The Caterpillar Tractor Co. of Peoria, Ill., exports cargo through several U.S. ports, not just the port of Baltimore, as a June 3 Washington Post article stated. Furthermore, the article incorrectly implied that Caterpillar uses the port of Baltimore because a port official is related to a Caterpillar Tractor Co. official. There is no such relationship. The post regrets the errors. CAPTION: (NEW-LINE)Picture 1, A ship in drydock forms an appropriately nautical backdrop for a street near the Baltimore harbor. By James M. Thresher-The Washington Post; Picture 2, no caption; Picture 3, Acres of imported cars and containerized freight at the Dundalk Marine Terminal and a freighter nudged by a pair of tugboats the activity of the port of Baltimore, heart of Maryland's economy and the nation's fourth busiest James M. Thresher-The Washington Post

The governor delighted the business establishment here several weeks ago by delivering a tough speech about mud. One week later, The Baltimore Sun ran a five-part editorial series that was promoted as an "investigative editorial expose." The subject, in essence, was mud. At the downtown luncheon clubs where corporate leaders congregate, a serious topic of conversation these days is mud.

The mud that inspires such interest at the highest levels of political and industrial power now rest undisturbed and unseen under about 42 feet of water.

It is at the bottom of the shipping channels that lead from the Chesapeake Bay to the sunken mouth of the Patapsco River and from there up to 45 miles of foundries, shipbuilding and repair yards, coal piers, container wharves, grain elevators, warehouses, gantry cranes, marine terminals, sugar piers, rail yards and vast cargo storage lots. This is the fourth largest seaport in the United States, the port of Baltimore.

The port is the heart of Maryland's economy.Every year, it takes in and pumps out 11 percent of the state's gross product, about $2.5 billion, and, directly and indirectly, it sustains 170-000 jobs - one of every 10 in the state. It is the site of the world's largest tidewater steel plant and serves as America's major importer of foreign cars and exporter of heavy manufacturing cargo to the Middle East.

Yet, like the mud that lines the channels, the port of Baltimore exists in a virtually hidden world. As Walter Orlinsky, president of the Baltimore City Council, put it: "The port has become a kind of abstraction. You know it's there, maybe, but you're never looking at it. It is absolutely fascinating how unknown the port is to the city and state."

This series is a look inside the port of Baltimore-the people and forces that have shaped it in the years since 1756 when the brig Philip and James sailed for Barbados with a hogshead of tobacco, Indian corn, iron and ham, and returned with rum and sugar.

The story begins at the bottom, with the mud.

Mud is the commom enemy of all seaports, year by year building up in the channels and making it more difficult for ever-larger ships to steam in and out with profitable loads of cargo. But at the port of Baltimore, the struggle goes beyond the norm of man versus nature.

Here, a governor commands a standing ovation when he says of the mud: "Dredge of Die!" Here, when an aging congressman talks about the mud, he is called a "goddamn, lying son of a bitch" by corporate executives. The mud that lines the bottom of this harbor has become a symbol of frustration for the port and its usually potent boosters.

Since 1969 the movers and shakers of Baltimore's business community have been pushing a proposal by the U.S. Army Corps of Engineers to dredge the port's channels to a depth of 50 feet. But in all that time, their moving and shaking has not budged one inch of the 100 million cubic yards of mud that was to be dredged.

The problem is not with dredging itself. As John Starr, a geologist at the University of Maryland-Baltimore County, said: "Just about everyone agrees that dredging the harbor is good-like the flag and motherhood." Rather, the problem is where to put the mud, so full of heavy metals and chemicals that it is called spoil.

The Maryland Department of Natural Resources, which is responsible for disposing of the spoil, would like to dump most of it inside the contours of a rock and sand dike the state would construct around Hart and Miller islands off the Baltimore County shoreline of the Chesapeake, 13 miles north of the harbor. With the addition of the riverbottom mud, the state officials says, the two rapidly eroding islands could be enlarged, combined and saved.

ENTER U.S. Rep Clarence Long, a former economist at Johns Hopkins University who represents Baltimore County in Congress.

Stubborn, irascible, tough-these are the words most often used to describe the 70-year-old Long, at least by his friends and aides. His enemies usually dip into a more profane bucket of adjectives. For most of this decade, Long has successfully blocked the construction of the spoil disposal dike at Hart and Miller islands.

In the congressman's view, the mud is part of a class struggle. His argument:

"In any other part of the United States where there is a beautiful coastline, the wealthy would be living there. But for some reason the working class settled on the eastern coast of our county and never moved. That's the only reason Hart and Miller where considered for this project. People assumed they could dump on the working class with impunity.

"It just seems absurd to haul this spoil laden with mercury, cadmium and lead out to a clean part of the bay and dump it there in a dike that could break and create a dreary wasteland. In the valley [the wealthy areas of western Baltimore County] they don't understand why these people object. But if they proposed a dump in the valley, they'd come out with a battalion of lawyers that could defeat the Russians."

In 1977, after the enviromental impact statement for the dredging was completed and the permit for the dike construction was issued by the Army Engineers, Long and his eastern county constituents went to court. They challenged the project on 11 grounds, ranging from technical to political. Last fall a federal judge agreed with them on their very first point-that the project required congressional approval because it would affect the interstate environment.

That ruling is now being contested before the 4th Circuit Court of Appeals. Since the court action began, Baltimore's opinion-makers and business leaders have been treating "The Old Professor" like a public enemy.

After endorsing him in congressional campaigns for 16 years The Baltimore Sun, in the fall of 1978, declared "Enough of Clarence Long," who, in the paper's words, "has turned from a service-oriented congressman into a curmudgeon." The Evening Sun urged his defeat with the headline, "Too, too Long," and argued that the bullheaded congressman" had "bent every effort to obstruct and delay."

THEN, after Long won reelection with the second largest margin in the state, the opposition turned serious.

"Dredge or Die"

Gov. Harry Hughes, normally a man of understatement, issued that apocalyptic warning on the first day of May. His audience was a select group of bankers, industrialists, educators, labor leaders, lawyers and politicians - members of the Greater Baltimore Committee, the Merchants Club, the Maryland Club and the Propeller Club.

These were the men who had embraced Hughes and accepted him into their world 10 years ago when the modest, upright state senator from the Eastern Shore moved to Baltimore. From Bill Bouchet of the Greater Baltimore Committee to Alonzo Decker of Black and Decker to Bradford Jacobs of The Evening Sun, men of influence got behind Hughes last summer when few others would and helped propel him into the governor's office.

Now, at a dinner in Dundalk, Hughes was saying that he was prepared to challenge Long head-on and "take whatever heat is necessary" to get the channel dredged. As one Baltimore columnist who was there wrote later, the speech "couldn't have pleased the port community more if it had been written in the corporate offices of Bethlehem Steel."

Bethlehem Steel is the largest private industry in Maryland, employing more than 20,000 workers at the Sparrows Point foundries where massive blast furnaces transform iron ore pellets into steel plates. The iron ore is all imported from Labrador in Canada, Liberia, Brazil and Venezuela, and all of it - between 7 million and 10 million tons a year - comes in by ship.

Of all the industries that line the Baltimore waterfront, Bethlehem Steel stands to gain the most from dredging. Louis Cherny, the company's marine division vice president, recalled one recent event in presenting his case:

"Just the April, we had the largest ship ever to call at Sparrows Point, the Authentic. It's a 150,000-dead-weight-ton vessel, meaning that's the amount it can carry at full load. With the 42-foot channel, the most it could bring in without scraping the bottom was 91,570 tons. With a 50-foot channel, she would have brough us more than 125,000 tons. The more you bring in at once, the more money you save with lower shipping rates. With that one trip of the Authentic, coming in with a bigger load through a deeper channel, we'd have saved $119,367."

The entire dredging and disposal project at the port of Baltimore would cost federal taxpayers at least $150 million and state taxpayers another $100 million. In return, bulk cargo shippers such as Bethlehem Steel would be able to use bigger ships and thus increase their productivity, expand their work forces and maintain a competitive edge in shipping rates. To Bethlehem alone, according to Cherny, dredging would mean a savings of $6 million a year.

For the most part, the corporate officials at the port of Baltimore are among the most vocal advocates of the free enterprise system and opponents of state and federal regulation. They grumble constantly about the 40 government agencies that regulate their works, controlling rates and tariffs, monitoring pollution and safety standards.

But if the dredging and disposal of the mud on the channel bottom are ever accomplished, it will mark the second time that public money and government enterprise have kept the economic heart of Maryland alive and pumping.

The first crisis involved the railroad.

Starting in the 1820s, when the first rail freight company in the United States was founded here, the port of Baltimore was railroad-owned and railroad-operated. The Baltimore & Ohio, the Pennsylvania and the Western Maryland railroads all came into the port and built massive dockside facilities to handle the loading, unloading and transshipment of coal, grain and other bulk commodities.

These rail companies were financial giants in the state, so powerful that they had it written into their state charters that they would not pay property taxes.

And the port was simply what they made it.

After 120 years, by the end of World War II, they had made it a mess. The piers were decaying, the rails were torn up by wartime overuse, and an important new form of freight transportation - trucking - was being discouraged at Baltimore by railroad-imposed high wharfage, or fees.

"The railroads were totally unprepared to meet the needs of the post-war period," said W. Gregory Halpin, the current port administrator. "They were rundown and going broke, and the last thing they were going to focus attention on was the port. So we were faced with an obsolete port and the people in control didn't have the resources to do anything about it."

The State of Maryland stepped in. In 1956, the General Assembly created the Maryland Port Authority and instructed it to develop and promote the port. Since that time the state has spent more than $160 million buying and leasing terminals from the rail companies and building new facilities. In a gradual transformation that most Marylanders probably still don't know about, the port changed from 90 percent railroad control to 70 percent state control.

Today, the port is what the state makes it.

Port Administrator Greg Halpin was still a news director at radio station WCBM in Baltimore back in the mid-1950s when a North Carolina trucker named Malcolm McLean felt penned in by competitors to the north and south and decided to extend his operation out into the sea.

McLean bought an old vessel and outfitted it so that it could carry his truck trailers. Now, Maryland Port Administrator H. Gregory Halpin and port officials around the world are still adjusting to the change McLean wrought. "It was," said Halpin, "the first revolution in shipping since the Phoenicians."

The process McLean invented - moving cargo by truck, rail and ship in the same, truck-sized steel box - is known as containerization. For nearly 10 years, until 1966, McLean's Sea-Land Services Inc., was one of the few steamship lines in the world using containerization, and he developed a virtual monopoly moving general cargo from New York to Puerto Rico and from the West Coast to Alaska.

But then, when McLean announced that he was ready to inaugurate his container service in the lucrative North Atlantic market from New York to Europe, the staid, established lines quickly adopted his system. "Git thar fustest with the mostest," said an advertisement for Moore-McCormack's first container run from Brooklyn to Antwerp, and the world of ports and shipping changed forever.

At about this time, in the mid-1960s, Baltimore was developing a massive terminal in Dundalk on the site of the old harbor airfield. The privately-owned Canton Marine Terminal and Sea-Land's own Sea Girt Terminal had been successfully handling container ships for a few years by then, and state port officials decided to go with the trend and develop Dundalk as a container-oriented facility.

In its first year, 1967, Dundalk handled so little container cargo that records were not kept. Today, it is the second busiest container terminal in the country, handling more the 3 million tons a year.

The container revolution affected just about every aspect of work at the port of Baltimore.

With containers moving from ship to truck or rail virtually untouched by human hands, there was less of a premium put on the skill of the 5,000 longshoremen at the port, rated the most productive on the East Coast in aDepartment of Labor study in the 1960s.

The longshoremen also feared they would have less work, and for that they demanded and received compensation. For every ton of container cargo not handled by members of the International Longshoremen's Assocation, the Steamship Trades Association, a management group at the port, puts $3 into a container royalty fund. The money is parceled out to the ILA members every December.

WHAT it amounts to," said William J. Detweiler, chief management negotiator, "is a nice Christmas bonus of between $900 and $1,500 per man."

For the steamship lines and agents at the port, the container royalty is a small price to pay considering the savings that containerization and other modern advances have brought them. One of the oldest tenents of shipping is that a ship at sea makes money, a ship at port loses.

In the last 30 years, at ships have become faster and dockside work quicker, due in large part to the containers, the yearly cycle of a world-cruising ship has reversed from 150 days at sea and 210 at sea and 150 at port.

The impact of containers also has been felt at the most ubiquitous and powerful government agency at the port of Baltimore, the U.S. Customs Office.

Every year about 16 million tons of cargo worth more than $3.3 billion is imported through this port - cars from Japan, engines from West Germany, liquor from Great Britain, chrome and nickel from Russia, domestic appliances from Sweden, coffee from Brazil, ammonia from Australia, shoes from South Korea, and so on.

By law, every bit of this imported cargo is in the possession of the customs office from the time it reaches the port to the time the customs agents inspect it, assess a duty for it, and release it.

About 70 percent of the general cargo comes into the port in containers. And this is the problem:

It is one thing for a customs inspector to examine a single package of shoes from South Korea. It is quite another, and more difficult, task for an agent to open up an entire 40-by-8-by-8-foot container and individually inspect all of the dozens of packages inside.

"The containers have made it impossible to inspect all cargo that moves through the port," said Neil Marsh, district director of the Baltimore customs office. "Just from a practical standpoint, we can only look at an entire container once in a long while. It takes a gang of men, a full day of work, and about $800 to fully inspect one container."

In most cases, Marsh's 70 blue-uniformed inspectors simply open a container and inspect the first box they see inside. If the contents of that box match the import papers prepared by the local middleman in the shipping operation, the customhouse broker, then the entire container is approved for transshipment by truck or rail to its destination.

IN recent years the customs agents have grown more and more reliant on the private customhouse brokers who, as agents for the shippers and buyers, prepare the essential import and quantity of the cargo.

Indeed, at the Baltimore port, customs this month will begin a computer inspection program - based on information supplied by the brokers - that will allow most containers to pass through the docks without a single box being examined.

As M. Sigmund Shapiro, president of Samuel Shapiro & Co., the largest customhouse brokering firm at Baltimore, put it: "The whole thing is based on faith."

In the early 1970s, during the Nixon administration, the customs officials had little faith in the private middlemen. "They thought we were all crooks," said Shapiro. "They beat on us unmercifully." But now, he added, "those guys are much more business-like about it. They know they couldn't get along without us."

Marsh agreed. "Like everyone else at the port," he said, "we're interested in keeping the cargo moving to where it's really supposed to go."

In Port Administrator Halpin's view that is the only true function of a port. His analysis:

"All ports are pretty much the same. They have no real identity of their own. Our facilities at Dundalk and Locust Point are no different than ones at Singapore. What's important is where the cargo goes and where it comes from."

As Halpin sees it, this port should not be called the port of Baltimore but the port at Baltimore. "It's the port of Cleveland and Pittsburgh and Rotterdam and Dusseldorf," he said. "Those are the markets it serves most."

Ports have two markets. The first is the captive or neighborhood market. For Baltimore, that includes about 9.2 million people and the industries within a 100-mile radius of the port. If the port had to depend primarily on that market for business, it might not exist. Only New York, with a neighborhood market of 26.2 million people, could function profitably on the business from its captive market.

The second market is known as the hinterland market, and it is on that that Baltimore depends. Its hinterland market is the 62 million people and manufacturing plants in the industrial heartland of the United States - from Peoria to Gary to Cleveland to Youngstown to pittsburgh.

For all these midwestern cities, Baltimore is the closest year-round port. By rail or truck from Cleveland, for instance, it is 444 miles to Baltimore, 490 to the port of Philadelphia and 562 to New York. Even Pittsburgh is closer to Baltimore than it is to Philadelphia, by 47 miles.

The Maryland Port Administration has field offices in Chicago and Pittsburgh. It is a happy coincidence, perhaps, that the MPA official in Chicago is related by marriage to a vice president at Peoria's massive Caterpillar plant, one of the largest shippers in the world. Wherever Caterpillar equipment goes overseas, to Venezuela, West Germany or Saudi Arabia, it moves first through the port of Baltimore.

As port administrator Halpin put it. "We live in Peoria, believe me."