fair prices for certain size cargoes. Of course, I remember your associate explaining about the three ships or four ships on the west coast that offered themselves and the private dealer-in this instance the Continental Grain Co. I think it was-turning down their offered rate of $17 I think it was.

Why should the Maritime Administration have anything to do with it?

Mr. GILES. We would not, sir, if the charterer, if Continental, had accepted that price. It wouldn't have bothered us at all. The CHAIRMAN. It wasn't you then?

do with that?

You didn't have anything to

Mr. GILES. That is right; yes, sir. It was the charterer.

The CHAIRMAN. But did you fix the price so that Continental had to conform to your price?

Mr. GILES. Not so that Continental would have to, but so that Continental would have a price on which it could count for purposes of trying to make a sale. We do not tell Continental that Continental cannot pay a greater price than our guidelines if they want to. That. is entirely their choice.

But we do say to the shipowner and to the charterer, if we are going to have this 50-percent shipping requirement on these Soviet commercial transactions, then we cannot leave the charterer at the mercy, if you want to call it that, of the shipping market, because we would not have enough competition within the American shipping market to produce reasonable rates which the charterers could live with.

Our action in setting guideline rates and in taking all of these other steps comes, in my view, under the authority of the Export Control Act.

The CHAIRMAN. You were asked by the dealers-I will call them dealers, Continental and other people of that type and the purchaser to adjust the rates and to ascertain rates so that this transaction could be consummated? Otherwise the transaction might not have been carried out?

Mr. GILES. Not by the purchaser, Mr. Chairman, if you are referring to the Soviets. As I understand their views, there in the early days, they were simply saying, "We don't care what ships you use. We are not going to be in a position to pay higher prices for American ships than we would pay for others," and so forth.

The Soviets didn't ask the Maritime Administration to do anything about rates. They said, "Well, that's up to you." We, of course, did have discussions with Agriculture officials and they in turn with the grain officials, and it was evident there in October that if the grain exporters were going to be able to make a sale they would have to try to be in a position to have the best price they could quote, and a significant factor in their total net price that they could quote to the Soviets of course would be shipping. At that time American-flag rates, based on our Public Law 480 guidelines, the top guidelines then in effect in early October, were averaging about $10 per ton above the equivalent foreignflag rate. That is a very substantial difference.

For example, on the Continental sale, if Continental shipped 500,000 tons on American-flag vessels and you were dealing with $10, or even $6 or $5 difference, you see what amount of money you have in addi

tional shipping cost. If it is $10, then that is a $5 million difference just on that amount, or if it is $5 you have $211⁄2 million, and the exporter obviously would not have the margin, even on those very substantial transactions, to make up that sort of difference unless the buyers, in this case the Soviets, were willing to recognize a substantial additional cost in the total net price, which would in effect cover shipping.

The CHAIRMAN. Though this is a commercial transaction and the Department of Agriculture is interested in moving something that is in great surplus and subject to deterioration, and the Soviets are interested in buying it, the matter of issuing an export license on it is in your jurisdiction?

Mr. GILES. The Department of Commerce; yes, sir.

The CHAIRMAN. Now, in the Canadian transaction; what type of ship handled that? Did Canadian or British ships have a preference in that transaction?

Mr. GILES. Yes, sir.

The CHAIRMAN. Now, in the Canadian transaction what type of ship handled that? Did Canadian or British ships have a preference in that transaction?

Mr. GILES. My recollection is that on a good portion of that the shipping was handled directly by the Soviets. Captain Goodman, do have the detail on that?

you

Captain GOODMAN. A great deal of it, Mr. Chairman, was Russian shipping, ships of their own, and other ships of Sweden, Norway, Great Britain, and Greece, just a general international type of fleet that they moved in.

To my knowledge there were very few Canadian ships as such. Of course there are very few Canadian ships capable of carrying this. The CHAIRMAN. What were the cargo rates, if you have any rates there we will say on the British and Canadian ships.

Captain GOODMAN. Actually, at the time, the Canadian fixtures were averaging between $10 and $11 a ton. That was the actual average. I would say that that $10 or $11 from, we will say, Montreal, or Quebec, if measured against our rate from the gulf and the difference in mileage, probably you could add, oh, say, $2 more to it to come up with a comparative rate as far as if the cargo was moving from the gulf.

The rate at which they were moving from Canada was in the nature of $10 to $11 a ton, and a fair equivalent rate from the gulf would be, say, $12 to $13 actually at that time.

The CHAIRMAN. Mr. Giles, in the collaboration you had with representatives of the steamship lines and associations how enthusiastic were they to secure cargoes and get into this movement? To what extent were they interested?

Mr. GILES. My impression, Mr. Chairman, was that at first there seemed to be unanimity among the shipping interests represented, and we tried to have all of them represented, that it was desirable to have this 50 percent requirement to go on American ships if available; No. 1, that that was a desirable policy for the Government to have, and they indicated appreciation for the Government's interest in American shipping as reflected by that action.

No. 2, I think there was generally, and I say no exceptions, every indication that the shipping industry desired to cooperate with the

Government officials in working out appropriate details to see how this could be done, and I will say very frankly that the Government officials, the Department of Commerce, could not have worked these arrangements out as we did without the cooperation, the advice, and the counsel of the shipping people, and they were very helpful indeed, so overall there was an attitude of cooperation and of interest in the

program.

I think on the part of individuals at the time there was certainly some reservation on their own part as to whether they, as a company, would participate or would want to. This was a new business.

Few American ships, if any, had been to Soviet ports in recent years, and I don't want to indicate that all shipowners or their representatives came forward and said, "We individually in our own company are just anxious to get into this program and handle this business."

I am not saying that at all. However, the overall interest on the part of these people indicated that it was good to have this program, this requirement of 50 percent, and they wanted to cooperate, and they were very cooperative in helping the Government work out these details.

The CHAIRMAN. Did anybody ever comment that it was questionable whether they should push the effort to get 50 percent of this cargo?

Mr. GILES. No, sir; I don't recall any reservation along that line at all last October and November. I will say, though, that here within recent days, the last couple of weeks, one industry representative expressing a personal view, and he made it clear that he wasn't purporting to speak for any one else, though he said he thought that his views. might be held by others, was very frank in expressing his personal view that perhaps this was not really a particularly desirable policy for the merchant marine as a whole, that is, to have this 50-percent requirement on the Soviet transactions, and here were the reasons that he mentioned as supporting that possible view.

No. 1, obviously when our Government imposes this policy or puts this policy on this sort of transaction you have some questions raised by our foreign friends, our friendly governments overseas, and we have had those in the Department of Commerce, and from various nations, about the cargo preference.

That is what they call this, and this committee is certainly very knowledgeable as to all of the international questions you get into on that, so that perhaps raises difficulty for the merchant marine as a whole.

The CHAIRMAN. Wait a minute right there. That is the reason I asked you the question whether this was a private business commercial transaction as distinguished from the 480 program, because certain countries now have pointed out, as you say, that we give preference in the 480 program, but that is strictly a Government movement. Mr. GILES. That is right.

The CHAIRMAN. And it is not a commercial movement. Certain countries have, as you say, objected to that and have set up some restrictions in their area as between ports in their nation and ports in another nation and restrictions on American-flag ships in that commerce, but this is strictly a commercial movement and in that respect couldn't be compared to 480.

Mr. GILES. That is right; it can't. But I think the answer, sir, to our complaints from our foreign friends is that, while as between a Government aid program, a Government aid shipment and commercial, this is commercial, from the standpoint of responding to the foreign complaints our answer has been and the State Department has appropriately said-it has been published that this is a unique shipment and transaction here on the part of our Government when we enter into this sort of transaction with the Soviets and we have not ordinarily been selling them this amount of grain. So we are justified in this case in having this sort of shipping requirement, and I think that is a sound explanation.

The CHAIRMAN. Mr. Tollefson?

Mr. TOLLEFSON. Thank you, Mr. Chairman.

Mr. GILES. Sir, may I add a couple of other points? I was indicating the reasons why this individual though that there was a reasonable question now about this 50-percent requirement.

He went ahead to point out that, in effect, our larger vessels would be able, if we didn't have the 50-percent requirement on the Soviet shipments, to continue to get their portion, you might say, on a competitive basis of the Public Law 480 shipments, and that the general shipping demand throughout the world would be increased to the point that really they would make out about as well in the long run without the 50-percent requirement, and he indicated just as a matter of an analysis that the 50-percent requirement was really helping more our least efficient ships, our smaller, less efficient ships, by giving them a first choice on Public Law 480 and that that wasn't necessarily a longrange desirable trend.

The other point he made, which I thought was appropriate, was that for the berth liners generally our 50-percent requirement is no particular help on this quantity of grain shipments. Certainly our subsidized operators and our berth liners are not going to carry a substantial amount of it, so they don't have the same interest in this program as our tramp operators do.

I am simply reporting that as a point of view where apparently there are some shipping people themselves who now, looking back on it, say that perhaps this is not a good item for our own interest overall. That doesn't mean that it isn't desirable for specific segments of the shipping industry or for specific operators, and I don't think the shipping industry generally is prepared at this point to step forward and ask the Government to change this policy.

If they are we would be happy certainly to consider it.

The CHAIRMAN. That was more or less an informal and confidential conversation.

Mr. GILES. That was a personal conversation, but I thought it was pertinent to add in connection with the sentiment as we understood it earlier in this program, that is, last fall.

The CHAIRMAN. Mr. Tollefson.

Mr. TOLLEFSON. Thank you, Mr. Chairman. Yesterday you gave a good explanation of why you did what you did in connection with this sale of wheat to Russia, and there may have been those who got the impression that whatever you did do was in accord with the thinking of the shipping industry generally, but I can't be too sure that that is the case because of the tremendous concern on the part of operator representatives who have talked to me.

I don't mean to intimate that you sought to mislead us, but I just want the record clear on this point; namely, that not everybody is happy with what happened. Yesterday there was reference made to the President's announcement and you said that there was no percentage figure cited in the announcement.

Did I understand that you had a copy of the President's announcement?

Mr. GILES. I do have a copy here before me, sir.

Mr. TOLLEFSON. Would it be possible for you to submit a copy of it for the record?

Mr. GILES. We will.

Mr. TOLLEFSON. So we will know exactly what the President said. The CHAIRMAN. Yes.

Mr. GILES. All right.

(The information requested follows:)

[From the Washington Post, Oct. 10, 1963]

TRANSCRIPT OF PRESIDENT'S NEWS CONFERENCE

(The transcript of President Kennedy's news conference yesterday :) The PRESIDENT. Good afternoon.

I have a statement to make. The Soviet Union and various Eastern European countries have expressed a willingness to buy from our private grain dealers at the regular world price several million tons of surplus American wheat or wheat flour for shipment during the next several months. They may also wish to purchase from us surplus feed grains and other agricultural commodities.

After consultation with the National Security Council, and informing the appropriate leaders of the Congress, I have concluded that such sales by private dealers for American dollars or gold, either cash on delivery or normal commercial terms, should not be prohibited by the Government. The Commodity Credit Corporation in the Department of Agriculture will sell to our private grain traders the amount necessary to replace the grain used to fulfill these requirements, and the Department of Commerce will grant export licenses for their sale with the commitments that these commodities are for delivery to and use in the Soviet Union and Eastern Europe only.

An added feature is the provision that the wheat we sell to the Soviet Union will be carried in available American ships, supplemented by ships of other countries as required. Arrangements will also be made by the Department of Commerce to prevent any single American dealer from receiving an excessive share of these sales.

No action by the Congress is required, but a special report on the matter will be sent to both Houses tomorrow.

Basically, the Soviet Union will be treated like any other cash customer in the world market who is willing and able to strike a bargain with private American merchants. While this wheat, like all wheat sold abroad, will be sold at the world price, which is the only way it could be sold, there is in such transactions no subsidy to the foreign purchaser; only a savings to the American taxpayer on wheat the Government has already purchased and stored at the higher domestic price which is maintained to assist our farmers.

This transaction has obvious benefit for the United States. The sale of 4 million metric tons of wheat, for example, for an estimated $250 million, and additional sums from the use of American shipping, will benefit our balance of payments and gold reserves by that amount and substantially strengthen the economic outlook for those employed in producing, transporting, handling and loading farm products.

Wheat, moreover, is our No. 1 farm surplus today, to the extent of about 1 billion unsold bushels. The sale of around 150 million bushels of wheat would be worth over $200 million to the American taxpayer in reduced budget expenditures. Our country has always responded to requests for food from governments of people who needed it, so long as we were certain that the people would actually get it and know where it came from.