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cost of all onboard labor, including men in tanks and men required for placing vacuvators and pipes in position. All shore labor to be for receiver's account.

Receivers, however, shall not be required to accept delivery in excess of 2,000 metric tons per day without their consent.

All customary loading and discharging tanker terms are to be considered as contained herein, including contamination clauses if previous voyage oil.

Documentation: Separate instructions to be issued by charterers regarding necessary manifests, bills of lading, etc. Necessary wireless clauses to be separately advised owners of any vessels chartered.

The following protective clauses to apply: Gencon ice clause (port of discharge); amended “Centrocon” strike clause (at loading port); chamber of shipping war risk clauses Nos. 1 and 2; P. & I. bunker clause; New York Produce Exchange arbitration clause; U.S. clause paramount; general average settlement in New York and in accordance with York/Antwerp rules 1950.

Brokerage: 1 to 14 percent to exporter's broker, if used ; 1 to 14 percent to owner's broker, if used.

Any conditions not specifically referred to herein are otherwise to be considered in accordance with the Baltimore form c charter party.

(Whereupon at 1:05 p.m., the committee adjourned to reconvene at 10 a.m., Wednesday, January 29, 1964.)




Washington, D.C. The subcommittee met at 10 a.m., pursuant to recess, in room 219, Cannon House Office Building, Hon. Herbert C. Bonner (chairman of the subcommittee) presiding.

The CHAIRMAN. The subcommittee will come to order.

Yesterday at the time of the recess Mr. Giles, the Acting Administrator of the Federal Maritime Administration, Department of Commerce, was the witness.

Mr. Giles, will you continue please?

There is one question, Mr. Giles. In your handling of this matter, is this a commercial transaction, or is it a Government transaction


Mr. GILES. Mr. Chairman, I think this is very definitely a commercial transaction rather than a Government transaction, as these two terms are used. This is not a Government-aid shipment or sale of wheat. This is not a Public Law 480 or any transaction of that sort, and this is no different from the commercial sale of wheat, for example, to West Germany which grain exporters would handle in the usual commercial channels. The only thing that is different, you might say, about this transaction from your other commercial sales is the matter of the shipping requirement, and that was the policy adopted by the President last October when he announced the approval of the sale of a substantial quantity of wheat to the Soviet Union; and the fact that we have this policy of utilizing American ships to the extent of 50 percent, if they are available, does not in my opinion make this any less of a commercial shipment. It does not make it a of ship and selecting other type ships for the transaction.

The CHAIRMAN. The reason I asked was on account of the setting of rates by the Government and the Government's ruling out one type of ship and selecting other type ships for the transaction.

If it was strictly a commercial matter, then what interested me was just why the Department of Commerce, the Maritime Administration, went into all this area of selecting the types of carriers and establishing

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fair prices for certain size cargoes.. Of course, I remember your asso-
ciate explaining about the three ships or four ships on the west coast
that offered themselves and the private dealer-in this instance the
Continental Grain Co. I think it was—turning down their offered rate
of $17 I think it was.

Why should the Maritime Administration have anything to do with

Mr. GILES. We would not, sir, if the charterer, if Continental, had accepted that price. It wouldn't have bothered us at all.

The CHAIRMAN. It wasn't you then? You didn't have anything to do with that?

Mr. GILEs. That is right; yes, sir. It was the charterer.

The CHAIRMAN. But did you fix the price so that Continental had to conform to your price?

Mr. GILES. Not so that Continental would have to, but so that Continental would have a price on which it could count for purposes of trying to make a sale. We do not tell Continental that Continental cannot pay a greater price than our guidelines if they want to. That is entirely their choice.

But we do say to the shipowner and to the charterer, if we are going to have this 50-percent shipping requirement on these Soviet commercial transactions, then we cannot leave the charterer at the mercy, if you want to call it that, of the shipping market, because we would not have enough competition within the American shipping market to produce reasonable rates which the charterers could live with.

Our action in setting guideline rates and in taking all of these other steps comes, in my view, under the authority of the Export Control Act.

The CHAIRMAN. You were asked by the dealers- I will call them dealers, Continental and other people of that type and the purchaser to adjust the rates and to ascertain rates so that this transaction could be consummated? Otherwise the transaction might not have been carried out?

Mr. GILES. Not by the purchaser, Mr. Chairman, if you are referring to the Soviets. As I understand their views, there in the early days, they were simply saying, "We don't care what ships you use. We are not going to be in a position to pay higher prices for American ships than we would pay for others," and so forth.

The Soviets didn't ask the Maritime Administration to do anything about rates. They said, "Well, that's up to you." We, of course, did have discussions with Agriculture officials and they in turn with the grain officials, and it was evident there in October that if the grain exporters were going to be able to make a sale they would have to try to be in a position to have the best price they could quote, and a significant factor in their total net price that they could quote to the Soviets of course would be shipping. At that time American-flag rates, based on our Public Law 480 guidelines, the top guidelines then in effect in early October, were averaging about $10 per ton above the equivalent foreignflag rate. That is a very substantial difference.

For example, on the Continental sale, if Continental shipped 500,000 tons on American-flag vessels and you were dealing with $10, or even $6 or $5 difference, you see what amount of money you have in addi

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tional shipping cost. If it is $10, then that is a $5 million difference just on that amount, or if it is $5 you have $21,2 million, and the exporter obviously would not have the margin, even on those very substantial transactions, to make up that sort of difference unless the buyers, in this case the Soviets, were willing to recognize a substantial additional cost in the total net price, which would in effect cover shipping

The CHAIRMAN. Though this is a commercial transaction and the Department of Agriculture is interested in moving something that is in great surplus and subject to deterioration, and the Soviets are interested in buying it, the matter of issuing an export license on it is in your jurisdiction?

Mr. GILES. The Department of Commerce; yes, sir.

The CHAIRMAN. Now, in the Canadian transaction; what type of ship handled that? Did Canadian or British ships have a preference in that transaction?

Mr. GILES. Yes, sir.

The CHAIRMAN. Now, in the Canadian transaction what type of ship handled that? Did Canadian or British ships have a preference in that transaction?

Mr. GILES. My recollection is that on a good portion of that the shipping was handled directly by the Soviets. Captain Goodman, do you have the detail on that?

Captain GOODMAN. A great deal of it, Mr. Chairman, was Russian shipping, ships of their own, and other ships of Sweden, Norway, Great Britain, and Greece, just a general international type of fleet that they moved in.

To my knowledge there were very few Canadian ships as such. Of course there are very few Canadian ships capable of carrying this. The CHAIRMAN. What were the cargo rates, if you

have there we will say on the British and Canadian ships.

Captain GOODMAN. Actually, at the time, the Canadian fixtures were averaging between $10 and $ií a ton. That was the actual average. I would say that that $10 or $11 from, we will say, Montreal, or Quebec, if measured against our rate from the gulf and the difference in mileage, probably you could add, oh, say, $2 more to it to come up with a comparative rate as far as if the cargo was moving from the gulf.

The rate at which they were moving from Canada was in the nature of $10 to $11 a ton, and a fair equivalent rate from the gulf would be, say, $12 to $13 actually at that time.

The CHAIRMAN. Mr. Giles, in the collaboration you had with representatives of the steamship lines and associations how enthusiastic were they to secure cargoes and get into this movement ? To what extent were they interested?

Mr. Giles. My impression, Mr. Chairman, was that at first there seemed to be unanimity among the shipping interests represented, and we tried to have all of them represented, that it was desirable to have this 50 percent requirement to go on American ships if available; No. 1, that that was a desirable policy for the Government to have, and they indicated appreciation for the Government's interest in American shipping as reflected by that action.

No. 2, I think there was generally, and I say no exceptions, every indication that the shipping industry desired to cooperate with the

any rates

Government officials in working out appropriate details to see how this could be done, and I will say very frankly that the Government officials, the Department of Commerce, could not have worked these arrangements out as we did without the cooperation, the advice, and the counsel of the shipping people, and they were very helpful indeed, so overall there was an attitude of cooperation and of interest in the program.

I think on the part of individuals at the time there was certainly some reservation on their own part as to whether they, as a company, would participate or would want to. This was a new business.

Few American ships, if any, had been to Soviet ports in recent years, and I don't want to indicate that all shipowners or their representatives came forward and said, “We individually in our own company are just anxious to get into this program and handle this business.”

I am not saying that at all. However, the overall interest on the part of these people indicated that it was good to have this program, this requirement of 50 percent, and they wanted to cooperate, and they were very cooperative in helping the Government work out these details

The CHAIRMAN. Did anybody ever comment that it was questionable whether they should push the effort to get 50 percent of this cargo?

Mr. GILES. No, sir; I don't recall any reservation along that line at all last October and November. I will say, though, that here within recent days, the last couple of weeks, one industry representative expressing a personal view, and he made it clear that he wasn't purporting to speak for any one else, though he said he thought that his views might be held by others, was very frank in expressing his personal view that perhaps this was not really a particularly desirable policy for the merchant marine as a whole, that is, to have this 50-percent requirement on the Soviet transactions, and here were the reasons that he mentioned as supporting that possible view.

No. 1, obviously when our Government imposes this policy or puts this policy on this sort of transaction you have some questions raised by our foreign friends, our friendly governments overseas, and we have had those in the Department of Commerce, and from various nations, about the cargo preference.

That is what they call this, and this committee is certainly very knowledgeable as to all of the international questions you get into on that, so that perhaps raises difficulty for the merchant marine as a whole.

The CHAIRMAN. Wait a minute right there. That is the reason I asked you the question whether this was a private business commercial transaction as distinguished from the 480 program, because certain countries now have pointed out, as you say, that we give preference in the 480 program, but that is strict)y a Government movement.

Mr. GILES. That is right.

The CHAIRMAN. And it is not a commercial movement. Certain countries have, as you say, objected to that and have set up some restrictions in their area as between ports in their nation and ports in another nation and restrictions on American-flag ships in that commerce, but this is strictly a commercial movement and in that respect couldn't be compared to 480.

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