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Mr. GILES. I refer to that, Mr. Kahn, to make this point: All of us, I am sure, recall the government-to-government negotiations on the principle, and we recall the position that Soviet high officials took, that American officials took. Rightly or wrongly, the decision was made by the U.S. Government last September and October, by the late President Kennedy, that if there were any sales of wheat to the Soviet Union, they would be made through what we call private channels, grain exporters.
And then, proceeding from that point, it was going to be up to the individual exporter to strike his bargain with the Soviets. That is what it has been.
Now, what you are suggesting is that the United States should have taken the position, or should take the position, that whatever it takes to cover the differential in American shipping costs or prices, then that is it, and if the Soviets want it, then they buy it. If they don't take it, then they don't. I think the grain exporters have found out, and I think that U.S. officials have, after exploring that quite thoroughly over a long period of time, that perhaps the Soviets didn't want or need the wheat that badly.
Now, we can have different points of view as to what the basic policy of the United States should have been. I just want you to know or to remind you that there, in December and the first part of January, before Continental ever made its sale, there were a lot of shipping owners--you weren't one of them because I don't recall you—a lot of shipowners who were very apprehensive that this was, in fact, going to bog down completely on shipping costs, and instead of coming in to me and talking about, “Let us be darn sure that the Soviets are going to do so-and-so," I heard much talk about “Let us work this out some way; the Soviets are not going to do it.”
Now, where do we come out? All I am saying is that you have basic points of view here that are rather irreconcilable. The basic point came up early as to whether there should be some sort of direct, out-and-out subsidy for American shipping. Perhaps many could make the argument that there should be. But that basic policy decision was not made by those in our Government who have the authority to make it, and I do not.
So we got the framework set up, we moved along. It so happened that Continental or somebody came up with this Durum wheat item and you can put your own interpretation on that. All I will say is that to the best of my knowledge, the grain exporters on the basis of what I know about it, they struck the best deal they could. If they had continued or stuck with the position you have described, there would not, so far as we can tell, be any sales of wheat. Many of you will say, "That is all right; there shouldn't have been.” But then we get to the question of difference of opinion as to what we really ought to do.
There are a lot of people in Congress who say, as is evident in what has happened in legislation, that it does not make any difference; there should not be any sale even if 100 percent went on American vessels, even if they paid twice the going world price, or all of the rest of it. There are a lot of people who feel just exactly the opposite.
So here in the Maritime Administration, what we have done is to take the basic policy decisions that have been made and then try to implement them or help the parties carry them out so far as the shipping.
Your point of view is a rational and logical one, but that just is not the way it turned out because of these other more basic decisions made.
Mr. KAHN. One more comment in answer. Mr. GILES. Yes, sir. Mr. Kahn. I agree with you on several points. First of all, I agree with you on the subject that there is just so much you can make the Russians pay. I agree with you that the business is good for the country. We are not discussing that phase of it, but you have implemented a policy under ground rules which presumably were to permit a good deal of American-flag participation.
I would like now to ask a question: Under the same rules, would this new million tons of wheat sold by Cargill, how can you anticipate that this policy will work wherein there will be any reasonable amount of American-flag participation?
Mr. GILES. What is the basic question you are raising? Are you talking about the time period?
Mr. Kaun. Because the type of ship that was really to have performed or moved the largest amount of this wheat is today excluded from this movement.
Mr. GILES. Mr. Kahn, on that point of your competitive interest, between the smaller vessels and the larger
Mr. KAHN. It is not competitive interest.
Mr. GILES. You know our point on the Public Law 480. As I have indicated previously, where it turns out that the larger ships are excluded from the Soviet commercial shipments, then they are not by advice of Maritime Administration excluded from Public Law 480. But I could not take the position and still cannot, as I was requested some weeks ago, to let the larger vessels have their choice as between the commercial shipments and the Public Law 480.
So I assume on that point we will have to be following along with any further shipments, along the same line we have here with Continental. I would like to ask, if I may, sir, this one specific question:
As you know and have seen in the papers, Captain Goodman and his staff have been working with this and—I am going to ignore myself at the moment-have been charged with collusion. Do you have any opinion as to whether you think that charge is correct?
Mr. Kaun. I think that Captain Goodman would verify that the first time that I spoke to him on the telephone in about 4 weeks is last night. Is that about right? So I would say the charge is irresponsible. I don't believe there is any collusion. I will answer it that way.
But I have not been telephoning Captain Goodman back and forth. I just sent him one Telex as per request as to what I offered, and that is it.
Mr. GILES. The charge was also made, and very widely publicized, that Captain Goodman and his staff-it did not name names, but it said “the staff working on this”—were incompetent.
Mr. Kaun. This is a very difficult question to answer. I think that this program is incompetently administered, if I have to answer it honestly.
Mr. GILES. What do you mean by "incompetently administered”? Mr. Kaun. Because it is not accomplishing its purpose. Mr. GILES. You mean incompetently administered by the people who are making the decisions from day to day because they have flexibility to make other decisions and don't do it!
Mr. Kahn. Mr. Giles, you know, I have gotten myself in a bad way with the Maritime before and I don't want to get into that. I just feel, you know, that the basic policy is wrong—the basic policy. I think there is little understanding of what is required in a change of policy to really get this cargo moving. I just don't think that this has been properly administered.
I think that there has been good will on the part of everyone who has had anything to do with it and I am very sympathetic with the complexity of the problem.
Mr. GILES. Assuming that Captain Goodman and I do not make this basic policy you are talking about, which I would like to state for the record is the fact, but we do have the day-to-day job of carrying it out, do you have any opinion as to whether that has been carried out by Captain Goodman and his staff incompetently?
Mr. Kaun. No, sir; I think it has been carried out competently. If you have a set of rules and have been following them, I think that you have tried to stick by them, there is no question about it. But I just feel someplace along the line, and I don't know how high I have to go, but someplace along the line someone is sure not doing what he is supposed to be doing or thinking through the problem and I would like to meet that person and I would tell him so straight to his face.
Mr. GILES. I understand your position pretty well I believe. Mr. Kahn. Again today I promised I wouldn't say it but I did.
Mr. GILES. Mr. Kahn, I think it has been good that you have said it. You say it well.
Mr. Kaun. But I said it twice.
Mr. GILES. Well, these people didn't hear it. I heard it twice but they didn't hear it but once. Thank you very much, Mr. Kahn.
Mr. Kaun. Thank you sir.
Mr. NORDEMANN. Mr. Kahn, not for the part you said you were sorry you said
again, but the rest of it, thank you very much. Mr. GILES. We have one final shipowner and this is Victory Carriers' Mr. Peter Spalding. Is Mr. Spalding here, please?
Mr. SPALDING. I believe it is not around any more. That ship is not around any more. I did not know that we would continue negotiations.
Mr. GILES. Is this Mr. Spalding?
Mr. GILES. And Victory Carriers, Inc.
VICTORY CARRIERS, INC. Mr. SPALDING. Mr. Chairman, I had no idea I was to come down here for the purpose, or with the possibility, to continue negotiations on the Montpelier Victory which we had offered to Continental. I therefore tried to obtain employment for the ship. This must be my lucky day because my office just advised me about a half hour ago that the ship has been fixed. Otherwise I would have been able to help out our friends in Continental and would have been willing to give them the ship ready on February 13 for 36,000 tons of grain which I had offered over the last 3 or 4. weeks to do. If you think that I can be of any help here
Mr. Giles. Then you have no ship in issue or in controversy.
Mr. GILES. While you are here, Mr. Spalding, if you have any general comments I would certainly be happy to have them for the record. If you don't mind, I would like to ask you these same specific questions I asked Mr. Kahn, if you would like to consider them. If you prefer not to get that specific in personalities that is all right.
But as you know, we have had a rather serious charge-again I am ignoring myself personally—it is very specific, a very serious charge against Captain Goodman and his staff.
Very specifically it is that, “We are convinced from its failure to protect the public interest and the rights of the U.S. merchant marine that the Maritime Administration, either in collusion with Continental or,"—and I am skipping the Administrator—“that portion of the staff charged with supervising this program are completely incompetent."
Now you have an important shipping operation and you have a good deal of dealing with this agency and this staff. Do you have any opinion which you would care to express as to whether you think or you know there has been any collusion on the part of Captain Goodman and his staff?
Mr. SPALDING. Mr. Administrator, I almost missed the plane this morning. I wish I had. But I would be less than fair if I would not state in this connection that I have always had the highest regard for Captain Goodman. There is no question about his integrity, his ability, and his very sincere determination to help the American merchant marine.
You referred to, I don't know which dictionary, probably Webster's, for definition of the word "collusion” and you seconded the motion of Mr. Kahn's. Surely there was no collusion of any kind. But having said so, you will pardon me if I say that I think this program does need tightening up:
Perhaps we are faced here with a situation which called for fairly quick decisions which could not be handled very much differently from what it was.
Furthermore, I understand you always know exactly on Monday morning how the football coach should have instructed his team the day before but I wish to state that I would not only have been able but I would have been most anxious to carry these 36,000 tons of cargo which Continental Grain now still wants to cover.
In this respect if I may make two points not to be considered directed against anyone but I hope that perhaps in the future it may help to tighten up this program in the interest of everybody concerned, including our grain merchants, because it seems to me that this program might continue for a quite a while, might also be expanded quantitywise and in that case we had better face the issues squarely,
Now in regard to the negotiations which we conducted on our ship since the beginning of January:I believe we made the first offer about January 7, when we offered at the Administration rate of $18.02. Sure, I am supposed to do a job for my company. Therefore I did not go along with all the terms of the tender in the beginning. As a matter of fact, at that time there was no tender. Later on I adjusted my offer very close to the terms of the tender, all within $18.02.
At no time at all did Continental concede the rate of $18.02 but insisted all along, I believe as late as a few days ago, on $17. In that respect and may I offer this as advice perhaps
to the grain merchants, I think this rate of $18.02 has been established by the Administration after very, very careful determination of all factors.
I believe there is no one who will complain that the owners are getting rich on it. As a matter of fact, I can assure you that if we had carried this cargo at $18.02 on basis of the tender terms we would have incurred a loss of several hundred dollars a day based on our running expense and debt service only provided everything would have been anywhere near normal during the voyage. If we would have had any bad surprises, and I would like you to bear this in mind because I would want to revert to this point in connection with the rate of demurrage, our loss would have been increased very sharply.
Now, I do not think that the grain companies do themselves a favor in holding out on the rate. As a matter of fact I don't think they should have the right to do that. I think there is only one authority who will decide whether the rate of $18.02 is too high for any given ship and that should be your office, Mr. Administrator. That is one point I would like to make.
Second, there were two more items that were open for negotiation as far as the tenders were concerned. As I said in the beginning I "tried to get away with something” and I was bold enough to ask for 33 feet draft on arrival at discharge port. As captain Goodman will bear me out, the tender stated maximum draft on arrival 32 feet but also stated that offers on increased draft would be given fair consideration. Well, Continental turned me down on that and insisted on 32 feet and came back and offered me $17. I went back at the time and tried to explain in my counteroffer that I could not possibly consider anything below my rate since I was supposed to carry about 10,000 to 11,000 tons of cargo less than than the ship actually was able to carry. However if charterers insisted $17, I was willing to accept it provided charterers would arrange that the ship may arrive at discharge port with a draft of 36 feet. And in order to be fair and in order to give Continental a fair chance to investigate this properly I stated that I would leave our offer on basis of $17—and 36 feet draft-with charterers long enough to give them a chance to check on the draft with the receivers.
I believe the telegraph line offer was made on a Friday afternoon and I stated I was willing to leave the ship with them until Monday morning. In the end we offered the ship time and again on the same basis. Continental always came back with a counteroffer of $17. In addition they told us that our offer was not responsive to the tender, probably because we were still holding out for higher demurrage. In addition they also stated that the draft and dimension of our ship were not acceptable.
That I could not understand. We had agreed to 32 feet draft as the basis of $18.02 freight rate. Furthermore, I believe, as Captain Goodman knows, one Italian vessel, the Primo, was accepted last October by the Russians through their agency in London with 32 feet arrival in the Black Sea but otherwise with dimensions larger than our vessel.