Mr. HAGEN. A berth operator if it offered the minus-20-percent rate would qualify?

Mr. GILES. Yes, sir; yes, sir.

Mr. HAGEN. That is all, Mr. Chairman.

The CHAIRMAN. Mr. Pelly?

Mr. PELLY. You may or may not remember, Mr. Giles, that early in December or in late November I wrote you a letter with regard to the use of foreign-flag vessels that had violated the late President Kennedy's voluntary boycott on trading with Cuba, and you replied that you had no authorized basis to direct a grain exporter not to utilize any particular foreign-flag vessels.

It seems to me that you have a right, as you say, to rule in or rule out American vessels as to size or what not but when it comes to foreign-flag vessels you disclaim any power to control those ships which have traded with a Soviet-controlled nation.

I can't understand it.

Mr. GILES. When I said I had no authority, that was correct. We have no authority in the Department of Commerce under the established Security Council policy on that because the policy of restriction there established by the President and Security Council was applicable only to the Government cargo.

It did not apply to commercial shipments so we had no restrictions on any commercial shipments of this category.

Mr. PELLY. President Johnson has the authority, however, and the Department of Commerce had been authorized by the President to issue export permits and certainly it seems to me that there should be the power with that to decide on just which vessels you would permit licenses to be issued.

Mr. GILES. I am not suggesting that there isn't the legal authority, for example, in the President. I don't know the extent of the authority there, but I think so far as taking this sort of an action, that does involve, as I am sure you would appreciate, a fairly basic policy decision.

Every time we do that, even with respect to the Government cargo, it involves our relations with other countries, and it would be even more sensitive if we moved into what we call the commercial shipments. I think I should defer to the State Department witness on any further exploration of that because it is, I think, primarily a matter involving our relations with other countries, and when I say other countries, I mean our friendly countries, our allies.

I am not informed that that is likely to be a major factor because I think most of our exporters here will probably endeavor, if they reasonably can, to utilize ships that have not participated in the Cuban trade. As a practical matter they would probably want to do that anyway but, under our existing administration policy, the Department of Commerce does not have the authority in policing this shipping requirement to go that far, and the administration policy has never extended beyond a restriction on shipping Government cargo-the Government-aid cargo.

From what I know about it, sir, as far as the facts, I would think that overall it would be to the best interests of our American merchant marine not to go that additional step rather than to take it, because every time we take a step of that sort and it has the effect of restricting the freedom of shipping of other nations to our own ports, and so on,

well, we always run the risk of some sort of retaliation and we have to try to keep some balance in it.

Therefore, looking at the total picture, all of the facts and the number of ships that potentially could be involved, my own estimate at the moment is that it is not such a big factor that you would want to take action which would cause a reaction out of all proportion to the benefit that you would get out of it.

Mr. PELLY. I think the American people disagree with you and I think that they fully supported President Kennedy's ban on the transport of any Government-generated cargoes on ships that had gone to Cuba. I realize, of course, that this is a matter which is beyond your particular jurisdiction, but I do think you have the power, personally, to deny the use of any permits to those who go in there.

I think personally that you should use them. I wonder if you could tell me or do you have knowledge as to whether any such foreign-flag vessels that have violated our voluntary boycott of Cuba have been used in this grain sale?

Mr. GILES. There were none on the Cargill shipment because we have the information on that.

Mr. PELLY. Do you have any information on Continental? Captain GOODMAN. Continental has told us that under no circumstances will they accept any ship that is on our so-called blacklist. Mr. PELLY. I am very glad to hear that.

Captain GOODMAN. We had specifically talked to them about it.

Mr. PELLY. I think it is fortunate at least that they are avoiding any criticism and I think that it should be a matter of policy myself of our administration. Thank you.

The CHAIRMAN. Mr. Murphy?

Mr. MURPHY. Yes, sir. Mr. Giles, have you published any rates out of Great Lakes ports?

Mr. GILES. No, sir; we have not.

Mr. MURPHY. Are you going to publish any?

Mr. GILES. If there are sales. If the exporter says, "We have a contract and we need rates out of this area," we certainly would.

For example, we hadn't published rates out of the west coast ports on the Cargill shipment earlier this year because they weren't moving any. Then when Continental made its specific sale we published rates there, and we will do the same for the Great Lakes.

Mr. MURPHY. Do you know if these shippers have any requirements that these vessels have vacuvators.

Mr. GILES. Yes, sir. That question came up on the Continental and it was a question of whether the vessel owner would furnish that equipment or whether that would be for the expense of the charterer, and we went into it very carefully and our judgment was that that was an owner expense because that is traditional. That is our practice on Public Law 480, and we didn't think it would be proper to say to Continental, "You take over an equipment expense" which is contrary to established shipping practice.

Mr. MURPHY. Would your Public Law 480 requirements necessitate vacuvators on all those ships?

Mr. GILES. No, it depends on the ship or the type of unloading gear with which it is equipped and so on, but on Public Law 480 we wouldn't require the Agriculture Department, for example, in its

rate to pay extra to an operator for having this, what I would call, normal minimum sort of unloading equipment.

Mr. MURPHY. Even this equipment was not required on Public Law 480 shipments, but it now is required on the shipments to the Soviet and the satellites.

Mr. GILES. Sir?

Mr. MURPHY. I say on the Public Law 480 shipments vacuvators were not required, and now with the Russian satellite operations these ships have to be equipped with them, is that right?

Mr. GILES. My understanding is that on the Public Law 480 if the shipowner did not have it, then he arranged for it on the discharging side. For example, he would rent it or he had other type of unloading gear which did not require the vacuvator, but this is trationally an expense for the vessel owner, just like it is traditional for the vessel owner to have his ship cleaned out if he wants to haul wheat. He shouldn't come in with it all messed up from a load of oil. It ought not to be contaminated.

Some of these raise that point as to whether they would have to be sure that their ship was clean. Well, if the vessel owner wants to haul cargo, it certainly is established shipping practice that he presents a vessel that is in good condition and equipped to haul that cargo. Mr. MURPHY. If he didn't have that equipment on the ship and there wasn't any, say, in these Russian ports, then he would not be considered an available vessel, is that right?

Mr. GILES. If he said that he did not have and would not have arrangements for proper discharge, or the vacuators or the unloading gear, then he does not have a vessel which is equipped to meet the reasonable requirements, so we couldn't insist that the charterer take that vessel.

Mr. MURPHY. You would consider it not available then.

Mr. GILES. That is right; yes, sir.

Mr. MURPHY. On these Public Law 480 shipments when you look all the American-flag ships over did you in your own mind set aside certain vessels and say that we have a Public Law 480 requirement to ship 50 percent in American vessels and we set aside certain ships there, and we have other ships equipped that can meet the requirements for this Russian deal?

Did you try and balance out the American ships in that manner?

Mr. GILES. We did not try to make any predetermination on specific ships. The line that we drew was on the size of vessels at 15,600. and with consultation with our shipping experts, Captain Goodman, who has been a tower of strength in all of this, with the help of the shipping industry, that is the line that we drew, on the size of vessels, and said that vessels larger than that are economically able to handle grain shipments at a minus 20 percent rate and then our next step was to say, "Well, then, for these Soviet bloc commercial shipments our top guideline rate is minus 20 percent."

We didn't say only the larger ships could handle it. We just set the rate, and by setting that lower rate we effectively, as an economic matter, ruled out the smaller ones because we recognized that the smaller vessels should not be called on to haul grain at this reduced rate, so we left them with the top guideline rate, the previous guide

line rate on the Public Law 480 program, and simply by our rate structure we made that division you are talking about.

Mr. MURPHY. You could leave then the small ships to handle the Public Law 480 and the big ships to handle the Russian deal.

Mr. GILES. Yes, sir; so far as having first choice. That doesn't mean that a big vessel would never have a Public Law 480 shipment. nor does it mean that a smaller one could not handle the other.

Mr. MURPHY. Did you say that you wanted any vessels which could not handle Public Law 480 to handle the Russian grain?

Mr. GILES. No; our recommendation and advice to the Agriculture Department is in order to keep the proper balance here on Public Law 480 shipments if you have Public Law 480 cargo to handle and you have ships offered in, both the small size and the larger vessels, we recommend you give the preference to the smaller one. If you can handle both, if you have enough cargo for both, then fine.

Obviously it is to the interest of the Agriculture Department, and it is in the interest of our Government strictly speaking, budgetwise, to use the larger vessels in those where possible, but we didn't want by Government action to rule out smaller vessels on the Soviet transactions and then, in effect, by competition rule them out on the Public Law 480 because that would be giving the larger vessel an unfair advantage by Government action, giving them a first choice on the Soviet transactions, and then, in effect, by competition, because they could compete better, offer lower rates on the Public Law 480.

That is one of our problems. I think everybody recognizes that is one of our problems on a Public Law 480 cargo, and we don't want to chase the big vessel owner into a corner. As the cases come up, if we can possibly avoid it, and I think we can avoid it, we are not going to have a situation where the owner of the big vessel is for one reason or another (other than his own choice) ruled out of the Soviet transaction shipments for a physical reason and then we also keep him ruled out on the other.

We are not going to be that inflexible about it.

Mr. MURPHY. What about a big ship who doesn't want to handle the Russian grain. Would you deny him a permit to handle 480 cargo? Mr. GILES. We would. If the smaller vessels are standing there in line and if it meant that if we let the big vessel come in that the smaller one is out of the picture or the smaller one is laid up, then we would have to do that.

Mr. MURPHY. But you wouldn't let the little vessels go back on the Russian shipments?

Mr. GILES. We would let them, but by our price structure they couldn't effectively do it. They are at an unfair competitive disadvantage in that situation.

Mr. MURPHY. Overall we could have a lot of American ships standing by and not handling this grain because they didn't have the vacuators or because they didn't want to handle it for Russia and they couldn't go to 480 cargo.

We would have them tied up because of these rules.

Mr. GILES. I don't think we would really have American ships tied up. We might not have American ships in the business because they have other business. Of course, there is other business available here and the shipowner naturally and properly is going to want to choose

the business that suits his particular situation and that gives him the best return, so some of these shipowners, a tanker, for example, is going to be hauling oil. He is not going to be interested in Public Law 480 or the other.

Others may be hauling something else, so the fact that we have a waiver and a waiver is granted doesn't mean that we have American vessels tied up with nothing to do. It may mean it, but it doesn't necessarily. I hope it will mean that we grant a waiver because American shipping is just in a period of good business and that they are busy all over the place and they don't want the business or they can't handle it. I hope that this is fundamentally the reason that we grant a waiver. Mr. MURPHY. Do you have any requirement that these ships that take grain over cannot bring a backhaul of oil back, say?

Mr. GILES. No, sir. If they make that arrangement it is really a good trip for that particular vessel.

Mr. MURPHY. If they discharge their oil cargo can they go back and pick up some more grain?

Mr. GILES. Certainly, of course, they are going to have to clean up the ship before loading with grain.

Mr. MURPHY. But you don't have any requirement that due to the fact that they carried a load of oil they cannot take a load of grain. Mr. GILES. No, sir.

Mr. MURPHY. They can just clean out.

Mr. GILES. Just so their tanker is cleaned out properly and it wouldn't contaminate the wheat shipment; that would be fine. The CHAIRMAN. Any further questions?

Mr. MURPHY. I have no other questions.

The CHAIRMAN. Mr. Giles, as chairman of this committee I want to congratulate you on the manner in which you have conducted yourself here under scrutinizing examination and I want also to congratulate you on your knowledge of the situation and the frank answers that you have given. You are now Acting Administrator of the Federal Maritime Administration.

Personally, as chairman of this committee I will say that you have certainly demonstrated a broad knowledge of maritime affairs in this case, which I presume will apply to other cases, and the Chair hopes that you will be appointed permanently Administrator.

Thank you for your frankness.

Mr. GILES. Don't adjourn on me on that note.

The CHAIRMAN. Thank you very much.

Mr. GILES. I do want to thank you for that, and that is the only point at which I have taken issue with you so far.

The CHAIRMAN. The subcommittee will stand adjourned, and will meet tomorrow morning at 10 o'clock.

(Whereupon, at 12:15 p.m., the committee adjourned to reconvene at 10 o'clock, Thursday, January 30, 1964.)