By way of a little bit of confession and avoidance, Mr. Chairman, I would like to say that we have been spending a great deal of time in the last several weeks in connection with the shipping questions and problems on the Russian wheat program.

As of last week we had several conferences with both exporter groups and with ship owner groups. Last Friday I had the indication that perhaps this particular hearing might not be held today, but might have to go over until later in the week, and for that reason I had not had a chance to prepare a statement. If I had prepared one I would have attempted to summarize very briefly the chronological events that occurred on this, and I would like to take about 10 minutes and do that right now.

For my purposes, Mr. Chairman, I want to deal only wih what I would call the domestic developments in regard to shipping. I am not in a position to speak to the international relations or the negotiations with the Soviet representatives-between them and the State Department. I would defer to the State Department on that point.

So I would begin with calling to the attention of the committee the statement of the President which I believe was released to the press on October 9 and which is contained in his communication to the President of the Senate and to the Speaker of the House dated October 10, in which the President, the late President Kennedy, announces his decision to authorize the sale of wheat to the Soviet Union and to Soviet bloc countries.

He enumerates the various good reasons from the standpoint of America's interest as to why he has taken that action and with regard to shipping he says this. It is in the second paragraph of his letter, and I am quoting:

An added feature is the provision that the wheat we sell to the Soviet Union will be carried in available American ships, supplemented by the vessels of other countries as required.

That particular policy decision has since been referred to as we will ship the wheat in American vessels if available.

The CHAIRMAN. Let me interrupt you.

Mr. GILES. Yes, sir.

The CHAIRMAN. In announcing the program in the beginning didn't the President say there would be 100-percent American-flag vessels. Mr. GILES. No, sir; there was no reference to any percentage at that point. No, sir; at the beginning there was no reference to any percentage, either 100 or 50 percent. It was just that the wheat will be carried in available American vessels, supplemented by the vessels of other countries as required. There was no express reference to percentage.

Following the President's announcement the Department of Commerce issued an export bulletin in which it spelled out the requirements on these exports and that bulletin I believe is No. 883, and which by this time the determination was made, after discussion with representatives of the shipping industry, that not more than 50 percent of American-flag tonnage would likely be available under any circumstances, would be physically available.

The CHAIRMAN. That is 50 percent of the American-flag tonnage, not 50 percent of the proposed cargo?

Mr. GILES. No; 50 percent of the proposed cargos. We are talking in terms of a total of about 42 million tons of wheat or wheat flour to be shipped to the Soviet bloc countries, a total of 42 million tons. That was what was being discussed, and when you take that and add to it the anticipated requirements under Public Law 480 and other Government programs for the next several months, it was evident that physically there would not be sufficient American tonnage to handle 100 percent of the Soviet bloc shipments and the 50 percent regularly scheduled under Public Law 480 and other programs. The question confronting the administration and the shipping industry, and also a question for the grain exporters, was: Can we arrive at some percentage, which is less than 100 percent, but which is as reasonable and as accurate as we can estimate it, so that the grain exporters can quote the lowest price to the buyer? If the grain exporter has to count potentially on shipping 100 percent of this wheat in American-flag vessels at the rates substantially higher than foreign-flag vessels, then his net price that he is going to quote to the buyer is going to be that much higher. The committee is aware of all of the discussions and the negotiations with Soviet representatives that have been reported in the papers, but which I would rather not get into and defer to the State Department on that. I simply state as a conclusion that it was in America's interests to attempt to arrange this shipping matter so that the exporter could quote the lowest net price to the purchaser. That was made clear.

Following our several discussions with shipping industry representatives, much of which was carried on by Under Secretary Roosevelt, who is now out of the country

The CHAIRMAN. Let me interrupt so we can understand it. You say American shipping representatives.

Mr. GILES. Yes, sir.

The CHAIRMAN. Would you put their names in the record.

Mr. GILES. I would say primarily on this would be representatives of the AMA. Mr. Max Harrison, of course, is the president of that group. Mr. Earl Smith I recall as one of the members of that group involved, along with other officials of that group. We had during that period two or three meetings with representatives of the four shipping associations, which include AMA, AMMI, the CASL group, and the PASSA group. All of those associations were represented and we invited all of them to the overall meetings where we were discussing these matters and trying to develop an approach which would be reasonable and which would benefit the shipping industry.

Out of all these discussions-this came from some of the industry shipping people-it was concluded and made evident that the only way American shipowners would be able to quote the lowest possible prices to the grain exporters, so they in turn could have a low net cost on the shipping side, was to attempt to set up a program where the larger vessels could participate in the commercial shipments to the Soviet bloc countries, and this particular suggestion did not originate as such with the Department of Commerce.

I don't know who it originated with among the shipowner group, but it did come from our discussions principally, I think, with the AMA, where it was suggested that we consider an arrangement where the larger ships could participate in the commercial shipments and the

smaller ships would have first call, or at least would be relied on primarily, for the Public Law 480.

The next step, Mr. Chairman, was to consider the question of rates. By this time the Commerce Department, the Maritime Administration, was called upon to publish some sort of guideline rates. Between the time of the President's announcement on October 10 and November 8, and I am referring to November 8 as the time of an announcement by Under Secretary Roosevelt, the Department of Commerce had held back and said, "Well, we will not set any rates. Let's see what the market will do." Some of the exporters, although they did not have any specific contracts, went on the market and asked for tonnage available, tonnage during the following months, and at what price, and some of the results they got then were quite discouraging.

Some of the larger vessels were offered in at prices in excess of the top guidelines that we had published for Public Law 480, in excess of the prices that we had published for the smaller vessels, which the smaller vessels could get along with.

Mr. CHAIRMAN. Do you remember what the guideline rates were at this point?

Mr. GILES. Mr. Chairman, you have that before you I believe in that package of material. It is headed "Voyage Charter Rate Guidelines." The CHAIRMAN. You understand. I want it for the record so someone reading it will see it.

Mr. GILES. Yes, sir; we will have that. The rate quotations the grain exporters initially obtained are understandable in that sort of situation. I think that you would get perhaps those sorts of rate quotations. Shipowners were asked really to give general advice as to what they thought they could do.

They really were not talking specific charters and they really could not anticipate at that time what the full development of the market was going to be, but the prices quoted then were also against the background of the Government's announced decision that all of this wheat shipped to the Soviet bloc countries would go in American-flag vessels as available, and it was understood that there would, in effect, be a cargo perference on it.

So the result of our sitting back and not giving any indication of rate guidelines made very clear to us that if we did that the exporter, so far as the prices quoted to him from the shipping industry, was not going to be able to compete really within reasonable terms with foreign-flag shipping.

The rates would simply be up there. So we were called upon to set some rates, and our only experience, as you know, Mr. Chairman, is with the Public Law 480 program. We looked at what we had done there and we considered the experience that we had had under Public Law 480 and we determined that over the past year or 2 years actual shipments of Public Law 480 cargo had in many instances been handled at rates by American-flag vessels, particularly by the larger vessels, from 20 to 40 percent below our published guidelines. Our published guideline rates of course had been set some years ago at such a level that the smaller vessels, the Liberty vessels, could participate in that program and have a rate of return they could live with.

The CHAIRMAN. Were the guideline rates published prior to 1963?

Mr. GILES. Yes, sir. As a matter of fact, the guideline rates largely that we have been working with were published in 1957, with some amendments since then. So that led to the conclusion, and it was a judgment, Mr. Chairman, that the Secretary of Commerce and other officials made after considering the facts, that we would be justified in specifying for the larger ships, and we drew the line at 15,600 deadweight tons, a minimum 20-percent rate. That would be their top rate for the larger vessels, and we published that after having a conference with representatives of the shipping associations, the four shipping associations.

This conference was held by Under Secretary Roosevelt on November 8.

Mr. CHAIRMAN. Let me interrupt you just a minute, Mr. Giles. Mr. GILES. Yes, sir.

The CHAIRMAN. In your voyage charter rate guidelines you state:

The rates established and issued in the form of rate advices by the Maritime Administration in 1957, and subsequent thereto, will continue to be used for the transportation of U.S. Government-sponsored commodities moving in full cargo lots on U.S.-flag vessels and will be applicable to such vessels of 10,000 deadweight tons to 15,500 TDWT.

But you didn't say what these rates were in 1957 and I would like to have it in the record.

Mr. GILES. Mr. Chairman, there are several sheets of those covering the many ports that we ship Government cargo to and we can furnish and will furnish those for the record.

The CHAIRMAN. What I would like to have is the rates to the ports to which this cargo would likely move.

Mr. GILES. We can furnish those and will for the record and we have attached to this material now at hand only the voyage charter rates for the Soviet ports, and we had not published, of course, rates for Soviet ports prior to this because we haven't been sending any Public Law 480 shipments to the Soviet Union.

(The information requested follows:)

DEPARTMENT OF COMMERCE, MARITIME ADMINISTRATION

VOYAGE CHARTER RATE GUIDELINES

Effective as of November 8, 1963, notice is hereby given that the Acting Maritime Administrator has determined that voyage charter rate guidelines applicable to U.S. Government-sponsored commodities moving in full cargo lots in U.S.-flag vessels are as follows:

1. The rates established and issued in the form of rate advices by the Maritime Administration in 1957 and subsequent thereto, will continue to be used for the transportation of U.S. Government-sponsored commodities moving in full cargo lots on U.S.-flag vessels and will be applicable to such vessels of 10,000 to 15,500 TDWT.

2. The rates for U.S.-flag vessels of 15,600 to 30,000 TDWT will be 20 percent under the rates for vessels in the aforementioned category.

3. The rates for U.S.-flag vessels over 30,000 TDWT will be subject to consultation on specific shipments.

Dated: November 13, 1963.

ROBERT E. GILES,

39-375-64- -2

Acting Maritime Administrator.

GUIDELINE No. 1-VOYAGE CHARTER RATE TO RUSSIA Effective as of November 8, 1963, notice is hereby given that the Acting Maritime Administrator has established the following voyage charter rate guidelines to Russia for the carriage of wheat in bulk in U.S.-flag vessels of 10,000 to 15,500 TDWT:

Rates for vessels of 15,600 to 30,000 TDWT will be 20 percent under the above rates. Actual rates are set forth in rate guideline No. 1-A appearing simultaneously in this Federal Register issue.

The guideline rates for vessels over 30,000 TDWT will be subject to consultation on specific shipments.

Rates are based on following conditions:

From one port of loading to one port of discharge.

Loading and trimming expense for account of vessel.
Discharge expense for account of charterer.

The foregoing represent maximum voyage charter rates per ton for the transportation in U.S.-flag vessels of full cargo lots of wheat in bulk. Dated: November 13, 1963.

ROBERT E. GILES, Acting Maritime Administrator.

GUIDELINE No. 1-A-VOYAGE CHARTER RATE TO RUSSIA

Effective as of November 8, 1963, notice is hereby given that the Acting Maritime Administrator has established the following voyage charter rate guidelines to Russia for the carriage of wheat in bulk in U.S.-flag vessels of 15,600 to 30,000 TDWT:

Rates for vessels of 10,000 to 15,500 TDWT are set forth in rate guideline No. 1 appearing simultaneously in this Federal Register issue.

The guideline rates for vessels over 30,000 TDWT will be subject to consultation on specific shipments.

Rates are based on following conditions:

From one port of loading to one port of discharge.
Loading and trimming expense for account of vessel.
Discharge expense for account of charterer.

The foregoing represent maximum voyage charter rates per ton for the transportation in U.S.-flag vessels of full cargo lots of wheat in bulk.

Dated: November 13, 1963.

ROBERT E. GILES, Acting Martime Administrator.