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Mr. GILES. You are Mr. Gleason?
Mr. GLEASON. Right.

Mr. GILES. Well, I wanted to hear these specific cases, first. That was my preference, Mr. Gleason, so that I would know and be able to tell you exactly where we stood on the waiver.

Again, I want to be as accommodating as we can.
And let me ask the shipowners. Mr. Hall is also here?
Mr. HALL. I am in no hurry, Mr. Chairman. I came to sit all day.
Mr. GILES. All right. Just Mr. Gleason.

Do the shipowners have any objection to Mr. Gleason following the National Defender matter?

Mr. Kaun. No objection from me, sir.
Mr. GILES. Mr. Gleason, we will take you next.
Mr. COLES. Mr. Administrator, the National Defender-
Mr. GILES. Excuse me.

For the benefit of our recorder and I believe some of the reporters that asked us to do this, would you please give your full name and your company?

STATEMENT OF MARVIN J. COLES Mr. COLES. I am Marvin J. Coles, and I am an attorney, and I represent National Transport, the owner of the National Defender.

The National Defender is a 67,000-ton American-flag tanker. She was first offered to Continental Grain on the 29th of January, and was declined on the 30th. She was reoffered on the 4th of February and declined on the 5th.

The offer-and I believe this is the last offer—was to carry 50,000 tons at 39-foot draft from the gulf to the Black Sea at a rate of $17.75.

I am told that the tender was in accord with the Continental's offer, except for two things. No. 1 was the draft, and No. 2, the demurrage was to be at the rate of $4,000 a day.

I would like to comment briefly that on a ship costing $16 million. we cannot expect the same demurrage rate as you would on a ship costing a half a million dollars.

I am told that the date in the gulf would be March 14. I am further told that the date on the range would be March 18.

I do not have corroboration of those dates, Mr. Chairman, and I don't have a change as to the rate if the loading is on USNH.

Mr. GILES. Mr. Stovall, I would like to hear from you at this point.

Mr. STOVALL. Mr. Giles, we advised some time previously that vessels of this size are physically unsuitable for this business. This owner was so advised on his original offer.

The draft, the physical characteristics of the ship, prohibit the use of the vessel in this area of discharge.

The position, also, is similar to the position of the Marine that was just discussed. He would fall into a March 15–31 loading period. According to the offer which the owner made in writing, his earliest estimated time of arrival was March 12–13 in the USNH or March 16-17 in the gulf.

Even on the basis of an arrival USNH on March 12 or 13, the loading schedule would necessarily have to apply to the last half of March position.

Again I must reiterate we have chartered 103,500 long tons of American flag for this position and a similar amount of foreign flag. There

is no cargo available should the vessel be physically suitable for this business.

Mr. GILES. Captain Goodman, would you ask your question?

Mr. GOODMAN. We are not sure from the telegram we received last evening. The freight rate that you have quoted, 16–75—can you tell us what this is for?

Mr. COLEs. As I understand, it is from the gulf. I have nothing but a secondhand telecode message. And originally that was given gulfBlack Sea, and the rate of 18–75. So it is my understanding, subject to correction, that that is from the gulf.

Mr. GOODMAN. Mr. Coles, I would think, if we can get over the problem of suitability of the ship because of its size, this would be rather important, 16–75 versus the present 18-02 being a substantial amount of money for 50,000 tons, unless we want to undertake just the issue of the suitability of the ship;

This is a very important item, and it isn't clear at all what it is that is meant.

Mr. COLES. I can get that on the telephone within a few minutes.

I wonder if I may respond to Mr. Stovall on the other issues, Mr. Administrator?

Mr. GILES. Yes.

Mr. COLES. I think that there are two problems here, arising out of the regulations and the practice of fixing into four equal terms. I have no objection to that. However, I have very great objection to the fact that American ships are not fixed first.

Remember we have only a small number of American ships, and we have a large number of foreign ships. So you can get a greater spread on the foreign ships. The American ships may group at particular times, because of their small number.

No. 2, under the rate guides set by Maritime, the charterer runs no risk on the American tonnage. It can't go above a certain rate, or it gets a waiver. He does run a risk on the foreign tonnage. Hence, there is a great tendency to charter the foreign vessels first.

My suggestion is that the American vessels on all subsequent programs be required to be chartered first. In other words, I have no objection to setting up your program in quarters or in thirds, or whatever it may be, so long as the American vessels are chartered first, irrespective of which segment they fit into.

Mr. Giles. Now, Mr. Coles, let me just react to that, and then, if you will, you might go and check this point of information.

Mr. Coles. I will be glad to.

Mr. Giles. My initial reaction is that I don't see how in proper administration we could impose that sort of requirement on the exporter. We have established the general rule that American ships should have the same offerings as the foreign.

Now, whether the exporters actually shipped charters on the foreign at one time, or not, I don't know. I know there was a little slippage on Continental, but I am going to make it clear that the exporter goes on the market for American shipping at the same time he goes on the market for foreign shipping.

Mr. Coles. Or, if I might ask, even before, because so long as there is a rate ceiling

Mr. GILES. I would be glad to consider that, if you could fill me in on that. At the moment, I don't see on what good basis we could require him to stay off the foreign market and go on the American, but we would be glad to go into that.

Now, I understand that the rate, our guideline rate, here, is $18.02. This is North Atlantic?

Our North Atlantic rate is $16.85, and our gulf rate is $18.02. And the rate you have quoted in your telegram is $16.75, which is a little bit below North Atlantic, and quite a bit below gulf.

Mr. COLES. I would rather corroborate.
Mr. GILES. I think you should.

Keep this in mind, too, that our specific rates on the larger vessels are subject to consultation. In other words, our specific guideline rates don't necessarily apply. That is all clearly spelled out in the rate guidelines that we put out. And this is the same basis on which we have long handled the Public Law 480.

The specific sentence here in guideline No. 1(a), which was issued November 13, is:

The guideline rates for vessels over 30,000 deadweight tons will be subject to consultation on specific shipments.

That is, we have to look specifically at that, the tonnage involved, and compute a rate for that voyage. And you understand that?

Mr. COLES. I do, fully.

I wonder if I might comment on one further thing? That is the suitability of the big ships.

Now, there are many ports in the world in which Public Law 480 cargoes are delivered in which lighterage is used. It is quite common. It seems to me there is no reason in the world why the big ships should be driven out of business, the big American ships, by not developing the same practice in Russia.

It seems to me in the next program—it is probably too late for this one-some consideration should be given to lightering these vessels before they actually enter the harbor.

Mr. Giles. Well, I agree fully with you, and as you know, and many others, and as others have pointed out, there are a good many points, here, such as the one Mr. Dowd made, about the use of lighters. There are just some empty blanks, but no one could anticipate in advance all of these, and we have not had an advantage to focus on them.

Let me ask you this: Are you taking the position that Continental should be required to take the National Defender, even though, according to my present information, the buyer has clearly indicated that it simply cannot handle or will not handle a ship of this size?

Mr. COLES. It certainly should, because I feel this vessel can deliver the grain. And, therefore, to set arbitrary guidelines—it is no different to say it will be 32 feet than to say it is 26, or to say it should have green funnels.

Mr. GILES. That is a little bit farfetched, when it comes to green funnels.

If the Soviets say, “We will not take that ship. It will not come into our ports,” for whatever the reason—and the reason generally, as I understand, is that it is a far more difficult discharging situation in terms of possible congestion, and so on—and I don't think there is any particular question but what a larger vessel than one this size

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poses, as a matter of fact, some unloading difficulties that your smaller vessels do not have, such as your lighterage and all of that.

Now, I am not speaking to the point that physically it could be done if the buyer wanted to work it out in a total situation. But I am simply putting this on the table so that you can talk to this point, because this draft matter is the big problem, here.

We have a situation where the buyer will not take the big vessel, and we have that sort of situation in the Public Law 480 program, you know.

I want you to be considering very carefully what you are asking me to do, to say to Continental, "You must take this, even though you cannot, on the basis of our best record and judgment and finding, work this out with the buyer.'

So would you consider that? And we will excuse you, please, sir, to make your phone call.

Mr. COLEs. Perhaps Mr. Stovall can tell me whether the $16.75 is from the gulf.

Mr. STOVALL. According to my information, the $16.75 is from the gulf. And whilst it might be a very attractive rate for the exporter, I might state at this point that the rate does not make the vessel suitable, whether it is $5 or $20. The rate is not an issue, here.

It is the suitability of the vessel, the safety of the vessel in these ports, and the question that the vessel has such physical characteristics that it cannot be utilized in this business.

And there are very few ports in the world that this vessel could call at. I venture to say the percentage is quite small.

Mr. COLES. Mr. Chairman, if I can answer that, I think we now know the rate would involve a substantial saving in funds.

This ship has been used to carry grain under Public Law 480 to South America, to Egypt, the United Arab Republic, and I believe elsewhere. And what I say is that the burden should be imposed by the Administration upon Continental Grain to use this vessel in the same way that others have before granting any waivers.

Mr. GILES. Well, now, wait a minute. I want to understand what rule you think I should follow, because I may be a little closer to you than you think .

Mr. COLES. I hope you are.

Mr. GILEs. You say the burden should be imposed on Continental to rise it?

Mr. COLES. Right, sir.

Mr. Giles. I would like to state it a little differently. The burden should be imposed on Continental to show why they can't use it.

Mr. COLES. I buy that. In other words, no waiver can be granted until the affirmative burden of proof has been assumed by Continental that they can't use it. I will buy that. Mr. GILES. That will be my rule of evidence.

Now, Mr. Stovall, you have a burden of evidence, here, to prove or to show reasonably, on the basis of facts, that you cannot use the ship. That includes an explanation of the physical conditions as you understand them, and includes an explanation of your efforts to contact the Soviets and what they have told you, and so on.

Now, are you prepared to meet all of this in detail this afternoon? If you aren't, this is one that

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Let me ask you this: As I understand it, the main question, here, or perhaps the only question, is the draft. It seems to me that this rate, subject to our checking, which is below the guideline, certainly for you covers this demurrage matter that you raised, because it seems to me there is some leeway there where we can work something out.

But the main point at issue here is the physical conditions of these ports, and regardless of that, whether reasonably Continental can persuade the buyer to take this vessel.

Are you prepared to meet that this afternoon, Mr. Stovall ?

Mr. NORDEMANN. Mr. Chairman, maybe I can give you a few experiences of my trip?

Mr. GILES. Would you give us your full name?

STATEMENT OF BEN NORDEMANN, VICE PRESIDENT, CONTINENTAL

GRAIN CO.

Mr. NORDEMANN. My name is Ben Nordemann. I was one of the representatives of Continental Grain Co. that negotiated the sale with the Soviet Union.

Right at the beginning of the program, we realized that a sale to the Soviet Union would have a very controversial nature. To that effect, we have made a very careful study before going over to the Soviet Union, and before entering into a contract with the Exportkhleb, which is an agency of the Ministry of Foreign Trade of the Soviet Union.

Of course, I appreciated all the sentiments of the gentleman who is Hungarian by birth. I myself have lived 5 years under the oppression of a foreign power. I believe, however, that this is irrelevant in this connection.

I want to stipulate that we made this transaction on a commercial basis and in good faith. We have tried to study what the Soviet Union has done during the last few months.

We have to realize that the Soviet Union is a traditional exporter of grain. We all know if we should have to import grain tomorrow we would be in a very awkward position, because the law of gravity doesn't work in reverse.

We studied the Russian moves after having purchased 642 million tons from our Canadian neighbors, and substantial quantities from the Australians.

We noticed that at no time did the Soviet Union charter vessels over 31 feet. In some very rare instances, 32 feet was the limit.

I want to mention that they were the f.o.b. purchaser in Canada and Australia. They could arrange the vessels exactly the way they wanted, and the program was not as heavy as it is at the present time.

As I told you, I myself have been in the Soviet Union twice in the last 6 weeks, and have negotiated with the Russian buyers. When we were in Russia, it became very apparent that the draft on arrival would be an issue.

I requested to make a visit to Odessa, which was granted. I spent some time in Odessa with the harbor board. We discussed the problems. They told me it was absolutely impossible, in a program of this magnitude, to take any exceptions as to drafts.

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