Mr. KAHN. Mr. Giles, you know, I have gotten myself in a bad way with the Maritime before and I don't want to get into that. I just feel, you know, that the basic policy is wrong the basic policy. I think there is little understanding of what is required in a change of policy to really get this cargo moving. I just don't think that this has been properly administered.

I think that there has been good will on the part of everyone who has had anything to do with it and I am very sympathetic with the complexity of the problem.

Mr. GILES. Assuming that Captain Goodman and I do not make this basic policy you are talking about, which I would like to state for the record is the fact, but we do have the day-to-day job of carrying it out, do you have any opinion as to whether that has been carried out by Captain Goodman and his staff incompetently?

Mr. KAHN. No, sir; I think it has been carried out competently. If you have a set of rules and have been following them, I think that you have tried to stick by them, there is no question about it. But I just feel someplace along the line, and I don't know how high I have to go, but someplace along the line someone is sure not doing what he is supposed to be doing or thinking through the problem and I would like to meet that person and I would tell him so straight to his face.

Mr. GILES. I understand your position pretty well I believe. Mr. KAHN. Again today I promised I wouldn't say it but I did. Mr. GILES. Mr. Kahn, I think it has been good that you have said it. You say it well.

Mr. KAHN. But I said it twice.

Mr. GILES. Well, these people didn't hear it. I heard it twice but they didn't hear it but once. Thank you very much, Mr. Kahn. Mr. KAHN. Thank you sir.

Mr. NORDEMANN. Mr. Kahn, not for the part you said you were sorry you said again, but the rest of it, thank you very much.

Mr. GILES. We have one final shipowner and this is Victory Carriers' Mr. Peter Spalding. Is Mr. Spalding here, please? Mr. SPALDING. I believe it is not around any more. That ship is not around any more. I did not know that we would continue negotiations.

Mr. GILES. Is this Mr. Spalding?

Mr. SPALDING. Yes.

Mr. GILES. This is Mr. Peter Spaulding; S-p-a-u-l-d-i-n-g?

Mr. SPALDING. S-p-a-1-d-i-n-g.

Mr. GILES. And Victory Carriers, Inc.

STATEMENT OF PETER SPALDING, EXECUTIVE VICE PRESIDENT, VICTORY CARRIERS, INC.

Mr. SPALDING. Mr. Chairman, I had no idea I was to come down. here for the purpose, or with the possibility, to continue negotiations on the Montpelier Victory which we had offered to Continental. I therefore tried to obtain employment for the ship. This must be my lucky day because my office just advised me about a half hour ago that the ship has been fixed. Otherwise I would have been able to help out our friends in Continental and would have been willing to give them the ship ready on February 13 for 36,000 tons of grain

which I had offered over the last 3 or 4 weeks to do. If you think that I can be of any help here

Mr. GILES. Then you have no ship in issue or in controversy.
Mr. SPALDING. Indeed not.

Mr. GILES. While you are here, Mr. Spalding, if you have any general comments I would certainly be happy to have them for the record. If you don't mind, I would like to ask you these same specific questions I asked Mr. Kahn, if you would like to consider them. If you prefer not to get that specific in personalities that is all right.

But as you know, we have had a rather serious charge-again I am ignoring myself personally-it is very specific, a very serious charge against Captain Goodman and his staff.

Very specifically it is that, "We are convinced from its failure to protect the public interest and the rights of the U.S. merchant marine that the Maritime Administration, either in collusion with Continental or," and I am skipping the Administrator "that portion of the staff charged with supervising this program are completely incompetent."

Now you have an important shipping operation and you have a good deal of dealing with this agency and this staff. Do you have any opinion which you would care to express as to whether you think or you know there has been any collusion on the part of Captain Goodman and his staff?

Mr. SPALDING. Mr. Administrator, I almost missed the plane this morning. I wish I had. But I would be less than fair if I would not state in this connection that I have always had the highest regard for Captain Goodman. There is no question about his integrity, his ability, and his very sincere determination to help the American merchant marine.

You referred to, I don't know which dictionary, probably Webster's, for definition of the word "collusion" and you seconded the motion of Mr. Kahn's. Surely there was no collusion of any kind. But having said so, you will pardon me if I say that I think this program does need tightening up.

Perhaps we are faced here with a situation which called for fairly quick decisions which could not be handled very much differently from what it was.

Furthermore, I understand you always know exactly on Monday morning how the football coach should have instructed his team the day before but I wish to state that I would not only have been able but I would have been most anxious to carry these 36,000 tons of cargo which Continental Grain now still wants to cover.

In this respect if I may make two points not to be considered directed against anyone but I hope that perhaps in the future it may help to tighten up this program in the interest of everybody concerned, including our grain merchants, because it seems to me that this program might continue for a quite a while, might also be expanded quantitywise and in that case we had better face the issues squarely. Now in regard to the negotiations which we conducted on our ship since the beginning of January: I believe we made the first offer about January 7, when we offered at the Administration rate of $18.02. Sure, I am supposed to do a job for my company. Therefore I did not go along with all the terms of the tender in the beginning. As a matter

of fact, at that time there was no tender. Later on I adjusted my offer very close to the terms of the tender, all within $18.02.

At no time at all did Continental concede the rate of $18.02 but insisted all along, I believe as late as a few days ago, on $17. In that respect and may I offer this as advice perhaps to the grain merchants, I think this rate of $18.02 has been established by the Administration after very, very careful determination of all factors.

I believe there is no one who will complain that the owners are getting rich on it. As a matter of fact, I can assure you that if we had carried this cargo at $18.02 on basis of the tender terms we would have incurred a loss of several hundred dollars a day based on our running expense and debt service only provided everything would have been anywhere near normal during the voyage. If we would have had any bad surprises, and I would like you to bear this in mind because I would want to revert to this point in connection with the rate of demurrage, our loss would have been increased very sharply. Now, I do not think that the grain companies do themselves a favor in holding out on the rate. As a matter of fact I don't think they should have the right to do that. I think there is only one authority who will decide whether the rate of $18.02 is too high for any given ship and that should be your office, Mr. Administrator. That is one point I would like to make.

Second, there were two more items that were open for negotiation as far as the tenders were concerned. As I said in the beginning I "tried to get away with something" and I was bold enough to ask for 33 feet draft on arrival at discharge port. As captain Goodman will bear me out, the tender stated maximum draft on arrival 32 feet but also stated that offers on increased draft would be given fair consideration. Well, Continental turned me down on that and insisted on 32 feet and came back and offered me $17. I went back at the time and tried to explain in my counteroffer that I could not possibly consider anything below my rate since I was supposed to carry about 10,000 to 11,000 tons of cargo less than than the ship actually was able to carry. However if charterers insisted $17, I was willing to accept it provided charterers would arrange that the ship may arrive at discharge port with a draft of 36 feet. And in order to be fair and in order to give Continental a fair chance to investigate this properly I stated that I would leave our offer on basis of $17-and 36 feet draft-with charterers long enough to give them a chance to check on the draft with the receivers.

I believe the telegraph line offer was made on a Friday afternoon and I stated I was willing to leave the ship with them until Monday morning. In the end we offered the ship time and again on the same basis. Continental always came back with a counteroffer of $17. In addition they told us that our offer was not responsive to the tender, probably because we were still holding out for higher demurrage. In addition they also stated that the draft and dimension of our ship were not acceptable.

That I could not understand. We had agreed to 32 feet draft as the basis of $18.02 freight rate. Furthermore, I believe, as Captain Goodman knows, one Italian vessel, the Primo, was accepted last October by the Russians through their agency in London with 32 feet arrival in the Black Sea but otherwise with dimensions larger than our vessel.

So I do not think that the charterers had a valid reason to reject our vessel.

Now, I am coming to the demurrage rate, Mr. Administrator. I put in a very urgent plea to you that this be reexamined. Our friends Continental Grain stated that they have to protect themselves against demurrage they are incurring for the grain if the ships do not keep exactly their readiness date. In this regard, if I have your permission, I may briefly quote what I Telexed yesterday to Captain Goodman:

As it is well known, demurrage rates are supposed to compensate vessels for delays during loading and discharging operations over and above the laydays allowed as per charter terms. Any demurrage rate in order to be realistic and equitable therefore must allow the vessel approximately the same daily return as inherent in the agreed charter rate and such is only an extension of freight. In the case of our vessel as you are probably aware our daily running expense amounts to more than $6,000 without any allowance for overhead.

Now the rate of $18.02 was determined based on an estimate which Captain Goodman has prepared and I have no quarrel with it. We were not supposed to get rich with this program and we don't get rich as I pointed out. But this means that Captain Goodman allowed in his estimate precisely the loading and discharging rate which we are supposed to get under the charter.

Let us say that such allowed time for loading and discharging totals 20 days for a specific vessel based on this size. What business do we have, or rather why should we be expected to allow that our ship be retained at port, so to speak, as a storage vessel over and above the allowed rate at a demurrage of $1,500 per day if the vessel costs about $6,500 a day? That makes the agreed freight rate absolutely useless. We heard from our friends at Continental Grain that they have information relating to a serious congestion in the Black Sea. We know if this program develops we will probably encounter serious congestion in our own ports.

Why, since we are supposed to and we are willing to accept a ceiling rate which is a very low one, why are we supposed to accept demurrage rates which have no resemblance to the freight rates?

These are the points I think where we could tighten up the program. Mr. GILES. Thank you very much for those suggestions. They will be carefully considered again, Mr. Spalding. I think on your demurrage pont you are talking primarily of your larger vessels, 36, 40 ? That is where your real problem comes in, your larger tonnage.

You said $6,000 a day. What size vessel?

Mr. SPALDING. The vessel we are talking about is the Mount Washington, or similar type vessel like Montpelier Victory.

Mr. GILES. Keep in mind and this is a point that I know there has been some confusion on. Under our rate guideline sheet that we put out we clearly specified, we clearly set out there that the rate for vessels over 30,000 tons is subject to consultation. That is not specifically set. We had in mind trying to work out the same general arrangements or considerations for larger vessels that we customarily do on the Public Law 480.

It just so happened that for one reason or another we never got to that specific situation where we could say, "Well, here is a 36,000tonner or 45,000, now let us sit down and work it out."

All of your suggestions are well made and certainly will be given our consideration in any future activity that we have on this. Mr. SPALDING. Thank you very much.

Mr. GILES. Thank you very much for coming.

Now I am very happy to make this announcement which some of you may note, which is news, good news to the shipowners. You recall that there has been a question about the tonnage used, the tonnage used on the Soviet side and whether or not the preferential or most-favored-nation treatment would apply to these U.S. ships.

The background on that, just to summarize it briefly, is that in 1934 we had an agreement between our two Governments, an executive agreement which in literal terms seemed to provide for this mutual most-favored-nation treatment for our ships.

During the war years many American ships went into Soviet ports and this lower tonnage rate applied. During the war years many Soviet ships came into U.S. ports and the same applied. The few Soviet ships that have been in the U.S. ports since 1945 have received, as a matter of fact, the lower tonnage due rate. The situation factually has been spotted on the American side during the last few years. Some American ships that have gone into Soviet ports and there have not been many of them, apparently simply did not raise the issue and they went ahead and paid on the Soviet side at the higher rate. It was against that factual background that the State Department had a quite difficult situation to work out to get the agreement. This was a matter which had to be worked out government to government.

I just have a note put before me from the State Department that they do now have this resolved and the Soviet Government has definitely agreed that all U.S.-flag ships will have this most-favorednation treatment on the tonnage dues.

That means quite a bit of potential income to many of our vessel owners because the higher dues are quite a bit, several times the regular

rate.

Just to summarize, ladies and gentlemen, on the ships in controversy. As you will recall, the last one we mentioned, the large ship from Victory Carriers, Mr. Spalding has had to withdraw that because he got other business. I will not enumerate-maybe I should as a matter of information.

We started out this morning definitely with 311,900 tons fixed. I indicated as a tentative conclusion that the marine vessel owned by Mr. Dowd should be worked out. I indicated as a tentative conclusion that the Elimar owned by Mr. Dowd could not be worked out.

That was the tanker to Nakhodka. I indicated that the Bincarrier vessel, a T-2 tanker owned by Mr. Obershol, because of the Gulf Sea limitation could not be worked out. I indicated that the National Defender, 50,000, is still open, subject to further checking on this size and draft. I indicated that the Transbay, 15,700, owned by Mr. Kahn, could not be ruled acceptable as a tentative decision because it was limited to the gulf. But that the Transhartford, though not strictly within the time schedule, would seem to be acceptable and that was a tentative conclusion.

That is the summary as I understand it on all of these that are still open. The record is open and I will reserve, I would like to reserve the right to discuss these further tomorrow morning with the shipowner or his designated representative and with Continental.