Page images
PDF
EPUB

There cannot be any discrimination, and the exporter must allow at least 5 days for his solicitation and for responses.

Then if he does not get the American shipping he may apply for a waiver, but he has to give us the full information as to what he did, the terms of his solicitation, and the responses he received, and then when we get it we will look at his record of solicitation and at the same time we will put it out ourselves for 5 days on the terms and the conditions that we have published and if we do not at the end of that 5 days have from American shipowners firm offers to take care of the tonnage that is available at the rates we have published on the terms and the conditions that we have published, then the waiver will be granted.

If offers are put in which meet these terms, then the waiver will not be granted. I think it is correct that there is no question or confusion on the part of either of the exporters or the shipowner groups about this procedure.

I think both groups regard it as a fair and reasonable procedure, and by the time we published it we had no question about it and that procedure is what we are going to follow. We are following that procedure on any waiver request that we have. We have not had any waiver request since the Cargill case, so we have not actually had a waiver request under this published procedure which was put out January 7.

The CHAIRMAN. Let me ask you one question about this rate business. You say "at a fair and reasonable rate." Did you estimate in establishing a fair and reasonable rate what would be a fair and reasonable profit for that carrier on this voyage?

Mr. GILES. In this voyage?

The CHAIRMAN. Specifically. Did you go into what it cost the operator and would the rate you set reflect a fair and reasonable profit to the American-flag vessel?

Mr. GILES. Mr. Chairman, the rate structure that we used we took over from the Public Law 480. We didn't think that we could justify setting up an entirely new rate structure for handling shipments of wheat in this program which was different from Public Law 480, so we borrowed from that.

The CHAIRMAN. May I ask at the time this took place did you then go into the subject of whether the Public Law 480 rates do at this time reflect a fair and reasonable profit to the operator?

Mr. GILES. We think so. I am going to ask Captain Goodman. The CHAIRMAN. I am not talking about financing. I am talking about did you estimate it?

Mr. GILES. I would like to ask Captain Goodman to comment.
The CHAIRMAN. Yes.

Captain GOODMAN. Yes, Mr. Chairman, we did. As Mr. Giles said, we took the 1957 rate structure and, as one of the gentlemen said before, costs have gone up and we know they have. There is no question about it. But in our 1957 rate structure there were factors in there that are not present now, such as the cost of fuel oil was in excess of $5 a barrel in 1957. It is now about $2.10 so there were many compensating factors between 1957 and today.

To check ourselves against this we actually took types of ships, Liberty and T-2 tankers, and ran them through the same procedures with the existing factors to satisfy ourselves that the 1957 rate struc

ture was fair and reasonable and also had the same profit margin in it that they had in 1957, which is 10 percent of the capital invested. That is what we figure the profit margin is in the rate structure. The CHAIRMAN. All right. Go ahead.

Mr. PELLY. May I ask Mr. Giles a question on that point?

Mr. Giles, are the draft limitations of certain Russian ports such as to almost exclude some American operators from carrying grain under the preference that you give to the larger vessels?

Mr. GILES. Mr. Congressman, this leads to the next point I was going to get into with the Continental sale. Following the publication of our waiver procedure, shortly thereafter, Continental announced that it had this contract for a million tons, and that meant 50,000 tons to go on American-flag vessels if they were available.

Initially in its tender which Continental put out for American shipping they had a restriction in there, vessels with 31-foot draft and less. When that came to our attention we got in touch with them promptly. We have had several conferences with them on these various matters, and we asked about that. They indicated, "Well, this is what the buyer prefers. He would rather have the smaller vessels, and it makes his discharge problem less on the receiving side" and so on, and "We would have difficulty in working out larger vessels."

Well, I looked at the figures and showed them that, if we stuck strictly to that restriction of 31-foot draft or less, we would be eliminating approximately two-thirds of the American-flag tonnage in the larger vessel category, and I indicated my view that I did not think that that could be regarded as a reasonable condition on the part of the exporter for purposes of passing on a waiver, so I suggested, "Now, if you have to stick with that, then we have a lot of vessels that are under 31-foot draft. We have just a whole lot of Liberty ships and smaller ships like that and if they have to come in on it, though, they would have to get the very top rate, and I think you ought to go back and see if you can't work this out and get far more flexibility on the draft."

They had to take 2 or 3 days to check into it and they thought that they could work out some more flexibility and so we finally agreed with them and they agreed with us that they would put out an amended tender which would not have any specific restrictions on draft. We didn't think there should be one. We did say, "Well, you can indicate your preference about the size of the ship, but you have to consider every ship regardless of draft and then when we see what is actually offered, if you have to apply for a waiver, we will have to look at the exact facts of that and if you have facts which will support turning down a given ship on the basis of draft, then we can act on it, but you are going to have to have the facts to back it up."

Now, as to the Russian port conditions, I would like Captain Goodman to comment specifically on that and just give in a word what his information is as to the draft conditions at the Soviet ports. Captain GOODMAN. I think, Mr. Pelly, No. 1, shortly after that Continental did fix one of the large supertankers at a 32-foot draft, 30,000 tons at 32-foot draft. This was shortly after their initial 31foot-draft limitation that Mr. Giles was talking about.

It is our information that at the port of Odessa, which will be one of the main ports that will be used, the actual port has a draft of 33 feet. The port of Nakhodka, which is the only port they expect to use from the west coast, has a draft of 34 feet. These are the actual port conditions inside the port.

I might say Novorossisk too, which will probably be another one of the big ports in the Black Sea, has a draft somewhere in the same 33-foot range.

In addition to that, like many ports throughout the world, though, they have anchorages. For instance, Odessa has an anchorage up to 54 feet. This is not the most desirable way to discharge cargo of course. Most any port authority would like to bring it right up to the dock, as the most desirable way, but, as I say, in many ports of the world cargo is not necessarily always unloaded that way and some of the large supertankers do not enter the ports at all. They anchor off the port and the cargo is lightered into other ships and brought into the port.

This is what Mr. Giles had in mind when he told Continental that they would, in effect, have to prove to us that the larger ships just could not be handled.

Mr. PELLY. I thought I was informed that Nakhodka had only a draft of 31 feet and under conditions that have been described that it would practically exclude any but foreign-flag vessels as the smaller American-flag vessels because of their higher rates would not be considered and the larger vessels couldn't get in.

Therefore, it would give the business to the foreign-flag operators. Captain GOODMAN. I think, Mr. Pelly, what it amounts to is, it is a question there of what type of figures do you use. The actual published figure for Nakhodka in world type publications is 34 feet. The 31-foot-draft limitation which they would like to impose is a restriction in relation to certain docks, if you follow me, where they would like to unload this, but this in our opinion cannot be construed as the limiting factor for the entire port.

Mr. PELLY. If a grain vessel goes in there it could only go to certain docks, and if those docks allowed only a 31-foot draft, you would consider it a 34-foot draft? It seems to me that constitutes a shutout for the larger vessels.

Captain GOODMAN. Oh, no, sir. Take your Russian ports, for instance. With the importation of grain in Russia all of their equipment is now working in reverse. Russia was not an importing grain nation. All of their dock and port facilities were for export, and, of course, a great deal of the Russian transportation system is through their system of cabotage, and small craft, and so forth, so in our opinion there is nothing unusual about discharging a large ship into lighters, into their inland transportation system small craft which they are going to have to use, anyway.

Mr. PELLY. Are there any lighters in Nakhodka?

Captain GOODMAN. I can't imagine, Mr. Pelly, any port in the world that doesn't have lighters. I wouldn't say they do have. I don't honestly know that particular point, but I can assure you in all of the rest of Russia that is the main part of their merchant fleet, small craft rather than their new large ones.

Mr. PELLY. I hope on the Pacific coast if our American-flag vessels are under some difficulty that you will consider the point that I have raised, and I think from what Mr. Giles said you don't intend to shut out our American-flag vessels.

Mr. GILES. Yes, sir; we are trying to follow that.

Captain GOODMAN. I think just the other day on the Niagara one of the big ships either 32 or 33 feet actually was fixed for Nakhodka, firm and fixed 22,000 tons from the west coast to Nakhodka.

Mr. GILES. Mr. Chairman, this draft limitation and then some other matters between the charterer, that is, Continental, and shipowners about demurrage rates, insurance features, who is going to have overtime or who is going to be responsible for it, and a myriad of detail which can be involved in a ship charter, all of that had to become involved in discussion with the Maritime Administration.

I initially took this view, which I expressed to both the exporters and shipowners. I told them that the Government had been called on in effect to set the rates. I hoped that we would not have to get in and pass on or in effect determine each and every little detail which could be involved in a ship charter.

On the other hand, if the parties cannot get together and if the whole thing is bogged down and if we have to make a decision, or if we would be called on to make a decision on these various points in processing a waiver application, it made more sense to me to go ahead and try to give them a judgment in advance; that is, before anybody had to file a waiver application.

So we got involved in a great deal of that. We got from both, exporter groups or Continental, and from the shipowners, principally, AMA, their views about these various conditions and on January 17 we published a rather detailed release in which we felt that we had covered most of the details which had been in controversy or which would be, and before putting that out we had considered the views of both of these groups. We had received from AMA in writing a specific list of their recommended conditions. This is dated, Mr. Chairman, January 17, "MA Lists Terms for Charter Offers for U.S. Ships," and I am referring to that, sir, only to indicate the amount of detail that we were called upon to look at and make some judgment on. Some of those items in our discussions we had to disagree with Continental about.

We said that we just can't agree with you on this, for example, on the draft limitation, and there were some other items. On some of these we could not agree with the shipowner recommendations. For example, on demurrage rates the suggestion was made by AMA that the demurrage rate should be entirely in the owners' discretion; that is, the owner of the vessel.

Well the standard demurrage rate for vessels, the standard that applies to the Public Law 480 program, is $1,500 a day and we were willing to consider something above that because of the fact that these shipments were fairly new and shipowners did not have the experience in these areas that they had in other areas of the world, but the suggestion that that should be entirely in the discretion of the shipowner I think was perhaps a little bit facetious.

At least we certainly couldn't agree with it because if a charterer agreed to that term, the shipowner could say, "Well, I want $10,000

a day," or "I would like to have $100,000 a day," most any absurd figure. I cite that as simply a point in our review that we couldn't agree with the shipowners on.

For example, on demurrage after considering the views of both parties we suggested to them or told them, then finally had to decide and put out, that $2,500 a day is fair and reasonable to both parties, and Continental after considerable objection indicated that they would certainly try to live with that.

At this point, Mr. Chairman, I do not know of any single item involved in these terms and conditions which the shipowner could say is discriminatory as between American vessels and foreign vessels. I do not at this time have one single item where they have shown me that is the case. There is a question, for example, on the matter of port dues, and fees, and taxes. We are trying to get more information as to exactly what that is and what the fees and taxes are at the Soviet ports. The real question involved here, and which I think Representative Findley alluded to, is whether or not American vessels will have the so-called favored-nation treatment in the Soviet ports. It is a general practice in shipping circles for various nations to have treaties of commerce and friendship, and as to those nations that we have such treaties or agreements with, our fees for that nation's ships that come into port are going to be less than for a nation with which we don't have such a treaty, and the same applied to our ships that go into their port.

The United States follows that practice. As to ships coming into U.S. ports from a country with whom we don't have such a treaty of commerce and friendship our port fees are going to be higher for the vessels of that nation than they will be for another, and our view on this particular point right now is that we do not want any discrimination.

There has been some indication that really as between the Soviet Union and American ships in effect we have the commerce and friendship understanding going back to 1934 by an executive agreement and that American ships would be entitled to the lower taxes and fees and that the Soviet ships would be entitled to the same coming from there to the United States.

We don't know, but whatever it is we certainly will make every effort to see that there is no discrimination applied against American ships as compared with the foreign. One other item which I have left before you, sir, is an exchange of telegrams with Mr. Max Harrison, of the AMA, which occurred on January 22. I simply leave that with you as representative of some of the basic questions that have been raised and some of the difficulties you might say that we have had.

The CHAIRMAN. If you are going to discuss that, will you put it in the record?

Mr. GILES. All right, sir. I will be glad to or to try to answer any questions. The inquiry from Mr. Harrison, the telegram of January 22 raised several questions.

« PreviousContinue »