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AMENDING THE MERCHANT MARINE ACT OF 1936

WEDNESDAY, DECEMBER 8, 1937

UNITED STATES SENATE,
COMMITTEE ON COMMERCE, AND

COMMITTEE ON EDUCATION AND LABOR,

Washington, D. C.

The committees met, pursuant to call, at 10 a. m., in the caucus room, Senate Office Building, Senator Royal S. Copeland (chairman of the Commerce Committee) presiding.

Present: Senators Copeland (chairman of the Commerce Committee, presiding), Sheppard, Clark, Guffey, Radcliffe, Pepper, Nye, Vandenberg, Gibson, and Davis.

The CHAIRMAN. The committees will be in order, please. This is a meeting of the Committee on Commerce and of the Committee on Education and Labor, with reference to S. 3078, a bill to amend the Merchant Marine Act of 1936, and for other purposes.

(S. 3078 is as follows:)

[S. 3078, 75th Cong., 2d sess.]

A BILL To amend the Merchant Marine Act, 1936, and for other purposes Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That section 207 of the Merchant Marine Act, 1936, is hereby amended to read as follows:

"SEC. 207. The Commission may enter into such contracts, upon behalf of the United States, and may make such disbursements as may, in its discretion, be necessary to carry on the activities authorized by this Act, or to protect, preserve, or improve the collateral held by the Commission to secure indebtedness, in the same manner that a private corporation may contract within the scope of the authority conferred by its charter. All the Commission's financial transactions shall be audited in the General Accounting Office according to approved commercial practice as provided in the Act of March 20, 1922 (42 Stat. 444): Provided, That it shall be recognized that, because of the business activities authorized by this Act, the accounting officers shall allow credit for all expenditures shown to be necessary because of the nature of such authorized activities, notwithstanding any existing statutory provision to the contrary. The Comptroller General shall report annually or oftener to Congress any departure by the Commission from the provisions of this Act."

SEC. 2. Section 214 (a) of the Merchant Marine Act, 1936, is hereby amended to read as follows:

"SEC. 214. (a) For the purpose of any investigation which, in the opinion of the Commission, is necessary and proper in carrying out the provisions of this Act, any member of the Commission, or any officer or employee thereof designated by it, is empowered to subpena witnesses, administer oaths and affirmations, take evidence, and require the production of any books, papers, or other documents which are relevant or material to the matter under investigation. Such attendance of witnesses and the production of such books, papers, or other documents may be required from any place in the United States or any Territory, district or possession thereof at any designated place of hearing. Witnesses summoned before the Commission shall be paid the same fees and mileage that are paid witnesses in the courts of the United States." SEC. 3. Title II of the Merchant Marine Act, 1936, is amended by adding a new section at the end thereof to read as follows:

"SEC. 215. The provisions of this Act, insofar as they are practically or appropriately applicable, are extended to the construction and operation of aircraft used in transportation for hire of passengers and property in overseas trade between the United States, its Territories, possessions, or the Canal Zone and foreign countries; and between the United States and its Territories, possessions, or the Canal Zone; and between such Territories or possessions and between the Canal Zone and such Territories or possessions."

SEC. 4. Section 301 (a) of the Merchant Marine Act, 1936, is hereby amended to read as follows:

"SEC. 301. (a) The Commission is authorized and directed to investigate the employment and wage conditions and ocean-going shipping and, after making such investigation and after appropriate hearings, to incorporate in the contracts authorized under titles VI and VII of the Act minimum-manning scales and minimum-wage scales, and reasonable working conditions for all officers and crews employed on all types of vessels receiving an operatingdifferential subsidy. After such minimum manning and wage scales and working conditions shall have been adopted by the Commission, no change shall be made therein by the Commission except upon public notice of the hearing to be had, and a hearing by the Commission of all interested parties, under such rules as the Commission shall prescribe. Every contractor receiving an operating-differential subsidy shall post and keep posted in a conspicuous place on each such vessel operated by such contractor a printed copy of the minimum manning and wage scales and working conditions prescribed by his contract and applicable to such vessel: Provided, however, That any increase in the operating expenses of the subsidized vessel occasioned by any change in the wage, manning scales, and working conditions as provided in this section shall be added to the operating-differential subsidy previously authorized for the vessel."

SEC. 5. Section 301 (b) of the Merchant Marine Act, 1936, is hereby amended to read as follows:

"(b) Every contract executed under authority of titles VI and VII of this Act shall require

"(1) Insofar as is practicable, officers' living quarters shall be kept separate and apart from those furnished for members of the crew;

"(2) Licensed officers and unlicensed members of the crew shall be entitled to make complaints or recommendations to the Commission, provided they file such complaint or recommendation with their immediate superior, who shall be required to forward such complaint or recommendation with his remarks to the Commission;

"(3) Licensed officers who are members of the United States Naval Reserve shall wear on their uniforms such special distinguishing insignia as may be approved by the Secretary of the Navy; officers being those men serving under licenses issued by the Bureau of Marine Inspection and Navigation;

"(4) The uniform stripes, decoration, or other insignia shall be of gold braid or woven gold or silver material, to be worn by officers, and no member of the ship's crew other than licensed officers shall be allowed to wear any uniform with such officer's identifying insignia ;

"(5) No discrimination shall be practiced against licensed officers, who are otherwise qualified, because of their failure to qualify as members of the United States Naval Reserve."

SEC. 6. Section 402 (b) and (c) of the Merchant Marine Act, 1936, is hereby amended by striking out the quotation marks.

SEC. 7. Section 501 (c) of the Merchant Marine Act, 1936, is hereby amended by striking out the words "section 201 (c)" where they appear in such subsection and inserting in lieu thereof the words "section 204 (b)."

SEC. 8. Section 502 (a) of the Merchant Marine Act, 1936, is hereby amended to read as follows:

"(a) If the Secretary of the Navy certifies his approval under section 501 (b) of this Act, and the Commisison approves the application, it may secure, on behalf of the applicant, bids from foreign and domestic shipbuilders for the construction of the proposed vessel according to the approved plans and specifications. If the bid of the domestic shipbuilder who is the lowest responsible domestic bidder is determined by the Commission to be fair and reasonable, the Commission may approve such bid, and, if such approved bid is accepted by the applicant, the Commission is authorized to enter into a contract with the successful domestic bidder for the construction, outfitting, and equipment of the proposed vessel, and for the payment by the Commission to the shipbuilder, on terms to be agreed upon in the contract, of the contract price of

the vessel, out of the construction fund hereinbefore referred to or out of other available funds. Concurrently with entering into such contract with the domestic shipbuilder, the Commission is authorized to enter into a contract with the applicant for the purchase by him of such vessel upon its completion, at a price corresponding to the estimated cost, as determined by the Commission pursuant to the provisions of this Act, of building such vessel in a foreign shipyard."

SEC. 9. Section 502 (b) of the Merchant Marine Act, 1936, is hereby amended to read as follows:

"(b) The amount of the reduction in selling price which is herein termed the 'construction-differential subsidy' may equal, but not exceed, the excess of the bid of the domestic shipbuilder constructing the proposed vessel (excluding the cost of any features incorporated in the vessel for national-defense uses, which shall be paid by the Commission in addition to the subsidy), over the fair and reasonable estimate of cost, as determined by the Commission, of the construction of the proposed vessel if it were constructed under similar plans and specifications (excluding national-defense features as above provided) in a principal foreign ship-building center which is available to the principal foreign competitors in the service in which the vessel is to be operated and which is deemed by the Commission to furnish a fair and representative example for the determination of the estimated cost of construction in foreign countries of vessels of the type proposed to be constructed. The construction differential approved by the Commission shall not exceed 33% per centum of the construction cost of the vessel paid by the Commission (excluding the cost of nationaldefense features as above provided), except that in cases where the Commission possesses convincing evidence that the actual differential is greater than that percentage, the Commission may approve an allowance not to exceed 50 per centum of such cost, upon the affirmative vote of four members, except as otherwise provided in subsection 201 (a). In any case where the Commission finds that the construction differential exceeds 33% per centum but does not exceed 50 per centum of such cost, and that the lowest bid of a responsible domestic shipbuilder is unreasonable, excessive, or collusive, the Commission may authorize the applicant to have the vessel built in a foreign shipyard, without financial aid from the United States, if the applicant agrees to document such vessel under the laws of the United States as soon as practicable after its completion. Where the Commission finds that the construction differential exceeds 50 per centum of such cost, the applicant may have such vessel built in a foreign shipyard without the consent of the Commission. The Commission shall reimburse the applicant for the cost of the national-defense features incorporated in such vessels constructed in foreign shipyards under this section. Notwithstanding any other provision of law, such vessels shall be eligible for an operating-differential subsidy upon being documented under the laws of the United States, under the same terms and conditions as if such vessels had been constructed in a domestic shipyard under the provisions of this Act."

SEC. 10. Section 502 (c) of the Merchant Marine Act, 1936, is hereby amended to read as follows:

"(c) In such contract between the applicant and the Commission, the applicant shall be required to make cash payments to the Commission of not less than 25 per centum of the price at which the vessel is sold to the applicant. The cash payments shall be made at the time and in the same proportion as provided for the payments on account of the construction cost in the contract between the shipbuilder and the Commission. The applicant shall pay, not less frequently than annually, interest at the rate of 3% per centum per annum on those portions of the Commission's payments as made to the shipbuilder which are chargeable to the applicant's purchase price of the vessel (after deduction of the applicant's cash payments). The balance of such purchase price shall be paid by the applicant, within twenty years after delivery of the vessel and in not to exceed twenty equal annual installments, the first of which shall be payable one year after the delivery of the vessel by the Commission to the applicant. Interest at the rate of 3% per centum per annum shall be paid on all such installments of the purchase price remaining unpaid." SEC. 11. Section 502 (d) of the Merchant Marine Act, 1936, is hereby amended by adding at the end thereof a new sentence to read as follows: "Nothing in this section shall be construed as authorizing the Commission to approve a construction-differential in excess of 50 per centum of the construction cost of the vessel paid by the Commission.

SEC. 12. Section 503 of the Merchant Marine Act, 1936, is hereby amended to read as follows:

"SEC. 503. Upon completion of the construction of any vessel in respect to which a construction-differential subsidy is to be allowed under this title and its delivery by the shipbuilder to the Commission, the vessel shall be documented under the laws of the United States, and concurrently therewith, or as soon thereafter as practicable, the vessel shall be delivered with a bill of sale to the applicant with warranty against liens, pursuant to the contract of purchase between the applicant and the Commission. The vessel shall remain documented under the laws of the United States for not less than twenty years, or so long as there remains due the United States any principal or interest on account of the purchase price, whichever is the longer period. At the time of delivery of the vessel the applicant shall execute and deliver a first preferred mortgage to the United States to secure payment of any sums due from the applicant in respect to said vessel. The purchaser shall also comply with all the provisions of section 9 of the Merchant Marine Act, 1920." SEC. 13. Section 504 of the Merchant Marine Act, 1936, is hereby amended to read as follows:

"SEC. 504. Where an eligible applicant under the terms of this title desires to finance the construction of a proposed vessel according to approved plans and specifications rather than purchase the same vessel from the Commission as hereinabove authorized, the Commission may permit the applicant to obtain and submit to it competitive bids from domestic shipyards for such work. If the Commission considers the bid of the shipyard in which the applicant desires to have the vessel built fair and reasonable, it may approve such bid and become a party to the contract or contracts or other arrangements for the construction of such proposed vessel and may agree to pay a constructiondifferential subsidy in an amount determined by the Commission in accordance with section 502 of this title and for the cost of national-defense features. The construction-differential subsidy and payments for national-defense features shall be based on the lowest responsible domestic bid. No constructiondifferential subsidy, as provided in this section, shall be paid unless the said contract or contracts or other arrangements contain such provisions as are provided in this title to protect the interests of the United States as the Commission deems necessary. Such vessel shall be documened under the laws of the United States as provided in section 503 of this title and operated as approved by the Commission under the requirements applicable to vessels constructed under this Act."

SEC. 14. The last proviso in section 505 (b) of the Merchant Marine Act, 1936, is hereby amended to read as follows: "Provided, That this section shall not apply to contracts or subcontracts for scientific equipment used for communication and navigation as may be so designated by the Commission, nor to contracts or other arrangements entered into under this title by the terms of which the United States undertakes to pay only for national-defense features, and the Commission shall report annually to Congress the names of such contractors and subcontractors affected by this provision, together with the applicable contracts and the amounts thereof."

SEC. 15. The Merchant Marine Act, 1936, is hereby amended by striking out section 506 and inserting in lieu thereof the following:

"SEC. 506. Every owner of a vessel for which a construction-differential subsidy has been paid shall agree that the vessel shall be operated exclusively in foreign trade, or on a round-the-world voyage, or on a round voyage from the west coast of the United States to a European port or ports which includes intercoastal ports of the United States, or a round voyage from the Atlantic coast of the United States to the Orient which includes intercoastal ports of the United States, or on a voyage in foreign trade on which the vessel may stop at an island possession or island Territory of the United States, and that, if the vessel is operated in the domestic trade on any of the above-enumerated services, he will pay annually to the Commission that proportion of onetwentieth of the construction-differential subsidy paid for such vessel as the gross revenue derived from the domestic trade bears to the gross revenue derived from the entire voyages completed during the preceding year. The Commission may consent in writing to the temporary transfer of such vessel to service other than the service covered by such agreement, for periods not exceeding six months in any year, whenever the Commission may determine that such transfer is necessary or appropriate to carry out the purposes of this Act. Such consent shall be conditioned upon the agreement by the owner to pay to the Commission, upon such terms and conditions as it may prescribe,

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