[Senate Hearing 114-148]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 114-148
 
                             REVIEW OF THE
                        U.S. GRAIN STANDARDS ACT

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

                                HEARING

                               before the

                       COMMITTEE ON AGRICULTURE,
                        NUTRITION, AND FORESTRY

                          UNITED STATES SENATE


                    ONE HUNDRED FOURTEENTH CONGRESS

                             FIRST SESSION


                               __________

                              MAY 5, 2015

                               __________

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           Committee on Agriculture, Nutrition, and Forestry
           
           
           
           
           
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           COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY



                     PAT ROBERTS, Kansas, Chairman

THAD COCHRAN, Mississippi            DEBBIE STABENOW, Michigan
MITCH McCONNELL, Kentucky            PATRICK J. LEAHY, Vermont
JOHN BOOZMAN, Arkansas               SHERROD BROWN, Ohio
JOHN HOEVEN, North Dakota            AMY KLOBUCHAR, Minnesota
DAVID PERDUE, Georgia                MICHAEL BENNET, Colorado
JONI ERNST, Iowa                     KIRSTEN GILLIBRAND, New York
THOM TILLIS, North Carolina          JOE DONNELLY, Indiana
BEN SASSE, Nebraska                  HEIDI HEITKAMP, North Dakota
CHARLES GRASSLEY, Iowa               ROBERT P. CASEY, Jr., Pennsylvania
JOHN THUNE, South Dakota

               Joel T. Leftwich, Majority Staff Director

                Anne C. Hazlett, Majority Chief Counsel

                    Jessica L. Williams, Chief Clerk

             Christopher J. Adamo, Minority Staff Director

              Jonathan J. Cordone, Minority Chief Counsel

                                  (ii)
                                  
                                  

  
                            C O N T E N T S

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                                                                   Page

Hearing(s):

Review of The U.S. Grain Standards Act...........................     1

                              ----------                              

                          Tuesday May 5, 2015
                    STATEMENTS PRESENTED BY SENATORS

Roberts, Hon. Pat, U.S. Senator from the State of Kansas, 
  Chairman, Committee on Agriculture, Nutrition, and Forestry....     1
Stabenow, Hon. Debbie, U.S. Senator from the State of Michigan...     2

                               Witnesses

    Gordon, Bill, Member, Board of Directors, American Soybean 
      Association, Worthington, MN...............................     4
    Ayers, David, President, American Association of Grain 
      Inspection and Weighing Agencies, Urbana, IL...............     6
    Paurus, Tim, Representative, National Grain and Feed 
      Association, Inver Grove Heights, MN.......................     7
    Campbell, Steve, Vice Chairman, Board of Directors, North 
      American Export Grain Association, Kansas City, MO.........     9
                              ----------                              

                                APPENDIX

Prepared Statements:
    Ayers, David.................................................    26
    Campbell, Steve..............................................    29
    Gordon, Bill.................................................    34
    Paurus, Tim..................................................    37
Document(s) Submitted for the Record:
Campbell, Steve:
    U.S. Grain and Oilseed Inspection Services Competitiveness 
      Study: Customer Specifications and Preferences.............    48
    U.S. Grain and Oilseed Inspection Services Competitiveness 
      Study: Export Competitor and Importer Information..........    65
Paurus, Tim:
    FGIS Export Inspection Fees..................................    96
    Joint Stakeholder letter to Hon. Thomas J. Vilsack...........    99
    Korea Flour Mills Industrial Association.....................   102
    Joint letter to Federal Grain Inspection Service (FGIS)......   103
Question and Answer:
Ayers, David:
    Written response to questions from Hon. Michael Bennet.......   106
Campbell, Steve:
    Written response to questions from Hon. Michael Bennet.......   109
    Written response to questions from Hon. Charles Grassley.....   111
Gordon, Bill:
    Written response to questions from Hon. Michael Bennet.......   113
Paurus, Tim:
    Written response to questions from Hon. Michael Bennet.......   115



                             REVIEW OF THE



                        U.S. GRAIN STANDARDS ACT

                              ----------                              


                          Tuesday, May 5, 2015

                              United States Senate,
         Committee on Agriculture, Nutrition, and Forestry,
                                                     Washington, DC
    The Committee met, pursuant to notice, at 2:33 p.m., in 
room 328A, Russell Senate Office Building, Hon. Pat Roberts, 
Chairman of the Committee, presiding.
    Present: Senators Roberts, Hoeven, Perdue, Ernst, Tillis, 
Sasse, Grassley, Thune, Stabenow, Brown, Klobuchar, Gillibrand, 
and Donnelly.

 STATEMENT OF HON. PAT ROBERTS, U.S. SENATOR FROM THE STATE OF 
KANSAS, CHAIRMAN, U.S. COMMITTEE ON AGRICULTURE, NUTRITION, AND 
                            FORESTRY

    Chairman Roberts. Good afternoon. I call this meeting of 
the Senate Committee on Agriculture to order.
    I have said many times that one of my main goals--and I 
know you all share that--for our Committee is to conduct our 
legislative work in a transparent and inclusive manner that 
gives members opportunities to pass good legislation for their 
constituents. Today's hearing is an important step in 
completing the Committee's work in considering provisions of 
the U.S. Grain Standards Act that expires later this year, so 
we must move.
    For nearly 100 years, the U.S. Grain Standards Act has 
authorized the Department to establish marketing standards for 
grains and oilseeds. Regulations set official standards to 
define each grain, class of grain, numerical grades of specific 
physical characteristics.
    In the 1970s, irregularities in grain inspection and 
weighing led to a grand jury investigation and indictments 
which threatened the U.S. marketing system. As a result, there 
were major reforms to the Grain Standards Act back in 1976 to 
ensure there was no questioning of the reliability and quality 
of U.S. grains and oilseeds.
    That global reputation is more important now than ever 
before in the history of U.S. agriculture. Our farmers and 
others in the value chain export over half of the wheat and 
soybeans produced in the United States. Additionally, about 15 
percent of corn and other feed grains are sold to customers 
around the globe. Predictability and transparency are key to 
maintaining this success story for farmers and ranchers in 
Kansas and all across the country.
    Needless to say, the valuable role that our trading 
partners play in the agriculture economy cannot be overstated. 
A handful of the provisions in the Grain Standards Act are set 
to expire on September 30. This hearing gives us a chance to 
hear from stakeholders on what is working well and where we 
might want to make some improvements.
    I am particularly interested in ensuring that the 
Department of Agriculture fulfills its statutory obligation to 
inspect exports. This responsibility lapsed for 36 days at a 
facility at the Port of Vancouver last summer. During that 
period there was substantial uncertainty about if and when 
inspection would be restored, and questions were raised about 
safety. That unprecedented event warrants our careful oversight 
and increased transparency. It is important that we find 
solutions to ensure the reliability and the quality of U.S. 
exports continue to be beyond question for years to come.
    The witnesses we will hear from today represent different 
perspectives in the grain and oilseed value chain: a farmer, an 
inspector, a grain handler, and a global customer. I thank each 
witness for traveling to Washington, taking time out of your 
very valuable time and providing testimony before the Committee 
on such an important issue. I appreciate your joining us as we 
seek to make this a Government in action--that is two words. 
Everybody understand that? All right.
    Senator Gillibrand. ``In action'' as opposed to 
``inaction.''
    Chairman Roberts. Thank you. I do not know what I would do 
without you.
    [Laughter.]
    Chairman Roberts. I appreciate your joining us as we seek 
to make this a Government in action, responsive to the concerns 
and working together to find common-sense solutions. The 
Committee will work to ensure that our U.S. grain inspection 
system continues to be one that ensures the reliability and 
high quality of U.S. exports. I look forward to hearing from 
our witnesses.
    With that, I recognize our Chairwoman Emeritus, Senator 
Stabenow, from the great State of Michigan, for any remarks.

STATEMENT OF HON. DEBBIE STABENOW, U.S. SENATOR FROM THE STATE 
                          OF MICHIGAN

    Senator Stabenow. Well, thank you, Mr. Chairman, for 
holding this important hearing on the Grain Standards Act. I am 
looking forward to working with you to reauthorize this. I also 
thank those who traveled today to give us very important input 
on this issue. You bring perspectives from all sides of the 
grain inspection system, and we look forward to hearing your 
testimony.
    Our Nation's farmers and producers grow the very best 
products in the world. Whether it is Michigan soybeans or 
Kansas wheat, buyers around the world know that when American 
products carry the seal of the U.S. Department of Agriculture, 
its quality is second to none. That is one reason why the U.S. 
is the premier supplier of high-quality grains and oilseeds 
worldwide and why the United States is the number one farm 
goods exporter worldwide, supporting more than a million jobs 
here at home.
    To paint that in a different light, in 2014 the U.S. had 
agricultural exports totaling more than $150 billion, the 
highest dollar value we have ever had. But let me share a bit 
of historical perspective as we meet today on why it is so 
critical the U.S. maintain the Federal Grain Inspection Service 
and how it was designed to defend the interests of American 
farmers and protect the integrity of the United States as a 
trading partner.
    In 1974, as the Chairman said, our private inspection 
system was rocked by a scandal that threatened the credibility 
of U.S. agricultural exports. While American farmers were 
producing high-quality grain, private individuals and companies 
charged with inspections were shortchanging foreign customers 
by inaccurately weighing grain, shipping in dirty vessels, and 
accepting bribes.
    In New Orleans, private inspectors took bribes to certify 
that an oil tanker could be used to transport grain so that 
companies would not have to take extra time and pay for an 
extra cleaning process.
    A number of those individuals and companies were indicted 
by Federal grand juries, but, unfortunately, these revelations 
significantly diminished our reputation as a reliable business 
partner, and our competitive advantage in international markets 
was questioned.
    As a result, in November of 1976, Congress acted by 
federalizing the grain inspection system, now called the 
Federal Grain Inspection Service, to help rebuild the integrity 
and image of American agricultural exports.
    The good news is our country's agricultural exports have 
grown 6 times since then, and the trust associated with the 
official USDA Certificate of Inspection is a big part of that 
success story. That certificate also gives our American farmers 
the reassurance they need that they will receive a fair price 
for the grain that they have worked so hard to produce.
    So I look forward, again, Mr. Chairman, to working with you 
in a bipartisan way to maintain the integrity of the existing 
inspection system as we bring the process of reauthorizing this 
important piece of legislation forward.
    Thank you.
    Chairman Roberts. As usual, well spoken, and thank you very 
much, Senator.
    Senator Klobuchar, the distinguished Senator from 
Minnesota, will be introducing two of our witnesses: Mr. Bill 
Gordon of the American Soybean Association and a grower from 
Minnesota, and also Mr. Tim Paurus, who is the representative 
of the National Grain and Feed Association from Minnesota. 
Senator Klobuchar.
    Senator Klobuchar. Well, thank you very much, and thank you 
for your wisdom in having two witnesses that are associated 
with my State.
    First of all, Mr. Bill Gordon farms with his wife, Dawn, 
their four children, and his parents on a fourth-generation 
farm in Worthington, Minnesota, which is right near the South 
Dakota border, not too far from Iowa, Senators Grassley and 
Ernst.
    They farm soybeans and corn on 2,000 acres and have 250 
acres of CRP and water quality areas. Bill also practices as a 
tax accountant in Worthington. He is here today representing 
the American Soybean Association. You should know, Mr. Chairman 
and Ranking Member Stabenow, that he told me he has his planter 
out there, which is--who? Brother?
    Mr. Gordon. My little brother, yes.
    Senator Klobuchar. His little brother, who does not quite 
know what he is doing, and so if he has to leave at any time 
during the hearing, he is literally giving him instructions as 
the day goes by. So I just want to make sure he has permission 
to leave.
    Our second Minnesota witness is Mr. Tim Paurus. Tim is the 
vice president of terminal operations at CHS, a Fortune 100 
farmer-owned energy, grain, and food co-op based in Inver Grove 
Heights, Minnesota, and he is here representing the National 
Grain and Feed Association.
    Tim began his career in grain marketing at CHS in 1978, and 
his experience has led to a number of leadership positions in 
the field, including serving as past president and chairman of 
the Grain Elevator and Processing Society and two-time former 
chairman of the USDA's Grain Inspection, Packers and Stockyards 
Administration's Grain Inspection Advisory Committee. That is 
the longest association I think I have ever heard. But thank 
you for being here as well.
    Thank you, Mr. Chairman.
    Chairman Roberts. We thank you very much, Senator.
    Bill, you are at bat, and, David, I will be introducing 
you. Let us see here. We have got to keep going. Steve--pardon 
me for calling you ``Steve''--Vice Chairman Campbell, I will be 
introducing you, and then you can make your comments. So you 
are not in the hole. We just have a batter up right now.
    Bill, why don't you proceed with your testimony, please? 
You have 5 minutes. Feel free to summarize any part of your 
statement that you would like.

STATEMENT OF BILL GORDON, MEMBER, BOARD OF DIRECTORS, AMERICAN 
          SOYBEAN ASSOCIATION, WORTHINGTON, MINNESOTA

    Mr. Gordon. Thank you, Mr. Chairman and members of the 
Committee. I am Bill Gordon, a farmer from Worthington, 
Minnesota, and a member of the Board of Directors of the 
American Soybean Association. My family farm is in southwest 
Minnesota.
    We farm soybeans and corn on 2,000 acres on a fourth-
generation farm. Our statement today is supported by the 
American Farm Bureau Federation, the National Corn Growers 
Association, the National Association of Wheat Growers, and the 
National Barley Growers Association. We thank you for the 
opportunity to testify on the reauthorization of the U.S. Grain 
Standards Act.
    Soybeans and soy products, as you heard earlier, are the 
most valuable U.S. agricultural export. In 2014, the U.S. 
exported $28 billion in soybeans, soy meal, and soy oil, 
representing 56 percent of our total U.S. production. Our 
industry and our foreign customers are highly dependent on 
having a reliable and transparent export inspection and 
marketing system.
    Key to the growth in exports has been the reliability of 
the official U.S. inspection and weighing system. Under the 
Grain Standards Act of 1976, the service provided by the 
Federal Grain Inspection Service has been the gold standard for 
assuring foreign buyers that they are receiving the quality and 
volume of products for which they have contracted.
    Most of the authorities in the Grain Standards Act due to 
expire at the end of this fiscal year are not controversial. 
There is broad support for reauthorizing congressional 
appropriations to fund FGIS operations and for FGIS to charge 
fees for supervising delegated State agencies. In addition, the 
grain trade has recommended that the cap to cover FGIS 
administrative and supervisory costs in user fees be replaced 
by a rolling average based on export volumes and inspections. 
Finally, the charter for the Federal Grain Advisory Committee 
should be renewed.
    In addition to these reauthorizations, the act needs to be 
strengthened to require FGIS to intervene in the event of a 
disruption in inspection services. The issue of when and how 
FGIS intervenes has been a serious concern for producers, the 
grain trade, and foreign buyers since the Washington State 
Department of Agriculture refused to have its employees cross 
the picket lines during a labor-management dispute at the Port 
of Vancouver last summer. This refusal resulted in a 36-day 
delay before FGIS was willing to have its own employees take 
over the inspections.
    Under the Grain Standards Act, official inspections are 
required for all export shipments, either directly by FGIS or 
by delegated state agencies. In the event the state agency 
services are disrupted, the act requires FGIS to step in. 
However, there is no fixed timeline for FGIS action, and the 
Secretary is given discretion to decide whether an interruption 
represents an emergency requiring FGIS to intervene.
    In October 2013, ASA and the other farm and industry 
organizations urged the Department of Agriculture to develop a 
contingency plan to respond to any disruption at the Port of 
Vancouver. After the Washington State Department of Agriculture 
withdrew services last July, 22 farm and industry organizations 
asked the Department to take immediate action to meet its 
statutory obligations. USDA replied that it was withholding 
services over concerns that its employees would not have safe 
access to the port facility. Subsequent to resolution of the 
dispute, we are not aware that the Department has taken any 
action to prevent the reoccurrence of a similar situation.
    We encourage the Committee to engage the Department on when 
and how it will act to resolve any future disruption of export 
inspection services. If this discussion is inconclusive, we 
recommend the Committee strengthen the Act to require FGIS to 
take action according to a fixed timetable based on hours 
rather than days or weeks.
    We further recommend that any state agency that withdraws 
services be suspended until the Department completes a review 
that confirms the agency is capable of resuming services 
without further interruption.
    As I stated earlier, our grain inspection and weighing 
system is a fundamental guarantee to our foreign customers that 
supplies of U.S. grains and oilseeds will be officially 
inspected and not be disrupted. Reauthorization of the Grain 
Standards Act presents an opportunity to correct uncertainties 
in the system that have come to light in the last 2 years. The 
changes needed to address these concerns need to be resolved 
well in advance of expiration of the authorities under the act.
    Thank you again for letting me testify.
    [The prepared statement of Mr. Gordon can be found on page 
34 in the appendix.]
    Chairman Roberts. Mr. Gordon, thank you so much for being 
on time. Most Senators can read. All staff can read. So that is 
why we ask--and the Chairperson Emeritus--well, she did not do 
this, but she would ask people to be timely. Thank you so much 
for finishing in time, and if I had not said that, Bill could 
be in better shape.
    Our next witness is David Ayers, president of the American 
Association of Grain Inspection and Weighing Agencies from 
Illinois. Mr. Ayers joins us today on behalf of the American 
Association of Grain Inspection and Weighing Agencies. He has 
been in the grain inspection business for nearly 40 years. He 
currently owns and operates a designated official agency, the 
Champaign-Danville Grain Inspection Agency, headquartered in 
Urbana, Illinois.
    Welcome. I look forward to your testimony and learning from 
your experience, sir.

 STATEMENT OF DAVID AYERS, PRESIDENT, AMERICAN ASSOCIATION OF 
    GRAIN INSPECTION AND WEIGHING AGENCIES, URBANA, ILLINOIS

    Mr. Ayers. Mr. Chairman and members of the Committee, I 
appreciate the opportunity to be here today to discuss the 
reauthorization of the U.S. Grain Standards Act. I would like 
to make a few opening comments this afternoon and respectfully 
request that my full statement be included in the record.
    Chairman Roberts. Without objection.
    Mr. Ayers. Our association, the American Association of 
Grain Inspection and Weighing Agencies, represents the public 
and private agencies designated and delegated by the United 
States Department of Agriculture, the Grain Inspection, 
Packers, and Stockyards Administration, and we inspect the 
Nation's grain. AAGIWA's members are located throughout the 
United States and perform 90 percent of all of the official 
inspections under the United States Grain Standards Act. Our 
official agencies employ over 2,000 dedicated employees.
    AAGIWA supports reauthorization of the expiring USGSA 
provisions and wishes to provide the following observations to 
Congress:
    Much has changed in America's grain marketing system since 
the Federal Grain Inspection Service was formed by Congress in 
1976. Industry consolidations, transportation efficiencies, 
testing services, and result accuracy have all improved beyond 
what anyone could have envisioned 39 years ago to make the U.S. 
grain marketing system the world leader. Shuttle trains and 
export containers have replaced boxcars for moving grain. We 
can now test for substances in parts per billion and 
electronically provide inspection and weighing results around 
the world in seconds.
    What has not changed is the need for a third-party 
inspection service that is both responsive and unbiased to 
provide accurate and timely results. Producers, marketers, 
handlers, and grain processors in the U.S. and around the world 
all benefit from knowing the true quality of the grain they are 
selling or buying.
    GIPSA's ability to supervise official agencies has vastly 
improved. Each agency now has a quality management program with 
internal audits that are reviewed annually by GIPSA's auditors. 
Inspection results are sent electronically on a daily basis to 
GIPSA to monitor inspection accuracy.
    Official agencies have also evolved with the changing pace 
of the grain industry by providing on-site inspection 
laboratories for shuttle loaders and at container yards. We now 
have testing methodologies that allow official agencies to 
quickly provide results at remote locations so shippers can 
make real-time decisions.
    Where agencies have struggled is in surviving the changing 
rural business economy. The number of official agencies has 
significantly decreased since 1976. The need for greater 
capital as official agencies have consolidated has increased.
    AAGIWA is requesting that the U.S. Grain Standards Act be 
amended to increase the maximum designation length for official 
agencies from 3 to 5 years. Providing a 5-year designation 
would not compromise GIPSA's authority to suspend or revoke a 
designation already in place. AAAGIWA supports the suspension 
and revocation of a designation when it is warranted to protect 
the integrity of the official inspection system.
    AAGIWA believes this change will strengthen the official 
inspection system and its direct and indirect beneficiaries. 
This change would allow agencies to secure more favorable 
financing for the purchase of new equipment and expansion to 
keep pace with the U.S. grain industry. Increased designation 
times to 5 years would also bring more financial stability to 
the over 2,000 citizens employed by official agencies, mostly 
in rural communities across the Nation.
    A 5-year designation also provides agencies the opportunity 
to control expenses which translates to the inspection costs 
incurred by the grain industry. Inspection costs have been 
reported to be a grain company's third largest cost. Keeping 
these costs under control contributes to the local elevator's 
viability, which in some cases is the only major business in 
many rural communities.
    This change would not create any additional budgetary 
burden on the U.S. taxpayers, and it would not decrease any tax 
revenue to the U.S. Treasury. What it would do is help ensure 
that the official inspection system remains robust so that it 
is able to meet the needs of the grain industry, producers, and 
all those supported and dependent on receiving timely, 
accurate, and unbiased results.
    Thank you.
    [The prepared statement of Mr. Ayers can be found on page 
26 in the appendix.]
    Chairman Roberts. We thank you, sir.
    Our next witness is Tim Paurus, who has already been 
introduced by the distinguished Senator from Minnesota.
    Mr. Paurus.

  STATEMENT OF TIM PAURUS, REPRESENTATIVE, NATIONAL GRAIN AND 
        FEED ASSOCIATION, INVER GROVE HEIGHTS, MINNESOTA

    Mr. Paurus. Chairman Roberts, Ranking Member Stabenow, and 
members of the Committee, thank you for the opportunity to 
testify today. I am Tim Paurus, assistant vice president of 
terminal operations for CHS Inc., headquartered in Inver Grove 
Heights, Minnesota. CHS is a leading global agribusiness owned 
by farmers, ranchers, and cooperatives across the United 
States. In my capacity at CHS, I am responsible for the 
operations of our company's grain-handling facilities.
    I am testifying today on behalf of the National Grain and 
Feed Association. I am a member of NGFA's Grain Grades and 
Weights Committee and previously served as chairman of the 
committee for 8 years.
    NGFA consists of more than 1,050 grain, feed, processing, 
exporting, and other grain-related companies that operate more 
than 7,000 facilities and handle more than 70 percent of all 
U.S. grains and oilseeds.
    NGFA strongly supports reauthorization of the U.S. Grain 
Standards Act to improve and maintain the U.S. official grain 
inspection system. We have worked continuously for nearly 40 
years to encourage continued improvements to this system and 
have several recommendations to offer here today to further 
enhance the system.
    First, in response to apparent system shortcomings, 
including the disruptions in official inspection and weighing 
service at the Port of Vancouver, Washington, during 2013-14, 
we urge that existing language in the act be strengthened to 
reinforce the obligation of the Secretary of Agriculture to 
restore official inspection and weighing service in a prompt 
manner, except in instances where the disruption is caused by 
cataclysmic natural disasters.
    Unfortunately, the Secretary did not do this when the 
interruption in services occurred at the Port of Vancouver, 
Washington.
    Make no mistake, foreign buyers took note. In the process, 
the reputation of FGIS was damaged, as was the confidence of 
international buyers in the reliability of the U.S. system. I 
respectfully request that a letter from the Korea Flour Mills 
Industrial Association in this regard be made part of the 
hearing record.
    Chairman Roberts. Without objection.
    [The following information can be found on page 99 in the 
appendix.]
    Mr. Paurus. Second, we recommend the process used by FGIS 
to delegate its authority to perform official inspection and 
weighing service at export elevators be made more transparent, 
more accountable, and open to the public. We urge that the 
delegation of official inspection service to State agencies be 
subject to notice-and-comment rulemaking and that the duration 
of such delegation be limited to no more than 5 years.
    Further, consideration should be given to directing FGIS to 
license and utilize, subject to FGIS oversight, qualified 
personnel employed by independent third-party entities to 
perform official inspection and weighing services at export 
elevators, particularly in cases where disruptions in official 
service occur. This can be done through existing licensing 
provisions in the act. Some attempt to label this concept as 
``privatization.'' That is not what NGFA is proposing.
    Some people have pointed out to a pilot study GIPSA 
conducted as a reason not to allow qualified third-party 
inspectors. This study had several significant flaws, the most 
glaring of which is that GIPSA chose to study sites that 
historically account for less than 5 percent of the export 
volume. To properly assess the viability of using qualified 
independent third-party inspectors, GIPSA would need to base 
its assessment upon a port region that handles a more 
significant export volume.
    Third, NGFA supports the current provisions that authorize 
FGIS to designate qualified, accredited State or private 
entities to perform official inspection and weighing services 
in geographic territories within the domestic market and 
support extending the designation from 3 to 5 years.
    Fourth, we urge that FGIS be required to base the tonnage 
portion of export inspection user fees on shifts in actual 
shipment volumes that are officially inspected by basing it on 
a 5-year rolling average.
    Finally, we recommend that reauthorization of the act be 
reduced from 10 years to 5 years, particularly given the 
dynamic, changing, and highly competitive nature of the global 
grain export marketplace. The recommendations we have proposed 
will help strengthen the official inspection system, enhance 
U.S. competitiveness, and retain the integrity of U.S. 
inspection results. Our industry pledges to work with Congress 
to craft policies that achieve these positive outcomes.
    Thank you for the opportunity to testify. I will be pleased 
to respond to any questions you may have.
    [The prepared statement of Mr. Paurus can be found on page 
37 in the appendix.]
    Chairman Roberts. Well, thank you, sir. So far everybody is 
on time. We may set a record here today. I hate to put pressure 
on you, Mr. Campbell.
    Steve Campbell, vice chairman, board of Directors, North 
American Export Grain Association, from Kansas City, Missouri. 
Mr. Campbell is the executive vice president and head of Grains 
Platform, North American, Louis Dreyfus Commodities in Kansas 
City. He has spent his career working with customers all around 
the globe who purchase U.S. grains and oilseeds.
    Welcome, sir, and we look forward to your testimony.

STATEMENT OF STEVE CAMPBELL, VICE CHAIRMAN, BOARD OF DIRECTORS, 
 NORTH AMERICAN EXPORT GRAIN ASSOCIATION, KANSAS CITY, MISSOURI

    Mr. Campbell. Thank you. Chairman Roberts, Ranking Member 
Stabenow, and members of the Committee, I am Steve Campbell, 
executive vice president and head of Grains Platform, North 
America for Louis Dreyfus Commodities. I manage our grain 
businesses in North America and work with customers around the 
world to meet their grain procurement needs.
    I appreciate this opportunity to appear on behalf of the 
North American Export Grain Association, which was established 
in 1912 and whose members consist of private and publicly owned 
companies and farmer-owned cooperatives that shift the vast 
majority of U.S. grain exports.
    Let me begin by saying NAEGA supports each of the 
recommendations for improvements to the U.S. Grain Standards 
Act made by the National Grain and Feed Association. Virtually 
my entire 28-year industry career has focused on meeting the 
needs and understanding the perspectives of customers around 
the world.
    In my grain trade experience, I have found that 
international markets in which we do business and the demands 
and needs of foreign customers are complex, dynamic, and ever 
changing, and their purchase decisions are based on value.
    When I started supplying international markets in U.S. 
wheat, buyers specified simply U.S. No. 2 and nothing more. 
Increasingly over the past two decades, buyers now specify that 
export wheat meet several safety, label, and quality 
attributes. Many of the attributes are end-use properties: 
protein, falling number, and other processing specifications 
require specific sample analysis, in addition to inspection for 
factors used to determine a U.S. grade, even though the grade 
still provides a baseline for which value can be built.
    When it comes to the value equation, also paramount in 
buyers' minds is the importance of a reliable, predictable, and 
competitively priced source of supply. That also encompasses 
the reliability, integrity, competence, and reputation of the 
originating country's grain inspection.
    The world-class productivity of American farmers, the 
fungibility of our supply, and our grain-handling and 
transportation infrastructure are among the many U.S. 
advantages. So, too, is our leadership in assembling and 
conveying market information. FGIS plays a key role. The U.S. 
Grain Standards Act provides an efficient and transparent 
system for price discovery that benefits all market segments, 
including consumers. FGIS' work in resolving problems that 
periodically arise in international trade has proven value.
    But the fungibility of the world's grain supply also means 
customers have a wide choice of options when it comes to 
suppliers. Those involved in the international grain trade 
source and act globally, with competition driving us to 
continually improve.
    As shown in my written testimony, our buyers and our 
foreign competitors are not standing still when it comes to 
improving their export and inspection systems. Let me share a 
few examples.
    One of our major competitors, Canada, has eliminated its 
monopoly state grain trading enterprise and revised its very 
expensive grain inspection. It now is largely using independent 
third-party firms working at the direction of the government.
    Australia, Brazil, and other South American competitors 
also have changed their approaches to marketing grain by 
opening up to private competition and deploying competitive 
third-party inspectors.
    Reliably meeting demands of buyers around the world, as 
well as price, are the keys to winning the challenge to bring 
the most value to market.
    Two recent U.S. Grain and Oilseed Inspection Services 
Competitiveness studies conducted for NAEGA and attached to my 
written testimony provide important insights. One found that 20 
to 25 percent of U.S. exports now are being reinspected by 
third parties to verify inspection results. Further, we 
currently estimate that third parties already are performing 
tests for various grain quality attributes of more than 70 
percent of all U.S. exports.
    The global trend clearly is toward increased utilization of 
these highly qualified third-party inspectors to provide the 
risk management and intrinsic product value information needed 
by international customers. We believe adding the capabilities 
of third-party inspection personnel to our U.S. official grain 
inspection system is justified, particularly as a tool to 
improve reliability and responsiveness. We would not be making 
this recommendation unless these entities already had earned a 
solid reputation for professionalism and integrity and whose 
work not only is accepted but actually requested by foreign 
customers.
    Reauthorization of the U.S. Grain Standards Act provides 
Congress with the chance to work to further improve and 
strengthen U.S. agricultural competitiveness. We can burnish 
the existing grain inspection system that Government and 
industry have worked hard to establish as the gold standard and 
which is integral to the unique U.S. brand value. It is 
imperative to ensure that the Federal Inspection System comes 
with the proper controls, best practice, and best science.
    The paramount issue for inspection is reliability. The best 
inspection system in the world will not generate sufficient 
value if it is not predictable and reliable.
    In closing, let me reiterate NAEGA believes strongly that 
official inspection plays an integral role in meeting the value 
chain needs and can be strengthened by ensuring availability 
and adding accountability and market responsiveness to build 
U.S. competitive advantage in the international marketplace.
    That can be done while maintaining a system that has 
unquestioned reliability, responsiveness, and integrity by 
providing for prudent FGIS oversight and licensing of qualified 
personnel of third-party firms that already are in the U.S. 
grain export elevator performing a wide variety of non-grade-
determining inspections.
    We look forward to working together to make trade work, and 
we thank you for this opportunity.
    [The prepared statement of Mr. Campbell can be found on 
page 29 in the appendix.]
    Chairman Roberts. Thank you very much.
    Here is a question for the entire panel. All of you 
mentioned, either directly or indirectly, the situation in 
Washington State and the shutdown at the Port of Vancouver last 
summer. I find the whole thing incredulous and egregious, and I 
am curious--and I think all the members of the Committee share 
our concern. I am curious. Did any of you imagine a scenario 
like this occurring? Bill, did you imagine something like this 
happening?
    Mr. Gordon. Mr. Chairman, no, because when you put faith in 
USDA or the Government, you expect, when a state agency steps 
out, that the U.S. Government will step in in a timely fashion. 
That is why we proposed having a timetable set in the statute. 
That way if this happens again, at least the U.S. Government 
can step in and make something happen and continue our 
shipments. As these gentlemen said, our foreign buyers depend 
on that reliability.
    Chairman Roberts. Mr. Ayers.
    Mr. Ayers. Senator, I personally have never dreamed that 
anything like this would have ever happened. I call it ``a 
perfect storm,'' all the different scenarios that came into 
place at one time. In my nearly 40 years, I have never seen a 
disruption like this before, even through natural disasters, 
hurricanes.
    Chairman Roberts. Mr. Paurus.
    Mr. Paurus. I would not have foreseen that happening. I 
would have expected FGIS to provide the inspection and weighing 
services, unless there was a bodily harm that may have come to 
somebody, and in that case, I would think that you would have 
Federal marshals or something, somebody would have been doing 
something illegal that would have caused people to be fearful 
of being hurt.
    Chairman Roberts. Mr. Campbell.
    Mr. Campbell. Senator, no, I would not. I have been loading 
vessels and been in the export trade my entire career, and I 
have never seen anything of this magnitude from the U.S. Have I 
seen it from other countries, other parts of the world? 
Absolutely, but not from the U.S. As Tim said, our people were 
going to work. There was plenty of opportunity to have 
security, plenty of protection. No reason to get into all that. 
But could I have foreseen that they would shut the markets 
down, shut the PNW down for 36 days? Absolutely not.
    Chairman Roberts. You have already touched on the answers 
to my next questions, but what do you see--take into account 
what you see as the role of the Department of Agriculture and 
the FGIS in mitigating the risks to the industry. Where did 
most of the breakdown occur? Let us go in reverse order.
    Mr. Campbell. Where did the breakdown occur is essentially 
your question. I think honestly, when the State inspection 
decided to not go to work and when at that point the Federal 
Grain Inspection Service did not step in and say, ``We will 
bring our own people in. We will make other arrangements. We 
will get marshals in there to make sure that you are protected 
so that you can come to work.'' That is when the breakdown 
occurred, and then when the breakdown moved to Washington, it 
just stopped.
    Chairman Roberts. Mr. Paurus.
    Mr. Paurus. I would agree with Steve on that, that it 
happened at that point. I am sure there were things that went 
on previous to the Washington Department of Agriculture making 
their decision about not providing that service. Even though 
FGIS could have--should have been prepared, I know there were 
letters that were sent to the Secretary of Agriculture asking 
them to take steps to make sure it did not happen. I believe 
that it probably--that is where it started, but previous to 
that, there were people talking about what would happen if they 
did not show up for work.
    Chairman Roberts. David.
    Mr. Ayers. Senator, I believe that all the parties involved 
had some play in what happened, and the lack of preparedness 
through all the different parties involved led to what happened 
in the Vancouver situation.
    Chairman Roberts. Steve.
    Mr. Gordon. I agree with the gentlemen here, the same 
thing. As a producer on the beginning end of this, we look 
toward the Government. We follow our rules. We do what we are 
supposed to do. We produce this wonderful crop. We ship it out 
there. Because of bureaucracy and Washington or however you 
want to look at it, all of a sudden our buyers cannot receive 
their products, and our sellers are in the middle. They are 
trying to work on it. So you have a fundamental breakdown. When 
you have a state agency that is using the U.S. Government as 
their backbone and they just step out of the way, there is no 
consequence for that. They just say, ``Well, we do not want to 
do it today,'' and then the U.S. Government does not step in 
and either punish that or at least evaluate what happened. That 
is the key step to trying to fix this problem.
    Chairman Roberts. I might have another question, but I will 
now recognize the Senator from Michigan.
    Senator Stabenow. Thank you very much, Mr. Chairman.
    Let me first follow up, Mr. Gordon, on what you were 
saying, and I appreciate all the testimony. We obviously need 
to know that you have predictability and reliability. No 
question about it. But since we have every other row of 
soybeans being exported now, and we are proud of our Michigan 
soybean growers, but you mentioned--all of you have mentioned 
how this system is vital to you, and that it is the gold 
standard for us, and so understanding the disruption at the 
Port of Vancouver and how serious that was for all of you.
    If we would build confidence that our Federal inspectors 
will be able to promptly respond to situations, which is what 
you need, do you think that we need to make other major changes 
in the current inspection system?
    Mr. Gordon. Thank you, Senator, for the question. No, I 
really think the breakdown here is the major one. I was in 
Japan at the end of January when they had a longshoreman's 
strike out of L.A. I had a gentleman ask me ``Are you guys 
doing anything about it?'' Our association had sent a letter to 
the administration asking what we are doing about it. I said, 
``We are trying. We are doing our best. We are bringing up the 
issue.'' He says, ``Good, because tomorrow I was going to 
change my order of soybeans to Canada.'' But he said, ``Because 
you told me that you are trying with the U.S. Government, I 
have faith in the U.S. Government. I will keep purchasing my 
beans from the U.S.''
    That is a big deal when our foreign buyers are asking, and 
the gold standard is the key to the credibility that we have, 
but we need to keep that credibility.
    Senator Stabenow. I agree with you. In fact, Mr. Chairman, 
I am sure you have as well, but I have received communications 
from a number of countries actually that support our system. 
They want it to work. They support the current system, 
including South Korea. So it is important to make sure that the 
current system works, and that is what we are all about.
    But to go a little farther, Mr. Paurus, and, Mr. Campbell, 
you mentioned this as well, the idea of using licensed private 
contractors in some way. My concern is that the current system 
right now, American exports have been at record levels. The 
cost of grain inspection is about a penny per bushel. It seems 
like that is a good deal for the American farmer.Since we had a 
system before that had serious issues with scandal and so on, 
had to be fixed, and now we have a system that, in general, is 
supported--we had a problem, a serious problem, but is in 
general supported, everyone has said that our system is 
respected around the world. So I am wondering, if that is the 
case, why would we risk our reputation and possibly our 
competitiveness by directing the USDA to again go back in some 
way to private contractors? Mr. Paurus.
    Mr. Paurus. Thank you. The proposal would still have FGIS 
oversight. We would still want to maintain the integrity of the 
official grade certificate and weight certificates. The idea is 
you would have people in the wings, so to speak, to be able to 
address the situation in Vancouver if it happened again for 
that reason or some other reasons. The people available today, 
FGIS licenses designated agencies today.
    Those individuals are--they grade the same grain. They do 
it the same way that the Federal Inspection Services do. So 
there is a possible group of people that you could use to hire 
on a short-term basis, and I believe FGIS has the authority to 
do that already. So that would be a backup plan at least at 
this point.
    Senator Stabenow. You are saying they have the authority to 
do that already? If that is the case, I just do not see that as 
a solution. It seems to me we need to be addressing making sure 
that there is a prompt response and so on by the Federal 
inspectors. But I do not understand why if they already have 
the authority anyway, why that would have made a difference 
then. If, in fact, we had another layer or another step away 
from the inspectors who, in fact, have done an excellent job, 
the system has done an excellent job, I am not--I just do not 
see that as the solution. I guess I am not quite understanding 
of how that is the solution.
    Mr. Paurus. Well, maybe you would look at it that FGIS 
needs to manage and be held accountable for making sure that 
process is in place so that when something happens, they are 
able to react to it.
    Senator Stabenow. Thank you very much, Mr. Chairman.
    Chairman Roberts. Senator Perdue.
    Senator Perdue. Thank you, Mr. Chairman, Ranking Member. 
Thank you for being here.
    Tell your brother to turn the GPS on. He will be just fine 
on that tractor.
    [Laughter.]
    Senator Perdue. You know, this is at the heart of our 
financial crisis in America. I personally believe we have a 
very serious financial problem in the United States, our debt. 
One of the ways to get out of that is to grow the economy. Both 
sides up here agree on that. One of the best ways to grow our 
economy is to export more. You guys are in that business. I 
have been in that business most of my career, and I can tell 
you, what you are saying today, credibility, consistency, and 
reliability are the three things that I always depended on. 
When you break that, you lose customers, to your point.
    I can tell that you had a good record with that individual 
customer, or he would have switched to soybeans out of Canada. 
We have plenty of alternatives around the world today, which 
makes this very critical.
    I just have a quick question. Mr. Paurus, would you expand 
just a little bit more on why it is so important to maintain an 
uninterrupted and consistent flow of products out of the United 
States in our export efforts?
    Mr. Paurus. To keep the system moving and keep our 
customers over there, that they can rely on us being able to 
satisfy their needs in a competitive manner, price competitive, 
and so they do not do what Mr. Gordon's Japanese stakeholder 
said, ``I was going somewhere else, but I am going to come back 
to you or stay with you to buy soybeans.''
    Senator Perdue. Did we have any evidence in the 36 days of 
that disruption, did we have any evidence coming through the 
industry of lost sales? Do we have any quantification of that? 
Mr. Chairman, do you have any information on that?
    Mr. Campbell. Yes, we absolutely lost sales. We lost sales, 
and we also switched vessels from the United States to other 
parts of--to Canada.
    Senator Perdue. As I understand it, though, right now--and 
correct me if I am wrong. Any of you can jump in on this. It 
looks to me like we have 58 U.S. inspection facilities, and 
about 45 of those use Federal inspectors. Only 13 use 
designated State inspectors, which I presume was the Vancouver 
situation. I have a couple questions on that.
    It looks to me like you already have some potential backup 
in those designated State facilities, that they could rely on 
Federal inspectors. I have a specific question, though. In this 
situation that happened in Vancouver, during those 36 days, did 
the industry, the grain industry contact the Secretary of 
Agriculture? If they did, what was the response? Mr. Paurus.
    Mr. Paurus. Yes, they did. The ag stakeholders sent two 
letters that were submitted as part of this record, and the 
letters urged the Secretary to immediately provide service. The 
response received from the Secretary referenced safety 
concerns, but to date, the USDA has not shared their safety 
report, if there is one.
    The ag stakeholders also met with GIPSA Administrator Mr. 
Mitchell, but that meeting did not bring about any action from 
the USDA to restore the service.
    Senator Perdue. What was the security risk? I know they did 
not supply the report, but what was the security situation that 
caused them not to respond?
    Mr. Paurus. I do not know.
    Senator Perdue. The record said it had something to do with 
the longshoremen's strike. Is that right?
    Mr. Paurus. Well, there was the longshoremen's strike going 
on, and the Vancouver facility was still operating. The 
Columbia grain facility in Portland operated, but FGIS was 
inspecting grain there, and they kept operating at that time.
    Senator Perdue. But there was no attempt to move FGIS 
inspectors from other facilities into Vancouver during those 36 
days?
    Mr. Paurus. No, there was not.
    Senator Perdue. The primary reason given was the security 
issue, which was never----
    Mr. Paurus. Safety concern.
    Senator Perdue. Which was never--well, safety concern to me 
is the machinery is not protected, but a security concern is a 
little more alarming to me. I would like to know more about 
that for the Committee. I will submit that, Mr. Chairman, in 
writing to follow up.
    Senator Perdue. I just have one last question. I am about 
out of time. Mr. Campbell, you had mentioned changing--I think 
you were the one. If not, anyone can respond. Why do you think 
it is important to change the reauthorization period? We have 
gone from 3 to 10 over the last 20 years or so, I guess. What 
is the reasoning behind reducing back to a 5-year 
recommendation?
    Mr. Campbell. So really, in the end here, we are talking 
about reliability, we are talking about competitiveness, and we 
are talking about evolution. As I mentioned in my opening 
comments, what they did in 1974, not so relevant today in 2014. 
I understand the problem, but the reality is the buyer today is 
way more sophisticated than he ever was.
    In the last 20 years, the buyer today is very 
sophisticated. Every one of them has a plaque on their wall as 
to what milling school they went to. Every one of them can tell 
you all the milling characteristics of any class of wheat in 
the United States. The FGIS system has not evolved. It has not 
maintained. So at the end of the day, we get the grade factor, 
and the grade factor is very important for setting that 
baseline.
    But if it does not evolve and maintain itself in the world 
marketplace, it is going to continue to slip. We simply ask 
that it gets--as we see, the labs that the third-party 
inspections have and are performing those tests today, we 
simply ask FGIS that you are going to have to evolve and stay 
up.
    Senator Perdue. Thank you.
    Thank you, Mr. Chairman.
    Chairman Roberts. Senator Brown.
    Senator Brown. Thank you, Mr. Chairman. I appreciate that. 
Thank you, all four of you, for testifying today and for 
sharing your knowledge and experience.
    Mr. Gordon, my first question is for you. Soybeans are an 
important crop in Ohio, as you noted, our Nation's largest 
agricultural export. The Federal Grain Inspection Service was 
created by Congress some 40 years ago because of significant 
problems at our ports, as you know.
    Private inspectors were taking bribes. Shipments were being 
misrepresented. Inferior products were being exported. You also 
noted that the work of the Federal Grain Inspection Service is 
the gold standard to assure foreign buyers about the high 
quality of our exported grain.
    That being the case, if you would just answer yes or no, 
does the American Soybean Association support privatizing the 
inspection of exported grain?
    Mr. Gordon. On behalf of the groups that I mentioned, the 
National Wheat Growers and others, we have no problems with the 
Government running the program. We do not necessarily see the 
need to privatize it. The gentleman has spoken in favor of it. 
We are not necessarily opposing it, but the system is not 
broken. How the system didn't work in Vancouver is the real 
problem behind it, the rest of the system.
    We do agree, though, that the inspection system needs to 
evolve. Mr. Campbell said it exactly. Our customers know more 
about our soybean genetic makeup than we do even as producers. 
As a producer, I know just about everything about that soybean 
when I put it in the ground so I can raise it the best way I 
can.
    So to answer your question, no, we do not necessarily do we 
need it to be privatized. We think the Government does a good 
job.
    Senator Brown. Thank you.
    Mr. Paurus, I understand that NGFA and others on the basis 
of last year's lockout--lockout, not strike--of long--not a 
strike by the longshoremen but a lockout of the longshoreman, 
major distinction--at the Vancouver report are recommending 
that Congress force the Secretary to take certain actions in 
light of possible disruptions in ports. In particular, it is my 
understanding that while foreign-owned conglomerates were 
locking out workers--foreign-owned conglomerates were locking 
out workers at the Vancouver, Washington, port--your company, 
which had negotiated a successful contract with your workers 
was actually experiencing an increase in business at your 
Tacoma operations. Is that correct?
    Mr. Paurus. Yes, we would have had some more volume than 
maybe if the others had not locked out the longshoremen. That 
is correct.
    Senator Brown. According to USDA, more than 80 percent of 
exported grain is inspected by Federal inspectors, that the 
delegated States are each inspecting a relatively small amount 
of grain. I do not understand why in light of this isolated 
incident in Vancouver, the trade association is advocating for 
such a one-size-fits-all approach that could tie USDA's hands.
    Mr. Paurus. We would like--are you talking about the 
proposal to have the USDA take over----
    Senator Brown. Well, I am talking about your trade 
association. You were moving forward. The foreign conglomerates 
were locking workers out. You were moving forward. You were 
seeing increased business. I guess I do not understand why the 
trade association is advocating for a one-size-fits-all 
approach as a result.
    Mr. Paurus. In case we would all be for the same thing, to 
have FGIS be held accountable to provide service at any kind--
where there is a disruption, like there was in Vancouver. Now, 
I cannot--that may be the next time. It may be our joint 
venture with Cargill and TEMCO, one in Tacoma, or Kalama, 
Washington, or Portland, Oregon.
    Senator Brown. Well, I guess I look at it as you negotiated 
a contract, you did it right. These foreign companies locked 
out their workers and, unfortunately, what happened is what 
happened.
    Thank you, Mr. Chairman.
    Chairman Roberts. Senator Thune.
    Senator Thune. Thank you, Mr. Chairman, you and Senator 
Stabenow, for having this hearing about reauthorizing the U.S. 
Grain Standards Act. My home State of South Dakota is a big 
exporter. We are number 10 in the Nation total when it comes to 
agricultural exports, and our top five exports totaled over $2 
billion last year, soybeans leading the way at about $1.2 
billion, wheat around $400 million, and corn around $300 
million.
    But we have about, I think one out of every three rows of 
soybeans that is grown in South Dakota hitting the export 
market. So what those numbers confirm is the urgent need that 
we have for an effective, reliable, and accurate U.S. grain 
inspection process.
    Global grain trade is growing. I think our producers and 
exporters are continually facing increasing competition from 
around the world, and so we cannot afford another disruption of 
inspection services and trade flows such as what we had last 
summer and the Port of Vancouver in Washington State.
    So in thinking about that, as we consider reauthorization, 
I want to ask if you could make a recommendation--you have 
probably been asked this already--to this Committee as we 
prepare for reauthorization of the U.S. Grain Standards Act to 
ensure that we have uninterrupted inspections moving forward in 
the event similar situations such as Vancouver, Washington, 
occur again.
    What would you recommend to this Committee in terms of the 
reauthorization process with regard to a circumstance along the 
lines of what we saw? Feel free. Yes, sir, Mr. Gordon.
    Mr. Gordon. Senator Thune, thank you for the question. As I 
said in my testimony we talked about an hourly decision. There 
are other Federal agencies like the FAA, that in the event of a 
disruption, lockout or a strike, the Government would not allow 
them to walk out of the booths and not regulate airplanes.
    Now this does not raise a safety concern to that degree, 
but it is still a federally delegated agency. We have the 
statute in place for the Secretary of Agriculture to take this 
action, but the time frame is ambiguous. If we set up a time, 
at least make them either have a policy or have the Committee 
set that time frame, then you have teeth where you say, ``Okay, 
Secretary, you have had 10 hours to respond to the walkout.
    Washington State decided not to go in there. You need to 
get your inspectors there.'' Now we would have that timeline. 
Right now we do not have that timeline in the Act.
    Senator Thune. Anybody else? Any suggestions or 
recommendations?
    Mr. Paurus. I think we need to hold the USDA and FGIS 
accountable to provide service in times when there are 
interruptions, whether it would be a lockout, a strike, 
something else would happen. I cannot foresee everything, but I 
think we need to have FGIS accountable to provide the service.
    Senator Thune. How do you think--or how would you suggest 
Secretary Vilsack should have handled the Port of Vancouver 
slowdown with regard to using private agencies?
    Mr. Paurus. He could have maybe got some other State, 
delegated State to bring some people in and to add more people 
from the delegated State, or could have maybe in the act itself 
maybe changed it so that you can use some designated agencies 
to come in and provide official service at export. I believe 
today the act says that you cannot do that from a designated 
agency standpoint.
    Senator Thune. Good. Anybody else?
    Mr. Campbell.
    Mr. Campbell. Well as Mr. Paurus said, he could have acted 
much quicker, number one.
    Number two, at the end of the day we had buyers asking for 
waivers, which they eventually granted, but that is not a good 
sign when a buyer is asking for a waiver and we are talking 
about reliability of our exports. But he could have simply 
mandated that Federal inspectors went in there. If the 
Washington State inspectors did not want to go in, he should 
have just mandated that we take in and we bring in some Federal 
inspectors. It could have happened in 24 hours. That is the 
law. It should have been--should have been enforced.
    Senator Thune. Right. Okay.
    All right. I see my time has expired, Mr. Chairman, so 
thank you. Thank you, panel, for your testimony.
    Chairman Roberts. Thank you very much. We are expecting 
Senator Hoeven. Let me go ahead. I just have a couple of 
follow-up questions for the panel.
    The Grain Inspection Advisory Committee, what role did the 
Advisory Committee play during the situation in the Port of 
Vancouver? We can go down. Mr. Gordon, why don't you just start 
off, and then we go to Mr. Ayers, Mr. Paurus, and then Mr. 
Campbell.
    Mr. Gordon. Senator, I am not aware of that information. I 
am not sure how that Advisory Committee played a part in that.
    Chairman Roberts. Mr. Ayers.
    Mr. Ayers. Mr. Chairman, the Advisory Committee members 
made recommendations to GIPSA on how to react to the situation, 
and I have never heard of any follow-up on an actual----
    Chairman Roberts. No recommendations after this has 
occurred?
    Mr. Ayers. They made recommendations for trying to correct 
the situation at the Advisory Committee, but it is just that, 
an Advisory Committee, and whether they take the advice or not 
is strictly up to them.
    Chairman Roberts. Well, they are not sitting there 
somewhere. I mean, they sent them to the Department of 
Agriculture, I am assuming. Is that correct?
    Mr. Ayers. I am not sure where the Advisory Committee 
recommendations go. They go to the Administrator and Deputy 
Administrator of GIPSA, and where it goes from there, sir, I am 
not aware.
    Chairman Roberts. Mr. Paurus.
    Mr. Paurus. There were two resolutions made for 
consideration to the Administrator, one in July shortly after 
the State of Washington Department of Ag stopped service, and 
that one urged FGIS to take whatever action was necessary 
immediately to restore official grain inspection and weight 
service.
    Then in November of 2014, there was another resolution that 
talked about the FGIS revoked the agreement--or the Advisory 
Committee recommends that FGIS remove the delegation and 
designation of all State agencies that did not fulfill their 
obligation of providing service as required under the Grain 
Standards Act and that FGIS immediately provide the required 
services.
    I am a current member of the Advisory Committee. As far as 
I am aware of, there was never any follow-up to the Advisory 
Committee from that.
    Chairman Roberts. So they never got back to you?
    Mr. Paurus. Pardon?
    Chairman Roberts. You did not get an answer.
    Mr. Paurus. No.
    Chairman Roberts. Please, sir.
    Mr. Gordon. I cannot add to what Tim put forward. He is on 
the Committee.
    Chairman Roberts. Well, this goes into my second part of 
this. I think everybody on the Committee was troubled by the 
lack of response that the Department offered the commodity 
groups when you all wrote the Department about the situation at 
the port. Has there been any follow-up from USDA on GIPSA since 
last August?
    Mr. Paurus. I have not gotten any.
    Mr. Gordon. The commodity groups have not gotten any 
either. We had the one letter basically stating that they would 
not send people in due to the employees' safety. That was the 
last and only thing we have heard from USDA.
    Mr. Campbell. No, we have not as exporters heard anything, 
and we continue to wait for the safety report.
    Chairman Roberts. Well, that is not the way things ought to 
operate. That is probably the understatement of the hearing.
    Well, Senator Hoeven is here, and I am going to recognize 
him.
    Senator Hoeven. Thank you, Mr. Chairman. Thanks to each of 
you for being here. I guess from your respective perspectives, 
just tell me how the problem developed and all the components 
you think it would take to solve it. So not just the inspection 
piece, but if you were overseeing the situation, both how we 
got into it and how you would try to address it. We can start 
on either end.
    Mr. Gordon.
    Mr. Gordon. We did talk about it a little earlier, but the 
Grain Inspection Act actually is a very good Act. It has a lot 
of great attributes, and there are teeth in place. It is just 
that there isn't a timeline, which allows for this ambiguous 
decision by the Secretary of when he decides if it is an 
emergency.
    Well, a decision on an emergency differs from one person to 
another. For a farmer in southwest Minnesota, when my basis 
goes from a negative 30 cents to a negative dollar because I 
cannot ship anything, and for my bankers, that is an emergency. 
You know, we have seen that with different transportation 
issues. So the timeliness of response from the U.S. Government 
is probably the key factor.
    Now, there are ideas on how to increase that timeliness 
with private sector--I truly believe and I think the 
associations really truly believe we have the people in place. 
We just need to act on that; when something goes wrong, get 
that timetable set up either in statute or in response from 
USDA, and act on it, get the inspectors there. If we have got 
to bring in U.S. marshals to get them through the picket lines, 
it is our job as the U.S. to provide this service to our 
foreign customers.
    Senator Hoeven. Were there workers in place to actually do 
the work then?
    Mr. Gordon. I believe so. Again, the problem with being in 
the middle of the heartland in Minnesota is that I do not get 
to go to the PNW all that often to get my soybean to my foreign 
buyers in a timely fashion. I do believe there were ships 
available. There were workers available. I have no problem with 
the union issues. I understand they have contract issues. As a 
farmer, my job is to produce the crop, and the U.S. 
Government's job is to inspect it and to get it out to my 
foreign buyers.
    Senator Hoeven. Mr. Ayers, same question. In other words, 
kind of comprehensive here, not just the inspection but the 
other things that have to happen here.
    Mr. Ayers. Senator, we are in a precarious situation that 
we not only provide service to the elevators and the customers 
that export grain, but we also answer to the guidelines of the 
USDA GIPSA's authority through the Grain Standards Act. It is 
our opinion that this scenario that came up was a very unique 
scenario, and I do not foresee and nobody did foresee a 
situation like this coming up. I think the key is to ensure in 
the future that no other happenings like this ever comes about 
again, and that GIPSA prepare a comprehensive procedure to 
handle the situation.
    Senator Hoeven. So you would agree it is more than just the 
inspectors. It is also other components that have to go into 
having a solution here.
    Mr. Ayers. Yes.
    Senator Hoeven. That is what I am asking. What other pieces 
besides the inspection? Any other recommendations?
    Mr. Ayers. No, sir.
    Senator Hoeven. Okay. Mr. Paurus.
    Mr. Paurus. First of all, I am going to go with David and 
say there needs to be a plan that FGIS has, like an emergency 
action plan that every industrial facility has to have, a 
manufacturing plant or something like that, that they would put 
together in case there is one of these disruptions or something 
similar not a lockout, it could be a strike, it could be any 
one of a number of things that could happen.
    I think that FGIS under the act should be held accountable 
to do that and should be also held accountable to plan ahead 
and have a contingency plan set up. If we are looking for 
people, there is any number of licensed inspectors that work in 
the domestic and/or possibly in other delegated States or that 
they could draw on and hire those people to work for an 
intermittent period of time. I think the main thing is to get 
FGIS held accountable for coming up with that plan.
    Senator Hoeven. Thank you.
    Mr. Campbell.
    Mr. Campbell. Senator, it has been said once before--I am 
not sure if you were in the room or not--that this was the 
perfect storm. I frankly do not think it was the perfect storm. 
It was a labor situation. We are probably going to have labor 
situations in a lot of ports at different places. We cannot 
afford to shut down the grain system to back up thousands of 
rail cars into South Dakota and other parts, to have major 
transportation issues because we are shutting down these 
railroads.
    So I do not really know--I mean, I kind of do know, but 
what was the problem? I mean, the problem was they refused to 
go and inspect, as the Washington delegate said. Then the 
Federal Grain Inspection Service refused to send workers in. 
Where the workers are is a bit irrelevant to me per se. Should 
there have been workers? You bet. It is their job. It is their 
mandate. But could they have gotten workers? Sure, they could 
have flew workers out of many of the other ports.
    Senator Hoeven. Well, that is my question in that you need 
inspection, you need workers, you need ships, you need a number 
of things. That is why I am getting your recommendations as to 
what all--all the component parts that go into the solution. 
That is my question.
    Mr. Campbell. There were plenty of ships. The ships were 
there. The sales were on the books. The rail cars were----
    Senator Hoeven. Trucks, rail cars, all the----
    Mr. Campbell. Trucks--we do not take trucks in the PNW, 
but, yes, the rail cars were flowing, the barges were flowing. 
The rail cars backed up in the interior, caused massive 
problems. It was all there in place. What was not in place, 
pure and simple, was the inspection of our grain being loaded 
on our vessels because they chose for 36 days to not abide by--
--
    Senator Hoeven. But you feel the other components were 
there. So there are not other recommendations besides the 
inspection piece that you have.
    Mr. Campbell. Well, this is--yeah, I mean, this--there may 
be--no, I do not really believe so in this particular case. 
This one is about reauthorization of FGIS, so in that vein, we 
are talking about, A, when it comes to grain trade and all the 
numbers that have been thrown around, 70, 80 percent, this and 
that and that, reliability is all it is about. I have had many 
customers say, ``When is this going to happen in the gulf? Is 
this better than Russia? Russia bans exports. Is this better? 
You tell me. You are the exporter. Is this going to happen to 
me?'' These are the questions they ask me when we are shut down 
for 36 days.
    Senator Hoeven. All right. Well, we are working on 
reauthorization of the Federal Grain Inspection Act, and that 
is why I want to make sure that we are including any and all 
components that we need to in order to have the kind of 
solution that works. Yes, you are right. I mean, in this case 
it was the Pacific Northwest. It could be somewhere else. But, 
again, we want to make sure we are looking at all the things we 
need to in order to have a good solution. That is the question 
I am asking.
    Mr. Campbell. Yeah. Well, I think we are looking at all 
things, but I guess my point is that no other--in this 
particular supply chain, that was the only bottleneck.
    Senator Hoeven. Okay. I am asking, do you have any other 
recommendations besides the inspection piece?
    Mr. Campbell. Not from a reauthorization----
    Senator Hoeven. Okay, and that was what I was looking for 
from all of you.
    Chairman Roberts. Time.
    Senator Hoeven. Thanks.
    Chairman Roberts. I do not mean it is time.
    Senator Hoeven. Thank you, Mr. Chairman.
    Chairman Roberts. I do not mean it is time. Time is the 
other equation. Inspection----
    Senator Hoeven. Oh, I thought you meant time as in my time 
is up.
    Chairman Roberts. No.
    [Laughter.]
    Senator Hoeven. Thank you, all of you. I appreciate it.
    Chairman Roberts. My time is your time if you would like to 
have another 30 seconds.
    Senator Hoeven. No. Thank you, Mr. Chairman. I appreciate 
it.
    Chairman Roberts. All right. Thank you.
    I promise, the last question for the panel, user fees. You 
and others in industry are supporting a new mechanism to 
support the mandatory export inspection. I was going to ask 
you, can you elaborate on how the Department currently sets the 
user fee schedule? But the question I have, given our recent 
history of drought and other very limiting supply and demand 
factors, the only thing certain in farm country is uncertainty. 
How much confidence do you have in the USDA's ability to 
predict export tonnage several years from now with regard to 
user fees?
    Mr. Paurus. Their history of predicting, which they use the 
WASDE numbers that the USDA puts out, has not been over a 
period of time very good. So what we proposed is to do a 5-year 
average of export tonnage, for their tonnage fee, right? Those 
would be actual numbers, so take out the highs, take out the 
low over a period of 5 years, and then use that to develop 
their tonnage rate.
    Chairman Roberts. Mr. Paurus, have you ever thought about 
working for the RMA in crop insurance?
    [Laughter.]
    Mr. Paurus. I do not understand that, sir.
    Chairman Roberts. Same deal. We just offered a different 
kind of program.
    I want to thank the panel. I feel that as Chair of this 
Committee I owe you an apology from the Department of 
Agriculture and GIPSA and to a certain extent in terms of our 
oversight responsibility here. This should not have happened. 
It has dramatic effects. I think we all know that you have made 
good suggestions on timing, on inspection, and obviously a 
backup plan that can be put immediately into place. I would 
offer that authority is already there, but at least we could 
buttress that with regards to when we mark up the bill.
    I thank you all for coming. I want to thank you for taking 
the time to come and thank you for what you do.
    This hearing is adjourned.
    [Whereupon, at 3:47 p.m., the Committee was adjourned.]

      
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