Rates are based on following conditions:

From one port of loading to one or two ports of discharge as listed above. Loading and trimming expenses for account of vessel-discharging expenses for account of charterer.

Posted spot bunker fuel oil prices in effect June 27, 1957.

The above represent fair and reasonable voyage charter rates for the transportation of U.S. Government-sponsored commodities on U.S.-flag vessels moving in full cargo lots and do not apply to shipments for private account. Effective: June 27, 1957.

OFFICE OF SHIP OPERATIONS.

Mr. TOLLEFSON. Mr. Chairman, may I just ask one question at this point?

The CHAIRMAN. Yes.

Mr. TOLLEFSON. Has there been any great change in the rates since 1957 ?

Mr. GILES. No overall change, no fundamental change.

Mr. TOLLEFSON. Fundamentally, the rates were the same in 1963 as they were in 1957?

Mr. GILES. That is right; yes sir.

Mr. DOWNING. But haven't the costs gone up since 1957 ?

Mr. GILES. The costs have gone up some.

Mr. DOWNING. Why isn't that reflected in the rate increase?

Mr. GILES. The rates that were originally set up in our computation allowed for approximately a 10-percent profit margin, net profit margin, and many of these vessels in the Public Law 480 cargo, a large number of them, have relatively low, very low, capital investment. Of course some of them, the newer vessels, have relatively high capital investments.

Over the years the actual experience under that program showed that these vessels were being chartered at rates under our published guidelines. There was a degree of competition in the American market. I know that a good many of our shipowners have said, and they have said in the last several months to me, "Well, we should have had our rates revised," and "We have had these since 1957," and so on. My answer to them was this: "I have been here since January 1961, and others in the Department in the policy positions, and this question has not been raised with us a single time, about revising these rates. It hasn't come up until our present situation. Of course, when we get into this in October and November, we don't feel that it is practical for the Government at that time to revise these rates upward because that certainly would be calculated to make our sales more difficult to the Soviet Union," and it would have pinpointed the entire blame in my opinion on the shipping industry if we had done that.

Everybody would have come back and said, "Well, if this falls through it is all because of shipping," so I think the answer to your question, sir, is that, while there very well could be some justification for some revisions in some of these categories, the shipowners have not really come forward to my knowledge in the last 3 years and made this a point of issue. This hasn't come to the Commerce officials' attention, anyway.

Mr. HAGEN. Mr. Chairman?

The CHAIRMAN. Yes.

Mr. HAGEN. I am sorry I wasn't here when you started.

The CHAIRMAN. Since the witness does not have a prepared statement, I think we ought to make some notes and let the witness go over his 10-minute statement and then we come back with any questions.

Mr. HAGEN. I notice in the document you have with a cover of November 14, you have guidelines from North Atlantic and gulf ports but none from the Pacific coast ports. What is the reason for that?

Mr. GILES. That is right. We had not had a request at that time, sir, for Pacific port rates.

Mr. HAGEN. That has been accomplished subsequently?

Mr. GILES. Yes.

Captain GOODMAN. Yes, it has been given out. We just haven't published it yet.

Mr. GILES. Mr. Chairman, on November 8 then, after discussion with representatives of the four shipping associations, we announced our conclusion to publish this minimus 20-percent rate. We discussed with them at that time the basic idea that, in order to enable the grain exporters to count on the lowest American costs that we could make available for the shipping, the larger ships would be available at this minimus 20-percent rate.

I am simply referring to an article, which I believe was in the Baltimore paper, and one also in other papers, where I think the owners indicated at that time that this approach seemed to them to be reasonable. That was the general sentiment at that meeting. That doesn't mean that they fell over with joy because we were suggesting a minus 20-percent lower rate there. I don't mean to give that implication. What I do mean to say is that we discussed this out with the shipping people. We explained our reasons. We considered their advice and counsel, much of which was very helpful to us, and I think it is very fair to say that we met with them in a spirit of reasonableness, and at that time they felt that what we were doing was reasonable and was supported by the facts.

It was an effort to make American-flag shipping available to handle at least 50 percent of this shipment to the Soviet Union. We had arrived at that 50 percent also in consultation with representatives of the shipping groups and it was generally agreed-I think there was a general sentiment among the group-that that was a reasonable percentage to peg it at. I don't have it before me, but I would just like to mention that within the last 3 or 4 weeks I have seen an item in some New York paper quoting some shipping source-I don't believe it was identified--which indicated that they didn't think there would be physically enough American shipping available to handle even the 50 percent if we made the contemplated 41⁄2 million ton sale to the Soviet bloc countries, but, nevertheless, we have set the 50 percent because we felt that we had to have a guideline.

We had to have something certain for the exporters to count on. Now, sir, I would like to refer to another export bulletin of November 13, and our basic authority for handling these shipping arrangements of course goes back to the Export Control Act.

As the committee may wish to just have this put before them, the President made a basic policy decision with regard to the conditions on these exports, and the Export Control Act provides that the Presi

dent may, to further the foreign policy of the United States, and to aid in fulfilling our international responsibilities to exercise the necessary vigilance over exports from the standpoint of their strategic and economic significance, the President may export on such terms and conditions as he deems reasonable and necessary.

That is the essence of the language. So the Maritime Administration's authority with regard to these shipping matters goes back to the authority delegated to the Secretary of Commerce in supervising and policing exports. So the Export Control Bulletin No. 883, which we will have for the record, dated November 13, was published. (The document referred to follows:)

CURRENT EXPORT BULLETIN

No. 883

SUPPLEMENT TO THE COMPREHENSIVE EXPORT SCHEDULE

U.S. DEPARTMENT OF COMMERCE,
BUREAU OF INTERNATIONAL COMMERCE,

OFFICE OF EXPORT CONTROL,
Washington, D.C., November 13, 1963.

Subject: Exportations of Agricultural Commodities to Subgroup A Destinations.'

PURPOSE AND EFFECT

Current Export Bulletin No. 881, dated October 11, 1963, announced that where specified conditions were met, the Office of Export Control would give favorable consideration to the issuance of export licenses covering the exportation of agricultural commodities and manufacturers thereof to certain Subgroup A countries.* Subsequently, in a press release dated October 18, 1963, the Department stated that the shipping restrictions were to apply only to wheat and wheat flour. Today's Bulletin makes further revisions in the licensing conditions for agricultural commodities and manufacturers thereof moving to these Subgroup A countries.

Exportations of Wheat and Wheat Flour

In compliance with the President's original announcement that this wheat and wheat flour will be carried in United States flag carriers as available, and pursuant to a finding by the Maritime Administration as to the amount of suitable United States flag carriers not required for hauling Public Law 480 type cargoes, and which will be available for shipment of commercial transaction commodities to the Subgroup A countries, at least 50 percent of the wheat and wheat flour will be exported on United States flag carriers. If a United States flag carrier is not available at reasonable rates, the exporter must obtain prior authorization from the Maritime Administration to ship less than 50 percent on United States flag carriers.

In addition, upon completion of shipping arrangement for all the wheat and wheat flour to be exported under an export license, the exporter is now required to notify the Maritime Administration of the export license number, the name(s) of the carrier (s), the carrier's flag of registration, and the quantity of each shipment. Communications with Maritime Administration regarding these provisions should be addressed to the Office of Ship Operations, Maritime Administration, 441 G Street, N.W., Washington, D.C., 20235.

The applicant's certification required on the license application has been modified to include the shipping commitments set forth above and to include a statement that the wheat or wheat flour proposed for exportation was produced in the United States. Additionally, all details of the financing arrangements, in

1 The reporting requirements contained herein have been approved by the Bureau of the Budget, in accordance with the Federal Reports Act of 1942.

These Subgroup A countries are Albania, Bulgaria, Czechoslovakia, East Germany (Soviet Zone of Germany and the Soviet Sector of Berlin), Estonia, Hungary, Latvia, Lithuania, Outer Mongolia, Rumania, and the Union of Soviet Socialist Republics.

Icluding the names of financial institutions or facilities participating in the financing, must be included on the license application. If the financing arrangements are not completed at the time of application submission, the applicant shall state on the license application that the Office of Export Control will be provided this information promptly as soon as the financing arrangements are completed. Further, the name and address of the supplier is no longer required on the license application (item 10 of application form).

In another revision of the regulation, the Office of Export Control will now give favorable consideration to a license application in which the export transaction has not been registered with the Department of Agriculture at the time of submission of the license application provided that the exporter undertakes to notify the Office of Export Control promptly when the registration is made.

As previously announced, no American exporter will be permitted to participate in these wheat and wheat flour export transactions to an extent greater than 25 percent of the total quantity expected to be purchased in the United States. Exportations of Other Agricultural Commodities

The applicant's certification on a license application covering the exportation of any agricultural commodity or manufacture thereof, other than wheat or wheat flour, now specifies only that (1) the terms of sale will be cash or normal commercial credit, (2) the exportation will not be financed under Public Law 480, (3) the sale does not involve the exporter in any barter arrangement, and (4) the commodities were produced in the United States. In addition, the applicant is required to disclose on his license application the specific terms of sale, i.e., cash, credit and credit terms as well as the details of the financing arrangements, including the names of the financing institutions or facilities participating in the financing; and to accompany his license application by a Form FC-842 completed by the foreign purchaser. If the financing arrangements are not completed at the time of application submission, the applicant shall state on the application that the Office of Export Control will be provided this information promptly as soon as the financing arrangements are completed. These revisions apply to any agricultural commodity or manufacture thereof subject to license, other than wheat or wheat flour, whether or not price-supported or subsidized for export.

It is pointed out that the restriction regarding the 25-percent participation in export licensing by any one American exporter was and still is applicable only to the licensing of wheat and wheat flour. Similarly, the shipping restrictions apply only to wheat and wheat flour.

Requirement for Additional Copy of Declaration

The exporter is required to present to the Collector an additional copy of the Shipper's Export Declaration upon clearing a shipment of any agricultural commodity or manufacture thereof moving to a Subgroup A destination under authority of a validated export license.

Exportations Under General License GLSA

Exporters are reminded that any agricultural commodity subject to the provisions of General License GLSA (see § 371.24 and Supplement No. 1 to Part 371 of the Comprehensive Export Schedule) may be exported to the Subgroup A countries listed in footnote 2 above without the need for submitting a license application or obtaining an export license from the Department's Office of Export Control.

Accordingly, §§ 373.5 and 379.3(c)(3) of the Comprehensive Export Schedule are amended to read as set forth below.

"§ 373.5

"LICENSING POLICY FOR AGRICULTURAL COMMODITIES AND MANUFACTURES THEREOF COVERING SHIPMENTS TO SUBGROUP A DESTINATIONS AND CUBA

"(a) Exportations and Reexportations to Cuba, Communist China, North Korea, and the Communist-controlled area of Viet-Nam.

"It is the general policy of the Office of Export Control to deny applications for validated licenses to export, and requests for authorizations to reexport, any agricultural commodity or manufacture thereof to Cuba, Communist China, North Korea, or the Communist-controlled area of Viet-Nam.

"(b) Exportations and Reexportations of Wheat and Wheat Flour.

"(1) Destinations and estimated total to be licensed.-The Office of Export Control will issue licenses for exportation to all Subgroup A countries except Communist China, North Korea, or the Communist-controlled area of Viet-Nam. All such export licenses issued will bear an expiration date of May 31, 1964. "(2) Percentage of participation.-No American exporter will be permitted to participate in these wheat and wheat flour export transactions to an extent greater than 25 percent of the total quantity expected to be purchased in the U.S. License applications which meet all the requirements for approval will be processed promptly if there is sufficient evidence that the provisions of the 25 percent participation rule is met.

"(3) Certification.-The exporter shall enter the following certification on the license application in the space entitled 'additional information' or on an attachment thereto :

"'I (We) certify that with respect to the commodities described on this application (1) the price will be on the basis of the prevailing world price at the time the contract is concluded; (2) the payment will be made in United States dollars or gold; (3) the terms of sale will be cash or normal commercial credit; (4) the explortation from the U.S. will not be financed under Public Law 480; (5) the sale does not involve (me) (us) in any barter arrangement; (6) the commodities were produced in the United States; (7) at least 50 percent of the commodities exported under any export license resulting from this application will be exported in United States flag ocean carriers unless authorization to do otherwise is obtained from the Maritime Administration; and (8) upon completion of shipping arrangements for all the commodities to be exported under any export license resulting from this application, the Maritime Administration will be notified promptly of the name (s) of the carrier (s), the carrier's flag of registration, the quantity of each shipment, and the export license number under which the shipment(s) is made.'"

NOTE.-Communications with Maritime Administration should be addressed to the Office of Ship Operations, Maritime Administration, 441 G Street NW., Washington, D.C., 20235.

"(4) Additional information.-The following information shall be included on the license application or on an attachment thereto :

"(i) The proposed shipping date, if known;

"(ii) The specific terms of sale, i.e., cash, credit and credit terms if applicable;

"(iii) All the details of the financing arrangements, including the names of financial institutions or facilities participating in the financing, must be included on the application. If the financing arrangements are not completed at the time of application submission, the applicant shall state on the application that the Office of Export Control will be provided this information promptly as soon as the financing arrangements are completed. The notification shall refer to the application case number, or if the case number is unknown, the export license number, the applicant's reference number, or the date of submission of the application.

"(iv) The name and address of the firm which registered the export sale transaction with the U.S. Department of Agriculture, together with the registration number assigned by the Department of Agriculture. If the export sale transaction has not been registered with the Department of Agriculture at the time of application submission, the applicant shall state on the application that the Office of Export Control will be advised promptly as soon as the Department of Agriculture registration is made. The notification to the Office of Export Control shall refer to the application case number, or if the case number is unknown, the export license number, the applicant's reference number or the date of submission of the application." NOTE. The applicant is not required to complete item 10 of the application with regard to the name and address of the supplier.

"(5) Single transaction statement by consignee and purchaser.-Each application shall be accompanied by a Form FC-842, Single Transaction Statement by Consignee and Purchaser, completed in accordance with the provisions of § 373.65."

NOTE. In accordance with the provisions of $$ 371.4 and 372.12, wheat and wheat flour may not be reexported to any Subgroup A country unless specific authorization is received from the Office of Export Control.