Mr. DOWNING. Yes, sir.

Mr. GILES. I don't agree with that, sir, and I don't think any of the shipping people have submitted to us a good solid case for that at all. In fact last November they understood clearly what we were going to do and we explained it to them, and, as the newspaper reports or the files will indicate, the representatives at that time indicated that they thought this was a fair and proper action by the Department.

So far as the berth liners, I would like to comment specifically on that. The berth liners are those ships that haul parcel lots. They haul other cargo. They make a voyage out and then they haul cargo back. That is the nature of their business.

Our tramp steamers and ships haul a full load of cargo out and they have to count on coming back empty, coming back in ballast.

Last year before we ever heard of any Soviet transactions, here are some representative berth liner rates on the shipment of grain. In April 1963, Lykes Bros. in parcel lots shipped out of the gulf to Poland at a rate of $12.75. The comparable minus-20-percent rate to that same port would be $15.09. The comparable Liberty vessel rate from that same port to the destination would be $18.96, os you see the difference at that time.

Mr. DOWNING. Yes.

Mr. GILES. A similar situation with Moore-McCormack Lines in May of last year, and all of this is a matter of public knowledge and record in the shipping records, a shipment to Poland at a liner rate of $12.10. That was just on the competitive market. The top Liberty rate on Public Law 480 or the comparable would have been $16.38. There is other information here, three or four other shipments, very similar, Mr. Chairman. I will be glad to put this whole sheet in the record if it is desired.

The CHAIRMAN. Put it in at this point. (The information referred to follows.)

Mr. GILES. Now, here are some berth liner bookings of grain to Hungary via Hamburg or Gydnia, and I believe this is on the Cargill shipment. The U.S. Lines took a parcel lot at $9.25 a ton. The minus-20-percent maritime guideline rate was $11.04.

The CHAIRMAN. I didn't hear that. What was that figure?

Mr. GILES. The U.S. Lines took a parcel lot at $9.25. The minus20-percent maritime guideline rate for the tramp steamer, same shipment, same ports, would have been $11.04, about $2 higher.

Moore-McCormack took a parcel lot shipment to Gydnia from Albany, $13.97. It would have been the same. The $13.97 was the guideline, so they took this at the top guideline rate or the minus-20percent rate, to which they were entitled.

Bloomfield handled two parcels to Hamburg at about 50 cents under the minus-20-percent rate for the tramp steamers.

The CHAIRMAN. Are all these that you are talking about now the wheat deals to the satellite countries?

Mr. GILES. TO Hungary.

The CHAIRMAN. I mean it is in this general area.

Mr. GILES. Yes, sir, in this general area.

The CHAIRMAN. Of this movement we are discussing?

Mr. GILES. That is right. The point I am making, Mr. Downing, is that if we had berth liner service, established service into Soviet ports, of any substantial quantity over a period of time and had good going service, we would have been in a position to say, well, there is no problem about rates, because our berth liners meet the foreign competition, whatever it is, because that is the nature of what their commercial business already is.

Our Public Law 480 program wasn't set up for the benefit of our berth liners. It was just the opposite, so I can't have any sympathy at all for a berth line operator who comes in and offers over our published guideline rate when, as a matter of fact, he is asking and he is taking advantage of a higher rate than he would get in a normal competitive situation.

He is getting the same rate that the tramp steamer operator is getting when he takes his ship out and hauls it back empty. As between those two segments there is obviously no equity in that.

If we got down to more detail on this rate business, which we don't want to do, we would specify that berth line operators, if they haul this wheat, would haul it at competitive world prices, whatever that is.

Mr. DOWNING. You just said that you really have no historical background to base the rate from here to Russia because we haven't got any ships that have made that trip.

It doesn't appear that you had any realistic information to base your rates for the berth liners and for the tramps. That is the point I am getting at. And the reason it wasn't contested at that time was that they thought that superships would take it and the tramps and berth liners would get the 480 shipments.

Mr. GILES. The berth liners who thought they were going to be hauling Public Law 480 were certainly off on that one. That Public Law 480 program was not designed for berth liners.

Mr. DOWNING. What are the rates for the Exilona which left yesterday, I believe, for the Black Sea?

Mr. GILES. Captain Goodman is informed that it was under the minus-20-percent rate. He doesn't have the exact figure.

Mr. DOWNING. That is the first American ship to carry goods over there, isn't it? Is that the first American ship to carry wheat over there?

Mr. GILES. I understand it is the first one on the Continental shipment. We of course had several American ships on the Cargill shipment. The Cargill shipment back in December and January was our first actual transaction under this program.

Mr. MURPHY. Will the gentleman yield?

Mr. DOWNING. Yes.

Mr. MURPHY. Why do we have American ships carrying this grain at below the guideline rate?

Mr. GILES. Because it is convenient perhaps for them to get the business. Understand, they have a full cargo. It could be many other things, and these are parcel lots. It might be 2,000 or 3,000 tons, or 3,000 or 4,000 tons and they negotiate with the charterer, and I don't know what factors would enter in. Maybe they make arrangements with the charterer. Maybe they want other business in the future or have had a business relationship in the past as you normally would have in the shipping business, and what factors entered into that I don't know.

Mr. MURPHY. Then we say that we can't get American ships to take our 50 percent of the tonnage. Then we have American carriers cutting the rate on it when they are guaranteed the freight.

Mr. GILES. That is their privilege. We have said these are the top rates. Now, it is up to the parties if they want to negotiate on something different, if they want to change the terms. So long as they get together, that's fine, either below or above the rate, and we don't have any problem unless we get an application for a waiver.

All of the exercise we go through, everything we have done, is an effort to advise the parties of what our position will be if we get that application for a waiver. We are doing that because we feel that it will help the total picture to let them know before hand rather than to waste a lot of time and then they come in and then we adjudicate it at that point.

However, this is in the nature of advice. Our specific ruling, Mr. Murphy, is on a waiver. We don't tell them what they must do. We just say we will or will not grant a waiver on this basis if we have to pass on a waiver.

Mr. MURPHY. If you find American ships cutting the price, say, on this Continental, and then Continental comes in for a waiver on the 50-percent ruling, don't you think it looks like here certainly is available American tonnage because they are starting to competitively cut the price to get the business.

Mr. GILES. No, sir, that doesn't follow at all because what a berth liner could haul a small parcel lot at, the price there doesn't mean that a tramp steamer operator could take on a full load, haul it over to the Soviet port, and come back empty at that rate.

As a matter of fact, on our Public Law 480 experience, I will mention again, in the past 2 years these same ships that we are talking about, certainly the larger vessels, have hauled grain on the Public Law 480 program. It is the same kind. It would be No. 2 red or whatever, at rates below what we have suggested as the top guideline on the Public Law 480, but that was the competitive situation, and the rates that we have suggested I don't think are excessive.

I don't think they allow the operator a huge profit. I think they allow him a reasonable return on this voyage. It covers his operating

expenses and allows him some profit margin. What the operator can say on these matters is that "Our business is not good enough and our rates are not good enough so that over a period of time we are not making enough money to replace our ships. Many of our ships are

obsolete."

And that is one of the big difficulties in that segment of our merchant marine. Our answer to them on these rates is that we can't reform our rate structure here in the middle of this particular program. We can't up everything all over the place. We can't increase our Public Law 480 rates to perhaps the reasonable level that operators would desire because we have the Agriculture Department budget to look at and there is just so much that you can do there in that area, so we always have to try to strike a balance between these competing interests.

Mr. DOWNING. In the case of the Exilona, she only had 6,500 tons and she is going to top off at New York with some income-producing goods which will balance her trip out and back.

Mr. GILES. That is right.

Mr. DOWNING. So I understand how she could take it at that price, but if she didn't have that top off at New York she couldn't carry it over there and back.

Don't you agree?

Captain GOODMAN. I wonder if I might comment so that we are completely straight as far as the rate structure is concerned.

Our rate structure is based on full cargo lots, a full ship. It is never based on berth shipping terms. It has no relationship whatsoever to berth shipping terms such as the Exilona where she is only carrying a small amount of cargo, and historically berth ships always carry cargo at less than full cargo lots, and it is understandable because in your full cargo lot, as Mr. Giles said, the rate is based on a full cargo. It is a one-shot deal.

He goes out and he delivers and he must come back in ballast. There is nothing else for him, and the rate has to reflect that, whereas your berth liner rates are based on a two-way proposition, but I wanted to be clear there is no rate that Maritime sets based on berth ships.

Mr. DOWNING. I will close here because I am taking too long, but it appears to me that the rate that you have set for these liners is inadequate.

The CHAIRMAN. Mr. Mailliard.

Mr. MAILLIARD. Thank you, Mr. Chairman.

Mr. Giles, one thing that is a little unclear to me is this question of the depths that are involved in these ports. We had some interesting figures here about what you eliminate as you increase the depth, but nobody talked about what the actual usable depths are in the various ports.

Have you gotten that?

Mr. GILES. It seems to be fairly clear that the draft depth for a ship to tie right up to a dock in most of the Soviet ports is going to be 31, perhaps a maximum of 32 feet, but that doesn't mean that the ship participating or hauling grain into Soviet ports cannot exceed that, because what you raise here is the question of what is your method of discharge. Are you going to discharge into a dock facility, or are you going to use the lighter method, that is, discharge grain into smaller

vessels or barges and then when you lighten your larger ship you can move on in and tie up, so that is your question there.

Mr. MAILLIARD. All this though would affect the rate, wouldn't it? Mr. GILES. That is right.

Mr. MAILLIARD. After all, these are all added costs if we have to use lighterage.

Mr. GILES. Yes.

Mr. MAILLIARD. And also what information, if any, do we have about availability of lighters?

Mr. GILES. We have taken the position with Continental, with whom this question has been raised, that we want to help them carry out their contract. We haven't asked to look at the details of their specific contract with the Soviet buyers.

We take their word that the Soviet purchasers prefer the smaller draft sizes because it is easier to handle on the other side, but we have told them as a general provision we could not regard as a reasonable limitation going on to the American market and saying we want ships with a 31-foot draft or less.

We have told them if they want to express that preference, all right, but they have to consider other larger sizes, and they have actually already booked larger ships, that is, with a deeper draft, and that we will look at a specific case.

I mean by that, and we have informed them of this, the ships that have a draft of 32, 33, and 34 feet are going to have to have a mighty, mighty good case before we would say they could turn that down.

Mr. MAILLIARD. But isn't that sort of absurd, because if a fellow owns a ship that has a 34-foot draft and he is offering it at a certain rate to a port where he knows he can't get alongside the dock, I guess he never would offer it.

Mr. GILES. You handle it just like much of the wheat hauled into Soviet ports is handled. You discharge by the lighter operations. You discharge into barges or smaller ships and then go on in.

Mr. MAILLIARD. But he would have to be able to do that and see it as being economical and at a rate which is predicated upon more rapid means of unloading.

Mr. GILES. The matter of discharge and expense on discharge is on the charterer or the buyer. That is standard and that is the basis of our terms. It is free discharge.

Mr. MAILLIARD. Of course the length of time the vessel is in port would be a factor too.

Mr. GILES. That is right.

Mr. MAILLIARD. That would be a charge against the shipping rate, wouldn't it?

Mr. GILES. We have a demurrage rate set. Incidentally, we persuaded Continental, and we did persuade them. The standard demurrage rate for some time has been $1,500 a day. That applies to our Public Law 480 shipments in ports throughout the world. We worked out a demurrage rate of $2,500 on the Continental shipment, a demurrage rate of $2,500, dispatch rate one-half of that, $1,250 so now there has been some question about that, whether the demurrage rate should not be enough to cover the cost of operating expenses of a ship. That is not the basis of the demurrage rate, never has been.

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