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Mr. STOVALL. I believe, I might state, that Mr. Kahn is probably as surprised as I am that there is a controversy on these two ships. It was in the normal course of trading.

Mr. GILES. All right. Mr. Kahn advised us yesterday by wire that he had offered the boats and they were not accepted.

Mr. STOVALL. We had many offers that came in and the owners realized immediately they were not workable.

Mr. GILES. He is here today. He says this is an issue. He would like to put this before us. So we have no choice but to do so. I am impressed with what Captain Goodman has indicated on these dates, Mr. Stovall, particularly the Transhartford; that is, the gulf and North Atlantic. On the basis of this offer, is that not acceptable, Mr. Stovall?

Mr. STOVALL. I can only state, Mr. Giles, that it is outside the tender terms and conditions as laid down, and with the split dates it does not satisfy either position. I don't know. Possibly

Mr. GOODMAN. Mr. Stovall, are you still short on the March 1-15 position?

Mr. STOVALL. Yes, we are.

Mr. GOODMAN. In other words, there is quite a bit of tonnage to be fit in someplace other than foreign tonnage.

Mr. STOVALL. Yes,

Mr. GoodMAN. Both positions of this ship are offered in either the February USNH or the gulf 1-15. There is still a deficiency of tonnage in American ships.

Mr. STOVALL. Yes. If the vessel comes in with either of those laydays in accordance with the terms, of course, we have

Mr. GILEs. I am not sure I understand this February 21 date. Will you explain it?

Mr. STOVALL. The laydays which Mr. Kahn offered was February 23-March 5, which again does not fit into the February 14-29 position, nor does it fit into the March 1-15 position without imposing a hardship on him of waiting, which he, of course, as he stated before, was not willing to do. It leaves us hanging in the balance for a February 14–29 position in the event that the vessel should then lose some days coming across or if she was sent to the gulf she would then be February 29 in the gulf, which would put her out of the February 14-29 position.

Mr. GILES. Do you have any further questions, Captain?

Mr. GOODMAN. No, just to confirm again that there is open tonnage in both of these two dates, the February 14-29 and the March 1-15. You still have a considerable amount of American tonnage open

and not fixed ; is that right?

Mr. STOVALL. That is correct.

Mr. GILES. It seems to me that you have overlapped there in both instances, both on your February period and March. I don't quite see, Mr. Stovall, how that literally differs from that precise language in the tender. I don't see how that could prejudice you.

Mr. STOVALL. If we book March 1-15 fully and this vessel comes in and falls in the March 1-15 position, there is no cargo for the vessel. In the event the vessel is fixed 14–27, then in view of his ETA he would come in at the latter part of the dates and it would mean that we would have cargo and grain on demurrage; consequently, we would not make our February 14–29 shipment days.

The schedules set forth in the shipping schedule and approved by the Maritime Administration are the shipping schedules and the laydays required.

Mr. GOODMAN. Mr. Stovall, it is now February 6. Your February 14 tender-correct me if I am wrong—was for 93,000 tons.

Mr. STOVALL. Our February 14 tender?

Mr. GOODMAN. The open dates, your February 14-29, your tonnage. How much of that do you have open at the present time?

Mr. STOVALL. 38,000 tons.

Mr. GOODMAN. It is now February 6. In laydays you start loading conceivably. How will you know when you can fix the ship or not? What are you going to do in this very position now?

Mr. STOVALL. We know right now, Captain Goodman, and, of course, these delays, first of all in the filing of the waivers and the delay in processing the waivers, has created a hardship because we will have to go out immediately and book tonnage, but we must book it in the position which suits the shipping schedule as has been established.

Mr. GOODMAN. You anticipate no difficulty in booking foreign tonnage starting, let us say, tonight or tomorrow, February 17, to meet this 14–29 date for 38,000 tons, but there is no way you can figure out to work Mr. Kahn's ship in that will be ready Febuary 23 to March 5 ?

Mr. STOVALL. I am saying that the February 14-29 balance of cargo with split dates, we have no way of knowing in which position to allocate this vessel or what shipping dates he is going to be able to make.

Mr. GILES. Again, how soon will you be able to make that decision?

Mr. STOVALL. I don't know, Mr. Giles, without discussing it with the grain people and the interior offices who handle the routing of the grains to the ports.

Mr. GILES. Within 5 days? Within the next 5 days? Mr. Stovall. I am not sure within the next 5 days, but I don't believe we could wait another 5 days—I don't know what position we will be in as far as trying to cover in the event the vessel wasn't fixed. I don't know whether Mr. Kahn wants to run the risk of the split dates pr not. This, I think, is a decision he should make.

Mr. GILES. That is the basis of his offer. This is his responsibility.

Mr. STOVALL. But the offer was declined, and he did not reoffer before 5 o'clock. He is as surprised as I am that there is a conflict.

Mr. GILES. Let us get this straight. The fact that the offer was declined, he did not reoffer, that does not settle the issue.

Mr. STOVALL. No, it was settled as far as I was concerned. He was no longer interested in the business,

Mr. GILES. Now we have it before us. We have to deal with it.

Mr. Kahn, can you suggest any point, such as a matter of days such as we discussed a while ago, in which you give, say, 5 days or whatever, giving something to Continental so that they will be protected here on this point!

Mr. STOVALL. Is it possible that Mr. Kahn would be able to work the boat in the March 1-15 position ?

Mr. Kain. If it is U.S. gulf.

Mr. Giles, just to further clarify, to make sure that you understand, we have a ship coming out of Gibraltar. When that ship hits Norfolk, she is there on the 23d. When that ship hits U.S. gulf, she is there

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approximately the first of March. We cannot accept laydays the first of March if Norfolk is nominated. There we wait a week. On the ship we fixed to Continental, on one of the ships we fixed to Continental, I believe it was the Transorleans, we were obliged to fix Fehruary 14-29. In that case, if they nominate north of Hatteras, that ship is in Peekskill today. She will be on the 9th, north of Hatteras and there we waste the 5 days.

A ship coming in from Gibraltar, you just can't figure that carefully. No ship can afford to wait a week's time. No ship can afford to be in the U.S.gulf area and go to north of Hatteras.

Mr. GILES. Mr. Stovall, do you have anything further!

Mr. STOVALL. No, sir. I said before, that if Mr. Kahn can possibly make the open March position, we certainly would stand ready to fix the vessel if he wants the business.

Mr. Giles. My tentative conclusion on these two, Mr. Kahn, and Continental, is this: On the Transbay I don't see how I can make an exception here for you any more than I did on the preceding, where you had the gulf only.

On the Transhartford, it seems to me that the time element here, while not exactly the language of the tender, there is, as a matter of merit within it, I don't see how Continental is really prejudiced on this.

My tentative conclusion is that the Transhartford should be worked out and that will be subject to further specific discussion with Mr. Kahn and Continental, but that is my tentative conclusion and I would like Mr. Kahn and Continental to be thinking about some specific little detail there of time to give reasonable protection to each to guard against these elements that both of you have mentioned. Do you have anything further, Mr. Kahn? Mr. KAHN. Just the general policy statement, if I may. Mr. GILES. All right. Mr. KAHN. Just a 2-minute statement. It just occurs to me, and this has no relationship at this moment with Continentalmif I may take just 2 or 3 minutes, it just occurred to me, as I am seated here that we are having a hearing here where the shipowner is apparently not quite happy. The grain houses are not quite happy. Labor is not quite happy. And the Government is harassed. Mr. GILES. Not quite happy?

Mr. Kahn. In view of that, it bears some reflection on everything that we have heard about the ground rules. The ground rules initially were established, and I don't think it is a secret to the Maritime Administrator, that I for one did not particularly agree with the merits of the ground rules and at one time I expressed myself in a manner about which I am not too proud, perhaps a bit too vehemently. Nevertheless, I did. Today I will be calm, I promise you.

Mr. GILES. The record should show that today he is calm.

Mr. KAHN. I believe neither Mr. Goodman nor the Administrator will argue the point with me when I say that initially, when this complicated Russian program came about, and when the ground rules were set, the ground rules were set keeping very much in mind the participation of very large ships.

May I ask this question? Is that so?
Mr. GOODMAN. We certainly hope so, Mr. Kahn. That is correct.

Mr. Kaun. Even the rate structure was so established to allow participation of very large ships, and the largest possible participation of American-flag shipping that can be utilized in this program.

With that in mind, the Maritime has directed or used its good offices to try to get the small ships into the Public Law 480 program and the large ships for the Russian program. Now, it occurs to me that the large ships have been performing under the Public Law 480 program with very little difficulty. It just occurs to me that if it is Americanflag participation that is needed in Russia or that is desirable in Russia, isn't it perhaps logical to have a combination of ships, or just conversely, to have the small ships participate in the Russian program and the large ships participate in the Public Law 480 program? Or perhaps the ground rules should call as one of the most important things not ground rules for Continental or ground rules for the shipowner, but the ground rules for the Russians; that as part of the purchase contract he must accept the type of tonnage which will permit large American-flag participation.

Now, Mr. Giles, I don't know whether anyone in Maritime today is aware of the contract such as Cargill executed in Russia.

Mr. GILES. I do not know the details of that.

Mr. Kahn. I don't know whether anyone is aware of the contract that Dreyfus is attempting to execute in Russia, or Bunge or anyone else. If it is desirable to have American-flag participation in the movement of this grain, don't you think that you ought to reexamine this entire proposition and tell Messrs. Cargill, Bunge, and Dreyfus that they must, as part of the conditions of your sale, have the Russians accept any American-flag ship either with lighterage tonnage or revise your rate structure so as to permit the smallest ship to go to Russia and have the Russians pick up that difference in the price so that you will have American-flag participation?

Mr. Giles. Mr. Kahn, I thank you for those remarks. They go to basic points which I think are generally well known and certainly it has been quoted widely in the papers. The point you are raising is the issue of what is the world price or the shipping price, what is the price that the Soviets will pay. Now, that has been up on many occasions. The fundamental issue was much in the

papers

before Continental had made their sale.

I would like to put in the record at this point an article carried in the New York Times on January 1. It is headed “Capacity of U.S. Ships Limited for Carrying Wheat to Soviet. Industry Estimates It Could Transport No More Than 40 Percent of Proposed Purchase of 4.5 Million Tons," an article by Mr. Bamberger. (The article referred to follows:)

[From the New York Times, Jan. 1, 1964]

CAPACITY OF U.S. SHIPS LIMITED FOR CARRYING WHEAT TO SOVIET

INDUSTRY ESTIMATES IT COULD TRANSPORT NO MORE THAN 40 PERCENT OF PROPOSED

PURCHASE OF 4.5 MILLION TONS

(By Werner Bamberger) There simply is not enough American shipping to carry half of the proposed wheat sale to the Soviet Union, trade sources said yesterday.

The original talks on the deal contemplated a total of 442 million tons. The Department of Commerce imposed a requirement that half of any such cargoes

be carried in ships flying the American flag-if they were available at the specified rates.

But the consensus of shipping industry sources yesterday was that, even if all available oil tankers were pressed into service, no more than 1.8 million tons, or 40 percent of the total, could be handled by the U.S. merchant fleet.

There is considerable doubt that the Soviet Union will buy all it originally negotiated for. Even so, the trade sources said, there will not be enough American shipping to handle half of a large grain deal on a short-term basis.

At present the rates for American-flag ships are about $7 higher than foreignflag rates for 10,000-ton vessels and about $4 higher for vessels in the 15,600-to30,000-ton range.

The larger ships are permitted to carry wheat at a 20-percent discount from the rates applicable to the 10,000-ton vessels. For all practical purposes, the smaller ships are said to be disqualified because of the higher rates.

Dry-cargo tramp-ship operators noted that the American tramp fleet consisted of about 115 active vessels. About 20 units were said to be larger vessels in the 20,000-ton class and the remainder Liberty and C-2-type ships in the 10,000-ton range.

Unless additional American-flag tonnage is made available-presumably tankers that would be diverted from carrying oil—the dry-cargo tramp fleet could carry only 15 to 20 percent of a large-scale wheat export program to the Soviet Union.

Whether tankers will be diverted in large numbers to grain carriage appears doubtful, many U.S.-flag vessels are profitably employed carrying refined products over coastal routes at favorable freight rates.

However, some tanker tonnage, particularly in the supertanker class, was said to be available. This could be supplemented, to some extent, by carrying grain shipments in vessels owned by subsidized steamship lines. These ships are normally employed on fixed routes.

Earlier this month one grain cargo to Hungary was moved by a subsidized vessel.

However, even if large tankers and some subsidized tonnage were brought into play, only 30 to 40 percent of the wheat exports could travel in American ships.

The shipping industry views were expressed in response to inquiries concerning the granting of two export licenses by the Department of Commerce to Continental Grain Co.

The two licenses authorized the sale of about 700,000 tons or $40.6 million worth of wheat, to the Soviet Union. It would be a cash transaction,

A spokesman for Continental said here yesterday that no negotiations were being conducted now. He said that the company was not looking for tonnage to cover that shipment, but added that a few unsolicited offers of American-flag ships had been received.

He said the sale of the 700,000 tons was "just a big question mark" now.

Shipping industry sources referred to the Continental licenses as “hunting licenses" and explained that the issuance of a license was no guarantee that any “game would be bagged."

It was recalled that when shipment of 100,000 tons of wheat to Hungary was made earlier this month, only 9,000 tons of it could be booked on American-flag vessels. A waiver was granted by the Maritime Administration to permit 41,000 tons of that shipment to travel in foreign-flag ships.

Other potential obstacles to large-scale sales of wheat to the Soviet Union were said to be:

Soviet unwillingness to pay the higher freight rates for American ships.

The ability of American tramp ships to keep busy with cargoes through Gov. ernment-sponsored exports of agricultural surplus commodity exports under Public Law 480.

Doubt as to the ability of Russian ports to handle large tanker-borne grain shipments, which may require special pneumatic unloading equipment.

The possibility that American maritime labor might boycott foreign-flag ships carrying wheat to the Soviet Union. The Seafarers International Union earlier this month made an unsuccessful attempt to delay through picketing a West German vessel carrying Hungarian wheat.

Industry sources said they did not anticipate any relief in the situation from the authority granted the Administration on Monday to allow Export-Import Bank credit guarantees for commercial wheat export transactions.

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