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WASHINGTON — Military exchange customers could see bigger couches and bigger diamonds for sale later this year, if service officials can convince lawmakers to relax their rules.

Leaders from the service’s exchange services told a House panel Tuesday that expanding furniture and jewelry sales — items now restricted under federal law — would lead to larger profits for their stores and better options for military families.

“If our customers can’t purchase what they want when they want it from an exchange, they will look elsewhere,” said Air Force Maj. Gen. Paul Essex, commander of the Army and Air Force Exchange Service.

That forces troops off base for those items, he said, which costs the buyers more than if the products were sold through exchanges.

At issue are restrictions on certain exchange sales developed in 1986 to limit the military stores’ competition with small businesses and “Mom and Pop” specialty stores, according to G.R. Rowan, president of the Armed Forces Marketing Council.

Under current restrictions, the exchanges may not carry any single piece of furniture over $900, even if the item is part of a larger set, such as a bedroom unit.

Rings and necklaces with diamonds over one carat, along with some other high-end jewelry, are also prohibited under the rules.

Navy Exchange Service Commander Rear Adm. Robert Cowley III said the restrictions are severely outdated, since now the main competitors for those types of items aren’t specialty stores but instead are corporate chains.

“Especially in metropolitan areas where many of our exchanges are located, we are looking at large stores,” he said. “We understand the need to protect small business, but that’s not who we’re competing against.”

Last year the exchanges successfully lobbied Congress to raise limits on high-end electronics, such as large flat-screen TVs, to help respond to the demand from military customers.

Defense leaders said they hope expanding the furniture and jewelry offerings can help offset declining sales worldwide, due to base realignment and capital investment over the last few years.

Principal Deputy Undersecretary of Defense Michael Dominguez said combined the exchanges raised nearly $305 million for MWR programs last fiscal year, down from almost $313 million the previous year. In fiscal 2007, that number is projected to fall to around $261 million.

Those figures alarmed several House lawmakers.

“One of the most important things for a soldier serving overseas is knowing that his family is being taken care of, so I am very concerned,” said Rep. Patrick Murphy, D-Pa. “These dividends fund critical programs like child care, e-mail and phone access to communicate with loved ones overseas, and other important services.”

Essex said officials are optimistic those numbers will improve after fiscal 2008, but added that lifting restrictions would be an extra boost to the exchanges.

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