DATE: Thursday, June 5, 1997                TAG: 9706050457

SECTION: BUSINESS                PAGE: D1   EDITION: FINAL 

SOURCE: BY DALE EISMAN, STAFF WRITER 

DATELINE: WASHINGTON                        LENGTH:   76 lines

FURNITURE, BIG TVS MAY SOON SHOW UP AT MILITARY EXCHANGES

Shoppers at base exchange stores in Hampton Roads and other military communities may soon have more to choose from when they're in the market for furniture, microwave ovens, television sets and a variety of other products.

Congress is moving toward relaxing restrictions on what the exchanges can sell, but apparently will refuse requests that it remove the barriers altogether.

A panel of the House National Security Committee already has agreed that the exchanges should be able to sell TV sets with screens of up to 35 inches, microwaves and other electrical appliances priced at $150 or less, furniture priced at $900 or less, and sports and photo equipment priced at $500 or less.

The panel also wants price limits lifted so that the exchanges can sell all U.S-made computer equipment. It refused a bid to let the exchanges sell computers and computer components produced overseas but agreed to eliminate restrictions on sales of most other foreign-made products.

The exchanges currently are permitted to sell furniture only when it is unassembled, limited to sales of rugs smaller than 9 feet by 12 feet, TV sets smaller than 27 inches and sports and photo equipment costing less than $253.

National retailers like Sears, Wal-Mart, and Richmond-based Circuit City, plus local firms like Willis Wayside Furniture, lobbied vigorously against any changes. The companies argued that the exchanges' tax-exempt status would give the military stores an unfair advantage in direct competition for sales of expensive items like big-screen TVs.

The lobbying apparently has had some effect. The House panel's original draft removed all TV sales restrictions, except those governing projection sets. But at least partly at the urging of Rep. Herbert H. Bateman, R-Newport News, the final draft puts a 35-inch limit on sets to be sold at the exchanges, an increase over the current 27-inch limit.

Bateman suggested that he pressed for the 35-inch limit out of concern that the exchanges ought not to be enticing young, enlisted personnel to spend the kind of money needed to buy even larger sets.

An industry source suggested that because few 35-inch screen sets are available - 36 inches is becoming the standard in that size range - the panel's action actually means that the exchanges' biggest sets will be 32 inches.

The House panel outlined its views in a letter sent to Assistant Secretary of Defense Frederick F.Y. Pang several weeks ago. The exchange stores, run by the Navy Exchange Command and the Army and Air Force Exchange Service, are awaiting a similar word from a Senate committee before increasing their product offerings.

Though the exchange sales limits are set by Defense Department regulations, not federal law, the congressional committees have claimed effective control over the restrictions as part of their responsibility to oversee the military.

In a related matter, the House panel signaled Wednesday that it has decided to back away from a confrontation with the Pentagon over the sale of cigarettes and other tobacco products in military commissaries. The commissaries are grocery and convenience stores run by the Defense Commissary Agency, while the exchanges are department stores.

Both the commissaries and exchanges typically offer service members substantially lower prices than civilian retail outlets, in part because commissary and exchange purchases are exempt from state sales taxes.

The Clinton administration dramatically raised tobacco prices in the commissaries last year, sidestepping a federal law that caps commissary prices at 5 percent above wholesale. The Pentagon got around the 5 percent cap by consigning tobacco sales in the commissaries to the exchange service, which is free to set its own prices.

Should the commissaries want to exceed the 5 percent markup limit on other types of goods, the House panel said in draft legislation it endorsed Wednesday, the Pentagon must get specific authorization from Congress. Other changes in commissary pricing policies, the panel said, should not be made without at least 90 days' advance notice to Congress.

The panel also fired what several members privately characterized as a warning shot at Pang's office, endorsing a proposal to transfer administrative responsibility for the commissaries and exchanges to the Pentagon's comptroller.

That provision is given little chance of surviving future hurdles in the lawmaking process, but apparently was included to signal bipartisan displeasure with Pang's handling of the tobacco issue, among others.

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