approximately the first of March. We cannot accept laydays the first of March if Norfolk is nominated. There we wait a week. On the ship we fixed to Continental, on one of the ships we fixed to Continental, I believe it was the Transorleans, we were obliged to fix February 14-29. In that case, if they nominate north of Hatteras, that ship is in Peekskill today. She will be on the 9th, north of Hatteras and there we waste the 5 days.

A ship coming in from Gibraltar, you just can't figure that carefully. No ship can afford to wait a week's time. No ship can afford to be in the U.S. gulf area and go to north of Hatteras.

Mr. GILES. Mr. Stovall, do you have anything further?

Mr. STOVALL. No, sir. I said before, that if Mr. Kahn can possibly make the open March position, we certainly would stand ready to fix the vessel if he wants the business.

Mr. GILES. My tentative conclusion on these two, Mr. Kahn, and Continental, is this: On the Transbay I don't see how I can make an exception here for you any more than I did on the preceding, where you had the gulf only.

On the Transhartford, it seems to me that the time element here, while not exactly the language of the tender, there is, as a matter of merit within it, I don't see how Continental is really prejudiced on

this.

My tentative conclusion is that the Transhartford should be worked out and that will be subject to further specific discussion with Mr. Kahn and Continental, but that is my tentative conclusion and I would like Mr. Kahn and Continental to be thinking about some specific little detail there of time to give reasonable protection to each to guard against these elements that both of you have mentioned.

Do you have anything further, Mr. Kahn?

Mr. KAHN. Just the general policy statement, if I may.

Mr. GILES. All right.

Mr. KAHN. Just a 2-minute statement.

It just occurs to me, and this has no relationship at this moment with Continental-if I may take just 2 or 3 minutes, it just occurred to me, as I am seated here, that we are having a hearing here where the shipowner is apparently not quite happy. The grain houses are not quite happy. Labor is not quite happy. And the Government is

harassed.

Mr. GILES. Not quite happy?

Mr. KAHN. In view of that, it bears some reflection on everything that we have heard about the ground rules. The ground rules initially were established, and I don't think it is a secret to the Maritime Administrator, that I for one did not particularly agree with the merits of the ground rules and at one time I expressed myself in a manner about which I am not too proud, perhaps a bit too vehemently. Nevertheless, I did. Today I will be calm, I promise you.

Mr. GILES. The record should show that today he is calm.

Mr. KAHN. I believe neither Mr. Goodman nor the Administrator will argue the point with me when I say that initially, when this complicated Russian program came about, and when the ground rules were set, the ground rules were set keeping very much in mind the participation of very large ships.

May I ask this question? Is that so?

Mr. GOODMAN. We certainly hope so, Mr. Kahn. That is correct.

Mr. KAHN. Even the rate structure was so established to allow participation of very large ships, and the largest possible participation of American-flag shipping that can be utilized in this program.

With that in mind, the Maritime has directed or used its good offices to try to get the small ships into the Public Law 480 program and the large ships for the Russian program. Now, it occurs to me that the large ships have been performing under the Public Law 480 program with very little difficulty. It just occurs to me that if it is Americanflag participation that is needed in Russia or that is desirable in Russia, isn't it perhaps logical to have a combination of ships, or just conversely, to have the small ships participate in the Russian program and the large ships participate in the Public Law 480 program? Or perhaps the ground rules should call as one of the most important things not ground rules for Continental or ground rules for the shipowner, but the ground rules for the Russians; that as part of the purchase contract he must accept the type of tonnage which will permit large American-flag participation.

Now, Mr. Giles, I don't know whether anyone in Maritime today is aware of the contract such as Cargill executed in Russia.

Mr. GILES. I do not know the details of that.

Mr. KAHN. I don't know whether anyone is aware of the contract that Dreyfus is attempting to execute in Russia, or Bunge or anyone else. If it is desirable to have American-flag participation in the movement of this grain, don't you think that you ought to reexamine this entire proposition and tell Messrs. Cargill, Bunge, and Dreyfus that they must, as part of the conditions of your sale, have the Russians accept any American-flag ship either with lighterage tonnage or revise your rate structure so as to permit the smallest ship to go to Russia and have the Russians pick up that difference in the price so that you will have American-flag participation?

Mr. GILES. Mr. Kahn, I thank you for those remarks. They go to basic points which I think are generally well known and certainly it has been quoted widely in the papers. The point you are raising is the issue of what is the world price or the shipping price, what is the price that the Soviets will pay. Now, that has been up on many occasions. The fundamental issue was much in the papers before Continental had made their sale.

I would like to put in the record at this point an article carried in the New York Times on January 1. It is headed "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 4.5 Million Tons," an article by Mr. Bamberger. (The article referred to follows:)

[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 4.5 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 42 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.

But the consensus of shipping industry sources yesterday was that, even if all available oil tankers were pressed into service, no more than 1.8 million tons, or 40 percent of the total, could be handled by the U.S. merchant fleet.

There is considerable doubt that the Soviet Union will buy all it originally negotiated for. Even so, the trade sources said, there will not be enough American shipping to handle half of a large grain deal on a short-term basis.

At present the rates for American-flag ships are about $7 higher than foreignflag rates for 10,000-ton vessels and about $4 higher for vessels in the 15,600-to30,000-ton range.

The larger ships are permitted to carry wheat at a 20-percent discount from the rates applicable to the 10,000-ton vessels. For all practical purposes, the smaller ships are said to be disqualified because of the higher rates.

Dry-cargo tramp-ship operators noted that the American tramp fleet consisted of about 115 active vessels. About 20 units were said to be larger vessels in the 20,000-ton class and the remainder Liberty and C-2-type ships in the 10,000-ton range.

Unless additional American-flag tonnage is made available—presumably tankers that would be diverted from carrying oil-the dry-cargo tramp fleet could carry only 15 to 20 percent of a large-scale wheat export program to the Soviet Union.

Whether tankers will be diverted in large numbers to grain carriage appears doubtful, many U.S.-flag vessels are profitably employed carrying refined products over coastal routes at favorable freight rates.

However, some tanker tonnage, particularly in the supertanker class, was said to be available. This could be supplemented, to some extent, by carrying grain shipments in vessels owned by subsidized steamship lines. These ships are normally employed on fixed routes.

Earlier this month one grain cargo to Hungary was moved by a subsidized vessel.

However, even if large tankers and some subsidized tonnage were brought into play, only 30 to 40 percent of the wheat exports could travel in American ships.

The shipping industry views were expressed in response to inquiries concerning the granting of two export licenses by the Department of Commerce to Continental Grain Co.

The two licenses authorized the sale of about 700,000 tons or $40.6 million worth of wheat, to the Soviet Union. It would be a cash transaction.

A spokesman for Continental said here yesterday that no negotiations were being conducted now. He said that the company was not looking for tonnage to cover that shipment, but added that a few unsolicited offers of American-flag ships had been received.

He said the sale of the 700,000 tons was "just a big question mark" now. Shipping industry sources referred to the Continental licenses as "hunting licenses" and explained that the issuance of a license was no guarantee that any "game would be bagged."

It was recalled that when shipment of 100,000 tons of wheat to Hungary was made earlier this month, only 9,000 tons of it could be booked on American-flag vessels. A waiver was granted by the Maritime Administration to permit 41,000 tons of that shipment to travel in foreign-flag ships.

Other potential obstacles to large-scale sales of wheat to the Soviet Union were said to be:

Soviet unwillingness to pay the higher freight rates for American ships. The ability of American tramp ships to keep busy with cargoes through Government-sponsored exports of agricultural surplus commodity exports under Public Law 480.

Doubt as to the ability of Russian ports to handle large tanker-borne grain shipments, which may require special pneumatic unloading equipment.

The possibility that American maritime labor might boycott foreign-flag ships carrying wheat to the Soviet Union. The Seafarers International Union earlier this month made an unsuccessful attempt to delay through picketing a West German vessel carrying Hungarian wheat.

Industry sources said they did not anticipate any relief in the situation from the authority granted the Administration on Monday to allow Export-Import Bank credit guarantees for commercial wheat export transactions.

Mr. GILES. I refer to that, Mr. Kahn, to make this point: All of us, I am sure, recall the government-to-government negotiations on the principle, and we recall the position that Soviet high officials took, that American officials took. Rightly or wrongly, the decision was made by the U.S. Government last September and October, by the late President Kennedy, that if there were any sales of wheat to the Soviet Union, they would be made through what we call private channels, grain exporters.

And then, proceeding from that point, it was going to be up to the individual exporter to strike his bargain with the Soviets. That is what it has been.

Now, what you are suggesting is that the United States should have taken the position, or should take the position, that whatever it takes to cover the differential in American shipping costs or prices, then that is it, and if the Soviets want it, then they buy it. If they don't take it, then they don't. I think the grain exporters have found out, and I think that U.S. officials have, after exploring that quite thoroughly over a long period of time, that perhaps the Soviets didn't want or need the wheat that badly.

Now, we can have different points of view as to what the basic policy of the United States should have been. I just want you to know or to remind you that there, in December and the first part of January, before Continental ever made its sale, there were a lot of shipping owners-you weren't one of them because I don't recall you-a lot of shipowners who were very apprehensive that this was, in fact, going to bog down completely on shipping costs, and instead of coming in to me and talking about, "Let us be darn sure that the Soviets are going to do so-and-so," I heard much talk about "Let us work this out some way; the Soviets are not going to do it."

Now, where do we come out? All I am saying is that you have basic points of view here that are rather irreconcilable. The basic point came up early as to whether there should be some sort of direct, out-and-out subsidy for American shipping. Perhaps many could make the argument that there should be. But that basic policy decision was not made by those in our Government who have the authority to make it, and I do not.

So we got the framework set up, we moved along. It so happened that Continental or somebody came up with this Durum wheat item and you can put your own interpretation on that. All I will say is that to the best of my knowledge, the grain exporters on the basis of what I know about it, they struck the best deal they could. If they had continued or stuck with the position you have described, there would not, so far as we can tell, be any sales of wheat. Many of you will say, "That is all right; there shouldn't have been." But then we get to the question of difference of opinion as to what we really ought to do.

There are a lot of people in Congress who say, as is evident in what has happened in legislation, that it does not make any difference; there should not be any sale even if 100 percent went on American vessels, even if they paid twice the going world price, or all of the rest of it. There are a lot of people who feel just exactly the opposite.

So here in the Maritime Administration, what we have done is to take the basic policy decisions that have been made and then try to implement them or help the parties carry them out so far as the shipping.

Your point of view is a rational and logical one, but that just is not the way it turned out because of these other more basic decisions made. Mr. KAHN. One more comment in answer.

Mr. GILES. Yes, sir.

Mr. KAHN. I agree with you on several points. First of all, I agree with you on the subject that there is just so much you can make the Russians pay. I agree with you that the business is good for the country. We are not discussing that phase of it, but you have implemented a policy under ground rules which presumably were to permit a good deal of American-flag participation.

I would like now to ask a question: Under the same rules, would this new million tons of wheat sold by Cargill, how can you anticipate that this policy will work wherein there will be any reasonable amount of American-flag participation?

Mr. GILES. What is the basic question you are raising? Are you talking about the time period?

Mr. KAHN. Because the type of ship that was really to have performed or moved the largest amount of this wheat is today excluded from this movement.

Mr. GILES. Mr. Kahn, on that point of your competitive interest, between the smaller vessels and the larger

Mr. KAHN. It is not competitive interest.

Mr. GILES. You know our point on the Public Law 480. As I have indicated previously, where it turns out that the larger ships are excluded from the Soviet commercial shipments, then they are not by advice of Maritime Administration excluded from Public Law 480. But I could not take the position and still cannot, as I was requested some weeks ago, to let the larger vessels have their choice as between the commercial shipments and the Public Law 480.

So I assume on that point we will have to be following along with any further shipments, along the same line we have here with Continental. I would like to ask, if I may, sir, this one specific question:

As you know and have seen in the papers, Captain Goodman and his staff have been working with this and I am going to ignore myself at the moment-have been charged with collusion. Do you have any opinion as to whether you think that charge is correct?

Mr. KAHN. I think that Captain Goodman would verify that the first time that I spoke to him on the telephone in about 4 weeks is last night. Is that about right? So I would say the charge is irresponsible. I don't believe there is any collusion. I will answer it that way.

But I have not been telephoning Captain Goodman back and forth. I just sent him one Telex as per request as to what I offered, and that is it.

Mr. GILES. The charge was also made, and very widely publicized, that Captain Goodman and his staff-it did not name names, but it said "the staff working on this"-were incompetent.

Mr. KAHN. This is a very difficult question to answer. I think that this program is incompetently administered, if I have to answer it honestly.

Mr. GILES. What do you mean by "incompetently administered"? Mr. KAHN. Because it is not accomplishing its purpose.

Mr. GILES. You mean incompetently administered by the people who are making the decisions from day to day because they have flexibility to make other decisions and don't do it?