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of PASSA was present at that meeting. See attachment No. 6, which contains representative press stories on the press conference which Under Secretary Roosevelt had that aftrenoon of the meeting with the shipping representatives, and note the references in these items to the understanding and the cooperation of the shipping industry representatives, and note the express statement (Baltimore Sun) that the minus 20-percent guideline rate will be the maximum rate for all the American-flag wheat shipments involved in the Soviet bloc sales. Therefore, instead of this specific point being made known on January 9, as stated by Mr. Dewey in the last paragraph of page 2 of his letter, it was made known 2 months earlier, on November 8. Furthermore, the January 7 publication of waiver procedure was widely distributed to the shipping industry, including PASSA, in draft form on December 11, 1963, (attachment No. 7).
The Maritime Administration specifically asked for comments on this proposed waiver procedure which we could consider before publishing the proposal in official form, See attachment No. 8 which is a copy of a laudatory reply we received from Mr. Dewey. Against this factual background, I can only express utter astonishment with the statements contained in Mr. Dewey's letter of January 24. Item No. 5
In the first paragraph on page 3 of Mr. Dewey's letter, it is stated that the “Maritime Administration, apparently pursuant to directives of the Department of Agriculture, shut out the tramp and the berth carrier from participation in the wheat-to-Russia program. These two segments simply cannot operate at the low supership rates."
Comment.--I simply do not understand the above statement. So far as carriage of this wheat by berth line operators is concerned, I believe this point is fully covered in discussion under previous item No. 3. With regard to the reference to “tramp participation" in the wheat shipments to the Soviet bloc, as previously explained, the Maritime Administration published the minus 20-percent rates which in our judgment were entirely reasonable for the larger vessels (over 15,500 TDWT) and it was made clear back in November that the smaller vessels (those 15,500 TDWT and under) would have the preference on Public Law 480 cargoes as against the larger vessels—if we had actual shipments of grain to the Soviet bloc countries available for the larger vessels. The explanation for giving some preference to the smaller vessels on Public Law 480 shipments is clearly evident.
By Government action in setting the minus 20 percent rates as the maximum rates on the commercial shipments to the Soviet bloc, we had as a practical matter granted the larger vessels a distinct preferential position over the smaller vessels on this business. To maintain a proper balance between these two segments of our American merchant marine, it followed that we should grant some reasonable preference to the smaller vessels on the Public Law 480 shipments. If we had not done this, the larger vessels would in effect have been in a preferential position on both Public Law 480 business and on any of the Soviet bloc business that might develop. Mr. Dewey's letter makes a reference to "directives of the Department of Agriculture” given to the Maritime Administration. The Maritime Administration did not receive any "directives" from the Department of Agriculture with regard to the shipping policy under discussion. On the contrary, the Maritime Administration recommended to the Department of Agriculture that this particular policy on utilization of the smaller vessels for Public Law 480 shipments should be followed, and this was done. The Department of Agriculture followed our advice on this point even though it was against that Department's own "budget interest." Obviously, the net budget cost of using American ships on the Public Law 480 program—which is a budget cost to the Department of Agriculture—is increased somewhat if the Department of Agriculture gives preference to the smaller American-flag vessels at the higher rates over larger American-flag vessels which can compete for the business at lower rates. Nevertheless, the Department of Agriculture cooperated with the Maritime Administration in an effort to assure that all segments of the American merchant marine (smaller as well as larger vessels) would overall have a good opportunity for employment. Item No. 6
In the third paragraph on page 3 of Mr. Dewey's letter, there is a reference to excluding larger vessels from the Continental business on the basis of vessel draft.
Comment.-Initially, the Continental Grain Co. published a tender stating it was limited to ships of 31 feet draft or less. Three weeks ago, Maritime Administration officials discussed the draft matter with Continental officials and thereafter the Continental tender for American-flag tonnage was amended to remove the draft limitation. We informed Continental officials there could not be a general rule of exclusion based on draft but they should consider any vessel offered and would have to have strong supporting facts on any individual case where an American vessel was turned down on the basis of draft. As a matter of fact, Continental Grain Co. has actually chartered American-flag vessels which will carry up to 30,000 tons of wheat (the size of vessel Mr. Dewey refers to as "superships”). As of this date, we have not granted any waiver to Continental Grain Co. for any portion of the American-flag shipping requirement and we do not know at this point whether the draft question will actually be involved in passing on their waiver application. Item No. ry
In the fourth paragraph on page 3 of his letter, Mr. Dewey claims there is a "scheme" to shut out use of American-flag shipping.
Comment. This statement is not correct. Item No. 8
In the last paragraph on page 3 of his letter, Mr. Dewey refers to the offer of parcel lot shipments by Waterman Steamship Corp., American President Lines, and Weyerhaeuser Line, at $17 per ton. These were presumably berth line offerings.
Comment.--First, our previous discussion under item No. 3 regarding berth line rates for the carrying of parcel lots of grain is a full and complete answer to this particular complaint. The rate of $17 cited in Mr. Dewey's letter apparently refers to an actual offer by Waterman of $17.08. Our published guide line rate for the Russian shipments from the North Pacific ports to Nakhodka is $13.73 (our so-called minus 20 percent rate). The Waterman offer was $3.35 in excess of our published guideline rate for the Soviet bloc shipments, and Continental Grain Co. was entirely correct and justified in turning down the Waterman offer. Also, we should keep in mind, as discussed under previous item No. 3, that actual berth liner rates during the past 2 years and as recently as the Cargill shipment to Hungary have been below the minus 20 percent rate.
As to Mr. Dewey's reference to a layup of two or three vessels of Waterman, it is our information that these vessels are not laid up but are presently fixed with other cargo. As for the American President Lines' offer referred to by Mr. Dewey, our information is that the American President Lines did offer to carry a parcel lot at a rate greatly in excess of our maximum guideline for this shipment, and the interesting point is this offer by American President Lines was that it stipulated loading in California ports. The Continental request for American shipping clearly specified the grain would have to be loaded in Puget Sound or Columbia River ports, all of which are somewhat north of California. Therefore, on two separate and distinct counts, Continental was justified in de clining the offer from American President Lines. As for Mr. Dewey's reference to the Weyerhaeuser offer at the rate of $17, we have checked this point and find that as a matter of fact Continental Grain Co. did not receive an offer from Weyerhaeuser. However, if Continental Grain had received an offer from Weyerhaeuser at $17 a ton, Continental would have been fully justified in turning it down. Item No.8
At the top of page 4 in his letter, Mr. Dewey refers to the regrettable circumstance that "we can't even get a share of the movement of bagged flour."
Comment.-Unfortunately, no vessel owner has been able to get a share of the "movement of bagged flour" because Continental Grain Co. did not sell any begged flour to Russia and we are not aware at this time that any grain ex
ter has sold any bagged flour to the Soviet Union.
the fourth paragraph on the fourth page of his letter, Mr. Dewey comments se 37,000 tons of grain in the Soviet wheat program to date have gone on
Comment.-As a matter of fact, Cargill Co. chartered 60,000 tons of Americanflag shipping on their sale of grain to Hungary and, as stated in the Maritime Administration release of last Friday concerning notice of application for a waiver filed by the Continental Grain Co. (copy of which is attached-attachment No. 9), Continental has already chartered American-flag vessels to date to cover 213,000 long tons. Item No. 10
In the fifth paragraph on page 4 of his letter, Mr. Dewey states there is a "flouting” of export control regulations and Presidential directives.
Comment. This statement is false.
In summary, I have attempted in the foregoing to touch on identifiable points contained in Mr. Dewey's letter. We have endeavored to be factual and to deal in specifics rather than generalities.
I believe there has, unfortunately, been some misunderstanding on the part of Mr. Dewey concerning our shipping policies and procedures relative to the commercial wheat sales to the Soviet-bloc countries. Please let me know if we can furnish additional information on this subject. Sincerely yours,
ROBERT E. GILES, Acting Maritime Administrator.
PACIFIC AMERICAN STEAMSHIP ASSOCIATION,
San Francisco, Calif., January 24, 1964. Re wheat to Russia; shipping problems. Hon. HERBERT C. BONNER, Chairman, House Merchant Marine and Fisheries Committee, House of Representatives, Washington, D.C.
DEAR MR. CHAIRMAN : You and your fellow committee members are to be commended for calling a hearing to inquire into the shipping aspects of the wheat-toRussia program. It is a most timely inquiry and comes in the midst of some shocking developments concerning American-flag participation, or rather the lack of it, in this program.
To put it into brief terms, the American merchant marine has gone from 100percent participation (President Kennedy's initial announcement) to a 50-percent participation (Secretary Hodges compromise, with industry concurrence) down to the present where we are almost shut out of this program by means of rate discrimination thrust upon us by the architects of the program.
We recognize that the Cargo Preference Act does not completely cover cash sales in the wheat-to-Russia program, although it does apply if loan financing is used. However, we have taken in good faith the statement of the President of the United States when he said that the program would move in U.S. ships when available at reasonable rates; and we have taken in good faith the proposal by the Department of Commerce to reduce our share to 50-percent U.S.-flag participation as a practical matter. We resent with fullest vigor the devices that have been used by the USDA and by orders of the Maritime Administration which have effectively destroyed the plan whereby the 50-percent participation was to have been accomplished. A precedent has been set which needs to be corrected and which your committee can be most influential.
To take the events in their proper sequence, when the industry sat down in late October and early November with Under Secretary of Commerce Roosevelt, together with the Acting Administrator of the Maritime Administration, Mr. Giles, to determine a proper course of action in this matter, we quickly recognized that physically the American merchant marine was probably not available to carry 100 percent of these cargoes and that a 50-percent participation would be more in keeping with the cargo preference statutes. Certainly, 100 percent could not be carried in the face of other commitments in other oversea programs. Following these meetings, the export control authorities in the Department of Commerce published rules and regulations which provided for a mandatory 50-percent U.S.-flag usage in the granting of any export license for the wheat-to-Russia program. This had the conurrene of our group and most other groups representing the American merchant marine. Following this, the Maritime Administration undertook a series of discussions with the industry to get their views on fair and reasonable rates to be established in this program. It was proposed that rates
in this program be based upon existing levels of fair and reasonable rates used by the Maritime Administration and applicable in Public Law 480 programs to other nearby ports. In these discussions, we learned that Maritime intended to publish two different fair and reasonable rates; one would be for conventional tramp vessels (i.e., vessels under 15,500 deadweight tons) and a lower rate would be for superships (i.e., vessels over 15,500 deadweight tons). It was generally agreed that within recent years the superships had quoted rates roughly 20 percent below rates quoted by the conventional tramp vessels under the U.S. flag. We did not object to this plan, but did urge that the rates be adjusted to reflect cost increases arising since 1957 when the rates were set.
In late November the Maritime Administration published what they considered guideline rates (i.e., fair and reasonable rates) for the wheat-to-Russia program and included rates for vessels in the two different size categories. No adjustments for cost increases since 1957 were included therein. The berth line operators felt however, that they could live with the fair and reasonable rates for conventional tramp vessels (under 15,500 tons) since these rates closely approximated what is historically a fair and reasonable rate for American-flag berth vessels in parcel lots.
All of the informal agreements with the Secretary of Commerce's Office and with the Maritime Administration and all of the understandings on rates, came to a crashing halt on January 9 when the Maritime Administration published its shipping regulation governing the wheat-to-Russia program. In these regulations, the Maritime Administration insisted that the grain brokers canvass all U.S.-flag segments (i.e., supership, tramp, and berth lines) before seeking a waiver for nonavailability. But in the next breath, the same order said that the guideline rate for the wheat-to-Russia program would be the supership rate; namely, that which would be 20 percent under a conventional tramp and berth parcel rate. In effect therefore, the Maritime Administration, apparently pursuant to directives of the Department of Agriculture, shut out the tramp and the berth carrier from participation in the wheat-to-Russia program. These two segments simply cannot operate at the low supership rates.
For a few days after this order was published, bertb carriers and tramp-vessel owners consoled themselves with the advise from Department of Agriculture, amply reported in the press, that foreign purchasing missions had been told by USDA that they would no longer approve vessels of the supership size in the Public Law 480 grain programs. By this means, USDA implied that superships would be fully occupied in the wheat-to-Russia program and would have for the other U.S.-flag vessels the usual Public Law 480 cargoes.
This consolation prize vanished in thin air within a few days when it was learned that certain superships which had offered their vessels in the wheat-toRussia program were turned down not because of rate considerations but be cause the vessel draft fully loaded exceeded that which was available at either the Black Sea or Siberian Pacific coast ports of Russia (i.e., 31 feet) (most superships are 32-35 feet loaded).
We thus see that the entire scheme for ocean transportation, under the direction of the U.S. Department of Agriculture, with the apparent concurrence of the Maritime Administration has resulted in shutting out not only U.S.-flag berth and tramp vessels by reason of rate discrimination, but also has frustrated the American superships by reason of inadequate draft in the Russian ports. These port drafts in Russia were common knowledge in steamship offices but apparently not known by the Maritime Administration.
One quickly comes to the conclusion that the Department of Agriculture marketing experts, when they farmed out the wheat-to-Russia program, made provision for a grain subsidy in excess of the usual subsidy in an amount only sufficent to cover the barest minimum of ocean freight costs. In other words, in providing approximately 1442 cents per bushel more export subsidy to the grain brokers than was normal, they allowed only sufficient freight costs in the program to cover carriage of grain on American superships or on foreign-flag tramps and as noted above, even the superships are left out now. As things now stand, the foreign tramp ships will profit most from freight revenues, but not the Americans, How this helps our balance of payments really escapes us.
A number of American-flag carriers on the Pacific coast have offered their vessels for parcels of grain at fair and reasonable rates to the agents for the Continental Grain Co. and have been turned down. In one instance; namely, the Waterman Steamship Corp., of California, the turndown of their offers of fair and reasonable rates of 7,000-ton parcels at $17 per long ton to Nakhodka has
resulted in the layup of two vessels in the port of San Francisco with a possibility of a third layup within the next 10 days. American President Lines and Weyerhaeuser Line both offered full or parcel lots at $17 and were likewise turned down.
We can't even get a share of the movement of bagged flour which has been sold to Russia. Here again, Continental Grain Co. is the seller. The Maritime Administration announced in November that they would publish guideline rates for bagged flour in the Russian program, and published a rate of $24.25 per long ton from the Pacific Northwest to Nakhodka. The most recent American rate to the nearby ports in Korea is approximately $31 per short ton, equivalent to $34 per long ton. This rate is quoted by both foreign and American carriers engaging in the berth trade to the Far East and is deemed a fair and reasonable rate.
When we wired the Maritime Administration asking how they arrived at the $24.25 rate, they advised us : "Rate is keyed to ships under 15,500 deadweight for full bulk cargo.” We have checked the market situation in recent months and find that there have been no American-flag bulk cargo of flour to that area at such rates. We can only surmise that Marad used a foreign-flag charter rate in determining a rate for U.S.-flag berth ships. We don't mind losing business to foreign-flag lines if we cannot help ourselves, but in this instance, our own Government has used the rate to freeze out berth carriers. We doubt that rail rates, or truck rates, have been whipsawed in similar manner in this program.
The Maritime Administration has cautioned the industry against referring to the published rates as "fair and reasonable rates.” Rather, they say these are "guideline" rates. We are not impressed with the semantics used by the Maritime Administration in this matter or by the Department of Agriculture. Insofar as we are concerned, the entire program was designed to follow closely the intent of the Cargo Preference Act which requires that each segment shall participate at rates fair and reasonable for the carriage in that segment of trade.
In recent press reports, it is reported that if the Russian wheat program which has moved to date from all ports within the United States, only 37,000 tons out of near 300,000 tons have gone U.S. flag, the balance going foreign flag. On the Pacific coast there has been no American-flag participation and the way matters stand, none in prospect.
Our plea is that nonavailability waivers be granted by Marad to the Continental Grain Co. and other brokers only when they have been unable to find American-flag vessels at the guideline rate applicable to each segment. If USDA must adjust its deal with Continental Grain Co. to accomplish this, so be it. As matters stand, they are purposely flouting the export control regulations and Presidential directives.
We trust that the above information can serve as a guide to the kind of information that your committee members will seek when witnesses from the U.S. Department of Agriculture and from the Maritime Administration appear on January 29.
By separate communication, I have asked for time to appear on January 30 at your committee's hearings. Yours very truly,
RALPH B. DEWEY, President.
ATTACHMENT No. 1
(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 4.8 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 412 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.