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ence has a differential of from 5% to 7%. There is a Differential Conference to Italy.

(4) Differentials are permitted and fostered in a great variety of other forms of transportation.-Street car fares are less than bus fares; bus fares than taxicab fares; goods or mail moved by airplane pay more than by train; by train more than by bus; by bus than by canal boat, etc., etc., the world over.

Indeed, it is so obvious as to preclude all discussion that a parity of rates for all types of transportation service, irrespective of cost, would be against the public interest. Such a parity would be sheer economic waste. It would cripple the free flow of commodities. It would drive the more modest but economically valuable means of transport out of business. It would deprive shippers and consumers of a varied and well balanced system of transportation, and compel them to pay for a uniformly high geared one which they neither need nor want.

II. THE A LINES OPERATING IN THE INTERCOASTAL TRADE ARE DETERMINED TO BRING ABOUT A PARITY OF RATES IRRESPECTIVE OF TYPE AND COST OF SERVICE

THE SITUATION IN THE INTERCOASTAL TRADE

The so-called intercoastal trade is the trade by water (limited of course to United States vessels) between ports on the Atlantic Coast of the United States and ports on the Pacific Coast of the United States by way of the Panama Canal. In this trade there have been operating the following steamship lines, known as A lines, operating fast vessels and frequent sailings, viz: American-Hawaiian Steamship Company, Dollar Steamship Lines, Inc., Ltd., (Grace Line) Panama Mail Steamship Company, Luckenbach Steamship Company, Inc., (Panama Pacific Line) American Line S. S. Corporation.

There are also the following lines known as B lines, maintaining slower or less frequent service, viz: Arrow Line (Sudden & Christenson-Los Angeles Steamship Company), Calmar Steamship Corporation, Isthmian Steamship Company, McCormack Steamship Company, Pacific-Atlantic Steamship Company (Quaker Line), Williams Steamship Corporation; and finally there are the following lines known as C lines, maintaining a distinctly inferior and less frequent service: Nelson Steamship Company, (Pacific Coast Direct Line, Inc.) Weyerhaeuser Steamship Company, Shepard Steamship Company, Union Sulphur Company, Argonaut Steamship Company.

THE POSITION TAKEN BY THE "A" LINES

In all proceedings before the Shipping Board Bureau (as well as in their dealings with their competitors) the "A" Lines have insisted that in the intercoastal trade there must be a single rate structure or an absolute parity of rates without regard to the type of service and to the cost of running it. That position was stated as follows in a joint brief filed by three of the "A" lines (Grace Line, Panama-Pacific Line and Dollar Steamship Lines) in the intercoastal investigation recently conducted by the United States Shipping Board Bureau:

"The development of the American Merchant Marine as required by Congressional mandate can be served best by the Bureau prescribing a single set of rates for all services in order to make the competition between carriers one in service only" (page 9).

During the same investigation, Mr. Luckenbach, President of the Luckenbach Steamship Company, operating one of the "A" services in the intercoastal trade, testified as follows:

"Q. I wish you would advise the Examiner as to what you think should be the method of making rates on steamships operating between the Atlantic and the Pacific? A. I think we should work on a one-rate basis, service to count.

Q. One rate basis, service to count?-A. Yes.

Q. I understand you to mean by that, that there should be one rate: To illustrate, on one commodity, between New York and San Francisco?-A. Yes. Q. By all lines?-A. By all lines.

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A. I think we all ought to be on the same basis. They had the same opportunity. I mean they, or anybody, could have bought the ships that I bought; but they did not see fit to do it.

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Q. (By Examiner de Quevedo). Mr. Luckenbach, why is it that you advocate one single rate in this intercoastal operation?-A. Well, from my experience.

I am competing with fast ships, and I am perfectly willing to do that, and I think everybody else should be in the same boat.

Q. For what particular reasons? Will that be helpful to the trade?—A. That would build up more ships and faster ships.

Q. What would become of the slower vessels? A. It would be just too bad for them unless they got together wnd had a service which could compete with us.

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Q. Then it would cost you more to operate a 13-day vessel than it would to operate a 32-day vessel? Is that correct?-A. Yes, sir.

Q. Still you believe that the 32-day vessel should have the same rate as the 13-day vessel? A. Yes, sir.

Q. In other words, there should be no relationship to the cost of the service as shown in the rates-A. No, sir. The 32-day vessel a man can go out and build just the same as I can. I do not believe in putting a premium on inferior service" (Record of Intercoastal Investigation, pp. 521, 522, 523, 528, 529 and 533). [Italics ours.]

At the same time Mr. Luckenbach insisted that his ships must be allowed to charge a differential under the transcontinental railroad rates, because: 66* * * I would not get any business if I did not."

He stated that he must charge a lower rate "in order to live" (Record of Intercoastal Investigation, p. 532).

The Shipping Board Bureau has not as yet issued a report or made any ruling on the subject of differentials in the intercoastal trade. It is certain, however, that the organized and persistent pressure of the "A" lines in favor of the singlerate structure will continue to be exerted upon the Shipping Board Bureau and, if this Bill should be enacted without adequate safeguards, increasingly upon the new Maritime Authority.

III. THE OPINION OF SHIPPERS ON THE QUESTION OF RATE DIFFERENTIALS IN INTERCOASTAL TRADE

The intercoastal investigation referred to above was conducted from February to October of last year. It was widely advertised. An unusual number of shippers appeared and testified at the hearings. Every one of the shippers was of the opinion that the maintenance of rate differentials for varying types of services is absolutely necessary.

Their composite opinion may fairly be summarized as follows:

(1) Under one rate structure, all cargo that moved at all would move by the fastest, most frequent service available. This would mean that the slower, less frequent lines would starve to death and go out of business and the remaining A lines would have a monopoly.

(2) Some commodities require frequent shipments and swift transport. These can afford to and do pay a premium. These travel by railroad or by A lines for the most part. Others, less valuable, or less perishable, or more bulky, or easier to store, can more economically move by the slower, less frequent lines. The shippers of such commodities should not be deprived of these slower services. (3) Slower lines do not, in any fair sense, "divert" traffic from A lines. They carry traffic which, on a basis of sound business, properly belongs to them. They create traffic which otherwise could not afford to move. Shippers need the cheaper differential services in order to afford to move low grade, heavy volume, high weight density products at all.

(4) The faster, more frequent lines, because of the necessity of maintaining punctual departures and fixed schedules, naturally give their preference to the needs of a few predominant ports, such as New York, San Francisco, Philadelphia. They tend to ignore the needs of lesser ports to the injury of millions of citizens. (5) Shippers wish no injury to the A lines. They now divide their patronage among the A, B, and C, lines in accordance with the varying business factors in each case.

(6) Differentials exist the world over. They rest on economic necessity. Shippers can see no reason why the intercoastal trade should be treated differently from other trades.

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The effect which a single-rate structure would have upon the intercoastal trade was aptly stated during the investigation by Mr. Warley of the Calmar Steamship Corporation, as follows:

"Can you state the grounds on which you think the one class set-up is illogical?— A. There has been a great deal of testimony to substantiate my own belief that a one-rate set-up would simply mean that the slower lines would be forced out of the entire business, or only sufficient left in the business to take what the 'A' lines

did not want or could not carry. * *.* And I think that anything that would establish a set-up of a single-rate structure would put 60 per cent. of the tonnage in the trade in a very hazardous and perhaps impossible position to operate. (Record of Investigation, pp. 3410–3411.)

At the time of the proposal to establish a Code of Fair Competition for the shipping industry, the situation in the intercoastal trade received extensive study by Mr. William H. Davis, a distinguished lawyer, then Deputy Administrator of the N. R. A. in charge of Shipping. As a result of that study, Mr. Davis made public announcement of his conviction that any regulation of water carriers operating in the intercoastal trade must provide for differentials for the varying services. He stated:

11* * * But I do say that you must in some form reintroduce into the intercoastal trade a competitive condition that will, either by agreement or by the pressure of necessity, develop a differential for different services. I do not care whether it is agreed on beforehand by rational men who know the value of their services or whether the industry is forced to come to agreement about it by selling their service for what it is worth in order to live. But unless I am wholly mistaken, and if I am I want to be corrected, it is necessary, to solve the problems of that branch of the industry, that that idea should be introduced some way.' (Speech before the Propeller Club of the United States, Port of New York, December 14, 1933.) [Italics ours.]

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IV. THE PRINCIPLE OF CHEAPER RATES FOR CHEAPER TYPES OF SERVICE SHOULD NOT BE LEFT TO IMPLICATION BUT SHOULD BE EXPRESSLY DECLARED

In the nature of things, the Authority to be set up under the Bill will have to rely for information and suggestion upon the industry itself. The powerful lines have been in a position in the past, and will be in a position in the future, to spend the time and effort necessary for a continuous and persistent presentation of their point of view and of their special interests. The smaller carriers and the often unorganized shipping public are not in a position to do so. In the light of past experience, there is just cause for concern that, if not accompanied by further safeguards, the new rate fixing power will be exercised to the exclusive advantage of the powerful lines maintaining superior services, causing the elimination of their more modest competitors, to the detriment of the public interest. This can only be avoided by enacting the express proviso suggested herein.

Dated New York, April 21, 1935.
Respectfully submitted.

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SHEPARD STEAMSHIP CO.

The CHAIRMAN. Mr. Shepard, I now want to ask you a question. Have you seen the committee print with the explanation of the different sections as made by the Maritime Commission on page 40? I do not think you have quite answered the explanation or the criticism that was made by the Commission about the importance of filing these rates, both maximum and minimum, on 10 days' notice. The charge made is:

They may charge different rates from different shippers for the same services, provided such rates are lower than the maximum rates, and may increase their actual rates without notice provided the increased rates are not higher than the maximum rates. These privileges and the lack of publicity lend themselves to secret rebates, trading, and discrimination.

Do you disagree with that?

Mr. SHEPARD. Yes, sir; I decidedly do. I should like permission, if I may, to furnish a short brief in refuting that statement.

The CHAIRMAN. I think you should, because this bill that we have before us is the bill which was suggested to us by the Maritime Commission. These explanations included in the paper we have before us are the explanations provided by the Commission, and here this

definite charge is made that the present arrangement lends itself to secret rebates, trading and discrimination. So if you care to furnish it to us, we shall be glad to have your brief on that particular subject. Mr. SHEPARD. Yes. I shall appreciate the opportunity to present it. Senator THOMAS. Mr. Shepard, you made reference to section 4 of the Transportation Act. There is nothing in section 43 of this bill which would affect the law as it stands under section 4 today, is there? Mr. SHEPARD. Section 4 is the part of the Transportation Act covering rail carriers. There is nothing in this bill that would have any effect on that.

Senator THOMAS. You used it, though, as a reference, did you not, in your argument?

Mr. SHEPARD. I referred to it to point out the necessity for minimum rate power in the case of the railroads, which necessity is absent in the case of water carriers.

The CHAIRMAN. For the benefit of the committee I wish to call attention to the Economic Survey of the American Merchant Marine, prepared by the United States Maritime Commission. It will be recalled that the chairman, Mr. Joseph P. Kennedy, in his letter of transmittal said:

It should be pointed out that Commissioner Moran feels that there should be no amendments to the 1936 act, as the Commission suggests in the survey, until it has had a longer period of experience in the administration of such act.

At the conclusion of the last hearing I wrote to Commissioner Moran, because I knew that several members of the committee were anxious to hear him, and I certainly have been anxious to hear him. The letter which I wrote to Commissioner Moran is as follows:

Hon. EDWARD C. MORAN, Jr.,

Commissioner, United States Maritime Commission,

DECEMBER 8, 1937.

Washington, D. C.

MY DEAR COMMISSIONER MORAN: This morning in making a statement to the Commerce Committee, Chairman Kennedy stated that you were not in full accord with the recommendations of the remaining members of the Board. Mr. Kennedy made a strong appeal for modification of existing law.

Naturally we are anxious to hear all sides of the question. We would be happy to have you express your views. Would it be agreeable to you to appear before the Commerce Committee on Friday morning of this week at 11 o'clock? If so, I shall notify them so all the members of the committee may be present. With kind personal regards,

Cordially,

The reply from Commissioner Moran is as follows:

Hon. ROYAL S. COPELAND,

ROYAL S. COPELAND,

UNITED STATES MARITIME COMMISSION,
Washington, D. C., December 9, 1937.

Chairman, Committee on Commerce, United States Senate,

Washington, D. C.

MY DEAR SENATOR: I appreciate your kindness and courtesy in extending to me an invitation, on behalf of the Committee on Commerce, United States Senate, to appear before your committee and express my views concerning the proposed amendments to the Merchant Marine Act, 1936.

The statement of Chairman Kennedy before your committee was full and complete, and was the result of a painstaking study of the shipping problem.

Since my views, generally speaking, are set forth in the Economic Survey of the American Merchant Marine and letter of transmittal submitted therewith, sent to Congress by the United States Maritime Commission, I feel there is

nothing further to add, and therefore I do not plan to accept your invitation to appear before your committee.

With kind personal regards, I remain,
Cordially yours,

EDWARD C. MORAN, Jr.,

Commissioner.

We came together this morning particularly to hear witnesses who care to speak regarding the labor recommendations to the Maritime Commission. I suggest that there be printed in the record at this point the pages from the Economic Survey of the American Merchant Marine, dealing with the subject, Labor, beginning at the bottom of page 43, where the statement is made that labor conditions are deplorable, and up to the subject of Training, but not including it, near the top of page 50.

(The matter referred to, being under the heading Labor, in the Economic Survey of the American Merchant Marine, prepared by the United States Maritime Commission, is printed in the record, as follows:)

LABOR

One of the most difficult problems with which the Commission is confronted today is that of seagoing personnel.

Labor conditions in the American merchant marine are deplorable. Unless something is done to reduce interunion friction, to increase the efficiency of our crews, and to restore order and discipline upon our ships, all Government efforts to develop a strong American fleet will be futile. A merchant marine built upon inadequate and unsatisfactory personnel is little better than no merchant marine at all.

Labor relations in the shipping industry have long been characterized by an unenlightened attitude on the part of both employer and employee. The employer, for his part, has in the past imposed long hours, low wages, and cramped quarters. The employee, meanwhile, has abused his employment in a manner that would not be tolerated in any other industry. The result of these things has been that shipping, despite the marvelous technical progress of the past century, has remained in a backward state so far as labor relations are concerned.

The Commission found, in approaching the labor problem, little information upon which to proceed. There are available practically no statistics relating to the employment of seamen on ocean-going vessels. The earnings of seamen, their conditions of labor, the average length of service, and similar matters affecting seafaring men seem to have been overlooked. The Commission was forced to undertake some rather unusual research in order to establish a proper basis for its study of the labor problem.

It was found, first off, that no one knew exactly how many men were employed on our subsidized vessels. The study revealed that there is a total of approximately 10,000 men employed on the 155 vessels now under subsidy contracts.

The next step, in the determination of conditions among seamen, was to inquire into wages and earnings. Although the Federal Government now publishes a table which compares American wages with those paid on foreign ships, these figures do not provide a proper comparison. For one thing, they are distorted by currency fluctuations; for another, they do not take into account subsistence, security, pensions, or the purchasing power of the seaman's wages in his home country. It was accordingly necessary to work up a mass of original data in order to arrive at a true conception of the conditions of American seamen, both as compared with foreign seamen and with domestic workers ashore.

To make up for statistical deficiencies, and to get the very latest information about American seamen, the Commission arranged with a private agency in New York to interview 1,000 men. Interviews were secured in various parts of the city to secure as large a spread as possible. The replies reveal some interesting facts about the men who man our vessels.

The men interviewed have been at sea anywhere from 1 month to 40 years. They come preponderantly from seaboard States. The majority are sailing in capacities below what they consider themselves qualified by experience and licensing to fill. Most of the men are single; practically none have bank accounts; few vote.

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