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The CHAIRMAN. But it has come down now to one rate.
Mr. Dewey. When orders came out finally in January they only had one rate in them.
The CHAIRMAN. One rate; and the small vessel is required to carry the cargo at that rate as well as the supervessel.
Mr. DEWEY. That is the advice that Continental tells the carriers that offer their ships; yes, sir.
. The CHAIRMAN. That is the way I get this thing.
STATEMENT OF HON. ROBERT E. GILES, ACTING ADMINISTRATOR,
FEDERAL MARITIME ADMINISTRATION, DEPARTMENT OF COMMERCE-Resumed
Mr. GILES. Mr. Chairman, let me see if I can clarify it. There has been only one rate from the beginning on the Soviet shipments.
The CHAIRMAN. That is the less 20 percent?
Mr. GILES. On any ship. We didn't specify that small ships couldn't handle it. We said this is the rate, the minus 20-percent rate. If the small shipowner wanted to come in on it they could.
This was not announced in January. This was announced last November, and I just quoted from the newspaper item which he is going to have in the record, so Mr. Dewey is wrong in saying that this was only done in January. It was announced last November that if the ship rates offered in were above the minus 20 percent, then there would not be available American shipping on that basis. That was made clear.
There were and there are now two rates on the Public Law 480. The top rate, which we had before we got into all of this, is for those vessels up to 15,500 tons. They can charge that top rate on Public Law 480.
The minus 20-percent rate on Public Law 480 applies to vessels over that size where they are hauling Public Law 480 cargo. That was stated and was fixed last November and there has been no change in that.
The CHAIRMAN. With regard to those three vessels that didn't get this cargo on the Pacific, I understand that they bid $17, we will say, and you say the figure should have been $13. Is that right?
Captain GOODMAN. About $13.45.
The CHAIRMAN. That $13 rate was the rate for the large ship, was it ?
Mr. Giles. It was the rate for any ship.
The CHAIRMAN. I think that clears it up that there is a difference, that the small ship isn't getting the cargo with elimination of the 20-percent discount.
Mr. GILES. Yes, sir; that is right. That is exactly right.
The CHAIRMAN. Then I thought the large ship had to have 20 percent discount from a Public Law 480 rate, which would be about this $13.
Mr. GILES. That is right.
The CHAIRMAN. And the small ship wouldn't have to have this 20 percent.
Mr. GILES. It wouldn't have to have it on Public Law 480. The CHAIRMAN. But you kind of patterned this after Public Law 480, though.
Mr. GILES. Yes, but we had only one rate for the Soviet shipments. The CHAIRMAN. Go ahead.
Mr. DoWNING. It is difficult for me to understand. I am reading here from the November 8, 1963, publication of the CIB which is the usual reliable Maritime periodic:
The rate from U.S. ports to Odessa, it was explained, will work out at $22.50 per ton based on Liberty ships while for the T-2 tankers at 15,000 deadweight tons there will be a 20-percent reduction. This, it was stated, would work out at $18 per ton.
Then in an official release from the Secretary of Commerce issued November 14, 1963, it reads:
Secretary of Commerce Luther Hodges today announced the Maritime Administration had extended previously established Public Law 480 guideline rates to shipping rates for the charge of wheat to the U.S.S.R. from North Atlantic and gulf ports of the United States on vessels from 10,000 to 15,500 tons. For vessels from 15,600 deadweight to 30,000 deadweight the fair and reasonable rate has been determined to be 20 percent below those for the smaller ships.
So there were two rates, and only one rate was to be used, which was the supership rate, and it must have been with the knowledge that you are not going to use these smaller ships.
Mr. GILES. That is right and the reason, sir, we stated it in that way; that is, we stated the smaller vessel rate, was to show to the larger vessel owner how we arrived at a specific dollar figure. It was 20 percent below what it would have been.
At that time we didn't have published guidelines to Soviet ports because we hadn't been shipping Public Law
480 cargo to them. Mr. Downing. You couldn't determine the rates really with any accuracy. You had no historical experience.
Mr. GILES. It is not a matter of historical experience. We would have no difficulty in determining rate levels on the basis of our 480 levels.
It is a matter of adding in distances, and taking into account the greater distances, and such factors as that.
Mr. DoWNING. But we never had 480 in Russia.
Mr. GILES. We know the distance to the ports. We know the distances involved.
Mr. Downing. You did not know about wharfage. You had no historical experience to back up these rates and I think the rate for the berth liners and your smaller ships has been set too low for them to allow them to compete and I think you should open these rates to allow them to compete with their competitors.
Mr. Giles. To compete on the Soviet shipments?
Mr. DoWNING. Yes, sir.
Mr. GILES. I don't agree with that, sir, and I don't think any of the shipping people have submitted to us a good solid case for that at all. In fact last November they understood clearly what we were going to do and we explained it to them, and, as the newspaper reports or the files will indicate, the representatives at that time indicated that they thought this was a fair and proper action by the Department.
So far as the berth liners, I would like to comment specifically on that. The berth liners are those ships that haul parcel lots. They haul other cargo. They make a voyage out and then they haul cargo back. That is the nature of their business.
Our tramp steamers and ships haul a full load of cargo out and they have to count on coming back empty, coming back in ballast.
Last year before we ever heard of any Soviet transactions, here are some representative berth liner rates on the shipment of grain. In April 1963, Lykes Bros. in parcel lots shipped out of the gulf to Poland at a rate of $12.75. The comparable minus-20-percent rate to that same port would be $15.09. The comparable Liberty vessel rate from that same port to the destination would be $18.96, os you see the difference at that time.
Mr. DOWNING. Yes.
Mr. GILES. A similar situation with Moore-McCormack Lines in May of last year, and all of this is a matter of public knowledge and record in the shipping records, a shipment to Poland at a liner rate of $12.10. That was just on the competitive market. The top Liberty rate on Public Law 480 or the comparable would have been $16.38. There is other information here, three or four other shipments, very similar, Mr. Chairman. I will be glad to put this whole sheet in the record if it is desired.
The CHAIRMAN. Put it in at this point. (The information referred to follows.)
Mr. GILES. Now, here are some berth liner bookings of grain to Hungary via Hamburg or Gydnia, and I believe this is on the Cargill shipment. The U.S. Lines took a parcel lot at $9.25 a ton. The minus-20-percent maritime guideline rate was $11.04.
The CHAIRMAN. I didn't hear that. What was that figure?
Mr. GILES. The U.S. Lines took a parcel lot at $9.25. The minus20-percent maritime guideline rate for the tramp steamer, same shipment, same ports, would have been $11.04, about $2 higher.
Moore-McCormack took a parcel lot shipment to Gydnia from Albany, $13.97. It would have been the same. The $13.97 was the guideline, so they took this at the top guideline rate or the minus-20percent rate, to which they were entitled.
Bloomfield handled two parcels to Hamburg at about 50 cents under the minus-20-percent rate for the tramp steamers.
The CHAIRMAN. Are all these that you are talking about now the wheat deals to the satellite countries?
Mr. GILES. To Hungary.
Mr. GILES. That is right. The point I am making, Mr. Downing, is that if we had berth liner service, established service into Soviet ports, of any substantial quantity over a period of time and had good going service, we would have been in a position to say, well, there is no problem about rates, because our berth liners meet the foreign competition, whatever it is, because that is the nature of what their commercial business already is.
Our Public Law 480 program wasn't set up for the benefit of our berth liners. It was just the opposite, so I can't have any sympathy at all for a berth line operator who comes in and offers over our published guideline rate when, as a matter of fact, he is asking and he is taking advantage of a higher rate than he would get in a normal competitive situation.
He is getting the same rate that the tramp steamer operator is getting when he takes his ship out and hauls it back empty. As between those two segments there is obviously no equity in that.
If we got down to more detail on this rate business, which we don't want to do, we would specify that berth line operators, if they haul this wheat, would haul it at competitive world prices, whatever that is.
Mr. Downing. You just said that you really have no historical background to base the rate from here to Russia because we haven't got any ships that have made that trip.
It doesn't appear that you had any realistic information to base your rates for the berth liners and for the tramps. That is the point I am getting at. And the reason it wasn't contested at that time was that they thought that superships would take it and the tramps and berth liners would get the 480 shipments.
Mr. GILES. The berth liners who thought they were going to be hauling Public Law 480 were certainly off on that one. That Public Law 480 program was not designed for berth liners.
Mr. Downing. What are the rates for the Exilonu which left yesterday, I believe, for the Black Sea ?
Mr. GILES. Captain Goodman is informed that it was under the minus-20-percent rate. He doesn't have the exact figure.
Mr. Downing. That is the first American ship to carry goods over there, isn't it? Is that the first Am
e ship to carry wheat over there?
Mr. GILES. I understand it is the first one on the Continental shipment. We of course had several American ships on the Cargill shipment. The Cargill shipment back in December and January was our first actual transaction under this program.
Mr. MURPHY. Will the gentleman yield?
Mr. MURPHY. Why do we have American ships carrying this grain at below the guideline rate?
Mr. GILES. Because it is convenient perhaps for them to get the business. Understand, they have a full cargo. It could be many other things, and these are parcel lots. It might be 2,000 or 3,000 tons, or 3,000 or 4,000 tons and they negotiate with the charterer, and I don't know what factors would enter in. Maybe they make arrangements with the charterer. Maybe they want other business in the future or have had a business relationship in the past as you normally would have in the shipping business, and what factors entered into that I don't know.
Mr. MURPHY. Then we say that we can't get American ships to take our 50 percent of the tonnage. Then we have American carriers cutting the rate on it when they are guaranteed the freight.
Mr. GILES. That is their privilege. We have said these are the top rates. Now, it is up to the parties if they want to negotiate on something different, if they want to change the terms. So long as they get together, that's fine, either below or above the rate, and we don't have any problem unless we get an application for a waiver.
All of the exercise we go through, everything we have done, is an effort to advise the parties of what our position will be if we get that application for a waiver. We are doing that because we feel that it will help the total picture to let them know before hand rather than to waste a lot of time and then they come in and then we adjudicate it at that point.
However, this is in the nature of advice. Our specific ruling, Mr. Murphy, is on a waiver. We don't tell them what they must do. We just say we will or will not grant a waiver on this basis if we have to pass on a waiver.
Mr. MURPHY. If you find American ships cutting the price, say, on this Continental, and then Continental comes in for a waiver on the 50-percent ruling, don't you think it looks like here certainly is available American tonnage because they are starting to competitively cut the price to get the business.
Mr. GILES. No, sir, that doesn't follow at all because what a berth liner could haul a small parcel lot at, the price there doesn't mean that a tramp steamer operator could take on a full load, haul it over to the Soviet port, and come back empty at that rate.
As a matter of fact, on our Public Law 480 experience, I will mention again, in the past 2 years these same ships that we are talking about, certainly the larger vessels, have hauled grain on the Public Law 480 program. It is the same kind. It would be No. 2 red or whatever, at rates below what we have suggested as the top guideline on the Public Law 480, but that was the competitive situation, and the rates that we have suggested I don't think are excessive.
I don't think they allow the operator a huge profit. I think they allow him a reasonable return on this voyage. It covers his operating