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moment, as I indicated a while ago, we do not know of any specific point where American-flag owners are in effect being discriminated against in the Continental tender, discriminated against as compared to foreign-flag vessels.

If we do learn of such discrimination we will certainly take it into account in passing on any waiver application. At this point we do not have any waiver application from Continental. I do not know whether we will. As of yesterday I believe Continental had actually fixed approximately 113,000 tons of American-flag shipping and had in negotiations approximately 200,000, and perhaps that has changed. so they may not have to come in for a waiver, or if they do we certainly have made every effort to inform both parties, both the exporters and the shipowners, what our basis of judgment is, has been, and will be, and we have tried to take into account the appropriate interests and the proper interests of both parties.

I have told them very frankly that I regretted that we were called on to have to arbitrate or be the arbitrator on some of these relatively small points in a charter. I thought that they were matters which the parties really should negotiate out, one give a little bit here and one a little bit there, but any time, of course, the Government has a program of this sort, and it could apply to Public Law 480 or anything else, where you set up a given portion of the market, then you have these other questions which come up and sometimes you just have to answer them, and that is what we have had to try to do.

I would simply indicate as a matter of a point of view, Mr. Chairman, that I think some of the information and articles you have seen in recent weeks in the newspapers reflect and it is not unusual and I am not critical of it-the different and conflicting interests among segments of our American merchant marine.

Take the large vessel owners. Their interests are not the same as other segments, and so I think that has accounted for some of the questions that have been raised.

Looking back on it, perhaps the Department of Commerce could have been more explicit sooner than we were. Perhaps we should have put out a complete waiver procedure last November and spelled out all of the detail or covered all of these conditions, but we did not do that. We did not at the very beginning rush in and take over the whole thing and say, "Now, we are going to decide each and every little point that we can imagine will come up.'

Rather we said, "We will just wait until it becomes an issue and/or problem and then we will do the best we can with it."

My own judgment at this moment, sir, is that our shipping requirement is soundly based. I think that the terms and conditions that we have had to publish are reasonable so far as we can judge. We have listened to everybody who had something to offer on it, and if the American-flag tonnage is not there, if somebody has to apply for a waiver, we are going to do our best to see that it is. If American-flag tonnage is busy elsewhere and they just don't want the business, if they say to us, "Well, we don't want the business at the rates you have put out," or that, "We want the demurrage rate at $10,000 a day rather than $2,500 a day," then we will just have to say, "Well, in passing on the waiver we can't agree with that. If that is the best that is available we will have to grant the waiver from this requirement."

Naturally, we would prefer that there be no waiver applications and then we won't have to make those decisions.

I apologize, Mr. Chairman, for taking this long on my statement. I will be glad to try to answer any questions or to return another day if the committee prefers.

The CHAIRMAN. This statement of Mr. Findley, the Chair can't pass over. The statement he makes is:

Obviously, Continental got preferential treatment.

You have Mr. Findley's statement there?
Mr. GILES. Yes, sir.

The CHAIRMAN. I would like you to give your reply to this charge he makes.

Mr. GILES. Sir, are you pointing to a specific paragraph?

The CHAIRMAN. The 12th paragraph on the 1st page or the 3d from the bottom.

Mr. GILES. The reference to, "obviously Continental got preferential treatment and this presumption accepted by all responsible observers," and he is referring to the export subsidy obtained from the Department of Agriculture.

The CHAIRMAN. If that is not a matter that you should answer, then we will let the Department of Agriculture answer this.

Mr. GILES. Mr. Chairman, I would prefer, if it is all right, to defer to the Department of Agriculture.

The CHAIRMAN. All right. That is that?

Mr. GILES. Yes, sir.

The CHAIRMAN. Now I am going to pass down a memorandum which the Chair has received. I would like you to look through it and on such matters that pertain to the Maritime Administration I would like you to reply.

Mr. TOLLEFSON. Mr. Chairman, before he gets on that may I ask him just one question about this preferential treatment.

The CHAIRMAN. Yes.

Mr. TOLLEFSON. As I read it, this has to do with the amount of export subsidy averaging 72 cents. Did you or your Department have anything to do with the amount of this? In other words, were you in consultation with the Department of Agriculture?

Mr. GILES. Not about the export subsidy or the wheat that they could sell. We were in consultation and have been in consultation regularly with the Department of Agriculture concerning availability of American shipping, giving our judgment as to how much American shipping would likely be available for business during certain months and so on. That was the extent of my participation with the Department of Agriculture on this particular thing.

Mr. TOLLEFSON. Did you discuss also with them the rates normally charged by American-flag operators and the rates normally charged by foreign flags?

Mr. GILES. Well, I didn't myself have any specific discussions about American rates because they were already published. As to the rates that would apply to the Soviet Black Sea ports and so on, I think all off us have assumed that, because of the relatively high demand if these sales are made, relatively high demand for American shipping, the American shipowners would be able to get the top guideline rate, that is, the minus 20 percent.

There is not enough competition within the American community, I don't think, to bring it down below that, so we have assumed that any of the American tonnage that went on these sales would be at our minus 20-percent rate.

Mr. TOLLEFSON. The only purpose I had was you said you would defer to the Department of Agriculture to answer the chairman's question and I just wanted to make sure that you had no part in this matter of determining the export rate.

Mr. GILES. No; what I was referring to was Agriculture's price on their wheat. We didn't get into that and what price they would quote. I would simply say, as I have understood from what the Agriculture Department has said and what I have seen in the paper, Secretary Freeman has said, "If somebody else will come along and buy this much Durum wheat from me I will be glad to sell it at the same price."

That is my understanding of this point, but I do think that could be better covered by the Agriculture witness.

Mr. TOLLEFSON. Thank you.

The CHAIRMAN. I am going to have this letter from Mr. Ralph B. Dewey, dated January 24, placed in the record. (The letter mentioned above follows:)

JANUARY 24, 1964.

DEAR MR. CHAIRMAN: You and your fellow committee members are to be commended for calling a hearing to inquire into the shipping aspects of the wheatto-Russia program. It is a most timely inquiry and comes in the midst of some shocking developments concerning American-flag participation, or rather the lack of it, in this program.

To put it into brief terms, the American merchant marine has gone from 100percent participation (President Kennedy's initial announcement) to a 50-percent participation (Secretary Hodges compromise, with industry concurrence) down to the present where we are almost shut out of this program by means of rate discrimination thrust upon us by the architects of the program.

We recognize that the Cargo Preference Act does not completely cover cash sales in the wheat-to-Russia program, although it does apply if loan financing is used. However, we have taken in good faith the statement of the President of the United States when he said that the program would move in U.S. ships when available at reasonable rates; and we have taken in good faith the proposal by the Department of Commerce to reduce our share to 50-percent U.S.-flag participation as a practical matter. We resent with fullest vigor the devices that have been used by the USDA and by orders of the Maritime Administration which have effectively destroyed the plan whereby the 50-percent participation was to have been accomplished. A precedent has been set which needs to be corrected and which your committee can be most influential.

To take the events in their proper sequence, when the industry sat down in late October and early November with the Under Secretary of Commerce, Mr. Roosevelt, together with the Acting Administrator of the Maritime Administration, Mr. Giles, to determine a proper course of action in this matter, we quickly recognized that physically the American merchant marine was probably not available to carry a hundred percent of these cargoes and that a 50-percent participation would be more in keeping with the cargo preference statutes.

Certainly, 100 percent could not be carried in the face of other commitments in other oversea programs. Following these meetings, the export control authorities in the Department of Commerce published rules and regulations which provided for a mandatory 50-percent, U.S.-flag usage in the granting of any export license for the wheat-to-Russia program. This had the concurrence of our group and most other groups representing the American merchant marine. Following this, the Maritime Administration undertook a series of discussions with the industry to get their views on fair and reasonable rates to be established in this program. It was proposed that rates in this program be based upon existing levels of fair and reasonable rates used by the Maritime Administration and applicable in Public Law 480 programs to other nearby ports.

In these discussions, we learned that Maritime intended to publish two different fair and reasonable rates; one would be for the conventional tramp vessels (i.e., vessels under 15,500 deadweight tons) and a lower rate would be for superships (i.e., vessels over 15,500 deadweight tons). It was generally agreed that within recent years the superships had quoted rates roughly 20 percent below rates quoted by the conventional tramp vessels under the U.S. flag. We did not object to this plan, but did urge that the rates be adjusted to reflect cost increases arising since 1957 when the rates were set.

In late November, the Maritime Administration published what they considered guideline rates (i.e., fair and reasonable rates) for the wheat-to-Russia program and included rates for vessels in the two different size categories. No adjustments for cost increases since 1957 were included therein. The berth line operators felt, however, that they could live with the fair and reasonable rates for conventional tramp vessels (under 15,500 tons) since these rates closely approximated what is historically a fair and reasonable rate for American-flag berth vessels in parcel lots.

All of the informal agreements with the Secretary of Commerce's Office and with the Maritime Administration and all of the understandings on rates, came to a crashing halt on January 9 when the Maritime Administration published its shipping regulation governing the wheat-to-Russia program. In these regulations, the Maritime Administration insisted that the grain brokers canvass all U.S.-flag segments (i.e., supership, tramp, and berth lines) before seeking a waiver for nonavailability. But in the next breath, the same order said that the guidelines rate for the wheat-to-Russia program would be the supership rate; namely, that which would be 20 percent under a convention tramp and berth parcel rate.

In effect, therefore, the Maritime Administration, apparently pursuant to directives of the Department of Agriculture, shut out the tramp and the berth carrier from participation in the wheat-to-Russia program. These two seg ments simply cannot operate at the low supership rates.

For a few days after this order was published, berth carriers and tramp vessel owners consoled themselves with the advice from Department of Agriculture, amply reported in the press, that foreign purchasing missions had been told by U.S. Department of Agriculture that they would no longer approve vessels of the supership size in the Public Law 480 grain programs. By this means, U.S. Department of Agriculture implied that superships would be fully occupied in the wheat-to-Russia program and would leave for the other U.S.-flag vessels the usual Public Law 480 cargoes.

This consolation prize vanished into thin air within a few days when it was learned that certain superships which had offered their vessels in the wheat-toRussia program were turned down not because of rate considerations but because the vessel draft fully loaded exceeded that which was available at either the Black Sea or Siberian Pacific coast ports of Russia (i.e., 31 feet) (most superships are 32 to 35 feet loaded).

We thus see that the entire scheme for ocean transportation, under the direction of the U.S. Department of Agriculture, with the apparent concurrence of the Maritime Administration has resulted in shutting out not only U.S.-flag berth and tramp vessels by reason of rate discrimination, but also has frustrated the American superships by reason of inadequate draft in the Russian ports. These port drafts in Russia were common knowledge in steamship offices but apparently not known by the Maritime Administration.

One quickly comes to the conclusion that the Department of Agriculture marketing experts, when they framed out the wheat-to-Russia program, made provision for a grain subsidy in excess of the usual subsidy in an amount only sufficient to cover the barest minimum of ocean-freight costs.

In other words, in providing approximately 142 cents per bushel more export subsidy to the grain brokers than was normal, they allowed only sufficient freight costs in the program to cover carriage of grain on American superships or on foreign-flag tramps and as noted above, even the superships are left out now. As things now stand, the foreign tramp ships will profit most from freight revenues, but not the Americans. How this helps our balance of payments really escapes us.

A number of American-flag carriers on the Pacific coast have offered their vessels for parcels of grain at fair and reasonable rates to the agents for the Continental Grain Co. and have been turned down. In one instance; namely, the Waterman Steamship Corp. of California, the turndown of their offers of fair and

reasonable rates for 7,000-ton parcels at $17 per long ton to Nakhodka has resulted in the layup of two vessels in the port of San Francisco with a possibility of a third layup within the next 10 days. American President Lines and Weyerhaeuser Line both offered full or parcel lots at $17 and were likewise turned down.

We can't even get a share of the movement of bagged flour which has been sold to Russia. Here again, Continental Grain Co. is the seller. The Maritime Administration announced in November that they would publish guideline rates for bagged flour in the Russian program, and published a rate of $24.25 per long ton from the Pacific Northwest to Nakhodka. The most recent American rate to the nearby ports in Korea is approximately $31 per short ton, equivalent to $34 per long ton. This rate is quoted by both foreign and American carriers engaging in the berth trade to the Far East and is deemed a fair and reasonable rate.

When we wired the Maritime Administration asking how they arrived at the $24.25 rate, they advised us: "Rate is keyed to ships under 15,500 deadweight for full bulk cargo." We have checked the market situation in recent months and find that there have been no American-flag bulk cargo of flour to that area at such rates. We can only surmise that MARAD used a foreign-flag charter rate in determining a rate for U.S.-flag berth ships. We don't mind losing business to foreign-flag lines if we cannot help ourselves, but in this instance, our own Government has used the rate to freeze out berth carriers. We doubt that rail rates, or truck rates, have been whipsawed in similar manner in this program.

The Maritime Administration has cautioned the industry against referring to the published rates as "fair and reasonable rates." Rather, they say these are "guidelines" rates. We are not impressed with the semantics used by the Maritime Administration in this matter or by the Department of Agriculture. Insofar as we are concerned, the entire program was designed to follow closely the intent of the Cargo Preference Act which requires that each segment shall participate at rates fair and reasonable for the carriage in that segment of trade.

In recent press reports, it is reported that of the Russian wheat program which has moved to date from all ports within the United States, only 37.000 tons out of nearly 300,000 tons have gone U.S.-flag, the balance going foreign-flag. On the Pacific coast there has been no American-flag participation and the way matters stand, none in prospect.

Our plea is that nonavailability waivers be granted by MARAD to the Continental Grain Co., and other brokers only when they have been unable to find American-flag vessels at the guideline rate applicable to each segment. If USDA must adjust its deal with Continental Grain Co. to accomplish this, so be it. As matters stand, they are purposely flouting the export control regulations and Presidential directives.

We trust that the above information can serve as a guide to the kind of information that your committee members will seek when witnesses from the U.S. Department of Agriculture and from the Maritime Administration appear on January 29.

By separate communication, I have asked for time to appear on January 30 at your committee's hearings.

(S) RALPH B. DEWEY.

Mr. GILES. The second paragraph refers to the 50-percent participation, that the American merchant marine has gone from 100-percent participation in President Kennedy's initial announcement to a 50-percent participation and says Secretary Hodges compromised, with industry concurrence

down to the present where we are almost shut out of this program by means of rate discrimination thrust upon us by the architects of the program.

First, as to the 100-percent participation, as I answered awhile ago in response to a question, President Kennedy in his initial announcement did not refer to any percentage. It certainly is subject to the interpretation of 100 percent-that is, if it were available but his announcement was "will be carried in available American ships, supplemented by ships of other countries as required."

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