (EQIP) provides 
technical, educational, and financial assistance to eligible farmers 
and ranchers to address soil, water, and related natural resource 
concerns on their lands in an environmentally beneficial and cost-
effective manner. The program provides assistance to farmers and 
ranchers in complying with Federal, State, and tribal environmental 
laws, and encourages environmental enhancement. The EQIP is 
administered by both NRCS (lead agency) and FSA, and is funded through 
the CCC. The purposes of the program are achieved through the 
implementation of a conservation plan which includes structural, 
vegetative, and land management practices on eligible land. Five- to 
ten-year contracts are made with eligible structural or vegetative 
practices, such as animal waste management facilities, filter strips, 
tree planting, and permanent wildlife habitat. Incentive payments can 
be made to implement one or more land management practices, such as 
nutrient management, pest management, and grazing land management.
    Fifty percent of the funding available for the program will be 
targeted at natural resource concerns relating to livestock production. 
The program is carried out primarily in priority areas that may be 
watersheds, regions, or multi-state areas, and for significant 
statewide natural resource concerns that are outside of geographic 
priority areas.
    Section 1240(G)(c) of the 1996 Act prohibits the payment of 
expenditures that are obligated in the first fiscal year of an EQIP 
contract until the subsequent fiscal year.
    Status of EQIP: The final rule is expected to be cleared through 
the Department by March 12.

                      Farmland Protection Program

    The Farmland Protection Program (FPP) provides funds to help 
purchase development rights to keep productive farmland in agricultural 
uses. Working through existing programs, USDA joins with State, tribal, 
or local governments to acquire conservation easements or other 
interests from landowners. USDA provides up to 50 percent of the fair 
market easement value. To qualify, farmland must be part of a pending 
offer from a State, tribe, or local farmland protection program; be 
privately owned; have a conservation plan; be large enough to sustain 
agricultural production; be accessible to markets for what the land 
produces; have adequate infrastructure and agricultural support 
services; and have surrounding parcels of land that can support long-
term agricultural production. Depending on funding availability, 
proposals must be submitted by the government entities to the 
appropriate NRCS State Office during the application window. The FPP is 
funded with CCC funds, and is administered by NRCS.
    Status of FPP: During fiscal year 1996, 53 entities from 20 States 
submitted proposals requesting Federal matching funds of $130 million 
for 628 farms with 176,000 acres of farmland at an estimated easement 
value of $330 million. $14.5 million of CCC funds were provided to 
match 37 government entity programs. This allocation will lead to the 
protection of approximately 76,000 acres of farmland on 203 farms with 
an estimated easement value of $116 million in 17 States when all 
easement acquisitions have been completed.
    For fiscal year 1997, $2 million in CCC funds was approved by 
Congress to purchase development rights from farmers and ranchers. 
Fiscal year 1997 allocations are pending.

                      Flood Risk Reduction Program

    Section 385 of the Federal Agriculture Improvement and Reform Act 
of 1996 authorizes the Flood Risk Reduction Program (FRRP) for 
producers of frequently flooded farmland. The FRRP is available to a 
producer on a farm with frequently flooded land currently under a 
production flexibility contract or expiring CRP contract. The 
participant will receive a one-time payment, not to exceed 95 percent 
of the estimated PFC payment the participant would otherwise have 
received. FRRP is administered by FSA and is funded with CCC funds.
    If a producer receives a flood risk reduction payment, the producer 
must forgo a production flexibility contract payment and the amount 
made available for production flexibility contracts must be reduced by 
an amount that is equal to the contract payments that producers forgo. 
In addition to forgoing production flexibility contract payments, 
producers who enter into a flood risk reduction contract must also 
forgo loan eligibility, crop insurance indemnities, disaster payments, 
and conservation program payments.
    Status of FRRP: Regulations are currently being drafted to seek 
comments on program implementation. It is anticipated that the program 
will be offered beginning October 1, 1997.

                  Wildlife Habitat Incentives Program

    The Wildlife Habitat Incentives Program (WHIP) provides financial 
incentives to develop habitat for fish and wildlife on private lands. 
Participants agree to implement a wildlife habitat development plan and 
USDA agrees to provide cost-share assistance for the initial 
implementation of wildlife habitat development practices. USDA and 
program participants enter into a cost-share agreement for wildlife 
habitat development. This agreement generally lasts a minimum of 10 
years from the date that the contract is signed. WHIP is administered 
by NRCS and funded with CCC funds.
    Status of WHIP: A proposed rule has been published. All comments 
were received and the final WHIP rule is now in the process of being 
drafted.
               conservation program expenditures by state
    Mr. Skeen. Please provide a table showing expenditures by State for 
each of the CCC-financed conservation programs.
    [The information follows:]

[Pages 44 - 47--The official Committee record contains additional material here.]


                      flood risk reduction program

    Mr. Skeen. One of the programs in the Farm Bill was the Flood Risk 
Reduction Program. The budget justifications indicate an expenditure of 
$10,000,000 for this in the current fiscal year and nothing in fiscal 
year 1998. Explain how this program is supposed to work.
    Response. The 1996 Act authorizes the Secretary to offer flood risk 
reduction contracts to producers on farms that have frequently flooded 
acreage under production flexibility program contracts. Producers can 
receive in advance up to 95 percent of the projected production 
flexibility contract payments the producer would otherwise have 
received from the time of enrollment in the Flood Risk Reduction 
Program through September 30, 2002. In return, producers must terminate 
their production flexibility contract with respect to the enrolled 
acreage, comply with swampbuster and conservation compliance 
provisions, and forgo future disaster payments, crop insurance 
payments, conservation program payments, and loans for contract 
commodities, oilseeds, and extra long staple cotton. The 1996 Act 
provides that the Secretary shall carry out the program through the 
Commodity Credit Corporation.
          technical assistance costs for conservation programs
    Mr. Skeen. For each of the new authorized programs, how much of 
each may be used for salaries and expenses or other technical 
assistance?
    Response. No CCC funds will be used for FSA salaries and expenses 
for the new programs, but funds will be used for NRCS and FS technical 
assistance. The following table reflects the amounts and source of 
funds for each new program and the Conservation Reserve Program.

[Page 49--The official Committee record contains additional material here.]


                      conservation reserve program
    Mr. Skeen. The Conservation Reserve Program has become very 
controversial as the Department looked at what conservation criteria 
will be used to set new contracts. Now that the rules allow over 200 
million acres of land to be eligible for enrollment, how will you 
assure that only the highest quality environmental benefits get into 
the program?
    Response. Based on provisions of the final rule, approximately 230 
million to 240 million acres are eligible to be offered for enrollment. 
This larger pool of eligible acreage allows the Department to be more 
selective in the acreage it enrolls. USDA selects acreage through the 
use of an Environmental Benefits Index (EBI). The EBI is a relative 
measure of the environmental benefits of a CRP offer compared to the 
cost of the offer. The EBI utilizes 6 environmental factors that 
include (1) wildlife, (2) water quality, (3) on-farm benefits of 
reduced erosion, (4) long-term retention, (5) air quality, and (6) 
benefits of enrollment in conservation priority areas. It also utilizes 
a cost factor. The sum of the six environmental factors and the cost 
factor comprise the EBI. Each offer into CRP is scored and competes 
with every other eligible offer in the country. Only the highest ranked 
offers are selected. After the signup concludes, USDA will review the 
data to develop a minimum EBI threshold to ensure all offers enrolled 
into CRP provide significant environmental benefits. The benefits of 
the CRP will be based on the quality of the offers that are accepted 
rather than the average quality of all offers. Those offers with low 
environmental benefits will not be accepted.
                     state and county office leases
    Mr. Skeen. You can use the authority of CCC to lease space directly 
and not go through GSA. For fiscal years 1996 and 1997, tell us how 
much space you leased directly and how much you leased through GSA, 
including the cost of each. What will change in fiscal year 1998?
    Response. Following is a table that reflects State and county 
office leases and costs for FY 1996, FY 1997 and FY 1998.

                               COST INFORMATION FOR STATE AND COUNTY OFFICE LEASES                              
                                          [Cost in millions of dollars]                                         
----------------------------------------------------------------------------------------------------------------
                                             FY 1996                   FY 1997                   FY 1998        
                                   -----------------------------------------------------------------------------
            Lease type               Space (sq.                Space (sq.                Space (sq.             
                                        ft.)         Cost         ft.)         Cost         ft.)         Cost   
----------------------------------------------------------------------------------------------------------------
State Office Leases:                                                                                            
    FSA...........................      425,877        $5.72      383,289        $5.36      344,960        $5.02
    GSA...........................      384,429         5.76      345,986         5.39      311,387         5.05
County Office Leases:                                                                                           
    FSA...........................    6,019,677        50.60    5,417,709        47.39    4,875,938        44.37
    GSA...........................      158,312         1.63      142,481         1.52      128,233         1.43
----------------------------------------------------------------------------------------------------------------

                   agricultural conservation program
    Mr. Skeen. Are there any unobligated balances left from the old 
Agricultural Conservation Program?
    Response. As of September 30, 1996, there was an unobligated 
balance of $2.4 million in the Agricultural Conservation Program 
account. These funds may not be used by States for any new approvals 
but will remain available for approved producer appeals, errors, and 
omissions.
                    water quality incentive projects
    Mr. Skeen. Provide a table showing the average cost per acre of 
land treated and the number of producers participating in the Water 
Quality Incentives Program since the program began in fiscal year 1992.
    [The information follows:]

                    WATER QUALITY INCENTIVE PROJECTS                    
------------------------------------------------------------------------
                                             Number of     Average cost 
                  Year                     participants      per acre   
------------------------------------------------------------------------
1992....................................             219           $7.02
1993....................................           1,192            7.51
1994....................................           2,559            7.88
1995....................................           3,588            7.87
1996....................................           4,630            5.69
------------------------------------------------------------------------

    Mr. Skeen. How were Water Quality Incentive Program (WQIP) funds 
allocated to the States in fiscal years 1995 and 1996?
    Response. An ACP Notice was issued in both fiscal year 1995 and 
1996 which provided the guidelines to be used in developing a WQIP 
proposal as a first step in making WQIP funds available. Project 
proposals were then compiled, reviewed, and rated at the national level 
by an interagency team comprised of the Farm Service Agency, the 
National Resources Conservation Service, the Cooperative State 
Research, Education, and the Extension Service, the Economic Research 
Service, the United States Geologic Survey, and the Environmental 
Protection Agency. The projects were then prioritized according to 
their ratings. The highest rated projects were funded based on the 
funds available, after considering congressional directives regarding 
certain individual projects contained in the respective fiscal year 
appropriations act conference reports.
    Mr. Skeen. Provide a list, by State, of projects that received 
funding and how much each received.
    [The information follows:]

[Pages 52 - 55--The official Committee record contains additional material here.]


                      conservation reserve program

    Mr. Skeen. Provide a table, for the record, showing the number of 
acres of conservation land planted in trees, wildlife plantings, native 
grasses, and other grass species as a result of cost sharing through 
USDA programs.
    [The information follows:]

          CRP Acreage by Type of Cover--Program since Inception

        Cover                                                      Acres
Wildlife planting.......................................       1,895,193
Trees...................................................       2,230,241
Native grasses..........................................       8,127,540
Other grasses...........................................      20,547,026
                    --------------------------------------------------------
                    ____________________________________________________
      Total.............................................      32,800,000

    Mr. Skeen. Please update the table that appears on page 167 of last 
year's hearing record showing the Conservation Reserve Program (CRP) 
signup periods, the eligibility criteria used, and the number of acres 
enrolled.
    [The information follows:]

[Pages 57 - 58--The official Committee record contains additional material here.]


    Mr. Skeen. Also update both tables that appear on page 169 of last 
year's hearing record showing the technical assistance costs and ASCS/
FSA administrative costs.
    [The information follows:]

[Page 60--The official Committee record contains additional material here.]


    Mr. Skeen. For the record, please provide a table that shows the 
CRP carryover balances for each of the years the program has been in 
operation.
    Response. It should be noted that, generally, carryover balances 
were applied to subsequent years' program costs to reduce appropriation 
requests.
    [The information follows:]

  Conservation Reserve Program--Carryover unobligated balances, fiscal 
                              years 1986-96

Fiscal year:                                           Carryover balance
    1986................................................          \1\ $0
    1987................................................           \1\ 0
    1988................................................     794,282,776
    1989................................................   1,149,617,269
    1990................................................     647,502,996
    1991................................................     320,374,550
    1992................................................     272,198,054
    1993................................................     131,002,896
    1994................................................     138,689,597
    1995................................................     121,820,920
    1996................................................ \2\ 110,987,113
---------------------------------------------------------------------------
\1\ Conservation Reserve Program payments were authorized to be made 
directly from Commodity Credit Corporation funds in fiscal years 1986 
and 1987. There were no appropriations made for the program in these 
fiscal years.
\2\ Funds remaining at the end of fiscal year 1996 will be used for 
conservation technical assistance performed by USDA agencies. The year-
end fiscal year 1996 carryover balance is net of transfers to the 
Agricultural Credit Insurance Fund ($16,400,000) for funding emergency 
disaster loans and to the FSA Salaries and Expenses Account 
($51,270,000) for financing employee separation costs. Both transfers 
were made under the Secretary's 7 percent interchange authority.
---------------------------------------------------------------------------
                        dairy indemnity program
    Mr. Skeen. Have any payments been made from the Dairy Indemnity 
Program for fiscal year 1996?
    Response. Yes, during fiscal year 1996, 22 dairy farmers in 7 
States filed and received payment for claims totaling $207,867 under 
the Dairy Indemnity Program. These farmers' claims resulted from losses 
incurred due to aflatoxin contamination discovered in their cattle's 
milk.
                     emergency conservation program
    Mr. Skeen. For the record, please provide an update of the table 
that appears on page 175 of last year's hearings showing the Emergency 
Conservation Program (ECP) expenditures.
    [The information follows:]

[Page 62--The official Committee record contains additional material here.]


    Mr. Skeen. What is the current backlog of requests for ECP funding?
    Response. As of today, March 6, the amount of unfunded requests is 
$24.9 million. This amount does not include any funds that will be 
needed for States affected by the most recent severe flooding along the 
Ohio Valley, the tornados in several southern States, and other natural 
disasters occurring in other States. Winter storms in several western 
States have caused severe flooding and extensive damage to farmland, 
farm equipment, levees, homes, and businesses in those areas affected.
    Mr. Skeen. For the record, please provide a listing and short 
description of each approved ECP practice.
    [The information follows:]

                    Emergency Conservation Practices

    Practice EC1, Removing Debris from Farmland. This practice provides 
assistance to remove debris from farmland damaged by natural disasters 
and return that farmland to productive agricultural use.
    Practice EC2, Grading, Shaping, Releveling, or Similar Measures. 
This practice provides assistance to grade, shape, and relevel farmland 
damaged by natural disasters and return the land to agricultural use .
    Practice EC3, Restoring Permanent Fences. This practice provides 
assistance to restore or replace farmland or ranchland fencing damaged 
by natural disasters.
    Practice EC4, Restoring Structures and Other Installations. This 
practice provides assistance to restore structures and installations 
such as dams, terraces, and waterways damaged by natural disasters.
    Practice EC5, Emergency Wind Erosion Control Measure. This practice 
provides assistance to apply emergency wind erosion control measures 
such as contour or cross-slope chiseling, or deep plowing on similar 
measures, to farmland damaged by natural disasters.
    Practice EC6, Drought Emergency Measures. This practice provides 
assistance to provide water conservation and enhancement measures to 
permit grazing of range or pasture, emergency water for livestock, or 
emergency water supply for existing irrigation systems for orchards and 
vineyards, on land suffering from severe drought.
    Practice EC7, Other Emergency Conservation Measures. This practice 
is to allow other emergency conservation practices not covered above.
    Mr. Skeen. For the record, please provide a list of the ECP 
expenditures for each of the past 10 years.
    [The information follows:]

                            ECP Expenditures

        Fiscal year                                              Outlays
1987....................................................      $4,656,594
1988....................................................       4,763,344
1989....................................................       7,893,738
1990....................................................      12,256,527
1991....................................................      13,245,469
1992....................................................       8,854,177
1993....................................................      27,431,669
1994....................................................      34,139,167
1995....................................................      27,206,940
1996....................................................      25,406,741
                    --------------------------------------------------------
                    ____________________________________________________
      Total.............................................    $165,854,366
                            object class 41
    Mr. Skeen. Object Class 41, Grants, Subsidies, and Contributions, 
includes county office staff year costs and conservation program 
obligations. Provide a detailed breakout of this object for fiscal 
years 1997 and 1998.
    Response. Object class 41 also includes appropriated subsidy 
amounts and grant accounts for farm credit programs. Following is a 
table depicting all components of this object class.

  OBJECT CLASS 41--GRANTS, SUBSIDIES AND CONTRIBUTIONS--FY 1997-FY 1998 
                                 [$000]                                 
------------------------------------------------------------------------
                                                  FY 1997      FY 1998  
                    Program                      estimated    estimated 
------------------------------------------------------------------------
Emergency Conservation Program................       44,086       12,230
Dairy Indemnity Program.......................          292          100
Rural Clean Water Program.....................          956          729
Agricultural Credit Insurance Fund program                              
 account......................................  \1\ 163,202       97,590
Agricultural Credit Insurance Fund non-                                 
 recoverable loan costs.......................       12,600       10,000
State mediation grants........................        2,000        4,000
Salaries and expenses (non-federal County                               
 offices).....................................      542,797      543,537
                                               -------------------------
      Total...................................     $765,933     $668,186
------------------------------------------------------------------------
\1\ Includes $28,939 thousand in the FY 1996 emergency supplemental.    

                commodity credit corporation guarantees
    Mr. Skeen. The Commodity Credit Corporation guarantees loans made 
by U.S. banks to finance the sale of agricultural products to foreign 
governments. Would you please provide, for the record, the amount of 
loan guarantees currently outstanding, by country, and indicate the 
current status of each of these loans.
    [The information follows:]

[Page 65--The official Committee record contains additional material here.]


    Mr. Skeen. According to last year's list, six countries were in 
arrears. What is the current status of each of these?
    [The information follows:]
            Update on countries reported behind in their payments last 
                    year
    Dominican Republic: CCC is working with the Dominican Republic to 
clear up its arrears. The Dominican Republic made a total of $9 million 
in payments since March 1996 as a good faith payment towards its 
outstanding rescheduling arrears of $109 million, to show its 
commitment for resolution.
    Jamaica: As of January 31, 1997, Jamaica is current on all GSM 
loans.
    Peru: As of January 31, 1997, Peru had arrears of $75,332 which is 
not being rescheduled.
    Russia (FSU): As of January 31, 1997, Russia has principal arrears 
of $307,529,330 which will be rescheduled under the Paris Club Agreed 
Minute dated April 29, 1996.
    Sudan: As of January 31,1997, Sudan's principal and interest 
arrears have increased to $96,183,470 from $91,326,839 reported last 
year. CCC continues to bill but has not received a payment from the 
Government of Sudan in many years. No current GSM program is available 
for Sudan.
    Zaire: As of January 31, 1997, Zaire's principal and interest 
arrears have increased to $13,534,999 from $12,869,069 reported last 
year. CCC continues to bill but has not received a payment from the 
Government of Zaire in many years.
            Other countries currently in arrears
    Honduras: As of January 31, 1997, Honduras has principal arrears of 
$1,337,317 which will be rescheduled under the Bilateral Agreement 
dated December 4, 1996 not yet in force.
    Mr. Skeen. What is being done to collect on these loans?
    Response. We employ a number of collection techniques to collect on 
defaulted payments. Billing notices are sent to obligors, and meetings 
are occasionally conducted between the staff of the agricultural 
attaches and the defaulting institutions, as well as between USDA, 
Washington representatives, and representatives of foreign governments. 
We coordinate our collection effort with our U.S. government creditors 
such as the Export-Import Bank and private sector creditors such as 
U.S. commercial banks. In the case of Iraq, we are monitoring the 
activities of the United Nations Compensation Commission for Iraq, 
related to the liquidation of frozen assets in theUnited States. CCC is 
on the creditors' committee related to the liquidation of Rafidin Bank 
of Iraq's subsidiary in London. CCC also informs Treasury's Office of 
Foreign Asset Control of its outstanding Iraqi claims. In addition, CCC 
frequently participates in official reschedulings of the Paris Club. 
Such reschedulings are often our best recourse to collect the hundreds 
of million of dollars in previously defaulted public sector payments.
                commodity credit corporation guarantees
    Mr. Skeen. Are we still selling agricultural products to these 
countries under guaranteed loans?
    Response. It is our policy to suspend programming for significant 
arrears totaling more than $250,000. Nearly all of the arrears under 
CCC export credit guarantees are public sector, the bulk of which is in 
countries considered the poorest or in countries where we have legal or 
political constraints. As of January 31, 1997, the four countries with 
arrears of over $250,000 that have not been rescheduled were the 
Dominican Republic, Zaire, Sudan, and Honduras. However, the arrears 
for Honduras will be rescheduled under a Bilateral Agreement dated 
December 4, 1996, not yet in force. The other three countries do not 
have current GSM programs.
                           ccc interest rate
    Mr. Skeen. What is the current interest rate Treasury charges on 
CCC borrowings?
    Response. The rate varies monthly. The current interest rate 
Treasury charges on CCC borrowings is 5.50 per annum for March 1997.
                             ccc inventory
    Mr. Skeen. Would you please provide a list of the availability of 
commodities held in CCC inventory, giving both quantity and dollar 
values, for fiscal years 1995 and 1996, and the most up-to-date totals 
for fiscal year 1997.
    [The information follows:]

[Page 67--The official Committee record contains additional material here.]


                        ccc donations and sales

    Mr. Skeen. Also, would you provide a detailed description of 
commodities provided from CCC inventory to other government programs, 
including the quantity provided and its market value.
    Response. The entire value of CCC domestic and export donations is 
charged off as a loss. Therefore, no reimbursement is received, except 
that the value of export sales to the Department of Defense is 
partially offset by limited recoveries.
    The donation of surplus dairy products to the Veteran's 
Administration and the Department of Defense is authorized by section 
202 of the Agricultural Act of 1949, as amended. Section 210 of the 
Agricultural Act of 1956 authorizes the donations of surplus 
commodities in CCC inventory to Federal penal and correctional 
institutions. Institutional donations to Research and Other include 
miscellaneous donations as authorized in Section 505 of the 
Agricultural Act of 1958, as amended.
    Surplus commodities are also distributed to charitable 
institutions, nonprofit school lunch programs, food banks, soup 
kitchens, and similar nonprofit agencies. Section 416 of the 
Agricultural Act of 1949, as amended, is the statutory authority for 
making donations to State, Federal, or private agencies in the United 
States, including areas of jurisdiction or administration in the United 
States. The Emergency Food Assistance Act (TEFAP) authorizes the 
release of commodities to relieve situations of emergency and distress 
to needy persons, including low-income and unemployed persons.
    The export donation of surplus commodities is accomplished through 
foreign governments and public and nonprofit private humanitarian 
organizations for the assistance of needy persons outside the U.S. 
These donations are authorized by Section 416 of the Agricultural Act 
of 1949, as amended, and includes Public Law 480 Food for Progress 
donations.
    [The information follows:]

[Page 69--The official Committee record contains additional material here.]


                          ccc tefap donations

    Mr. Skeen. Provide a list of all commodities that have been donated 
to The Emergency Food Assistance Program since it was established as a 
temporary program in 1981. Include the quantity and dollar value of 
each commodity.
    [The information follows:]

[Pages 71 - 73--The official Committee record contains additional material here.]


            budget request for the credit guarantee program

    Mr. Skeen. How much did USDA request from the Department of 
Treasury for the GSM-102 and GSM-103 Export Credit Guarantee programs 
for fiscal years 1996 and 1997?
    Response. For fiscal year 1996, USDA requested $423.7 million in 
subsidy to cover the estimated cost of loan guarantees entered through 
September 30, 1996. Of the $423.7 million in subsidy, $49.4 million is 
for costs associated with fiscal years 1994-1995.
    For fiscal year 1997, USDA did not request any subsidy from 
Treasury because the fiscal year 1996 negative subsidy reestimate of 
$571.8 million, resulting from lower costs associated with the 1992 and 
1993 programs, will be used entirely to finance the program account. 
The 1997 President's Budget estimated that $390.3 million in subsidy 
will be needed to cover the costs of loan guarantee agreements entered 
into during fiscal year 1997. The balance of this reestimate, $181.5 
million, will be used to partially fund GSM program costs in 1998.
    In addition to the above amounts, $3.381 million and $3.820 million 
were appropriated by Congress in fiscal years 1996 and 1997, 
respectively, to cover the cost to administer these guarantee programs.
                        county office employees
    Mr. Skeen. Please update the table that appears on page 190 of last 
year's hearing record showing the number of FSA county employees by 
State, to include fiscal year 1997 and estimates for fiscal year 1998.
    Response. Following is a table that reflects the number of FSA non-
Federal county employees by State for actual fiscal year 1996 and 
current fiscal year 1997. We do not have FY 1998 estimated non-Federal 
county office employment levels available by State, since no specific 
plans have been established at this time regarding the FY 1998 
distribution of FSA non-Federal county employees.

[Page 75--The official Committee record contains additional material here.]


                      ccc hazardous waste program
    Mr. Skeen. Describe the fiscal year 1996 and 1997 activity in the 
hazardous waste account.
    Response. During fiscal year 1996, CCC completed site 
characterizations at Leoti, Agenda, and Hilton, Kansas, and the first 
phase of site characterization at Clay Center, Nebraska. Feasibility 
studies were completed for Humphrey, Nebraska, and Agra, Kansas. During 
fiscal year 1997, site characterization will commence at Raymond, 
Walton, and Wymore, Nebraska.
    Site characterization studies at Ramona, Kansas, have yet to be 
completed in fiscal year 1997 due to access agreement problems with the 
affected railroad. Remedial selection and design have been completed at 
Hordville, Utica, and York, Nebraska, and Navarre, Kansas.
    Hordville, Nebraska, and Navarre, Kansas, are sites for which the 
No Action Alternative under the Comprehensive Environmental Response, 
Compensation, and Liability Act (CERCLA) has been selected by CCC. 
However, these sites will be monitored to ensure the accuracy of plume 
predictions and to ensure the protection of the public health.
    Negotiations with Region VII of the Environmental Protection Agency 
(EPA) and Nebraska resulted in the selection of a No Action Alternative 
for Murdock, Nebraska, a site currently under an Order on Consent 
Agreement between CCC and EPA. A long-term monitoring program was 
initiated at Murdock, Nebraska, to ensure the protection of the public 
health.
    We proceeded to install two new public drinking water wells at 
Hordville, Nebraska, and completed air stripper construction at Shelby, 
Nebraska.
    At Waverly, Nebraska, the only CCC site listed on the National 
Priorities List for Uncontrolled Hazardous Waste Sites (NPL) commonly 
referred to as ``Superfund,'' the final remedy outlined in the Record 
of Decision signed between CCC and EPA has been achieved. Since April 
1995, the supplementary groundwater extraction well (SGWEX) has been 
pumping alone and has captured the contaminant plume. The site will be 
proposed for delisting from the NPL in fiscal year 1997. It is 
anticipated that the necessary data will be available during fiscal 
year 1997 to enable establishment of a timeframe regarding shutdown of 
the Waverly facility.
    CCC is working with Nebraska and Kansas to establish a data base 
and protocols for proposed sampling of private drinking water wells in 
fiscal year 1997 in both States at sites near former grain storage 
facilities. Neither State samples private drinking water wells on a 
regular basis, and both States are concerned that communities that are 
served by private wells could be contaminated with carbon 
tetrachloride. As part of this initiative, CCC has solicited bin site 
survey data from Kansas and Nebraska. This information will be compiled 
during fiscal year 1997.
    CCC continues to work with Argonne National Laboratory, Department 
of Energy (Argonne), to improve site characterization methodologies as 
well as develop realistic and dynamic methods for risk-based decision 
making for remedial option selections.
    Through CCC's sponsorship, Argonne's efforts have resulted in 
increased savings in site characterization costs compared to EPA's 
traditional approaches while improving the technical product for 
correct decision making. During fiscal year 1996, Argonne and CCC 
produced the first dynamic risk assessment for plume migration that 
allows risk to be evaluated over time with plume movement. This allows 
exact delineation of risk-based populations and communities and enables 
regulators to realistically assess the impact of no action and partial 
containment alternatives, a major goal of projected Superfund 
reauthorization legislation.
    CCC and Argonne also established a broad-based community relations 
program to ensure community involvement throughout all environmental 
investigations conducted by CCC.
    Mr. Skeen. What is the known backlog of site investigations and 
clean-up?
    Response. As CCC continues to complete site investigations and 
feasibility studies, the number of sites scheduled for remediation or 
long-term monitoring increases. Remedy selection at Utica and York, 
Nebraska, is complete, and construction should begin in fiscal year 
1997.
    Six sites in Kansas and Nebraska are anticipated to be evaluated 
for remedy selection in fiscal year 1997. It is also anticipated that 
these sites will have remedial costs in the vicinity of $500,000 to 
$2,000,000 for design and construction. Operation and maintenance of 
these sites may well increase the cost by several million dollars per 
site depending on the type of remedial system required and the length 
of time necessary for operation. Even for sites with proposed No Action 
Alternative selection such as Hordville and Murdock, Nebraska, and 
Navarre, Kansas, operating adequate monitoring can be expected to vary 
from $50,000 per year to $75,000 per year.
    There are at least 18 new site investigations to be conducted in 
Nebraska, and at least 11 sites in Kansas remain to be characterized. 
The number of potential sites that may require characterization has 
increased due to submission to CCC from Nebraska of a list of sites 
with potential drinking water problems. The number from Nebraska is now 
73 sites based on an inventory that includes private drinking water 
wells. Kansas is expected to submit a similar number this year. 
Therefore, there are approximately 150 sites to be monitored for the 
need for complete site characterization.
    CCC is also working with Nebraska and Kansas to implement sampling 
of private drinking water wells near former CCC grain storage 
locations. CCC will carry out a program of sampling such wells for 
carbon tetrachloride contamination in both States. There are 
potentially 73 towns in Nebraska and a similar number in Kansas. These 
wells may require long-term monitoring until site characterization is 
completed to ensure that no health threat exists. CCC is currently 
negotiating with the two States to establish such a program. When 
contamination is found to exist in a private drinking water well, CCC 
immediately offers the individual an interim clean drinking water 
supply option such as bottled water or a charcoal filtration system.
    During fiscal year 1997, CCC will finalize an agreement between 
USDA and EPA regarding private well testing in Nebraska and Kansas. 
This agreement will encompass prioritization of sites, sampling 
methodology, and data sharing. The bin site survey mentioned in 
response to the previous question is part of this cooperative effort. 
Obviously, the results of this survey will lead to an increase in the 
number of sites to be addressed in the future.
                  status of export guarantee programs
    Mr. Skeen. Of the $5 billion available for the short-term credit 
guarantee program how much do you expect to use in fiscal year 1997?
    Response. For 1997, we anticipate total GSM export credit 
guarantees to be about the same or slightly higher than the 1996 level. 
As of February 21, 1997, USDA has made available $3.7 billion in credit 
guarantees. Of this amount, $1.8 billion of sales have been registered 
to date.
    Mr. Skeen. What did you use in each of the past 5 years?
    [The information follows:]

  EXPORT CREDIT GUARANTEE PROGRAMS, GSM-102 FROM 1992 TO 1996 ANNOUNCED 
                         AND REGISTERED AMOUNTS                         
------------------------------------------------------------------------
                                                             Export     
                                        Announced         applications  
               Year                    allocations          received    
                                       (million $)        (million $)   
------------------------------------------------------------------------
1992..............................              6,074              5,596
1993..............................              4,592              3,643
1994..............................              4,213              3,080
1995..............................              4,066              2,772
1996..............................              4,134              3,079
------------------------------------------------------------------------

                            tobacco program
    Mr. Skeen. How much was spent for administrative costs in support 
of the tobacco program in fiscal year 1996?
    Response. Administrative costs of approximately $14.3 million were 
expended in support of the tobacco price support program in FY 1996 by 
FSA in the county offices for direct salaries and expenses.
                           fsa debt write-off
    Mr. Skeen. How much debt did FSA write off during fiscal years 1995 
and 1996?
    Response. The Farm Service Agency wrote off $982,951,000 during 
fiscal year 1995 and $1,286,221,000 during fiscal year 1996 for debt 
related to the farm credit programs.
                      direct farm operating loans
    Mr. Skeen. How many requests for direct operating loans did you 
have in fiscal year 1996? Were all of them able to be filled? Of the 
total amount available to you, how much was obligated?
    Response. There were 15,216 direct operating loan applications 
received in fiscal year 1996. A total of $566.6 million of direct 
operating loan funds were obligated in fiscal year 1996. Demand for 
direct operating loans was able to be met with the available 
allocations. A total of $73.5 million of the appropriated $75.1 million 
program subsidy authority was utilized.
                 direct and guaranteed operating loans
    Mr. Skeen. Please provide for the record the number and dollar 
amount supported by direct and guaranteed operating loans, by year, for 
each of the past 10 years.
    [The information follows:]

    FARM SERVICE AGENCY DIRECT AND GUARANTEED FARM OPERATING LOANS OBLIGATED  FISCAL YEARS 1987 THROUGH 1996    
                                             [Dollars in Thousands]                                             
----------------------------------------------------------------------------------------------------------------
                                                              Direct                        Guaranteed          
                                                 ---------------------------------------------------------------
                   Fiscal year                      Number  of                      Number  of                  
                                                       loans          Amount           loans          Amount    
----------------------------------------------------------------------------------------------------------------
1987............................................          32,096      $1,298,281          13,614      $1,240,738
1988............................................          23,167         899,501           9,853         892,578
1989............................................          20,517         856,018           9,863         879,174
1990............................................          16,600         733,291           9,954         908,748
1991............................................          10,679         489,890          10,745       1,040,555
1992............................................          13,784         570,737          10,976       1,107,915
1993............................................          13,144         545,173           9,783       1,013,341
1994............................................          15,737         650,965          12,297       1,300,067
1995............................................          10,712         437,854          12,788       1,378,323
1996............................................          12,992         566,583          11,445       1,315,848
----------------------------------------------------------------------------------------------------------------

                           rescheduling loans
    Mr. Skeen. Please provide for the record a table showing the number 
of farms assisted, by State, through rescheduling, consolidation, or 
reamortization by deferral or by the Interest Assistance Program for 
fiscal year 1996.
    [The information follows:]

[Page 79--The official Committee record contains additional material here.]


    Mr. Skeen. Please provide for the record a table showing the same 
information on a national basis for each of the past five years.
    [The information follows:]

          NUMBER OF BORROWERS ASSISTED WITH RESCHEDULING, CONSOLIDATION, REAMORTIZATION AND/OR DEFERRAL         
                                                [In fiscal year]                                                
----------------------------------------------------------------------------------------------------------------
                      1992                           1993         1994         1995         1996        Total   
----------------------------------------------------------------------------------------------------------------
                     8,008                             8,146        6,313        4,823        4,974       32,264
----------------------------------------------------------------------------------------------------------------


                                       GUARANTEED INTEREST ASSISTANCE ONLY                                      
                                                [In fiscal year]                                                
----------------------------------------------------------------------------------------------------------------
                      1992                           1993         1994         1995         1996        Total   
----------------------------------------------------------------------------------------------------------------
                     1,452                             1,244        2,009        1,790        1,208        7,703
----------------------------------------------------------------------------------------------------------------

    Mr. Skeen. How many of these borrowers are again delinquent?
    Response. There were 5,625 borrowers delinquent as of October 3, 
1996, who were assisted with rescheduling, consolidation, 
reamortization, and/or deferral. In addition, there were 244 borrowers 
delinquent who were assisted with interest assistance.
    Mr. Skeen. How many farms were in inventory, by State, and what is 
the total average estimated value of each farm?
    [The information follows:]

[Page 81--The official Committee record contains additional material here.]


    Mr. Skeen. How many farms were sold from inventory, by State, in 
fiscal year 1996?
    [The information follows:]

[Page 83--The official Committee record contains additional material here.]


                    farm operating loan obligations

    Mr. Skeen. For the record, please provide a table showing how much 
of the fiscal year 1996 loan allocations were provided for each of the 
insured farm operating loan programs, such as one-year operating loans, 
seven-year operating loans, limited resource programs, and socially 
disadvantaged programs, along with any others.
    [The information follows:]

           Direct Operating Loan Obligations, Fiscal Year 1996

                                                  (Dollars in Thousands)
Regular Rate, one-year........................................  $190,899
Regular Rate, seven-year......................................   130,192
Limited Resource, one-year....................................   106,065
Limited Resource, seven-year..................................   139,427
                    --------------------------------------------------------------
                    ____________________________________________________

  Total Obligations...........................................  $566,583
                    ==============================================================
                    ____________________________________________________

    A portion of the initial direct operating allocation was targeted 
for exclusive use by socially disadvantaged applicants. The targeted 
allocation totaled $65,146,000 and $58,861,000 was obligated.
    Mr. Skeen. Provide the same information for guaranteed subsidized 
and unsubsidized operating loans.
    [The information follows:]

               Guaranteed Farm Operating Loan Obligations

                                                   (Dollars in Millions)
Subsidized one-year...........................................   $71,556
Subsidized seven-year.........................................   119,234
                    --------------------------------------------------------------
                    ____________________________________________________

  Total Obligations...........................................   190,790
                    ==============================================================
                    ____________________________________________________

Unsubsidized one-year.........................................    85,675
Unsubsidized seven-year.......................................   440,383
                    --------------------------------------------------------------
                    ____________________________________________________

  Total Obligations...........................................$1,125,058
                    ==============================================================
                    ____________________________________________________

    Mr. Skeen. Did any of the legislatively mandated set-asides cause 
funds to go unused at the end of fiscal year 1996?
    Response. $3,155,964 of guaranteed operating budget authority was 
left unused at the end of the fiscal year. A portion of the guaranteed 
subsidized loan funds were initially targeted for socially 
disadvantaged applicants and were released for any eligible applicants 
near the end of the fiscal year.
    Mr. Skeen. Did any legislative changes occur in the Farm Bill to 
allow better management of expenditures for loan programs?
    Response. The 1966 Farm Bill requires the transfer of unobligated 
guaranteed operating-unsubsidized loan funds to the direct farm 
ownership beginning farmer loan program on August 1 and September 1 of 
each fiscal year. In fiscal year 1996, this transfer resulted in nearly 
$15 million of direct farm operating beginning farmer loans being made. 
One-hundred eighty deserving young family farmers were able to utilize 
otherwise unspent loan funds to purchase farms, and establish 
themselves as contributing members of rural communities.
                          farm ownership loans
    Mr. Skeen. Please provide for the record a table showing the number 
of direct and guaranteed farm ownership loans, by year, for the past 
ten years.
    [The information follows:]

  FARM SERVICE AGENCY, NUMBER OF FARM OWNERSHIP LOANS FISCAL YEARS 1987 
                              THROUGH 1996                              
------------------------------------------------------------------------
            Fiscal year                   Direct           Guaranteed   
------------------------------------------------------------------------
1987..............................                896              2,137
1988..............................              1,371              2,436
1989..............................              1,172              2,139
1990..............................                949              2,399
1991..............................                641              2,509
1992..............................                447              1,304
1993..............................                746              2,754
1994..............................              1,066              3,339
1995..............................                897              3,447
1996..............................              1,120              3,130
------------------------------------------------------------------------

    Mr. Skeen. Please provide for the record, a table showing the 
number and amounts of direct and guaranteed farm ownership loans made, 
by State, in fiscal year 1996.
    [The information follows:]

[Page 86--The official Committee record contains additional material here.]


                        emergency disaster loans

    Mr. Skeen. How many emergency disaster loans did you make in fiscal 
year 1996 and so far in fiscal year 1997? Please provide a table 
showing how many and the total dollar value by each State.
    [The information follows:]

[Page 88--The official Committee record contains additional material here.]


    Mr. Skeen. For emergency disaster loans, please provide for the 
record a ten-year table showing the actual number and dollar amount of 
emergency disaster loans made each year.
    [The information follows:]

 FARM SERVICE AGENCY EMERGENCY DISASTER LOANS OBLIGATED FISCAL YEAR 1986
                              THROUGH 1996                              
                         [Dollars in Thousands]                         
------------------------------------------------------------------------
            Fiscal year              Number of loans         Amount     
------------------------------------------------------------------------
1986..............................              5,584           $217,774
1987..............................              2,548            113,613
1988..............................                554             29,891
1989..............................              2,806             73,493
1990..............................              2,609            101,510
1991..............................              1,181             81,402
1992..............................              1,602             74,883
1993..............................                885             58,607
1994..............................              3,815            145,738
1995..............................              1,526             68,823
1996..............................              3,015            176,500
                                   -------------------------------------
    Total.........................             26,125         $1,142,234
------------------------------------------------------------------------

                         state mediation grants
    Mr. Skeen. Please provide for the record, a list of all State 
mediation grants made in fiscal years 1995, 1996, and 1997.
    [The information follows:]

[Page 90--The official Committee record contains additional material here.]


    Mr. Skeen. What States contribute to the mediation program?
    Response. The 22 States participating in the mediation program 
during fiscal years 1995, 1996, and 1997 are providing $5,725,899 over 
the 3-year period as their match for the USDA mediation matching grant 
program.
    Mr. Skeen. How much has each participating State contributed?
    Response. The following is a table showing the breakout of the 
$5,725,899 by State.

[Page 92--The official Committee record contains additional material here.]


    Mr. Skeen. Where any new States certified for mediation grant 
programs in 1995? Did any State drop the program in fiscal year 1995 or 
request less funding than in 1994?
    Response. The State of Michigan was certified for the mediation 
grant program in 1995 and no State dropped out of the program in 1995 
or 1996. The States of New York, Illinois, and Washington were 
certified in 1996. The States of Florida and Missouri have submitted 
applications to FSA for certification in 1997. The 22 States currently 
participating in the program requested over $3.4 million in mediation 
grants for fiscal year 1996. The full $2 million appropriated for 
fiscal year 1997 was pro-rated to give all States the same percentage 
of available grant funds. Of the 22 States, 6 States requested less 
funding in fiscal year 1996 than in 1994, and 16 requested more funding 
than in 1994.
                   credit sales of acquired property
    Mr. Skeen. For the record, provide a five-year table showing the 
annual cost and the number of units sold through the credit sales of 
acquired property program.
    [The information follows:]

------------------------------------------------------------------------
                                                                Total   
                                   Acres at     Estimated     inventory 
           Fiscal year              end of    holding cost    properties
                                    period         \1\           sold   
------------------------------------------------------------------------
1992............................    949,922     $65,236,900          886
1993............................    879,139      64,712,394        1,244
1994............................    699,837      46,959,749        1,138
1995............................    598,414      38,239,978          684
1996............................    530,306      31,140,959          538
------------------------------------------------------------------------
\1\ The estimated holding cost is calculated by considering expenses    
  such as taxes, hazardous waste cleanup, maintenance, and legal fees.  

    Mr. Skeen. What is the current backlog of inventoried property? 
Please provide a list by State.
    [The information follows:]

[Page 94--The official Committee record contains additional material here.]


    Mr. Skeen. Describe what efforts have been made to assist 
disadvantaged farmers in the credit sales program.
    Response. The Agency makes every effort to assist beginning and 
socially disadvantaged farmers in its offering of inventory properties 
for sale. However, with the enactment of the Federal Agriculture 
Improvement and Reform Act of 1996, the Agency is mandated to provide 
preferences to beginning farmers and ranchers when it sells its 
inventory farm properties. In order to make every effort that all 
classes of farmers are reached, including socially disadvantaged 
individuals, the Agency makes every effort to advertise properties for 
sale in a wide variety of publications including those targeted to 
special groups.

              outreach for socially disadvantaged farmers

    Mr. Skeen. Please provide a table showing the distribution of the 
Outreach for Socially Disadvantaged Farmers grants for both fiscal 
years 1996 and 1997.
    Response. I will provide the information for the record. This 
information was obtained from the Natural Resources Conservation 
Service (NRCS) because effective October 1, 1996 the Outreach Program 
was transferred to the NRCS.

[Page 96--The official Committee record contains additional material here.]


               indian tribe land acquisition loan program

    Mr. Skeen. For the record, please provide a table showing the five-
year history of the Indian Tribe Land Acquisition Loan Program. Show, 
by State, the dollar amount and number of loans made each year.
    [The information follows:]

[Page 98--The official Committee record contains additional material here.]


                      conservation reserve program

    Mr. Skeen. CRP has shifted its focus from highly erodible land 
conservation and supply management to environmental protection. The new 
CRP objectives are wildlife habitat, water quality, and erosion 
reduction.
    Your 1998 budget request assumes that 19 million acres will be 
enrolled in 1997. Since CRP emphasis has shifted, what will happen if 
you are not able to sign up 19 million acres?
    Response. While the 1998 budget does assume a planning figure of 19 
million acres, the Department has made no decision on the amount of 
acres that will actually be enrolled into CRP for the fifteenth signup 
period. Enrollment will be dependent on a number of factors including 
the amount of acres offered and the quality of the environmental 
benefits that would accrue if land were enrolled into CRP. USDA will 
only enroll land that provides high environmental benefits per acre.
    Before any decision is made on future signups, USDA must review the 
results of the 15th sign up. USDA will review the expected 
environmental and economic impacts of the 15th sign up prior to making 
any decision on future signups.
    Mr. Skeen. Please describe for the Committee how the CRP signup 
process will work and how it will ensure environmental benefits.
    Response. Public announcements, fact sheets, press releases and 
letters to producers about the CRP signup were provided to the field 
offices for use in informing producers of the program. Producers offer 
acreage for enrollment at their local FSA office. The maximum payment 
rate the Commodity Credit Corporation is willing to pay for each soil 
type in the county is posted in the field office to allow the producers 
to have information about what the maximum CRP payment rate for their 
acreage would be before they offer the acreage for enrollment. The 
offered acres are evaluated by NRCS to determine whether the land 
eligibility criteria have been met. For eligible offers, FSA and NRCS 
work with the producer to determine the best conservation practice 
available to be implemented on the offered acres that will fit the 
producer's management plan and address the environmental concerns of 
the site. Each eligible offer will compete against all other eligible 
offers based on the same established factors contained in the 
environmental benefits index (EBI). The EBI was developed by a multi-
agency team to ensure equivalent consideration of all offers and 
provide a tool to be used in determining the offers with the highest 
environmental benefits. After the evaluation and ranking process is 
completed, producers with accepted offers work with NRCS to develop a 
conservation plan for the acreage which becomes part of the approved 
contract.
                            private lenders
    Mr. Skeen. The Farm Credit Administration reported in their 
testimony that private lenders are getting back into the business of 
making loans to farmers and ranchers. How do you see this affecting the 
guaranteed and direct loans you administer?
    Response. Increased lending activity by private lenders will 
sustain the historical heavy usage of the Farm Service Agency 
guaranteed loan programs. Adequate funding is available to meet the 
demand in the guaranteed operating and farm ownership loan programs. 
Increased activity by private lenders should lessen the demand for Farm 
Service Agency direct loans.
                       authority to forgive loans
    Mr. Skeen. Mr. Buntrock, I understand the Administrator has the 
authority to forgive farm ownership or operating loans. Do you intend 
to use this authority before you leave the Department?
    Response. This authority has been used for many years as authorized 
in the CONACT. Borrowers can file an application for debt settlement 
when the debt exceeds the security value of the loan, or there is no 
security and the borrower does not have repayment ability. This 
authority is used in lieu of foreclosure.

                         crp signup extensions
    Mr. Skeen. We understand there is some interest in Congress in 
legislating a one-year extension for CRP signups. What would be the 
Department's position on a one-year extension?
    Response. The Department of Agriculture opposes another round of 
one-year extensions. We believe another one-year extension would be 
poor environmental and agricultural policy, would not be a judicious 
use of taxpayer dollars, would exacerbate the enormity of the task of 
evaluating acres offered for enrollment, and could put at risk the 
authority to enroll acreage in CRP in the future.
             fsa employee or county committee member loans
    Mr. Skeen. Please provide a table showing farm ownership, operating 
or emergency loans where there is a balance owed by an FSA employee or 
County Committee Member distinguished between the type of employees and 
loans, the outstanding balance, payment status and any major debt 
restructuring that has been taken in the FY'95 and '96.
    [The information follows:]

[Page 101--The official Committee record contains additional material here.]


                        civil rights action team

    Mr. Skeen. The Department's recently released Civil Rights Action 
Team Report highlighted minority concerns about loan and other programs 
administered by FSA. What are you doing to address the issues raised in 
the Report?
    Response. FSA will soon issue Notice FC-106, ``Suspending Farm 
Credit Foreclosures,'' that suspends any foreclosure sales until an 
independent review team has reviewed foreclosure cases and determined 
whether disparities exist. Also, if a discrimination complaint has been 
filed by a borrower, all adverse actions will cease until the complaint 
is resolved. The makeup of the independent review team is being 
developed and will be activated shortly. On other issues raised by the 
report, FSA will be collaborating with the Civil Rights Implementation 
Team to put into place actions necessary to address the issues raised. 
Timelines and procedures are being developed.

    [Clerk's Note.--Notice FC-106 was issued March 12, 1997.]

    Mr. Skeen. The Civil Rights Report recommends improving the 
management of FSA programs by adding diversity to the county 
committees, converting all county non-Federal positions, including 
county executive directors, to Federal status, and removing county 
committees from loan determinations. Will these changes materially 
alter how FSA carries out its business and how will they affect your 
budget?
    Response. The changes in the committee system, including removal of 
loan determinations and converting county non-Federal positions to 
Federal status, will alter, but not materially, how FSA carries out its 
business.
    Since FSA county non-Federal staff are already funded through 
annual appropriations, the effect, if any, on the budget should be 
minimal.
    Mr. Skeen. This will take legislation. When will that proposal come 
to Congress?
    Response. There are several different recommendations in the Civil 
Rights Action Team report that will require legislation. USDA plans to 
package them together and submit legislation within 45 to 60 days. 
Timelines and procedures are now being developed.
                            minority farmers
    Mr. Skeen. The Civil Rights Report also calls for fully funding the 
farm ownership and farm operating direct loan programs at $85 million 
and $550 million and targeting a higher percentage of these loans to 
minorities and socially disadvantaged groups. What percent of these 
loans currently go to minority farmers and what is the proposed funding 
level?
    Response. The Administration has requested $30.8 million in direct 
farm ownership and $450 million in direct farm operating funds for 
fiscal year 1998. In the direct operating program, 11 percent of the 
funds are targeted for applicants classified as socially disadvantaged, 
while in the direct farm ownership the percentage is 20.
                    food security commodity reserve
    Mr. Skeen. Before fiscal year 1994, surplus commodities were 
available from CCC to respond to emergencies. Up to 2 million metric 
tons of surplus commodities were provided. Since these surplus 
commodities are no longer available and P.L. 480 funding is declining, 
is the Food Security Commodity Reserve a suitable and sufficient way to 
meet emergency food needs?
    Response. The Food Security Commodity Reserve is an important 
backstop to the P.L. 480 program, which helps to ensure that the U.S. 
Government can meet its foreign food assistance commitments. As you are 
aware, commodities can be released from the reserve under two different 
conditions. First, if the domestic supply of a commodity held in the 
reserve is so limited in any fiscal year that the Secretary of 
Agriculture cannot make the commodity available for P.L. 480 
programming under the domestic supply criteria established in the law, 
the reserve may be tapped and the commodity made available for 
programming under Titles I, II, and/or III of P.L. 480.
    Second, commodities may be released from the reserve without regard 
to the domestic supply situation to meet unanticipated food assistance 
needs that cannot be met under the normal means of obtaining 
commodities for P.L. 480 programming. In this second case, the 
commodities can only be made available as emergency assistance under 
Title II of P.L. 480. This second release mechanism does provide a 
highly useful means for meeting emergency food assistance needs. 
However, the total volume of commodities that can be released for 
emergency programming through Title II in any given year is limited to 
500,000 metric tons, plus an additional 500,000 metric tons that could 
have been released in prior fiscal years but were not.
    Mr. Skeen. If more is needed in fiscal year 1997 and 1998, will the 
Reserve be used?
    Response. Should conditions develop which allow for release of 
commodities from the reserve in either fiscal year 1997 or 1998, we 
would be willing to consider that option. However, at this point we do 
not see any need for tapping the reserve. Moreover, because of 
difficulties we are likely to face in meeting the costs of replenishing 
commodities in the reserve, we will need to be very judicious when 
considering tapping the reserve in the future. At present, there are 
approximately 2.5 million metric tons of wheat in the reserve.
             government performance and results act (gpra)
    Mr. Skeen. GPRA, known as the Results Act, requires each executive 
agency to issue, no later than September 30, 1997, a strategic plan 
covering at least five years. In addition to a mission statement 
grounded in legislative requirements, the plans are to contain general 
goals and objectives that are expected to be outcome or results 
oriented (such as to improve literacy) as opposed to output or activity 
oriented (such as to increase the number of education grants issued). 
What progress is the agency making in developing its strategic plan, 
including defining its mission and establishing appropriate goals?
    Response. The Farm Service Agency (FSA) Strategic Plan for fiscal 
years 1997-2002 was completed in November 1996. The plan includes 
mission and vision statements, strategic goals and objectives, key 
tasks, performance measures and baselines and was submitted to the 
Office of the Chief Financial Officer and OMB. The plan will be updated 
quarterly, beginning April 1997, to reflect changes in strategic 
direction.
    Mr. Skeen. Has the agency identified conflicting goals for any of 
its program efforts? If so, what are the performance consequences of 
these conflicting goals and what actions--including seeking legislative 
changes--is the agency taking to address these conflicts?
    Response. FSA has not identified any conflicting goals.
    Mr. Skeen. Strategic plans must be based on realistic assessments 
of the resources that will be available to the agency to accomplish its 
goals. As you are developing your strategic plan, how are you taking 
into account projected resources that likely will be available--
especially as we move to a balanced budget?
    Response. The resources required to achieve FSA's goals and 
objectives take into consideration the Agency's streamlining and 
downsizing plan. The administrative services goals and objectives, in 
particular, provide for streamlining, reinvention and reengineering of 
certain administrative processes in support of these streamlining and 
downsizing objectives. In addition, FSA is utilizing and cultivating 
partnerships with other agencies--such as Natural Resources 
Conservation Service (NRCS), Rural Business-Cooperative Services 
(RBCS), Rural Housing Service (RHS), and Rural Utilities Service (RUS), 
community-based organizations--for outreach activities, other private 
organizations--such as commercial lending institutions, and State and 
local governments--on environmental issues, to maximize the benefit of 
our limited resources and attain common goals and objectives.
    Mr. Skeen. What assumptions are you making?
    Response. Our assumptions are that we have to do more with less, 
and, as priorities shift, we must be flexible and shift resources 
accordingly.
    Mr. Skeen. How are you ensuring that your goals are realistic in 
light of expected resources?
    Response. Agency managers periodically review and update the 
strategic plan to ensure that goals are realistic and reflect the 
current status of programs and legislation.
    In setting annual goals, we are identifying anticipated levels of 
resources required for their achievement. In cases where budget 
realities do not meet our resource expectations, we will review and 
appropriately revise target levels of performance.
    Mr. Skeen. For Congress, the heart of the Results Act is the 
statutory link between agency plans, budget requests, and the reporting 
of results. Starting with fiscal year 1999, agencies are to develop 
annual performance plans that define performance goals and the measures 
that will be used to assess progress over the coming year. These annual 
goals are to measure agency progress toward meeting strategic goals and 
are to be based on the program activities as set forth in the 
President's Budget. What progress have you made in establishing clear 
and direct linkages between the general goals in your strategic plan 
and the goals to be contained in your annual performance plans? OMB 
expressed concern last year that most agencies had not made sufficient 
progress in this critical area.
    Response. The strategic and annual performance plans will include 
an explanation as to why each performance measure is an appropriate 
gauge of progress toward achievement of a specific strategic goal/
objective.
    Mr. Skeen. More specifically, how are you progressing in linking 
your strategic and annual performance goals to the program activity 
structure contained in the President's budget?
    Response. Performance goals and measures have been established for 
each major program and are included in the FY 1998 Budget Explanatory 
Statement which is directly linked to a specific strategic goal/
objective in the strategic plan. However, strategic goals and annual 
performance goals are not presently linked to the program activity 
structure contained in the President's budget.
    Mr. Skeen. Do you anticipate the need to change or modify the 
activity structure to be consistent with the agency's goals?
    Response. It is possible that we may want to do that. However, much 
effort has gone into linking performance goals and measures to the 
strategic plan. The present activity structure would have to be 
significantly modified to identify strategic goals and performance 
goals for major programs.
    Mr. Skeen. Overall, what progress has your agency made--and what 
challenges is it experiencing--defining results-oriented performance 
measures that will allow the agency and others to determine the extent 
to which goals are being met?
    Response. We have developed key performance measures for our major 
programs. However, the majority of these measures are process-oriented 
outputs. We have experienced difficulty in developing results-oriented 
outcome measures because many external factors impact upon the ultimate 
outcomes of our programs, and managers are reluctant to provide 
measurements for factors they cannot control. Additionally, systems are 
not in place to measure certain results and development of these 
reporting systems could be costly and would take several years to 
complete. In an agency faced with major personnel and administrative 
budget reductions through FY 2002, dedicating the needed resources to 
GPRA reporting will be a major challenge. In such an environment, 
performance goals will have to be realistically formulated.
    Mr. Skeen. The Results Act requires agencies to solicit and 
consider the views of stakeholders as they develop the strategic plans. 
Stakeholders can include State and local governments, interest groups, 
the private sector, and the general public, among others. Who do you 
consider to be the agency's primary stakeholders and how will you 
incorporate their views into the strategic plans?
    Response. Our primary stakeholders/customers are congressional 
appropriations and authorizing committees, producers, ranchers, lending 
institutions, tobacco, peanut, and other loan associations, 
cooperatives, warehousemen, commodity and conservation groups, and 
other agencies--such as NRCS, RHS, RUS, RBCS, Agricultural Marketing 
Service (AMS), Grain Inspection, Packers and Stockyards Administration 
(GIPSA), Agency for International Development (AID), Foreign 
Agricultural Service (FAS), and Risk Management Agency (RMA). We will 
share our plan with stakeholders, obtain feedback, and make appropriate 
adjustments to the plan. The plan is currently available on the FSA 
Homepage on the World Wide Web.
    Mr. Skeen. For the Results Act to be successful, agencies with 
similar missions, goals, or strategies will need to ensure that their 
efforts are coordinated. What other federal agencies are you working 
with to ensure that your strategic plans are coordinated?
    Response. FSA is in the process of requesting the strategic plans 
of other agencies to identify issues that cross agency lines.
    The FSA strategic goals and objectives regarding USDA Service 
Centers, conservation and environmental programs, and administrative 
services require continued coordination with other mission areas and 
departments including RuralDevelopment, Natural Resources and 
Environment, National Park Service, Fish and Wildlife Service, and 
Treasury.
    Mr. Skeen. What steps have you taken to ensure that your efforts 
complement and do not unnecessarily duplicate other federal efforts?
    Response. Individual agencies, who have identified cross-cutting 
issues, are responsible for ensuring that these issues are adequately 
coordinated and addressed in their respective strategic plans. FSA has 
begun discussions with FAS, RMA, and Food and Consumer Service. These 
efforts will continue with other agencies--such as AMS, GIPSA, AID, 
NRCS, RHS, RBCS, and RUS--as the planning process develops.
    Mr. Skeen. The Results Act requires agencies to consult with 
Congress as they develop their strategic plans. Since these plans are 
due in September, now is the time for agencies to begin the required 
consultations. What are your plans for congressional consultation as 
you develop your strategic plan? Which Committees will you consult 
with? How will you resolve differing views?
    Response. All USDA Mission Areas/Agencies have prepared draft 
Strategic Plans which are currently being reviewed by an Under/
Assistant Secretary (or other relevant official), the Senior Policy 
Staff and the Secretary. Upon completion of the review, the Department 
plans to provide copies of the Strategic Plan (including an overall 
Departmentwide Executive Summary and the Strategic Plans for individual 
Mission Areas/Agencies) to relevant Congressional Committees. 
Thereafter, we will look forward to meeting with Members or Staff to 
discuss our Strategic Plan and to solicit their input and advice on 
refinements to that Plan. We plan to provide copies of the Department 
Strategic Plan to the following Committees:
    House Agriculture Committee
    House Appropriations Committee
    House Economic and Educational Opportunities Committee
    House Government Reform and Oversight Committee
    House Resources Committee
    Senate Agriculture, Nutrition, and Forestry Committee
    Senate Appropriations Committee
    Senate Energy and Natural Resources Committee
    Senate Governmental Affairs Committee
    Mr. Skeen. In passing the Results Act, Congress sought to 
fundamentally change the focus of federal management and decision 
making to be more results-oriented. Organizations that have 
successfully become results-oriented typically have found that making 
the transformation envisioned by the Results Act requires significant 
changes in what they do and how they do it. What changes in program 
policy, organization structure, program content, and work processes has 
the agency made to become more results-oriented?
    Response. Through this effort and as a result of NPR, FSA has 
become more customer focused and is realigning the field office 
structure to more efficiently and effectively deliver USDA programs. We 
have developed customer service standards for program delivery and 
conducted surveys to determine customer satisfaction with service 
delivery and quality, payment timeliness, forms sensibility and 
reasonableness, and the timeliness of program announcements.
    The Agency has reorganized to better carry out major program policy 
changes resulting from the Federal Agriculture Improvement and Reform 
Act of 1996. FSA is also in the process of implementing a cost 
accounting system that will provide managers and officials with 
quantitative information that will be useful in improving asset 
management, operating efficiency, evaluating cost-effectiveness, and 
establishing charges for services performed.
    Mr. Skeen. How are managers held accountable for implementing the 
Results Act of improving performance?
    Response. Agency managers are accountable for achievement of 
performance goals within their respective areas of responsibility. 
Performance measures are being established and will be tracked and 
evaluated. As the GPRA implementation process evolves, it will be 
integrated into the performance measurement system for each employee.
    Mr. Skeen. How is the agency using the Results Act performance 
goals and information to drive daily operations?
    Response. FSA will track progress toward achievement of its FY 1999 
annual performance goals through the establishment and periodic 
monitoring of performance measures. During FY 1997, strategic plans for 
FY's 1998 through 2002 and performance plans that tie to the Agency 
plans will be developed at the appropriate levels to drive day-to-day 
operations.

                          staffing reductions
    Mr. Latham. The budget claims to be cutting 269 FTE's at the 
Headquarters, State and field offices. Would you please break this 
number down into those three categories for the record. Also please 
give us an idea of these positions by role or function.
    Response. The proposed reduction of 269 Federal FTE's for FY 1998 
include 46 at Headquarters, 154 at State offices and 69 FTE's in field 
offices. These reductions are based on a preliminary review and are 
subject to change as final decisions are made.
    The FTE's reflect a broad range of positions such as human 
resources personnel, administrative officers, clerical and 
administrative personnel, program specialists, management analysts, 
information technology specialists, general business analysts, 
financial and budget analysts and others.
    Mr. Latham. Your budget includes a commensurate decrease of $2.75 
million dollars in operating expenses in the county offices in 
anticipation of a reduction in county staff. However there is no 
reduction in operating expenses proposed for the federal offices. Why 
is this?
    Response. The estimate for county office operating expenses--
travel, postage, rent, utilities, supplies--is a reduction of $2.75 
million from FY 1997 to FY 1998. This estimate is based on projected 
county office closures and the restructuring of county-based field 
office locations and services as well as reductions in county staff. 
The decrease in operating expenses will parallel this county office 
staff reduction.
    Administrative efficiencies have enabled FSA to reduce Federal 
operating expenses in each of the previous 4 years. In fact, we 
received reduced budgets that reflected a Presidential executive order 
requiring such savings in each of these years. Although non-Federal 
staffing is being reduced by the programmatic impacts of the 1996 Farm 
Bill, the projected FY 1998 Federal workforce includes over 2,000 
employees at the county level performing Agricultural Credit program 
workload for direct and guaranteed loans. Their operating expenses will 
not decline. In addition, there are additional Federal FTE's at the 
State office level, including personnel in support of farm credit 
activities as well as CCC activities, that perform program oversight 
and other supervisory functions. Their rent will not decline since no 
Federal State office is expected to close.
                   independent study of fsa and nrcs
    Mr. Latham. In both Mr. Smith's and Mr. Buntrock's testimonies, it 
is stated that USDA may contract for a study of FSA and NRCS offices 
for proposed closings and consolidations. Who will do the independent 
study and what weight will it be given in the final process and 
decision to close offices?
    Response. The Department has some ongoing planning and study 
efforts which will be coordinated with, or reviewed in combination 
with, the potential independent study to provide the best input we can 
get. The recommendations of the study or studies will be evaluated by 
the Secretary, and any plans for field office streamlining or other 
significant changes would be reviewed with this committee and other 
members of Congress.
                         ccc adp budget request
    Mr. Latham. Your testimony touches on the budget's request for $104 
million for computer and telecommunications. This is in addition to 
$109 million for 1997. Does this assume the current moratorium on 
information technology procurement is lifted?
    Response. Yes, the fiscal year 1998 funding request assumes the 
moratorium on information technology procurement is lifted and business 
re-engineering plans are ready to guide spending in the new post-farm 
bill environment.
    Mr. Latham. Does this figure take into account the Department's 
plans to reduce staffing levels at the rate proposed in the budget?
    Response. Adjustments have been made in this funding request 
because of reduced staffing levels. For example, fewer personal 
computers, computer terminals, printers, and less associated 
maintenance of same, will be needed as staffing decreases.
    Mr. Latham. Does your Agency have an information technology 
architecture plan?
    Response. USDA has long been criticized for having separate 
approaches to implementation technology. We are sensitive to that issue 
and have been careful at the Farm Service Agency to develop our 
technology plans in concert with our Service Center partner agencies, 
Rural Development and the Natural Resources Conservation Service. None 
of the Service Center agencies should or will implement any technical 
plan without full coordination among those that serve the public 
through our field offices.
    FSA provided co-leaders for two of three parts of the USDA-wide 
information systems technical architecture development effort. These 
were the Business Data Architecture and Technical Standards efforts. No 
agency of USDA has as yet definedor implemented the Department level 
architecture which was recently finalized. FSA has been working with 
NRCS and RD since January 1997 to develop a vision of Service Center 
requirements based on the USDA architecture.
    Mr. Latham. If so, could you provide it for record.
    Response. As previously stated, the USDA architecture was just 
recently finalized, and FSA is working with NRCS and RD to develop 
Service Center architecture consistent with the USDA's.
                   prorated federal staff reductions
    Mr. Latham. In your budget, the breakdown of staff years by State 
indicates the staff years for my State of Iowa will decrease from 196 
to 188 for 1998. Would you give me an idea of where the decrease will 
come from and how this number was generated for Iowa?
    Response. The calculation for the geographic breakdown of 
obligations and staff-years is based on estimated prorations to arrive 
at an equitable distribution of the available staff years between 
headquarters and field offices. State office staff years are among 
those prorated to reflect each State's share of available staff years. 
Before FY 1998 employee reduction plans are finalized, the Agency will 
have obtained general approval from the Secretary after his 
consultations with the Congress.
                       classification by objects
    Mr. Latham. In your budget, in the classification by objects you 
have two categories labeled respectively ``25 Other Services'' and ``31 
Equipment''. Would you please break down these categories for the 
record.
    [The information follows:]

[Page 108--The official Committee record contains additional material here.]


                increased planting flexibility proposal

    Mr. Fazio. Concerns have been raised by a number of my growers--
including my dry bean and fruit and vegetable growers--about possible 
Administration proposals that would permit increased flexibility for 
planting on acreage enrolled in production flexibility contracts.
    We have respected historical practices, but opening this up would 
give an unfair advantage to farmers receiving program crop payments.
    What is the Administration's proposal, and is that reflected in 
your budget submission?
    Response: One provision being considered for inclusion in the 
Department of Agriculture's 1997 legislative agenda would permit the 
planting of fruits and vegetables (FAVs) following a contract commodity 
that is prevented from being planted or has failed due to adverse 
weather. Under the Agricultural Act of 1949, the production of FAVs was 
permitted on program crop acreage determined to be prevented due to 
natural disaster or similar conditions. This authority was discontinued 
under the Agricultural Market Transition Act (AMTA).
    The enactment of this provision would merely allow producers to 
regain an option that had been available to them in 1995. We do not 
believe that FAV producers would be unfairly disadvantaged by the 
restoration of this provision.
                      conservation reserve program
    Mr. Fazio. Several of us in the California delegation were 
concerned about marginal pasture lands that have been converted to 
wetland or established as wildlife habitat--areas previously covered by 
the Water Bank Program.
    How were these lands treated in your final rule, and what type of 
coverage might you expect from your upcoming CRP signup?
    Response: The final rule provides that acreage in the final year of 
the Water Bank Program (WBP) agreement may be eligible to be enrolled 
in the CRP under the marginal pasture land eligibility criteria. 
Additionally, acreage under a WBP agreement that expired on December 
31, 1996, where the land would be considered in compliance if the 
agreement was still in effect, may be eligible to be enrolled in the 
CRP. It must be determined that enrollment of these acres in CRP would 
enhance the environmental benefits of the site. Acreage that is 
classified as natural occurring type 3 through 7 wetlands (that is, 
acreage under some level of water) is not eligible to be enrolled in 
the CRP, but WBP acreage that is artificially flooded will be eligible.
    This is the first CRP signup period where WBP acreage is eligible 
to be enrolled in the CRP. We have no prior statistics or history to 
use as an estimate of the number of WBP acres that may be offered for 
enrollment. Based on discussions with our State FSA personnel in those 
areas with eligible WBP acres, we are hopeful that producers will offer 
those environmentally sensitive acres for CRP enrollment. Eligible WBP 
acreage, like all other acreage offered for enrollment during the 15th 
CRP signup, will be scored and ranked according to an Environmental 
Benefits Index.

                   office consolidations and closures
    Mr. Rogers. Consolidations and closures of offices seem inevitable 
as the Department of Agriculture continues to downsize. From March 3 
until March 28, 1997, the Conservation Reserve Program will enroll 
farmers for new and expiring contracts for 19 million acres. Since this 
enrollment period will be tedious for FSA offices, temporary employees 
may be hired. Do you anticipate any other periods of heavy work in 
which you will need to hire temporary assistance in the near future?
    Response. Secretary Glickman has asked the program delivery 
agencies--Rural Development, the Natural Resources Conservation 
Service, and the Farm Service Agency--to review their administrative 
operations for ways to improve efficiency through sharing 
administrative services and adjusting staffing. The Secretary has made 
it clear that State directors can use their authority to adjust staff 
to ensure that we have resources in place to carry out our program 
responsibilities.
    It is difficult to predict if there will be periods in the future 
when a need to hire temporary employees may arise until after the 
Department has completed its downsizing and all of the program changes 
made by the Federal Agriculture Improvement and Reform Act are fully 
implemented. Outside influences, such as natural disasters, can greatly 
affect workload and may necessitate temporary hires. In addition, any 
legislative changes to our programs that Congress may make in the 
future could impact program delivery and staffing needs.
    Mr. Rogers. For FY 1998, you have set a goal of reducing the FSA 
workforce by 34 percent for non-Federal county office employees and 
21.5 percent for Federal employees. How did you reach these percentages 
in reduction?
    Response. The FY 1998 President's Budget reflects a staff-year 
level of 5,877 Federal and 9,879 non-Federal county staff years, which 
represents a decrease of 22.8 percent in Federal staff years and a 33.9 
percent decrease in non-Federal county office staff years from the FY 
1993 base level of 7,615 FTE's and 14,953 FTE's, respectively. While 
much of the total percentage reduction has already occurred, the 
remaining reductions reflect anticipated staffing levels associated 
with streamlining proposals of the USDA Reorganization Act of 1994, the 
programmatic impacts of the 1996 Farm Bill, and potential office 
closures.
    Mr. Rogers. An independent study will be conducted to determine 
additional opportunities for streamlining and efficiency. When will the 
study be concluded? What will be done with these recommendations?
    Response. We have not yet initiated a formal independent study of 
the opportunities for streamlining. The Department has some ongoing 
planning and study efforts which will be coordinated with, or reviewed 
in combination with, the potential independent study to provide the 
best input we can get. In any case, the planning for this study is not 
far enough along to determine when the study would be concluded (target 
is for the fiscal year 1999 budget). The recommendations of the study 
or studies will be evaluated by the Secretary, and any plans for field 
office streamlining or other significant changes would be reviewed with 
this committee and other members of Congress.
    Mr. Rogers. The State directors of the Farm Service Agencies were 
to submit recommendations for closures and consolidations in their 
respective region. How heavily are these recommendations weighed in the 
final decision? What other factors are taken into consideration that 
are outside the realm of the State directors?
    Response. It is true that the FSA State directors have made some 
contingency plans in light of the budget allowances through FY 2002. No 
specific plans have yet been approved by the Secretary concerning the 
numbers of locations of potential office closures, and consultations 
with Congress will also need to occur before any action is undertaken. 
Furthermore, other factors must also be considered to assure that USDA 
provides customers the best service possible. Any decisions to close 
USDA field offices, or reduce an agency presence within a USDA service 
center must be done in coordination with the other agencies involved, 
including Rural Development and Natural Resources Conservation Service.
    Mr. Rogers. During the last round of office closures and 
consolidations, criteria were established by the USDA to determine 
which offices would be affected. What criteria will be used for future 
consolidations? Will the criteria be applicable to all States or will 
they be tailored to meet each State's unique needs?
    Response. The Department is currently developing a plan for 
consolidation that looks across the entire field delivery system, not 
just the Farm Service Agency, and factors in future workload 
requirements and technological advances that improve the delivery of 
our programs. During the last round of closures and consolidations, the 
States were given some flexibility in making determinations, and it is 
reasonable to expect the same considerations will apply with the new 
plan. The previous closure plan focused on six basic criteria to 
allocate the office reductions: program delivery cost, service group 
and customer base, complexity, geographic service area, collocation 
status, and workload intensity and productivity of the office. We would 
strongly consider the use of these or similar criteria in any 
additional office closing effort.
    Mr. Rogers. The notion of using distance between FSA offices to 
determine closures has been discussed. Will the FSA consider road 
conditions and terrain in addition to distance?
    Response. The Secretary has made it clear that geography will not 
be the sole criterion for any future office closings. Road conditions 
and terrain would certainly be factors the States may want to consider 
when making recommendations regarding office locations.
    Mr. Rogers. The frequency of FSA office visits for farmers depends 
on the crop that is produced. Is that being taken into consideration 
when determining closures for certain regions?
    Response. As stated before, the plan for future consolidation is 
currently being developed and workload requirements, which could be 
influenced by frequency of producer visits, are certainly a 
consideration.
                              fsa workload
    Mr. Rogers. In your testimony, you state that some FSA program 
activities are expected to increase. Please inform the committee of 
these activities and how much you anticipate activities to increase.
    Response. As a result of the 1996 Farm Bill, FY 1998 workload in 
functional areas such as commodity program payments, conservation, 
basic farm record maintenance, and compliance will continue to decline. 
Other activities such as peanut and tobacco program activities are 
expected to remain constant. However, we expect increases in some 
commodity loan activity and the Non-Insured Disaster Assistance 
Program. The level of increases will depend on commodity prices and 
disaster incidences in FY 1998.
    FSA will also need to conduct a substantial CRP signup in FY 1998. 
The associated workload was not considered in the agency's original 
analysis of Farm Bill workload because, although that Act provided the 
opportunity to increase enrollment, decisions concerning alternate 
enrollment levels had not been completed at the time of the analysis. 
The decision to increase enrollment levels includes enrolling an 
additional 8 million acres in 1998, as reflected in the 1998 
President's Budget. A table is provided that shows functional areas we 
estimate will increase or decrease in 1998 from 1997, and the amount of 
change, in workdays.
    [The information follows:]

[Page 112--The official Committee record contains additional material here.]


    Mr. Rogers. In the last round, Kentucky dealt with 41 office 
closures. This year, according to the executive director of the Farm 
Service Agency in Kentucky, as many as 50 offices may be scheduled to 
close. Is there any consideration for States that took a 
disproportionate share in cuts in the previous round when considering 
future cuts?
    Response. The plan to which the State Executive Director was 
referring was an internal working document and nothing more than 
preliminary contingency planning. The Secretary has not approved any 
action plan and has given every assurance that none of the plans will 
go ahead without consultation with the Congress. I can only say, again, 
that plans on how to consolidate are currently being developed and that 
workload requirements and efficient program delivery will be primary 
considerations.
                      Foreign Agricultural Service
                          beef hormone dispute
    Mr. Skeen. What is the status of the dispute between the United 
States and the European Union over the beef hormone ban?
    Response. On January 1, 1989, the EU implemented a ban on imports 
of red meat from animals treated with growth promoting hormones, 
cutting off U.S. beef exports to the Community valued at approximately 
$100 million annually--80 percent of which was offals for human 
consumption. Following unsuccessful bilateral discussions and 
unproductive WTO consultations in March 1996--in which the United 
States was joined by Canada, Australia, and New Zealand--in July 1996 a 
WTO dispute settlement panel was formed at the United States's request. 
This is the first WTO panel under the new Uruguay Round Sanitary and 
Phytosanitary--SPS--Agreement. The panel consists of three members--
agreed to by both the United States and the EU: Thomas Cottier--
Switzerland as chairman, Peter Palecka--Czech, and Jun Yokota--Japan.
    In October and November 1996, there were two panel meetings, as 
provided for the Dispute Settlement Understanding. In October 1996, 
Canada also requested a panel to examine the EU's ban; the panelists 
are the same as for the U.S. panel, and the two panels have effectively 
been merged procedurally--though not legally.
    On February 17-18, 1997, the panel met again, this time with five 
technical experts appointed by the panel to give guidance for both the 
U.S. and the Canadian panel proceedings. The meetings were helpful in 
giving the panel members a much better sense of the scientific--as well 
as legal--issues involved, and in effectively debunking most of the 
EC's ``evidence.'' All of the technical experts agreed that any risk 
from hormones is extremely small, but it's unclear how much credence 
the panel gives to the EC argument that the risk is real. The panel has 
delayed its deadline for the descriptive report until late March; the 
final report, with the panel findings, is expected in late May.
                         market access program
    Mr. Skeen. Are foreign entities producing in the United States 
eligible for Market Access Program funds?
    Response. FAS does not enter into direct agreements with commercial 
entities that are not located in and doing business in the United 
States and eligible products must be at least 50 percent U.S. content. 
However, participants are not prohibited from providing MAP resources 
to foreign entities to reimburse costs they may incur in jointly 
sponsored promotional activities. As one example, the Alaskan Seafood 
Marketing Institute, undertakes brand promotion in cooperation with a 
foreign-owned label. In that instance, however, the promoted product, 
canned salmon, is 100 percent U.S.-source and is processed, canned and 
even the labels are affixed in the United States. In effect, all of the 
value-added aspect of this branded product accrues to the local U.S. 
economy.
    Mr. Skeen. What percentage of domestic content must a product have 
in order to qualify for MAP funding?
    Response. While the domestic content must be a minimum of 50 
percent, almost none is less than 80 percent. The vast majority of the 
products exceed 95 percent domestic content.
                       agricultural trade offices
    Mr. Skeen. What Agricultural Trade Offices or other FAS posts are 
being expanded in fiscal year 1997? What are your plans for fiscal year 
1998?
    Response. In fiscal year 1997, FAS has opened ATOs in Jakarta and 
Miami--for the Caribbean Basin--, and the opening of the Moscow ATO is 
scheduled for late summer 1997. In addition, an FAS attache office has 
been established in Hanoi, and FAS will open an office in Nuevo Laredo, 
Mexico in the summer of 1997. The agency is adding an American officer 
position in Geneva at the WTO and adding one officer slot at the ATOs 
in both Seoul and Tokyo, all of which will take place this summer.
    In conjunction with this increased American officer presence, in 
the course of fiscal year 1997 FAS will have expanded foreign national 
employee staffing at 15 offices around the world.
    FAS will conduct its annual review of overseas resources in April, 
1997. FAS will continue to adjust staffing to take advantage of medium- 
and long-term opportunities for U.S. agriculture. Among areas which 
will receive attention for possible staffing augmentation during the 
April Global Review are Latin America and the newly independent states 
of the former Soviet Union.
                         food and fiber exports
    Mr. Skeen. Can you estimate how much of the annual increase in 
dollar value of food and fiber exports in fiscal years 1996 and 1997 is 
due to higher prices and inflation?
    Response. Yes, we can provide these estimates. In fiscal year 1996, 
export volume fell while export value rose to a record $59.8 billion. 
In this case, 100 percent of the annual increase in the value of U.S. 
agricultural exports was due to higher prices for most products. The 
Department's current export forecast for fiscal year 1997 calls for a 
drop in both export volume and value; however, volume is projected to 
fall at a faster rate. Somewhat higher prices are keeping the overall 
export value higher than it would otherwise be if prices were held 
constant. If prices were held constant, instead of the current 
projected $3.3-billion decline in total export value, export value 
would drop by $4.9 billion or 48 percent more than called for in the 
current estimate.
    From fiscal year 1995 to 1996, export value rose 9.5 percent from 
$54.6 billion to $59.8 billion. In fiscal year 1997, export value is 
expected to drop 5.5 percent to a projected $56.5 billion. From fiscal 
year 1995 to 1996, export volume fell 6.7 percent from 169.7 million 
tons to 158.4 million tons. In fiscal year 1997, export volume is 
expected to fall another 8.2 percent to a projected 145.4 million tons. 
Please remember that the volume figure for total agricultural products 
should be used with some caution because only products which are 
measured in tons are included. Products that are measured in ``head'' 
or ``number'' such as live animals or plants, or in ``liters'' such as 
fruit juices or wine are not included in the total agricultural volume 
figures.
                     trade barriers to u.s. exports
    Mr. Skeen. What countries would you identify as being particularly 
difficult in terms of erecting unfair trade barriers to U.S. exports?
    Response. As you are aware, the Department has placed and continues 
to place strong emphasis on providing U.S. agricultural exporters with 
a level playing field. Fair access to foreign export markets is a must, 
and removing unfair trade barriers is fundamental to the Department's 
export efforts. The Uruguay Round was vital to this process in 
agriculture.
    This said, we do face unfair trade barriers. We expect, however, 
that as we work with our foreign partners the process of eliminating 
non-tariff barriers will be clear and progressive.
    In this regard, we are extremely frustrated with some countries, 
particularly those which have the capacity to identify their own unfair 
barriers and address them, but avoid moving forward with elimination 
for trade protectionist reasons. Obviously, our myriad problems with 
the European Union come at the top of this list. With the EU, we face 
technical standards which, if not challenged, are often adopted by 
other countries--looking to minimize their problems in shipping to the 
EU. Our major issues with the EU, for example, include the contentious 
veterinary equivalence negotiations, the EU hormone ban, and EU 
approval of new biotech products. The importance of issues such as 
these lies not only in the market access--or preservation of trade--for 
U.S. products into the EU, but also in our concern that other countries 
may adopt the unscientific methodologies used by the EU in setting 
their own animal, plant, and public health standards.
    Another country that has been particularly difficult is China. The 
lack of transparency in China's import regime continues to be a 
concern, as well as its use of unscientific sanitary and phytosanitary 
measures, discretionary import licensing and state trading. These 
policies continue to constrain the way U.S. agriculture conducts 
business in China. We expect that these restrictions will be clarified 
and unfair barriers removed in the process of negotiating China's 
accession to the World Trade Organization.
                          u.s. export programs
    Mr. Skeen. Please provide a schedule of required reductions in U.S. 
export programs as a result of the GATT/WTO agreement.
    Response. The commitments are on a commodity basis, not a program 
basis.
    [The information follows:]

[Page 116--The official Committee record contains additional material here.]


               u.s.-mexico trade in agricultural products
    Mr. Skeen. What is the export and import forecast for U.S.-Mexico 
trade in agricultural products for fiscal year 1997?
    Response. After Japan, the European Union, and Canada, Mexico is 
the fourth largest market for U.S. agricultural exports. U.S. 
agricultural exports to Mexico are projected to reach a record $5.5 
billion in fiscal year 1997, up 10 percent--$500 million--from the 
previous year, despite lower U.S. wheat and corn prices. The major 
reasons for the overall increase are: U.S. soybean and cotton exports 
are projected higher, as are shipments of high-value horticultural and 
meat products. U.S. agricultural imports from Mexico are forecast to 
rise $200 million to a record $3.9 billion largely on the strength of 
fresh fruit and vegetable shipments and higher coffee prices. Mexico is 
the third largest supplier of agricultural products to the United 
States.
               two new offices on the u.s.-mexican border
    Mr. Skeen. Did you open two new offices on the U.S.-Mexican border 
as requested in last year's budget? What are the primary missions of 
these two offices?
    Response. FAS will open its Nuevo Laredo office this summer. Once 
that office is operating, FAS staff will begin the planning process for 
an office in the western segment of the U.S./Mexico border. The primary 
mission of these two offices will be to minimize the adverse impact of 
non-tariff barriers on U.S. trade with Mexico. These offices will help 
define and identify problems affecting cross-border trade for bilateral 
discussions/negotiations, provide support for U.S. exporters by 
developing materials explaining procedures and logistics, help 
inexperienced firms get ``export ready'', and give our Embassy office 
and ATO in Mexico City support in locations where most trade problems 
actually arise.
      operating costs of international cooperation and development
    Mr. Skeen. What is the cost to operate the International 
Cooperation and Development Program and how much of this is offset from 
reimbursements?
    Response. The total funding for the International Cooperation and 
Development Program is about $40 million annually. Of this, $32 
million, or 80 percent of the total, is offset from reimbursements, 
primarily from AD.
                       mexico's creditworthiness
    Mr. Skeen. What is the status of Mexico's creditworthiness under 
the General Sales Manager--GSM--program?
    Response. The Government of Mexico has implemented various programs 
to help the banking sector adjust to the new financial conditions 
caused by the devaluation of the peso. These programs have contributed 
to increased stability in the Mexican banking sector. TheGovernment of 
Mexico also fully backs international obligations incurred by Mexican 
commercial banks, such as those under the GSM program. Mexico is USDA's 
largest GSM program. We have taken great care to balance the risk to 
the CCC and simultaneously support exports to Mexico during a difficult 
economic downturn. There have been no problems with payments under the 
Mexican export credit guarantee program.
                       foreign market development
    Mr. Skeen. How will the new competitive process for awarding funds 
to cooperators in the Foreign Market Development--FMD--Program operate? 
How will the new system differ from the previous one?
    Response. FAS has developed a proposal to allocate funding 
competitively under the FMD effective with the 1998 program year, which 
we have shared with House Appropriations Subcommittee staff. We will 
shortly publish the proposal in the Federal Register to solicit public 
comments. As currently drafted, FAS will solicit applications once a 
year, which will be reviewed by FAS commodity specialists and attaches 
in the respective targeted markets in terms of the following criteria:
          The ability of the organization to provide an experienced 
        U.S. based staff with technical and international trade 
        expertise to ensure adequate development, supervision and 
        execution of the proposed project.
          The organization's willingness to contribute resources 
        including cash and goods and services of the U.S. industry and 
        foreign third parties.
          The conditions or constraints affecting the level of U.S. 
        exports and market share for the agricultural commodities and 
        products.
          The degree to which the project is likely to contribute to 
        the creation, expansion, or maintenance of foreign markets.
          The degree to which the strategic plan is coordinated with 
        other private or U.S. government-funded market development 
        activities.
    In addition, the new process will require that eligible 
applications compete for funds on the basis of the following specific, 
quantifiable allocation criteria:
          The proposed contribution level compared to the requested 
        budget.
          Past export performance compared to prior FAS promotional 
        funding.
          Past demand expansion performance compared to prior FAS 
        funding.
          Future demand expansion goals compared to requested funding.
          Accuracy of past demand expansion projections compared to 
        actual performance.
    We will also consider setting aside funds for short-term 
promotional campaigns, selecting the promotions which are likely to 
have the greatest impact on export development.
    fas program support for states, nasda and state regional groups
    Mr. Skeen. Please update the chart on pages 41-46 of last year's 
hearing record showing how much money from FAS programs, including 
FSMIP, MAP and FMD/Cooperator, are going to the states.
    Response. Please note that the states receive only FSMIP funds 
directly. Market Access Program and FMD-Cooperator Program funds are 
allocated directly from FAS to the National Association of State 
Departments of Agriculture/NASDA, and the four State Regional Trade 
Groups which are the Eastern U.S. Agricultural and Food Export Council 
Inc./EUSAFEC, the Mid-America International Agri-Trade Council/MIATCO, 
the Southern United States Trade Association/SUSTA, and the Western 
U.S. Agricultural Trade Association/WUSATA. Individually, and reflected 
in the attached chart, the FY 1996 budgets for each of the four state 
regional trade groups and NASDA when combining MAP and FMD funds are as 
follows; EUSAFEC $6,493,845, MIATCO $8,369,478, SUSTA $6,021,000, 
WUSATA $7,651,249, and NASDA $730,513.
    [The information follows:]

[Pages 119 - 123--The official Committee record contains additional material here.]


                   supplier credit guarantee program

    Mr. Skeen. Please explain how the Supplier Credit Guarantee Program 
works and how it is different from other credit guarantee programs.
    Response. Under the Supplier Credit Guarantee Program, Commodity 
Credit Corporation--CCC--guarantees a portion of payments due from the 
importer. These guarantees cover short-term financing up to 180 days 
that exporters have extended directly to such importers for the 
purchase of U.S. agricultural commodities and products. The direct 
credits must be secured by promissory notes signed by importers.
    By contrast, under the GSM-102 program, CCC guarantees repayment of 
credits extended to foreign banks which have issued letters of credit 
as a means of payment for imports of U.S. agricultural commodities. 
Under the Supplier Credit Guarantee Program, CCC's guarantee covers the 
risk of default by the importer, as opposed to foreign bank risk under 
GSM-102. As a result, under the Supplier Credit Guarantee Program, CCC 
will cover a smaller portion--50 percent of the value of exports--
rather than the traditional 98 percent guaranteed under GSM-102.
    As under GSM-102, the U.S. exporter may assign the proceeds of the 
Supplier Credit Guarantee Program guarantee to a U.S. financial 
institution so that the exporter can receive payment before it is due 
under the promissory note.
    Mr. Skeen. What commodities will benefit most from this program?
    Response. We anticipate the Supplier Credit Guarantee Program will 
be most helpful in exporting value-added and high-value products and/or 
commodities where supplier credits are normally extended for 180 days 
or less on open account sales, and where the transaction size makes the 
cost of obtaining a letter of credit prohibitive. For example, products 
eligible for the Supplier Credit Guarantee Program include: fresh, 
canned, and dried fruits; fresh, canned, and frozen vegetables; dairy 
products, including ice cream, and processed meat products. As the 
program develops, more consumer-ready foods are expected to benefit.
    Mr. Skeen. Why were there no registrations in the Supplier Credit 
Guarantee Program in fiscal year 1996?
    Response. The Supplier Credit Guarantee Program was not implemented 
until August 30, 1996, when a program for Mexico was announced. Given 
the timing, there may not have been enough time for exporters to get 
sales in place in fiscal year 1996. With any new program, the learning 
curve is steep; participants need time to understand the program and 
make decisions on how and where it can benefit their business.
    Mr. Skeen. What are the estimates for fiscal year 1997?
    Response. For fiscal year 1997, we have announced Supplier Credit 
Guarantee Programs totaling $80 million for use in three countries, 
Mexico, Guatemala and Jamaica, and one regional program in South East 
Asia, including Indonesia, Malaysia, Philippines, and Singapore. 
Through the end of February, we have approved 50 percent coverage on 
sales totaling $2.7 million. As I noted earlier, we have learned that 
all such programs require some learning time for participants to become 
familiar with the program. Therefore, is it difficult to project 
accurately what our total sales registrations will be by the end of the 
fiscal year.
                              trade shows
    Mr. Skeen. Do the U.S. companies participating in international 
trade shows reimburse USDA/FAS for its costs? Are all companies and 
organizations fully paid or are some in arrears?
    Response. All companies participating in USDA/FAS sponsored shows 
are charged an exhibitors fee. The total fees collected in fiscal year 
1996 were $1,696,600 or 92 percent of the expenses to organize the 
sponsored shows. Through cost efficiencies and greater cost sharing by 
the private sector, FAS has been able to reduce its investment in 
organizing international trade shows.
    During fiscal year 1996, there were 486 companies participating in 
the USDA sponsored shows. There are still 12 companies with payment in 
arrears for a total of $88,475.
                   trade embargoes on iran and libya
    Mr. Skeen. Do trade embargoes on such countries as Libya and Iran 
include agricultural products? What restrictions are there on the 
export of U.S. agricultural products?
    Response. As a result of their continued support international 
terrorism, then President Reagan imposed comprehensive trade sanctions 
against Libya in 1986 and Iran in 1987. Under these sanctions, the 
export of goods and services from the United States to Iran and Libya, 
either directly or through third countries, generally is prohibited. 
Only donations of articles intended to relieve human suffering--such as 
food, clothing, and medicine--are permitted. These sanctions are 
covered under Title 31 Parts 550 and 560 of the U.S. Code of Federal 
Regulations and are administered by the U.S. Treasury Department's 
Office of Foreign Assets Control.
                           alcoholic products
    Mr. Skeen. How much does FAS spend in all export assistance and 
promotion on alcoholic products, including wines, beers, and distilled 
spirits?
    Response. For 1995, total expenditures were $5.7 million and $6.1 
million was budgeted for 1996. I am providing a list of the breakouts.

------------------------------------------------------------------------
                                           1995 Expended   1996 Budgeted
------------------------------------------------------------------------
Brandy Export Association...............        $245,146        $246,542
Vodka Producers Association.............          83,829  ..............
State Regional Trade Group's est \1\....         350,000         900,000
Pacific N.W. Wine Promotion Coalition...         256,539         288,240
New York Wine & Grape Foundation........         169,977         218,271
Wine Institute..........................       4,587,255       4,443,650
------------------------------------------------------------------------
\1\ Not specialized in these products, but are typically part of a      
  broader grocery mix.                                                  

                                food aid
    Mr. Skeen. What are the restrictions USDA and AID are under in 
terms of providing food aid and not interfering with the development of 
local agriculture?
    Response. Both USDA and AID are required by law to certify that 
food aid will not be a disincentive to local production or marketing. 
These certifications are called ``Bellmon'' determinations and are 
completed before an action to provide food aid is undertaken. These 
determinations also certify that a country can receive, store and 
distribute commodities without waste.
    Mr. Skeen. Is the U.S. Government prohibited from promoting foreign 
aid programs which would have negative effects on U.S. commodity 
exports?
    Response. There are a number of such provisions that have appeared 
in appropriations acts covering programs administered by the Agency for 
International Development or that address assistance to multinational 
development banks. The only related provision that is applicable to 
operations of the Department of Agriculture appears in section 414(a) 
of the Agricultural Trade Development and Assistance Act of 1954--
``P.L. 480''. That section directs that local currencies made available 
under P.L. 480 may not be used to finance the production of 
agricultural commodities for export that would compete with similar 
agricultural commodities produced in the United States if such 
competition would cause substantial injury to the United States 
producers.
    Mr. Skeen. Again this year, P.L. 480 program levels are decreasing, 
especially title I, but administrative and program costs are 
increasing. Why is this?
    Response. The current, limited staff supporting the proposed $123 
million title I program level must continue to prepare and negotiate a 
similar number of agreements, handle the commodity purchases and 
monitor the program. The $31,000 increase in administrative costs is 
projected to cover pay costs.
                         u.s. wheat associates
    Mr. Skeen. In its first half fiscal year 1995 report, the Inspector 
General reported that FAS gave U.S. Wheat Associates $192,000 to open 
an office in Moscow. How much FMD/MAP/MPP support has been given to 
U.S. Wheat for its Moscow office since April 1, 1991? How much has U.S. 
Wheat paid from its own funds?
    Response. Since the office opened in February 1992, U.S. Wheat 
Associates has been reimbursed $1,073,980 in MAP resources to support 
their Moscow office. In addition, U.S. Wheat Associates has contributed 
an additional $1,286,500 of their own resources--which includes $96,500 
towards salary costs for Moscow office staff and $1,190,000 for home 
office supervision and administration of staff and programs of the 
Moscow office.
                        criteria used to select
    Mr. Skeen. In the past year, have you made any changes to the 
criteria used to select Market Promotion Program/Market Access Program 
participants?
    Response. In keeping with the 1996 Farm Bill, FAS no longer 
allocates resources directly to large companies or to foreign entities. 
Otherwise, the basic entry criteria remain unchanged. FAS has developed 
a formula, however, to make more transparent the competitive basis upon 
which the level of resources allocated to eligible participants is 
determined. The factors considered by the formula and the weights 
assigned to each were published in the Federal Register soliciting 
applications for the 1997 program year.
                            mpp/map program
    Mr. Skeen. How many new participants joined the MPP/MAP program in 
fiscal year 1996 and how many either dropped out or were removed?
    Response. Although several organizations applied for MAP 
participation for the first time in 1996, only three, the United Fresh 
Fruit and Vegetable Association, Western Growers and the North American 
Blueberry Council, received allocations. Western Growers had previously 
participated in the FMD program.
    Of the total number of participants in the fiscal year 1995 
program, Cal-Almond, Inc., U.S. Mink Export Development Council, and 
Vodka Producers of America did not reapply in fiscal year 1996.
    In addition, the U.S. Surimi Commission applied successfully for 
1996 MAP, but subsequently withdrew from the program.
    Mr. Skeen. For the record, please provide a list of all 
organizations and companies that received MPP/MAP funds in fiscal year 
1996.
    [The information follows:]

[Pages 127 - 128--The official Committee record contains additional material here.]


    Mr. Skeen. Please update the information provided last year as to 
how many small and medium-sized companies participate in MPP/MAP.
    Response. FAS provides assistance on a ``priority'' basis only to 
companies that qualify as ``small'' by SBA's criteria and cooperatives, 
so these are the only categories tracked in our records. In the 1995 
program year, 449 of the 648 companies participating in the MAP, 
through brand promotion agreements directly with CCC or with 
Participants, qualified as ``small'' per the criteria used by the Small 
Business Administration. So far in the 1996 program year, 417 of the 
564 companies participating in MAP qualify as ``small''. The 1996 
program year is underway and, as additional companies are enlisted, the 
number of those qualifying as ``small'' will likely increase.
    Mr. Skeen. What evidence do you have that the MPP/MAP is working as 
it was intended? Can you estimate direct benefits from MPP in terms of 
exports and job growth?
    Response. Evaluating the effectiveness of export promotion, 
particularly generic promotion which accounts for most of the promotion 
undertaken in the MAP, is difficult and the factors affecting exports 
vary greatly by commodity. Therefore, evaluation studies attempting to 
measure the effects of promotion on exports have focused on specific 
commodities or small groups of commodities in selected countries. 
Recent analytical efforts have focused on high-value consumer-oriented 
products since about 80 percent of MPP/MAP funds are used to promote 
these products.
    One such study published by FAS in 1995, ``Evaluating the 
Effectiveness of the Market Promotion Program on U.S. High Value 
Agricultural Exports'' concluded that, assuming 100 percent 
additionality for the programs, that the government's investment in 
export promotion for high value products since 1986 through the TEA, 
MPP and MAP programs would generate $4.8 billion of the total value of 
U.S. exports of those products in 1996, supporting 105,000 jobs 
throughout the U.S. The study also separated the effects of a cheaper 
dollar on U.S. market share from the impact of export promotion, 
concluding that the change in the value of the dollar was responsible 
for roughly 40 percent of the change in market share, the rest was due 
to export promotion. The net result assuming 100 percent additionality, 
was that for every dollar spent on export promotion, exports rose 
sixteen dollars.
    Independent researchers in the academic community have produced 
several significant studies evaluating the effectiveness of the FAS 
export promotion programs in recent years. One of the most recent 
works--1995--by Halliburton and Henneberry of Oklahoma State University 
confirmed the effectiveness of U.S. almond promotions in Japan, Taiwan, 
and Hong Kong indicating a return on investment to the Government 
ranging from $4 to $9 for every dollar of promotional expenditure. 
Another even more recent study--presented at the May 1996 NEC-63 
Conference, but still ongoing--by the University of California at Davis 
produced results consistent with the almond study in measuring the 
effectiveness of U.S. export promotions of walnuts to Japan.
    Prior research conducted at Oklahoma State University in 1991 by 
Henneberry and DeBrito also concluded that U.S. non-price promotions 
had a positive impact on total Japanese red meat imports, particularly 
beef offals. Similarly, export promotion programs for cotton in the 
Pacific Rim countries of Japan, Hong Kong, South Korea, and the 
Philippines were found to be effective in a study conducted in the 
early 1990s by Solomon and Kinnucan.
    According to Timothy Richards, et al., who investigated the 
promotion of Washington apples, ``* * * the U.K. results show that U.S. 
promotion both increases the size of the total market and the U.S. 
share of the market.'' Richards attributes a growth in U.S. market 
share of over 5 percent for each $100,000 in additional promotional 
expenditures. In Singapore, Mr. Richards concludes that ``export 
promotion is successful in increasing aggregate apple demand * * *'' 
and ``* * * that each dollar of promotion increases total expenditure 
on apple imports by $27.84.''
                               wto budget
    Mr. Skeen. What is the current WTO annual budget and what is the 
U.S. share of that budget? Is the U.S. the largest contributor?
    Response. The WTO budget for 1996 was about $80.6 million. The U.S. 
was the largest single contributor with a 16 percent share, or about 
$12.7 million. However, when the contributions of the member states of 
the European Union are added together, their combined share is nearly 
45 percent or about $36.4 million.
                          former soviet union
    Mr. Skeen. What is the current situation with regard to credit 
guarantees to the countries of the Former Soviet Union?
    Response. Russia is the only FSU country with a credit guarantee 
program for fiscal year 1997. The country recently exhausted the $70 
million allocated under its private sector GSM-102 program. Last year, 
Russia used about $54 million of its $70 million allocation. Similar to 
the case of Mexico last year, we are carefully balancing our objectives 
of managing risk to CCC and developing market opportunities. In 
addition to the program for Russia, we have allocated a total of $13.5 
million to the Baltic countries of Estonia, Latvia and Lithuania. To 
date, no sales have been registered for these countries.
    Mr. Skeen. How large a market is the Former Soviet Union, by 
country, and what were the main commodities it bought during 1996?
    Response. The Russian Federation is by far the largest market for 
imported agricultural products within the Former Soviet Union--FSU. 
This is true both for imports from the world and imports from the 
United states. In calendar 1996, U.S. agricultural exports to the FSU 
totaled $1.7 billion, two-thirds of which--$1.3 billion--were shipped 
to the Russian Federation. A table on the value of U.S. agricultural 
exports, by republic, follows.

                        U.S. Agricultural Exports

        FSU Country                                   CY 1996 $ Millions
Russian Federation............................................    $1,326
Latvia........................................................        92
Uzbekistan....................................................        81
Georgia.......................................................        48
Ukraine.......................................................        44
Armenia.......................................................        42
Estonia.......................................................        27
Kyrgyzstan....................................................        16
Lithuania.....................................................        15
Moldova.......................................................        12
Turkmenistan..................................................        12
Tajikistan....................................................        12
Byelarus......................................................        11
Azerbaijan....................................................         6
Kazakhstan....................................................         1
                    --------------------------------------------------------------
                    ____________________________________________________

      Total...................................................    $1,745

    The Russian Federation is currently the ninth largest market for 
U.S. agricultural exports, and the largest market for U.S. poultry 
meat. U.S. agricultural exports to the Russian Federation are highly 
concentrated in a few products, namely poultry meat and red meats. 
These two product groups accounted for 83 percent--$1.1 billion--of 
total U.S. agricultural exports to the country in 1996. The other 
product groups whose export value exceeded $15 million in 1996 were: 
wheat--$28.5 million, processed fruit and vegetables--$22 million, and 
dairy products--$19 million. A table on U.S. agricultural exports to 
the FSU and the Russian Federation follows.

[Pages 131 - 132--The official Committee record contains additional material here.]


              commercial sales to the former soviet union
    Mr. Skeen. What percent of the U.S. sales to the former Soviet 
Union are commercial sales and what percent are government-involved 
sales?
    Response. U.S. sales to the former Soviet Union--including the 
Baltics--reached $1.66 billion in fiscal year 1996, of which $167.4 
million--10 percent--was food aid and $1.5 billion--90 percent--was 
commercial, including $61.2 million financed with CCC export credit 
guarantees.
    Mr. Skeen. What is the total quantity of commodities sold to the 
former Soviet Union under the EEP and GSM programs during calendar year 
1996, and what was the value of the bonuses paid in connection with 
those sales?
    Response. During calendar year 1996, there were no awards under the 
EEP to the former Soviet Union. The report for GSM follows.

[Page 134--The official Committee record contains additional material here.]


                             sales to china
    Mr. Skeen. What have been our sales to the People's Republic of 
China during fiscal year 1996, and what is the outlook for 1997? Please 
discuss both the terms of commercial sales and government-involved 
sales.
    Response. U.S. sales to the People's Republic of China reached 
$1.83 billion in fiscal year 1996, and all sales were made on a 
commercial basis. In fiscal year 1997, exports are projected a $20.0 
billion, of which up to $100 million are eligible to be financed under 
the export credit guarantee program--GSM-102. China is also included in 
the Asia Region under the DEIP for sales of nonfat dry milk, cheese and 
butterfat.
                       export enhancement program
    Mr. Skeen. What EEP sales were made to China during calendar years 
1995 and 1996 and what bonuses were paid on those sales?
    Response. During calendar 1996, there were no awards under the EEP 
to China.
    [The information follows:]

                         EXPORT ENHANCEMENT PROGRAM AWARDS TO CHINA--CALENDAR YEAR 1995                         
----------------------------------------------------------------------------------------------------------------
                   Commodity                      Quantity            Unit of measure              Bonus paid   
----------------------------------------------------------------------------------------------------------------
Wheat.........................................    1,546,000  MT..............................     $25,345,540.00
    Total.....................................    1,546,000    ..............................     $25,345,540.00
----------------------------------------------------------------------------------------------------------------

                      china's accession to the wto
    Mr. Skeen. What effect would China's accession to the WTO have on 
U.S. agricultural imports and exports?
    Response. China's accession to the WTO has serious implications for 
U.S. agriculture over both the short and long term. As a consequence, 
USDA places the highest importance on getting the terms of the 
accession right and has devoted significant resources for negotiations 
with China. Certainly, few international trade issues are as important 
for U.S. agriculture.
    In the near term, China's adopting WTO rules for its trade regime 
through accession could result in significant benefits for U.S. 
agriculture. Coming into compliance with general WTO rules, suchas 
transparency, non-discrimination, expanding trading rights, improving 
uniform application of laws, administration of customs procedures, and 
application of sanitary and phytosanitary measures and other standards 
would have an immediate positive impact on the trading environment. 
Moreover, implementation of specific commitments by China to lower 
tariffs, liberalize trade of state-traded products, remove unjustified 
sanitary and phytosanitary measures, and refrain from certain subsidy 
practices would improve market access for U.S. products and reduce 
unfair export competition. Over the longer term, if China disciplines 
its trade policies through WTO rules, market conditions in China will 
become more predictable and market-oriented, which would benefit 
competitive agricultural exporters such as the United States.
    There are serious consequences of China entering the WTO under the 
wrong conditions. Not only would the United States lose a unique 
opportunity to negotiate specific concessions of value to U.S. 
agriculture, but a weak agreement would not include the mechanisms 
necessary to encourage trade liberalization in China. Moreover, if 
China joins the WTO and has not adopted liberal market-oriented 
principles for agricultural trade, it would likely become a serious 
obstacle within the organization to continued WTO negotiations to 
liberalize agricultural trade.
                       export enhancement program
    Mr. Skeen. Your budget justification says that the Department spent 
$5 million in Export Enhancement Program money in fiscal year 1996 to 
assist poultry exports. Was that the total level of EEP spending in 
fiscal year 1996? What is your estimate for fiscal year 1997 for total 
EEP funding?
    Response. Yes, total bonus awards under EEP for fiscal year 1996 
totaled $5 million. For fiscal year 1997 to date, USDA has not awarded 
any bonuses under the EEP, however, we view EEP as a ready policy 
option, if needed, to make our exports competitive.
    Mr. Skeen. Please provide for the record a table showing the total 
value of bonuses paid by exporter under the Export Enhancement program 
since the inception of the program.
    [The information follows:]

[Pages 136 - 139--The official Committee record contains additional material here.]


                         eep bonuses by country

    Mr. Skeen. Please provide for the record a table which shows the 
total bonuses, by country, for fiscal years 1995 and 1996.
    [The information follows:]

[Page 141--The official Committee record contains additional material here.]


                         changes in eep program
    Mr. Skeen. Please describe for the Committee any changes you have 
made in the EEP program since last year.
    Response. In its 1995 Farm Bill ``Bluebook,'' the Administration 
committed to propose for public comment the reform of USDA's export 
bonus programs. At the time, programs included the Export Enhancement 
Program, the Dairy Export Incentive Program, the Sunflowerseed Oil 
Assistance Program, and the Cottonseed Oil Assistance Program. On June 
8, 1995, the NEC Deputies met to discuss reform concepts for USDA's 
export bonus programs. It was agreed that a Federal Register notice 
would be published to solicit public comment on three options to reform 
USDA's export bonus programs. The comment period ended July 26, 1995. 
The three options considered were: (1) an auction system; (2) a pre-
announced bonus; and (3) a significantly modified price/bonus process 
designed to enhance market-orientation. These reform options could make 
the export bonus programs more flexible in responding to changing world 
market conditions and serve to further goals for increased deficiency 
and lower program costs. In response to the Advance Notice of Proposed 
Rulemaking, USDA received 65 comments. The NEC Deputies met on December 
10, 1996 to consider the three options for awarding export subsidy 
bonuses through, (1) an auction system, (2) use of a pre-announced 
bonus, or (3) modifications to make the current price/bonus review 
process more market-oriented. The Deputies agreed to delay the 
selection of a reform option for bulk commodities like wheat until the 
program is reactivated and to adopt the third option for value-added 
commodities like flour. USDA is implementing these modifications in the 
operation of the DEIP.
    Mr. Skeen. How much barter was done in fiscal year 1996?
    Response. CCC did not participate in any direct barter arrangements 
in fiscal year 1996. We continue to structure our export assistance 
programs such as EEP and DEIP so that trade financing such as barter or 
counter trade among commercial entities can be accommodated.
                        map brand name companies
    Mr. Skeen. Please provide for the record a list of the private 
companies with which you had contractual relations for the promotion of 
brand name food items during fiscal year 1996.
    Response. FAS had MAP agreements with only four private commercial 
entities in 1996, all of which were U.S. cooperatives: Blue Diamond 
Almond Growers, Sunkist Growers, Ocean Spray Cranberries, Inc. and the 
National Grape Cooperative. However, the nonprofit commodity 
associations and state regional trade groups that receive MAP 
allocations for branded programs reallocate those resources to hundreds 
of private companies and cooperatives to promote value added forms of 
their commodities. I am providing a list of the private companies and 
entities with which participants have signed agreements to date in the 
1996 program year. Since the 1996 program is still underway and new 
agreements may continue to be signed, this list may not be complete.

[Pages 143 - 154--The official Committee record contains additional material here.]


           export incentive program and market access program

    Mr. Skeen. Please describe the difference between the Export 
Incentive Program--EIP--and the Market Access Program.
    Response. EIP is a subcomponent of the Market Access Program in 
which the CCC enters into direct agreements with small-sized U.S. 
commercial entities and agricultural cooperatives.
    Mr. Skeen. In fiscal year 1996, of the MPP/MAP agreements, how much 
was for EIP?
    Response. There were no EIP agreements in 1996. Collectively, the 
four cooperatives with which FAS has direct MAP agreements have budgets 
totaling almost $5 million.
                       credit sales registration
    Mr. Skeen. Please provide a table showing a list of the countries 
that receive GSM-102 guarantees during fiscal year 1996 and show what 
commodities were sold.
    [The information follows:]

[Pages 156 - 166--The official Committee record contains additional material here.]


                       credit sales registration

    Mr. Skeen. Please provide a table showing the list of the countries 
that received GSM-103 guarantees during fiscal year 1996 and show the 
amount of the guarantee and what commodities were sold.
    [The information follows:]

[Pages 168 - 169--The official Committee record contains additional material here.]


                       u.s. produced commodities

    Mr. Skeen. Your regulations require that commodities sold under the 
GSM-102 and -103 programs should be restricted to agricultural 
commodities or products entirely produced in the United States. How do 
you go about enforcing this provision?
    Response. Exporters participating in the GSM programs are required 
to certify to CCC that the commodity exported meets the definition of a 
U.S. agricultural commodity. This certification is obtained at the time 
of application for a payment guarantee and again when the evidence of 
export report is filed. Further, exporters are required to maintain and 
grant access by USDA officials to their records of sales and 
inventories. FAS's Compliance Review Staff samples approximately 10 
percent of GSA-102/103 payment guarantees issued annually by CCC and, 
among other checks, determines compliance with the U.S. content 
provisions of the program. If evidence is found that foreign 
commodities were included in an export transaction, CCC may hold that 
exporter liable for any amounts attributed to the foreign content which 
are paid by CCC in the event of a claim. CCC may also suspend or debar 
an exporter from participation in the GSA-102/103 and other CCC 
programs for shipping foreign commodities under CCC programs.
    Mr. Skeen. During fiscal year 1996, did you have any cases where 
exporters falsely certified that the commodities they were selling were 
not entirely of U.S. origin.
    Response. No. For applications received in fiscal year 1996, we are 
presently unaware of any cases where exporters falsely certified that 
the commodity was entirely of U.S. origin.
                       facility guarantee program
    Mr. Skeen. Under the guarantees for emerging democracies, what 
amount of the guarantees were used for facilities in fiscal years 1995 
and 1996.
    Response. No facilities financing guarantees were issued in 1995 or 
1996. The 1990 Food, Agricultural, Conservation and Trade Act 
authorized the Facilities Guarantee Program to target countries that 
were designed as emerging democracies. On March 1, 1993, CCC published 
a Facilities Guarantee Program interim rule in the Federal Register. 
However, due to delays in determining what countries qualified as 
``emerging democracies'', the statutory authorization expired before 
the program could be made operational. Subsequently, the interim rule 
itself was deleted.
    FAS is currently finalizing an interim rule to operate the 
Facilities Guarantee Program. The program is expected to be in 
operation as soon as clearances can be obtained and the rule published. 
We are now projecting a late spring or early summer starting date for 
the program. Now, of course, the program will focus on emerging markets 
in accord with the 1996 Farm Bill.
                       ccc export credit programs
    Mr. Skeen. Please update the table that appears on page 96 of last 
year's hearing, listing all of the countries that are in arrears in 
their payments.
    [The information follows:]

[Page 171--The official Committee record contains additional material here.]


    Mr. Skeen. Please provide for the record, a table showing how much 
CCC has paid out, by country, on loans that were in arrears. Also show 
what recoveries were made in 1996.
    [The information follows:]

[Pages 173 - 174--The official Committee record contains additional material here.]



    Mr. Skeen. What are the total arrearages for P.L. 480 and the 
Commodity Credit Corporation--CCC?
    Response. As of January 31, 1997, arrearage under our P.L. 480 and 
CCC programs totaled $636 million.
    Mr. Skeen. What is being done to collect this money?
    Response. It is our policy to suspend programming for significant 
arrears--arrears of more than $250,000. Nearly all of the arrearage 
under the programs are public sector arrears, the bulk of which is in 
countries considered the poorest or in countries where we have legal or 
political constraints. For example, of $636 million total arrears, $600 
million is owned by the Dominican Republic, Liberia, Somalia, Sudan, 
Syria, and Zaire. The remaining balance of $36 million is owed by all 
other countries.
    Mr. Skeen. Are any countries in arrears continuing to receive the 
benefit of P.L. 480 or CCC Programs?
    Response. Several years ago, we revised our suspension policy to 
allow for private sector CCC programs in countries with protracted 
public sector arrears. Therefore, we have private sector CCC programs 
in several countries where there are significant public sector arrears 
on our records. These countries include, Brazil, Ecuador and Bulgaria. 
We have found that arrearages in public sector programs have no 
correlation to the private sector activity.
    Under P.L. 480, our policy is not to sign a new agreement with a 
country's government unless the country is current on its Title I 
payments. Occasionally a country may lag behind on payments during the 
course of the year after an agreement has been signed. Given the 
concessional nature of this program, we will not suspend shipments. 
However, we will suspend new Title I programming until the arrearages 
are resolved.
    Mr. Skeen. During calendar years 1995 and 1996, what debts were 
written off by CCC?
    Response. For fiscal year 1995, CCC wrote off a total of $17.7 
million in GSM rescheduled Jordanian debt. In addition, a total of $1.5 
million of P.L. 480 Title I debt was written off for Jordan in fiscal 
year 1995 and $1.3 million in fiscal year 1996.
    Mr. Skeen. How long are these old loans carried on CCC's books, and 
under what circumstances is the debt written off?
    Response. Write-off of any CCC foreign debt requires legislative 
authority. Without such authority, debts remain on CCC's book 
indefinitely. Legislative authorities used in the past to reduce debt 
are: Section 411 of P.L. 480, Section 604 of P.L. 480--Enterprise for 
the Americas Initiative, Section 579 of the Foreign Operations 
Appropriations Act of 1991 for Poland, and the recent special statutory 
for Jordan debt forgiveness.
                             public law 480
    Mr. Skeen. Please list for the record all of the Title I agreements 
that were signed during fiscal year 1996, including the country, the 
commodity, the dollar value and the terms of these agreements.
    [The information follows:]

[Pages 176 - 177--The official Committee record contains additional material here.]


                             public law 480

    Mr. Skeen. Please provide for the record the allocations, by 
country, under Title I for calendar years 1996 and 1997 after the 
proposed $50 million rescission.
    Response. The Title I commodity allocations announced for 1997 will 
not be affected by the proposed rescission. The reduction in program 
funding will be taken from a reserve of unallocated funds and from 
unobligated funds carried over from 1996. The fiscal year 1996 and 
fiscal year 1997 allocation tables follow.

[Pages 179 - 180--The official Committee record contains additional material here.]


                       ocean freight differential
    Mr. Skeen. What is the ocean freight differential for fiscal years 
1995 and 1996, and your estimate for fiscal year 1997?
    Response. The ocean freight differential for Title I for fiscal 
years 1995 and 1996 was $28.0 million and $23.2 million respectively. 
Our estimate of ocean freight differential for fiscal year 1997 is 
currently $13.9 million, excluding the pending rescission proposal.
                       standard commercial terms
    Mr. Skeen. What is the status of negotiations on standard 
commercial terms for P.L. 480 contracts discussed in last year's 
hearing record?
    Response. We are continuing to make progress as we work with both 
the Maritime Administration and the Agency for International 
Development on specific commercial terms which are appropriate for P.L. 
480 shipments. There is not one standard set of ``commercial terms'' 
which all parties use in a commercial sale; all freight contract terms 
are negotiable. We also must take into consideration that countries 
receiving food aid often have problems, such as inefficient discharge 
facilities, which commercial importers do not.
    Our policy is that Title I recipient countries should arrange and 
pay for shipping commodities inland after discharge, relieving the 
ocean carrier from that responsibility. After consultation with the 
Maritime Administration, we agreed to Armenia's request to include the 
costs of inland transportation in their fiscal year 1997 Title I 
agreement; however we do not plan any future exceptions to this policy.
                       p.l. 480 title ii program
    Mr. Skeen. Please provide for the record the Title II program, by 
country and commodity, for fiscal year 1996.

[Pages 182 - 231--The official Committee record contains additional material here.]


                     p.l. 480 transportation costs

    Mr. Skeen. What was the cost of internal transportation during 
fiscal years 1995 and 1996, and what is the estimate for 1997?
    [The information follows:]

             P.L. 480 Title II Internal Transportation Costs

        Fiscal Year                                               U.S. $
1995 (final)............................................     $98,691,400
1996 (final)............................................     $86,038,900
1997 (estimate).........................................     $87,000,000

    Mr. Skeen. How do you determine what internal transportation costs 
are allowable under the program?
    Response. Internal transportation costs are those that are related 
to the movement of commodities from the point of entry or port of entry 
in the recipient country to the distribution sites where the 
beneficiaries receive the food. In accordance with Title II 
legislation, USAID only pays these costs when they are related to 
activities for urgent and extraordinary relief. Allowable costs under 
internal transport are those directly related to the internal 
transportation, storage, monitoring, and distribution of Title II 
emergency commodities.
    Mr. Skeen. What was the cost of external transportation during 
fiscal years 1995 and 1996, and what is the estimate for 1997?
    [The information follows:]

             P.L. 480 TITLE II EXTERNAL TRANSPORTATION COSTS            
------------------------------------------------------------------------
                                                           Inland U.S. $
               Fiscal year                     Ocean          (000s)    
------------------------------------------------------------------------
1995 (final)............................        $200,359         $84,307
1996 (final)............................        $179,015         $58,461
1996 (estimate).........................        $180,000         $60,000
------------------------------------------------------------------------

    Mr. Skeen. Please describe what external transportation costs are 
allowable.
    Response. Title II may pay the ocean transportation costs incurred 
in the delivery of commodities from the port of loading in the Untied 
States to the primary discharge port in the recipient country. Also, in 
the cast of a land-locked country, Title II may pay the transportation 
costs associated with the delivery of the commodity from the primary 
discharge port to the primary storage point in the land-locked country.
                          school lunch program
    Mr. Skeen. Please describe the school lunch program provided under 
Title II, and let us know how many children were involved in this 
program during calendar year 1996.
    Response. A successful school feeding project will provide a 
nutritional supplement to school children coming from households in a 
country or region within a country which is clearly food deficit and 
encourages families to enroll or maintain their children in school. The 
project needs a demonstrated host government commitment to education in 
general, and basic education in particular. Active community 
participation, through parent's associations is essential in providing 
services such as cooks, kitchen helpers, and guards required for 
operating a school feeding program. The community may either provide 
these services or contribute cash to compensate those engaged to 
perform the services. Based on fiscal year 1996 records, school feeding 
activities benefited over 3.8 million children.
                              monetization
    Mr. Skeen. Please explain monetization. In what programs is it 
used? How much was monetized in fiscal year 1996?
    Response. Monetization is the sale, by a Cooperating Sponsor, of 
Title II commodities in the recipient or neighboring countries to 
obtain foreign or local currencies to support humanitarian and 
development activities. The currencies generated by the monetization of 
Title II commodities are used to support activities related to 
household nutrition and agricultural productivity, such as maternal 
child health activities and food for work activities. In fiscal year 
1996, approximately 190,000 metric tons, with a total commodity and 
freight value of over $86 million, were monetized.
                  food for peace and food for progress
    Mr. Skeen. Please explain Food for Peace and Food for Progress and 
how they fit into P.L. 480 Titles I, II, and III. Please also explain 
section 416 and its relationshp to other food aid programs.
    Response. The authority for P.L. 480 was enacted in 1954, and is 
commonly referred to asthe ``Food for Peace Program.'' Title I, P.L. 
480 is a long-term concessional credit program administered by USDA, 
and is primarily a market development tool. Titles II and III are food 
donation programs, and are administered by AID. Title II is generally 
designed to respond to emergency food needs and to support humanitarian 
and development programs carried out by private voluntary 
organizations. Title III provides grants to governments to promote 
economic development. Funding for these P.L. 480 programs is 
appropriated annually.
    The Food for Progress program was authorized under a separate 
authority in 1985. Under this program USDA may donate from CCC 
inventories or purchase, either with Commodity Credit Corporation funds 
or funds appropriated for Title I, P.L. 480, up to 500,000 metric ton 
of commodities each fiscal year for donation to foreign governments, 
private voluntary organizations, international organizations or private 
entities. The commodities are used to support the introduction or 
expansion of free enterprise systems in agricultural economies. In 
addition, not more than $30 million of CCC funds are available each 
fiscal year for transportation costs and other non-commodity costs 
associated with the donation of the commodities purchased with CCC 
funds or donated from CCC inventories. USDA can also use Title I funds 
to pay for costs related to the provision of commodities purchased with 
Title I, P.L. 480 funds.
    Section 416(b) of the Agricultural Act of 1949 authorizes CCC to 
donate surplus commodities acquired by CCC under domestic price support 
programs. This authority only applies to commodities in CCC inventory. 
The donated commodities may be used to support direct feeding programs 
or may be sold with the proceeds used for development activities. Since 
CCC does not at present own excess stocks, this program is inactive.
                   agreements signed under title iii
    Mr. Skeen. During fiscal year 1996, what agreements were signed 
under Title III and in what amounts?
    [The information follows:]

                   FY 1996 TITLE III AGREEMENTS SIGNED                  
                        [In millions of dollars]                        
------------------------------------------------------------------------
                         Countries                             Amounts  
------------------------------------------------------------------------
Eritrea....................................................          $20
Bangladesh.................................................          7.5
Haiti......................................................           10
Honduras...................................................            5
Nicaragua..................................................            4
Ethiopa....................................................       \1\ 25
------------------------------------------------------------------------
\1\ This three year agreement was signed in FY 1996, with the first     
  tranche of $9 million acutally funded in early FY 1997.               

    Mr. Skeen. Please describe how these Title III funds are used.
    Response. Title III funds were used to support a variety of policy 
reforms and programs in agriculture, primary education and health care, 
and rural infrastructure development.
    In Bangladesh, Title III supported a primary education program for 
poor children; policy reforms to reduce government interventions in 
food marketing; and government and nongovernmental organization 
collaboration to increase agricultural productivity and food-based 
nutrition.
    In Eritrea, the Title III program is structured around the 
country's national food security policy. Disbursement of assistance is 
based on Eritrean demonstrated commitment to their own policies and to 
measurable results against these commitments rather than to USAID-
determined benchmarks. The program reinforces not only Eritrean 
ownership of policy reform but also Eritrean leadership.
    In Ethiopa, the Title III program focuses on policies associated 
with liberalizing food markets and the development of targeted safety 
net programs. It also promotes restructuring and eventually privatizing 
state-owned enterprises engaged in agri-based manufacturing, 
distribution, and marketing; developing efficient agricultural input 
markets, with particular emphasis on fertilizer; and creating an 
environment supportive of private sector involvement in the grain and 
agricultural inputs markets.
    In Haiti, policy reform has focuses on two objectives: (1) 
liberalization of the country's agricultural markets and (2) the 
development of a National Environmental Action Plan that also will 
address many of the numerous underlying constraints to increasing 
agricultural production and productivity in the country.
    The Title III local currencies were used to support the creation of 
short-term jobs to build or repair productive infrastructure and the 
expansion of agricultural productivity enhancing and soil conservation 
activities to reach additional poor hillside farmers. Funds were also 
used to support activities primarily in the social sectors begin 
carried out by the three Title II cooperating sponsors.
    In Honduras, the current program builds on earlier program 
successes in improving food availability and access by implementing 
land tenure reforms begun under previous agreements; continuing 
commitments to the liberalization of agricultural trade; creating an 
agricultural marketing information system; strengthening agricultural 
research and extension; and privatizing state enterprises. A 1994 
evaluation of the earlier program concluded that the Title III 
supported policy reforms had a significant and measurable impact on the 
availability and access to food among the countries rural poor.
    Title III local currencies were used to support the government's 
family assistance program, which provides a social safety net during 
the economic adjustment process, as well as land titling, market 
information, and small farmer access to financial, agriculture 
processing, and marketing services.
    In Nicaragua, the policy conditionalities in the fiscal years 1993-
1996 agreement required the Government to remove the ban on 
agricultural exports, eliminate the sale of donated food at below 
market prices, adopt open trade policies--including the elimination of 
some input taxes and the facilitation of the legal and administrative 
environment for exports--and to allocate at least 40 percent of the 
Ministry of Health's budget to primary health care. The economic 
reforms led to an increase in producer prices for basis grains which 
contributed to a substantial increase in the total value of 
agricultural exports and in food grain production.
    Title III local currencies were used to provide small farmers with 
technical and marketing support for both traditional and non-
traditional crops, including assistance in agro-forestry, land titling 
and improved on-farm grain storage; microenterprise credit; and support 
for improvements in primary health care.

                       section 461(b) commodities

    Mr. Skeen. During fiscal year 1996, what commodities were 
distributed under section 416(b) and what countries received these 
commodities?
    Response. There were no agricultural commodities determined 
available for distribution from CCC inventories for donation overseas 
under section 416(b) in fiscal year 1996.
    Mr. Skeen. What are the terms and conditions for distributing 
section 416(b) commodities?
    Response. Section 416(b) allows CCC to donate its agricultural 
commodities acquired through its price support operations to assist 
needy people overseas. The program has specific requirements on the use 
of local currencies generated from the sale of commodities. Foreign 
currencies generated from the sale or barter of commodities shall be 
used to enhance the effectiveness of the use of commodities donated 
under this program and to implement, community development, health, and 
nutrition programs, and other developmental activities.
    Mr. Skeen. Are all of the section 416(b) commodities distributed 
from CCC inventory, or does USDA purchase any commodities for 
distribution under this section?
    Response. All section 416(b) commodities are distributed from CCC 
inventory.
                           food for progress
    Mr. Skeen. During fiscal year 1996, did you purchase any 
commodities for the Food for Progress program? What are the plans for 
fiscal years 1997 and 1998?
    Response. For fiscal year 1996, about 350,000 metric tons of 
agricultural commodities were purchased for the Food for Progress 
program. About half of this amount was under Title I-funded Food for 
Progress agreements with Georgia, Kyrgyzstan and Tajikistan and the 
rest were purchases made with CCC funds. In fiscal years 1997 and 1998, 
we plan to ship as much tonnage as possible within the constraint of 
the $30 million freight cap for CCC purchases. These funds are used to 
support Food for Progress programs with Private Voluntary 
Organizations. In addition, we have several Title I-funded Food for 
Progress programs planned for fiscal years 1997 and 1998.
    Mr. Skeen. Do you have authority to pay any transportation costs 
under section 416(b) and if so, what were the transportation costs 
associated with this program during fiscal year 1996?
    Response. Yes, we have authority to pay for ocean and inland 
freight, as well as internal distribution. However, no commodities were 
available from CCC inventories for section 416(b) foreign donations in 
fiscal year 1996; therefore, no transportation costs were incurred 
under the program.
                          transportation costs
    Mr. Skeen. Please provide a table for the record showing the 
transportation costs for 416(b) and Food for Progress in fiscal years 
1995 and 1996 and the estimates for fiscal years 1997 and 1998.
    [The information follows.]

      SECTION 416(b) AND FOOD FOR PROGRESS TRANSPORTATION COSTS, FY 1995-96 AND ESTIMATES FOR FY 1997-1998      
                                            [In millions of dollars]                                            
----------------------------------------------------------------------------------------------------------------
                                                                                  Fiscal year                   
                                                             ---------------------------------------------------
                                                                  1995         1996         1997         1998   
----------------------------------------------------------------------------------------------------------------
Section 416(b)..............................................           .3          0            0            0  
Food for Progress...........................................    \1\ $47.3    \1\ $40.0        $30.0        $30.0
    Total...................................................         47.6         40.0         30.0         30.0
----------------------------------------------------------------------------------------------------------------
\1\ Transportation costs for Food for Progress for fiscal years 1995 and 1996 include costs incurred for        
  shipping CCC purchased agricultural commodities as well as shipping agricultural commodities purchases with   
  Title I funds. Estimates for fiscal years 1997 and 1998 represent the $30.0 million transportation cap for CCC
  purchases for the Food for Progress program.                                                                  

                     dairy export incentive program
    Mr. Skeen. Please provide the statutory authority for the Dairy 
Export Incentive Program--DEIP.
    Response. The DEIP was established by sec. 153 of the Food Security 
Act of 1985. It was most recently extended through December 2002 by 
sec. 148 of the Federal Agriculture Improvement and Reform Act of 1996.
    Mr. Skeen. Please describe how this program operates.
    Response. The DEIP operates by paying a bonus or subsidy on a bid 
basis for the export of specific dairy products to targeted 
destinations. This makes it possible for U.S. dairy products to compete 
against subsidized prices offered by competitor countries. The bonus 
paid by CCC for the export of the dairy product is meant to bridge the 
price difference between the U.S. domestic market and the world market 
for that product.
    In general, the DEIP works as follows. CCC issues invitations for 
bids targeting various regional groups of countries with specific dairy 
products. An eligible exporter negotiates a firm export sale for one of 
the dairy products with a buyer in a targeted destination. The exporter 
then submits a bid for a bonus to CCC along with other relevant 
information regarding their sale to the buyer. The bid submitted by the 
exporter is in dollars and cents per ton. CCC reviews the exporters 
bonus request, along with other relevant information in the bid, such 
as sales price, and delivery period, and compares this against 
prevailing world market conditions and the U.S. domestic market for 
that product. CCC responds to the exporter the next business day 
following the submission of the bid. If accepted by CCC, the exporter 
is paid the bonus in cash following submission of export documentation. 
If the bid is not accepted the exporter may submit another bid for a 
bonus at any time he or she wishes. The current program pays subsidy on 
nonfat dry milk, butterfat which includes anhydrous milk, butter oil or 
ghee, wholemilk powder and a variety of cheeses.
    Mr. Skeen. What was the cost of the DEIP in fiscal years 1995 and 
1996, and what is the estimate for fiscal years 1997 and 1998?
    Response. Bonus award commitments under the DEIP for fiscal year 
1995 totaled $140.2 million. For fiscal year 1996 commitments totaled 
$20.4 million. Budget estimates for fiscal year 1997 are $55.5 million 
and $88.7 million for fiscal year 1998. The Secretary is authorized to 
use up to the maximum volume and funding levels permitted under GATT.
    Mr. Skeen. For the record, please provide a list of countries that 
participated in the DEIP program and the amount of product they 
received in fiscal year 1996.
    [The information follows:]

[Page 236--The official Committee record contains additional material here.]


                       section 416(b) commodities

    Mr. Skeen. Please list for the record the total amount of Section 
416(b) commodities donated, by fiscal year, since fiscal year 1987. 
Please estimate the market value of those commodities for each fiscal 
year.
    [The information follows:]

[Page 238--The official Committee record contains additional material here.]


                    sunflower oil assistance program

    Mr. Skeen. Please describe what has happened under the Sunflower 
Oil Assistance Program during calendar year 1996.
    Response. The Federal Agriculture Improvement and Reform--FAIR--Act 
of 1996 did not reauthorize funding for the Sunflowerseed Oil 
Assistance Program--SOAP. However, Congress did provide funding for 
SOAP for fiscal year 1996 in the Agriculture Appropriations Act, but no 
SOAP bonuses were awarded. While no funding for SOAP is available in 
fiscal year 1997, the Secretary may utilize funds under the EEP to 
facilitate the export of sunflower oil. During calendar year 1996, 
neither SOAP nor EEP funds were utilized to facilitate sales of 
sunflowerseed oil because the market situation did not warrant their 
use.
    Mr. Skeen. What are your plans for 1998?
    Response. USDA could use EEP funds to promote exports of U.S. 
sunflower oil should their use be justified.
                   cottonseed oil assistance program
    Mr. Skeen. Please describe what has happened during calendar year 
1996 under the Cottonseed Oil Assistance Program.
    Response. As in the case for SOAP, the FAIR Act of 1996 did not 
reauthorize funding for COAP. While Congress provided funding for COAP 
in the 1996 Agriculture Appropriations Act, the program was inactive. 
During calendar year 1996, neither COAP nor EEP funds were utilized to 
facilitate sales of cottonseed oil because the market situation did not 
warrant their use.
    Mr. Skeen. What are your plans for 1998?
    Response. USDA could use EEP funds to promote exports of U.S. 
cottonseed oil should their use be justified.
                            fas trade shows
    Mr. Skeen. What international or national food shows were sponsored 
by FAS during fiscal year 1996, and what shows are currently scheduled 
for fiscal years 1997 and 1998? Also indicate the location, dates, and 
purpose of each show.
    [The information follows:]

----------------------------------------------------------------------------------------------------------------
                   Show                                      Date                             Location          
----------------------------------------------------------------------------------------------------------------
FAS sponsored shows, fiscal year 1996:                                                                          
    Festival de Alemientos y Bebidas,      Jan., 1996.............................  Mexico.                     
     1996.                                                                                                      
    Great American Food Show.............  Mar., 1996.............................  Korea.                      
    Food & Hotel Asia....................  Apr., 1996.............................  Singapore.                  
    Alementaria..........................  Mar., 1996.............................  Spain.                      
    Great American Food Show--Argentina..  Aug. 21-22, 1996.......................  Buenos Aires, Argentina.    
    Great American Food Show--Brazil.....  Aug. 26-28, 1996.......................  Sao Paulo, Brazil.          
FAS endorsed shows, fiscal year 1996:                                                                           
    FMI Asiamart.........................  Oct. 18-20, 1995.......................  Hong Kong.                  
    World Food '95.......................  Nov. 13-17, 1995.......................  Russia.                     
    IGEHO................................  Nov. 23-29, 1995.......................  Switzerland.                
    MEFEX................................  Jan. 13-16, 1996.......................  Bahrain.                    
    World of Private Label...............  Jan. 24-25, 1996.......................  Japan.                      
    Chna Supermarket/Hotel '96...........  Mar. 11-14, 1996.......................  China.                      
    Foodex...............................  Mar. 12-15, 1996.......................  Japan.                      
    Food '96.............................  Mar. 17-20, 1996.......................  Saudi Arabia.               
    Shanghai Hotelex/Foodex '96..........  Apr. 2-5, 1996.........................  China.                      
    CIBUS................................  May 9-13, 1996.........................  Italy.                      
    SPAFE '96--St. Petersburg............  May 17-21, 1996........................  Russia.                     
    IFIA '96--food ingredients...........  May 28-30, 1996........................  Japan.                      
    Taipei Int'l Food Industry Show......  June 15-18, 1996.......................  Taiwan.                     
    Food & Hotel China...................  Sept. 3-6, 1996........................  China.                      
    Fine food '96........................  Sept. 8-11, 1996.......................  Australia.                  
    World Food '96--Moscow...............  Spet. 16-21, 1996......................  Russia.                     
    POLAGRA '96..........................  Sept. 19-24, 1996......................  Poland.                     
FAS endorsed shows, fiscal year 1997:                                                                           
    SIAL (American Foods Pavilion).......  Oct. 20-24, 1996.......................  Paris, France.              
    Food and Hotel Africa '96 (American    Nov. 10-13, 1996.......................  Johannesburg, South Africa. 
     Foods Pavilion).                                                                                           
    Gulf Food '97........................  Feb. 23-26, 1997.......................  Dubai, United Arab Emirates,
                                                                                     World Trade Center.        
    Great American Food Show--Philippines  Feb. 25-26, 1997.......................  Mainla, Philippines, Shangri-
                                                                                     La's EDSA, Plaza Hotel.    
    Great American Food Show--Korea......  Mar. 18-20, 1997.......................  Seoul, Korea.               
FAS endorsed shows, fiscal year 1997:                                                                           
    AsiaMart '96.........................  Oct. 30-Nov. 1, 1996...................  Hong Kong.                  
    Food & Hotel Vietnam.................  Nov. 13-16, 1996.......................  Ho Chi Minh, Vietnam.       
    International Food Products Salon....  Nov. 14-17, 1996.......................  Poliedro de Caracas,        
                                                                                     Venezuela.                 
    Food & Hotel Indonesia '97...........  Feb. 19-22, 1997.......................  Jakarta, Indonesia, Jakarta 
                                                                                     Int'l Exhibition Center.   
    Foodex '97...........................  Mar. 11-14, 1997.......................  Tokyo, Japan, Nippon        
                                                                                     Convention Center.         
    GastroNord '97.......................  Mar. 18-21, 1997.......................  Stockholm, Sweden,          
                                                                                     Stockholmsmassan.          
    HOFEX '97............................  May 6-9, 1997..........................  Hong Kong Convention Center.
    Alimentaria '97......................  May 10-14, 1997........................  Lisbon, Portugal.           
    Int'l Food Ingredients & Additives...  May 27-29, 1997........................  Tokyo, Japan, Tokyo Int'l   
                                                                                     Exhibition Centre, Ariake. 
    World Food '97.......................  June 3-7, 1997.........................  Moscow, Russia.             
    Int'l Food & Hospitality '97.........  June 5-8, 1997.........................  Bangkok, Thailand, Queen    
                                                                                     Sirikit Nat'l Convention   
                                                                                     Center.                    
    Taipei Int'l Food Industry Show......  June 12-16, 1997.......................  Taipei, Taiwan.             
    Food & Hotel China...................  Aug. 26-29, 1997.......................  Shanghai, China.            
    SIAL Mercosur........................  Aug. 26-29, 1997.......................  Buenos Aires, Argentina     
                                                                                     Municipal Exhibition       
                                                                                     Center.                    
    Fine Food '97........................  Sept. 7-10, 1997.......................  Sydney, Australia.          
FAS endorsed shows, fiscal year 1998:                                                                           
    ANUGA '97............................  Oct. 11-16, 1997.......................  Cologne, Germany.           
    Great American Food Show--Korea '98..  Mar. 17-19, 1998.......................  Seoul, Korea                
FAS endorsed shows, fiscal year 1998:.                                                                          
    POLAGRA '97..........................  Oct. 2-7, 1997.........................  Poznan, Poland.             
    Food & Hotel Vietnam '97.............  Nov. 5-8, 1997.........................  Ho Chi Minh City, Vietnam,  
                                                                                     HIECC                      
    Food & Hotel Philippines.............  Feb. 18-21, 1998.......................  Manila, Philippines.        
    MEFEX '98............................  Feb. 28-Mar. 13, 1998..................  Manama, Bahrain.            
    Food and Hotel Asia..................  Apr. 14-17, 1998.......................  Singapore.                  
----------------------------------------------------------------------------------------------------------------

                            fas trade shows
    Mr. Skeen. What are the FAS trade shows scheduled for calender 
years 1997 and 1998, where will they be held, and what will be the 
dates?
    [The information follows:]

----------------------------------------------------------------------------------------------------------------
                   Show                                      Date                             Location          
----------------------------------------------------------------------------------------------------------------
Sponsored trade shows: \1\                                                                                      
    Gulf Food '97........................  Feb. 23-26, 1997.......................  Dubai, United Arab Emirates,
                                                                                     World Trade Center.        
    Great American Food Show--Philippines  Feb. 25-26, 1997.......................  Manila, Philippines, Shangri-
                                                                                     La's EDSA Plaza Hotel.     
    Great American Food Show--Korea......  Mar. 18-20, 1997.......................  Seoul, Korea.               
    ANUGA '97............................  Oct. 11-16, 1997.......................  Cologne, Germany.           
Endorsed trade shows: \2\                                                                                       
    Food & Hotel Indonesia '97...........  Feb. 19-22, 1997.......................  Jakarta, Indonesia, Jakarta 
                                                                                     Int'l Exhibition Center.   
    Foodex '97...........................  Mar. 11-14, 1997.......................  Tokyo, Japan, Nippon        
                                                                                     Convention Center.         
    GastroNord '97.......................  Mar. 18-21, 1997.......................  Stockholm, Sweden,          
                                                                                     Stockholmsmassan.          
    HOFEX '97............................  May 6-9, 1997..........................  Hong Kong Convention Center.
    Alimentaria '97......................  May 10-14, 1997........................  Lisbon, Portugal.           
    Int'l Food Ingredients & Additives...  May 27-29, 1997........................  Tokyo, Japan, Tokyo Int'l   
                                                                                     Exhibition Center, Ariake. 
    World Food '97.......................  June 3-7, 1997.........................  Moscow, Russia.             
    Int'l Food & Hospitality '97.........  June 5-8, 1997.........................  Bankok, Thailand, Queen     
                                                                                     Sirikit National Convention
                                                                                     Center.                    
    Taipei International Food Industry &   June 12-16, 1997.......................  Taipei, Taiwan.             
     Additives.                                                                                                 
    Food & Hotel China...................  Aug. 26-29, 1997.......................  Shanghai, China.            
    SIAL Mercosur........................  Aug. 26-29, 1997.......................  Buenos Aires, Argentina,    
                                                                                     Municipal Exhibition       
                                                                                     Center.                    
    Fine Food '97........................  Sept. 7-10, 1997.......................  Sydney, Australia.          
    POLAGRA '97..........................  Oct. 2-7, 1997.........................  Poznan, Poland.             
    Food & Hotel Vietnam '97.............  Nov. 5-8, 1997.........................  Ho Chi Minh City, Vietnam,  
                                                                                     HIECC.                     
----------------------------------------------------------------------------------------------------------------
\1\ Note: In a USDA sponsored show, USDA is involved in all aspects of show management and provides related     
  services. These services include assistance in sample product shipment, rental of floor space, booth design/  
  layout and marketing the show to potential exhibitors.                                                        
\2\ Note: A USDA endorsed show is a show recommended by USDA as the best avenue to enter a prospective market   
  for consumer-oriented foods. USDA provides limited services related to these shows. These services include    
  marketing, mailing advertising material, referral to show organizer, an information booth or national         
  pavilion, pre-show promotion, and invitation of potential buyers.                                             

    The 1998 calendar year schedule has only one endorsed show to date.
    Food & Hotel Philippines; February 18-21, 1998, Manila, 
Philippines.
                       agricultural trade offices
    Mr. Skeen. Please list for the record the location of the 
Agricultural Trade Offices--ATO--and indicate the number of FAS and 
foreign nationals assigned to each ATO.
    [The information follows:]

------------------------------------------------------------------------
                                                 Number of    Number of 
                Location of ATO                   American     foreign  
                                                  officers    nationals 
------------------------------------------------------------------------
China, Guangzhou..............................            1            4
China, Shanghai...............................            1            3
Germany, Hamburg..............................            1            4
Hong Kong.....................................            2            4
Indonesia, Jakarta............................            1            3
Italy, Milan..................................            1            2
Japan, Osaka..................................            1            3
Japan, Tokyo..................................            2            5
Korea, Seoul..................................            1            6
Mexico City...................................            2            5
Saudi Arabia, Riyadh..........................            1            3
Singapore.....................................            2            4
United Arab Emirates, Dubai...................            1            3
U.S. Miami--Caribbean Basin...................            1        \1\ 2
------------------------------------------------------------------------
\1\ U.S. staff.                                                         

                                landsat
    Mr. Skeen. Please describe the program you have for evaluating 
LANDSAT data. Describe what type of data you purchase, how the data is 
evaluated, and how accurate your estimates are based on use of this 
technique.
    Response. The Foreign Agricultural Service's Remote Sensing Program 
has been a major civilian user of LANDSAT data. Satellite imagery 
analysis is an important element in the Department's monthly lockup 
process that analyzes the world agricultural production, supply, and 
demand situation. The major application of LANDSAT data is to monitor 
the condition and expected yield of crops in designated countries. 
These crops include wheat, coarse grains, rice, oilseeds and cotton in 
major competitor and importing countries. For example, FAS satellite 
imagery analyses of 1996 drought in Ukraine and Mexico and flooding in 
China and North Korea allowed the U.S. Department of Agriculture to 
accurately estimate these important countries' grain and oilseed 
production months before harvest, thus alerting U.S. policy makers and 
traders to potential market changes. Also, FAS supports the Farm 
Service Agency's and Risk Management Agency's domestic commodity and 
program analyses by submitting regular and ad hoc reports on crop 
conditions and crop disasters. FAS, for example, closely monitored the 
drought-affected U.S. southern Great Plains hard red winter wheat crop.
    FAS purchases LANDSAT Thematic Mapper digital data, both full-
resolution and sampled. This data is received daily on computer tapes 
and is processed and analyzed immediately. Analysts visually assess 
crop conditions, relative yield, reservoir levels, and field operations 
by comparison to imagery acquired earlier in the crop season and to 
other crop years. Additionally, spectral reflectance equations are 
automatically calculated and entered into a world grid-cell and 
political polygon data base. The derived greeness index may then be 
quantitatively related to crop yield.
    The accuracy and reliability of USDA crop condition assessments and 
production estimates have been enhanced and have steadily improved 
since the FAS remote sensing program became operational in 1983. 
through daily operational analysis of satellite data, we have gained 
experience and increased both our confidence and skill. Our recently 
updated computer support system provides superior capabilities in 
processing speed and storage capacity. Our timely, accurate assessments 
have been routinely confirmed by subsequent ground-truth crop 
observations and official year-end commodity harvest reports.
    Mr. Skeen. How much did you receive from the Commodity Credit 
Corporation during fiscal year 1996 for the purchase of LANDSAT data 
and what are your current plans for fiscal years 1997 and 1998?
    Response. FAS received $2.25 million from the Commodity Credit 
Corporation for fiscal years 1996 and 1997 for the purchase of 
satellite imagery and services and to fund two FAS staff positions. The 
CCC funds are being used to purchase LANDSAT imagery as well as SPOT 
and IRS imagery, as the loss of LANDSAT 6 has required us to go to 
other sources of multi-spectral imagery to meet our global coverage 
requirements. For fiscal year 1998, FAS is proposing to use $2.25 
million of Commodity Credit Corporation funds to purchase satellite 
imagery.
    For the future, FAS aims to maximize the operational use of 
remotely sensed data in a multi-disciplinary and multi-agency 
environment. The new FAS Image Analysis System allows for a much 
greater throughput in image analysis, the flexibility to include 
spectral crop yield modeling, expanded Geographic Information System 
and database management capability, improved area discrimination 
enhancements, and sufficient data handling capability to cover all 
significant foreign agricultural areas.
    We are working to expand and improve information on crops for 
domestic commodity and program analyses so that more accurate, 
unbiased, and timely projections and evaluations of crop disaster 
situations and program compliance can be made during the growing 
season. With our increased capabilities and additional funding, we will 
be able to significantly enhance support and assistance to the Farm 
Service Agency, Risk Management Agency, and the National Agricultural 
Statistics Service.
    Mr. Skeen. What were the total costs of the LANDSAT program, 
separately identifying people assigned to the program and the purchase 
of data in fiscal years 1995 and 1996?
    [The information follows:]

------------------------------------------------------------------------
                                                    1995         1996   
------------------------------------------------------------------------
Data costs....................................         $2.3         $2.3
Personnel costs...............................           .3           .3
                                               -------------------------
                                                        2.6          2.6
------------------------------------------------------------------------

    Note: Dollars are in millions.
                           language training
    Mr. Skeen. How much did you spend on language training during 
fiscal year 1996, and what are your estimates for 1997 and 1998?
    Response. During fiscal year 1996 a total of $335,678 was spent on 
language training. The estimated language training costs for fiscal 
year 1997 and fiscal year 1998 are $380,000 and $398,000, respectively.
    Mr. Skeen. During fiscal year 1996 and to date for fiscal year 
1997, how many FAS employees have been enrolled in language training, 
by language?
    Response. A total of 59 FAS employees were enrolled in language 
training during fiscal year 1996. In fiscal year 1997 to date, 27 FAS 
employees are currently enrolled in language training. A list of 
languages with the number of employees follows.

                   FAS EMPLOYEES IN LANGUAGE TRAINING                   
------------------------------------------------------------------------
                                                      Fiscal year--     
                   Language                    -------------------------
                                                    1996         1997   
------------------------------------------------------------------------
Arabic........................................            5            1
Chinese.......................................            3            3
Dutch.........................................            1            0
French........................................            9            1
German........................................            1            0
Indonesian....................................            1            0
Italian.......................................            0            4
Japanese......................................            4            3
Korean........................................            1            2
Malay.........................................            1            0
Polish........................................            2            1
Portuguese....................................            1            1
Russian.......................................           13            9
Spanish.......................................           12            2
Swahili.......................................            1            0
Swedish.......................................            1            0
Tagalog.......................................            1            0
Turkish.......................................            1            0
Vietnamese....................................            1            0
                                               -------------------------
      Total...................................           59           27
------------------------------------------------------------------------

    Mr. Skeen. Where do your employees receive this training and what 
is the average cost per student? What is the length of the training?
    Response. The majority of employees attend the National Foreign 
Affairs Training Center, Department of State for language training. 
Some employees attend in-house group training and others receive 
training from private language schools. The average length of training 
is 20 weeks. The average cost is $5,700 per student.
                   conference on asia-pacific issues
    Mr. Skeen. It has been reported to the Committee that FAS 
contracted with World Perspectives, Inc. in 1996 to conduct a seminar 
or conference on Asia-Pacific issues. Please provide a brief summary of 
that event, its purpose and cost.
    Response. There were some very positive aspects of the conference, 
especially because the Pacific Economic Cooperation Council--PECC--
brought together government, private sector, and academic 
representatives to address the refrigeration and distribution needs of 
the Pacific Rim food system and the enormous potential for increasing 
exports once these bottlenecks are suitably addressed. The conference 
was held in conjunction with the FMI AsiaMart show; the subject of 
refrigeration would not have otherwise been covered at the FMI show.
    On a less positive note, however, FAS was concerned that the number 
of participants at the PECC conference may not have warranted the 
Emerging Markets Program contribution of $240,000, with additional 
resources needed to support FAS staff travel to attend and make 
presentations at the conference.
    In addition, the composition of the audience was disappointing. The 
PECC proposal to FAS defined the target audience as representatives 
from the food and beverage industry, hotel and restaurant industry, 
refrigeration products and services, and all aspects of the 
transportation and distribution industry. We do not believe these 
groups were adequately represented. In particular, the U.S. 
refrigeration and distribution companies were under-represented.
    The budget of projected expenditures which was part of the 
cooperative agreement between FAS and PECC indicates the total cost of 
the conference--excluding participation in the FMI show--at 
approximately $1.3 million; USDA's contribution was $240,000, or 
approximately 19 percent.--U.S. private sector contributions are listed 
at $848,000, PECC foreign contributions are listed at $158,500. 
Frankly, from many reports, it appears that $1.3 million may have 
exceeded the value of the end product.
    Mr. Skeen. Does FAS plan to contract for any similar events in 
fiscal year 1997 and fiscal year 1998?
    Response. No, not at this time.
                            fas conferences
    Mr. Skeen. What other FAS conferences took place in fiscal year 
1996 and where were they held?
    Response. The Global Attache Conference was held in Washington, 
D.C. the week of July 16, 1996. A Regional Attache Conference was held 
in Brussels, Belgium on December 14-16, 1995.
                           employee retreats
    Mr. Skeen. Has FAS held any employee management retreats during the 
past 12 months, and if so, where and what was the cost.
    Response. FAS did not have any employee management retreats during 
the past 12 months.
                         fas employees training
    Mr. Skeen. Has FAS held any large training sessions during the past 
12 months, and if so, where, what was the purpose of the training, and 
what was the cost?
    [The information follows:]

----------------------------------------------------------------------------------------------------------------
                 Training                                  Location                          Purpose/Cost       
----------------------------------------------------------------------------------------------------------------
Export Payments..........................  Washington, D.C.........................  To provide knowledge of    
                                                                                      export credit             
                                                                                      documentation payment     
                                                                                      process. 3 sessions--     
                                                                                      $12,190.                  
Contracting Officers Responsibilities....  Washington, D.C.........................  To inform contracting      
                                                                                      officer's technical       
                                                                                      representative--CORT--of  
                                                                                      procurement               
                                                                                      responsibilities. 2       
                                                                                      sessions--$10,620.        
Marketing Skills.........................  Washington, D.C.........................  To upgrade skills and      
                                                                                      knowledge of marketing    
                                                                                      specialists. 3 sessions-- 
                                                                                      $11,104.                  
----------------------------------------------------------------------------------------------------------------

           ``top ten'' suppliers of u.s. agricultural imports
    Mr. Skeen. Please list the top ten sources of U.S. agricultural 
imports, in terms of dollar value, for fiscal years 1995 and 1996.
    [The information follows:]

------------------------------------------------------------------------
                                                 Fiscal year in billions
                                                       of  dollars      
                   Supplier                    -------------------------
                                                    1995         1996   
------------------------------------------------------------------------
Canada........................................         $5.4         $6.4
European Union-15.............................          5.8          6.3
Mexico........................................          3.7          3.7
Indonesia.....................................          1.4          1.5
Brazil........................................          1.3          1.2
Colombia......................................          1.1          1.1
Thailand......................................          0.9          0.9
Australia.....................................          0.9          0.9
New Zealand...................................          0.8          0.7
Argentina.....................................          0.5          0.7
------------------------------------------------------------------------

                 ``top ten'' u.s. agricultural imports
    Mr. Skeen. Please list the top ten items imported for fiscal years 
1995 and 1996, by dollar value.
    [The information follows:]

------------------------------------------------------------------------
                                                 Fiscal year in billions
                                                       of  dollars      
                Products groups                -------------------------
                                                    1995         1996   
------------------------------------------------------------------------
Fruit and juices..............................         $3.4         $3.8
Vegetables and preparations...................          3.0          3.4
Coffee and products...........................          3.4          2.9
Wine and malt beer............................          2.2          2.7
Grains, feeds, and grain prods................          2.3          2.6
Red meats.....................................          2.3          2.3
Oilseed and products..........................          1.8          2.1
Sugar and products............................          1.2          1.8
Live animals..................................          1.7          1.6
Rubber and gums...............................          1.6          1.4
------------------------------------------------------------------------

                      fas representation allowance
    Mr. Skeen. During fiscal year 1996, how much of the representation 
allowance was used in Washington and how much was used overseas?
    Response. Of the $128,000 available for representation activities 
in fiscal year 1996, $84,370 was used by overseas offices and $26,787 
used for domestic activities.
    Mr. Skeen. Please provide for the record a listing of how the funds 
were used in Washington during fiscal year 1996.

[Pages 246 - 250--The official Committee record contains additional material here.]


                 middle-income country training program

    Mr. Skeen.How many students, and from what countries, were selected 
to participate in the Middle-Income Country Training Program during 
fiscal year 1996?
    Response. In fiscal year 1996, a total of 676 participants from 44 
countries received training under the Middle-Income Country Training 
Program. Participant numbers by region and by country follow:

  --Asia: 102 participants from seven countries: Korea--16 
            participants, Malaysia--8, China--24, Thailand--17, 
            Indonesia--10, Philippines--25, and Vietnam--2.
  --Eastern Europe: 171 participants from 13 countries: Turkey--12, 
            Poland--34, Hungary--13, Czech Rebpulic--10, Slovakia--15, 
            Albania--7, Bulgaria--22, Slovenia--16, Crotia--8, Latvia--
            10, Estonia--10, Lithuania--6, and Romania--8.
  --Latin America: 85 participants from seven Latin American countries: 
            Mexico--32, Venezuela--9, Trinidad & Tobago--8, Barbados & 
            Other West Indies--2, Panama--9, Colombia--19, and Chile--
            6.
  --Africa: 47 participants from five African countries: Cote d' 
            Ivoire--2, Algeria--6, Tunisia--14, South Africa--22m and 
            Namibia--3.
  --New Independent States: 271 participants from the New Independent 
            States of the Former Soviet Union: Russia--121, Ukraine--
            43, Belarus--13, Kazakstan--23, Kyrgyzstan--7, Uzbekistan--
            8, Turkmenistan--6, Tajikistan--9, Armenia--18, Moldova 12, 
            Georgia--5, and Azerbaijan--6.

    Mr. Skeen.What is the status of the 1997 program? How many students 
will be selected and what countries will be involved?
    Response. The Middle-Income Country Program staff are in the 
process of selecting participants for the program in 1997, and we 
expect to provide training to over 700 participants. The program will 
operate in 46 countries, up from the 44 countries mentioned above for 
1996. Three new countries will be added in 1997--Brazil, Kenya, and 
Bosnia--and one country, Belarus, will be dropped at the request of the 
State Department.
    Mr. Skeen.Please provide for the record an object classification 
table for the program for fiscal years 1996 and 1997.
    [The information follows:]

 FAS MIDDLE-INCOME COUNTRY TRAINING PROGRAM OBJECT CLASS TABLE, FY 1996-
                                   97                                   
------------------------------------------------------------------------
                                                 Fiscal Year--          
                                     -----------------------------------
                                         1996 actual      1997 estimate 
------------------------------------------------------------------------
Object class--description:                                              
    11--Personnel compensation......          $408,360          $410,000
    12--Personnel benefits..........            69,213            69,500
    21--Travel......................           270,049           271,200
    22--Transportation of things....             6,792             6,800
    23--Communications and utilities            64,496            64,800
    24--Printing....................            13,147            13,200
    25--Contracts and agreements....           911,434           915,100
    26--Supplies....................            25,114            25,200
    41--Grants......................           649,683           652,200
                                     -----------------------------------
      Total appropriation...........         2,418,288         2,428,000
------------------------------------------------------------------------

    Mr. Skeen. Is there a carryover in this program?
    Response. Yes, there is. Each year, about two to three hundred 
thousand dollars is carried over due to the fact that most of the 
programs run in the summer and early fall. Our experience in the past 
was that the program managers were running into the limits of the 
annual appropriation and losing program funds due to the program's time 
constraints. The problem of funds lapsing three-quarters of the way 
through the program cycle was, I believe, the reason that Congress 
authorized these funds to be available until expended. This has worked 
well.
                              aid funding
    Mr. Skeen. What is the current estimate for AID reimbursable 
funding for fiscal years 1997 and 1998?
    Response. The current estimate for AID reimbursable funding for 
fiscal years 1997 and 1998 is $32 million for each year.
 united states-israel binational agricultural research and development 
                               fund--bard
    Mr. Skeen. What is the total amount of U.S. funding provided to 
United States-Israel Binational Agricultural Research and Development 
Fund--BARD--and what years were the funds provided?
    Response. In fiscal year 1977 the United States contributed $40 
million for the BARD endowment; in fiscal year 1984, another $15 
million was provided. These amounts were matched by the Government of 
Israel, creating a total endowment of $110 million. In each of the 
fiscal years 1994, 1995 and 1996 an additional $2.5 million was 
provided, not to increase the endowment, but rather as direct support 
for grant operations that year. All three of these U.S. contributions 
have been matched by Israel.
    Mr. Skeen. What research grants were awarded by BARD during fiscal 
year 1996?
    [The information follows:]
                          bard research grants
Bitter taste transduction: Cellular pathways, inhibition and 
        implications for human acceptance of agricultural food products
The interaction between nonpathogenic mutants of Colletotrichum and 
        Fusarium, and the plant host defense system
Enhancement of baculoviruses' insecticidal potency by expression of 
        synergistic anti-insect scorpion toxins
Molecular genetic analysis of citric acid accumulation in citrus fruit
Transpirational cooling of greenhouse crops
Molecular pathogenesis of Mycoplasma bovis and Mycoplasma agalactiae 
        and its application in diagnosis and control
Virus synergy in transgenic plants
Genetic diversity at resistance gene clusters in wild populations of 
        Lactuca
Molecular mechanisms of pollen-pistil interactions in interspecific 
        crossing barriers in the tomato family
Optimization of secondary wastewater reuse to minimize environmental 
        risks
Characterization and immunogenicity of Mycobacterium paratuberculosis 
        secreted and cellular proteins
Resistance to tomato yellow leaf curl virus by combining expression of 
        a natural tolerance gene and a dysfunctional movement protein 
        in a single cultivar.
Parthenogenesis-inducing microorganisms in parasitic Hymenoptera: Their 
        mode of action and utilization for improvement of biological 
        control agents
Mapping and tagging by DNA markers of wild emmer alleles that improve 
        quantitative traits in common wheat
Ozone altered stomatal/guard cell function: Whole plant and single cell 
        analysis
Computerized synthesis of information on the scale insects of the world
Osmotin and osmotin-like proteins as a novel source for phytopathogenic 
        fungal resistance in transgenic carnation and tomato plants
Bacteriocin markers for propionibacteria gene transfer systems
Consumption of tannin-rich forage by ruminants: From mechanism to 
        improved performance
Developing nutritional-management protocols which prevent tibial 
        dyschondroplasia
Study of the basis for toxicity and specifically of Bacillus 
        thuringiensis &-Endotoxins
Elicitor--induce response in Lycopersicon esculentum
Advancing puberty in the black carp (Mylopharyngodon piccus) and the 
        striped bass (Morone saxatilis)
Isolation and characterization of plasmodesmata components by 
        association with tobacco mosaic virus movement proteins fused 
        with green fluorescent protein from Aequorca victoria
Problems and prospects in the political economy of trans-boundary water 
        issues
Biosensors for on-line measurement of reproductive hormones and milk 
        proteins to improve dairy herd management
Increasing mammary protein synthesis through endocrine and nutritional 
        signals
Role of placental lactogen in sheep
Identification of Staphylococcus aureus virulence factors associated 
        with bovine mastitis Regulated expression of yeast FLP 
        recombinase in plant cells
Functional biogenesis of V-ATPase in the vacuolar system of plants and 
        fungi
Sub-specific populations of Verticillium dahliae and their roles in 
        vascular wilt pathosystems
Creating and characterizing genetic variation in Tilapia through the 
        creation of an artificial center of origin
Identification of polyviral domains controlling system infection, host 
        range and aphid transmission
Rhizosphere ecology of plant-beneficial microorganisms
                     scientific activities overseas
    Mr. Skeen. Are any foreign currencies currently in surplus?
    Response. There are no foreign currencies currently in surplus.
                             maritime costs
    Mr. Skeen. What is the total USDA/CCC spent on maritime costs for 
each of the past five years for food aid programs? How much was paid by 
USDA/CCC and how much was paid by MARAD
    [The information follows:]

         OCEAN FREIGHT DIFFERENTIAL COSTS FOR FOOD AID PROGRAMS         
                        [In millions of dollars]                        
------------------------------------------------------------------------
                                                               USDA/CCC 
           Fiscal year              OFD costs   MARAD costs     costs   
------------------------------------------------------------------------
1992.............................        170.4         86.6         83.8
1993.............................        252.9         68.1        184.5
1994.............................        204.2         24.1        180.1
1995.............................        107.4         21.1         86.3
1996*............................         66.1         12.0         54.1
                                  --------------------------------------
      Total......................        801.0        212.2        588.8
------------------------------------------------------------------------
OFD costs are included for Section 416, Food for Progress, and P.L. 480,
  Titles, I, II and III.                                                
Figures are based on Quarterly Tonnage/OFD Reports which lists the cargo
  preference year. Cargo Preference years do not coincide with the      
  fiscal years. Two cargo preference quarters are in one fiscal year and
  two are in another.                                                   
                                                                        
*Preliminary. All documents may not have been received for fiscal year  
  1996.                                                                 

                  activities previously funded by ccc
    Mr. Skeen. FAS is requesting an increase of $15,381,000 for fiscal 
year 1998 over the current year. How much of this increase is to cover 
costs now paid for with CCC funds?
    Response. The fiscal year 1998 FAS budget includes $19.7 million 
for activities previously funded from CCC, including $10.0 million for 
the Emerging Markets Program and $9.7 million for the CCC Computer 
Facility and related FAS IRM costs. The budget proposes increases 
totaling $14.0 million for these costs, with the $5.7 million balance 
to be absorbed through reductions in FAS market development activities.
    Mr. Skeen. What are the specific areas in which you propose to make 
reductions as a result of absorbing the $5,652,000 in CCC computer 
costs?
    Response. Reductions in FAS market development activities totaling 
$5,652,000 are necessary to partially offset a portion of the annual 
operating costs of the CCC Computer Facility which now must be funded 
from FAS appropriations. Offsets will be created through reductions in 
marketing programs conducted through FAS Agricultural Trade Offices, 
including limiting trade show activities and in-store promotions. 
Additional savings are anticipated by increasing the cost-share factor 
for participants in the Foreign Market Development Cooperator Program.
                  fiscal year 1998 proposed increases
    Mr. Skeen. Please provide a breakdown of the requested increase 
showing where you propose to put additional money in fiscal year 1998.
    [The information follows:]

                   SUMMARY OF FY 1998 BUDGET INCREASES                  
                          [Dollars in millions]                         
------------------------------------------------------------------------
                                           Dollars             SY       
------------------------------------------------------------------------
FY 1997 current level...............            $135.5               885
FY 1998 budget request..............             150.9               885
                                     -----------------------------------
      Net increase..................              15.4                 0
------------------------------------------------------------------------

Distribution of Increases

1. Strategic Outreach and Market Intelligence: Funding for CCC 
    Computer Facility/FAS IRM.....................................  $9.7
2. Market Development and Promotion: Reduction of $5.7 million to 
    be applied to funding the CCC Computer Facility/FAS IRM.......  -5.7
3. Market Access: Identify and catalog technical barriers to trade 
    in top 30 markets.............................................   0.5
4. Long-term Market Development: Fund Emerging Markets Program 
    from FAS appropriation........................................  10.0
5. FAS Pay Costs..................................................   0.9
                        -----------------------------------------------------------------
                        ________________________________________________
      Total Distribution of Increases.........................     $15.4
                       market development program
    Mr. Skeen. Please provide the table of actual and estimated costs 
for the Foreign Market Development program provided to Subcommittee 
staff on February 28, 1997.
    [The information follows:]

[Page 255--The official Committee record contains additional material here.]


    Mr. Skeen. What is the authority which allows the carry over of 
funds from year to year in the FMD program?
    Response. Historically, FMD program agreements are fully obligated 
in the fiscal year for which appropriations are made available. 
Typically, these program agreements finance marketing activities that 
extend beyond the year in which the agreements were obligated. As such, 
the unliquidated portions of specific program agreements are carried 
forward into the subsequent fiscal year.
                      cooperator program expenses
    Mr. Skeen. Please list all expenses, such as housing, travel, 
entertainment, etc. for which cooperators may claim reimbursement under 
the Foreign Market Development/Cooperator Program.
    Response. Under the FMD program, project funds may be used to pay 
costs which are necessary to carry out the activities in the 
Cooperator's annual marketing plans, approved by FAS. FAS tracks such 
expenses by ``Cost Codes''. I will provide for the record the cost 
codes and their descriptions.
                       cost code and description
10--Technical assistance to the foreign trade
20--Activities targeting trade or government decision makers
30--Activities targeting consumers
40--International travel and per diem in compliance with the Fly 
        America Act, but excluding first class accommodations, and 
        standard Government per diem rates.
50--Sales and Trade Relations Expenses
60--Personnel Compensation for approved foreign offices including 
        allowances for U.S. citizen employees, such as housing, 
        education, etc.
70--Office Rents, Utilities & Maintenance, including office equipment, 
        supplies, and communications.
                            fmd participants
    Mr. Skeen. Please provide a table identifying each participant in 
the FMD/Cooperator program in fiscal year 1996, the overseas location 
of each participant, the total U.S. contribution to each and a 
breakdown of that contribution into categories such as travel, housing, 
office expenses, etc. If the full U.S. contribution has not been made 
for that year, please provide estimates of the full contribution.
    [The information follows:]

[Pages 257 - 258--The official Committee record contains additional material here.]


                          fmd/map participants

    Mr. Skeen. Please provide a table for fiscal years 1995 and 1996 
listing all participants in the FMD/Cooperator Program together with 
all U.S. contributions received or estimated, if necessary, from the 
FMD/Cooperator funds and from the Market Promotion/Market Access 
Program.
    [The information follows:]

[Pages 260 - 261--The official Committee record contains additional material here.]


                       export enhancement program

    Mr. Skeen. What justifies the need for an increase of $400 million 
in the Export Enhancement Program this year?
    Response. The goal of inducing competitors to negotiate an end to 
unfair trading practices has been strongly advanced, but not entirely 
resolved by the Uruguay Round Agreement. Limits on direct export 
subsidies are a major accomplishment, but the fact remains that the UR 
agreement allows those limited export subsidies to continue and, 
furthermore, does not address the differential pricing practices of 
monopoly export organizations like the Canadian and Australian wheat 
boards. EEP allows us to continue to compete with these monopolies and 
the lower levels of export subsidies that the EU will continue to 
grant. Allocations for the 1996/97 EEP Program were announced last 
summer at the maximum allowable quantity levels under the Uruguay Round 
Agreement. We will implement the program if we believe it is necessary 
for our exports to be competitive. For fiscal year 1998, the budget 
provides funding for EEP at the maximum level authorized in the FAIR 
Act.
                                 chile
    Mr. Skeen. Does the Department expect to engage in any preliminary 
or formal negotiations with Chile in fiscal year 1997 regarding NAFTA 
accession?
    Response. Formal negotiations with Chile on NAFTA accession began 
in the summer of 1995, but stalled due to the lack of fast-track 
negotiating authority and Chile's resulting unwillingness to further 
advance discussions. USDA is prepared to work closely with USTR trade 
officials to prepare for Chile's accession to NAFTA, once fast-track 
negotiating legislation is extended by Congress.
             u.s.-chilean agricultural exports and imports
    Mr. Skeen. Please provide a table showing U.S.-Chilean agricultural 
exports and imports--including processed products such as beer, wine 
and distilled spirits--for fiscal years 1995, 1996, and the most recent 
statistics for fiscal year 1997.
    [The information follows:]

[Pages 263 - 264--The official Committee record contains additional material here.]


                         chile's trade barriers
    Mr. Skeen. What are Chile's trade barriers to U.S. agricultural 
exports? What does Chile consider to be U.S. barriers to its 
agricultural products?
    Response. Sanitary and phytosanitary import requirements and 
quality and grade standards color much of Chile-United States bilateral 
agricultural issues. In 1996, USDA/Animal and Plant Health Inspection 
Service--APHIS--discontinued annual bilateral meetings on plant health 
and quarantine issues out of frustration on lack of progress with 
Chile. There is considerable concern within USDA and U.S. commodity 
groups that Chilean market access restrictions have increased despite 
U.S. attempts to cooperate closely with Chile for a number of years. 
The United States is seeking access to the Chilean market for wheat, 
poultry, beef, applies, pears, and citrus, among other products.
    In February, USDA agreed to establish a Consultative Mechanism on 
Agriculture that provides for the discussion and resolution of 
bilateral agricultural trade issues, as well as increased cooperation 
in the area of sanitary and phytosanitary regulations. Recognizing the 
potential of the Chilean market for U.S. agriculture, President Clinton 
has asked Secretary Glickman to travel to Chile in order to initiate a 
new series of discussions on agricultural trade issues.
Current Issues
    Wheat--Chile currently prohibits imports of U.S. wheat citing 
Karnal bunt concerns. Chile is one of the few remaining countries that 
does not accept APHIS certification for Karnal bunt. In February, Chile 
proposed new import requirements that would allow for imports of U.S. 
wheat from ports in the Pacific Northwest--PNW, as well as require 
APHIS to provide state of origin certification and private lab testing. 
USDA opposes any limitation of wheat exports from ports in the PNW, as 
well as mandatory private lab testing on the basis that APHIS has 
established a quarantine and surveillance area for Karnal bunt and 
issues phytosanitary certificates based on enforcement of that system. 
We continue to urge the Chilean government to implement new import 
requirements for wheat that are based on sound science.
    Poultry.--In 1992, Chile's Servicio Agricolay Gandadero--SA--issued 
revised import regulations calling for zero tolerance for salmonella, 
effectively blocking U.S. poultry sales to Chile. The U.S. maintains 
that Chile's salmonella rule is unscientifically based and inconsistent 
with international trade practices. According to APHIS, Chile's zero 
tolerance for salmonella cannot be justified, as it is likely already 
present and being carried by other sources such as live chicks and 
eggs, which the U.S. currently exports. Chile is currently considering 
irradiation, as well as USDA/Food Safety and Inspection Service's--
FSIS--new Hazard Analysis and Critical Control Points--HACCP--
methodology, as alternatives to its current requirements.
    Horticultural Products--For the past 4 years USDA/APHIS officials 
have been working with the Chileans to establish a set of protocols 
that would allow for the export of certain horticultural products--
applies, pears, grapes, lemons, and kiwis to Chile. In February, Chile 
announced that it was prepared to finalize protocols that would provide 
for the entry of these products. However, to date no action has been 
taken.
    Beef--Although U.S. beef is not banned, Chile's grading system, 
based on the age of the animal, instead of the quality of the meat, 
restricts U.S. sales. U.S. producers agree that the size of the Chilean 
market is too small to make grading by the Chilean system economically 
feasible.
    Chilean kiwis to the United States.--Chile faces minimal 
phytosanitary import restrictions when exporting to the United States, 
but believes recently implemented fumigation requirements for kiwi 
fruit are unjustified, unduly harsh and implemented in a punitive 
manner. Chile also views marketing orders maintained by the United 
States as market access barriers. The Chilean Ministry of Agriculture 
appears to be withholding approval of U.S. horticultural products until 
the United States approves an alternative program for Chilean kiwis.
                          major trade barriers
    Mr. Skeen. What are Canada's major trade barriers to U.S. 
agricultural exports? Is there any prospect of resolving these in the 
coming year?
    Response. In general, we have a large and growing agricultural 
trade relationship with Canada. But with more than $12 billion in 
agricultural goods crossing the border now on an annual basis, 
naturally there are frictions. On January 1, 1998, all bilateral trade 
will be duty-free, with the exception of those products that are 
subject to tariff-rate quotas--resulting from the Uruguay Round and 
subject to the recent NAFTA panel decision. These products include 
dairy, poultry, eggs, barley, and margarine. Since the panel found in 
Canada's favor, it will be difficult to tackle these remaining tariff 
barriers except in the context of market access negotiations--for 
example, the next round of WTO negotiations or negotiations under the 
Free Trade Area of the Americas.
    We continue to face barriers in exporting wheat and barley. These 
barriers stem from Canada's grading, marketing, and transportation 
system for grains. We will continue to push for resolution of these 
issues and will likely request consultations soon to discuss these 
issues further.
    Barriers continue in the animal health area--costly quarantine 
requirements for U.S. feeder cattle and slaughter hogs. We are working 
with Canadian health officials on changes to their regulations that 
would provide less onerous entry requirements for live animals and are 
hopeful of progress this year.
    We remain concerned about Canadian grading and packaging 
requirements for some bulk horticultural products and processed foods. 
Although we had a success last year in getting Canada to remove 
restrictive requirements affecting french fry exports, we will continue 
to work toward removal of other similar requirements that occasionally 
disrupt and limit U.S. exports.
                   object class 25.2, other services
    Mr. Skeen. What is the reason for the increase in Object Class 
25.2, Other Services?
    Response. The increase in Object Class 25.2, which totals $11.4 
million, includes $10.0 million for Emerging Markets Program agreements 
and $7.4 million for commercial ADP costs in support of the CCC 
Computer Facility and $0.5 million for contract support for the market 
access barrier identification initiative, offset by a reduction of $5.5 
million in the Cooperator Program, $0.2 million in FAS market 
development projects and $0.8 million in non-recurring overseas office 
renovations.
                       object class 31, equipment
    Mr. Skeen. What is the reason for the increase in Object Class 31, 
Equipment?
    Response. The increase in our equipment budget is associated with 
IRM equipment purchases which were previously funded through CCC--
Section 11 transfers.
                          vehicle replacement
    Mr. Skeen. Where are the three replacement passenger vehicles to be 
used?
    Response. These vehicles will be used in Rabat, Morocco, Brasilia, 
Brazil and New Delhi, India.
                     funds available for two years
    Mr. Skeen. Why is FAS asking for obligation of funds for two years?
    Response. Essentially, this proposal is in conjunction with the 
proposal for an advance appropriation. Under this initiative, upon 
documentation as to the extent that wage and prices increases and/or 
changes in exchange rates were incurred in fiscal year 1998, OMB will 
make available some or all of the fiscal year 1999 advance 
appropriation to offset those expenses. Having the fiscal year 1998 
appropriation available for obligation for two fiscal years is 
essential in the case where exchange rates offer more buying power to 
U.S. currency and unobligated balances are incurred.
                         advance appropriation
    Mr. Skeen. FAS is asking for an advance appropriation of up to $3 
million for overseas wage and price increases. How are such increases 
handled now?
    Response. In previous budgets, requests for overseas wage and price 
increases and changes in exchange rates were made as part of the 
President's budget. However, it is virtually impossible to accurately 
forecast these costs given the long lead time associated with the 
budget process. In some years, amounts were included for increases that 
did not subsequently occur at the level estimated and, conversely, 
budgets were presented that did not include sufficient funding to 
maintain current services overseas. This proposal will help to 
eliminate those budgetary uncertainties.
                         market barrier access
    Mr. Skeen. How much has been spent annually on Market Barrier 
Access Identification--MBAI--in the past two years and what is your 
estimate for fiscal years 1997 and 1998?
    Response. The Market Barrier Access Identification project proposed 
in the President's fiscal year 1998 budget represents that first 
dedicated effort in FAS to implement a systematic process to review, 
identify, and catalog technical barriers to trade and other technical 
requirements that limit export opportunities for U.S. agricultural 
product. This effort is an important step in preparing for the next 
round of multilateral trade negotiations during which they are expected 
to be a major focus of the negotiations.
    Mr. Skeen. Who will be the primary beneficiaries of the MBAI 
project?
    Response. U.S. agricultural product exporting firms are targeted as 
the primary beneficiaries.
                        emerging markets program
    Mr. Skeen. Please provide some specific examples of how the 
Emerging Markets Program works.
    Response. In 1996, Russia declared a moratorium on all U.S. poultry 
exports because of Russian food safety concerns related to American 
imports. The issue was resolved through the intervention of the 
Secretary of Agriculture, assisted by Emerging Markets-funded training 
and information seminars on poultry diseases and health and food safety 
regulations involving Russian officials and U.S. federal, state, and 
private industry representatives. Partly because of these efforts, in 
fiscal year 1996 the U.S. shipped nearly one billion dollars worth of 
poultry to Russia, up from $530 million in fiscal year 1995. Also, 
technical assistance funds were used in Russia to train private 
commodity brokers, many of whom were directly involved in the accession 
of the Russian grain economy to the international market.
    Under the Emerging Markets Program, the Technical Issue Resolution 
Fund was established in 1996 to specifically address sanitary and 
phytosanitary trade barriers. This program financed the attendance of 
an ARS scientist at technical bilateral meetings in July 1996 in 
Brasilia which played a critical role in persuading Brazilian officials 
to eliminate a proposed treatment on pears for the eradication of fire 
blight. As a result, the new requirements for pears are greatly 
improved compared to previous proposals. Another example was the 
funding of three senior veterinarians from China's Ministry of 
Agriculture to conduct on-site visits in the U.S. which led to the 
approval for export to China of two bovine semen artificial 
insemination centers and nine embryo transfer centers.
                       domestic staff assignments
    Mr. Skeen. How many staff did FAS assign to the California, 
Colorado and Oregon state offices and to the Iowa FSA office in fiscal 
year 1996 and how many people are assigned there in fiscal year 1997?
    Response. During fiscal year 1996, two FAS staff members began 
their assignments, one in Colorado and a second in Oregon. In fiscal 
year 1997, two additional staff members have been assigned, one in 
California and another in Iowa, bringing the total to four staff 
members.
    Mr. Skeen. What is the length of assignment of FAS personnel in 
these offices?
    Response. These assignments are for a two-year period.
                  criteria for domestic field offices
    Mr. Skeen. What were the criteria for selecting these offices? Why 
are there none in the east or south?
    Response. To better serve our constituents with hands-on counseling 
in all parts of the country, FAS in 1996 established its outreach 
offices in the cities of Portland, Oregon; Sacramento, California; 
Denver, Colorado; and Des Moines, Iowa. FAS continues to work very 
closely with the four State Regional Trade Groups, EUSAFEC, MIATCO, 
SUSTA and WUSATA, to service companies and organizations in all states 
which have expressed an interest in exporting agricultural products. 
Geographically, EUSAFEC is located near Harrisburg, Pennsylvania and 
serves the northeast region, MIATCO is in Chicago and serves the 
Midwest, SUSTA is located in New Orleans and provides services to the 
southern states, and WUSATA is in Vancouver, Washington focusing on the 
western states which includes Hawaii and Alaska. In order to more 
effectively and efficiently engage more cooperatives, small, medium and 
new-to-market entities in exporting it was important to establish FAS 
domestic field offices in states with a strong agricultural base, but 
relatively distant from already established SRTG offices. As to the 
east and southern regions of the United States, FAS with its 
headquarters in Washington, D.C. plus EUSAFEC and SUSTA have done a 
very good job serving the needs of those regions. Noting the outreach 
role of the SRTG's, in affect, there are eight domestic offices for 
exporters to contact, as each provides a complete range of export 
services, all supported by FAS's AgExport Services Division and the 
local State Department of Agriculture. This partnership between Federal 
and State offices is tangible evidence of FAS's commitment to expanding 
business knowledge of export opportunities, USDA export programs and 
services. FAS actively monitors the effectiveness of these offices, and 
any future outreach office sites will be based on regional need and the 
ability of that office to effectively contribute to the mission of the 
agency.
                                  lats
    Mr. Skeen. Is the Department still developing the Long term 
Agricultural Trade Strategy--LATS?
    Response. The 1996 Long-term Agricultural Trade Strategy--LATS--was 
submitted to Congress by the Secretary on October 25, 1995. The major 
policy objectives contained in the LATS largely drive the Agency's 
strategic planning process and the subsequent decision-making processes 
for resource allocation. The LATS is intended to reflect changing 
world-wide market opportunities and, as such, will be periodically 
reviewed and modified as necessary.
               reimbursements to the department of state
    Mr. Skeen. Please describe the program under which the Department 
reimburses the Department of State for certain expenses overseas. 
Please also provide the amount reimbursed to the Department of State in 
fiscal years 1995 and 1996 together with estimates for fiscal years 
1997 and 1998.
    Response. FAS, as well as other foreign affairs agencies, relies on 
the State Department to provide in-country administrative support 
services including such functions as budget, fiscal, personnel, 
building maintenance, motor pool, and security. Agencies receiving 
these services reimburse State through the Foreign Affairs 
Administrative Support--FAAS--system. Beginning in fiscal year 1998, 
the State Department will implement the International Cooperative 
Administrative Support Services--ICASS--program which replaces the 
current FAAS system as the mechanism for sharing overseas 
administrative support costs.
    ICASS essentially represents a redistribution of existing costs on 
a budget neutral basis; participating agency costs will increase while 
the State Department's share decreases. To fund these higher agency 
costs, the President will be submitting an amendment to the fiscal year 
1998 budget transferring $113 million from the State Department to the 
30 Federal department and independent agencies that maintain a presence 
in diplomatic missions overseas. For USDA, the budget amendment 
includes a total of $5.5 million; $4,521,000 to FAS, $932,000 to APHIS 
and $16,000 to ARS.
    A four year cost summary for FAS reimbursements to the State 
Departments is as follows:

                                 [$000]

Fiscal year:
    1995 actual...................................................$6,278
    1996 actual................................................... 6,490
    1997 estimate................................................. 6,823
    1998 estimate.................................................11,344
                        p.l. 480 programs levels
    Mr. Skeen. Please provide a table showing adjusted program levels 
for Titles I, II and III for fiscal years 1995 and 1996 and estimates 
for fiscal years 1997 and 1998 to include the transfer announced in 
Acting Under Secretary Smith's letter to the Committee of February 11 
and the rescission proposed by the Administration in Title I for fiscal 
year 1997.
    [The information follows:]

[Page 269--The official Committee record contains additional material here.]


                        inspector general report

    Mr. Skeen. Page 60 of the Inspector General's most recent report 
says that there were 71 indictments and 22 convictions involving FAS in 
a six-month review period. Please provide brief summaries of the 
indictments and convictions.
    Response. The Office of Inspector General--OIG--report is 
incorrect. The indictments and convictions resulted from OIG 
investigations of Farm Service Agency, not Foreign Agricultural 
Service, programs and activities.
    Mr. Skeen. What is FAS doing about the IG's suggestion that public 
access to results of the Emerging Democracies program be improved?
    Response. The Emerging Markets Office has posted on FAS' Internet 
home page Executive Summaries of project reports and assessments, as 
well as instructions on how to receive a copy of a full report.
                        food aid to north korea
    Mr. Skeen. Please describe the Administration's food aid program to 
North Korea. Please include tonnages and commodities, total cost and 
brief description of how the program will operate. Also include 
participation by other donors and the scope of the entire program.
    Response. In response to a World Food Program appeal for 100,000 
metric tons of food for North Korea, the United States Government 
recently announced that it will provide about 27,000 metric tons corn 
soy blend, rice, and corn at a cost of $10 million. This assistance 
will be provided under P.L. 480 Title II through the World Food Program 
as emergency food aid for children under age five and food victims. The 
World Food Program will monitor distribution to ensure that aid reaches 
those in need. The Republic of South Korea intends to provide $6 
million and Australia about $2 million in response to the World Food 
Program appeal. Last year, the United States government provided $8.2 
million in assistance to North Korea, of which $6.3 million was funded 
by P.L. 480 Title II and the balance was funded from USAID's 
international disaster assistance program.
                          reduction in title i
    Mr. Skeen. In last year's hearing, then Under Secretary Moos 
testified that although title I was to be reduced in fiscal year 1997, 
``we believe we will be able to achieve the program's market 
development objectives.'' given the Administration's intention to 
reduce Title I spending in both fiscal years 1997 and 1998, how can 
these program objectives still be realized?
    Response. We have been able to continue to achieve the program's 
market development objectives with reduced funding primarily because 
most of the reductions have been in our grant funding. From fiscal 1995 
to 1997, funding under Title I--funded food for Progress grant 
programs, for countries in the former Soviet Union, has declined from 
$88 million to $30 million.We have been successful in graduating 
Armenia and Georgia from large Food for Progress grants to smaller 
Title I direct credit programs. As a result, we are continuing to 
develop these markets without unduly adding to these countries' debt 
burdens. We have also been able to continue programs in other parts of 
the world including, Asia, Latin America, and Africa. For example, we 
work with the U.S. Wheat Associates in our Title I program with Angola 
to support their efforts. We are also continuing to work with our 
partners in the U.S. rice industry in several Latin America markets.
                       great lakes--proposed rule
    Mr. Skeen. Great Lakes port representatives have told the Committee 
that USDA's proposed rule on Section 17 of the Maritime Security Act of 
1966 effectively prohibits use of lower cost intermodal transportation 
in the region. Please explain your proposed rule and its relationship 
to cost effectiveness.
    Mr. Response. our proposed rule was published in the Federal 
Register on February 12, 1997. It would revised CCC's procedures for 
buying processed commodities under P.L. 480, Title II. This proposal 
would implement recent changes in Section 17 of the Maritime Security 
Act of 1996 which require CCC to follow certain procedures in these 
purchases.
    The new procedures are intended to correct a perceived unfairness 
to Great Lakes ports stemming from cargo preference requirements. Up to 
25 percent of the cargo would be allocated to Great Lakes ports if 
ocean transportation was available and it represented the lowest landed 
cost. The procedure would also allow CCC the flexibility to allocate 
the balance of the cargo in the most efficient manner to meet cargo 
preference requirements.
    We intend to comply with this legislation in the most cost-
effective way possible. I want to emphasize that this is simply a 
proposed rule; no final decisions have been made. We are soliciting 
public comments, which we will take into consideration in developing 
the final rule. Comments received regarding the use of intermodal 
transportation in the Great Lakes will be part of this consideration.
               the government performance and results act
    Mr. Skeen. GPRA, known as the Result Act, requires each executive 
agency to issue, no later than September 30, 1997, a strategic plan 
covering at least five years. In addition to a mission statement 
grounded in legislative requirements, the plans are to contain general 
goals and objectives that are expected to be outcome or results 
oriented--such as to improve literacy--as opposed to output or activity 
oriented--such as to increase the number of education grants issued.
    What progress is the agency making in developing its strategic 
plan, including defining its mission and establishing appropriate 
goals?
    Response. The Foreign Agricultural Service--FAS--has provided its 
draft strategic plan to USDA's Office of the Chief Financial Officer 
and to the Office of Budget and Program Analysis. The draft strategic 
plan includes a mission statement and strategic goals.
    Mr. Skeen. Has the agency identified conflicting goals for any of 
its program efforts? If so, what are the performance consequences of 
these conflicting goals and what actions--including seeking legislative 
changes--is the agency taking to address these conflicts?
    Response. To date, the agency has not identified any conflicting 
program goals.
    Mr. Skeen. Strategic plans must be based on realistic assessments 
of the resources that will be available to the agency to accomplish its 
goals. As you are developing your strategic plan, how are you taking 
into account projected resources that likely will be available--
especially as we move to a balanced budget? What assumptions are you 
making? How are you ensuring that your goals are realistic in light of 
expected resources?
    Response. We fully recognize that constraints on federal spending, 
including outlays for agriculture, are likely to become even more 
severe as further progress is made toward achieving a balanced budget. 
At the same time, we believe that exports are likely to grow in 
importance as a critical safety net for U.S. agriculture, especially as 
domestic demand expands only at the rate of U.S. population growth, and 
as direct federal income support for farmers declines as currently 
provided by the Federal Agricultural Improvement and Reform--FAIR--Act 
of 1996. If export revenue is expected to comprise an ever larger share 
of U.S. net farm income, then the trade programs that contribute to 
export success are likely to remain vital, particularly if competitor 
countries maintain support for their own agricultural exports, as 
anticipated. Taken together, we believe these factors support our 
assumption that FAS resources will remain essentially flat, after 
accounting for inflation.
    Mr. Skeen. For Congress, the heart of the Results Act is the 
statutory link between agency plans, budget requests, and the reporting 
of results. Starting with fiscal year 1999, agencies are to develop 
annual performance plans that define performance goals and the measures 
that will be used to assess progress over the coming year. These annual 
goals are to measure agency progress toward meeting strategic goals and 
are to be based on the program activities as set forth in the 
President's budget.
    What progress have you made in establishing clear and direct 
linkages between the general goals in your strategic plan and the goals 
to be contained in your annual performance plans? OMB expressed concern 
last year that most agencies had not made sufficient progress in this 
critical area.
    Response. FAS will be engaged through the summer of 1997 in 
developing performance plans for each division in the agency. Since 
most of our work in this area still lies ahead of us, this activity 
will be an agency priority in the coming months.
    Mr. Skeen. More specifically, how are you progressing in linking 
your strategic and annual performance goals to the program activity 
structure contained in the President's budget? Do you anticipate the 
need to change or modify the activity structure to be consistent with 
the agency's goals?
    Response. Because our strategic plan is still in the draft stage, 
and because our performance plans are still very much a work in 
progress, it is too early for us to predict with absolute certainty at 
this point if our strategic and annual performance goals will require a 
change in the FAS program activity structure as presented in the 
President's budget. We should point out, however, that the FAS program 
activity structure as presented in the President's fiscal year 1998 
budget already reflected the general strategic goals proposed in the 
initial version of the FAS strategic plan. Having taken this step, it 
is probably fair to say that any further change that may be made will 
likely be a refinement in what has been adopted for the 1998 budget.
    Mr. Skeen. Overall, what progress has your agency made--and what 
challenges is it experiencing--defining results-oriented performance 
measures that will allow the agency and others to determine the extent 
to which goals are being met?
    Response. FAS has made considerable progress in establishing the 
framework for carrying out strategic planning and measuring results in 
a manner consistent with GPRA prescribed standards. This foundation 
should serve us well as we focus with specificity on the development of 
performance plans in the weeks ahead. The major challenges encountered 
thus far have been: (1) to determine with clarity just what the Act 
requires and how FAS' strategic plan needs to be made consistent with 
related efforts across the entire Department of Agriculture; (2) to 
identify performance measures that are ``measurable,'' appropriate, and 
both realistic and challenging; and (3) to convince each agency 
employee that the Results Act is not just another temporarily 
fashionable management tool--that in fact it is required by law and 
will have a direct bearing on the ability of FAS to serve its customer 
needs in the years ahead.
    Mr. Skeen. If applicable, what lessons did the agency learn from 
its participation in the Results Act pilot phase and how are those 
lessons being applied to agency-wide Results Act efforts? What steps is 
the agency taking to build the capacity--information systems, personnel 
skills, etc.--necessary to implement the Results Act?
    Response. The pilot phase introduced the agency to the general 
requirements and ``language'' of the Results Act. It also forced the 
development of a more comprehensive strategic plan. In order to ensure 
compliance with the Results Act, the agency has named a Director of 
Strategic Operations and plans to train additional agency personnel in 
GPRA implementation.
    Mr. Skeen. The Results Act requires agencies to solicit and 
consider the views of stakeholders as they develop the strategic plans. 
Stakeholders can include state and local governments, interest groups, 
the private sector, and the general public, among others. Who do you 
consider to be your agency's primary stakeholders and how will you 
incorporate their views into the strategic plans?
    Response. Our primary stakeholders are producers--farmers and 
ranchers, processors and exporters. These stakeholders are generally 
represented by the many trade associations--usually referred to as 
``cooperators''--that serve as advocates for the various segments of 
agriculture that are interested in expanding trade opportunities. We 
have held strategic planning sessions with a number of cooperators in 
order to provide them with an understanding of our strategic planning 
efforts to date and to support their strategic planning initiatives. We 
also are planning a large ``strategic planning'' conference with the 
cooperators and many of our overseas staff to be held this July.
    Mr. Skeen. For the Results Act to be successful, agencies with 
similar missions, goals, or strategies will need to ensure that their 
efforts are coordinated. What other federal agencies are you working 
with to ensure that your strategic plans are coordinated? What steps 
have you taken to ensure that your efforts complement and do not 
unnecessarily duplicate other federal efforts?
    Response. At this stage of the process, we have not shared our 
strategic plan with agencies outside of USDA. However, we anticipate 
doing that once the FAS strategic plan has received additional review 
within the Department. We are confident that our agency's activities 
complement and do not unnecessarily duplicate other federal efforts.
    Mr. Skeen. The Results Act requires agencies to consult with 
Congress as they develop their strategic plans. Since these plans are 
due in September, now is the time for agencies to begin the required 
consultations. What are your plans for congressional consultation as 
you develop your strategic plan? Which Committees will you consult 
with? How will you resolve differing views?
    Response. All USDA Mission Areas/Agencies have prepared draft 
Strategic Plans which are currently being reviewed by an Under/
Assistant Secretary--or other relevant official--the Senior Policy 
Staff and the Secretary. Upon completion of the review, the Department 
plans to provide copies of the Strategic Plan--including an overall 
Department-wide Executive Summary and the Strategic Plans for 
individual Mission Areas/Agencies--to relevant Congressional 
Committees. Thereafter, we will look forward to meeting with Members or 
Staff to discuss our Strategic Plan and to solicit their input and 
advice on refinements to that Plan. We plan to provide copies of the 
Department Strategic Plan to the following Committees:

House Agriculture Committee
House Appropriations Committee
House Economic and Educational Opportunities Committee
House Government Reform and Oversight Committee
House Resources Committee
Senate Agriculture, Nutrition, and Forestry Committee
Senate Appropriations Committee
Senate Energy and Natural Resources Committee
Senate Governmental Affairs Committee

    Mr. Skeen. In passing the Results Act, Congress sought to 
fundamentally change the focus of federal management and decision 
making to be more results-oriented. Organizations that havesuccessfully 
become results-oriented typically have found that making the 
transformation envisioned by the Results Act requires significant 
changes in what they do and how they do it.
    What changes in program policy, organization structure, program 
content, and work process has the agency made to become more results-
oriented?
    Response. In general, we anticipate that significant GPRA-inspired 
changes in policy and programs will flow from the findings in the first 
performance reports. Those performance reports will be the first 
opportunity to review actual performance results as measured under 
approved GPRA performance indicators. However, the early imprint of 
GPRA principles is already in evidence throughout FAS. For example, 
significant changes have occurred with respect to the two major market 
development programs that FAS administers: the Market Access Program--
MAP--and the Cooperator Program. Over the past year, new, more 
comprehensive competitive criteria have been developed to determine the 
awarding of funds under these two programs. These criteria are very 
much performance based, focused on such criteria as export levels 
attained, private-sector matching contributions, and the degree to 
which strategic planning is employed by the program participant.
    Mr. Skeen. How are managers held accountable for implementing the 
Results Act and improving performance?
    Response. At this early stage, there is simply the expectation, as 
made clear by the FAS Administrator, that all managers--indeed, all 
agency employees--will be held responsible for implementing the Results 
Act. In addition, agency employees are being told in no uncertain terms 
that GPRA performance results will be used to determine the level of 
support for each agency activity as our annual funding requests are 
submitted. One specific proposal that we are considering, as we gain 
experience with GPRA implementation, is to include GPRA compliance as 
one of the formal ``elements'' that will be included in each manager's 
or employee's ``standards and elements'' used for purposes of annual 
employee performance ratings.
    Mr. Skeen. How is the agency using Results Act performance goals 
and information to drive daily operations?
    Response. At this point, the realization that FAS must, in the very 
near future, have measurable results for all that we do is permeating 
all agency activities related to planning, budgeting, and the 
development of new initiatives. This realization has a clear impact on 
the agency mind set as we conduct our business. As indicated in some of 
the previous answers, however, the full impact of the GPRA-driven 
performance standards is not likely to be felt until the results of the 
first performance plans are measured and reported.
                           p.l. 480 title ii
    Mr. Walsh. There are two important issues to raise with AID and 
USDA regarding P.L. 480 Title II and the Food Security Commodity 
Reserve.
    Under P.L. 480 Title II, each year at least 1.55 MMT of commodities 
are supposed to be used in programs that help the poor and hungry 
directly, such as food-for-work, school feeding and mother-child health 
care. Typically, there are 5-year programs developed and implemented by 
private voluntary organizations and cooperatives. However, this 1.55 
MMT level has not been reached and AID does not encourage private 
voluntary organizations to submit proposals for this program. Actually, 
by established an extremely cumbersome approval process, AID actively 
discourages these types of proposals for many needy countries.
    An important element of the Title II program is that programs are 
sponsored overseas by non-governmental organizations. How does AID ask 
private voluntary organizations to submit Title II proposals for such 
things as mother-child health care, food-for-work and school feeding? 
For instance, does AID send releases or notices encouraging PVOs to 
submit proposals?
    Response. There are many mechanisms USAID uses to support private 
voluntary organizations and to encourage their participation in the 
P.L. 480 Title II program. These mechanisms cover the full range of 
non-emergency programs, including maternal and child health, food-for-
work and school feeding.
    First, we maintain a continuous dialogue with the community of 
private voluntary organizations. Overall, USAID works closely with the 
Advisory Committee on Voluntary Foreign Aid--ACVFA--which represents 
the entire private voluntary organization community on a broad range of 
issues ranging from development assistance strategy to federal 
procurement regulations. There are over 400 private voluntary 
organizations which have registered with USAID and which participate in 
this dialogue with USAID, either directly or through ACVFA.
    With respect to Title II food aid programs, USAID works closely 
with the private voluntary organizations through the Food Aid 
Consultative Group, an advisory group established by the P.L. 480 
legislation to assure close consultation on all food aid matters. This 
group meets at least twice a year in formal session and has constituted 
several working groups to review and advise on food aid issues.
    Second, the private voluntary organizations review and contribute 
to USAID guidance and regulations on food aid programs, including 
mother-child care, food for work and school feeding. For example, they 
are now completing review of the guidance for so-called Development 
Activity Proposals, which document requests for new programs, and for 
requests for resources for ongoing programs. This guidance will soon be 
published in the Federal Register to reach out to as broad a community 
as possible.
    Third, we have encouraged our USAID field missions to work closely 
with private voluntary organizations in the Field and to include them 
as partners in deciding objectives for U.S. assistance programs. This 
involvement allows for outreach to organizations which may not be 
familiar to USAID in Washington but are interested in participating in 
field operations.
    So I believed we do a good job of reaching out to the private 
voluntary organization community and encouraging new Title II non-
emergency programs. Just last year, for example, we received fifty-
eight proposals for new programs from eighteen private voluntary 
organizations.
    Mr. Walsh. could you submit to the subcommittee any AID releases or 
notices asking for PVO proposals for Title II programs to subcommittee?
    Response. I will provide a copy of the fiscal year 1998 draft Title 
II guidelines for food aid development activities. These guidelines, 
while admittedly detailed, are the product of a collaborative effort of 
USAID and members of the Food Aid Consultative Group, established by 
Section 205 of P.L. 480. We believe that these guidelines redefine and 
focus food security strategic objectives and promote the efficient and 
effective management of food aid.

    [Clerk's note.--The 1998 draft Title II guidelines for food 
aid development activities is too lengthy to print and is 
retained in the Committee files.]
                  the food security commodity reserve
    Mr. Walsh. Also under Title II, at least another 475,000 MT of food 
is supposed to be made available each year for emergencies. If 
emergency needs exceed this amount and there is inadequate funding to 
meet the additional needs--which is usually the case--then funds can--
and have been--transferred from Titles I and III to Title II. In 
addition, commodities from the USDA Food Security Commodity Reserve can 
be used for an emergency. But using the Reserve for emergencies just 
borrows against future year P.L. 480 funds and once the 2.3 MMT 
commodities remaining in the Reserve are gone, it will take an 
appropriation to refill the Reserve. Therefore, this emergency back-up 
mechanism needs to be improved.
    In Mr. Rogers testimony, he mentions the Food Security Commodity 
Reserve, which is important as a back-up for P.L. 480 Title II to 
provide food for emergency needs. However, it seems that there are some 
reimbursement and replenishment problems with the Reserve. I would 
appreciate it if both USDA and AID could submit recommendations to the 
Committee about how the Food Security Commodity Reserve could be 
improved to make it an effective means for providing food for 
emergencies.
    Response. USAID. The Food Security Commodity Reserve provides an 
effective backup for the Food for Peace Program in responding to 
emergency and urgent humanitarian food needs. The Food Security 
Commodity Reserve Act of 1996 authorized the Secretary of Agriculture 
to release commodities from the Reserve as needed. The Act also 
provided flexibility for holding corn, grain, sorghum and rice, in 
addition to wheat currently in the Reserve and the authority to 
exchange these commodities for another United States commodity of equal 
value. Commodities can be released from the reserve under two different 
conditions. First, if the domestic supply of a commodity held in the 
reserve is so limited in any fiscal year that the Secretary of 
Agriculture cannot make the commodity available for P.L. 480 
programming under the domestic supply criteria established in the law, 
the reserve may be tapped and the commodity made available for 
programming under the three P.L. 480 titles.
    Second, commodities may be released from the reserve without regard 
to the domestic supply situation to meet unanticipated emergency food 
assistance needs under Title II that cannot be met under the normal 
means of obtaining commodities for P.L. 480 programming. This provision 
provides a highly useful means for meeting emergency food assistance 
needs. However, the total volume of commodities that can be released 
for emergency programming through Title II in any given year is limited 
to 500,000 metric tons, plus an additional 500,000 metric tons that 
could have been released in prior fiscal years but were not.
    While we continue to believe the Reserve is well designed to 
support our international Food Aid, efforts, we will certainly continue 
to work with AID officials and Congressional staff to see if we can 
find ways to further improve this tool.
                           p.l. 480 title ii
    Mr. Walsh. Mr. Rogers, I have several questions regarding some 
points you made in your written statement about the programming of 
Title II food aid for non-emergency programs.
    On page 4, you state that non-emergency Title II resources will 
concentrate on improved nutrition or agricultural productively 
objectives. Although these both have merit, this seems to place severe 
limitations on the program and overlooks many other important 
contributors to food security. For instance, poverty is directly linked 
to food insecurity. Why can't programs be approved that help improve 
the incomes--and purchasing power--of the poor? Why is school feeding 
considered an unusual case for food aid, since it is one way to 
encourage poor families to send their children to school and education 
is particularly important for long-term human development? Since 
private voluntary organizations and cooperatives are responsible for 
designing and implementing Title II regular programs, and under section 
202 of the P.L. 480, they must be consulted by AID on the development 
of program guidance and procedures, do they support these programming 
limitations?
    Response. You are referring to the priorities which have been 
established for non-emergency Title II programs. These priorities 
provide guidance to the private voluntary organizations and USAID's 
field missions on those activities which are most likely to be 
successful in promoting food security in poor, food deficit countries. 
They were developed because we recognized there was a significant 
change in the environment in which the United States provides its food 
aid and also because GAO, in an audit of U.S. food aid programs, 
strongly recommended we develop such guidance.
    These guidelines provide program managers with a general sense of 
what works best in improving food security. As such, we expect that 
over time Title II resources will concentrate in these areas. I would 
like to emphasize, however, that they are not intended to exclude 
activities which might make a major contribution to food security in 
any specific country setting. You are absolutely right that there are 
good examples of other types of programs which improve incomes and as a 
result enhance food security. School feeding programs can also be 
worthwhile interventions. In fact, we have recently approved major 
school feeding programs in Burkina Faso and in Bolivia.
    The private voluntary organizations participated in developing this 
program guidance through extensive series of briefings and through full 
and open discussion. While the private voluntary organizations 
represent a board diversity of views, I believe they agree with these 
priorities. At the same time, I think it fair to say they would define 
the areas for intervention broadly, and they strongly support the 
position that other interventions can successfully enhance food 
security and should be given full consideration for approval.
    Mr. Walsh. On page 4, you state that USAID is ``decentralizing'' 
operational decisions to USAID field missions. I understand that USAID 
is phasing out many missions and that several food insecure countries 
in sub-Sahara Africa either do not or will not have missions. Which 
sub-Saharan countries have a mission, which do not and which are being 
phased out?
    Response. There are ongoing bilateral USAID assistance programs in 
20 sub-Saharan countries. These are: Benin, Eritrea, Ethiopia, Ghana, 
Guinea-Bissau, Kenya, Madagascar, Malawi, Mali, Mozambique, Namibia, 
Nigeria, Rwanda, Senegal, South Africa, Tanzania, Uganda, Zambia and 
Zimbabwe.
    In addition, USAID provides assistance through its regional 
programs located in Botswana, Cote d'Ivoire and Kenya to 14 sub-Saharan 
countries. These are: Botswana, Cote d'Ivoire, Central African 
Republic, Comoros, Congo, Djibouti, Equatorial Guinea, Gabon, 
Mauritania, Mauritius, Sao Tome and Principe, Seychelles and Sierra 
Leone.
    Finally, USAID provides limited humanitarian or emergency 
assistance programs to five counties: Angola, Burundi, Liberia, Somalia 
and the Sudan.
    Starting in fiscal year 1994, USAID closed missions in twelve 
countries, including Botswana, Burkina Faso, Burundi, Cameroon, Chad, 
Cape Verde, Cote d'Ivoire, Gambia, Lesotho, Swaziland, Togo, and Zaire. 
USAID expects to close Niger in 1998 and to graduate Zimbabwe, Namibia 
and South Africa in 2000. Countries without bilateral missions, 
however, can continue to participate in regional or USAID-funded 
private voluntary programs, depending on the nature of their 
development problems.
    Mr. Walsh. Under section 202 of P.L. 480, private voluntary 
organizations and cooperatives are eligible to develop and implement 
non-emergency Title II programs and such programs can be conducted in 
countries where there are no USAID missions or where the program does 
not fit into a USAID country strategy. What will be the impact of 
decentralization on the ability of private voluntary organizations and 
cooperatives to establish programs in countries without USAID missions 
or where the program does not fit into USAID mission strategy? Do these 
organizations support this decentralizing strategy?
    Response. Decentralization will not have any significant effect on 
the ability of private voluntary organizations to operate in countries 
without USAID missions or to operate where programs do not fit into a 
USAID mission strategy.
    The point of decentralization is to put responsibility for 
operational decisions into the hands of field managers. This allows the 
field team, consisting of both USAID and private voluntary organization 
personnel, to make direct operation decisions on how best to produce 
the results we are all seeking. Accountability for taxpayer resources, 
as represented by final authority to sign and approve official 
documents, will be decentralized to the USAID Mission Director. 
However, we intend that actual operational decisions will be made by 
the team managing the food aid program in the country. That team 
includes the private voluntary organizations.
    We hope ultimately to do something similar in countries where there 
is no USAID mission. We still believe the field managers should be the 
ones making the operational decisions. In this case, the private 
voluntary organization, perhaps in consultation with one of the USAID 
regional offices or USAID/Washington, would make the decisions. Final 
signing authority would rest with a USAID regional office or USAID/
Washington, but that would simply be a matter of routine.
    I would like to point out that we believe food aid programs are 
most likely to produce significant results where they are integrated 
with a USAID mission program. This is so because USAID can bring 
dollar-funded resources, usually in the form of technical assistance, 
to the joint activity. USAID also maintains close coordination with and 
can leverage the resources of other donors. And because we represent 
the U.S. Government, USAID usually has considerable influence with the 
host government. So for all these reasons, which have the effect of 
amplifying the scope and impact of an activity, we give priority to 
integrated private voluntary organization/USAID programs. In short, we 
give priority to these programs because we expect them to produce the 
greatest results. However, we do recognize fully that Title II programs 
where there is no USAID mission or where the food aid is not integrated 
into the mission strategy can also produce results and are therefore 
worthy of full consideration.
    With respect to whether the private voluntary organizations support 
decentralizations, I believe they support the concept and agree that 
field managers are best positioned to make operational decisions. The 
private voluntary organizations are also willing to work with USAID to 
see if an acceptable process for implementation can be developed. We 
are now working on three pilot cases in Ethiopia, Peru and Bangladesh. 
We will proceed based on mutual agreement that decentralization 
improves the efficiency and effectiveness of the Title II program. So 
in the end, we will all agree that decentralization is a good idea, or 
we will revert to some form of the current system in which many 
decisions are made in Washington.
                        sugar tariff-rate quota
    Mr. Kingston. I understand that USDA is required to announce by mid 
March whether the Department will increase the raw cane sugar import 
quota as specified in your quota formula announcement of September 
1996. Have you made a decision? What will it be and why?
    Response. Our September 13, 1996, announcement of the fiscal year 
1997 sugar tariff-rate quota--TRQ--is the only announcement that USDA 
is likely to make during fiscal year 1997 regarding sugar. The 
administrative plan we established calls for the allocation, by the 
U.S. Trade Representative--USTR--of additional 200,000 ton tranches 
from the USDA-announced TRQ if the stocks-to-use ratio, as defined in 
the World Agricultural Supply and Demand Estimates (WASDE), is less 
than or equal to 15.5 percent. If, however, the ratio is greater than 
15.5 percent, the tranche is canceled. In January the ratio was at 15.7 
percent, resulting in the cancellation of the first tranche. On March 
11, 1997, the stocks-to-use ratio in the WASDE report will signal the 
allocation or cancellation of another 200,000 ton tranche. Once again 
in May, if the stocks-to-use ratio as reported in the WASDE is less 
than or equal to 15.5 percent, the USTR will allocate 200,000 tons of 
sugar to exporting countries. That will be the final tranche that is 
available as a result of the September 13, 1996 announcement.
                         foreign trade efforts
    Mr. Fazio. There is a portion of Response's testimony that I wish I 
could bronze and mount over the dias: ``As domestic farm supports are 
reduced, export markets become even more critical for the economic 
well-being of our farmers and rural communities, as well as suburban 
and urban areas that depend upon the employment generated from 
increased trade.''
    Your testimony tells a wonderful and successful story of our 
foreign trade efforts: A record year for ag exports` $60 million, up 
nearly 50 percent since 1990 and rising--the number 1 positive 
contributor to the U.S. trade balance.
    Individual success stories abound:

Rice to Japan: Half the market, more than $125 million in US sales this 
        year--up from zero in 1993.
Beef to Korea: Up 50 percent.
Soybeans in the Philippines: Up 122 percent--to $160 million.
Soybeans to Indonesia: Up to $20 million in just two years.
Feed grains to the Philippines: 75 percent of a once-closed market.
Table grapes to Korea: $1.3 million in 10 months.
Oranges to Korea: From $5.3 million to $13.6 million in one year and 
        rising.

Much of our success stems from the Market Access Program.

    Tell us about your changes to get more of these resources to small 
companies and to cooperatives.
    Response. FAS has made several changes designed to increase 
opportunities for small businesses and cooperatives. Within the brand 
program, FAS continues to give priority assistance to small-sized 
entities and cooperatives. In 1997, because FAS has made every effort 
to fully fund the requests for brand promotion funding for small 
companies, 84 percent of brand promotion funds will go to these groups, 
up from 76 percent in 1996. Four percent of the resources allocated for 
brand promotion will go directly to four cooperatives: Blue Diamond 
Almond Growers, Sunkist Growers, Ocean Spray Cranberries and the 
National Grape Cooperative. The remaining 96 percent of brand promotion 
funds will be competitively allocated by nonprofit commodity trade 
associations and state regional trade groups to private companies and 
cooperatives within their respective industries or regions. In 
addition, small entities and cooperatives will benefit from generic 
activities, including the opportunity to participate in subsidized 
trade shows and retail promotions organized and coordinated by 
participants. This is part of an ongoing effort to reach out to 
organizations that can benefit most from export promotion assistance by 
availing less experienced new-to-market small entities and cooperatives 
the advantage of closer supervision and guidance by the participants' 
in-country representatives.
    FAS also continues to dedicate significant staff and financial 
resources to outreach efforts to educate associations with significant 
small, medium and minority business membership regarding export 
opportunities, FAS services and programs available to assist them, and 
to provide advice regarding the mechanics of exporting. To augment that 
effort we have actually placed for FAS staff in outreach offices, 
cooperatively housed with State Departments of Agriculture or USDA's 
own FSA staff, in Des Moines, Iowa; Sacramento, California; Denver, 
Colorado; and Portland, Oregon. We also opened an Agricultural Trade 
Office in Miami, Florida, to assist exporters in that area in fully 
capitalizing on the opportunities offered by the Caribbean region.
    Mr. Fazio. Can you provide any up-to-date estimates of the total 
return from MAP? For many years, we have been using a $16 in increased 
exports for every $1 provided, but it appears that the return would be 
significantly increased for some commodities.
    Response. Two years ago, a study was completed by FAS which 
provided this estimate of $16 in increased exports for every $1 of 
promotional funds. While it is undoubtedly true that some commodities 
have a greater than 16 to 1 ratio, this study looked at changes in 
market share of the total basket of consumer oriented products, and not 
the sum of individually promoted products. Therefore, this study 
provides no performance measures on individual commodities. There have 
been no subsequent studies by the Agency which would quantify different 
impacts on a commodity specific basis.
                             trade barriers
    Mr. Fazio. Is FAS working to enumerate trade barriers, especially 
those based on ``scientific'' or ``phytosanitary'' concerns? The 
Economic Research Service spoke of a report coming out in several weeks 
that may be related.
    Response. In 1995, FAS initiated, in cooperation with the Economic 
Research Service--ERS--a desk inventory of known barriers to U.S. 
exports. The compiled information was provided to the affected 
Agricultural Affairs Offices of the U.S. Embassies located in those 
countries for comment and verification. This research resulted in a 
first assessment of the Technical Barriers to Trade--TBT. A more 
systematic approach to include the broader set of foreign markets, 
other government agencies, and U.S. commodity group interests was 
undertaken in 1996. The 1996 inventory, therefore, represents a very 
comprehensive view of potential technical barriers faced by U.S. 
agriculture.
                         Risk Management Agency
                              blazy report
    Mr. Skeen. Shortly after the FCIC was merged with the Farm Service 
Agency a study was conduced to analyze RMA and its strengths and 
weaknesses. Please submit for the record a copy of the complete study 
and agency actions taken to address weaknesses found by the study 
author. I believe the study is commonly referred to as the Blazy 
Report.
    Response. The report referred to by the question was a draft study 
by the Farm Service Agency performance Engineering and Analysis Staff 
entitled ``Technical and Organizational Analysis of Risk Management 
Loss Adjustment Operations; and the Structure of Compliance, and the 
Regional Services Offices.'' The study, which was intended to implement 
the full merger of the former Federal Crop Insurance Corporation into 
the then-newly constituted FSA, was never issued in final form, and is 
now viewed as largely moot in light of the creation of a separate Risk 
Management Agency. Nevertheless, the draft report has served to provide 
RMA with insights of understandably mixed value given the original 
premise of the study.
    The draft report contained nine recommendations. Those--#1 and #3--
relating to organizational change were based on the assumption that 
FCIC/Risk Management would be fully folded into FSA and its field 
structure. The resources of FCIC's ten Regional Service Offices and the 
six Compliance Field Offices were seen as FTE's best made available to 
the FSA State Executive Directors or FSA Administrator to enhance the 
federal portion of the dual delivery system. The report also envisioned 
a role for FSA state offices overseeing private reinsured companies 
inconsistent with the public-private relationship basic to the crop 
insurance program. The proposal--#7--calling for institution of cross-
cultural training for Risk Management, FSA Program Delivery, and Farm 
Programs, might have been appropriate to the single agency concept. All 
three of the recommendations noted above were rendered moot by the 1996 
Act.
    The report recommended the immediate creation of an Internal 
Quality Assurance Staff within Risk Management's Compliance office--#2. 
That capability was in place and operating at the time of the report. 
Compliance was then and is now able to measure key timeliness and 
accuracy factors in Risk Compliance reports. RMA will continue to do 
so. The former FCIC's ``Internal Controls Staff,'' which had been 
absorbed by FSA as a part of the 1994 merger, has since returned to RMA 
and made part of RMA's Risk Compliance office. Other concerns about 
Compliance raised in the draft study have been addressed by greater use 
of administrative sanctions, close cooperation with the Justice 
Department ACE program for civil cases, development of a Memorandum of 
Understanding--MOU with the Office of Inspector General, a request for 
limited subpoena power, changes in reinsured company reviews that will 
make for more responsive reporting of findings, and continued training 
for all investigators. RMA has developed revisions to its operating 
manual for reinsured companies--M-14--that will simplify and 
systematize many company requirements. The pending 1998 Standard 
Reinsurance Agreement--SRA negotiations will likely reflect these and 
other positive innovations.
    The proposal--#4--calling for the development of a loss adjustment 
training certification program failed to note the nature of RMA's SRA-
based relationship with participating companies. Training for the 
private companies already existed and is reimbursed as an 
administrative expense under the SRA. In keeping with the concept of 
limited direct involvement in the training process, we continue to 
explore improvements and potential third party training programs.
    Recommendations #5 and #6 proposed that RMA develop statistical 
models of the loss adjustment and claims adjudication processes based 
upon ``outcome'' performance measures. We are in the process of 
establishing such a tracking system, pending Privacy Act considerations 
and final Office of General Counsel--OGC approval. Some tracking of 
company agents exists. Tracking of loss adjusters, other than former 
FCIC and current FSA adjusters, has generated privacy questions because 
of the proprietary nature of that information. It should be noted that 
reinsured companies are required under the SRA to maintain loss 
adjustment and agent training annually, including required hours of 
update training. Records are available to Compliance and are part of 
the reinsured company compliance review process. We did, however, 
disagree with an approach solely based on statistical models. The 
advent of loss adjuster tracking in the data base will allow Risk 
Management to establish performance norms based on the overall book of 
business, and identify those adjusters falling outside expected 
performance levels. We will continue to use statistical resources to 
develop methods and measures to assure accurate loss adjustment.
    The recommendation--#8 to develop a Concept of Operation has been 
folded into RMA's GPRA process which is proceeding on schedule.
    We concurred with the general concept of recommendation #9 
regarding Derived Issues and the need for an Improvement Program. 
However, a number of the individual observations were made moot by the 
``carve-out''--movement of the R&D computers, others are addressed in 
procedural changes--Compliance random selection of policies, others by 
purchase--laptops in the field, some by training--lack of contract 
administration knowledge, and still others through application of 
statutory requirements--MBO planning replaced by GPRA. RMA follows an 
annual business cycle that generates continuous review and improvement 
of the Risk Management Program.

    [Clerk's note.--The report provided for the record is too 
lengthy to reprint and is retained in Committee files.]
               funding for additional compliance staffing
    Mr. Skeen. Of the $4,465,000 increase requested in your budget, how 
much will go for additional compliance staffing?
    Response. Risk Compliance is scheduled to receive an additional 
$1,338,350 to support the increase of 13 additional staff persons 
required to handle the increased workload of the expansion of programs 
and increasing demands of the Federal crop insurance program.
                      sales commissions of agents
    Mr. Skeen. What would the possible consequences be if no funds are 
appropriated for sales commissions to reinsurance companies?
    Response. Delivery of the crop insurance program since the Federal 
Crop Insurance Act of 1980 has been through privately licensed 
insurance agents. If no funding for sales commissions is appropriated--
a delivery system would be destroyed. Taking the agent out of the sales 
and service of crop insurance is troublesome to RMA since 15 years of 
experience gained and the proven ability of agents to properly market 
and service crop insurance products would be lost. We also expect that 
agents will be actively involved in RMA's risk management education 
efforts.
    RMA and the Department are committed to the private delivery of 
crop insurance. We believe in the private delivery system and its 
ability to broaden the available safety net to farmers. Insurance 
agents are knowledgeable about the crop insurance products and have 
made extra efforts to provide producers with access to other lines of 
insurance and non-insurance risk management tools.
                      funding of delivery expenses
    Mr. Skeen. In FY 1998 some costs related to delivery expenses are 
paid from the crop insurance fund and some will be paid from the A&O 
account. Please describe the difference between the costs paid from 
each account.
    Response. Under current law, the delivery expenses estimated to be 
paid from the A&O account--discretionary funds--for FY 1998 are part of 
the program expenses paid to reinsured companies as authorized by 
Section 516 of the Federal Crop Insurance Act. These delivery expenses 
currently represent what is estimated to be paid by the reinsured 
companies to their sales agents. Mandatory funds--from the FCIC 
insurance fund--reimburse the reinsured companies for all other 
administrative, delivery, and loss adjusting expenses they incur 
related to delivering the crop insurance programs. For FY 1995, 1996, 
and 1997 all reinsured company delivery expenses, including sales 
agents expenses, were paid from FCIC's mandatory funds. Any loss 
adjustment contractor costs for the FSA county office business will 
also be paid from mandatory funds. Our legislative proposal would allow 
the payment of delivery expenses other than just sales commissions from 
discretionary funds in FY 1998. The proposal specifies that 10.5 
percentage points of the rate used to reimburse reinsured companies for 
their administrative expenses be funded out of the discretionary 
account.
                             excess losses
    Mr. Skeen. The budget reflects an increase in costs to the fund of 
$5,419,000 for excess losses. What constitutes an ``excess loss'' and 
how do you estimate for these costs for FY 1998?
    Response. An excess loss refers to the excess of losses over total 
premiums net of underwriting gain due the reinsured companies. For each 
crop year, FCIC estimates its total losses by first estimating gross 
premiums which include the portion paid by the farmer and the portion 
subsidized by the federal government. Gross premiums are then 
multiplied by an estimated loss ratio. The determination of any excess 
loss involves the estimation of net premiums which are gross premiums 
less the underwriting gains paid to the private reinsured companies. 
FCIC records an excess loss when total losses exceed net premiums. The 
estimated losses for FY 1998 are $2,100,645,000 minus the estimated 
total premium of $1,909,215,000 net of the estimated underwriting gain 
of $123,502,000, to equal excess losses of $314,932,000. The estimated 
excess losses for FY 1997 were $309,513,000, which shows an increase of 
$5,419,000.
                               de-linkage
    Mr. Skeen. Last year the Farm Bill unlinked the requirement to 
carry crop insurance from participation in the farm programs of USDA. 
Have you been able to tell yet if this has caused any erosion in 
participation?
    Response. De-linkage has caused a decrease in participation when 
comparing the 1995 and 1996 crop years. The year-to-year change is 
shown in the following two tables, which show (1) the number of 
catastrophic level coverage active policies, and (2) the number of 
catastrophic level coverage acres insured. The decrease in policy count 
is greater than the decrease in acres, which indicates there was a 
tendency for small farms to drop out in greater percentages than did 
larger farms.

----------------------------------------------------------------------------------------------------------------
                                                                                                  Difference    
                                                                         1995        1996   --------------------
                                                                                               Amount    Percent
----------------------------------------------------------------------------------------------------------------
Change in premium earning CAT Policies:                                                                         
    FSA............................................................      807,134    431,980  (375,154)       -46
    Reinsured......................................................      367,507    297,756   (69,751)       -19
    Less New Buy-up Policies.......................................  ...........     19,394  .........  ........
                                                                    --------------------------------------------
      Total........................................................    1,174,641    749,130  (425,511)       -36
                                                                    ============================================
Change in CAT acres insured (000):                                                                              
    FSA............................................................       73,729     47,608   (26,121)       -35
    Reinsured......................................................       41,565     39,274    (2,291)        -6
    Less New Buy-up Acres..........................................  ...........     11,596  .........  ........
                                                                    --------------------------------------------
      Total........................................................      115,294     98,478   (16,816)       -15
                                                                    ============================================
----------------------------------------------------------------------------------------------------------------

                            buy-up coverage
    Mr. Skeen. For the 1995 crop insurance year, you stated last year 
that about 51,000 more policies were sold at higher coverage levels 
than in 1994. Clearly that was a part of the goal of the Crop Insurance 
Reform Act. What kind of buy-up occurred in 1996?
    Response. As can be seen from the tables presented previously, in 
1996 the number of active buy-up policies increased by 19,394, or 2.2 
percent. The number of acres insured increased by 11,596,000, or 11 
percent.
                   object class 25.2--other services
    Mr. Skeen. For the record please provide a breakout of object class 
25.2--Other Services.
    Response. For FY 1998, we have estimated that the $9 million 
requested will be required to support activities, such as: $8 million 
for the services of the National Computer Center in Kansas City, MO; an 
estimated $556,000 for Department Greenbook charges; and the remaining 
portion for re-engineering initiatives of the accounting system for the 
Fiscal Systems Branch.
                   object class 23.3--communications
    Mr. Skeen. The budget justifications indicate an almost doubling of 
object class 23.3--Communications from FY 1996 to 1997. What caused the 
increase?
    Response. For FY 1996, the budget for Risk Management was 
consolidated with FSA's budget. While every effort was made to track 
obligations for all of the cost centers of Risk Management, there are 
obviously obligations that were coded incorrectly or entered into the 
system charged to the incorrect object codes. The obligations for FY 
1996 are the best that could be determined at the end of the fiscal 
year. The FY 1997 estimated obligations are needs that have been 
identified for Risk Management for communications, such as FTS charges 
for our Washington offices and field offices, and utilities for our 
field offices. It is difficult to make a comparison of obligations from 
FY 1996 to FY 1997.
                     computer and software spending
    Mr. Skeen. For the record, please provide a table showing all costs 
related to computer and software spending for fiscal years 1995, 1996, 
1997, and 1998.
    [The information follows:]

[Page 282--The official Committee record contains additional material here.]


                  delivery of crop insurance policies

    Mr. Skeen. One of the concerns of providing crop insurance was the 
competition between private insurance agents and Farm Service Agency 
personnel. Do FSA personnel or other Federal employees still sell some 
crop insurance policies?
    Response. CAT coverage is available from local FSA offices in all 
States except the following single delivery States announced last 
year--Arizona, Colorado, Illinois, Indiana, Iowa, Kansas, Minnesota, 
Montana, Nebraska, North Carolina, North Dakota, South Dakota, 
Washington, and Wyoming. As you know we are required by statute to 
announce other single delivery states by April 30th this year.
                          underserved counties
    Mr. Skeen. For the record please provide a list of counties that 
are considered underserved by private insurance agents.
    Response. Presently, there are no crop insurance agents in the 
State of Alaska. The following counties were reported to be 
``underserved''--Boundary County, Idaho; Cape May, Middlesex, Morris, 
Sommerset, and Sussex Counties, New Jersey; Bristol, New Port, 
Providence, and Washington Counties, Rhode Island; and Boone, Braxton, 
Calhoun, Clay, Doddridge, Gilmer, Harrison, Lewis, Logan, Marion, 
Monongalia, Ritchie, Taylor, Upshur, Wayne, Wetzel, Wirt, and Wyoming 
Counties, West Virginia.
                         options pilot program
    Mr. Skeen. Over the past several years the Department has carried 
out a Pilot Options Program. For the record, please provide a table 
that shows the costs per fiscal year for every year the program 
operated?
    [The information follows:]

                              COSTS OF OPTIONS PILOT PROGRAM, FISCAL YEARS 1993-95                              
----------------------------------------------------------------------------------------------------------------
                                                                                 Deficiency                     
                           Year                                 Total OPP         payments          CCC cost/   
                                                                payments          foregone          (savings)   
----------------------------------------------------------------------------------------------------------------
1993......................................................       $12,685,665        $4,783,800        $7,901,865
1994......................................................        14,653,680        14,532,400           121,280
1995......................................................        11,105,491                 0        11,105,491
                                                           -----------------------------------------------------
      Total...............................................        38,444,836        19,316,200        19,128,636
----------------------------------------------------------------------------------------------------------------

    Mr. Skeen. This program was to be operated in a budget neutral way. 
With the costs running into the millions each year, how was that 
department operating a cost neutral program?
    Response. The cost-offsetting effect of foregone deficiency 
payments under the Options Pilot Program from 1993 through 1995 was 
heavily dependent upon commodity prices over the growing and marketing 
season. During both 1993 and 1995 years, adverse weather and strong 
demand combined to push market prices for corn and wheat close to, or 
above the Farm Service Agency (FSA) target price. Thus, the deficiency 
payment rate fell short of expected levels. Costs far exceeded savings 
and the program was not operating in a cost neutral manner. However, 
FSA's report on this subject does imply that the neutrality could have 
been achieved over the long term.
    Mr. Skeen. The new Farm Bill again allows a pilot options program. 
The budget justification indicate the RMA will now operate this program 
instead of the Farm Service Agency. Why this shift in agency 
management?
    Response. RMA administration of the Options Pilot makes sense in 
view of its broadened ``risk management'' mission beyond the scope of 
crop insurance. RMA will be the ``manager'' of all agricultural risk 
management tools. Among these aspects are the expansion into revenue 
coverage products and a much sharper focus on educating farmers to meet 
individual risk management needs. The Options Pilot Program fits well 
in each of these two categories.
    Mr. Skeen. What do you expect to spend in fiscal years 1997 and 
1998 on this problem? How much will come from the A&O account and from 
the fund?
    Response. RMA did not spend any funds for an Options Pilot Program 
during the 1997 fiscal year and no monies have been budgeted to provide 
an Options Pilot Program during the 1998 fiscal year. At this time RMA 
continues to evaluate this program. We have received a program for an 
option on milk from the Coffee, Sugar and Cocoa Exchange. We are 
currently evaluating this option.
    Mr. Skeen. How will the program be different than the previous 
efforts?
    Response. RMA is currently evaluating the Options Pilot Program 
delivered by the former Agricultural Stabilization and Conservation 
Service. We have reviewed an Office of the Inspector General Report 
regarding this program and will consider the recommendations made by 
the OIG in this evaluation. RMA currently does not have a position 
regarding the differences between the RMA Options Pilot Program and the 
former ASCS program at this time.
                            group risk plan
    Mr. Skeen. For the record, provide a list of all counties and 
states where the Group Risk Plan is in effect for 1997. Do you plan any 
expansion of the plan in 1998?
    Response. An expansion of the GRP pilot program is planned for the 
1998 crop year. The expansion would add approximately 200 additional 
forage production counties to the GRP program. Please refer to the 
attached listing of 1997 GRP counties and crop programs by state. This 
listing is followed by a summary page for all states for the 1997 crop 
year.

    [Clerk's note.--The list provided was too lengthy to 
reprint and is retained in Committee files.]

    Mr. Skeen. What has been the loss ratios in GRP areas versus other 
crop insurance programs?
    [The information follows:]

                            1996 LOSS RATIOS                            
------------------------------------------------------------------------
                                                                Actual  
                                                 Group risk   production
                                                 plan (GRP)    history  
                                                                (APH)   
------------------------------------------------------------------------
Corn..........................................         0.03         0.41
Cotton........................................         0.00         1.45
Forage Production.............................         0.00         0.98
Grain Sorghum.................................         0.00         0.09
Peanuts.......................................         0.00         0.56
Soybeans......................................         0.04         0.29
Wheat.........................................         0.00         1.49
------------------------------------------------------------------------

                   nonstandard classification system
    Mr. Skeen. The nonstandard classification system has had a big 
impact on reducing the losses in the crop insurance program. Can you 
provide us some details as to what your experience has been on a crop-
by-crop basis?
    Response. The NCS program identifies insureds with abnormal loss 
histories and individually adjusts their rate and/or coverage to 
reflect the higher risk they represent. RMA thus hopes to avoid 
inequitable, across-the-board rate increases which would otherwise be 
required to achieve actuarial sufficiency as established by the Omnibus 
Reconciliation Act of 1993 (OBRA) and the Federal Crop Insurance Act of 
1994.
    Overall, the nonstandard classification system program has had a 
positive effect on the insurance program. The General Accounting Office 
(GAO) released in September, 1995, a report to the U.S. Senate 
Committee on Agriculture, Nutrition, and Forestry entitled, ``Crop 
Insurance, Additional Actions Could Further Improve Program's Financial 
Condition.'' Its findings indicated that the NCS program produced 
initial savings of $33 million annually.
    The attached table provides NCS for the 1997 crop year on a crop by 
crop basis.
    [The information follows:]

[Page 286--The official Committee record contains additional material here.]


                   distribution of profits and losses

    Mr. Skeen. For the record, please provide a table displaying how 
profits and losses were distributed between RMA and reinsurance 
companies for the past ten years.
    [The information follows:]

[Page 288--The official Committee record contains additional material here.]


                          reinsured companies

    Mr. Skeen. For the record, please provide us with a list of the 
currently active reinsurance company agreements, and indicate which 
ones had gains and losses under the gain-loss provisions.
    [The information follows:]

    COMPANIES UNDERWRITING GAIN/LOSS POSITION, 1996 REINSURANCE YEAR    
                        [As of February 10, 1997]                       
------------------------------------------------------------------------
                  Company                     Underwriting  Gain or Loss
------------------------------------------------------------------------
Alliance Insurance Co......................  Gain.                      
American Agricultural Insurance Co.........  Gain.                      
American Growers Insurance Co..............  Gain.                      
CIGNA Property & Casualty Insurance Co.....  Gain.                      
Cotton States Mutual Insurance Co..........  Gain.                      
Country Mutual Insurance Co................  Gain.                      
Farm Bureau Insurance Co. of Nebraska......  Gain.                      
Farm Bureau Mutual Insurance Co. of Iowa...  Gain.                      
Farmers Alliance Mutual Insurance Co.......  Gain.                      
Great American Insurance Co................  Gain.                      
Hartford Fire Insurance Co.................  Gain.                      
IGF Insurance Co...........................  Gain.                      
Millers Mutual Fire Insurance Co...........  Gain.                      
Plains Insurance Co........................  Gain.                      
Producers Lloyds Insurance Co..............  Loss.                      
Rural Community Insurance Co...............  Gain.                      
SAPR (Puerto Rico).........................  Loss.                      
------------------------------------------------------------------------
Source: Jan. 11, 1997 Reinsurance Accounting Report.                    

    Mr. Skeen. For the record, please provide a table showing, from 
1981 through fiscal year 1996, the reimbursements to reinsured 
companies and the total RMA operating and administrative costs 
(including the costs paid from the fund).
    [The information follows:]

[Page 290--The official Committee record contains additional material here.]


                            ratio of losses
    Mr. Skeen. For the record, please provide a table that shows the 
ratio of losses for RMA and reinsured companies to the units insured 
and the average losses for each year since 1991.
    [The information follows:]

                        RISK MANAGEMENT AGENCY, FCIC/FSA/REINSURANCE COMBINED EXPERIENCE                        
----------------------------------------------------------------------------------------------------------------
                                                                                                         Percent
                                                                                               Dollar     loss  
                       Year                           Units       Units         Indemnity      average  units to
                                                     insured   indemnified                     losses    insured
                                                                                                          units 
----------------------------------------------------------------------------------------------------------------
1981.............................................     952,649     151,378        407,288,709     2,691        16
1982.............................................     951,674     147,155        529,075,057     3,595        15
1983.............................................     773,801     197,212        583,743,866     2,960        25
1984.............................................     961,248     202,422        638,475,475     3,154        21
1985.............................................   1,008,608     169,311        683,214,394     4,035        17
1986.............................................   1,013,931     170,207        615,742,121     3,618        17
1987.............................................   1,075,238     136,773        369,844,076     2,704        13
1988.............................................   1,218,891     430,038      1,067,610,557     2,483        35
1989.............................................   2,178,443     461,813      1,215,278,470     2,632        21
1990.............................................   2,149,498     296,514        971,959,478     3,278        14
1991.............................................   1,846,889     339,765        955,093,714     2,811        18
1992.............................................   1,903,134     245,128        917,801,181     3,744        13
1993.............................................   1,565,132     458,298      1,655,473,843     3,612        29
1994.............................................   1,815,784     190,064        594,304,310     3,127        10
1995.............................................   3,706,456     565,004      1,547,237,366     2,738        15
1996.............................................   3,193,549     462,920      1,340,901,665     2,897        14
----------------------------------------------------------------------------------------------------------------

            administrative and operating expense obligations
    Mr. Skeen. Please provide for the record an update of the table 
that described the administrative and operating expenses obligations 
and RMA revolving fund activities.
    [The information follows:]

[Pages 292 - 293--The official Committee record contains additional material here.]


                      fcic/reinsurance experience

    Mr. Skeen. For the record, please update the table that appears on 
page 208 of last year's hearing record which shows RMA and reinsurance 
combined insurance.
    [The information follows:]

[Page 295--The official Committee record contains additional material here.]


                         marketing expenditures

    Mr. Skeen. Please provide a ten-year table showing the marketing 
expenditures for the crop insurance program.
    [The information follows:]

RISK MANAGEMENT AGENCY/FEDERAL CROP INSURANCE CORPORATION FUND MARKETING
                              EXPENDITURES                              
------------------------------------------------------------------------
                      Fiscal year                          Expenditure  
------------------------------------------------------------------------
1986..................................................          $749,181
1987..................................................           847,382
1988..................................................           961,268
1989..................................................         1,005,481
1990..................................................           540,000
1991..................................................                 0
1992..................................................           275,501
1993..................................................         3,731,115
1994..................................................         1,644,463
1995..................................................         2,371,715
1996..................................................         1,150,510
------------------------------------------------------------------------

                             insured crops
    Mr. Skeen. For the record, please provide a list of all crops on 
which crop insurance is now being offered.
    [The information follows:]
All other citrus trees
All other grapefruit
Almonds
Apples
Avocado
Avocado trees
Barley
Blueberries
Burley tobacco
Canning beans
Canola
Carambola trees
Cigar binder tobacco
Cigar filler tobacco
Cigar wrapper tobacco
Citrus
Citrus trees
Corn
Cotton
Cotton ex long staple
Cranberries
Dark air tobacco
Dry beans
Dry peas
Early & midseason oranges
Figs
Fire cured tobacco
Flax
Flue cured tobacco
Forage production
Forage seeding
Fresh apricots
Fresh freestone peaches
Fresh market sweet corn
Fresh market tomatoes
Fresh nectarines
Fresh plum
Grain sorghum
Grapefruit
Grapefruit trees
Grapes
Green peas
GRP barley
GRP corn
GRP cotton
GRP forage production
GRP grain sorghum
GRP peanuts
GRP soybeans
GRP wheat
Hybrid corn seed
Hybrid sorghum seed
Income protection corn
Income protection cotton
Income protection sorghum
Income protection soybeans
Income protection wheat
Kinnow mandarins
Late oranges
Lemon trees
Lemons
Lime trees
Macadamia nuts
Macadamia trees
Mango trees
Maryland tobacco
Millet
Minneola tangelos
Navel oranges
Nursery
Oats
Onions
Orange trees
Orlando tangelos
Peaches
Peanuts
Pears
Peppers
Popcorn
Potatoes
Processing apricots
Processing cling peaches
Processing freestone
Prunes
Raisins
Revenue assurance corn
Revenue assurance soybeans
Revenue coverage corn
Revenue coverage sorghum
Revenue coverage soybeans
Revenue coverage wheat
Rice
Rio red & star ruby
Ruby red grapefruit
Rye
Safflower
Soybeans
Sugar beets
Sugarcane
Sunflowers
Sweet corn
Sweet oranges
Table grapes
Tomatoes
Valencia oranges
Walnuts
Wheat
                      ccc and treasury borrowings
    Mr. Skeen. Over the years, FCIC had to borrow a significant amount 
of funds from CCC to cover indemnities. For the record, would you 
provide a table showing Treasury and CCC borrowings since 1981?
    [The information follows:]

[Page 298--The official Committee record contains additional material here.]


                        crop participation rates

    Mr. Skeen. Please provide a table, by crop that shows the average 
participation rate for the last three fiscal years. For each crop, show 
the insurable acres, the insured acres, and the participation rate.
    Response. The following tables provide the request information for 
principle crops only. It is not possible to provide the information for 
all insurable crops--the data is not available.
    [The information follows:]

           FEDERAL CROP INSURANCE CORPORATION, PRINCIPAL CROPS PARTICIPATION BY DELIVERY SYSTEM--1996           
                                              [Acres in thousands]                                              
----------------------------------------------------------------------------------------------------------------
                                                                                           Reinsured            
                                                                   Insurable   FCIC net       net     1996 total
                              Crop                                   acres      insured     insured     percent 
                                                                                 acres       acres      insured 
----------------------------------------------------------------------------------------------------------------
Barley..........................................................       7,174         648       4,139          67
Corn............................................................      79,487      11,853      35,070          59
Cotton..........................................................      14,666       2,425       9,921          84
Dry beans.......................................................       1,813         150       1,159          72
Grain sorghum...................................................      13,188       1,837       7,901          74
Oats............................................................       4,661         266         927          26
Peanuts.........................................................       1,413         208       1,022          87
Potatoes........................................................       1,456         206         559          53
Rice............................................................       2,819         951         877          65
Soybeans........................................................      64,205      10,198      29,555          62
Sugar beets.....................................................       1,368         122         963          79
Sunflowers......................................................       2,556         134       2,039          85
Tobacco.........................................................         734         147         396          74
Wheat...........................................................      75,639      15,049      44,356          79
                                                                 -----------------------------------------------
      Total 1996................................................     271,179      44,194     138,884  ..........
----------------------------------------------------------------------------------------------------------------


           FEDERAL CROP INSURANCE CORPORATION, PRINCIPAL CROPS PARTICIPATION BY DELIVERY SYSTEM--1995           
                                              [Acres in thousands]                                              
----------------------------------------------------------------------------------------------------------------
                                                                                           Reinsured            
                                                                   Insurable   FCIC net       net     1995 total
                              Crop                                   acres      insured     insured     percent 
                                                                                 acres       acres      insured 
----------------------------------------------------------------------------------------------------------------
Barley..........................................................       6,689       1,375       4,316          85
Corn............................................................      71,245      20,269      39,299          83
Cotton..........................................................      16,931       5,612      10,210          93
Dry beans.......................................................       2,069         306       1,310          78
Grain Sorghum...................................................       9,454       2,429       4,984          78
Oats............................................................       6,336         510       1,103          25
Peanuts.........................................................       1,538         335       1,111          94
Potatoes........................................................       1,398         430         506          67
Rice............................................................       3,121       2,003       1,034          97
Soybeans........................................................      62,575      18,479      32,287          81
Sugar beets.....................................................       1,445         337         998          92
Sunflowers......................................................       3,478         380       2,947          96
Tobacco.........................................................         663         290         359          98
Wheat...........................................................      69,132      17,182      41,002          84
                                                                 -----------------------------------------------
      Total 1995................................................     256,074      69,937     141,466            
----------------------------------------------------------------------------------------------------------------


           FEDERAL CROP INSURANCE CORPORATION, PRINCIPAL CROPS PARTICIPATION BY DELIVERY SYSTEM--1994           
                                              [Acres in thousands]                                              
----------------------------------------------------------------------------------------------------------------
                                                                                           Reinsured            
                                                                   Insurable   FCIC net       net     1994 total
                              Crop                                   acres      insured     insured     percent 
                                                                                 acres       acres      insured 
----------------------------------------------------------------------------------------------------------------
Barley..........................................................       7,159         117       2,526          37
Corn............................................................      79,175         474      28,956          37
Cotton..........................................................      13,720          94       5,685          42
Dry beans.......................................................       2,016          13         972          49
Grain Sorghum...................................................       9,827          73       3,037          32
Oats............................................................       6,639          34         733          12
Peanuts.........................................................       1,641          48       1,033          66
Potatoes........................................................       1,416          26         275          21
Rice............................................................       3,353          26         621          19
Soybeans........................................................      61,670         376      18,837          31
Sugar beets.....................................................       1,476          16         707          49
Sunflowers......................................................       3,567          27       1,585          45
Tobacco.........................................................         671          19         290          46
Wheat...........................................................      70,349       1,980      27,250          42
                                                                 -----------------------------------------------
      Total 1994................................................     262,679       3,323      92,507            
----------------------------------------------------------------------------------------------------------------

                           program indicators
    Mr. Skeen. For the record, please provide a table of program 
indicators for crop years 1979, 1980, 1981, 1994, 1995, and 1996.
    [The information follows:]

[Page 301--The official Committee record contains additional material here.]


  implementation of the government performance and results act (gpra)
    Mr. Skeen. GPRA, known as the Results Act, requires each executive 
agency to issue, no later than September 30, 1997, a strategic plan 
covering at least five years. In addition to a mission statement 
grounded in legislative requirements, the plans are to contain general 
goals and objectives that are expected to be outcome or results 
oriented (such as to increase the number of education grants issued). 
What progress is the agency making in developing its strategic plan, 
including defining its mission and establishing appropriate goals?
    Response. The Risk Management Agency has been working toward the 
establishment of its GPRA Strategic Plan. This effort has been an 
intensive effort to plan the strategic direction and focus of RMA's 
programs. This process started with extensive internal USDA 
discussions, documented in our draft Strategic Plan.
    The next step of our process has been to share our draft plan with 
the Congress, private sector delivery partners, and farm and commodity 
groups in an effort to get their views. OMB is also part of the 
clearance process and will review RMA's strategic plan to ensure 
consistency with the Administration's long term objectives. Our goal is 
to develop a strategic plan that reflects, to a high degree, agreement 
by our stakeholders that we are doing the right things and moving in 
the right direction. Comments received from our private sector delivery 
partners are being reviewed and discussions held to determine 
appropriate actions. We have yet to receive comments from the Congress, 
OMB, or other groups.
    We expect that many of the comments received, both internally and 
externally, will be addressed as RMA implements the Annual Performance 
Planning part of GPRA.
    Mr. Skeen. Has the agency identified conflicting goals for any of 
its program efforts? If so, what are the performance consequences of 
these conflicting goals and what actions--including seeking legislative 
changes--is the agency taking to address these conflicts?
    Response. RMA has not identified or labeled any ``conflicting 
goals'' related to its program efforts. However, we are proposing 
legislative changes that will increase RMA's ability to successfully 
achieve its strategic goals. Generally, these legislative proposals 
include: reduction of delivery expense reimbursement to private 
reinsured companies; expansion of revenue insurance nationwide; 
reduction in loss ratio; and various initiatives to provide RMA more 
flexibility in managing the crop insurance program.
    Mr. Skeen. Strategic plans must be based on realistic assessments 
of the resources that will be available to the agency to accomplish its 
goals. As you are developing your strategic plan, how are you taking 
into account projected resources that likely will be available--
especially as we move to a balanced budget? What assumptions are you 
making? How are you ensuring that your goals are realistic in light of 
expected resources?
    Response. RMA, in the development of its Strategic Plan, has used 
the experiential data of the Federal crop insurance program as a basis 
for decision-making regarding the level of resources required to 
achieve success. We are fully aware that this data, as well as 
additional data, will be more thoroughly examined through the Annual 
Performance Planning process. As a result of this examination, our 
expectations include validation of and refinements to our Strategic 
Plan.
    Mr. Skeen. For Congress, the heart of the Results Act is the 
statutory link between agency plans, budget requests, and the reporting 
of results. Starting with fiscal year 1999, agencies are to develop 
annual performance plans that define performance goals and the measures 
that will be used to assess progress over the coming year. These annual 
goals are to measure agency progress toward meeting strategic goals and 
are to be based on the program activities as set forth in the 
President's budget. What progress have you made in establishing clear 
and direct linkages between the general goals in your strategic plan 
and the goals to be contained in your annual performance plans? OMB 
expressed concern last year that most agencies had not made sufficient 
progress in this critical area.
    Response. RMA is fully aware of the GRPA requirement that direct 
linkages between general goals in our Strategic Plan and the 
performance goals to be contained in our Annual Performance Plan. 
Progress in this requirement will not be visible until RMA is well into 
the Annual Performance Planning process.
    Mr. Skeen. More specifically, how are you progressing in linking 
your strategic and annual performance goals to the program activity 
structure contained in the President's budget? Do you anticipate the 
need to change or modify the activity structure to be consistent with 
the agency's goals?
    Response. RMA has not yet begun its Annual Performance Planning 
process. However, significant planning has taken place to ensure that 
RMA resources will be available to support meeting GPRA requirements as 
they relate to Annual Performance Planning. Currently, RMA has some 
benchmark data as it relates to crop insurance, however, our Agency 
responsibilities go beyond these former boundaries requiring additional 
benchmarks to be established.
    Mr. Skeen. Overall, what progress has your agency made--and what 
challenges is it experiencing--defining results--oriented performance 
measures that will allow the agency and others to determine the extent 
to which goals are being met?
    Response. The rigor and scope of Annual Performance Planning will 
allow RMA to validate and refine the performance measures currently 
identified in our Strategic Plan. It is our expectation that 
significant enhancements will be made to our performance measures. In 
RMA's efforts, planning has included the three major elements of GPRA 
(i.e., strategic plan, annual performance plan, annual performance 
report) as a collective and complimentary body. These elements cannot 
be developed in isolation from each other. Our process of GPRA 
implementation will ensure proper linkages and requirements are met.
    Mr. Skeen. If applicable, what lessons did the agency learn from 
its participation in the Results Act phase and how are those lessons 
being applied to agency-wide Results Act efforts? What steps are the 
agency taking to build the capacity (information systems, personnel 
skills, etc.) necessary to implement the Results Act?
    Response. RMA was not selected for the Results Act pilot phase. 
Additionally, RMA was not established as an Agency until October 1, 
1996. However, RMA was requested to establish a Strategic Plan for the 
Secretary to review. RMA incorporated the GPRA requirements as part of 
its Strategic Planning process.
    Implementation of RMA's Strategic Plan will require mobilization of 
resources, monitorization of progress, and reporting of results. RMA 
has incorporated into its Strategic Plan the utilization of information 
systems and personnel requirements.
    Mr. Skeen. The Results Act requires agencies to solicit and 
consider the views of stakeholders as they develop the strategic plans. 
Stakeholders can include state and local governments, interest groups, 
the private sector, and the general public, among others. Who do you 
consider to be your agency's primary stakeholders and how will you 
incorporate their views into the strategic plans?
    Response. RMA considers farmers and ranchers--i.e., producers--as 
its primary stakeholders. We surveyed a portion of our stakeholders 
before we began our strategic planning initiative. This survey included 
175 producers spread across the country. Additionally, RMA considers 
the Private Sector Reinsured Companies to be a key component of its 
delivery structure. All 16 companies were included in the survey. The 
survey information collected enabled RMA to focus strategically on the 
identified issues providing a spring-board into our strategic planning 
process. Issues identified through the survey allowed the incorporation 
of strategies to address stakeholder needs. RMA has recently shared its 
draft with the Private Sector Reinsured Companies. Currently, RMA is 
collecting responses and conducting discussions to determine impacts to 
the plan.
    Mr. Skeen. For the Results Act to be successful, agencies with 
similar missions, goals, or strategies will need to ensure that their 
efforts are coordinated. What other federal agencies are you working 
with to ensure that your strategic plans are coordinated? What steps 
have you taken to ensure that your efforts complement and do not 
unnecessarily duplicate other federal efforts?
    Response. Under the direction of the Farm and Foreign Agricultural 
Services mission area, RMA has been an active participant at several 
meetings with its peer agencies--FAS and FSA--to ensure consistency and 
coordination of GPRA activities. Furthermore, RMA has established, or 
is in the process of establishing, interagency agreements/MOU's with 
other agencies in the fulfillment of its mission.
    [The information follows:]

[Pages 304 - 309--The official Committee record contains additional material here.]


    Mr. Skeen. The Results Act requires agencies to consult with 
Congress as they develop their strategic plans. Since these plans are 
due in September, now is the time for agencies to begin the required 
consultations. What are your plans for congressional consultation as 
you develop your strategic plan? Which Committees will you consult 
with? How will you resolve differing views?
    Response. All USDA Mission Areas/Agencies have prepared draft 
Strategic Plans which are currently being reviewed by the Under/
Assistant Secretary--other relevant officials, the Senior Policy staff 
and the Secretary. Upon completion of the review, the Department plans 
to provide copies of the Strategic Plan--including an overall 
Departmentwide Executive Summary and the Strategic Plans for individual 
Mission Areas/Agencies--to relevant Congressional Committees. 
Thereafter, we will look forward to meeting with Members or Staff to 
discuss our Strategic Plan and to solicit their input and advice on 
refinements to that Plan. We plan to provide copies of the Department 
Strategic Plan to the following Committees:

House Agriculture Committee
House Appropriations Committee
House Economic and Educational Opportunities Committee
House Government Reform and Oversight Committee
House Resources Committee
Senate Agriculture, Nutrition, and Forestry Committee
Senate Appropriations Committee
Senate Energy and Natural Resources Committee
Senate Governmental Affairs Committee

    Mr. Skeen. In passing the Results Act, Congress sought to 
fundamentally change the focus of federal management and decision 
making to be more results-oriented. Organizations that have 
successfully become results-oriented typically have found that making 
the transformation envisioned by the Results Act requires significant 
changes in what they do and how they do it. What changes in program 
policy, organization structure, program content, and work process has 
the agency made to become more results-oriented?
    Response. RMA's GPRA activities have not produced impacts on the 
organization to date. However, as we advance through GPRA's 
requirements these impacts will materialize. Specifically, RMA expects 
our Annual Performance Planning to result in the implementation of 
necessary results-oriented changes.
    Mr. Skeen. How are managers held accountable for implementing the 
Results Act and improving performance?
    Response. We are in the process of establishing specific 
performance elements for our senior management with regard to GPRA 
requirements. Additionally, it is our intent that the Annual 
Performance Plan will contain specific results expectations that can be 
attributed back to senior managements effectiveness.
    Mr. Skeen. How is the agency using Results Act performance goals 
and information to drive daily operations?
    Response. RMA intends to establish a baseline that contains the 
necessary benchmarks to gauge our level of effectiveness and 
efficiency. We are beginning that process today. Once we have 
established our Annual Performance Plan, we will have the components 
necessary to manage our daily operations.
                           revenue insurance
    Mr. Kingston. As you know, cotton farmers in my home state of 
Georgia have the opportunity--although a very short (time-wise) 
opportunity--this year to purchase the popular Crop Revenue or CRC. I 
appreciate this fact and thank the Department and FCIC Board of 
Directors for taking this action.
    I have also reviewed your budget proposal which contains a 
legislative initiative that would make it appear that the Federal Crop 
Insurance Corporation does not have the authority to offer CRC or other 
revenue products on a nationwide basis. Could you help understand that 
position better, specifically:
    Does the Department feel that it does not have the authority to 
expand CRC or other privately-developed revenue products nationwide or 
is that restriction simply on government-developed products?
    Response. The Department does have authority to expand CRC on a 
nationwide basis. FCIC does not have authority to offer its own revenue 
products on a nationwide basis but is requesting an amendment to the 
FCIC Act which will authorize such.
    Mr. Kingston. Are the savings generated by the proposed reduction 
in the rate paid to private companies for administrative and operating 
expenses proposed solely as a means of funding the nationwide expansion 
of revenue in administrative and operating expenses?
    Response. No--the reduction is in part due to the joint GAO/FCIC 
study of the financial arrangements between FCIC and insurance 
providers for delivering crop insurance to producers. This study 
indicates insurance providers may have been compensated in excess of 
their actual administrative costs.
    Mr. Kingston. What is the revised loss ratio target that your 
revenue insurance expansion legislative proposal will contain?
    Response. The revised loss ratio target is 1.085 for the 1998 
reinsurance year and 1.06 for 1999 and beyond.
    Mr. Kingston. When can we expect to see the legislative proposal?
    Response. It is our understanding that the legislative proposal is 
currently being reviewed by the Administration and will be forwarded to 
you as soon as possible.
                   catastrophic coverage availability
    Mr. Fazio. What is the policy of the Risk Management Agency in 
providing catastrophic insurance to trade associations and 
cooperatives--what would be the benefit and drawbacks to changing the 
policy to permit this?
    Response. The Risk Management Agency's policy is that producers 
must pay administrative fees to purchase catastrophic coverage. Several 
insurance companies have entered into agreements with associations and 
cooperatives to purchase lists of member producers and an endorsement 
of the insurance company by that same association or cooperative. There 
is, however, no agreement between RMA and these associations and 
cooperatives to provide RMA with an opportunity to ensure that our 
policy regarding payment of fees is adhered to. RMA relies on the 
insurance company reinsured by FCIC to follow the established policy.
    Associations and cooperatives have attempted to pay fees for 
producers through these agreements. RMA is concerned that many of the 
cooperatives and associations may not understand the impact on RMA's 
ability to properly regulate the program. For example--RMA relies on 
third party verification of yield information. Many of the cooperatives 
and associations are responsible for tracking this information since 
the producer's crops are marketed through these organizations. Also, 
RMA needs unbiased input from many of these organizations in order to 
develop new crop programs and properly rate the product. The monetary 
incentives being offered by some insurance companies to these 
associations and cooperatives may undermine the integrity of this 
information and input.
    Most associations and cooperatives are endorsing CAT coverage. CAT 
may meet the needs of certain producers, however, CAT could not be 
expected to protect a producer's income when non-catastrophic losses 
occur. As a safety net--CAT coverage would only provide coverage for 50 
percent of the producer's yield and 60 percent of the established 
price--a guarantee of 30 percent. RMA is concerned that CAT coverage on 
``specialty'' crops, such as those grown in California and Florida, 
significantly increase the loss exposure to the Federal government--
specialty crops provide high dollar per acre coverage. This exposure 
coupled with the 100 percent subsidized premium for CAT coverage may 
significantly increase the Federal government's loss exposure.

           United States Agency for International Development

                          cooperating sponsors
    Mr. Skeen. How does USAID encourage Cooperating Sponsors to develop 
food aid programs? Please provide any USAID guidance or notice from 
1996 asking Cooperating Sponsors to develop and submit Title II 
programs to USAID?
    Response. There are many mechanisms USAID uses to support private 
voluntary organizations and encourage their participation in the P.L. 
480 Title II program. These mechanisms cover the full range of non-
emergency programs, including maternal and child health, food-for-work 
and school feeding.
    First, we maintain a continuous dialogue with the community of 
private voluntary organizations. Overall, USAID works closely with the 
Advisory Committee on Voluntary Foreign Aid (ACVFA), which represents 
the entire private voluntary organization community on a broad range of 
issues ranging from development assistance strategy to the federal 
procurement regulations. There are over 400 private voluntary 
organizations which have registered with USAID and which participate in 
this dialogue with USAID, either directly or through ACVFA.
    With respect to Title II food aid programs, USAID works closely 
with the private voluntary organizations through the Food Aid 
Consultative Group, an advisory group P.L. 480 provides to assure close 
consultation on all food aid matters. This group meets at least twice a 
year in formal session and has constituted several working groups to 
review and advise on food aid issues.
    Second, the private voluntary organizations review and contribute 
to USAID guidance and regulations on food aid programs, including 
mother-child care, food for work and school feeding. For example, they 
are now completing review of the guidance for so-called Development 
Activity Proposals, which document requests for new programs, and for 
requests for resources for ongoing programs. This guidance will soon be 
published in the Federal Register, to reach out to as broad a community 
as possible.
    Third, we have encouraged our USAID field missions to work closely 
with private voluntary organizations in the field and to include them 
as partners in deciding objectives for U.S. assistance programs. This 
involvement allows for outreach to organizations which may not be 
familiar to USAID in Washington but are interested in participating in 
field operations.
    So I believe we do a good job of reaching out to the private 
voluntary organization community and encouraging new Title II non-
emergency programs. Just last year, for example, we received fifty 
eight proposals for new programs from eighteen private voluntary 
organizations.
                      estimating commodity budget
    Mr. Skeen. The FY '98 budget request asks for $837 million to 
provide 2.4 million metric tons of commodities. How did you determine 
that this is a sufficient amount for that tonnage level?
    Response. The budget level was established by OMB based on their 
assessment of program needs. Since prices fluctuate, no direct linkage 
was made to tonnage levels. In the FY 1998 budget request, $837 million 
was requested, which will provide approximately 2,025,000 metric tons 
of commodity. This anticipated tonnage level was allocated among 
development and emergency activity commodity requirements for FY 1998.
    The total commodity requirement was then multiplied by the 
projected commodity prices (provided by USDA) and freight rates to 
arrive at the estimated total cost of FY '98 Title II activities.
    Mr. Skeen. Please provide the amount spent and tonnage provided 
from FY '94 through FY '96.
    Response. The table below shows the total tonnage and cost of that 
tonnage provided in each of the fiscal years you requested.

                            P.L. 480 TITLE II                           
------------------------------------------------------------------------
                                                                 U.S.   
                  Fiscal year                   MTN's (000)   dollars in
                                                               millions 
------------------------------------------------------------------------
1994..........................................        2,092       $919.8
1995..........................................        2,098        860.3
1996..........................................        1,694        841.5
------------------------------------------------------------------------

                processed, blended, and fortified foods
    Mr. Skeen. What percentage of the tonnage in each of those years 
was comprised of processed, blended and fortified foods?
    Response. We are providing the requested information in tabular 
form. The right-hand column of the table below shows the percentage of 
the total Title II tonnage that was processed, blended and fortified 
foods. In addition, we are providing in the center column the 
percentage of Title II processed, fortified, and bagged commodities 
that were procured in adherence to Section 204(b)1 of PL 480 which 
establishes the minimum levels of value-added commodities the program 
should provide.

                            P.L. 480 TITLE II                           
                 Processed, blended, and fortified foods                
------------------------------------------------------------------------
                                                              Percent of
                  Fiscal year                   Value added     total   
                                                  mandate      tonnage  
------------------------------------------------------------------------
1994..........................................          76%           86
1995..........................................           77           86
1996..........................................           75           79
------------------------------------------------------------------------

                            title ii program
    Mr. Skeen. Please provide for the record the Title II program, by 
country and commodity, for fiscal year 1996.

    [Clerk's note.--The information can be found in the Foreign 
Agriculture Service written questions and responses.]
                     internal transportation costs
    Mr. Skeen. What was the cost of internal transportation during 
fiscal years 1995 and 1996, and what is the estimate for 1997?
    [The information follows:]

        Fiscal year                                         U.S. dollars
1995 (final)............................................      98,691,400
1996 (final)............................................      86,038,900
1997 (estimate).........................................      87,000,000

    Mr. Skeen. How do you determine what internal transportation costs 
are allowable under the program?
    Response. Internal transportation costs are those that are related 
to the movement of commodities from the point of entry or port of entry 
in the recipient country to the distribution site(s) where the 
beneficiaries receive the food. In accordance with Title II 
legislation, USAID only pays these costs when they are related to 
activities for urgent and extraordinary relief. Allowable costs under 
internal transport are those directly related to the internal 
transportation, storage, monitoring, and distribution of Title II 
emergency commodities.
                     external transportation costs
    Mr. Skeen. What was the cost of external transportation during 
fiscal years 1995 and 1996, and what is the estimate for 1997?
    [The information follows:]

                                                                        
                         [Dollars in thousands]                         
------------------------------------------------------------------------
               Fiscal year                     Ocean          Inland    
------------------------------------------------------------------------
1995 (final)............................      $200,359.1       $84,307.0
1995 (final)............................       179,015.3        58,461.9
1995 (estimate).........................       180,000.0        60,000.0
------------------------------------------------------------------------

    Mr. Skeen. Please describe what external transportation costs are 
allowable.
    Response. Title II may pay the ocean transportation costs incurred 
in the delivery of commodities from the port of loading in the United 
States to the primary discharge port in the recipient country. Also, in 
the case of a land-locked country, Title II may pay the transportation 
costs associated with the delivery of the commodity from the primary 
discharge port to the primary storage point in the land-locked country.
                          school lunch program
    Mr. Skeen. Please describe the school lunch program under Title II, 
and let us know how many children were involved in this program during 
calendar year 1996.
    Response. A successful school feeding project will: (a) provide a 
nutritional supplement to school children coming from households in a 
country or region within a country which is clearly food deficit; and 
(b) encourage families to enroll/maintain their children in school. The 
project will have a demonstrated host government (policy and financial) 
commitment to education in general, and basic education in particular. 
Active community participation, in particular through parents' 
associations, is essential and the services required for operating a 
school feeding program--cooks, kitchen helpers, guards--are often 
covered by the community, either by providing such services itself or 
by contributing cash to compensate those engaged to perform the 
services. Based on fiscal year 1996 records, school feeding activities 
benefited over 3.85 million children.
                  monetization of title ii commodities
    Mr. Skeen. Please explain monetization. In what programs is it 
used? How much was monetized in fiscal year 1996?
    Response. Monetization is the sale, by a Cooperating Sponsor, of 
Title II commodities in the recipient or neighboring countries to 
obtain foreign or local currencies to support humanitarian and 
development activities. The currencies generated by the monetization of 
Title II commodities are used to support activities related to 
household nutrition and agricultural productivity, such as maternal 
child health activities and food for work activities. In fiscal year 
1996, approximately 189,780 metric tons, with a total commodity and 
freight value of over $86 million, were monetized.
                          title iii agreements
    Mr. Skeen. During fiscal year 1996, what agreements were signed 
under Title III and in what amounts?
    Response. During FY 1996, the following Title III agreements were 
signed:

      Bangladesh--$7.5 million.
      Haiti--$10 million.
      Honduras--$5 million.
      Nicaragua--$4 million.
      Ethiopia--$25 million.

    The three-year, $20 million agreement for Eritrea was signed in FY 
1996, with the first tranche of $9 million provided in early FY 1997.
    Mr. Skeen. Please describe how these title III funds were used.
    Response. Title III funds were used to support a variety of policy 
reforms and programs in agriculture, primary education and health care, 
and rural infrastructure development.
    In Bangladesh, Title III supported a primary education program for 
poor children; policy reforms to reduce government interventions in 
food marketing; and government and nongovernmental organization 
collaboration to increase agricultural productivity and food-based 
nutrition.
    In Eritrea, the Title III program is structured around the 
country's national food security policy. Disbursement of assistance is 
based on Eritrean demonstrated commitment to their own policies and to 
measurable results against these commitments rather than to USAID-
determined benchmarks. The program reinforces not only Eritrean 
ownership of policy reform but also Eritrean leadership.
    In Ethiopia, the Title III program focuses on policies associated 
with liberalizing food markets and the development of targeted safety 
net programs. It also promotes restructuring and eventually privatizing 
state-owned enterprises engaged in agri-based manufacturing, 
distribution, and marketing; developing efficient agricultural input 
markets, with particular emphasis on fertilizer; and creating an 
environment supportive of private sector involvement in the grain and 
agricultural inputs markets.
    In Haiti, policy reform has focused on two objectives: (1) 
liberalization of the country's agricultural markets and (2) the 
development of a National Environmental Action Plan that also will 
address many of the numerous underlying constraints to increasing 
agricultural production and productivity in the country.
    The Title III local currencies were used to support the creation of 
short-term jobs to build or repair productive infrastructure and the 
expansion of agricultural productivity enhancing and soil conservation 
activities to reach additional poor hillside farmers. Funds were also 
used to support activities primarily in the social sectors being 
carried out by the three Title III cooperating sponsors.
    In Honduras, the current program builds on earlier program 
successes in improving food availability and access by implementing 
land tenure reforms begun under previous agreements; continuing 
commitments to the liberalization of agricultural trade; creating an 
agricultural marketing information system; strengthening agricultural 
research and extension; and privatizing state enterprises. A 1994 
evaluation of the earlier program concluded that the Title III 
supported policy reforms had a significant and measurable impact on the 
availability and access to food among the country's rural poor.
    Title III local currencies were used to support the government's 
family assistance program, which provides a social safety net during 
the economic adjustment process, as well as land titling, market 
information, and small farmer access to financial, agricultural 
processing, and marketing services.
    In Nicaragua, the policy conditionalities in the FY 1993-1996 
agreement required the Government to remove the ban on agricultural 
exports, eliminate the sale of donated food at below market prices, 
adopt open trade policies (including the elimination of some input 
taxes and the facilitation of the legal and administrative environment 
for exports), and to allocate at least 40 percent of the Ministry of 
Health's budget to primary health care. The economic reforms led to an 
increase in producer prices for basic grains which contributed to a 
substantial increase in the total value of agricultural exports and in 
food grain production.
    Title III local currencies were used to provide small farmers with 
technical and marketing support for both traditional and non-
traditional crops, including assistance in agro-forestry, land titling 
and improved on-farm grain storage; microenterprise credit; and support 
for improvements in primary health care.
                         title ii ngo proposals
    Mr. Walsh. An important element of the Title II program is that 
programs are sponsored overseas by non-governmental organizations. How 
does USAID ask private voluntary organizations to submit Title II 
proposals for such things as mother-child care, food-for-work and 
school feeding? For instance, does USAID send releases or notices 
encouraging PVOs to submit proposals?
    Response. There are many mechanisms USAID uses to support private 
voluntary organizations and to encourage their participation in the 
P.L. 480 Title II program. These mechanisms cover the full range of 
non-emergency programs, including maternal and child health, food-for-
work and school feeding.
    First, we maintain a continuous dialogue with the community of 
private voluntary organizations. Overall, USAID works closely with the 
Advisory Committee on Voluntary Foreign Aid (ACVFA), which represents 
the entire private voluntary organization community on a broad range of 
issues ranging from development assistance strategy to the federal 
procurement regulations. There are over 400 private voluntary 
organizations which have registered with USAID and which participate in 
this dialogue with USAID, either directly or through ACVFA.
    With respect to Title II food aid programs, USAID works closely 
with the private voluntary organizations through the Food Aid 
Consultative Group, an advisory group P.L. 480 provides to assure close 
consultation on all food aid matters. This group meets at least twice a 
year in formal session and has constituted several working groups to 
review and advise on food aid issues.
    Second, the private voluntary organizations review and contribute 
to USAID guidance and regulations on food aid programs, including 
mother-child care, food for work and school feeding. For example, they 
are now completing review of the guidance for so-called Development 
Activity Proposals, which document requests for new programs, and for 
requests for resources for ongoing programs. This guidance will soon be 
published in the Federal Register, to reach out to as broad a community 
as possible.
    Third, we have encouraged our USAID field missions to work closely 
with private voluntary organizations in the field and to include them 
as partners in deciding objectives for U.S. assistance programs. This 
involvement allows for outreach to organizations which may not be 
familiar to USAID in Washington but are interested in participating in 
field operations.
    So I believe we do a good job of reaching out to the private 
voluntary organization community and encouraging new Title II non-
emergency programs. Just last year, for example, we received fifty 
eight proposals for new programs from eighteen private voluntary 
organizations.
    Mr. Walsh. Could you submit to the Subcommittee any USAID releases 
or notices asking for PVO proposals for Title II programs?
    Response. We have submitted for the record the FY 1998 draft Title 
II guidelines for food aid development activities as requested. These 
guidelines, while admittedly detailed, are the product of a 
collaborative effort of USAID and members of the Food Aid Consultative 
Group, established by Section 205 of P.L. 40. We believe that these 
guidelines redefine and focus food security strategic objectives and 
promote the more efficient and effective management of food aid.

    [Clerks note.--The FY 1998 draft Title II guidelines for 
food aid development activities is too lengthy to print and is 
retained in the Committee files.]
                    food security commodity reserve
    Mr. Walsh. In Mr. Rogers' testimony, he mentions the Food Security 
Commodity Reserve, which is important as a back-up for P.L. 480 Title 
II to provide food for emergency needs. However, it seems that there 
are some reimbursement and replenishment problems with the Reserve. I 
would appreciate it if both USDA and USAID could submit recommendations 
about how the Food Security Commodity Reserve could be improved to make 
it an effective means of providing food for emergencies.
    Response. (USAID) Unfortunately, there are no cost-free ways to 
restock this reserve. Additional appropriations would be one route, but 
they obviously are very difficult to come by in the current era of 
tight budgets. Another would be to provide new authority for USDA to 
use P.L. 480, Export Enhancement Program (EEP) and other funds 
remaining at the end of the year to buy commodities to restock the 
reserve. However, the amounts available are usually small and 
uncertain, so this approach might not accomplish the objective. A third 
would be to recycle the P.L. 480 funding which in short supply 
situations in the U.S. is used to ``buy'' commodities from the Food 
Security Commodity Reserve (FSCR). Under the current system, food 
stocks come from the FSCR but P.L. 480 funds go back to Commodity 
Credit Corporation (CCC) to make CCC whole for the initial procurement 
costs. Using the P.L. 480 funds to restock the reserve would mean CCC 
would be left holding the bag indefinitely for these initial costs, 
which were incurred in the early 1980's.
    As a practical matter, the Food Security Commodity Reserve is the 
last resort the U.S. has in responding to unanticipated food 
emergencies overseas. Since Section 416(b) surplus commodities are no 
longer available and supplemental appropriations are very difficult to 
obtain, the food reserve has become even more important. Since we do 
not see a likely means for replenishing the reserve, we are managing 
the resource carefully to preserve it for as long as possible.
    Response. (USDA) Mr. Walsh, we certainly agree with Mr. Rogers' 
testimony about the importance of the Food Security Commodity Reserve 
in helping to assure our ability to respond to emergency food needs. We 
also understand the difficulties, especially in this period of tight 
budgets, in addressing reimbursement and replenishment of the Reserve. 
We will, of course, be glad to work with both Subcommittee and USAID 
staff to see if there is an easier way to address these requirements or 
to identify any other ways to further improve the usefulness of this 
Reserve.
              title ii food aid for non-emergency programs
    Mr. Walsh. Mr. Rogers, I have several questions regarding some 
points you made in your written statement about the programming of 
Title II food aid for non-emergency programs.
    On page 4, you state that non-emergency Title II resources will 
concentrate on improved nutrition or agricultural productivity 
objectives. Although these both have merit, this seems to place severe 
limitations on the program and overlooks many other important 
contributors to food security. For instance, poverty is directly linked 
to food insecurity. Why can't programs be approved that help improve 
the incomes (and purchasing power) of the poor? Why is school feeding 
considered an unusual case for food aid, since it is one way to 
encourage poor families to send their children to school and education 
is particularly important for long-term human development? Since 
private voluntary organizations and cooperatives are responsible for 
designing and implementing Title II regular programs, and under section 
205 of the P.L. 480 they must be consulted by USAID on the development 
of program guidance and procedures, do they support these programming 
limitations?
    Response. You are referring to the priorities which have been 
established for non-emergency Title II programs. These priorities 
provide guidance to the private voluntary organizations and USAID's 
field missions on those activities which are most likely to be 
successful in promoting food security in poor, food deficit countries. 
They were developed because we recognized there was a significant 
change in the environment in which the United States provides its food 
aid and also because GAO, in an audit of U.S. food aid programs, 
strongly recommended we develop such guidance.
    These guidelines provide program managers with a general sense of 
what works best in improving food security. As such, we expect that 
over time Title II resources will concentrate in these areas. I would 
like to emphasize, however, that they are not intended to exclude 
activities which might make a major contribution to food security in 
any specific country setting. You are absolutely right that there are 
good examples of other types of programs which improve incomes and as a 
result enhance food security. School feeding programs can also be 
worthwhile interventions. In fact, we have recently approved major 
school feeding programs in Burkina Faso and in Bolivia.
    The private voluntary organizations participated in developing this 
program guidance through an extensive series of briefings and through 
full and open discussion. While the private voluntary organizations 
represent a broad diversity of views, I believe they agree with these 
priorities. At the same time, I think it fair to say they would define 
the areas for intervention broadly, and they strongly support the 
position that other interventions can successfully enhance food 
security and should be given full consideration for approval.
                   aid missions in sub-sahara africa
    Mr. Walsh. On page 4, you state that AID is ``decentralizing'' 
operational decisions to AID field missions. I understand that AID is 
phasing out many missions and that several food insecure countries in 
sub-Sahara Africa either do not or will not have missions. Which sub-
Saharan countries have a mission, which do not and which are being 
phased out?
    Response. There are ongoing bilateral USAID assistance programs in 
20 sub-Saharan countries. These are: Benin, Eritrea, Ethiopia, Ghana, 
Guinea, Guinea-Bissau, Kenya, Madagascar, Malawi, Mali, Mozambique, 
Namibia, Nigeria, Rwanda, Senegal, South Africa, Tanzania, Uganda, 
Zambia and Zimbabwe.
    In addition, USAID provides assistance through its regional 
programs (located in Botswana, Cote d'Ivoire and Kenya) to 14 sub-
Saharan countries. These are: Botswana, Cote d'Ivoire, Central African 
Republic, Comoros, Congo, Djibouti, Equatorial Guinea, Gabon, 
Mauritania, Mauritius, Sao Tome and Principe, Seychelles and Sierra 
Leone.
    Finally, USAID provides limited humanitarian or emergency 
assistance programs to five countries: Angola, Burundi, Liberia, 
Somalia and the Sudan.
    USAID has closed its missions in twelve countries, starting in FY 
1994, including Botswana, Burkina Faso, Burundi, Cameroon, Chad, Cape 
Verde, Cote d'Ivoire, Gambia, Lesotho, Swaziland, Togo, and Zaire. 
USAID expects to close Niger in 1998 and to graduate Zimbabwe, Namibia 
and South Africa in 2000. Countries without bilateral missions, 
however, can continue to participate in regional or USAID-funded 
private voluntary programs, depending on the nature of their 
development problems.
    Mr. Walsh. Under section 202 of P.L. 480, private voluntary 
organizations and cooperatives are eligible to develop and implement 
non-emergency Title II programs and such programs can be conducted in 
countries where there are no USAID missions or where the program does 
not fit into an USAID country strategy. What will be the impact of 
decentralization on the ability of private voluntary organizations and 
cooperatives to establish programs in countries without USAID missions 
or where the program does not fit into a USAID mission strategy? Do 
these organizations support this decentralization strategy?
    Response. Decentralization will not have any significant effect on 
the ability of private voluntary organizations to operate in countries 
without USAID missions or to operate where programs do not fit into a 
USAID mission strategy.
    The point of decentralization is to put responsibility for 
operational decisions into the hands of field managers. This allows the 
field team, consisting of both USAID and private voluntary organization 
personnel, to make direct operational decisions on how best to produce 
the results we are all seeking. Accountability for taxpayer resources, 
as represented by final authority to sign and approve official 
documents, will be decentralized to the USAID Mission Director. 
However, we intend that actual operational decisions will be made by 
the team managing the food aid program in the country. That team 
includes the private voluntary organizations.
    We hope ultimately to do something similar in countries where there 
is no USAID mission. We still believe the field managers should be the 
ones making the operational decisions. In this case, the private 
voluntary organization, perhaps in consultation with one of the USAID 
regional offices or USAID/Washington, would make the decisions. Final 
signing authority would rest with a USAID regional office or USAID/
Washington, but that would simply be a matter of routine.
    I would like to point out that we believe food aid programs are 
most likely to produce significant results where they are integrated 
with a USAID mission program. This is so because USAID can bring 
dollar-funded resources, usually in the form of technical assistance, 
to the joint activity. USAID also maintains close coordination with and 
can leverage the resources of other donors. And because we represent 
the U.S. Government, USAID usually has considerable influence with the 
host government. So for all these reasons, which have the effect of 
amplifying the scope and impact of an activity, we give priority to 
integrated private voluntary organization/USAID programs. In short, we 
give priority to these programs because we expect them to produce the 
greatest results. However, we do recognize fully that Title II programs 
where there is no USAID mission or where the food aid is not integrated 
into the mission strategy can also produce results and are therefore 
worthy of full consideration.
    With respect to whether the private voluntary organizations support 
decentralization, I believe they support the concept and agree that 
field managers are best positioned to make operational decisions. The 
private voluntary organizations are also willing to work with USAID to 
see if an acceptable process for implementation can be developed. We 
are now working on three pilot cases--Ethiopia, Peru and Bangladesh. We 
will proceed based on mutual agreement that decentralization improves 
the efficiency and effectiveness of the Title II program. So in the 
end, we will all agree that decentralization is a good idea, or we will 
revert to some form of the current system in which many decisions are 
made in Washington.
              developing u.s. agricultural export markets
    Mr. Fazio. In your testimony discussing both Title II and Title III 
food assistance, you mention the apparent win-win situation whereby our 
former recipients of humanitarian food assistance become some of our 
best agricultural customers. Can you provide some examples, and 
describe the distinction, if any, in the way this occurs with Title II 
and Title III assistance?
    Response. At present, one-third of U.S. farm acreage grows crops 
for export. Most of the growth in U.S. agricultural exports is expected 
to come from two sources: countries in the developing world and 
countries whose economies were once state-dominated and are now in a 
transition to a free market. Nine of the top ten consumer nations of 
American agricultural products were once U.S. food aid recipients. Such 
countries as Brazil, Indonesia, Thailand, Korea, Pakistan and Zimbabwe 
now purchase our farm products in quantities worth many times the value 
of the U.S. food aid they once received. Title II and Title III 
programs presently prioritized those countries that need food most and 
where food insecurity is greatest. Even though the two programs are 
different and address food security problems differently, they both 
foster economic strength and purchasing power thereby providing a link 
to long term sustainable development.
    Mr. Fazio. You note that Title III assistance to encourage 
agricultural reform poses no real threat to U.S. agricultural exports--
can you elaborate?
    Response. First, the program is small compared to U.S. exports. In 
1995, U.S. agricultural exports surged to an unprecedented $54.1 
billion. The United States is now exporting commercially more than $1 
billion in agricultural products a week. In contrast, our Title III 
program this past year shipped 147,000 metric tons of grain worth $51.5 
million to five chronically food insecure countries.
    Second, the poor countries in which Title III is now focused do not 
have any real prospect of becoming U.S. competitors in agricultural 
export markets, even if they do improve their agricultural 
productivity. They need to produce more food in order to feed their own 
people.

[Pages 319 - 666--The official Committee record contains additional material here.]


      
                                         Wednesday, March 12, 1997.

                   FOOD SAFETY AND INSPECTION SERVICE

                               WITNESSES

THOMAS J. BILLY, ADMINISTRATOR
PAT STOLFA, ASSISTANT DEPUTY ADMINISTRATOR
CRAIG REED, DEPUTY ADMINISTRATOR
KAYE WACHSMUTH, ACTING DEPUTY ADMINISTRATOR
JILL HOLLINGSWORTH, ASSISTANT DEPUTY ADMINISTRATOR
WILLIAM WEST, BUDGET OFFICER
STEPHEN B. DEWHURST, BUDGET OFFICER

                           Operating Remarks

    Mr. Skeen. The committee will come to order.
    This afternoon we want to welcome Mr. Thomas Billy, better 
known as Tom Billy, the Administrator of the Food Safety and 
Inspection Service. Mr. Billy and the folks who work at FSIS 
have one of the most important missions in all the U.S. 
Government and that is to protect the meat and poultry products 
of the American consumer.
    This is an agency and a responsibility that the committee 
has strongly supported. Last year I believe that FSIS was the 
only major agency to receive its full funding request.
    Tom, if you would please, make any necessary introductions 
and proceed with your statement. After that, we may even have 
time to take on a few questions about user fees.
    We do want to welcome you. Your entire text will be in the 
record.
    Mr. Billy. Thank you, Mr. Chairman.
    Mr. Skeen. It's good to see you.
    Mr. Billy. It's good to see you too.

                           opening statement

    I'm pleased to appear before you today to discuss the 
President's fiscal year 1998 budget request for the Food Safety 
and Inspection Service. As you may know, I became the 
Administrator of FSIS in October of 1996, after serving as 
Associate Administrator since October of 1994. Now, I've seen 
food safety from several sides; having worked at the National 
Marine Fisheries Service, with its Voluntary Seafood Inspection 
Program, at the Food and Drug Administration, and now at FSIS.
    Today, I will be assisted by Dr. Craig Reed, our Deputy 
Administrator for Field Operations; Ms. Pat Stolfa, Assistant 
Deputy Administrator for Policy; Dr. Kaye Wachsmuth, our Acting 
Deputy Administrator in the Office of Public Health and 
Science; Dr. Jill Hollingsworth, our Assistant Deputy 
Administrator in the Office of Public Health and Science; and 
Mr. William West, our Director of Budget and Finance.
    First, I'd like to thank you very much for supporting our 
1997 budget request. With the full funding you provided us last 
year, we were able to make giant steps forward in implementing 
our two major goals; to make food safer by finding better ways 
to control pathogens, and to make better use or our resources.

                      pathogen reduction and haccp

    The agency reached a milestone last July with publication 
of the final rule on pathogen reduction and Hazard Analysis and 
Critical Control Point System, or HACCP, which will directly 
target and systematically reduce harmful bacteria on raw 
products, as well as other likely hazards.
    It will equip FSIS inspection personnel with the scientific 
and regulatory tools they need to ensure that slaughter 
establishments meet specific standards for food safety 
performance, in terms of such bacteria. And we will also 
reinforce all plants' responsibilities for food safety. We 
began implementation of the rule a little more than a month 
ago. On January 27, all plants had to have plant-specific 
sanitation standard operating procedures or SOPs to ensure that 
they are meeting their responsibility for proper sanitation of 
facilities, equipment, and operation.
    In addition, most slaughter plants were required to begin 
testing for generic E. coli to verify process control 
effectiveness in preventing fecal contamination, the primary 
pathway for pathogenic bacteria. The implementation of these 
two requirements went very smoothly.
    The implementation of HACCP will begin in January of 1998 
for the largest meat and poultry plants. Smaller plants will 
have more time. In recognizing the specific difficulties that 
small plants will face, we have initiated an aggressive program 
to provide assistance to these plans such as developing model 
HACCP plans and scheduling additional conferences and meetings 
to answer their questions.
    Now, by January 25, 2000, all provisions of the final rule 
will have been implemented. The final rules set an important 
framework for change in FSIS, but by no means is it the 
completion of our strategy for change. We must now envision our 
food safety and consumer protection goals in a HACCP world.

                          fsis reorganization

    We realized early on that FSIS would need a new 
organization to make the changes necessary to achieve these 
goals. In fiscal year 1996 we began implementing a sweeping 
reorganization that will help us carry out our regulatory 
responsibilities in a more scientific and efficient manner.
    We are flattening and streamlining management structures, 
both at headquarters and in the field, and consolidating four 
former independent field structures into one. Our 46 field 
offices will be reduced to 18. And we will start opening these 
new district offices shortly.
    We've also established a Technical Services Center in 
Omaha, Nebraska, which will open this summer. Our new structure 
will accommodate the agency's need to function with fewer non-
front line staff. As we streamline the organization, we will 
increase the proportion of resources deployed to the front line 
work force--food inspectors, in-plant veterinarians, import 
inspectors, laboratory personnel, compliance officers, and 
first-line supervisors.

                     haccp opportunities for change

    In addition to streamlining the agency, we believe HACCP 
implementation provides us additional opportunities to improve 
the way we carry out inspection activities, to both improve 
food safety and to make better use of our resources. We want to 
make improvements in our inspection approach and redeploy some 
of our current input inspection work force both to HACCP 
verification tasks, and to new tasks outside of the traditional 
plant setting, in furtherance of our farm-to-table strategy.
    We are planning demonstration projects to explore improved 
methods for conducting inspection, and we will follow a public 
process to obtain input from all stakeholders.

                           regulatory reform

    I also want to take a moment to discuss the FSIS regulatory 
reform strategy. As you know, we have initiated a comprehensive 
review of our entire operations to reduce costs and burdens on 
industry and consumers without compromising public health and 
safety.
    As a part of this effort, I'm pleased to report that we are 
well underway with our efforts to eliminate a number of 
regulatory provisions and convert others to performance 
standards needed for HACCP.
    In December 1995 we published an advance notice of proposed 
rulemaking in the Federal Register describing our regulatory 
reform strategy. At the same time, we published three other 
documents:
    A final rule streamlining our prior approval system for 
labels; a proposal to cooperate more closely with the Food and 
Drug Administration on ingredient approvals; and a proposal to 
allow deviations from FSIS standards of identity and 
composition to produce products with reduced fat, cholesterol, 
and sodium.
    Since then, we have published a proposal to eliminate prior 
approvals for blue prints, equipment, and certain partial 
quality control programs; a proposal to shift from detailed 
command and control requirements in existing regulations to 
performance standards for certain meat and poultry products; 
and an advanced notice of proposed rulemaking to evaluate the 
continuing need for meat and poultry standards of identity and 
composition.
    When our regulatory reform is completed, we will clarify 
the proper roles of government and industry in ensuring safe, 
wholesome, and properly labeled foods.

                       emphasis on public health

    Achieving a significant reduction in the incidence of 
foodborne illness requires the cooperative efforts of public 
health agencies at the Federal, State, and local levels, as 
well as all other parties responsible for and concerned about 
food safety.

                   president's food safety initiative

    On January 25th, the President announced the 
Administration's Food Safety Initiative, which is designed to 
improve the safety of the nation's food supply. FSIS has 
responsibility for a portion of that initiative. In our 1998 
budget request, we are asking for additional funds to expand 
surveillance areas, and to include Campylobacter infections in 
the Sentinel Sites case-control study.
    As you may recall, these Sentinel sites were established to 
provide the baseline estimates for the national incidence of 
the major foodborne diseases and to explore what relationships 
may exist between specific pathogens and the types of meat, 
poultry, or other food products associated with them.
    With the Sentinel site information, FSIS can measure 
progress under HACCP, review HACCP programs, and trigger 
changes to prevent further outbreaks of foodborne illness. 
FSIS' other portion of the Food Safety Initiative involves 
funding for HACCP training for State and local food regulatory 
officials.
    These grassroots regulators have responsibility for 
ensuring food safety at retail shops and restaurants, an area 
where foodborne illness problems can also arise. The requested 
funding will allow us to begin a two-year program to train the 
trainers in HACCP.

                          1998 budget request

    In terms of our 1998 budget request to continue making food 
safety improvements and to accomplish our goals in 1998, we are 
requesting $591.2 million, an increase of $17.2 million over 
the amount provided in 1997. This proposal includes increases 
of $13.7 million for statutory pay increases, $1.1 million for 
the increased cost of State inspection programs, and a net 
increase of $2.4 million for program investments.
    In fiscal year 1998, FSIS will again continue the process 
of transforming the inspection process with no requested 
increase in staffing levels. We are requesting an increase for 
pay costs to maintain current inspection staffing levels so 
that we can cover the slaughter lines and processing 
operations, avoid disruption of the production process, and 
meet industry growth.
    In fiscal year 1998, FSIS proposes to build on the changes 
and the investments we have begun during the last two years. I 
am confident that the results will improve both food safety and 
FSIS' efficiency.

                           user fee proposal

    With respect to user fees, the Administration believes that 
the collection of user fees is essential to the successful 
long-term implementation of meat, poultry and egg products 
inspection reforms. Of the $591.2 million total, legislation 
will be proposed to recover $390 million in new user fees to 
pay for the cost of salaries and benefits, for personnel 
providing direct inspection services. The user fee proposal 
would result in the industry paying about 70 percent of the 
total cost of the program.
    For 1998 we are requesting an appropriation of $201 million 
to cover the remainder of our budget, which involves providing 
laboratory support for inspection, animal production food 
safety investments, investments in new inspection system 
improvements designed to enhance safety and productivity, and 
program administration.
    This proposal is intended to ensure that resources are 
available now and in the future to provide the level of 
inspection necessary to meet the demand for such services and 
to maintain consumer confidence, within a balanced budget 
framework.
    The Federal government must share with industry, who 
derives direct benefits from inspection, the fiscal 
responsibility for providing services that are essential to 
ensuring food safety. To accomplish a balanced Federal budget, 
cost burdens must be shifted from taxpayers to those who 
benefit directly from the provided services.
    The food industry profits in the marketplace from the level 
of consumer confidence provided by the Federal inspection 
programs. Additionally, the inspection programs provide a level 
playing field in maintaining standards of safety, 
wholesomeness, and labeling among individual industry entities 
competing for market advantage.
    Mr. Chairman, this concludes my statement. Thank you for 
the opportunity to testify on how FSIS is meeting its 
responsibilities to improve the safety of meat, poultry, and 
egg products, and thereby reduce the incidence of foodborne 
illness. We would be happy to answer any questions that you or 
other Members of the Subcommittee may have. Thank you.
    [Clerk's note.--Mr. Billy's written testimony appears on 
pages 868 through 900. Mr. Billy's, Ms. Stolfa's, Dr. Reed's, 
Dr. Wachsmuth's, and Ms. Hollingsworth's biographical sketches 
appear on pages 863 through 867. The Food Safety and Inspection 
Service explanatory statement appears on pages 901 through 
902.]

                           user fee proposal

    Mr. Skeen. Well, thank you very much, Mr. Billy. Let's get 
to the subject that I know you're eager to discuss with us. 
Let's get down to brass tacks on this user fee situation.
    The Administration's request would eventually result in 
about a 70 percent financing of FSIS through user fees which 
require authorization. And you say you have legislation that 
will be introduced when, for the authorizing committee?
    Mr. Billy. Yes. I'd like to ask Stephen Dewhurst to address 
that in terms of the status of the legislation.
    Mr. Dewhurst. That legislation is going to be a part of a 
government-wide budget piece of legislation the Administration 
is going to submit. As of this morning, we were advised that 
would be done within the next couple of weeks.
    Mr. Skeen. So, within a few weeks.
    Mr. Dewhurst. Yes.
    Mr. Skeen. Well, we've been through this exercise before. I 
think you're talking about the $201 million which is your total 
budget, would come from appropriated funds. Is that correct?
    Mr. Billy. Yes, sir.
    Mr. Skeen. All right. I'm tempted to say that we'd like to 
tell you today that you can have the $201 million along with 
our sincere and best wishes in trying to get the user fees 
authorized. This is going to be a tough, tough battle, I 
believe. In February OMB told us we'd see legislation that 
would authorize the user fees by March 1. It is now March 12 
and no legislation.
    Mr. Billy, you and this subcommittee share a common burden, 
and unlike OMB we have to work with the real world and real 
money. My first question is, and you've answered that I think, 
about the legislation that will be sent to Congress.
    Steve, you did a good job about telling us within a couple 
of weeks. We will set the clock ticking, but we won't hold you 
to it. Suppose the legislation would actually get signed into 
law this year. How long would it take the Department to produce 
the final regulations for the implementation of the program?
    Mr. Billy. Mr. Chairman, we would be under a very tight 
time frame to propose and finalize regulations that would 
implement a user fee scheme or system to meet the deadline of 
October 1st for fiscal year 1998. Towards that end, we have 
held a public meeting to begin the process of thinking about 
how to develop and implement such a user fee system.
    We believe that there are certain key criteria that need to 
be carefully weighed. They include equity, that is equity 
across the entire industry; integrity, and by integrity we're 
thinking of an approach that will not in any way compromise the 
inspector and the role that the inspector is expected to play 
from a public health perspective in carrying out his or her 
duties in a plant; and then minimum cost. We want to make sure 
that we don't have such a complicated system that it's going to 
cost us an arm and a leg to implement and maintain it.
    So, these are some of the criteria that we're looking at. 
We also recognize that we will need to do a complete cost 
benefit analysis. And we've asked our economists in the 
Department to begin the process of looking at the information 
we will need to carry out such an analysis. It's real important 
that we maintain the level of funding for our agency so that we 
can complete the process of transforming the agency in the 
manner that I've outlined over the next several years. That's 
very critical from a public health point of view. It's also 
critical from an industry point of view as well.

                          interstate shipment

    Mr. Skeen. Last year the Department told the Committee that 
it would consider the federal ban on interstate shipments of 
meat from certain plants. The State of Ohio has asked a federal 
judge to overturn this ban arguing that imported meats can be 
shipped interstate but state-inspected products can not. What 
is the Department's position on interstate shipment of meat? Is 
it possible that additional state-inspected plants will be able 
to ship interstate?
    Mr. Billy. Mr. Chairman, we provided a fairly detailed 
report to the Congress in July 1996, on this issue. In that 
report we made it clear that we are not philosophically opposed 
to the idea of changing the law to provide for such interstate 
shipment. However we recognize that there are several important 
issues that would have to be addressed. We've identified those 
issues. And to ensure that they're fully examined, the 
Department has announced its plans to hold two public meetings. 
We're planning those for June. At those meetings we will invite 
all interested parties to provide to us their input, their 
views in terms of how we address this important issue.

                     incidence of foodborne illness

    Mr. Skeen. A great deal of federal resources are devoted to 
discovery and prevention of contamination in plants and public 
places. Do you have any estimates of the incidence of foodborne 
illnesses that are caused in the home as a result of poor food 
handling or preparation?
    Mr. Billy. Mr. Chairman, in fact this is an area where 
unfortunately there is not good data to provide the kinds of 
estimates that you're asking for. Toward that end, we have 
joined forces with FDA and the Centers for Disease Control and 
Prevention in implementing the Sentinel Site project which 
we're now planning to expand, consistent with the President's 
Food Safety Initiative, into what we're calling ``Food Net.''
    That project will develop the kinds of estimates that 
you're asking for. We think it's very important that we have 
good reliable data, not just in terms of what happens in the 
home, but what happens in every stage in terms of the course 
that food follows to the consumer.
    It is our intent to provide that kind of data to all of 
you. In addition, we have provided a report in the last couple 
of days to the Congress in terms of the data that's available 
from the first year of that project. We encourage you to look 
at this information and we'd be happy to answer any questions.
    Mr. Skeen. Do we have it?
    Mr. Billy. Yes, sir. We just provided it within the last 
couple of days.
    Mr. Skeen. Well, the reason we bring that up is because 
we've heard an awful lot about the inspection process and what 
the government can do and so forth. And we have a great system 
in the United States about the purity and sanity of our food. 
There isn't any question about it, to the point where we've got 
people today that take too much for granted about the 
preparation and the handling of food in the home.
    They'll let it sit out too long or something of that kind. 
But it reflects back on the government programs to do the 
inspections. That's a real tragedy when that happens. So, I'll 
hold the rest of my questions for a time.
    Mr. Fazio, we'll let you get your turn and then we'll go 
vote.

                      inspection of exotic species

    Mr. Fazio. Well, thank you, Mr. Chairman. Welcome to all of 
you. I have a unique situation out in my part of California 
where we have an exotic industry that's developing, Emu Ratite. 
Some people even attempt to domesticate ostrich. And yet they 
can't be handled in USDA inspection facilities without unique 
and additional costs for veterinary attendants which can make 
it prohibitive.
    What criteria or threshold do specialty meat products have 
to reach in order to come under the same consideration that 
traditional poultry, beef, or other domesticated animals 
currently are dealt with?
    How can we broaden the consideration to some of the new and 
more innovative products that are gaining credence in 
restaurants that are developing followings because of, say, low 
fat content or other benefits that some people think can be 
derived without inordinately burdening the Department?
    Mr. Billy. I'd like to ask Dr. Reed to respond to that 
please.
    Dr. Reed. We have a number of folks that are interested in 
receiving voluntary inspection, which is the inspection that 
you referred to where the packing house bears the entire cost 
of inspection. Right now we do voluntary inspection for 
ostrich, emu, rhea, and game products on the meat side.
    Mr. Fazio. When you say game, you're talking deer and elk?
    Dr. Reed. Buffalo, deer, yes; if they wish to have them 
inspected. There is not a requirement that those products be 
inspected right now.
    Mr. Fazio. But for all practical purposes you can't sell 
them to restaurant trade or in the market unless you have.
    Dr. Reed. There are State and local governments that ask 
for those products to be inspected before they're allowed in 
their State.
    Mr. Fazio. And many consumers would.
    Dr. Reed. Yes.
    Mr. Fazio. Most restaurateurs would.
    Dr. Reed. I would think so.
    Mr. Fazio. So, for practical purposes, you need it.
    Dr. Reed. Yes.
    Mr. Fazio. So, how can we move to a more affordable program 
that will accommodate the more innovative product?
    Dr. Reed. Well, certainly I think we're trying to make sure 
that we don't over staff when we provide inspection to those 
local establishments, and make sure that the fees we charge are 
not only reasonable, but that they are accurate to recover the 
government cost to provide an inspector for that activity.
    And I think we have discussed internally, and those things 
still are under discussion, to see whether there needs to be 
another look at the definitions in the poultry regulations 
concerning the classes of poultry. Our policy people are 
reviewing those areas right now. We haven't reached any 
conclusions on that yet.
    I will tell you that we have an inspection force that is 
stretched right now; and additional demands for mandatory 
inspection are going to be met by pulling resources from other 
places in the program.
    Mr. Fazio. Mr. Billy, did you want to comment?
    Mr. Billy. Yes. The other thing I would add is I would not 
want the availability of inspection to be an impediment to the 
development of those new industry sectors because it is 
important that the consumer be confident about those products.
    We're now providing inspection services to what is really a 
brand new industry sector on a voluntary, user fee basis. But 
as appropriate, we need to look at it and see if we in fact 
need to shift and cover that through mandatory inspection.
    Mr. Fazio. Well, what is it that would bring you an 
awareness that we are creating an impediment? I mean there is 
additional costs for a veterinary meat inspector. And there are 
travel costs involved in bringing people to places where they 
normally wouldn't be. You wouldn't require a veterinarian to be 
on site.
    It's obvious to me that it's beginning to be an impediment. 
And that there are exotic products, and there are game products 
that are ready to move into the market but are being held back 
because your resources apparently aren't sufficientto reach 
them. Do you think there is validity to my assertion?
    Mr. Billy. As Dr. Reed indicated, we in fact are now 
looking at that very question because there are increasing 
demands for that kind of inspection support. We need to reach a 
decision about whether we should request additional funds that 
would be necessary to provide that additional inspection.
    Mr. Fazio. Well, I appreciate your attention to it. I'd 
like to be back in touch with you to see if we can focus your 
concern a little more specifically. We will be working with you 
on that.
    Mr. Skeen. With your forbearance, we will recess for awhile 
and go get this vote out of the way. We will be right back. 
Thank you, Mr. Billy, and thank you panel.
    [Recess.]
    Mr. Skeen. We're back on the record. Mr. Fazio.

                 species covered by poultry regulations

    Mr. Fazio. Thank you, Mr. Chairman. I'll wrap up here so we 
can have Mr. Latham take some time. I understand that some 
conversation has occurred since we recessed that makes it clear 
that the ratite, or at least the ostrich, industry might be 
allowed to be counted as a part of the National Poultry 
Improvement Plan under APHIS.
    Is there some legal authority for this strange bird to be a 
part of our poultry inspection? Perhaps you could answer more 
explicitly.
    Dr. Reed. Yes. Through our regulation, we define poultry as 
chickens, turkeys, geese, guineas, and ducks. Ostrich and other 
ratite are not included. So, there is not an inclusion in our 
regulation of any ratite.
    Mr. Fazio. So, we'd have to make changes. You don't have 
the authority to do any of this administratively.
    Dr. Reed. It would be a regulatory change.
    Mr. Billy. We do have the authority.
    Mr. Fazio. You have the authority. You haven't exercised 
it.
    Mr. Billy. You have to do it through regulation.
    Mr. Fazio. Yes.
    Mr. Billy. We could do it through legislation, I suppose, 
but maybe we wouldn't have to. I don't know.
    Dr. Reed. My understanding of the existing legislation is 
that it is generic in terms of poultry. So, I'm not sure that 
it would require a legislative change.
    Mr. Fazio. Well, perhaps we could have some more questions 
placed in the record at this point. And we will see what we can 
gather. I'm interested in that way of establishing a threshold, 
as I indicated earlier, which I didn't really get a response 
to. I don't think there is much of a process at this point that 
we could point to.
    I do hope we can follow-up with some cost estimates too of 
just how much of a market that there is out there, and at the 
same time what it might cost to treat it more in the normal 
process of inspecting as we would a domestic animal. Thank you.
    [The information follows:]

    FSIS has no reliable data on ratite production. Estimates 
of live animal production from the various ratite associations 
vary widely. FSIS provides voluntary inspection for ratites 
upon request. However, the Agency does not record the slaughter 
of ratites as a separate category in its animal disposition 
reporting system.
    FSIS is unable to estimate the cost of inspection due to 
considerable uncertainty regarding the scope and growth of the 
industry at this time. Anticipated costs would comprise both 
Agency and industry costs associated with implementing a 
mandatory inspection programs. Agency costs may include the 
cost of additional inspectors; training activities; program 
development activities; chemical residue analysis; and 
microbial baseline studies. Industry costs would involve 
developing and implementing HACCP plans as well as meeting 
other regulatory requirements.

    Mr. Skeen. The Department doesn't want to do anything to 
stick it's neck out on these ostriches right now. Mr. Latham.

                    cost impact of user fee proposal

    Mr. Latham. Thank you very much, Mr. Chairman. I'll be very 
brief. I've got another hearing I have to attend at 2:00 p.m. 
It's expected that the cost of the user fees for meat 
inspection will be passed on to the consumer. Have you 
estimated how much affect this will have on the feeding 
programs at USDA and the poor people who are purchasing meat?
    Mr. Billy. No, we haven't, sir. We have started that 
process and asked our Economic Research Service to develop 
those kinds of analysis. They're in the process of doing that.
    Mr. Latham. When would you expect to know what the cost is 
going to be?
    Mr. Billy. I'm not sure. I could go back and check and let 
you know. I mean I haven't gotten any kind of an estimate from 
them. So, I'm uncertain.
    [The information follows:]

    The ERS user fee analysis has not been completed.
    FSIS expects the analysis to be completed by the end of 
June may 1997 and a copy will be provided to the Committee at 
that time.

                              hepatitis a

    Mr. Latham. Just briefly, there is another real concern I 
have; regarding the food safety initiative with Salmonella and 
E. coli. One foodborne illness that's not covered is Hepatitis 
A. And it's a local issue for me in that there was a community-
wide outbreak in Sioux City back in 1995.
    And just this week in Council Bluffs, Iowa there was 
another outbreak. There is data supporting the fact that there 
is more Hepatitis outbreaks in restaurants and delis than E. 
Coli. Isn't this an important problem and why isn't that 
included?
    Mr. Billy. I would like for Dr. Wachsmuth to address that. 
Before she joined us from FDA, Dr. Wachsmuth worked for over 20 
years at the Centers For Disease Control and Prevention and is 
a recognized expert.
    Mr. Latham. I understand. Hepatitis can be prevented with a 
vaccine. Am I right?
    Dr. Wachsmuth. Yes. It can. I think one reason we don't 
include this in the same way that we talk about Salmonella and 
E. Coli is that it's generally transmitted person-to-person. 
When it is through food, it's usually through food handling; 
almost always. The organism source is human.
    So, there is a different route and a different way to 
control it. I think our efforts at retail that Mr. Billy 
described earlier, in terms of trying to get HACCP into retail 
so that people think in terms of the process and where a 
packaging might come into the food chain is how we're 
approaching this particular problem. We do also offer advice 
through pamphlets and through our hotline if anyone calls in 
terms of food handling problems.
    Mr. Latham. Isn't it also a fact though that most of the 
other problems are also in the handling?
    Dr. Wachsmuth. Well, there are animal reservoirs for most 
of these other pathogens that we're talking about. And for 
Hepatitis A, it's the human reservoir. So, it's a little 
different epidemiologically. So, your control measures will be 
a little different.
    Mr. Skeen. That's a very interesting question. And by the 
way, here is a map of the incidents of Hepatitis. It's from the 
CDC. The West Coast and Southwest have a real problem. Mr. 
Walsh.

                          haccp implementation

    Mr. Walsh. Thank you, Mr. Chairman. Welcome. Thank you for 
your testimony. I'd like to ask some questions regarding the 
HACCP implementation if I may. With the implementation of the 
new regulations, what obstacles have you confronted within the 
agency or within the industry at this point?
    Mr. Billy. To this point I think the principal challenge we 
and the industry both had was the training that was needed to 
understand what was required.
    Mr. Walsh. Training of food safety inspection?
    Mr. Billy. Food safety inspection personnel, as well as the 
training that industry needed to address the sanitation SOPs, 
and the sampling for generic E. Coli. I think the other key 
challenge was communication. And I mean it in a very generic 
way. Getting the word out to over 6,000 plants in a manner that 
people understand.
    They had questions about doing SOPs in a way that will 
satisfy FSIS. We addressed that concern through a hotline that 
we established well-before the deadline. In fact, we've 
continued that hotline. So, anyone, our own personnel or plant 
personnel, can call and ask questions to ensure that they have 
an understanding and feel confident in moving forward to meet 
the requirements. So, I think it's those two keys. It was the 
training and the communication that were so important. I think 
the results we accomplished, and how smoothly it went is 
testimony to those two being the real key.
    Mr. Walsh. I'll get back to that in a second as far as the 
communication is concerned. But have there been any physical or 
structural problems for the industry adapting to HACCP, 
perceived or otherwise?
    Mr. Billy. Sir, for the HACCP part of the rule, the first 
deadline is January of 1998. So, we're really on the front edge 
of that being phased in. What's happened so far is the 
implementation of the sanitation standard operating procedures, 
SOPs. This will be followed next year by the big plants written 
plans and implementing of HACCP plans and verification by our 
inspectors.
    I'm not aware of any structural problem. The feedback we've 
gotten from industry and across the board is that it's worked 
pretty well.

                    communication with stakeholders

    Mr. Walsh. Prior to the promulgation of HACCP, USDA agreed 
to host a series of meetings, round tables. I think the 
industry was pleased that USDA agreed to that. Can you give us 
your impression of those sessions and what has come out of it? 
Did that help this communication problem?
    Mr. Billy. These sessions helped communication immensely. 
They were invaluable. We were able to share with all of 
thestakeholders our current thinking at that time on the final rule 
based on all the public input we had received to-date. The further 
dialogue that occurred, not just with us, but between the different 
stakeholders, influenced the final rule in several ways.
    For example, the selection of generic E. Coli as the 
organism to monitor and measure the effectiveness of the 
slaughter sanitary control activities in slaughter plants. The 
time frame for implementing HACCP, shifting from a process 
approach which we had in the proposal to one based on the size 
of the plant, grew out of those discussions.
    There are many more examples. So, in fact, the dialogue 
that occurred was very valuable to the agency in finalizing the 
rule.

                           regulatory reform

    Mr. Walsh. That's terrific. I think all the sides, 
everybody, that was involved in those had a very positive 
feeling. I think it bodes well for public and private 
cooperation. I think all of the departments can learn from that 
experience.
    One of the issues that remained was this issue of layering 
or de-layering. The Secretary wrote to me awhile back now that 
the USDA would review, revise, and repeal its existing 
regulations as needed. Since then, FSIS has sought public 
comment on ways to de-layer inspection and is reportedly 
conducting a study.
    That study, I'm told, will not be available for another 18 
months. Would you care to comment on that and what can be done 
to accelerate that process?
    Mr. Billy. In fact, the examples that I offered in my 
formal testimony and highlighted in my oral comments are 
examples of existing regulations that need to be changed to 
make them compatible with HACCP and the HACCP approach. And 
there are many others.
    We are just about ready to publish a proposal that will 
completely revamp all of the existing regulations that address 
sanitation. I think everyone will be amazed at the kinds of 
changes that we're going to be proposing to streamline those 
regulations, as well as combine separate meat and poultry 
requirements into one set.
    And wherever possible, we are shifting from a command and 
control type requirement to a performance standard. We will be 
saying here is the end result. We expect you to figure out how 
to accomplish it. We recently provided to the Department a 
schedule for the completion of our regulatory reform 
activities.
    And I'd like to provide it to you and for the record so 
that you can see the schedule we have established for 
completing that process.
    Mr. Walsh. That will be very helpful.
    Mr. Billy. I will supply a draft of this review schedule?
    [The information follows:]

[Pages 679 - 731--The official Committee record contains additional material here.]


                         changes in inspection

    Mr. Walsh. Can any of these steps be implemented prior to 
the completion of that report?
    Mr. Billy. In terms of the study that I think you're 
referring to, one of the areas that we want to look at in terms 
of our inspection responsibilities is how we carry out carcass-
by-carcass inspection. There are two parts to that. There is 
the ante-mortem part of it; ensuring that live animals are 
acceptable for slaughter.
    And then the post-mortem part of inspection in terms of 
ensuring that there aren't any disease conditions present, as 
well as the sanitation aspects of slaughter. We believe that 
there is a possibility to modify how we carry out those 
inspection activities.
    Only in part do those inspection activities relate to food 
safety, however, which is what HACCP is about. The other part 
of it is about unwholesome or unacceptable conditions that 
animals may have that you would not want to allow into meat or 
poultry products.
    We want to carry out a public process, not unlike the one 
we've just talked about for HACCP, that will engage all of the 
interested parties in taking a fresh look at how we do carcass-
by-carcass inspection as mandated in the law. We think we can 
change our approach, and as a result free up some resources to 
allow us to do some of the new HACCP tasks, as well as new 
inspection tasks in the distribution of product to the 
marketplace. Some of that will have to wait for the study. We 
currently define in regulations how we do those inspections in 
slaughter plants.
    We need data to support any changes. And then we would have 
to follow that by rulemaking. So, that 18-month estimate is 
tied to a process of collecting the data, sharing that with 
everyone, and then going through a rulemaking process. It's 
very important for us to complete that in the time frame that 
you've referred to.
    It only, in part, addresses food safety. There are other 
reasons for some of that inspection activity that need to be 
looked at from a separate perspective.

                          sentinel site survey

    Mr. Walsh. Once HACCP is fully implemented, do you have 
qualitative goals that you anticipate in terms of improving the 
safety and the reduction in some of these transferrable 
diseases? Do you have any idea what you expect to get from 
this?
    Mr. Billy. We haven't established specific qualitative 
goals. What we have done is through the initiation of the 
Sentinel site project and the data that's being collected now--
--
    Mr. Walsh. What is the Sentinel Site Project?
    Mr. Billy. It is a project we are jointly doing with the 
Food and Drug Administration and the Centers For Disease 
Control. We're currently at five sites around the country. 
These are geographic areas. There is a very pro-active 
collection of data on illnesses that are associated with food 
products, where we will have much better data to work with in 
terms of, in our case, the extent to which meat and poultry 
products are associated with disease.
    That data, because of the way the Sentinel Site Project is 
designed, can be extrapolated to the U.S. population. The data 
that's being collected right now, which I referred to earlier 
in the initial report from the first year of work, will be our 
baseline.
    And as we phase in HACCP and the Salmonella Performance 
Standard, we will in fact get a direct measure of the impact of 
these regulatory requirements. That's what we want to do. The 
current data system that's available would not allow us to get 
a good measure of the impact. But the specific answer to your 
question is we have not established numerical targets at this 
time.
    Mr. Walsh. I'd just finish by saying, I think that the 
process toward this goal of fully implementing HACCP, and 
ultimately having an even better and safer food supply can be a 
model for the world.
    Mr. Billy. I agree with that.
    Mr. Walsh. And with all of the transference of food in the 
world today, it's just going to accelerate. By setting ahigh 
standard for our own products, we can set a high standard for the 
world. I think it's a good thing. Thank you.
    Mr. Skeen. Ms. DeLauro.

                          food safety training

    Ms. DeLauro. Thank you, Mr. Chairman. Welcome. Thank you 
very much. The Administration's plan for improving our food 
safety calls for better use of scientific analysis. Obviously, 
the scientific analysis is critically important because of the 
many harmful pathogens that cannot be detected under current 
inspection methods.
    I would expect that the success of the scientific testing, 
however, will depend on the skill of the inspectors who are out 
in the field. Can you tell us a little about how the Department 
is going to train inspectors so that they have the skills to be 
able to implement the improved Food Safety Standards? Is 
training a significant part of the Food Safety Initiative?
    Mr. Billy. I think I'll have Dr. Reed, who is overseeing 
that training, lay that out for you.
    Dr. Reed. We have a number of formal training efforts going 
on right now. The bulk of them are at Texas A&M. We're training 
our work force to understand the reasons and the underpinnings 
of what they do rather than to just perform tasks as written.
    Ms. DeLauro. How large is that work force?
    Dr. Reed. It's 6,500 employees. We've just finished our 
second class at Texas A&M for college credit in food safety. It 
is not an easy course. It's not an attendance certificate. It's 
difficult and it's important for them to grasp the concepts to 
start understanding the HACCP system that they're going to be 
involved in.
    So, we're pursuing that vigorously. We also have a number 
of other training efforts going on for our supervisors. Of 
course, this includes all of the technical training we have to 
do just to get people doing the new procedures that they're 
expected to do. But we know we can't do it without upgrading 
the education level of all of our work force. So, we're pushing 
that very hard.
    Ms. DeLauro. What's the length of time that they are 
trained? What's the period of time in which they're in a 
session?
    Dr. Reed. Congresswoman, we started with an arrangement for 
a very intensive four-week course, in addition to all of the 
training and experience the inspectors already have, to even 
get their position and do their job. We think that will help 
them.
    We've always encouraged our inspectors to take any number 
of college courses, and other training activities. The agency 
reimburses them for successful completion of courses in Food 
Science Technology, understanding of basic chemistry, and 
microbiological sciences.
    Mr. Billy. Part of the reason for the time frames that we 
established in the HACCP Rule, of phasing it in over a three 
and a half-year period, was to allow us the time to provide the 
appropriate training to all of our work force.
    When you're up in the thousands of people and all of those 
people have jobs that tie them to plants on a daily basis, the 
logistics of providing that training is a very complex 
undertaking. So, we've chosen the just-in-time approach for the 
HACCP part of the training, not what Dr. Reed is referring to, 
but the basic training on the tasks that our inspectors will 
carry out under HACCP.
    And we are carrying the training to our inspectors. We have 
trained 104 facilitators that will use the training materials 
and go out into the nation and provide training for groups of 
five, 10, or 20 inspectors consistent with where they're 
located throughout the country.
    That minimizes our cost and maximizes, we believe, our 
effectiveness. It's not just one training program or one 
segment. It will come in several segments. We'll build one on 
top of the other to gear up our inspectors to carry out their 
tasks under HACCP.
    So, you can expect that this training will be ongoing for 
the next three years. It will be done in waves as we implement 
HACCP throughout the country.

                           food safety risks

    Ms. DeLauro. What would happen if we didn't implement the 
final ruling on HACCP? What risks do we run if we don't have 
the final implementation?
    Mr. Billy. Well, we know from the available data from the 
Centers For Disease Control that foodborne illness is 
increasing. And we further know that meat and poultry products 
are one of the major sources of foodborne illness. Given that, 
it's just critical that we have the kind of shift in our 
inspection approach to one that's based on preventative 
controls, relying on the science that's available, and ensuring 
that the measures that are carried out in the plant in fact 
impact the pathogens that can be present on the products at 
that point in time.
    That's what the rule is designed to do. We have a 
performance standard in it for Salmonella. We have generic E. 
Coli monitoring by the plant at the slaughter level. These 
measures, we believe will have a big impact in terms of 
reversing that trend that I've referred to at the outset. But 
we can't stop there either.

                         farm-to-table strategy

    We can't focus all of our energy on slaughter and 
processing plants. We know that problems can occur in 
distribution. A truck isn't properly chilled when it's carrying 
product to the marketplace. It's stored somewhere that's 
inappropriate, or it gets into a retail setting and it's 
mishandled at the retail level.
    That's why we've talked about a farm-to-table strategy. And 
we believe that what I was referring to earlier with Mr. Walsh 
in terms of identifying a way to redeploy some of our resources 
to focus on those other areas is very important if we're going 
to address this whole problem in an effective way.

                         advanced meat recovery

    Ms. DeLauro. We've all heard a lot about Mad Cow Disease. 
Let me just ask you this question. It affects the central 
nervous system elements such as the spinal cord. What does the 
Department of Agriculture do to ensure that spinal cords are 
removed from bones before those bones enter advanced meat 
recovery systems?
    Mr. Billy. We have responded to concerns that were raised 
with us about whether spinal cords were being removed from neck 
material that's processed in those advanced meat recovery 
systems. And to determine whether in fact the plants using that 
equipment were effectively removing the spinal cord consistent 
with our definition of meat.
    We did a survey. As a result of that survey, which we 
published and made available a couple of weeks ago, we did find 
a number of samples where there was evidence of spinal cord 
material in the product that was produced. Given that, we have 
indicated our intent to put out a directive that will identify 
an additional task that inspectors will carry out to make sure 
that the spinal cords are completely removed before the raw 
material is processed through those machines.
    That's important because the way we define meat does not 
allow for the inclusion of spinal cord as a raw material for 
that type of processing. So, that directive will come out in 
the next several days.
    And we also generated a lot of additional data in that 
study that is requiring us to go back and look at the existing 
regulation that addresses this type of equipment to determine 
what other changes we need to make to ensure that the equipment 
is operated properly by the plants that use it.
    Ms. DeLauro. Thank you very much. And thanks for the work 
that you do.
    Mr. Skeen. Mr. Kingston.

                     incidence of foodborne illness

    Mr. Kingston. Thank you, Mr. Chairman. Mr. Billy, what is 
the percentage of foodborne illnesses that happen outside of 
the plant?
    Mr. Billy. I don't know.
    Mr. Kingston. If you could provide that for the record.
    [The information follows:]

    The percentage of foodborne illness linked to product from 
a federal plant versus restaurants or from improper handling by 
the consumer is not known at this time. In the past two years, 
1995 and 1996, there were two foodborne disease outbreaks 
attributed to product from a federal plant.
    The Sentinel Site Study, recently named FoodNet, will help 
explain the prevalence of causes of foodborne illness next year 
when two years of data will be available for extrapolation to 
the U.S. population.
    The President's proposed expansion from five to eight sites 
will strengthen FoodNet and create the early warning capability 
described by the President. Such a system could detect large 
outbreaks as they begin, then quickly alert State and federal 
agencies, whose rapid response could avert further foodborne 
illnesses and deaths.
    Epidemic investigations as well as planned case-control 
studies within the expanded surveillance network will identify 
specific foods or food processing activities associated with 
pathogens and human illness. By identifying and implementing 
corresponding control or prevention practices throughout the 
food chain, the risk of foodborne illness could be reduced 
nationwide.

    Mr. Kingston. I know CDC did a study on it and found an 
overwhelming amount of it actually took place outside the 
grocery store and really happened a long, long way from the 
farm. I'm going to guess that it was as much as 70 percent, and 
I think that it's very important to the Members of this 
committee.
    In our discussion, we very honestly think you're doing a 
great job at the packing plants. And we can beat up on packing 
plants all we want. That's not where the real problem is. It's 
as fundamental as putting the meat back on the plate that you--
the cooked meat, that you put the uncooked meat on. It is just 
things like that.

                        meat and poultry hotline

    You're spending a lot of money advertising on that too, I 
noticed. How much are you spending or does that come through a 
different department?
    Mr. Billy. We don't do any of that type of activity.
    Mr. Kingston. So, that goes to a different department? 
Because USDA spends a lot of money advertising on that.
    Mr. Billy. It's not a part of our agency. So, I'm not aware 
of that.
    Mr. Kingston. That's interesting. So, you don't do any 
public awareness at all?
    Mr. Billy. Well, we do consumer education. For example, we 
operate the meat and poultry hotline which addresses questions 
that consumers have aboutthe use of meat or poultry products. 
For example, around the Thanksgiving period is our peak annually. We 
get thousands of calls asking questions about how to safely prepare a 
turkey.
    We just celebrated about a month ago our millionth call to 
the hotline. And we think it provides an important service to 
the public in helping them understand the role that they need 
to play. And they do have responsibilities for safely 
preparing, not only meat and poultry products, but all food 
products.
    Mr. Kingston. Could you send me something on that?
    Mr. Billy. Sure.
    Mr. Kingston. How much it costs? Who calls and the nature 
of those calls; the breakdown of it?
    Mr. Billy. Absolutely. I'd be happy to.
    [The information follows:]

    The costs associated with the Meat and Poultry Hotline were 
approximately $515,000 in fiscal year 1996 and are expected to be about 
the same for fiscal year 1997. These costs include $450,000 in salaries 
and benefits, based on 8.5 staff years, plus $65,000 in additional 
operating costs.
    It is difficult to pinpoint an exact cost for this program because 
Meat and Poultry Hotline staff contribute in many ways to the overall 
consumer education efforts of the Agency. In fact, at least 25 percent 
of the staff time of each Technical Information Specialist on the 
Hotline is spent on duties other than answering consumer telephone 
calls--for example, developing educational materials.
    It should be noted that a significant portion of callers to the 
Meat and Poultry Hotline are educators and communicators--17 percent, 
or 6,750 callers in 1996, who pass hotline information along to many 
other people. Therefore, the number of calls to the Hotline does not 
convey the total number of consumers served.
    For the record, I will provide the most recent report for USDA's 
Meat and Poultry Hotline, for calendar year 1995, ``Making the 
Connection: An Update''. [The information follows:]
    For 1995, 84 percent of the calls to the FSIS Meat and Poultry 
Hotline were made by individual consumers. In addition, thousands of 
calls were received from business and professional clients. (See page 
8, Figure 2: Meat and Poultry Hotline Callers, 1995.)
    Callers' concerns ranged from food handling to causes and 
prevention of foodborne illness, from labeling and nutrition to the use 
of technology in food processing. Callers had concerns about many 
subjects, including E. coli 0157:H7, Salmonella enteritidis and eggs, 
animal health, turkey roasting, ground beef, power outages and floods, 
new products, and ratite species. (See pages 3-6.)

[Pages 738 - 752--The official Committee record contains additional material here.]


    Mr. Kingston. Last year I believe we quizzed you guys about 
a fish hotline and found out that it was almost a recipe swap. 
Who was that?
    Mr. Billy. I can share some information about that. When I 
worked for the Food and Drug Administration, we established a 
similar hotline for seafood.
    Mr. Kingston. Okay.
    Mr. Billy. That hotline is operated by the Food and Drug 
Administration.

                           user fee proposal

    Mr. Kingston. All right. Now, on the fees, one of your 
panelists said that you are deadlocked because the fees are a 
part of the budget. And as you know, the President worked very, 
very hard to kill the balanced budget amendment promising that 
he would put in a balanced budget, which has been proven now 
that his budget does not balance in the year 2002.
    Congress, today, will be voting on urging the President to 
submit a balanced budget. Could you please do your part to make 
sure that happens? There just doesn't seem to be any kind of 
good faith when we're killing balanced budget amendments and 
then not submitting a balanced budget. It makes it very 
difficult to drum up support for fee increases.
    Mr. Billy. I will carry the message back, sir.

                     redeployment and streamlining

    Mr. Kingston. Just to drive politics into a non-political 
dialogue here. Another discussion item; in terms of HACCP, when 
it's fully increased, fully implemented, would the number of 
inspectors decrease or increase? Let me tell you where I'm 
going. And you might want to touch on this one. When we 
implemented it we talked about also the fact that we didn't 
want to layer.
    Is there layering going on? What steps are being taken to 
make sure that, that doesn't happen? So, where I'm headed is I 
hope you're going to say that it should decrease the number of 
inspectors.
    Mr. Billy. Well, I'm going to disappoint you then, because 
a couple of years ago, in terms of a budget approach, our 
Department shifted from the traditional one of each year asking 
for increases in the number of inspectors to handle industry 
growth and additional second shifts.
    We indicated our intention to maintain and redeploy 
resources through several steps that we were taking. The one I 
referred to in my testimony is the reorganization. Streamlining 
efforts, administrative reductions over the last two fiscal 
years, and the current reorganization have enabled us to reduce 
non-frontline staff by 200-300.
    In a similar way, what I talked to Mr. Walsh about in terms 
of this study that we're embarking on looking at how we carry 
out our carcass-by-carcass inspection at slaughter. We 
similarly expect that we will be able to free-up some 
inspectors or inspector time that can be redeployed to 
implementing HACCP; carrying out our HACCP inspection tasks, 
and also using some of that inspector capacity to do a better 
job after a product leaves the slaughter and processing plant. 
That is what I think you were referring to earlier about where 
things can happen beyond those plants.
    We agree with that. And we think that we need to have an 
effective broad-based approach. That's all about re-deployment. 
What we're trying to do is to accomplish all those changes, 
carry out the training and the other things that we've talked 
about without any increase in the number of inspectors. Believe 
me, that is a huge challenge, but that's what we're trying to 
accomplish.

                      cost of haccp implementation

    Mr. Kingston. Say, the industry cost right now I think is 
about $1.1 billion in terms of their share of it.
    Mr. Billy. That's our estimate for the long-term cost of 
industry implementing the HACCP and pathogen reduction 
regulation.
    Mr. Kingston. Is that number a function, say, of percentage 
or a factor of, and I don't know how it would be measured, say, 
number of bird units, number of carcasses of beef? The reason 
why I'm asking is could you project theincrease in revenue 
because of the increased demand of the product?
    Five years down the road we know that we probably will be 
consuming more. So, your costs are going to be more. But will 
that cost be a percentage of something; a 5 percent, a 10 
percent? Is there any kind of ratio that we would know?
    Mr. Billy. I wouldn't know the answer to that. But what I 
could recommend and will provide to you is the detail cost 
benefit analysis that was associated with the final rule. And 
it goes into some detail in terms of what those costs are; how 
they'll be accrued the first year and on out. And then the 
benefit side of it as well.
    [The information follows:]

[Pages 755 - 757--The official Committee record contains additional material here.]

    Mr. Kingston. Yes. It would be useful just to see if that 
number is tracking. I think it would be a lot easier for us to 
sell fee increases or whatever if we knew that, that number was 
a percentage and it was in line.
    I do want to reiterate what the Chairman has said, that I 
think overall you do a great job. The American public expects 
to have safe food, and generally takes it for granted these 
days. I think it is a reflection of a lot of what you're doing. 
So, let me yield back.
    Mr. Skeen. Mr. Nethercutt.

                     incidence of foodborne illness

    Mr. Nethercutt. Thank you, Mr. Chairman. Mr. Billy, 
welcome; Ladies and Gentlemen. I want to follow-up on this a 
little bit with regard to complimenting you on the safety of 
our food nationally. High standards with good compliance.
    I was reading your testimony and it looks like there were 
7,259 laboratory confirmed cases of diarrheal illness in the 
calendar year 1996 at five sites. Is that correct?
    Mr. Billy. Yes. That's the Sentinel Site Project results; 
right.
    Mr. Nethercutt. Right. And this project is designed to get 
some sense of problems in the country, in terms of foodborne 
illness?
    Mr. Billy. That's right. Dr. Wachsmuth can shed some light 
on that from her experience at CDC.
    Mr. Nethercutt. Well, maybe as we move to that. Is this 
number going down or is it be going up?
    Dr. Wachsmuth. This is the first time that we've had this 
precise a number. We were establishing a baseline in the way 
that we are doing the surveillance. So, we can't say right now 
if it's up or down. But this is where we are right now.
    Mr. Nethercutt. Okay. What is your sense of where we have 
been without understanding that we have a baseline? Is your 
sense that it's better than it was a year or two or five years 
ago?
    Dr. Wachsmuth. That's very difficult to say, but it's 
different. The trends are different because people are eating 
different kinds of food. They're eating outside of the home. 
The food industry, the types of fast food and rapid 
dissemination of product provide the opportunity for these 
large outbreaks. So, the trends are very different, but the 
data we're getting now eliminates a lot of the artifacts that 
we used to have because a part of the project is to interview 
people to see how many people go to a doctor when they get ill.
    How many doctors would prescribe a culture? As you 
know,that just doesn't happen very often either way; and then 
what a laboratory can do in terms of detecting a pathogen. Then 
we factor in all of those artifacts to get a more precise 
number of cases. And we know the population base at each site.
    We've never had that kind of information before to compare. 
So, we really cannot say in numbers what we had in the past. 
Our data before were 6 to 33 million as a baseline.

                   president's food safety initiative

    Mr. Nethercutt. I hope it's 6 instead of 33 million. That 
would be more encouraging. With that background, I want to lead 
into, a discussion here for the record of the Food Safety 
Initiative. I know the President was in a radio address that 
came forward with this Food Safety Initiative.
    What can you tell us was not being done or is not being 
done that this so-called Food Safety Initiative will be assured 
will be done? What problem existed that created the need for 
the Food Safety Initiative? And what will we be doing 
differently from now on?
    Dr. Wachsmuth. With the surveillance, what I just described 
is brand new. This is one year of data. When we initially 
started, we wanted ten sites instead of five. But it's very 
expensive. We have five sites now and that's about 13 million 
people for a denominator, a population.
    What will happen with the increased sites that the 
President has proposed is we will have something more like 10 
percent of the population under surveillance rather than 5 
percent. So, it gives the associations we make with pathogens 
and with food more statistical power so that we can make really 
focused intervention in terms of HACCP and other regulations.
    Mr. Nethercutt. How many agencies are involved and how much 
money is spent, or will be spent in the next year on this Food 
Safety Initiative?
    Dr. Wachsmuth. Well, it's not just the agencies. We have 
FDA, USDA, CDC, but also the Sentinel sites are States or 
counties that have their own infrastructure for public health. 
Their resources are going into it too, but in terms of Federal 
money, I think it's running $300,000 to $350,000 a site.
    It's a little complicated because the sites are designed to 
address emerging infections in general. What we're doing is 
tieing into that larger program to look at foodborne diseases. 
So, the whole emerging infection cost is even higher for each 
site.
    Mr. Nethercutt. I know that your testimony related mostly 
to beef and eggs. What about seafood? How does that factor into 
the Food Safety Initiative?
    Mr. Billy. It factors in very directly. I think you 
received earlier some testimony from the Food and Drug 
Administration. They have the jurisdiction for seafood. Of the 
$43 million request that is represented by the Food Safety 
Initiative, about $24 million of that will go to the Food and 
Drug Administration.
    My understanding is that a significant percentage of that 
is for seafood inspection. You'd have to contact FDA to get the 
specific numbers. But it is an integral part of this whole 
initiative.
    Mr. Nethercutt. Is seafood outside your jurisdiction?
    Mr. Billy. Yes, sir.
    Mr. Nethercutt. Is that by statute?
    Mr. Billy. Yes, sir.
    Mr. Nethercutt. Of course, being from the Northwest we have 
substantial seafood consumption. Speaking as a consumer we 
certainly want to be sure that's safe as well.

                          early warning system

    My final question, if I may Mr. Chairman, would relate to 
the proposed early warning system. Would you explain to us how 
that will work and what benefits you see because of it?
    Mr. Billy. It really is what Dr. Wachsmuth has already 
described as the basic components of it, which is a very 
proactive effort to go out and identify in these sites 
illnesses that are caused by food products. And most 
importantly to identify what the agent is; what organism has 
been associated with this illness.
    Mr. Nethercutt. I'm thinking more from a practical 
standpoint. Let's say I'm out at a site, within the 
jurisdiction of a site. You find out that I've become ill 
because of something. What will happen?
    Mr. Billy. Dr. Wachsmuth can give you the specifics.
    Dr. Wachsmuth. Another part of the President's announcement 
about increasing the early warning sites was the technical 
component; how you transfer the laboratory information. I think 
that's the real key with the early detection.
    There is already a prototype of a system where if a 
Sentinel site detects an E. Coli 0157:H7, they can fingerprint 
the isolate and electronically transmit that to a data base at 
CDC where they can compare the fingerprint of that strain to 
other strains.
    So, if the State of Washington submitted an isolate today, 
tomorrow the State of Oregon submitted a very similar isolate, 
that system would feed back to each state to say, there is 
another isolate like this. In that way it's interactive. It's 
not just CDC looking at everything that comes in.
    And it happens in real time. As the procedure is being 
recorded, it is fed into a computer that transmits that 
information to CDC. But this is a prototype; it's just the 
beginning. The money that the President has asked for in the 
initiative is going to be necessary to really make that gel in 
terms of putting everybody on-line, including our laboratory.
    So, that if there is an outbreak and we're trying to track 
a product, if we find a pathogen, we can make sure it's the 
same pathogen and not one of a background number of pathogens. 
The possibilities are tremendous.
    Mr. Nethercutt. You sound like you all have high hopes and 
expectations for this.
    Dr. Wachsmuth. We do.
    Mr. Billy. From a regulatory point of view, two examples 
immediately come to my mind. One is if, in fact, in that 
scenario that was described, there is the same organism causing 
illness in what's called sporadic illness, then we really don't 
have much access to that kind of information right now.
    If we can get that kind of information in close to real 
time, and see that in fact there is a pattern and it actually 
is an outbreak, we can then react in terms of dealing with a 
recall, and take whatever steps we need to take to protect 
consumers; not only in the area of sporadic illness, but much 
more quickly than what is currently possible. That's in the 
public interest.
    The other thing it allows us to do is identify whether we 
see a certain pattern of illness that is being associated with 
a particular type of product that we regulate. With HACCP being 
implemented, what it will allow us to do is look at the plants 
that are producing that type of product and work with them to 
refine their HACCP approach so that the problem is resolved, 
rather than what I'll characterize as sort of the classic 
sledge hammer approach to regulation when you're trying to deal 
with these kinds of situations. So, I think this electronic 
transmission of laboratory information will introduce for us a 
much more sophisticated way of dealing with these kinds of 
problems.
    Mr. Nethercutt. And probably in a more acceptable model to 
the industries that are affected and those who produce the 
product.
    Mr. Billy. That's the feedback we're getting, absolutely.
    Mr. Nethercutt. Well, thank you very much for being here.
    Mr. Skeen. Mr. Bonilla.

                              hepatitis a

    Mr. Bonilla. Thank you, Chairman. Mr. Billy, I'd like to 
start out by talking about foodborne diseases, specifically in 
San Antonio, we're having a problem with hepatitis. It's two or 
three times above the national average. And 81 percent of those 
cases occur in persons of Hispanic origin.
    I think some people might be surprised to learn that 
according to the numbers I have from the CDC, data shows that 
there is significantly more foodborne Hepatitis A infections 
than E. Coli. E. Coli gets a lot of headlines, I know, and it's 
very important.
    But realizing that Hepatitis A is viral in nature and 
because of that different control techniques have to be 
employed. I'm wondering if you think that the foodborne 
Hepatitis A is in fact a serious food safety risk?
    Mr. Billy. We think it is a very serious public health 
problem. I'd like Dr. Kaye Wachsmuth to address your specific 
concerns about why that's happening.
    Dr. Wachsmuth. I think I'm aware of the information that 
you're citing. There was an MMWR report--Morbidity and 
Mortality Weekly Report--from CDC the first of this year. But 
it summarized some data from 1994 and earlier. Truly Hepatitis 
A was ubiquitous. It was widespread in this country ten years 
ago. And we've made great headwayin reducing the number of 
people who have that infection.
    It's generally a person-to-person infection. I think less 
than 3 percent of the Hepatitis A cases in the country are 
foodborne. The food becomes a problem when the person who is 
infected is handling the food and contaminates it, and then 
that food is consumed without a process to inactivate the 
virus. In other words the food is contaminated.
    Hepatitis A can be eliminated by cooking. But if the food 
doesn't receive that heat treatment, then it can be infectious. 
So, more or less, CDC considers this a person-to-person mode of 
spread.
    The new vaccine for Hepatitis A may be a very effective 
control to prevent spread of the infection within a community. 
It's an efficacious vaccine. It's new, so it's not widely used 
at this time. But there are a lot of asymptomatic infections. 
And those people who don't know they're ill could be the food 
handlers.
    We're addressing the problem in some ways through retail, 
through education of food handlers so that even if a person 
doesn't know they're ill, they take precautions in terms of 
wearing gloves, or washing hands.
    Mr. Bonilla. So, in other words, again acknowledging the 
low percentage of the disease being spread strictly by food, 
you're saying then that food can come into a facility that's 
safe and has been inspected and has gone through the process, 
and the infection or the disease then begins when the handler 
gets it, and not necessarily before that in most cases.
    Dr. Wachsmuth. The concept now is that the reservoir for 
the pathogen is the human being; much like Shigella. This is a 
bacterial example. There is not a known animal reservoir. So, 
we think that the spread is primarily human-to-human.
    Mr. Bonilla. In light of the fact that the numbers that I 
have here from 1988 to 1992, there were 2,109 Hepatitis cases 
versus 244 E. Coli cases, acknowledging that the percentage of 
those that may have been affected by food may be lower. It 
still may be, in some cases, higher than E. Coli. So, my 
question is, should Hepatitis A, be covered by the Food Safety 
Initiative so that we can study this problem.
    Dr. Wachsmuth. It will be.
    Mr. Bonilla. Even considering that the numbers are so much 
higher?
    Dr. Wachsmuth. Right. But it is included in a different way 
than the bacterial pathogens because specifically FSIS has 
asked for funds under that initiative to take HACCP all the way 
to the consumer, to the retailer. That would include concepts 
of where pathogens enter the food chain and educating people at 
retail on where pathogens occur so that they can control them 
properly.
    The Food Safety Initiative requests money to be used for 
education. That's education of consumers, retailers, 
veterinarians; really, all those involved in the food chain. 
Specifically at FSIS, we've been aware and have been asked 
about Hepatitis A many times; we have a brochure that's 
available to the public that talks about how the virus is 
transmitted and personal hygiene that would control its spread. 
Then, again, I think CDC also has programs for education and 
for vaccine use; for prevention.
    Mr. Bonilla. Programs like that are very useful because 
often times, like anything in this country, it's just a matter 
of educating and getting information to people. I would 
nonetheless urge FSIS to push to include all foodborne diseases 
in the President's Food Safety Initiative because the numbers 
are kind of scary down in my part of the country and then 
perhaps in other parts of the country as well.
    So, it's something that I wanted to put on your radar 
screen. It's something we're concerned about in South Texas. 
I'd like to turn now to user fees which I'm sure you probably 
think you've heard enough of by now. But in looking at it in a 
little different perspective, I asked the Secretary the other 
day, the same question in terms of percentages.

                           user fee proposal

    In your justification, you characterized meat processors 
and the public as joint beneficiaries of the Meat Inspection 
program. Yet your budget proposal places 70 percent of the cost 
of food inspection on the meat processors. I understand that 70 
percent is simply the total cost of salaries for on-sight 
inspectors.
    Is there any other reason you chose that 70/30 cost share 
ratio percentage? And do you think the processors benefit more 
than the public from the Meat Inspection program?
    Mr. Billy. The basis for the 70 percent is really capturing 
the cost, the salaries and benefits of the inspectors that are 
providing the inspection activity in the plants. It turns out 
that 70 percent of the cost is associated with inspection.
    That's a way of breaking it down in terms of the direct 
cost associated with the benefits that those plants derive from 
having the inspection and using the inspection marks that are 
available.
    The other 30 percent in costs would be for the 
administration of the program, for the laboratory activities, 
and the other costs we have. That 70 percent, the user fees, 
would be charged for inspection. It remains to be seen how 
those costs that the plants would incur would be distributed in 
terms of the extent to which that would represent a price 
increase at retail versus costs being passed back to the 
producers.
    We have asked the Economic Research Service to look at that 
and estimate for us how that would likely occur so that we have 
that type of information available when we move forward to 
promulgate regulations to implement a user fee.
    Mr. Bonilla. I asked the question because it seems a little 
out of whack as to who benefits the most. First of all, 
considering I think the general public benefits the most from 
having safe food, but also considering and always acknowledging 
that nobody is perfect, and every industry has its bad apples. 
But the majority of meat processors are doing a pretty good job 
of getting our food out the door in a safe and very competent 
manner and they would indeed then be having to carry the load 
to the tune of 70 percent.
    So, I'm trying to just draw a parallel between what they 
pay for and how the ratio is imbalanced from who benefits; 
especially, again, when it's imposed on people who are already 
complying with the law.
    I wonder if you anticipate a public perception problem 
resulting from the 70 percent of the funding for meat 
inspection coming from the industry being regulated itself? In 
other words, do you think the public will have the same level 
of confidence in our meat inspection program knowing that the 
vast majority of the funding for this comes from the industry 
that is actually being regulated?
    Mr. Billy. That's a very legitimate concern that Ibelieve 
needs to be addressed in determining how we establish such a user fee 
system. We have identified what we've labeled the integrity of the user 
fee system to address that very question. We need to make sure that in 
fact the public has confidence in the inspection system and what our 
inspectors are doing on a continuing basis.
    It is a very real issue that needs to be examined and an 
approach identified that will address that specific concern. It 
should be noted, and if you look at our current budget, we in 
fact now charge user fees for overtime and for holiday work 
where it is unexpected. That will be nearly $90 million for 
fiscal year 1998. It is important to note that there is strong 
confidence in the program, notwithstanding the fact that 
presently user fees are charged.
    So, I think we need to build on that; look at how that has 
worked as we look forward to the question of how to develop 
such a system.

                             new technology

    Mr. Bonilla. My last question is just about how an idea 
like this could impact on the private sector, on the industry 
of developing new technologies for safer food. Are you 
concerned that they could be discouraged from--it's as if they 
would have to theoretically pay user fees. It takes a lot of 
their money versus money they're putting into new technology to 
ensure the product is safe.
    Mr. Billy. Again, I think that's a very legitimate issue 
that needs to be looked at in terms of the cost of making the 
investments that are important to address these pathogen issues 
that we're trying to resolve through the HACCP and pathogen 
reduction rule, as well as the other costs that industry needs 
to bear.
    It is a legitimate issue that needs to be looked at as a 
part of this overall approach. One of the things that Congress 
did was provide us in our current year, funding to help adapt 
new technology to small plants in particular.

                      technology for small plants

    This would help the very small plants, the so-called mom-
and-pop operations that are a family carrying out slaughter, 
but don't have the resources to follow new technology, let 
alone figure out how to get it integrated into their small 
operation. We are very actively pursuing that and have 
solicited proposals. We've received several, I think six now. 
And we're looking at how we can facilitate adapting new 
technology so it works in a small plant setting. We think 
that's an important contribution we can make to ensuring that 
those small plants can take advantage of the kinds of 
technology you're talking about.
    Mr. Bonilla. I appreciate that very much. As you know, some 
of these questions we raise is because we have those very 
concerns.
    Mr. Billy. Yes.
    Mr. Bonilla. Not just to get a clear answer from you. We 
understand that. Thank you very much.
    Mr. Skeen. Ms. Lowey.

                     incidence of foodborne illness

    Ms. Lowey. You are very kind. And it's always an honor to 
be with you, Mr. Chairman. Mr. Billy, I wanted to be here, 
first of all, to thank you. You have released the report that 
we requested in last year's bill detailing the incidents of 
foodborne illnesses in the United States.
    Congresswoman Kaptur, who unfortunately couldn't be here 
today, and I were very concerned last year as you know about 
the lack of reliable data on this issue. In our judgment one of 
the first steps towards eliminating illnesses associated with 
contaminated food is to have accurate information about the 
scope of the problem. So, I do want to thank you. And it 
certainly demonstrates your commitment to the issue.

                          grant of inspection

    In the report, accompanying last year's bill, we also asked 
FSIS to revise its grant of inspection to acquire expanded 
information from plants about their operations and 
certification from these plants; that they are complying with 
food safety laws before FSIS enters into a contract with them.
    Can you share with us what you've done in response to this 
request by the committee?
    Mr. Billy. Yes. We've addressed that in part through the 
new HACCP and pathogen reduction regulation where we have 
modified the requirements that a new plant must meet in order 
to be granted inspection. They have to have a HACCP plan 
developed and make it available to us.
    That HACCP plan will address a number of the issues that 
you've identified before inspection is granted. We will see 
whether the HACCP plan that they're working under in fact works 
effectively during regular operation.
    And that will be done through our verification activities 
when they first operate under HACCP inspection. It doesn't 
address the full scope of what you've asked for. So, we are 
separately looking at that area. That is one of the regulatory 
reform projects that we will complete through that process that 
I've talked about earlier. So, we're following through. We're 
just doing it in two different steps.

                            plant violations

    Ms. Lowey. I look forward to continuing to be in contact 
with you. Last year we also raised an important issue regarding 
FSIS' response to plants that are in violation of our food 
safety laws. In the past FSIS has responded to these plants by 
sending more inspectors in to bring the plants into compliance.
    And I raised the concern, as well as several of my 
colleagues, that the practice seems to shift the burden of 
compliance from the plant owner and the manager to FSIS and the 
taxpayers. In other words, the more trouble you're in, the more 
inspectors we send and the faster you can get through the 
process. It didn't quite make sense. Can you tell us what 
you've done to address that problem?
    Mr. Billy. Yes. Again, that problem has been primarily 
addressed through the new HACCP and pathogen reduction 
regulation. In that regulation, we have changed our approach 
whereby documented failure to have an SOP, a standard operating 
procedure, or follow it would result in regulatory action on 
our part.
    If a plant fails to meet those regulatory requirements, 
then we will take the steps to withdraw inspection. And the 
same will apply to HACCP. So, we have restructured our approach 
in that regulation in terms of how we would address the issue 
that you've identified.
    We haven't at this point in time eliminated our established 
procedure which is called progressive enforcement. But that's 
now under review as a part of this transition to the new HACCP 
approach. It's a matter of timing. The first plants don't have 
HACCP. So, we've got to get it started and then make that 
transition into the regulatory approach that we've identified 
under the new regulation.

                            civil penalties

    Ms. Lowey. Lastly, and it's a related point. I offered an 
amendment, as you remember, to the fiscal year 1997 bill that 
would have allowed the Secretary of Agriculture to levelcivil 
monetary penalties against plants that violate food safety laws. This 
would have provided us another enforcement mechanism to ensure that our 
food supply is safe.
    Perhaps you can expand upon that. Have you explored how you 
can use this authority when you're talking about regulatory 
authority. Is this what you're considering frankly to better 
protect Americans from foodborne illnesses?
    Mr. Billy. I'm going to respond to that from my own point 
of view. This does not represent the Department or 
Administration's position. As a regulator, the availability of 
civil penalties and the procedures that are associated with 
them are a useful tool in terms of enforcing the kinds of 
regulations that we have. Civil penalties would be a useful 
tool for us to have.
    Ms. Lowey. Are we moving in that direction at all?
    Mr. Billy. We're looking at it, but we're looking at it in 
the context of all of the other changes that we have underway 
and how well firms respond and implement the SOPs which now are 
underway. And then HACCP will, I think, guide us in terms of 
whether that kind of legislative change would be needed or help 
us in what we're trying to accomplish.
    So, I think it's a step at a time. We've got a big set of 
challenges on our plate now in terms of implementing what we've 
put in place. I'd like to see how we do with that and then use 
that as a measure of what additional provisions we might need.
    Ms. Lowey. I thank you, Mr. Billy. And as we have all 
stated many times, I think we are very fortunate in the United 
States to probably have among the safest food supplies in the 
world, if not the safest food supply in the world. However, 
last year both Ms. Kaptur and I, among others, talked about how 
we're still not satisfied in the thousands of deaths that 
result each year have to be taken very seriously.
    So, I would hope with your competent agency you can 
continue to move in several directions so that we can continue 
to make progress. And I thank you very much for the report and 
for the work you've done. And I thank you very much, Mr. 
Chairman.
    Mr. Skeen. Mr. Fazio.

                               rendering

    Mr. Fazio. I just have a couple of questions. I don't have 
any idea what the answer to this is. I assume that rendering 
facilities are regulated by FDA. Is that correct?
    Mr. Billy. Yes, sir.
    Mr. Fazio. How closely are you entwined with them in that 
regard? I mean after all, it is a product that comes out of the 
other end of the process you're deeply involved in.
    Mr. Billy. We're working very closely with FDA in terms of 
the development of the proposed rule that they now have under 
consideration for finalization to deal with the rendering area. 
We were actively engaged in that area of developing the 
proposed rule and have formally supported that proposal. There 
are a number of instances where we have rendering facilities 
associated with certain types of slaughter operations.
    Mr. Fazio. I would think so.
    Mr. Billy. In that instance, our jurisdiction ends at their 
door, if you will, and then we look to FDA to deal with the 
activities that go on in the actual rendering. But, you know, 
we work with them and cooperate any way we can.
    Mr. Fazio. A product that's consumed after rendering would, 
by definition, be consumed by other animals.
    Mr. Billy. Right.
    Mr. Fazio. So, there is no rule for meat inspection for the 
Food Safety and Inspection Service.
    Mr. Billy. That's right. Yes. There are certain types of 
instances where certain types of edible products can come out 
of rendering. And in that instance, if it's meat or poultry 
derived, then we would have some jurisdiction.
    Mr. Fazio. What kind of products are we talking about that 
come out of the rendering process that would be then consumed 
by humans? I guess there are some chemical products that might 
ultimately get back into the food chain. Is that correct?
    Mr. Billy. Well, let me give you the easiest example of 
rendered pork fat that gets used by consumers very often in 
this country. There are other edible oils from animals that go 
through an edible rendering process, as opposed to an inedible 
rendering.
    Mr. Fazio. A totally different scientific process and then 
a different regulatory agency.
    Mr. Billy. Absolutely.
    Mr. Fazio. You're involved in that.
    Mr. Billy. Yes.
    Mr. Fazio. I appreciate that. Thank you.
    Mr. Skeen. The issue of the ambient temperature for 
transportation of shell eggs has been debated since legislation 
passed in 1991. You mention in your testimony that FSIS and FDA 
are working closely to develop standards. You also mention the 
conference you held in November last year. Where are you now on 
this issue, when will the studies and consultation end and when 
will we see a final result?
    Mr. Billy. Our two agencies have drafted jointly an 
advanced Notice of Proposed Rulemaking which has only in the 
last few days hit my desk. So, I'm now reviewing it. We will 
pursue that through the regulatory process and establish a 
comprehensive approach for dealing with that public health 
issue.
    Mr. Skeen. Thank you. We are adjourned.
    [The following questions were submitted to be answered for 
the record:]

                   Food Safety and Inspection Service

                          inspector vacancies
    Mr. Skeen. How many inspector vacancies have there been per year 
from 1992 through the current year?
    [The information follows:]

End of Year Inspector Vacancies \1\

    1992..........................................................   501
    1993..........................................................   372
    1994..........................................................   441
    1995.........................................................\2\ 728
    1996..........................................................   678
    1997.......................................................... \3\ 0

\1\ Inspection assignments covered through temporary combination of 
inspector assignments.
\2\ Early out retirement option caused a one-time, short term increase 
of 190 in permanent full-time vacancies.
\3\ Appropriations fully funded President's budget request. No further 
funding through supplemental is needed.

    Mr. Skeen. Please provide a table showing levels of permanent full-
time employees and other employees from fiscal year 1990 through 1998.
    [The information follows:]

[Page 769--The official Committee record contains additional material here.]


                             pilot programs

    Mr. Skeen. Please identify all pilot programs FSIS has in operation 
and include those pilot programs to be established in fiscal year 1997 
and those proposed for fiscal year 1998. Please also provide beginning 
and ending dates for the projects and estimated costs of each.
    [The information follows:]

[Pages 771 - 774--The official Committee record contains additional material here.]


                      report on foodborne illness

    Mr. Skeen. What is the status of the FSIS, FDA and State health 
department project on foodborne disease mentioned in last year's 
testimony?
    Response. The Sentinel Site Study, now known as FoodNet, is a 
comprehensive effort by CDC, FSIS, FDA and health departments at five 
sites, to track major pathogens that cause food-borne illness. The 
FoodNet is an ongoing effort of all involved. A report on the findings 
from the first year's data for calendar year 1996 is provided.

[Pages 776 - 792--The official Committee record contains additional material here.]


                     field management consolidation

    Mr. Skeen. What closings or consolidations of field offices will be 
completed by the end of fiscal year 1997?
    Response. By the end of fiscal year 1997, we will open 18 new 
District Offices and of the 18 locations, 17 are at locations where the 
Agency had prior offices. The locations are: Springdale, Arkansas; 
Alameda, California; Boulder, Colorado; Atlanta, Georgia; Chicago, 
Illinois; Des Moines, Iowa; Lawrence, Kansas; Greenbelt, Maryland; 
Boston, Massachusetts; Jackson, Mississippi; Albany, New York; Raleigh, 
North Carolina; Pickerington, Ohio; Salem, Oregon; Philadelphia, 
Pennsylvania; Dallas, Texas; and Madison, Wisconsin. In addition, FSIS 
will open a district office in Minneapolis, Minnesota.
    The Agency has also opened a Financial Processing Center in 
Urbandale, Iowa and consolidation of the field finance functions is 
expected to be completed by the end of fiscal year 1997. In addition 
the Agency will complete the consolidation of supply functions at the 
Department of Agriculture's Landover, Maryland Center and the 
consolidation of field personnel functions at a previously existing 
personnel office in Minneapolis, Minnesota by the end of fiscal year 
1997. As part of the Agency's reorganization, the Agency is 
establishing a Technical Service Center in Omaha, Nebraska. The Center 
is expected to open in the fall of 1997. FSIS has an ambitious plan to 
close a total of 44 program field offices by the end of fiscal year 
1997. However, completion of employee transfers and termination of 
building leases are likely to continue into fiscal year 1998. The 
offices scheduled for closing are provided for the record.

[Page 794--The official Committee record contains additional material here.]


    Mr. Skeen. What do you plan for fiscal year 1998?
    Response. Closure of the Program Review Office located in Lawrence, 
Kansas is scheduled to begin in fiscal year 1997, and will be completed 
in fiscal year 1998.
    Mr. Skeen. What personnel transfers will be required as a result of 
any closings or consolidations?
    Response. As a result of the office closures and consolidations 
indicated above, we expect to have about 150 personnel transfers over 
the period of fiscal year 1997 and fiscal year 1998. The Agency has 
minimized the movement of personnel by opening 17 of the new District 
offices in locations where a prior Agency Office existed. As a result 
many of the positions needed in the new offices will be filled by 
employees already in those locations. The Agency also is very committed 
to minimizing the impact of the reorganization on our existing 
workforce and therefore has offered a position in the new structure to 
every existing employee.
    Mr. Skeen. Please provide a chart showing the number of field 
offices FSIS will have by the end of fiscal year 1997 with a comparison 
of fiscal year 1996 and the proposed number for fiscal year 1998.
    [The information follows:]

[Page 796--The official Committee record contains additional material here.]


                           research projects

    Mr. Skeen. What joint or coordinated research is FSIS conducting 
with the Agricultural Research Service (ARS) and other USDA agencies?
    Response. FSIS coordinates 35 long-term, on-going research projects 
with ARS. These long-term projects frequently branch off into related 
research projects over time, according to changes in FSIS research 
needs, without generating new, and separate, project titles. 
Consequently, they are carried forward and represent the research that 
ARS will conduct for FSIS in 1997.
    Included for the record is the ``1996 Progress Report on Food 
Safety Research Conducted by ARS'' that describes each ongoing project 
that ARS is conducting for FSIS.

    [Clerk's note.--The report was too lengthy to print and is 
retained in Committee files.]
                           ratite inspection
    Mr. Skeen. According to press reports, consumption of ratite meats 
is increasing. Is FSIS considering a change in its policy on mandatory 
inspections?
    Response. FSIS has no plans to change policy on mandatory 
inspections of ratite meats. We will continue to provide voluntary fee-
for-service inspection for all ratites, which includes ostrich, emu, 
and rheas.
                        inspected establishments
    Mr. Skeen. Please provide a table showing the number of plants 
inspected in fiscal year 1995 and 1996 and the number estimated for 
fiscal years 1997 and 1998.
    [The information follows:]

                   FEDERALLY INSPECTED ESTABLISHMENTS                   
------------------------------------------------------------------------
                                    1995     1996      1997       1998  
                                   actual   actual  estimated  estimated
------------------------------------------------------------------------
Slaughter plants................      294      297       279        262 
Processing plants...............    4,376    4,402     4,364      4,327 
Combination slaughter and                                               
 processing plants..............      996      996       981        966 
Talmadge-Aiken plants \1\.......      259      245       231        215 
Import establishments...........      160      162       150        150 
Egg plants......................       82       78        81         82 
                                 ---------------------------------------
      Total.....................    6,167    6,180     6,086      6,002 
------------------------------------------------------------------------
\1\ Federal slaughter, processing, and combination plants that are      
  inspected by State employees under federal supervision.               
                                                                        
Note.--This does not include plants that are inspected on a voluntary   
  basis only, or inspected food warehouses.                             

             sanitary and phytosanitary cooperative efforts
    Mr. Skeen. How does FSIS work with other agencies in USDA and with 
other U.S. government agencies on trade-related matters such as 
Sanitary and Phytosanitary regulations, new requirements under trade 
agreements and trade disputes?
    Response. FSIS cooperates with USDA's Foreign Agricultural Service 
and the U.S. Trade Representative on sanitary issues affecting 
international trade. FSIS officials participate in the Codex 
Alimentarius Commission, a world standard-setting body, as well as in 
bi-lateral negotiations with foreign countries in order to resolve 
trade disputes, promote acceptance of the U.S. inspection system and 
remove barriers to the acceptance of U.S. meat and poultry products by 
our trading partners. FSIS works with Agricultural Attaches in foreign 
Embassies to resolve problems with specific export shipments and to 
communicate new inspection policies to countries that export meat and 
poultry to the United States.
    With regard to sanitary and phytosanitary standard development in 
the Codex Alimentarius Commission, FSIS staff carry out two roles. One 
is in the general coordination and management of U.S. participation in 
the Commission and the deliberations of its subordinate committees. The 
second is in substantive participation in the elaboration of issues in 
the Committees. The former involves work at both the policy levels and 
technical levels in the Department of Health and Human Services, 
Department of Commerce, and the Environmental Protection Agency, and 
within the Department, FAS, AMS, APHIS, GIPSA, and ARS. The latter 
involves participation as Chairpersons of Committees, U.S. delegation 
heads to Committees, and delegation members. These latter roles are 
also carried out by employees from several agencies in the Department. 
Technical staff from several agencies and departments will frequently 
work together as members of delegations to Codex Committees.
                           state equivalency
    Mr. Skeen. FSIS is responsible for assessing the effectiveness of 
state meat and poultry inspection programs. What happens when a state 
program is found to be inadequate?
    Response. FSIS regularly schedules reviews of each state's program. 
When a state program is found to be not ``equal to'' the federal, USDA 
designates the state for full federal inspection of all plants. 
Designation means Federal assumption of a State inspection program.
    Mr. Skeen. Are any states currently operating substandard programs?
    Response. No states are currently operating substandard programs.
    Mr. Skeen. What are Talmadge-Aiken plants?
    Response. Talmadge-Aiken plants are federal slaughter, processing, 
and combination plants that are staffed with State employees who serve 
as federal agents under federal supervision.
              field automation and information management
    Mr. Skeen. Last year you proposed delivering 1,889 computers by the 
end of FY 1997 to field inspection staff under the Field Automation and 
Information Management Project (FAIM). Is this program on schedule?
    Response. Yes, the program is on schedule. The number of computers 
represents those delivered during the FAIM pilots plus the first and 
second years of nationwide implementation. Through fiscal year 1996, a 
total of 1,103 computers have been provided to the field inspection 
staff, and an additional 814 computers are expected to be provided in 
fiscal year 1997, for a total of 1,917.
    Mr. Skeen. What is the current schedule for completion of the FAIM 
project?
    Response. Nationwide FAIM implementation is scheduled to be phased 
in over a five-year period. Implementation started in fiscal year 1996 
and is on schedule to be completed at the end of fiscal year 2000.
    Mr. Skeen. Is the FAIM project coordinated with the Chief 
Information Officer?
    Response. Yes, since the inception of the FAIM project, FSIS has 
coordinated closely with USDA's Office of Information Resources 
Management (OIRM), which is now under the Chief Information Officer 
(CIO). The agency worked closely with OIRM to obtain technical approval 
for the FAIM project and provides OIRM with an annual status report. 
The agency provides briefing on implementation of the FAIM project for 
the OIRM agency liaison officer as well as the CIO, who was most 
recently briefed by the agency's CIO and the FAIM project manager in 
October 1996. In January, FSIS requested and received an Information 
Technology (IT) wavier from the CIO to conduct computer acquisitions 
for the FAIM project. The waiver indicates that the agency is 
effectively coordinating the FAIM project with the CIO, and this 
coordination has enabled FSIS to continue the scheduled implementation 
of FAIM through the purchase of desktop and notebook computers for use 
by FSIS inspection personnel.
                           condemned products
    Mr. Skeen. What quantities of poultry, livestock and liquid eggs 
were found unfit in fiscal year 1996? What has been the trend for those 
products in terms of volumes of unfit commodities?
    Response. The following table shows the heads, or carcasses of meat 
and poultry condemned from fiscal years 1990 through 1996 and millions 
of pounds of liquid egg products condemned for the same period.

                            CONDEMNED PRODUCT                           
------------------------------------------------------------------------
                                        Thousands of heads    Liquid egg
                                     ------------------------  products 
                                                               (millions
                                        Poultry    Livestock  of pounds)
------------------------------------------------------------------------
Fiscal year:                                                            
    1990............................      71,056         410          95
    1991............................      74,282         386         104
    1992............................      72,154         401         109
    1993............................      63,927         385         113
    1994............................      69,192         412         128
    1995............................      79,998         469         139
    1996............................      82,665         546         145
------------------------------------------------------------------------

    Mr. Skeen. How much of these products were imported?
    Response. Since the early 1990's, less than one percent of product 
presented for entry into the U.S. has been refused entry and rejected 
as unfit. Imported product that has passed inspection at the port of 
entry is subsequently treated as domestic product and not accounted for 
separately if it is later found to be unfit during further processing.
                     progressive enforcement action
    Mr. Skeen. Under Progressive Enforcement Action (PEA) Stage II, a 
plant that is found to be not complying with FSIS requirements can be 
given 180 days to make required corrections?
    Response. PEA was designed to deal with chronic, recurring 
deficiencies. FSIS is in the process of phasing out the PEA program and 
replacing it with more effective enforcement programs envisioned by the 
Pathogen Reduction/HACCP rule. The majority of cases are already 
covered by the SSOP requirements now in effect. Once all plants are 
covered by HACCP enforcement, PEA will be completely replaced.
    The normal term of the Establishments Requiring Additional 
Inspection Effort (ERAIE) stage of PEA was 180 days. This term may have 
been shorter for plants that demonstrate substantial compliance during 
the first 90 days under ERAIE; or FSIS might have moved to withdraw 
inspection immediately in cases of gross negligence.
    Mr. Skeen. During this 180 day period, is the plant allowed to 
process and sell its products?
    Response. Plants could still process and sell products during this 
period but do so under increased inspection surveillance. Noncompliance 
at this stage of PEA could have resulted in withdrawal of inspection 
and a subsequent suspension of plant operations. In no cases, would 
FSIS allow plants to ship known adulterated or misbranded products.
    Mr. Skeen. What is the average length of time the 200 federally 
inspected plants were under some level of PEA in fiscal year 1996?
    Response. During fiscal year 1996, approximately 200 plants were 
under some level of PEA at one time or another. At the end of the 
fiscal year there were 60 plants in the program. The average length of 
time an establishment operated under PEA during fiscal year 1996 was 
5.8 months.
                      grant of inspection process
    Mr. Skeen. Did FSIS make any changes to the grant of inspection 
process in FY 1996 and 1997?
    Response. Beginning January 27, 1997, it was required that an 
establishment have an FSIS approved Sanitation Standard 
OperatingProcedure (SSOP) prior to approval of a grant of inspection. 
This is the first of a series of substantive changes in the grant of 
inspection process.
    FSIS plans to form a task force in the latter part of 1997 to 
examine grants of inspection as part of a comprehensive review of FSIS 
prior approval requirements under a HACCP inspection system. Under the 
pathogen reduction rule there are four basic conditions of inspection: 
1) that an approved SSOP be in place; 2) in slaughter plants, that e-
coli testing be conducted; 3) that national performance standards for 
salmonella be met; and 4) that a HACCP plan be in place. A goal of the 
task force will be to assure that industry clearly understands the 
responsibilities conveyed to an establishment with the Grant of 
Inspection and that the information each establishment must provide the 
Agency under the Grant of Inspection is the minimum required to perform 
effective regulatory oversight.
    As we reform our regulations to bring them in line with the 
Pathogen Reduction/HACCP final rule, we plan to further review and 
evaluate changes to provisions relating to the grant of inspection.
                       early retirement response
    Mr. Skeen. What was the response to the early retirement plan 
offered to FSIS employees last year?
    Response. In fiscal year 1996 we offered early out retirement to 
FSIS employees from February 16, 1996 to August 3, 1996. During this 
period we had 11 early out retirements.
                      haccp benefit/cost analysis
    Mr. Skeen. Did you complete the cost and benefit analysis for HACCP 
and, if so, please summarize the result?
    Response. The cost and benefit analysis for HACCP was completed and 
the summary results were published in the final rule. The cost 
estimates were based on data for average wages, the cost of specific 
processing equipment or the cost of conducting specific laboratory 
analyses. I will provide a copy of this analysis for the record.

[Pages 801 - 803--The official Committee record contains additional material here.]


                     office of the under secretary

    Mr. Skeen. Please provide the number of people assigned to the 
Office of the Under Secretary for Food Safety including those detailed 
from other agencies or from other offices in FSIS? Please also provide 
the job title for each of those persons?
    Response. Currently, no one is assigned to the Office of the Under 
Secretary for Food Safety and no one is detailed to this office from 
other agencies or from other offices in FSIS. Until mid-November 1996, 
the office included the former Acting Under Secretary, one special 
assistant, and two clerical staff. A new Under Secretary is expected to 
occupy the office before the end of fiscal year 1997, and new staffing 
arrangements will be made at that time.
                      poultry enhancement program
    Mr. Skeen. What effect does HACCP have on the Poultry Enhancement 
Program?
    Response. On July 13, 1994, FSIS published a proposed rule, 
``Enhanced Poultry Inspection,'' in the Federal Register (59 FR 35659) 
to implement a single system of postmortem inspection for all poultry 
species. Establishment personnel would have been required to pre-sort 
birds before inspection to exclude those with diseases and condemnable 
conditions. All reprocessed birds would have been returned to the main 
processing line for inspection and mandatory use of antimicrobial 
rinses would have been required.
    The ``Pathogen Reduction: Hazard Analysis and Critical Control 
Point (HACCP) Systems'' final rule (61 FR 38805-38989, July 25, 1996) 
establishes a more comprehensive framework for food safety protection 
than did the 1994 proposal, and therefore, supersedes it. HACCP is a 
comprehensive, preventive food safety strategy to reduce the incidence 
and prevalence of foodborne illness in the United States.
    In addition, on February 4, 1997, FSIS published a final rule 
revising the finished product standards with respect to fecal 
contamination of poultry carcasses (62 FR 5131). This revision had 
originally been proposed as part of ``Enhanced Poultry Inspection.''
    FSIS is planning to hold a public meeting to discuss inspection 
concepts consistent with HACCP principles. New inspection concepts will 
be designed to effectively and efficiently achieve food safety and 
consumer protection in a regulated industry operating under HACCP. The 
meeting will cover issues related to in-plant production in inspection 
establishments, including slaughter inspection of carcasses and methods 
to evaluate and verify industry implementation of HACCP. The meeting 
will also explore methods to provide oversight of the distribution of 
meat and poultry products in commerce.
            disposition differences between meat and poultry
    Mr. Skeen. In red meat inspection, only the veterinarian can make 
the final disposition on a diseased carcass, whereas in 
poultryinspection, the inspector can make final disposition under 
veterinary supervision. Why is there a difference?
    Response. Uniform inspection standards and procedures are to be 
applied during the postmortem inspection of each meat and poultry 
carcass. The regulations covering meat and poultry inspection provide 
that in red meat inspection, only the veterinarian can make final 
disposition on a diseased carcass, whereas in poultry disposition, the 
inspector can make a final disposition under direct veterinary 
supervision. Although the food inspector can condemn obviously diseased 
carcasses in poultry, the veterinarian is responsible for the uniform 
dispositions made by the food inspector. This is accomplished by 
setting standards and observing how inspectors handle normal as well as 
abnormal conditions. In both meat and poultry the inspector designates 
questionable carcasses for veterinary review and final disposition. A 
major factor in this difference has to do with the difference in the 
financial consequences of condemning a chicken vs. an animal carcass.
                     pathogen reduction task force
    Mr. Skeen. Was the Pathogen Reduction Task Force active in FY 1996?
    Response. The work of the Pathogen Reduction Task Force was 
completed in fiscal year 1995 with the publication of the proposed 
Pathogen Reduction HACCP rule which was finalized in fiscal year 1996.
                  pathogen reduction program and haccp
    Mr. Skeen. How does the Pathogen Reduction Program fit into HAACP?
    Response. FSIS has addressed the immediate need for pathogen 
reduction by implementing programs including Sanitation Standard 
Operating Procedures, E. coli testing and Salmonella testing. Pathogen 
reduction will be further addressed by establishments as the HACCP 
plans are implemented.
                           lab accreditations
    Mr. Skeen. Please update the table that appears on page 537 of last 
year's hearing record showing the total number of labs that were 
accredited, the total number of accreditations, and the cost to include 
fiscal year 1996 actual and estimates for fiscal year 1997.
    [The information follows:]

                         ACCREDITED LABORATORIES                        
                         [Dollars in thousands]                         
------------------------------------------------------------------------
                                Accredited      Number of               
                               laboratories  accreditations      Cost   
------------------------------------------------------------------------
Fiscal year:                                                            
    1990.....................           265            297          $902
    1991.....................           227            292           926
    1992.....................           231            313         1,024
    1993.....................           243            323         1,091
    1994.....................           149            186           672
    1995.....................           148            184           440
    1996.....................           150            186           360
    1997.....................           150            185           418
------------------------------------------------------------------------

    Mr. Skeen. What is the amount in accreditation fees that was 
collected in 1996 and so far in fiscal year 1997?
    Response. In fiscal year 1996 the agency collected $477,500 in 
accreditation fees. Through February of 1997, we have so far collected 
$392,000 in fees.
    Mr. Skeen. Are fees collected from accredited foreign plants and, 
if so, how much was collected in fiscal year 1996?
    Response. FSIS does not accredit foreign laboratories.
                        appropriations transfers
    Mr. Skeen. Were there any transfers made to or from your agency in 
fiscal year 1996? If so, please list where the transfer came from along 
with a brief explanation as to why they were made.
    Response. As provided by the Agriculture, Rural Development, Food 
and Drug Administration, and Related Agencies Appropriations Act, 1996, 
Public Law 104-37, the Office of the Assistant Secretary for 
Congressional Relations transferred $309,000 to FSIS to maintain 
personnel at the Agency level.
    Mr. Skeen. Have there been any transfers so far this fiscal year?
    Response. As provided by the Agriculture, Rural Development, Food 
and Drug Administration, and Related Agencies Appropriations Act, 1997, 
Public Law 104-180, FSIS has received one transfer of $309,000 from the 
Office of the Assistant Secretary for Congressional Relations to 
maintain personnel at the Agency level.
                         inspection exemptions
    Mr. Skeen. An establishment is exempt from Federal and/or state 
inspection if the product is for the sole use by the owner of the 
livestock, the owner's family, or nonpaying guests. How many exempt 
plants are there?
    Response. There are about 1,800 state plants and about 2,800 
federal plants involved in conducting custom exempt operations.
                  performance based inspection system
    Mr. Skeen. Please provide the Committee with the current status of 
the Performance Base Inspection System (PBIS).
    Response. PBIS continues to function as originally intended in 
scheduling of processing inspection activities. FSIS initiated 
implementation of off-line Slaughter activities (Process 03) into PBIS 
during FY 1996. Implementation was completed on a national basis during 
the first quarter of FY 1997.
    FSIS is currently developing a strategic plan for standardizing and 
improving the flow of PBIS-generated inspection data from the field 
level to headquarters. Part of this strategic plan is the PBIS 
Centralization and Reporting Project which will establish a central 
point for PBIS administrative operation schedule production and 
distribution, and feedback entry. The ability to access Management 
reports will be provided at locations other than a central point.
    PBIS will provide the vehicle for implementation of agency 
responsibilities pertaining to the HACCP regulation to be phased in 
through the year 2000. There also is the potential to expand PBIS to 
include egg products inspection in the near future.
    Mr. Skeen. A Data Quality Study was conducted to identify potential 
causes of inaccurate data in the PBIS system. What is the status of the 
recommendations based on the findings of the study?
    Response. Following are the recommendations and the resulting 
changes:
    1. Recommendation: Correct the minor data processing problems 
causing certain systematic errors.
    Agency Response: All software was reviewed and minor errors in data 
summary programs were corrected prior to reports being issued. This 
activity was completed in 1995.
    2. Recommendation: Re-evaluate the current national reports to 
ensure that national PBIS data is relevant and reported accurately and 
consistently.
    Agency Response: At the time of the study, PBIS reports were issued 
without regard to need by a particular staff or office. Now such 
reports are only issued to those requiring them. Each report is 
specifically designed for the requester's needs. This activity was 
completed in 1995.
    3. Recommendation: Develop a standardized data entry and audit 
procedure for area offices.
    Agency Response: The most recent software revision provides a more 
standardized data entry capability with built-in computer error checks 
to insure that data entry is performed in a consistent manner with 
fewer data entry errors.
    4. Recommendation: Incorporate a routine update of the plant 
specific monitoring plan in the PBIS procedures.
    Agency Response: A directive issued in August 1995 outlines 
procedures, responsibilities, and, a new, computer-assisted worksheet 
for updating the monitoring plan. The directive provides that the plan 
will be reviewed and updated when a change in plant conditions occurs 
or at least on a yearly basis.
    5. Recommendation: Re-evaluate the Plant Profile form to ensure it 
meets the needs of field personnel and Agency management.
    Agency Response: The Plant Profile form has been revised to 
accommodate the integration of Process 03 (slaughter inspection) into 
PBIS.
                       microbiological test kits
    Mr. Skeen. Has FSIS finalized the evaluation of data from the field 
test of microbioligical test kits?
    Response. The Fast Antimicrobial Screen Test (FAST) was 
successfully validated for cows and bob veal and is currently being 
used in these slaughter establishments. The FAST validation study in 
swine was terminated in fiscal year 1996, because of inspector 
shortages in the plant selected for study and the generation of an 
insufficient number of FAST positive samples during the course of the 
study period. For statistical purposes, a minimum of 150 FAST positive 
samples were required. At an estimated residue occurrence rate of about 
5 percent, this would require the testing of 3,000 carcasses by both 
FAST and STOP to generate the needed 150 FAST positive samples. During 
the course of the study, only around 30 FAST positive samples were 
found in testing over 200 carcasses. The study was not completed due to 
a lack of time by the inspection force in the plant selected for the 
study.
                      eligible exporting countries
    Mr. Skeen. How many countries are eligible to export to the U.S.?
    Response. There are 46 countries eligible to export to the U.S. in 
fiscal year 1997.
    Mr. Skeen. Please provide a list of these countries as well as the 
type and volume of product that was imported in fiscal year 1996.
    [The information follows:]

[Pages 807 - 813--The official Committee record contains additional material here.]


    Mr. Skeen. Has the number of eligible countries increased over 
fiscal year 1995?
    Response. The number of eligible countries increased by two, from 
42 in fiscal year 1995 to 44 in fiscal year 1996.
    Mr. Skeen. Provide a table showing the number of countries eligible 
to export to the U.S., the number that actually export products to the 
U.S., and the number of new countries that have applications pending to 
export to the U.S. for each of the fiscal years 1993 through estimates 
for 1998.
    [The information follows:]

        COUNTRIES ELIGIBLE TO EXPORT MEAT AND POULTRY TO THE U.S.       
------------------------------------------------------------------------
                                                             1997   1998
                                 1993   1994   1995   1996   est.   est.
------------------------------------------------------------------------
Eligible countries............     42     42     42     44     46     48
Exporting countries...........     32     35     34     34     34     34
Countries with pending export                                           
 applications.................     31     33     33     33     31     30
------------------------------------------------------------------------

    Mr. Skeen. How are exporting countries certified?
    Response. A country makes application to FSIS for eligibility to 
export to the U.S. FSIS conducts a document review and an on-site 
review to determine if the country's inspection system is equivalent to 
the U.S. system. If FSIS judges the system laws, regulations, and 
operations to be equivalent, a regulatory proposal is published in the 
Federal Register. Once a country becomes eligible, the chief inspection 
official in the country is responsible for certifying annually to FSIS 
the names of individual plants that meet all applicable standards and 
are authorized to export to the U.S.
    Mr. Skeen. How often are slaughter and processing plants in other 
countries reviewed by your agency?
    Response. Countries are reviewed by FSIS from one to four times 
annually. FSIS randomly selects plants within a country for auditing 
during a country review.
                library of foreign country requirements
    Mr. Skeen. What is the cost to maintain the Library of Foreign 
Country Requirements?
    Response. The cost of maintaining the on-line Library of Foreign 
Country Requirements is about $26,000 annually for staff and operating 
costs.
    Mr. Skeen. How many requests for information did you receive from 
the export library system in fiscal year 1996?
    Response. We received approximately 10,000 requests in fiscal year 
1996.
                          food safety research
    Mr. Skeen. What is the total amount you spent on research in fiscal 
year 1996, both internally and externally?
    Response. FSIS does not allocate any funds to research. FSIS 
research needs are performed by the Agriculture Research Service (ARS).
    Mr. Skeen. How much do you anticipate spending in fiscal years and 
1997 and 1998?
    Response. FSIS does not anticipate spending any funds on research 
in 1997 and 1998.
    Mr. Skeen. How much did you spend on scientific research in the 
area of microbial methodology in fiscal year 1996?
    Response. No funds were spent on microbial methodology scientific 
research. All of FSIS research needs are performed by ARS.
                     fast antimicrobial screen test
    Mr. Skeen. Will the Fast Antimicrobial Screen Test (FAST) be 
extended to pork inspection?
    Response. The FAST Antimicrobial Screen Test FAST was successfully 
validated for cows and bob veal and is currently being used in these 
slaughter establishments. The FAST validation study in swine was 
terminated in fiscal year 1996, because of inspector shortages in the 
plant selected for study and the generation of an insufficient number 
of FAST positive samples during the course of the study period. For 
statistical purposes, a minimum of 150 FAST positive samples were 
required. At an estimated residue occurrence rate of about 5 percent, 
this would require the testing of 3,000 carcasses by both FAST and STOP 
to generate the needed 150 FAST positive samples. During the course of 
the study, only around 30 FAST positive samples were found in testing 
over 200 carcasses. The study was not completed due to a lack of time 
by the inspection force in the plant selected for the study.
    Mr. Skeen. How widely is FAST being used?
    Response. FAST is currently being used in approximately 80 percent 
of all cow and bob veal slaughter plants in the USA. All other species, 
including swine, use the STOP test.
                         sos, stop, fast tests
    Mr. Skeen. Please update the table that appears on page 548 of last 
year's hearing record showing the number of SOS, STOP, CAST, and FAST 
tests performed to include fiscal year 1996.
    [The information follows:]

                                           RESIDUE TEST BY FISCAL YEAR                                          
----------------------------------------------------------------------------------------------------------------
                                                              1992       1993       1994       1995       1996  
----------------------------------------------------------------------------------------------------------------
SOS......................................................    106,133    101,118    127,742     26,273     17,682
STOP.....................................................    117,858    116,600     93,428     74,632     41,428
CAST.....................................................     79,666     85,033     54,783     79,542     19,448
FAST.....................................................      (\1\)      (\1\)     17,831     68,410     96,805
                                                          ------------------------------------------------------
      Total..............................................    303,657    302,751    293,784    248,857    175,363
----------------------------------------------------------------------------------------------------------------
\1\ FAST final analysis completed July 1993.                                                                    

    Mr. Skeen. What were the results of these procedures?
    Response. In fiscal year 1996 there were 1,372 total violations 
detected, including 26 by SOS tests, 344 by STOP tests, 111 by CAST 
tests, and 891 by FAST tests.
                          voluntary inspection
    Mr. Skeen. In total, how many inspection hours were performed in 
fiscal year 1996 on a voluntary basis and how much was reimbursed to 
FSIS?
    Response. In fiscal year 1996, 126,453 hours were spent on 
inspections not required by law. Fees paid for this inspection totaled 
$4,075,620.
                   fsis committees and working groups
    Mr. Skeen. Please provide the Committee with an updated list of 
committees and working groups that have been established within the 
agency and briefly describe their activities.
    [The information follows:]
                       office of field operations
    The following groups have disbanded and are no longer meeting:
          Technical Service Center Working Group
          District Working Group
          Circuit Supervisors Working Group
          Worker's Compensation Working Group
          Process 03 Work Group
          Preparing for the Future--Day Two
          Ongoing and new groups include:
Glass ceiling working group
    This group is identifying possible promotion barriers within Field 
Operations in order to develop strategies for overcoming barriers that 
prevent qualified women, minorities, and physically challenged 
individuals from reaching their full potential within the 
organization--the ``glass ceiling''. A report was issued by the group 
to the Administrator in early 1997. Members of the group are currently 
training FSIS managers and employees in issues related to the ``glass 
ceiling''.
Labor Management Transition Working Group
    This group is examining all personnel procedures and policies, 
levels of dealing, and other issues where the new organizational 
structure may impact on current Labor-Management policies and 
practices. This working group is also meeting with the bargaining unit 
to address and resolve issues and to develop new procedures acceptable 
to both union and management.
Safety and Health Steering Committees
    The Occupational Safety and Health (OSH) Steering Committee 
monitors and assists the Agency with in-plant safety issues by 
providing an open channel of communications between labor, management, 
and safety/health professionals. The Steering Committee's principal 
functions include; monitoring and evaluating performance of existing 
OSH programs; reviewing and evaluating new OSH programs before 
implementation; and advising or making recommendations concerning 
existing and/or proposed FSIS OSH programs.
Compliance and Enforcement Working Group
    This group will develop plans for the transfer of enforcement 
systems and records to the new district offices and to ensure the 
continuity and uniformity of the enforcement program. This group will 
absorb the Electronic Forms Working Group.
Salmonella Testing Project Team
    The Salmonella Testing Project Team is charged with completing 
program development work associated with the testing program for 
determining industry compliance with the Agency's performance standards 
for Salmonella under HACCP. This includes sample collection procedures, 
decision rules for sampling products and testing frequencies, 
development of training materials and training of inspection personnel, 
distribution of analytical results, and definition of the regulatory 
processes for enforcing the Salmonella performance standard in a HACCP-
Based environment. The work of the project team will continue 
throughout the implementation period of the final rule.
HACCP Implementation Work Group
    This group is designing and developing the training materials and 
delivery strategies to equip the inspection and compliance workforce to 
effectively carry out the Pathogen Reduction and HACCP requirements.
                  office of public health and science
    Ongoing and new groups include:
Food Safety Research Working Group
    This interagency group is charged with developing a food safety/
public health research needs assessment and agenda.
Executive Risk Advisory Committee
    The committee advises the Office of Risk Assessment Cost Benefit 
Analysis (ORACBA) on the development of programs supporting 
riskassessment and facilitates communication among USDA agencies on 
issues on concerning risk analysis.
Bovine Spongiform Encephalopathy (BSE) Working Group
    The group reviews the science and developments in animal health, 
food safety and public health related to BSE and recommends appropriate 
actions.
          office of policy, program development and evaluation
Interagency Coordinating Committee on Animal Production Food Safety
    The committee is composed of representatives from Federal agencies 
with public health, animal health, agricultural marketing or 
agricultural research responsibilities. These meetings provide a forum 
for discussion of current issues, seek to develop collaborative 
approaches which avoid duplication of effort, and strengthen working 
relationships between participants. A portion of each meeting is 
reserved for non-government speakers to present reports on activities 
or issues related to animal production food safety. The following 
groups made presentations to the committee during fiscal year 1996: 
National Pork Producers Council, National Turkey Federation, National 
Milk Producers Federation, American Veal Association, American Meat 
Institute, American Sheep Industry, and the National Poultry 
Improvement Plan.
The U.S. Codex Steering Committee
    The committee consists of policy-level government officials from 
USDA, FDA, and EPA that provide direction and guidance with respect to 
U.S. representation to Codex.
The U.S. Codex Technical Committee
    The committee consists of technical experts from USDA, FDA, and EPA 
providing technical expertise in matters relating to U.S. Codex.
Lincoln Multi-Cultural Middle School Committee
    The committee oversees the various activities (e.g., mentoring and 
tutoring) provided to the Washington, D.C., inner-city school by FSIS 
volunteers. Program areas within FSIS designate representatives to 
serve on the council. FSIS makes a special effort to assist the 
students with their science fair projects.
Standing Committee on Pathogen Control in Processing
    This ad hoc committee consists of subject matter experts who 
evaluate questionable meat and poultry processing practices. The 
committee is able to quickly evaluate potentially hazardous processing 
procedures and make recommendations for safety processing and labeling 
practices. The committee first formed to handle policy development 
related to mettwurst, a meat product traditionally expected to be 
ready-to-eat, but which supported the growth of Salmonella. The 
committee worked with industry representatives to identify and correct 
this potential food safety hazard.
Examining Process of Reviewing Foreign Countries Working Group
    The group consists of representatives from the International Policy 
Development Division and Program Review who are looking at how the 
Agency can best conduct reviews of foreign countries.
Issuance System Review Project Group
    Reviews the Agency's issuance system to ensure that all program 
related issuances provide inspectors with instruction and guidance they 
need to enforce the meat and poultry regulations. Also, ensure that all 
issuances are consistent with the goals of the Agency.
HACCP Policy and Procedures Work Group
    This group is designing and developing the framework and operating 
procedures for use by inspectors to determine a plant's conformance 
with the Pathogen Reduction and HACCP requirements.
                          office of management
Occupational Safety and Health Committees
    These committees are at the national, program, laboratory, and sub-
organizational levels. These committees meet periodically to discuss 
safety and health issues and emerging trends. The committees' 
recommendations help shape the Agency's safety and health programs.
                            grants to states
    Mr. Skeen. Update the table that appears on page 562 of last year's 
hearing record showing a cost breakout, by state, of the Grants to 
States program to include fiscal year 1996 actual and fiscal year 1997 
estimates.
    [The information follows:]

[Page 818--The official Committee record contains additional material here.]


       volume and cost of meat and poultry inspected at slaughter

    Mr. Skeen. Please update the table that appears on page 562 of last 
year's hearing record showing the volume of meat and poultry inspected 
at slaughter to reflect the separate cost associated with each to 
include fiscal years 1996 and 1997.
    [The information follows:]

                           VOLUME AND COST OF MEAT AND POULTRY INSPECTED AT SLAUGHTER                           
                                              [Dollars in millions]                                             
----------------------------------------------------------------------------------------------------------------
                                                                Millions of pounds    Slaughter inspection cost 
                                                               -------------------------------------------------
                                                                Red meat   Poultry    Meat     Poultry    Total 
----------------------------------------------------------------------------------------------------------------
1986..........................................................    37,042    24,273  ........  ........      $203
1987..........................................................    36,300    25,700  ........  ........       212
1988..........................................................    36,885    28,213  ........  ........       225
1989..........................................................    37,400    30,268  ........  ........       237
1990..........................................................    38,413    31,932  ........  ........       248
1991..........................................................    36,190    33,959  ........  ........       262
1992..........................................................    38,727    35,679  ........  ........       282
1993..........................................................    40,688    37,095  ........  ........       296
1994..........................................................    41,091    39,626      $138      $173       311
1995..........................................................    43,663    41,303       134       180       314
1996..........................................................    44,689    43,572       133       185       318
1997 estimate.................................................    45,011    44,262       136       189       325
----------------------------------------------------------------------------------------------------------------
Note.--The separate cost of meat and poultry slaughter is not available prior to Fiscal Year 1994.              

                      fsis enforcement activities
    Mr. Skeen. Also, update the table that appears on page 563 of last 
year's hearing record showing the number of FSIS enforcement 
activities, to include fiscal year 1996.
    [The information follows:]

[Page 820--The official Committee record contains additional material here.]


                            training center

    Mr. Skeen. Your agency has a training center located at Texas A&M 
University. Please update the table on page 563 of last year's hearing 
record showing the annual costs to operate the Donald L. Houston 
Training Center since it was first established.
    [The information follows:]

FSIS program training costs, Texas A&M University

                        [In thousands of dollars]

        Fiscal year:                                      Contract costs
1988..............................................................  $780
1989.............................................................. 2,372
1990.............................................................. 2,691
1991.............................................................. 2,562
1992.............................................................. 2,997
1993.............................................................. 2,748
1994.............................................................. 2,495
1995.............................................................. 2,852
1996.............................................................. 3,106

    Mr. Skeen. How many FSIS employees are located at this training 
center?
    Response. Currently, there are 36 permanent full-time and one 
permanent part-time FSIS employees at the training center in College 
station, Texas.
    Mr. Skeen. Do you plan to add or reduce staff at this center in 
fiscal years 1997 or 1998?
    Response. We have no plans to add positions to the staff during 
either fiscal year 1997 or fiscal year 1998. We do, however, plan to 
reduce the number of positions of the training center through attrition 
over the next few years.
    Mr. Skeen. How many employees were trained at the center during 
fiscal year 1996 and how many do you anticipate training during fiscal 
year 1997?
    Response. During fiscal year 1996, 1,515 FSIS employees were 
trained, and in fiscal year 1997, we expect to train up to 2,555 
employees. This figure includes training provided for the 
implementation of the Field Automation and Information Management 
(FAIM) project as well as the new Food Safety Educational Program being 
conducted in cooperation with the Texas A&M University.
    Mr. Skeen. Please provide a status report on FSIS' work with Texas 
A&M on developing new methods of training.
    Response. Our efforts to improve the design, development, delivery, 
and evaluation of training programs continues to go very well. We are 
working independently as well as in collaboration with Texas A&M in the 
effort. I would like to update you on several of our efforts.
    During the last year, we have been working with Texas A&M on the 
development of a Digital Library. The concept originated as a method to 
catalog the numerous slide and video images maintained by the Human 
Resource Development Staff (HRDS). It has quickly expanded to be a 
vehicle for allowing remote access to training and educational 
activities. We have an Internet homepage and recently distributed 
material from our pre-HACCP training via the Library. In addition, HRDS 
is working with our National Correlation Center to incorporate images 
and explanatory material that will help inspection personnel in the 
plants compare situations actually occurring in the plants with 
information available on-line. This can be both a vehicle for 
continuing education as well as help in bringing about greater 
consistency of dispositions nationwide. Currently, we have incorporated 
approximately 250 poultry correlation images in the library. HRDS and 
the National Correlation Center will continue to expand the information 
in this area on poultry and begin to move to other species such as 
swine and cattle over the next few months.
    HRDS is also continuing its efforts to develop computer-based 
training programs (CBT's) for use in FAIM computers as well as the 
classroom. Ultimately, these too may become a part of the digital 
Library system which will permit remote access, but also instant 
updating of information. A number of these programs are being developed 
in conjunction with Texas A&M University. We have disseminated modules 
for our veterinary Intern Program in the poultry specialty area and are 
completing more CBT's for the comparable red meat specialty. These will 
be primarily utilized at our field training stations across the 
country. HRDS has been working closely with our Import Program 
personnel and has completed a series of training modules for use with 
FSIS field trainers. In addition, FAIM has provided Library CBT and is 
developing a HACCP CBT. By the end of fiscal year 1997, an estimated 
10,000 training CD's will be distributed to field inspection personnel, 
five for each of the nearly 2,000 FAIM computers.
    Video tapes are also an important tool for training. While this is 
not a new methods, videos are seeing increased use in the 
implementation of new inspection methods. What is new is that the 
programs are being developed to deliver the key messages in a 
consistent way and at the same time, permit facilitators at field 
locations the opportunity to introduce discussions, workshops, and case 
studies that support that message and increase the effectiveness of the 
learning. HRDS produced approximately 75 percent of the videos used in 
the recent pre-HACCP training and expects to be even more involved in 
the development of videos for the next phases of HACCP training later 
this year.
    In addition, HRDS developed a video in conjunction with the 
Department of Transportation that will help vehicle inspection 
personnel at the Federal, state and local level involved in the 
transportation of meat and poultry products to identify common signs of 
product abuse which can threaten product safety. This video was 
completed and delivered to DOT in November.
    HRDS is also utilizing video-conferencing technology to aid in the 
delivery of classroom instruction. Using this technology, HRDS has 
brought a wider group of subject matter experts to the student enabling 
greater learning and with less cost than travel to the Training Center. 
At the same time, we are working with the Association of Food and Drug 
Officials (AFDO) on the development of programs to bring greater 
understanding of food safety issues to the state and local level. We 
are using video-conferencing to pilot the programs on a nationwide 
basis and receive feedback from AFDO on the programs content and 
effectiveness.
    We are also working very closely with Texas A&M on the new Food 
Safety Educational Program. The first, four week session of the program 
was delivered in January at the Training Center. The program is an 
academic program that will cover topics such as microbiology, 
environmental sanitation, statistical process control, and risk 
assessment. These individual topics are integrated together to form a 
seamless program that will better prepare our inspectors for their 
future roles in a HACCP environment. Students successfully completing 
the program will receive academic credit for their effort which can be 
used toward an undergraduate degree at Texas A&M or other institution 
near the student's home. We expect to offer nine programs this year and 
plan to offer as many as 24 programs during fiscal year 1998. There 
will be 30 students in each class.
    Finally, we are also trying to encourage FSIS personnel to make 
training and educational efforts a career long endeavor. With the 
significant geographic dispersion of the FSIS workforce, we need to 
develop a flexible program that can address their diverse learning 
needs. HRDS was designated by the International Association of 
Continuing Education and Training as a Certified Provider of Continuing 
Education Units (CEU's). HRDS therefore can give employees CEU's for 
participation in programs designed and developed within FSIS. Using 
this designation as a foundation, HRDS developed the Certificate of 
Excellence Program. The program currently offers basic, intermediate, 
and advanced certificates in several major areas such as inplant 
activities, compliance, and supervision and management. Employee 
pursuing a certificate will have a virtual menu of programs to choose 
from including audio visual and self study material owned by HRDS. In 
addition, training and educational courses offered by both FSIS and 
outside institutions can be used to complete a certificate. The 
Certificate Programs pulls together the many different activities 
available to FSIS employees and helps them structure their learning in 
a focused and graduated fashion. The certificate that employees will 
receive in the future will be a tangible reward for their effort and a 
demonstration of their commitment to meet the challenges of regulating 
in a HACCP environment.
                      amount of poultry inspected
    Mr. Skeen. Please update the table that appears on page 566 of last 
year's hearing record showing the number of poultry carcasses 
inspected.
    [The information follows:]

                                   POULTRY CARCASSES INSPECTED PER FISCAL YEAR                                  
                                                  [In millions]                                                 
----------------------------------------------------------------------------------------------------------------
                                                             Young      Mature                                  
                           Year                             chickens   chickens   Turkeys     Ducks      Other  
----------------------------------------------------------------------------------------------------------------
1985.....................................................      4,427        189        172         21        1.1
1986.....................................................      4,593        187        192         23        1.2
1987.....................................................      4,929        193        223         23        1.6
1988.....................................................      5,149        197        237         24        3.4
1989.....................................................      5,422        184        244         22        3.0
1990.....................................................      5,787        184        267         21        3.6
1991.....................................................      6,146        171        278         21        5.5
1992.....................................................      6,369        181        280         18        5.1
1993.....................................................      6,613        171        277         20        5.3
1994.....................................................      7,014        174        278         21        5.2
1995.....................................................      7,303        163        279         19        5.5
1996.....................................................      7,517        154        290         20        5.3
----------------------------------------------------------------------------------------------------------------

                            labeling program
    Mr. Skeen. Please update the two tables that were provided last 
year to include fiscal years 1996 and 1997 data. One showed the staff 
years and cost of the labeling program and the other showed the number 
of labels processed and approved. Be sure to include the footnote on 
the staff year table to reflect the total staff year level devoted to 
actually reviewing labels.
    [The information follows:]

[Page 824--The official Committee record contains additional material here.]


                      organic foods production act
    Mr. Skeen. Are any funds being devoted to the Organic Foods 
Production Act in fiscal year 1997?
    Response. No FSIS funds are being devoted to the Organic Foods 
Production Act in fiscal year 1997.
                     codex alimentarius commission
    Mr. Skeen. What responsibilities does FSIS have on the Codex 
Alimentarius Commission? Are there any new responsibilities in light of 
the GATT/WTO agreement?
    Response. The GATT Uruguay Round Agreements Act designated USDA as 
the lead agency for U.S. participation in the sanitary and 
phytosanitary standards-setting activities of the Commission. FSIS 
coordinates U.S. participation in these activities. The Act also 
established a requirement for annual public notice of the Codex 
standard-setting activities. FSIS published such notices on May 23, 
1995, and June 4, 1996. A May 1997 notice, covering the period of June 
1, 1997 to May 31, 1998, is anticipated.
               number of livestock inspected at slaughter
    Mr. Skeen. Update the table that appears on pages 569 and 570 of 
last year's hearing record showing the number of livestock inspected at 
slaughter, by species, to include fiscal year 1996.
    [The information follows:]

                                       LIVESTOCK INSPECTED PER FISCAL YEAR                                      
                                                 [In thousands]                                                 
----------------------------------------------------------------------------------------------------------------
                        Year                           Cattle    Calves     Sheep     Goats     Swine    Equines
----------------------------------------------------------------------------------------------------------------
1986................................................    34,822     3,215     5,411       147    77,246       171
1987................................................    34,811     2,779     5,096       159    76,388       246
1988................................................    32,790     2,437     4,802       236    79,129       300
1989................................................    31,340     2,177     5,059       230    82,111       343
1990................................................    33,034     1,872     5,141       230    83,856       315
1991................................................    29,620     1,463     4,449       191    81,298       236
1992................................................    30,759     1,353     5,129       225    89,210       244
1993................................................    32,569     1,210     5,094       289    90,481       184
1994................................................    33,179     1,191     4,645       365    90,206       109
1995................................................    35,681     1,395     4,512       333    94,490       113
1996................................................    37,690     1,723     4,268       421    93,397       113
----------------------------------------------------------------------------------------------------------------

                        meat and poultry exports
    Mr. Skeen. Provide a list of countries that received U.S. meat and 
poultry exports, how much they received, and the dollar value for 
fiscal year 1996.
    [The information follows:]

[Pages 826 - 829--The official Committee record contains additional material here.]


                    fiscal year 1998 budget request

    Mr. Skeen. Provide a table showing a complete breakout, including 
all proposed increases and decreases, of your budget request to the 
Secretary, the Secretary's request to OMB, and the OMB allowance.
    [The information follows:]

[Page 831--The official Committee record contains additional material here.]


           egg products inspection and salmonella enteritidis

    Mr. Skeen. Please describe FSIS responsibilities for egg products 
inspection and Salmonella enteritidis.
    Response. The Egg Products Inspection Act (EPIA), Public Law 91-
597, was passed by Congress in 1970 to provide for mandatory continuous 
inspection of the processing of liquid, frozen, and dried egg products 
to protect the health and welfare of consumers of these products. The 
Act and its associated regulations (7 CFR Part 59) set forth 
requirements to assure that eggs and egg products are wholesome, 
otherwise not adulterated, and properly labeled and packaged. Prior to 
the Department of Agriculture Reorganization Act of 1994, Public Law 
103-354, the Poultry Division of the Agricultural Marketing Service 
(AMS), U.S. Department of Agriculture (USDA), was responsible for 
administering the mandatory egg products inspection program under 
authority of the EPIA. On May 28, 1995, the Food Safety and Inspection 
Service (FSIS) of USDA assumed this responsibility from AMS.
    The term ``egg products'' refers to eggs which have been removed 
from their shells, processed, pasteurized, and packaged or shipped in 
bulk for institutional, food service, or retail sale. They include 
liquid, frozen, and dried whole eggs, egg yolks, egg whites, and 
various blends of these with or without non-egg ingredients added.
    Each plant in the United States which processes egg products is 
assigned one or more resident USDA egg product inspector(s). Inspectors 
are responsible for continuous supervision of sanitation and 
processing, which may include breaking, formulation, pasteurization, 
packaging, labeling, freezing, and/or drying. They also monitor the 
performance of experimental work or special approvals granted by the 
national office to assure they are carried out as intended.
    The staff of the national office is responsible for uniformly 
applying inspection procedures and standards for sanitation, 
processing, sampling, facilities and equipment, and product labeling at 
all establishments under Federal inspection. They are also responsible 
for assuring that imported egg products are wholesome, properly 
labeled, and equivalent to domestically-produced products. They carry 
out these responsibilities through review and approval of the 
following: plant blueprints, facilities, and equipment; formulations 
and all labels used to identify egg products; individual plants and 
inspection systems of foreign countries that wish to export egg 
products to the United States; and alternate processes or procedures 
not provided for in the regulations.
    Egg safety is very important to the Agency. In early 1996, we 
established an interagency review team on Salmonella enteriditis (SE) 
to summarize the current situation regarding SE and to make 
recommendation which address the issue. The report has been released to 
the public, and a copy is provided for the record.

[Pages 833 - 849--The official Committee record contains additional material here.]


    As directed in the House-Senate Appropriations Conference report 
for fiscal year 1996, FSIS stopped all Salmonella enteritidis (SE) 
program operations in fiscal year 1996. FSIS closed the FSIS-Animal 
Production Food Safety field office in Lancaster, Pennsylvania, the 
Pennsylvania Operations Center, which participated in active 
surveillance and verification of the voluntary Pennsylvania Egg Quality 
Assurance Program (PEQAP). Activities of the Pennsylvania Operations 
Center continued on a limited basis from mid-March until the end of 
June to allow for a smooth and orderly transition essential to assure 
continuation of the program. Two key personnel, a Veterinary Medical 
Officer and an Animal Health Technician, were detailed to the 
Pennsylvania Department of Agriculture (PDA) to assist in the 
transition of program duties. Their roles included: training 
Pennsylvania personnel in computer data base management, field 
activities, and acting as technical advisors for the program. 
Additionally, USDA provided computer equipment and supplies necessary 
to continue this industry-driven food safety program. The Agency 
provided $75,000 to support the Pennsylvania State Laboratory testing 
program for Salmonella enteritidis through June 30, 1996.
    FSIS is working closely with the Food and Drug Administration (FDA) 
to develop science-based regulatory standards for proper cooling of 
shell eggs and is looking at how best to implement the statutory shell 
egg requirement in the context of our HACCP-based farm-to-table food 
safety strategy for eggs.
    In close cooperation with the FDA, FSIS has undertaken a number of 
activities to address shell egg safety. In November, 1996, FSIS and FDA 
published an advance notice of proposed rulemaking (ANPR) to seek input 
on ways to improve food safety during transportation and storage. With 
FDA, we conducted a conference in November to receive information on 
temperature control interventions and verification techniques in the 
transportation and storage of meat, poultry, seafood, eggs and egg 
products. We are seeking comment on how the Federal government should 
be involved in this area.
    We are conducting a science-based, quantitative risk assessment for 
shell eggs and egg products to guide any actions taken to address the 
human health risks identified. The assessment will also consider 
various implementation strategies and costs. The project is being 
conducted by a multi disciplinary team of scientists from USDA, FDA, 
CDC, and academia. It includes a public process to provide the 
opportunity for input from all stakeholders.
    FSIS and FDA are also considering ways to solicit information 
through the rulemaking process on issues of comprehensive food safety 
in shell eggs from production to food preparation. An ANPR on Shell 
Eggs will be published soon by FDA and FSIS.
    We fully support the forum provided by the Conference for Food 
Protection for developing the best model code for State adoption. We 
are committed to strengthening how the existing Code addresses meat, 
poultry, and egg products. We also are committed to providing 
appropriate assistance to see the Food Code adopted nationwide.
    The Centers for Disease Control and Prevention (CDC) and others 
expressed the need for an ongoing forum for information exchange on SE. 
FSIS chaired a meeting at the International Poultry Exposition in 
Atlanta, GA on January 21, 1997 to bring together all parties 
interested in continuing coordinated efforts which reduce the public 
health risks from SE. This forum was well attended by federal agencies 
including CDC, FDA, APHIS, AMS, ARS, and FSIS, State Departments of 
Agriculture, academia, industry and consumer groups. The purpose of the 
meeting was to improve communication and promote constructive dialogue 
about SE. We plan to continue to facilitate such forums in the future.
                          exporting procedures
    Mr. Skeen. Is the recommendation from the Office of the Inspector 
General report on exporting procedures that has been open since 1987 
still unresolved? If so, why?
    Response. Before the end of fiscal year 1997, we expect to resolve 
the recommendation, which has been delayed as a result of numerous 
program changes since 1987. The Agency has reevaluated its position on 
the issue of Finished Product Standards (FPS) in light of the recent 
rulemaking on Pathogen Reduction and HACCP Rule. The Agency is now in 
the process of revising the Finished Product Standards. We will define 
different action levels for the potential food safety and consumer 
protection groups of nonconformance; establish FPS for poultry necks 
and giblets; set tolerances at the same level for all poultry classes; 
and separate the conditions which have the potential for transmitting 
foodborne illnesses. FSIS expects to complete revision of the Finished 
Product Standards before the end of fiscal year 1997.
                        meat and poultry hotline
    Mr. Skeen. How many calls did the Meat and Poultry Hotline receive 
in fiscal year 1996?
    Response. USDA's Meat and Poultry Hotline received 113,026 calls 
during the twelve-month period ending September 30, 1996. This marks 
the fourth consecutive fiscal year in which the Hotline recorded more 
than 100,000 calls. The Hotline recently celebrated the one millionth 
call to the service.
    Mr. Skeen. How does this compare with the two previous fiscal 
years?
    Response. The total number of calls for fiscal year 1996 is lower 
than the numbers in fiscal year 1995 and fiscal year 1994. There have 
been decreases of approximately three and eight percent, respectively.
        Fiscal year                                      Number of calls
1996..........................................................   113,026
1995..........................................................   116,530
1994..........................................................   126,244

    Events such as product recalls and foodborne illness outbreaks are 
expected to increase calls to the Hotline. Thus, some year-to-year 
fluctuation is normal. However, given that call volume has declined in 
two consecutive years, the Hotline has identified the following factors 
that may have contributed to that decline.
    There are more sources of food safety information available today. 
Many of these, including the FDA/CFSAN 800 line, were not in existence 
in the early days of the USDA Meat and Poultry Hotline. These new 
sources of information include a large number of online databases such 
as the National Food Safety Database at the University of Florida, many 
of which rely heavily on materials produced by FSIS and the Meat and 
Poultry Hotline.
    FSIS itself has instituted two new information retrieval systems 
for consumers and professionals. These are (1) the ``FSIS Fast Fax,'' 
an automated fax-on-demand system that consumers can call toll-free, 
and the FSIS HomePage on the World Wide Web. Again, these systems offer 
publications produced by the Meat and Poultry Hotline based on trends 
in Hotline inquiries.
    Media are reporting on food safety more frequently. If that 
reporting is accurate, particularly on the basic food handling 
messages, consumers would not need to call a government hotline for 
clarification. In fiscal year 1996, the Hotline received 861 media and 
``information multiplier'' calls. Hotline senior staff spend 
considerable time working with food and health editors to ensure the 
accuracy of the information the reporter will convey. In addition, 
Hotline staff produce information packages four times a year that are 
distributed to media and food safety educators. These information kits 
generate many articles, stories and programs that relay food safety 
information based on Hotline callers concerns or misconceptions. When 
the media produce a story, a much wider audience is reached with the 
food safety message.
    Downsizing has impacted available staffing for the Hotline. While 
the addition of phone lines could bring in more calls to the Meat and 
Poultry Hotline, especially during peak times, there are fewer 
specialists available to handle these calls than in either fiscal year 
1995 or fiscal year 1994. The addition of more telephone lines could 
adversely impact customer service and increase expenses, and is not 
seen as a prudent action at this time.
    The Hotline is a vital and important part of FSIS' public health 
and consumer education initiatives and the value can not be judged on 
call volume alone.
                export certification information system
    Mr. Skeen. When will the Export Certification Information System be 
implemented?
    Response. The system as described in a 1993 proposed rule is not 
planned for implementation. FSIS continues to explore methods of 
automating the export certification process.
               ergonomically designed poultry inspection
    Mr. Skeen. What is the status of the ergonomically designed poultry 
inspection station that is being developed to help reduce the potential 
for cumulative trauma disorders?
    Response. FSIS contracted for fabrication of a prototype 
ergonomically designed leaning/standing stool. A test plant was 
identified, but subsequently declined to allow the test of the stool. 
No further action has been taken on the stool at this time because an 
inspection station with ergonomically designed features is part of a 
pilot for a new evisceration system in a poultry slaughter plant.
                        inspection system guide
    Mr. Skeen. Have there been any modifications to the Inspection 
Service Guide in fiscal year 1996? If so, please describe them.
    Response. Modification to PBIS has been completed to provide for 
inspection tasks associated with the Sanitation Standard Operating 
Procedures, SSOPs, which went into effect January 27, 1997.
    The Inspection System Guide (ISG) was modified extensively during 
FY 1996 to reflect implementation of Process 03, off-line slaughter 
inspection. The incorporation of slaughter inspection into PBIS 
involved the addition of approximately 60 tasks to the ISG. Along with 
Process 03, regulatory changes pertaining to Prior Approval of Labeling 
required modification to Process 07 of the ISG. Some modification of 
Process 06 of the ISG was necessary prior to publication of FSIS 
directive 7160.1 pertaining to inspection of advanced meat recovery 
systems.
                            fsis staff years
    Mr. Skeen. For the record provide a table showing a breakout of 
your staff years by inspectors and non-inspectors for fiscal years 1990 
through 1997.
    [The information follows:]

                           APPROPRIATED FUNDS                           
------------------------------------------------------------------------
                                                      Inplant     Non-  
                                                    inspection   inplant
                                                       staff      staff 
                                                       years      years 
------------------------------------------------------------------------
Fiscal year:                                                            
    1990..........................................      7,495      1,711
    1991..........................................      7,593      1,693
    1992..........................................      7,644      1,742
    1993..........................................      7,667      1,857
    1994..........................................      7,829      1,782
    1995..........................................      8,025      1,773
    1996..........................................      7,915      1,555
    1997 (estimated)..............................      8,054      1,569
    1998 (estimated)..............................      8,054      1,553
------------------------------------------------------------------------
Note: Fiscal years 1995 and later include the Egg Products Inspection   
  and Animal Production Food Safety programs transferred to FSIS during 
  USDA reorganization in 1995.                                          

                         on-farm investigations
    Mr. Skeen. What type of on-farm investigations does the Food and 
Drug Administration (FDA) do?
    Response. The Food and Drug Administration conducts on-farm 
investigations related to violations of the Federal Food, Drug,and 
Cosmetic Act. These are primarily related to the illegal manufacture, 
distribution or use of animal drugs and veterinary medical devices and/
or to follow-up on reports of violative animal drug residues in animals 
submitted for slaughter. FDA also conducts follow-up investigations on 
Salmonella enteritidis reports in shell eggs.
    Mr. Skeen. Does FSIS conduct on-farm investigations?
    Response. FSIS does not conduct on-farm investigations.
                              haccp forum
    Mr. Skeen. Are you continuing to hold field hearings around the 
country to explain the Pathogen Reduction and HACCP programs?
    Response. We have found that conducting meetings around the country 
to explain Pathogen Reduction and HACCP is extremely beneficial and we 
plan to continue such meetings throughout the implementation period. We 
have recently announced 10 meetings to be held around the country 
starting on April 12. The purpose of these meetings is to discuss with 
establishment owners/operators information and communication needs. 
Additional meetings will be planned and held as needed during the 
implementation of the Pathogen Reduction/HACCP final rule.
    Mr. Skeen. Where were these meetings held in fiscal year 1996 and 
what are the plans for FY 1997?
    Response. During fiscal year 1996 FSIS held regional HACCP 
implementation conferences in the following locations: Chicago, 
Illinois; Kansas City, Missouri, Dallas, Texas; Oakland, California; 
Boston, Massachusetts and Atlanta, Georgia. Topics covered at these 
meetings included: Overview of the final rule; Sanitation Standard 
Operating Procedures; E. coli testing; Salmonella Testing; HACCP 
training; and the potential impact of in-plant HACCP implementation of 
food animal production.
    During fiscal year 1997 FSIS will hold 10 field meetings to improve 
communications between FSIS and federally-inspected plants, as HACCP is 
implemented. Meeting sites selected so far include Nashville, 
Tennessee; Philadelphia, Pennsylvania; Boston, Massachusetts; and 
Kansas City, Missouri. FSIS has held, and will continue to hold during 
1997, HACCP-related meetings on specific topics in the Washington, D.C. 
area.
                 animal production food safety program
    Mr. Skeen. Please describe the operation of the Animal Production 
Food safety program.
    Response. The Animal Production Food Safety (APFS) program provides 
leadership for USDA on public health concerns associated with animal 
production, transportation, marketing,and pre-processing preparation of 
livestock, poultry and eggs. It is responsible for outreach and liaison 
to create and sustain voluntary risk reduction strategies in the 
raising of live animals intended for human consumption. Approaches 
include:
    (1) Working with other Federal agencies with food safety 
responsibilities to ensure that efforts are coordinated.
    (2) Fostering collaborative opportunities and initiatives for 
public/private investment in APFS risk reduction activities and 
strategies.
    In carrying out this role, the APFS program provides assistance and 
leadership to foster the research needed to develop voluntary, science-
based good production and verification programs for animal production 
that will reduce the risk of chemical, physical and microbial 
contaminants from entering the food chain. The staff develop and 
maintain cooperative relationships to support FSIS public health and 
commodity food safety initiatives. In addition, they communicate 
information needed by the animal production community to assist them in 
meeting reasonable and science-based requirements of animals at the 
receiving stage of processing as HACCP systems are implemented.
    The Animal Production Food Safety Program is carried out by a staff 
of five professionals and three support staff. During FY 1997 the 
Program is funding cooperative agreements and contracts related to 
animal production food safety.
    On February 27, 1997, FSIS published in the Commerce Business Daily 
a request-for-proposals for a series of pilot demonstration animal 
production food safety projects in the non-fed Beef, pork, poultry and 
sheep areas. The projects are intended to demonstrate the application, 
feasibility and effectiveness of current technologies for controlling 
contamination with particular emphasis on pre-slaughter pathogen 
reduction. Animal identification will be a required element of the 
nonfed beef project. An animal identification element will be 
encouraged, but not required, in the pork and sheep projects.
    Additional projects include promoting the adoption of producer 
programs which improve the ability of food animal producers to maintain 
sustainable operations as they address food safety responsibilities and 
possible requirements of slaughter plants implementing HACCP systems; 
evaluating the specific needs of economically disadvantaged small 
producers to meet their food safety responsibilities; supporting the 
development of the Food Safety Digest to serve as a reliable source for 
multi-species animal production food safety information and promote the 
adoption of voluntary food safety practices by animal producers; and 
expanding the ability of the Food animal Residue Avoidance Databank to 
provide pharmacokinetics and withdrawal time information for animal 
drugs and pesticides used in minor food animal species.
               illegal and unapproved chemicals and drugs
    Mr. Skeen. The Inspector General's most recent report identifies 
illegal and unapproved chemicals and drugs smuggled into the United 
States by a Wisconsin company and its parent company in the 
Netherlands. What quantities of these drugs and chemicals were smuggled 
into the U.S.?
    Response. It is alleged that between 1988 and April 1994 the Vitek 
Supply Corporation, Oak Grove, Wisconsin sold over 1.7 million pounds 
of products containing unapproved drugs, valued at almost $1.3 million. 
The drugs identified were clenbuteral, a drug associated with 
reversible toxicity in humans in Europe who consumed livers from cattle 
fed the drug and slaughtered before the chemical had depleted from the 
tissue; Avoparcin, an antibiotic not approved by FDA that might 
stimulate development of antibiotic resistant bacteria; and nitrofuran 
compounds that have not been approved by FDA since 1985 and 1992 due to 
evidence that they are carcinogenic in animals.
    Mr. Skeen. What is the status of the investigation?
    Response. On January 21, 1997, U.S. district Judge Thomas J. Curran 
sentenced Jannes Doppenberg, president of Vitek Supply Corporation to 
44 months in prison. Vitek and Doppenberg were convicted in June 1996 
on 12 felony counts stemming from a scheme to smuggle into the United 
States and distribute unapproved drugs for use in veal calves. Fines 
levied to Doppenberg and Vitek related to the incident were $25,000, 
$29,452, $705,814, and $350,000.
                     laboratory recognition program
    Mr. Skeen. Why did FSIS terminate the Laboratory Recognition 
Program?
    Response. Several years ago, USDA's Office of Inspector General 
(OIG) recommended that the Laboratory Recognition Program (LRP) either 
be brought up to the standards of the Accredited Laboratory Program and 
conducted on a user fee basis or that it be terminated. The agency 
decided to terminate the program because the laboratories were used 
relatively infrequently and, because of FSIS audit testing, the total 
number of samples actually processed solely by LRP laboratories without 
concomitant FSIS analysis amounted to a few hundred samples per year. 
It would have been cost-prohibitive to bring the program up to 
Accredited Laboratory Program standards, as recommended by OIG, for so 
few samples each year.
    Mr. Skeen. Where do companies now send samples previously sent to 
LRP member laboratories?
    Response. FSIS has made arrangements for samples to be analyzed in 
its own laboratories, and for rapid reporting of results to 
establishments.
                 pennsylvania district office location
    Mr. Skeen. Last year, the Department changed a decision to base an 
FSIS district office in Harrisburg and move it to Philadelphia. 
According to Secretary Glickman's letter of December 31, 1996, the 
decision for Philadelphia was changed because of a Civil Rights Impact 
Analysis. Shouldn't food safety be the critical factor in location of 
field offices? How much weight is a civil rights impact analysis given 
over other factors?
    Response. The selection of district offices, which are responsible 
for field program administration, was based on a complete business 
analysis which balanced a range of factors, including costs and 
convenience of travel. Using the selection criteria, Harrisburg scored 
slightly higher than Philadelphia which is the location of one of the 
five existing FSIS Regional Offices.
    As part of the Department's review and approval process for the 
proposed reorganization, FSIS prepared a comprehensive Civil Rights 
Impact Analysis. This analysis included a reconsideration of all 
decisions on office locations from the point of view of FSIS employees. 
The analysis determined that locating the Pennsylvania District Office 
in Philadelphia rather than Harrisburg would result in separation of an 
estimated six fewer employees. Because the program criteria were 
closely matched between Harrisburg and Philadelphia, with Harrisburg 
having only a slight advantage, and because adverse impact on employees 
could be lessened by selection of Philadelphia, FSIS made the decision 
to change the initial decision and select Philadelphia as the site for 
the Pennsylvania District Office.
                          haccp implementation
    Mr. Skeen. How many plants in the United States have gone ahead 
with a HACCP system?
    Response. A number of plants have incorporated a number of the 
HACCP principles into their operation. Prior to the implementation of 
the HACCP/Pathogen Reduction Rule the Agency had no system in place for 
counting plants with HACCP programs. However, large plants will be 
required to have them in place by January 1998, small plants by January 
1999 and very small plants by the year 2000. At this time there is no 
reporting requirement that plants inform FSIS of the adoption of a 
voluntary HACCP program.
                   haccp impact on foreign countries
    Mr. Skeen. What effects will the new HACCP rules have on imported 
products?
    Response. Imported products will be required to have been subjected 
to an inspection process that is equivalent to that of the United 
States.
    Mr. Skeen. How are foreign plants that export to the United States 
approved through the new HACCP system?
    Response. In order to export to the United States, a foreign plant 
must be certified by the foreign country's chief inspection official as 
meeting all U.S. requirements, including the HACCP regulation. FSIS 
will determine if the country is implementing HACCP or equivalent 
measures by reviewing the countries regulations, directives and other 
documents implementing the requirements and by conducting on-site 
verification reviews.
    Mr. Skeen. Is there a timetable for foreign plants to meet HACCP 
standards?
    Response. Foreign countries are required to comply with the 
timetable established in the HACCP regulation for U.S. plants.
                             sentinel sites
    Mr. Skeen. Please provide the location of the existing sentinel 
sites and the three new sites for the food safety initiative.
    Response. The five existing sentinel sites include selected 
counties in Northern California; Oregon; the Minneapolis/St. Paul, 
Minnesota metropolitan area; the Atlanta, Georgia metropolitan area; 
and Connecticut. The additional sites include the Rochester, New York 
area and the Baltimore, Maryland area. The eighth site is as yet to be 
determined.
    Mr. Skeen. What are the criteria for selecting these sites?
    Response. The Centers for Disease Control and Prevention (CDC) 
manage the selection of sites. Site applications are ranked by a 
scoring system based on the State's existing infrastructure and ability 
to perform the programs. The criteria used by CDC in selecting the 
sentinel sites are part of their overall effort to establish Emerging 
Infections Program (EIP) projects with State and local health 
departments. These cooperative agreements will assist local, State, and 
national efforts to conduct surveillance and applied epidemiologic and 
laboratory research in emergency infectious diseases. CDC administers 
the EIP projects through an application and award process. Eligible 
applicants are the official public health agencies of States or their 
bona fide agents.
    Mr. Skeen. How much do FSIS and CDC respectively budget for the 
sentinel sites program?
    Response. For fiscal year 1997 FSIS provided $1 million to CDC for 
the Sentinel Site Survey, recently named FoodNet, which covers 5 sites. 
The fiscal year 1998 budget requests an increase of $500,000 to cover 
Campylobacter case control studies at 8 sites.
    For FY 1998, the CDC budget requests $14.5 million to establish a 
new National Early Warning System for outbreaks of foodborne illness 
which builds on the existing Sentinel Site Survey, recently named 
FoodNet. This request represents an increase of $10 million over fiscal 
year 1997.
                   increases in object classification
    Mr. Skeen. Please explain the increase in Object Class 25.2, Other 
Services for both fiscal years 1997 and 1998.
    Response. The increase in Object Class 25.2 Other Services for 
fiscal year 1997 of $4.6 million is primarily associated with 
investments to support a more science-based, modernized inspection 
system. The 1997 increase includes $2.6 million for small business 
HACCP-related technology and technology applications for food safety 
inspection, $1 million for laboratory renovation, $0.3 million for 
microbiological sampling and testing, and $0.7 million for Animal 
Production Food Safety projects.
    The increase for fiscal year 1998 of $0.7 million includes a $0.5 
million increase for the Sentinel Site Survey, recently named FoodNet, 
to cover Campylobacter case control studies at the expanded eight 
sites. In addition a $0.2 million increase is needed for a two-year 
program to provide training in HACCP principles to State and local 
regulators of retail stores and restaurants. The increase will provide 
training materials for State, county and city inspectors across 
approximately 3,000 government agencies.
    Mr. Skeen. Please explain the increase in Object Class 31, 
Equipment, for both fiscal years 1997 and 1998.
    Response. The increase in Object Class 31, Equipment, for fiscal 
year 1997 of $3 million is primarily associated with $2.2 million of 
increased obligations for microbiological sampling and testing, and 
laboratory renovations. the increase will provide equipment, such as 
laboratory benches and hoods, incubators, refrigerators and computers. 
This additional and upgraded equipment is needed to adequately cover 
the workload increase associated with HACCP implementation. The balance 
of the increase is FAIM funding that was ``carried over'' to 1997 from 
the 1996 appropriation for purchasing a new hardware/software platform.
    The increase for fiscal year 1998 of $0.6 million reflects a net 
increase for upgrading automated data processing and telecommunications 
technology in support of the Agency's streamlined organizational 
structure.
                       faim project expenditures
    Mr. Skeen. Please provide a table showing expenditures for the FAIM 
project from its first year with estimates for fiscal year 1998 and 
subsequent years.
    Response. Direct FAIM expenditures from the pilot phase of the 
project through the budget year estimates total $25.5 million. 
Estimates for subsequent years are as yet to be determined.

               FIELD AUTOMATION AND INFORMATION MANAGEMENT              
                        [In thousands of dollars]                       
------------------------------------------------------------------------
                        Fiscal year                         Expenditures
------------------------------------------------------------------------
1996......................................................        $7,230
1997 estimated............................................         9,720
1998 estimated............................................         8,525
------------------------------------------------------------------------

                          relocation benefits
    Mr. Skeen. Are the relocation benefits described on page 13-13 of 
your budget justification standard for all USDA agencies?
    Response. The following relocation allowances described on page 13-
13 of the budget justification are not only standard among USDA 
agencies, but required to be paid by all Federal agencies, under 5 
U.S.C. Sec. 5724 and 5724A: subsistence expenses for the employee and 
family to travel to the new duty station, transportation and storage of 
household goods; real estate expenses associated with the sale and/or 
purchase of a residence, and miscellaneous expenses. Relocation 
services include the home sale service, which is authorized under the 
real estate expense allowance. Section 302-12.2 of the Agriculture 
Travel Regulations states, ``Agencies must offer relocation services to 
all eligible transferring employees.''
    Agencies have some latitude with the house hunting and temporary 
quarters allowances. However, it is the practice of all USDA agencies 
to authorize these allowances in some combination to their transferring 
employees.
             government performance and results act (gpra)
    Mr. Skeen. GPRA, known as the Results Act, requires each executive 
agency to issue, no later than September 30, 1997, a strategic plan 
covering at lease five years. In addition to a mission statement 
grounded in legislative requirements, the plans are to contain general 
goals and objectives that are expected to be outcome or results 
oriented (such as to improve literacy) as opposed to output or activity 
oriented (such as to increase the number of education grants issued). 
What progress is the agency making in developing its strategic plan, 
including defining its mission and establishing appropriate goals?
    Response. The Agency submitted its strategic plan with a mission 
statement, goals, objectives, and measures to the Secretary on March 3, 
1997. Additional review and refinements to the plan's performance 
measurements will occur during the summer of 1997.
    Mr. Skeen. Has the agency identified conflicting goals for any of 
its program efforts? If so, what are the performance consequences of 
these conflicting goals and what actions--including seeking legislative 
changes--is the agency taking to address these conflicts?
    Response. The Agency has identified three goals for its strategic 
plan. Goal 1 incorporates the scientific methods of HACCP charges 
industry with greater responsibility for food safety, and should result 
in a safer food supply as stated in Agency's mission. Executive 
discussions on the Plan led to the creation of goal 2 for a farm-to-
table food strategy and Goal 3 on cultural change. These goals are in 
harmony for the Agency to realize its public-health oriented food 
safety mission. Performance considerations are being addressed through 
discussions with other agencies regarding the following cross-cutting 
issues contained in the strategic plan:
          Collaborative Efforts to Address Food Safety/Good Management 
        Programs in Animal Production
          Import/Export of Meat, Poultry, and Egg Products
          Regulatory Impact Analysis
          Animal Well-being
          Transportation/ Distribution
          Export Related Program Coordination
          Education
          Food Security Issues
          Research
          Nutrition Education
    Mr. Skeen. Strategic plans must be based on realistic assessment of 
the resources that will be available to the agency to accomplish its 
goals. As you are developing your strategic plan, how are you taking 
into account projected resources that likely will be available--
especially as we move to balanced budget? What assumptions are you 
making? How are you ensuring that your goals are realistic in light of 
expected resources?
    Response. For FY 1998 and on, FSIS assumes a new user fee will 
provide the means for funding the Agency's inspection activities. These 
include primary and second shift slaughter, processing, egg, and import 
export inspections. Laboratory services, pathogen reduction activities, 
grants to States, other support services, and administrative costs will 
continue to be supported through appropriated funds. In addition to the 
appropriated funds, FSIS charges fees for inspection services provided 
on an overtime and, in some cases, holiday basis, and for voluntary 
services requested by the industry to accommodate business needs. In 
addition, the Agency also charges for accreditation of laboratories. 
Enactment of the new user fee proposal is essential in order to meet 
the agency's goal of ensuring sufficient inspection services are 
available to undertake all inspection requirements and meet the needs 
of the industry.
    The FSIS reorganization strategy offers an approach to make the 
Agency more efficient with its allocated resources. In early 1995 the 
FSIS Administrator announced the Agency would look at itself ``from top 
to bottom'' and redefine for the future its regulatory roles, resource 
allocation, and organizational structure in a manner consistent with 
the goals and strategies of the Pathogen Reduction/HACCP regulation. 
The resulting Top-to-Bottom Review was part of the Agency's overall 
initiative to improve the safety of meat, poultry, and egg products and 
better protect consumers. A significant guiding principle in this 
initiative was to streamline filed and headquarters management 
structures to foster effective decision making, make optimal use of 
management resources, and achieve administrative streamlining targets. 
The reorganizations proposal was approved by the Department on July 17, 
1996, and took effect on November 11, 1996, when FSIS began the process 
of implementing the resulting changes. The new structure has eliminated 
one layer of management at the Agency's headquarters level, reduced the 
number of supervisory positions, centralized management of all policy, 
rulemaking and development activities, and improved the Agency's 
ability to make effective and efficient program changes. The resulting 
resource ``savings'' are being redeployed to front line activities.
    The reorganization has opened better communication pathways across 
program areas. It has resulted in a more efficientutilization of Agency 
resources. Improving the utilization of existing resources is the 
fundamental key to success during times of budgetary austerity, and 
instrumental to FSIS in meeting its strategic goals.
    Mr. Skeen. For Congress, the heart of the Results Act is the 
statutory link between agency plans, budget requests, and the reporting 
of results. Starting with fiscal year 1999, agencies are to develop 
annual performance plans that define performance goals and the measures 
that will be used to assess progress over the coming year. These annual 
goals are to measure agency progress toward meeting strategic goals and 
are to be based on the program activities as set forth in the 
President's budget. What progress have you made in establishing clear 
and direct linkages between the general goals in your strategic plan 
and the goals to be contained in your annual performance plans? OMB 
expressed concern last year that most agencies had not made sufficient 
progress in this critical area.
    Response. The Agency's initial experience in dealing with the 
elements of an Annual Performance Plan (APP) occurred when drafting a 
response to President Clinton's regulatory reform initiative of March 
4, 1995. The President's directive required the establishment of a 
Regulatory Performance Measures Plan, similar to a performance plan, 
for two areas: regulatory reform and employee performance. FSIS 
developed a plan to review and restructure its performance measures to 
reflect its purpose and mission. The Agency also developed a strategy 
to review and revise employee performance measures to reflect results 
instead of employing a ``score keeping'' approach and punitive actions. 
These accomplishments will be experiences on which the Agency will draw 
as it begins to prepare its Annual Program Performance Plan for 
submission in September 1997 for fiscal year 1999.
    The Agency has also developed a Performance Plan for Goal 1 or 
HACCP. This plan cuts across organizational boundaries and calls for 
``Events Managers'' to coordinate the various components of the 
activities. This is an experimental approach designed to ensure not 
only that the ultimate goal is met but also that the Agency complies 
with the commitments made during the finalization of the Pathogen 
Reduction/HACCP rule. Performance plans supporting the other goals will 
be developed during the fiscal year 1999 budget process later this 
year.
    The Agency recognizes the importance of linking its performance 
plans to its budget proposals. To accomplish this, the budget and 
planning staffs are working together to ensure that future budget 
submissions reflect the performance elements contained in the Agency's 
performance plans.
    Mr. Skeen. More specifically, how are you progressing in linking 
your strategic and annual performance goals to the program activity 
structure contained in the President's budget? Do you anticipate the 
need to change or modify the activity structure to be consistent with 
the agency's goals?
    Response. In the 1998 Budget, FSIS proposed a new, streamlined 
program activity structure which would reduce the number of activities 
from eight to five. In the Explanatory Notes, FSIS justified this 
change because it:
    1--facilitates strategic budgeting and performance measurement by 
combining similar functional activities (new activity of Federal Food 
Inspection combines former activities of Slaughter, Processing and Egg 
Products Inspection; former Pathogen Reduction eliminated and included 
in all activities.)
    2--streamlines Agency budget reporting and allows flexibility to 
better manage available funds and meet Congressional mandates.
    3--improves tracking of obligations with fewer activities.
    The new structure, while not designed specifically to do so, is 
broad and flexible enough to permit linkage with strategic and annual 
performance goals, especially as these are fine tuned or even if they 
change over time.
    Mr. Skeen. Overall, what progress has your agency made--and what 
challenges is it experiencing--defining results-oriented performance 
measures that will allow the agency and others to determine the extent 
to which goals are being met?
    Response. There is a fundamental gap in knowledge regarding the 
frequency of foodborne illnesses caused by adulterated meat, poultry or 
egg products. Ultimately, this will be the performance measurement of 
the future. But until such time as this knowledge is available, the 
Agency and its stakeholders must rely upon other measurements and 
variables over which the Agency has jurisdiction and management 
authority. Additionally, the Agency is progressing in the 
implementation of HACCP, reorganization, and cultural changes away from 
command and control. With these changes comes the challenge of 
envisioning performance measurements for systems which are not in place 
at this time. As the Agency progresses, this process will become more 
defined.
    Mr. Skeen. If applicable, what lessons did the agency learn from 
its participation in the Results Act pilot phase and how are those 
lessons being applied to agency-wide Results Act efforts? What steps is 
the agency taking to build the capacity (information systems, personnel 
skills, etc.) necessary to implement the Results Act?
    Response. FSIS did not participate as a GPRA pilot. The Field 
Automation and Information Management (FAIM) initiative is the Agency's 
primary information resource management focus and will extend 
automation to inspection personnel, connect various FSIS application 
systems, and should improve the productivity, quality, and services of 
both inspection and administrative process. When fully implemented, 
this initiative will greatly enhance the capability to provide the 
baseline information necessary for reporting progress in meeting or 
exceeding performance standards. In addition, GPRA information has been 
made available to employees and management alike via the Agency's 
automated communication system. This information, which is updated 
periodically, has provided the necessary reference material to continue 
building personnel skills.
    Mr. Skeen. The Results Act requires agencies to solicit and 
consider the views of stakeholders as they develop strategic plans. 
Stakeholders can include state and local governments, interest groups, 
the private sector, and the general public, among others. Who do you 
consider to be your agency's primary stakeholders and how will you 
incorporate their views into the strategic plans?
    Response. The ongoing strategic planning process incorporates four 
phases to develop the FSIS strategic plan. It is intended to provide an 
opportunity for Agency managers, employees, and constituent groups to 
review the plan and provide feedback on its content. The fourth phase 
of this process specifically involves employee/constituent outreach and 
feedback. This phase is intended to promote employee and constituent 
group feedback on the strategic plan and to realize a general agreement 
on the acceptability of the Agency strategic plan to all constituent 
groups. The Agency is also working on distributing an all-employee 
letter which will address FSIS' future direction under the Pathogen 
Reduction/HACCP regulation. These communications may be accompanied 
either through holding public meetings for comment on the strategic 
plan or by publishing the plan in the Federal Register. However, the 
Agency has already been in frequent contact with its stakeholders while 
formulating policy and will continue to do so.
    In 1995 and 1996, the Agency held more than two dozen public 
meetings, informational briefings, conferences and hearings on the 
Pathogen Reduction/HACCP regulation, time and temperature issues during 
meat, poultry and egg transportation, scientific and technical aspects 
of E. coli and Salmonella, and small plant concerns with constituent 
groups of consumers, industry,academicians, State and local officials, 
union members, and public health officials. The Agency intends to 
continue to review how well its stakeholders are being served by its 
programs through frequent contact with its constituent groups and other 
customer service activities.
    Mr. Skeen. For the Results Act to be successful, agencies with 
similar missions, goals, or strategies will need to ensure that their 
efforts are coordinated. What other federal agencies are you working 
with to ensure that your strategic plans are coordinated? What steps 
have you taken to ensure that your efforts complement and do not 
unnecessarily duplicate other federal efforts?
    Response. FSIS has been in contact with the Food and Drug 
Administration (FDA) and will share strategic plans to identify common 
goals and objectives for both agencies. In addition, FSIS is working 
with the Centers for Disease Control and Prevention (CDC) and the FDA 
to monitor five foodborne illness ``sentinel sites.'' These sites were 
established to estimate the national incidence of the major foodborne 
diseases and to explore what relationships may exist between specific 
pathogens and the types of meat, poultry, and other food products 
associated with them. On January 25, 1997, the President announced the 
Administration's Food Safety Initiative, which includes an expansion of 
the sentinel site project into the Nation's Early Warning System. The 
current sentinel sites are an integral part of the Early Warning 
System, and the President has requested funding for FSIS, FDA and CDC 
to increase the number of sites from five to eight, better equip and 
link the sites, and make available state of the art laboratory and 
electronic technology. With sentinel site information, FSIS can review 
HACCP programs and, where appropriate, trigger changes to prevent 
future outbreaks of foodborne illness.
    FSIS also plans to work closely with FDA to develop science-based 
regulatory standards for proper cooling of shell eggs and 
transportation and distribution food safety issues. For the past couple 
of years, the Agency has been working closely with FDA and State 
government agencies to address food safety gaps in the transportation 
and retail areas. The new food safety research agenda was developed 
cooperatively by the Food Safety Research Working Group, which is 
composed of scientists with a broad base of expertise in food safety 
and public health issues from USDA, FDA, CDC, the National Institutes 
of Health, and the Department of Defense. The agenda recognizes that it 
will require the combined efforts of government, industry, and academia 
to meet the need for human health research.
    Mr. Skeen. The Results Act requires agencies to consult with 
Congress as they develop their strategic plans. Since these plans are 
due in September, now is the time for agencies to begin the required 
consultations. What are your plans for congressional consultation as 
you develop your strategic plan? Which Committees will you consult 
with? How will you resolve differing views?
    Response. All USDA Mission Areas/Agencies have prepared draft 
Strategic Plans which are currently being reviewed by the Under/
Assistant Secretary (or other relevant official), the Senior Policy 
Staff, and the Secretary. Upon completion of the review, the Department 
plans to provide copies of the Strategic Plan (including an overall 
Department-wide Executive Summary and the Strategic Plans for 
individual Mission Areas/Agencies) to relevant Congressional 
Committees. Thereafter, FSIS will look forward to meeting with Members 
or Staff to discuss the FSIS Strategic Plan and to solicit 
Congressional input and advice on refinements to the Plan.
    Mr. Skeen. In passing the Results Act, Congress sought to 
fundamentally change the focus of federal management and decision 
making to be more results-oriented. Organizations that have 
successfully become results-oriented typically have found that making 
the transformation envisioned by the Results Act requires significant 
changes in what they do and how they do it. What changes in program 
policy, organization structure, program content, and work process has 
the agency made to become more results-oriented?
    Response. Despite the successes of the current program, Agency 
senior managers realized that there existed a significant gap between 
the original inspection system and the public's expectations for food 
safety. Foodborne illness outbreaks over the past few years have 
alerted the Agency to the need for establishing fundamental change in 
the FSIS meat and poultry inspection program to improve food safety, 
reduce the risk of foodborne illness in the United States, and make 
better use of Agency resources.
    The original inspection system largely focused on organoleptic 
(sensory) inspection, which was appropriate for the technology 
available when the first major meat inspection law was passed in 1906. 
Since that time, changes have been made in the inspection program to 
reflect changes in the production of meat, poultry, and egg products 
and to increase the efficiency of inspection. However, the original 
program has been deemed inadequate to detect hazards such as pathogenic 
microorganisms that can cause foodborne illness. Many internal and 
external studies conducted during the past decade (such as those of the 
National Academy of Sciences, the General Accounting Office, the 
National Advisory Committee on Microbiological Criteria for Foods, 
industry, producers, and consumer groups) called for change in the 
original inspection system to address microbial pathogens and make it 
more prevention-oriented.
    With implementation of the final rule on Pathogen Reduction and 
HACCP, there are additional opportunities to improve the way the Agency 
carries out inspection activities, to improve both food safety and 
allocation of resources. The Agency is developing microbial standards 
for each species which will form a scientific basis for program results 
management.
    Internally, the FSIS reorganization has centralized many of the 
policy, administrative, and program development components of the 
Agency which will provide much greater consistency and accountability.
    Mr. Skeen. How are managers held accountable for implementing the 
Results Act and improving performance?
    Response. The Agency's approach to creating its initial Annual 
Performance Plan (APP) began with senior managers establishing initial 
objectives for each strategic goal. Managers will then identify 
supporting activities, tasks, and their outcomes, which show what must 
be done to execute the objectives. Next, they will negotiate timeframes 
and resource requirements and establish performance measures for 
outcomes in collaboration with line managers. Finally, they will 
prepare an evaluation plan displaying this information, and this plan 
will be tied to manager performance evaluations.
    Mr. Skeen. How is the agency using Results Act performance goals 
and information to drive daily operations?
    Response. Following the requirements of the Results Act, FSIS will 
include performance indicators consistent with the Strategic Plan in 
its budget submissions beginning with the fiscal year 1999 budget. The 
Agency will therefore act to ensure that appropriate indicators which 
can be measured are chosen for its program operations. Performance 
goals will be very important in guiding the Agency's operations to 
achieve the strategic goals of implementing HACCP, efficiently using 
resources, and achieving a farm-to-table food safety strategy.
                   president's food safety initiative
    Mr. Nethercutt. Which federal agencies are participating in the 
Food Safety Initiative and what are there respective budgets for the 
program for FY 1998?
    Response. The fiscal year 1998 President's Budget requests a total 
of $43 million for the Food Safety Initiative. Of this total, $24 
million is included for the Food and Drug Administration (FDA), $10 
million is for the Centers for Disease Control and Prevention (CDC), 
and $9.2 million is for the United States Department of Agriculture 
(USDA).
    Of the $9.2 million proposed for USDA food safety initiatives, $1.1 
million is for FSIS; $0.5 million for the Early Warning System and $0.6 
million for HACCP training of State and local food regulatory offices. 
In addition, the Agricultural Research Service has proposed food safety 
initiatives of $4.1 million for Preharvest and Postharvest food safety 
research; and the Cooperative State Research, Education and Extension 
Service has proposed $4 million in food safety initiatives for a 
special research grant, and food safety education and extension 
activities.
    Mr. Nethercutt. Which agency has the lead?
    Response. No one agency has the lead in this initiative. This is a 
collaborative effort among FDA, CDC, and USDA. Each agency would 
fulfill an integral part of the proposed initiative, the sum of which 
would provide for a strengthened system for responding to the incidence 
of foodborne illness and disease, and ensuring the safety of the 
Nation's food supply.
                           ratite inspection
    Mr. Fazio. Does USDA possess the regulatory authority to include 
emus, ostriches or other ratites under the definition of poultry for 
purposes of FSIS inspection?
    Response. FSIS' statutory mandate is to inspect ``domesticated'' 
poultry. Poultry is defined in the regulations to include chickens, 
turkeys, ducks, geese, or guineas.
    Mr. Fazio. If not, what action would be required?
    Response. Changes to that definition to include ratites under the 
regulations could be made by public rulemaking.
    Mr. Fazio. What criteria does USDA use in determining a species is 
a game animal not subject to inspection?
    Response. FSIS does not use the criterion of whether a species is a 
game animal to determine the requirement for inspection. FSIS 
determines this requirement based solely on whether the animal is one 
for which inspection is required under either the Federal Meat 
Inspection Act (FMIA) or the Poultry Products Inspection Act (PPIA). If 
an animal does not fall under the coverage of either Act, then 
responsibility for food safety falls under the Federal Food, Drug, and 
Cosmetic Act. However, some animals, including species often considered 
to be game animals such as elk, deer, antelope, or migratory water fowl 
may be inspected under the authority of the Agricultural Marketing Act 
(AMA). The AMA permits FSIS to provide voluntary, fee-for-service 
inspection of animals not subject to mandatory inspection under the 
FMIA or the PPIA.
    Mr. Fazio. Describe the process required for producers of meat from 
animals currently defined as game animals to be classified as meat 
subject to FSIS inspection?
    Response. FSIS determines if inspection of meat from an animal is 
required based on the authority of the FMIA or the PPIA as described 
above. The FMIA requires inspection only for specified species of 
animal and for meat from those animals. Legislation would be required 
to provide mandatory inspection of meat from animals not listed by the 
FMIA. However, anyone may petition FSIS to amend the definition of 
``poultry'' to include additional species. A producer of an animal not 
covered by either Act may request inspection on a fee-for-service basis 
from the Agency.
    Mr. Fazio. What is the estimate of commercial emu, ostrich and/or 
ratite production in the U.S. today?
    Response. FSIS has no reliable data on ratite production. Estimates 
of live animal production from the various ratite associations vary 
widely. FSIS provides voluntary inspection for ratites upon request. 
However, the Agency does not record the slaughter of ratites as a 
separate category in its animal disposition reporting system.
    Mr. Fazio. What is FSIS's estimate of the cost required if this 
committee directed it to include emu, ostrich and other ratite 
production under its poultry inspection program?
    Response. FSIS is unable to estimate the cost of inspection due to 
considerable uncertainty regarding the scope and growth of the industry 
at this time. Anticipated costs would comprise both Agency and industry 
costs associated with implementing a mandatory inspection program. 
Agency costs may include the cost of additional inspectors; training 
activities; program development activities; chemical residue analysis; 
and microbial baseline studies. Industry costs would involve developing 
and implementing HACCP plans as well as meeting other regulatory 
requirements.
    Mr. Fazio. How much time would be required to implement such an 
inspection program?
    Response. Implementation of mandatory inspection for ratites would 
require notice and comment rulemaking. The Agency would need time to 
hire and train additional inspectors. It would also be necessary to 
phase in establishments consistent with the implementation requirements 
of the Pathogen Reduction and HACCP Rule.
    Mr. Fazio. How does USDA intend to respond to the emerging 
specialty meat production industry in ensuring a safe food supply for 
American consumers?
    Response. If the specialty meat is from species covered under the 
FMIA or PPIA, a grant of inspection is required prior to production, 
otherwise the product is regulated under the Federal Food, Drug and 
Cosmetic Act.
                        natural sausage casings
    Ms. Lowey. I understand that you have been working with several 
outside groups to address an export problem regarding natural sausage 
casings. The USDA has indicated to me in a letter dated February 12 
that FSIS agrees with the natural casing industry that form 9060-7 is 
inadequate and is working to change that form. Could you update us on 
the status of this effort?
    Response. The North American Natural Casings Association (NANCA) 
has indicated a need for an additional export certificate for natural 
casings to be issued for those countries that do not require that all 
of the conditions stated on FSIS Form 9060-7 have been met.
    For example, according to NANCA, several countries require that 
casings are of U.S. origin, come from animals that passed antemortem 
and postmortem inspection, and disease free and have been handled in a 
sanitary manner, but do not require that the casings remain in the U.S. 
throughout the cleaning, sorting and grading process. The FSIS 9060-7 
includes all of these statements, including a phrase that the casing 
remained in the U.S. This prohibits casings that are shipped to Mexico 
for sorting an grading, and then are returned to the U.S., from being 
exported to a third country with an FSIS 9060-7.
    As a result of this specific situation, FSIS is working with the 
Animal and Plant Health Inspection Service (APHIS) and NANCA to develop 
a protocol and create a new certificate that would allow U.S. casings 
to go to Mexico, return to the U.S. and subsequently be exported to a 
third country. The new certificate will indicate U.S. origin, 
autemortem and postmortem inspection, disease free, and sanitary 
conditions statements, but will not indicate that the casing remained 
in the U.S.
    APHIS will conduct periodic audits of the Mexican facilities to 
assure that they have controls in place to assure that identification 
and segregation requirements and sanitary conditions are met in those 
facilities so that only U.S. origin casings handled under sanitary 
conditions are returned to the U.S. Based on the APHIS audits and 
shipment by shipment certification from Mexican authorities, FSIS can 
issue a new certificate to those third countries that allow entry of 
casings under those conditions.
    An initial visit to the Mexican facilities by a joint FSIS/APHIS 
team is scheduled for May. After FSIS is assured that appropriate 
controls are in place, FSIS will contact the inspection officials of 
third countries that NANCA believes will accept the new certificate and 
confirm the acceptability of such a protocol and certificate. Upon 
official acceptance of the protocol by the importing countries, FSIS 
will begin issuing the new certificate.
    It is important to recognize that FSIS Form 9060-7 is a necessary 
certificate for several countries and that it will continue to be 
issued for casings that comply with the conditions stated on the 
certificate. It is not inadequate this situation. Our efforts with 
NANCA and APHIS are directed at developing controls that allows the 
creation of an additional certificate that meets the needs of the 
industry and the receiving countries.

[Pages 863 - 946--The official Committee record contains additional material here.]




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                                                                   Page
Ackerman, K.D....................................................     1
Billy, T.J.......................................................   667
Buntrock, G.B....................................................     1
Dewhurst, S.B....................................................1, 667
Goldthwait, C.E..................................................     1
Hollingsworth, Jill..............................................   667
Reed, Craig......................................................   667
Rogers, Len......................................................     1
Schumacher, August, Jr...........................................     1
Smith, D.R.......................................................     1
Stolfa, Pat......................................................   667
Wachsmuth, Kaye..................................................   667
West, William....................................................   667


                               I N D E X

                              ----------                              

                          Farm Service Agency

                                                                   Page
ADP/IRM:
    CCC Budget Request...........................................   106
    Effect of Limiting Spending...............................8, 40, 41
    Expenditures..............................................6, 19, 33
Administrative Support:
    State and County Office Leases...............................    50
    Tobacco Program..............................................    77
Agricultural Conservation Program:
    Unobligated Balance..........................................    50
    Water Quality Incentive Projects.............................    50
Biographical Sketches:
    Dallas Smith.................................................   319
    Grant Buntrock...............................................   320
Civil rights.....................................................   102
Commodity Credit Corporation:
    Conservation Programs........................................    41
        Expenditures.............................................    43
        Flood Risk Reduction Program.............................    48
        Technical Assistance Costs...............................    48
    Donations and Sales..........................................    68
    Export Credit Guarantees.................................64, 74, 77
    Interest Rate................................................    66
    Inventory....................................................    66
    TEFAP Donations..............................................    70
Conservation Reserve Program....................................50, 109
    Administrative Costs.........................................    60
    Cover........................................................    56
    Extensions...................................................    99
    Signup.......................................................    99
    Signups and Eligibility Criteria.............................    56
    Technical Assistance.........................................    60
    Unobligated Balance..........................................    61
County Committees................................................    25
County Offices:
    Closures................................................15, 25, 109
    Employment...................................................    74
Dairy Indemnity Program..........................................    61
Emergency Conservation Program:
    Expenditures.................................................61, 63
    Practices....................................................    63
Employment.......................................................    37
    County Offices...............................................    74
    Reductions.........................................17, 35, 105, 107
Equipment Purchases..............................................    38
Explanatory Notes:
    FSA..........................................................   400
    CCC..........................................................   509
Farm Credit Programs:
    Acquired Property:
        Credit Sales.............................................    93
        Inventory................................................    80
    Authority to Forgive Loans...................................    99
    Debt Write-Off...............................................    77
    Delinquencies................................................    11
    Effect of Private Lenders....................................    99
    Emergency Disaster Loans.....................................    87
    Farm Operating Loans.....................................77, 78, 84
    Farm Ownership Loans.........................................    84
        Rescheduling.............................................    78
    Indian Tribe Land Acquisition Loan Program...................    97
    Loans to FSA Employees.......................................   100
Food Security Commodity Reserve..................................   102
Government Performance and Results Act...........................   103
Hazardous Waste Management Program...............................    76
Information Resources Management Expenditures.................6, 19, 33
Management Studies..............................................18, 106
Object Classes:
    25 and 31....................................................   107
    41...........................................................    63
Opening Statement, Acting Under Secretary, Farm and Foreign 
  Agricultural Services..........................................     1
Operating Expenses...............................................    18
Outreach for Socially Disadvantaged Farmers......................    95
Production Flexibility Contracts.................................    15
    Increased Planting Flexibility Proposal......................   109
Questions Submitted for the Record:
    Mr. Skeen....................................................    37
    Mr. Latham...................................................   105
    Mr. Fazio....................................................   109
    Mr. Rogers...................................................   109
Staffing.........................................................    37
State Mediation Grant Program.................................... 9, 89
Tobacco Program Administrative Costs.............................    77
Work Measurement System.........................................23, 111
Workload.........................................................    24

                      Foreign Agricultural Service

Credit Guarantee Program:
    Claims Recovered by CCC......................................   174
    Countries in Arrears.........................................   173
    Criteria for Write Offs......................................   175
    Efforts to Collect Arreages..................................   175
    Enforcing U.S. Contents Requirements.........................   170
    Facilities Credit Program Activity Fiscal Year 1995/1996.....   170
    GSM 102 Sales in Fiscal Year 1996............................   156
    GSM 103 Sales in Fiscal Year 1996............................   168
    Guarantees to the Former Soviet Union........................   129
    Mexico's Credit Worthiness...................................   117
    Number of False Certifications...............................   170
    Operation of Supplier Credit Program.........................   124
    Total CCC/P.L. 480 Arreages..................................   175
    Total Debts Written Off 1995/1996............................   175
Biographical Sketch:
    August Schumacher............................................   321
    Christopher Goldthwart.......................................   322
DEIP/SOAP/COAP:
    COAP Activities in Fiscal Year 1996..........................   239
    DEIP Costs Fiscal Year 1995-1998.............................   235
    DEIP Country Participation in Fiscal Year 1996...............   236
    DEIP Program Operations......................................   235
    DEIP Statutory Authority.....................................   235
    SOAP Activities in Fiscal Year 1996..........................   239
    SOAP Activities Planned for Fiscal Year 1998.................   239
Export Enhancement Program:
    Bonuses Awarded by Country...................................   141
    Fiscal Year 1996 Actual and Projected Fiscal Year 1997 Use...   135
    Justification for $400 Million Increase......................   262
    Program Changes in 1997......................................   142
    Sales to China...............................................   135
    Total Bonuses Awarded........................................   136
    Use During Fiscal Year 1997..................................    22
Fiscal Year 1998 FAS Budget:
    Activities Previously Funded by CCC..........................   253
    Advance Appropriation........................................   266
    Beneficiaries of MBAI........................................   267
    Breakdown of Increases.......................................   253
    Criteria for Domestic Field Offices..........................   267
    Domestic Staff Assignments...................................   267
    Examples of Emerging Markets Program.........................   267
    Explanatory Notes............................................   566
    Funds Available for Two Years................................   266
    Market Barrier Access Identification (MBAI) costs............   266
    Object Class 25.2............................................   266
    Object Class 31..............................................   266
    Reductions to Absorb Computer Costs..........................   253
    Reimbursements to the Department of State....................   268
    Representation Allowance.....................................   245
    Trade Show Fees..............................................   239
    Trade Show Sponsored.........................................   239
    Vehicle Replacement..........................................   266
    Witness Statement, August Schumacher, Jr.....................   365
Food AID:
    China Food AID to North Korea................................    32
    Food AID to Africa...........................................    31
    Food AID to North Korea......................................    30
    Ocean Freight Differential 1992-1996.........................   253
    Section 416(b) Activity in Fiscal Year 1996..................   234
    Section 416(b) Commodity Acquisition.........................   234
    Section 416(b) Donations 1987 to Date........................   238
    Section 416(b) Terms and Conditions..........................   234
    USDA/AID Restrictions........................................   125
Foreign Market Development Program:
    Allowable Expenses...........................................   256
    Carryover Authority..........................................   256
    Carryover Funds..............................................    20
    Competitive Award Process....................................   117
    FMD/MAP Participants.........................................   260
    Historical Table.............................................   255
    Participant Locations and Contribution Levels................   257
General Export Issues:
    Assistance in Promotion of Alcoholic Products................   125
    Impact of Wage and Price Inflation on Export Levels..........   114
    Main Export to the Former Soviet Union.......................   131
    Percent Commercial vs. Government Involved Sales to the 
      Former Soviet Union........................................   133
    Restriction on Exports to Libya and Iran.....................   124
    Sales to China in Fiscal Year 1996/1997......................   135
    Size of Export Market in the Former Soviet Union.............   130
    U.S.-Chilean Exports/Imports.................................   263
Government Results and Performance Act:
    Accountability of Managers...................................   273
    Assumptions Made in Strategic Plan...........................   271
    Changes Made to Become More Results Oriented.................   273
    Conflicting Goals............................................   271
    Congressional Consultations..................................   272
    Lessons Learned From Pilot Phase.............................   272
    Linkage Between Strategic Plan and Annual Performance Plan...   271
    Need to Modify Activity Structure............................   271
    Primary Stakeholders.........................................   272
    Progress in Defining Results Oriented Measures...............   272
    Progress in Developing Strategic Plan........................   271
    Steps to Avoid Duplication...................................   272
    Use in Daily Operations......................................   273
Market Access Program:
    Changes Made to Improve MAP..................................   277
    Combating Corporate Welfare Charge...........................    26
    Difference Between MAP and EIP...............................   155
    Fiscal Year 1996 Participants................................   126
    Foreign Entity Participation.................................   113
    New Program Participants--Fiscal Year 1996...................   126
    MAP Return on Investment.....................................   277
    Participant Selection Criteria...............................   125
    Private Brand Promotions--Fiscal Year 1996...................   142
    Program Benefits.............................................   129
    Small and Medium Size Participants...........................   129
    US Wheat Office in Moscow....................................   125
Middle Income Training Program:
    Number of Students by Country--Fiscal Year 1996..............   251
    Program by Object Class......................................   251
    Program Carryover............................................   251
    Status of Fiscal Year 1997 Program...........................   251
Miscellaneous:
    BARD Research Grants.........................................   252
    FAS Conferences Held in Fiscal Year 1996.....................   243
    FAS Employee Retreats........................................   244
    LANDSAT Program..............................................   241
    LANDSAT Program Funding From CCC.............................   242
    LANDSAT Program Total Costs..................................   242
    Language Training Costs Fiscal Years 1996-1997...............   242
    Language Training--Location and Average Cost.................   243
    Language Training Participants Fiscal Years 1996-1997........   242
    Large FAS Training Sessions..................................   244
    Long-Term Agricultural Trade Strategy........................   268
    Model Farm in Russia.........................................    33
    OIG Report...................................................   270
    Opening Remarks--Mr. Rogers, AID.............................    29
    PECC Conference..............................................   242
    Reimbursements From AID--Fiscal Years 1997-1998..............   251
    Surplus Foreign Currencies...................................   253
    US Agricultural Imports--Top 10 Commodities..................   244
    US Agricultural Imports--Top 10 Countries....................   244
Public Law 480:
    Agreements Under Title III--Fiscal Year 1996.................   233
    Allowable External Transportation Costs......................   232
    Determining Allowable Internal Transportation Costs..........   232
    External Transportation Costs................................   232
    Fiscal Year 1998 Funding Request.............................    23
    Food-AID to North Korea......................................   270
    Food for Peace/Food for Progress.............................   233
    Food for Progress Commodity Purchases--Fiscal Year 1996......   233
    Food Security Commodity Reserves.............................   273
    Great Lakes Proposed Rule....................................   270
    Internal Transportation Costs--1997..........................   232
    Monetization of Title II.....................................   232
    Non-Emergency Use of Title II................................   275
    Number of Title II Agreements................................   176
    Ocean Freight Differential--Fiscal Year 1995-1996............   181
    Phase Out of USAID in Sub-Saharan Africa.....................   275
    Post Fiscal Year 1997 Rescission Allocation--Title I.........   178
    Program Levels 1995-1996-1997................................   269
    PVO Program Proposals........................................   273
    Reductions in Title I........................................   270
    School Lunch Program.........................................   232
    Standard Commercial Terms....................................   181
    Title II Program by Country/Commodity Fiscal Year 1996.......   182
    USAID Decentralization.......................................   276
    Use of Title III--Fiscal Year 1996...........................   233
Overseas Offices:
    ATO Expansion................................................   113
    Location of ATO's............................................   241
Questions Submitted for the Record:
    Mr. Skeen....................................................   113
    Mr. Walsh....................................................   273
    Mr. Kingston.................................................   276
    Mr. Fazio....................................................   277
    New Offices on Mexican Border................................   117
Trade Issues:
    Canadian Trade Barriers......................................   265
    Chilean Trade Barriers.......................................   265
    Chiles NAFTA Access..........................................   262
    China Accession to WTO.......................................   135
    EU Beef Hormone Dispute......................................   113
    Key Countries With Unfair Trade barriers.....................   114
    Raw Cane Sugar TRQ...........................................   276
    Reduction in Export Programs From GATT/WTO Agreements........   115
    Status of Report on Trade Barriers...........................   278
    US-Mexico Trade Forecast.....................................   117
    WTO Budget...................................................   129

       Risk Management Agency--Federal Crop Insurance Corporation

Crop Insurance Program:
    Buy-Up Coverage..............................................   280
    Catastrophic Coverage Availability...........................   311
    De-Linkage...................................................   280
    Delivery of Crop Insurance Policies..........................   283
    Group Risk Plan (GRP) [List of 1997 GRP counties/crop 
      programs held in Committee files]..........................   284
    Loss Ratios for GRP vs. Other Programs.......................   285
    Nonstandard Classification System (NCS)......................   285
    Options Pilot Program........................................   283
    Program Indicators...........................................   300
    Revenue Insurance............................................   310
    Underserved Counties.........................................   283
Crops:
    Insured Crops................................................   296
    Principal Crops Participation Rates..........................   299
Government Performance and Results Act (GPRA):
    GPRA Cross-Cutting Areas.....................................   304
    Implementation of GPRA.......................................   302
Miscellaneous:
    Biographical Sketch--Kenneth D. Ackerman.....................   323
    Blazy Report [Report too lengthy--retained in Committee 
      files].....................................................   278
    Computer and Software Spending...............................   281
    Explanatory Notes, 1998......................................   627
    Marketing Expenditures.......................................   296
    Object Class 23.3, Communications............................   281
    Object Class 25.2, Other Services............................   281
    Opening Remarks--Mr. Skeen, Chairman.........................     1
    Opening Statement--Mr. Smith, Acting Under Secretary.........     1
    Statement of Kenneth D. Ackerman.............................   386
    Witnesses....................................................     1
Reinsured Companies:
    Distribution of Profits and Losses...........................   287
    FCIC/Reinsurance Experience..................................   294
    Ratio of Losses for RMA/Reinsured Companies..................   291
    Reimbursements to Reinsured Companies........................   289
    Reinsured Companies--Gain/Loss Position......................   289
    Sales Commissions of Agents..................................   219
Questions Submitted For the Record:
    Mr. Skeen....................................................   278
    Mr. Kingston.................................................   310
    Mr. Fazio....................................................   311
RMA/FCIC Financial Condition:
    Administrative and Operating Expense Obligations.............   291
    Administrative and Operating Expense Specific Activities.....   293
    CCC and Treasury Borrowings..................................   297
    Excess Losses................................................   280
    FCIC Fund Specific Activities................................   292
    Funding of Delivery Expenses.................................   279
Staffing:
    Explanation of FTE Increase..................................    36
    Funding for Additional Compliance............................   279

                             Public Law 480

AID Missions in Sub-Sahara Africa................................   317
Biographical Sketch of Leonard Rogers............................   324
Chinese Food Aid to North Korea..................................    32
Cooperating Sponsors.............................................   311
Developing U.S. Agricultural Export Markets......................   318
Estimating Commodity Budget......................................   312
External Transportation Costs....................................   313
Food Aid in Africa...............................................    31
Food Aid to Africa and North Korea...............................    31
Food Aid to North Korea..........................................    30
Food Security Commodity Reserve..................................   315
Internal Transportation Costs....................................   313
Model Farm Project in Russia.....................................    33
Monetization of Title II Commodities.............................   313
Processed, Blended, and Fortified Foods..........................   312
Public Law 480--Titles II and III Food Aid.......................    29
Public Law 480--Explanatory Statement............................   652
Public Law 480--Reductions.......................................    23
Public Law 480--Title II Food Aid for Non-Emergency Programs.....   316
Public Law 480--Title II NGO Proposals...........................   315
Public Law 480--Title II Program.................................   313
Public Law 480--Title III Agreements.............................   314
Questions Submitted for the Record:
    Mr. Skeen....................................................   311
    Mr. Walsh....................................................   315
    Mr. Fazio....................................................   318
School Lunch Program.............................................   313
Written Statement of Leonard Rogers..............................   393

                   Food Safety and Inspection Service

1998 Budget Request............................................670, 830
Advanced Meat Recovery...........................................   735
Agency Committees and Working Groups.............................   815
Agency Employment................................................   769
Agency Staff Years...............................................   852
Animal Production Food Safety Program............................   853
Appropriations Transfers.........................................   805
Biographical Sketches............................................   863
    Thomas Billy.................................................   863
    Patricia Stolfa..............................................   864
    Craig Reed...................................................   865
    I. Kaye Wachsmuth............................................   866
    Jill Hollingsworth...........................................   867
Changes in Inspection............................................   732
Civll Penalties..................................................   765
Codex Alimentarius Commission....................................   825
Communication with Stakeholders..................................   678
Condemned Products...............................................   798
Disposition Difference Between Meat and Poultry..................   804
Donald L. Houston Training Center................................   821
Early Retirement Response........................................   800
Early Warning System.............................................   759
Egg Products Inspection..........................................   832
Emphasis on Public Health........................................   669
Enforcement Activities...........................................   819
Ergonomically Designed Poultry Inspection........................   851
Explanatory Notes................................................   901
Export Certification Information System..........................   851
Exporting Countries..............................................   806
Exporting Procedures.............................................   850
Farm-to-Table Strategy...........................................   734
Fast Antimicrobial Screen Test...................................   814
Field Automation and Information Management....................798, 856
Field Management Consolidation...................................   793
Field Office Closures............................................   794
Field Offices....................................................   796
Food Safety Research.............................................   814
Food Safety Risks................................................   734
Food Safety Training.............................................   733
FSIS Reorganization..............................................   668
Government Performance and Results Act (GPRA)....................   856
Grant of Inspection............................................764, 799
Grants to States.................................................   817
HACCP Impact on Foreign Countries................................   854
HACCP............................668, 669, 677, 754, 800, 804, 852, 854
Hepatitis A....................................................676, 761
Illegal and Unapproved Chemicals and Drugs.......................   853
Incidence of Foodborne Illness.......................672, 735, 758, 764
Inspected Establishments.........................................   797
Inspection Exemptions............................................   805
Inspection of Exotic Species.....................................   673
Inspection System Guide..........................................   852
Inspector Vacancies..............................................   767
Interstate Shipment..............................................   672
Labeling Program.................................................   823
Laboratory Accreditations........................................   805
Laboratory Recognition Program...................................   854
Library of Foreign Country Requirements..........................   814
Meat and Poultry Exports.........................................   825
Meat and Poultry Hotline.......................................736, 851
Microbiological Test Kits........................................   806
Natural Sausage Casings..........................................   861
Object Classification Increases..................................   855
Office of the Under Secretary....................................   804
On-Farm Investigations...........................................   852
Opening Remarks..................................................   667
Opening Statement................................................   667
Organic Foods Production Act.....................................   825
Pathogen Reduction.............................................668, 804
Pennsylvania District Office Location............................   854
Performance Based Inspection System..............................   805
Pilot Programs...................................................   770
Plant Violations.................................................   765
Poultry Enhancement Program......................................   804
President's Food Safety Initiative........................669, 758, 860
Progressive Enforcement Action...................................   799
Questions Submitted for the Record:
    Chairman Skeen...............................................   767
    Mr. Nethercutt...............................................   860
    Mr. Fazio....................................................   861
    Mrs. Lowey...................................................   861
Ratite Inspection..............................................797, 860
Redeployment and Streamlining....................................   753
Regulatory Reform..............................................669, 678
Relocation Benefits..............................................   856
Rendering........................................................   766
Report on Foodborne Illness......................................   775
Research Projects................................................   797
Residue Test (SOS, STOP, FAST)...................................   815
Salmonella Enteritidis...........................................   832
Sanitary and Phytosanitary Cooperative Efforts...................   797
Sentinel Site Survey...........................................732, 855
Species Covered by Poultry Regulations...........................   675
State Equivalency................................................   798
Statement of Thomas J. Billy.....................................   868
Technology.......................................................   764
User Fee Proposal...............................670, 671, 676, 753, 762
Volume and Cost of Product Inspected......................819, 822, 825
Voluntary Inspection.............................................   815