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Mr. MAILLIARD. The port they go to is what?
Captain GOODMAN. Nakhodka.

Mr. MAILLIARD. Is that a similar situation as far as draft and facilities, restrictions?

Captain GOODMAN. Mr. Mailliard, I believe that between the Russians and Continental in their original sales contract, again they were looking for a 31-foot draft, was what they considered the most desir

ole. believe the Russians would still like to have no more than a 31foot draft in Nakhodka.

However, as Mr. Giles has said, we again have not agreed with the 31-foot draft limitation and if ships in excess of 31 feet offer in, Continental is going to have to conclusively prove to us that the ships cannot be handled.

From just normal publications Nakhodka shows an actual port draft of 34 feet. I don't think there is any question that Nakhodka can't take extremely large ships. It is a so-called new port, new port within the last 10 or 15 years, and we know very little about it. Very few American ships have ever been there, but our information from other ships that have been there, foreign ships with Canadian wheat and so forth, indicate no difficulty in the port.

Mr. MAILLIARD. Thank you, Mr. Chairman.
The CHAIRMAN. Mr. Hagen?

Mr. HAGEN. It is a fact then that the foreign rates in both the supership category and the smaller ship category would be below the guideline rates?

Mr. GILES. Well, the foreign-flag rates are now below the Americanflag rates and, Captain Goodman, do you have the latest information?

Mr. HAGEN. In both categories.

Captain GOODMAN. The last fixture that I saw last week, just last week, of a foreign-flag ship, gulf to Black Sea, was $11 or $11.10, and that would compare with our guideline rate of $18.02, about a $7 differential. That was last week.

Mr. Hagen. In other words, for both categories of ships their rates would be cheaper.

Captain Goodman. There is no differential on foreign-flag shipping. Mr. Hagen. You haven't received any requests for waivers from Continental?

Mr. GILES. No, sir.

Mr. Hagen. Do you anticipate that American ships will be able to meet this 50-percent availability requirement?

Mr. GILES. I don't know that I have a good guess on that, sir. Certainly as of right now, according to our best information, that Continental has fixed 150,000 tons, a little bit more, it has a long way to go to get to 500,000 tons. That is a lot of shipping, so whether they will be able to work all of that out or not is a question. It seems to me at this late date, when they are going to have to start moving to get this matter settled, they apparently are going to come in with an application for some waiver, and it is still unsettled.

It is still not clear and we don't have the information to indicate that, even if there weren't some differences of opinion on some of these points between the charterer and the shipowner, whether there is right now enough available American shipping to make up the 500,000 tons.

Mr. Hagen. You have this element in the situation : Apparently

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the Agriculture Department granted the Continental an excessive export subsidy on Durum wheat. They are selling wheat at a fixed price to Russia and, in anticipation of this 50-percent requrements, the Agriculture Department gave them a substantially increased subsidy on one category of wheat.

They are going to get that regardless, and, to the extent they don't use these American ships up to 50 percent, they are getting a windfall, and I would think that under those circumstances if your present rates are inadequate to produce the amount of American ship tonnage, you should consider revising them upward.

Otherwise Continental is going to be the sole beneficiary of the U.S. Department of Agriculture action.

Mr. GILES. Without going into the details because I don't know them, our information is that the price at which Continental sold this grain does not allow for any so-called windfall, even if they get a waiver for as much as 25 percent or one-half of the American shipping:

I don't know. I think that is a matter of business information and it is something that the committee in the proper way, maybe con. fidential, would follow up with Agriculture. I don't think that the Agriculture Department wants to engage in a transaction which would involve that sort of tremendous windfall.

The CHAIRMAN. I think you better go over that with Agriculture.
Mr. GILES. That is right.
Mr. HAGEN. I don't see how you can arrive at that conclusion.

The CHAIRMAN. We are going to have the representatives from
Agriculture here so I think that should be posed to them.

Mr. HAGEN. Apparently they did grant an excess subsidy on Durum wheat just to cover this requirement that you people established, so I think it is patent that if that requirement does not obtain, they are going to get a benefit out of it.

Mr. GILES. The Secretary of Agriculture said he would be glad to sell that same amount of Durum wheat at the same price to somebody else without regard to any shipping requirement. He had enough of it.

Mr. HAGEN. Apparently the practice before was to offer a much lower export subsidy on Durum wheat. I think they get about 79 cents or something and the normal rate is about 60 cents. These are matters of record. They refused, apparently, requests for higher Durum export subsidies to exporters seeking non-Soviet sales of Ďur

What if this shipping were forthcoming in the form of offers from so-called berth carriers at the minus-20-percent rate?

Mr. GILES. That is available American shipping. They would be entitled to get it and Continental could not get a waiver if they turned that down. They couldn't get a waiver on that amount of tonnage.

Mr. HAGEN. With respect to this case that Mr. Dewey cited on the
Waterman, was that rate above this minus-20-percent rate?

Mr. GILES. Yes, sir; about $3—approximately $3.
Mr. HAGEN. Was that a berth carrier or was that a tramp?

Mr. Giles. Waterman is normally a berth operator and I assume it was, but even if it wasn't, even if it was a tramp ship, it still should have been at the minus-20-percent rate.

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Mr. HAGEN. A berth operator if it offered the minus-20-percent rate would qualify?

Mr. GILES. Yes, sir; yes, sir.
Mr. HAGEN. That is all, Mr. Chairman.
The CHAIRMAN. Mr. Pelly!

Mr. PELLY. You may or may not remember, Mr. Giles, that early in December or in late November I wrote you a letter with regard to the use of foreign-flag vessels that had violated the late President Kennedy's voluntary boycott on trading with Cuba, and you replied that you had no authorized basis to direct a grain exporter not to utilize any particular foreign-flag vessels.

It seems to me that you have a right, as you say, to rule in or rule out American vessels as to size or what not but when it comes to foreign-flag vessels you disclaim any power to control those ships which have traded with a Soviet-controlled nation.

I can't understand it.

Mr. GILES. When I said I had no authority, that was correct. We have no authority in the Department of Commerce under the established Security Council policy on that because the policy of restriction there established by the President and Security Council was applicable only to the Government cargo.

It did not apply to commercial shipments so we had no restrictions on any commercial shipments of this category.

Mr. PELLY. President Johnson has the authority, however, and the Department of Commerce had been authorized by the President to issue export permits and certainly it seems to me that there should be the power with that to decide on just which vessels you would permit licenses to be issued.

Mr. GILES. I am not suggesting that there isn't the legal authority, for example, in the President. I don't know the extent of the authority there, but I think so far as taking this sort of an action, that does involve, as I am sure you would appreciate, a fairly basic policy decision.

Every time we do that, even with respect to the Government cargo, it involves our relations with other countries, and it would be even more sensitive if we moved into what we call the commercial shipments. I think I should defer to the State Department witness on any further exploration of that because it is, I think, primarily a matter involving our relations with other countries, and when I say other countries, I mean our friendly countries, our allies.

I am not informed that that is likely to be a major factor because I think most of our exporters here will probably endeavor, if they reasonably can, to utilize ships that have not participated in the Cuban trade. As a practical matter they would probably want to do that anyway but, under our existing administration policy, the Department of Commerce does not have the authority in policing this shipping requirement to go that far, and the administration policy has never extended beyond a restriction on shipping Government cargo—the Government-aid cargo.

From what I know about it, sir, as far as the facts, I would think that overall it would be to the best interests of our American merchant marine not to go that additional step rather than to take it, because every time we take a step of that sort and it has the effect of restricting the freedom of shipping of other nations to our own ports, and so on,

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well, we always run the risk of some sort of retaliation and we have to try to keep some balance in it.

Therefore, looking at the total picture, all of the facts and the number of ships that potentially could be involved, my own estimate at the moment is that it is not such a big factor that you would want to take action which would cause a reaction out of all proportion to the benefit that you would get out of it.

Mr. PELLY. I think the American people disagree with you and I think that they fully supported President Kennedy's ban on the transport of any Government-generated cargoes on ships that had gone to Cuba. I realize, of course, that this is a matter which is beyond your particular jurisdiction, but I do think you have the power, personally, , to deny the use of any permits to those who go in there.

I think personally that you should use them. I wonder if you could tell me or do you have knowledge as to whether any such foreign-flag vessels that have violated our voluntary boycott of Cuba have been used in this grain sale?

Mr. GILES. There were none on the Cargill shipment because we have the information on that.

Mr. PELLY. Do you have any information on Continental?

Captain GOODMAN. Continental has told us that under no circumstances will they accept any ship that is on our so-called blacklist.

Mr. PELLY. I am very glad to hear that.
Captain GOODMAN. We had specifically talked to them about it.

Mr. PELLY. I think it is fortunate at least that they are avoiding any
criticism and I think that it should be a matter of policy myself of
our administration. Thank you.
The CHAIRMAN. Mr. Murphy?

Mr. MURPHY. Yes, sir. Mr. Giles, have you published any rates out of Great Lakes ports?

Mr. GILES. No, sir; we have not.
Mr. MURPHY. Are you going to publish any?

Mr. GILES. If there are sales. If the exporter says, “We have a contract and we need rates out of this area,' we certainly would.

For example, we hadn't published rates out of the west coast ports on the Cargill shipment earlier this year because they weren't moving any. Then when Continental made its specific sale we published rates there, and we will do the same for the Great Lakes.

Mr. MURPHY. Do you know if these shippers have any requirements that these vessels have vacuvators.

Mr. GILES. Yes, sir. That question came up on the Continental and it was a question of whether the vessel owner would furnish that equipment or whether that would be for the expense of the charterer, and we went into it very carefully and our judgment was that that was an owner expense because that is traditional. That is our practice on Public Law 480, and we didn't think it would be proper to say to Continental, “You take over an equipment expense" which is contrary to established shipping practice.

Mr. MURPHY. Would your Public Law 480 requirements necessitate vacuvators on all those ships?

Mr. Giles. No, it depends on the ship or the type of unloading gear with which it is equipped and so on, but on Public Law 480 we wouldn't require the Agriculture Department, for example, in its

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rate to pay extra to an operator for having this, what I would call, normal minimum sort of unloading equipment.

Mr. MURPHY. Even this equipment was not required on Public Law 480 shipments, but it now is required on the shipments to the Soviet and the satellites.

Mr. GILES. Sir?

Mr. MURPHY. I say on the Public Law 480 shipments vacuvators were not required, and now with the Russian satellite operations these ships have to be equipped with them, is that right?

Nr. GILES. My understanding is that on the Public Law 480 if the shipowner did not have it, then he arranged for it on the discharging side. For example, he would rent it or he had other type of unloading gear which did not require the vacuvator, but this is trationally an expense for the vessel owner, just like it is traditional for the vessel owner to have his ship cleaned out if he wants to haul wheat. He shouldn't come in with it all messed up from a load of oil. It ought not to be contaminated.

Some of these raise that point as to whether they would have to be sure that their ship was clean. Well, if the vessel owner wants to haul cargo, it certainly is established shipping practice that he presents a vessel that is in good condition and equipped to haul that cargo.

Mr. MURPHY. If he didn't have that equipment on the ship and there wasn't any, say, in these Russian ports, then he would not be considered an available vessel, is that right?

Mr. GILES. If he said that he did not have and would not have arrangements for proper discharge, or the vacuators or the unloading gear, then he does not have a vessel which is equipped to meet the reasonable requirements, so we couldn't insist that the charterer take that vessel.

Mr. MURPHY. You would consider it not available then.
Mr. GILES. That is right; yes, sir.

Mr. MURPHY. On these Public Law 480 shipments when you look all the American-flag ships over did you in your own mind set aside certain vessels and say that we have a Public Law 480 requirement to ship 50 percent in American vessels and we set aside certain ships there, and we have other ships equipped that can meet the requirements for this Russian deal?

Did you try and balance out the American ships in that manner?

Mr. Ĝiles. We did not try to make any predetermination on specific ships. The line that we drew was on the size of vessels at 15,600. and with consultation with our shipping experts, Captain Goodman, who has been a tower of strength in all of this, with the help of the shipping industry, that is the line that we drew, on the size of vessels, and said that vessels larger than that are economically able to handle grain shipments at a minus 20 percent rate and then our next step was to say, "Well, then, for these Soviet bloc commercial shipments our top guideline rate is minus 20 percent.”

We didn't say only the larger ships could handle it. We just set the rate, and by setting that lower rate we effectively, as an economic matter, ruled out the smaller ones because we recognized that the smaller vessels should not be called on to haul grain at this reduced rate, so we left them with the top guideline rate, the previous guide

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