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of the other creditors in the matter of write-off among creditors. It takes no preference in that position, but considers itself in preferred position on one loan already referred to.

Mr. SIROVICH. Then the C. G. T. amortizes its obligations to the Government?

Mr. SAUGSTAD. It does; yes, sir.

Mr. SIROVICH. Over the period of how many years?

Mr. SAUGSTAD. Over a period of 14 years, providing its operating losses do not absorb the 150,000,000 francs which they are allotted each year.

Mr. SIROVICH. So that in 2 of those 4 procedures, the Government is a partner.

Mr. SAUGSTAD. Yes, sir.

Mr. SIROVICH. In the Corsican line and the Far East?

Mr. SAUGSTAD. No, sir; in the South American line and the Far East line.

Mr. SIROVICH. The Government is a direct partner?

Mr. SAUGSTAD. The Government is a direct partner under a joint risk and joint liability arrangement.

Mr. SIROVICH. Now, would you be kind enough to let the committee know if in these two lines, in which the Government is a joint partner with the companies, they have made money or lost money?

Mr. SAUGSTAD. They have lost money, sir.

Mr. SIROVICH. In how many years; have you any figures?

Mr. SAUGSTAD. I think I have.

Mr. SIROVICH. Well, for the last 4 years.

Mr. SAUGSTAD. I can give you the last 2 years without looking for the records.

Mr. SIROVICH. All right; suppose you give us the last 2 years.

Mr. SAUGSTAD. Let us put it this way: The appropriation this year to the Far East Line is 202,000,000 francs, roughly. That represents 80 percent of the loss. The annual reports of the Far East Line this year indicate an operating loss of 252,000,000 francs.

Mr. SIROVICH. In the operation in which the Government selects the owner to run the ship, for example, do they allow them to charge any price they want for their services, or does the Government regulate the salaries of the officials?

Mr. SAUGSTAD. The Government has nothing to do with the salaries of the officials under that circumstance, except

Mr. SIROVICH. So that in the auditing of the books

The CHAIRMAN. Just wait a minute. The witness started to say 66 except." Let him finish the statement.

Mr. SAUGSTAD. Except through any pressure which may be exercised by the government commissioner who is on the board of each contract line representing the minister of merchant marine.

Mr. SIROVICH. Have you any way of figuring what those men get for operating their ships? Is there any way we could have placed in the record the salaries that the men receive for managing the Far East route and the South American route?

Mr. SAUGSTAD. No, sir.

Mr. SIROVICH. Is there any way of finding that out?
Mr. SAUGSTAD. No way, as far as I know.

V SONICH. And the other two companies, the C. G. T. and the an Line: They have received an average payment which they have time to amortize if they have any profits. Now, suppose they

rt have!

Mr SAUGSTAD. The French Government in that condition is in a ty the same position as any other creditor of the line previous

reorganization————

Mr Soon. In other words, there is no preferential considerato the Government!

SAUGSTAD. No, sir. Except on one loan already explained. MSIVICH. By taking advantage of its preferential position to -tr.nent of other creditors!

SAUGSTAD, No, sir.

M: SROVICH. They are all put upon a parity?

Vr. SAUGSTAD. Yes, sir.

1 - CHAIRMAN. You started to say "previous to the reorganiza; you started to make a remark there. I would like the wit~s to turish his remark.

Mr SAUGSTAD. I think I have already answered that.

M. HAMIS I would like to ask, Mr. Witness, upon general prinif the mail subsidies which we are paying, which are subai subsidies as I gather from the President's message, are quite ar to the French subsidies in the line of mail contracts, in the of nail payments-on general principles; not going into detail? Ie CHAIRMAN. I gather from the witness they are not mail sub

Mr. SAUGSTAD. I do not quite understand your question. I tried make clear that the contractors in France carry the mail merely as art of their regular business and charge the government for it at tal Postal Union rates and those rates are fixed further by

eement between the Postal Administration and the Minister of Merchant Marine at the end of each year. So that they may even wer the Universal Postal Union rates if they choose. In case the on of the line is such that the Government feels it ought to ivantage of lower rates, they can do so. CHATMAN. But not raise them?

M

SAUGSTAD. No, sir.

M- HAMIIN. In accordance with the President's suggestions, as item here, $27,000,000 a year is really paid as a subsidy m arrying: that is, he states here substantially that it would only it 85,000,000 to carry the mail for the United States.

Mr SALGSTAD. Yes, sir.

M HAMLIN. And that $27,000,000, we may say, is really a

AUGSTAD Yes, sir.

HAMIIN. But covered up, we will say.

Mr. SAUGSTAD. Yes, sir.

Mr. HAMLIN. So that his suggestion and yours, perhaps, would at we have a subsidy which would be paid straight, so that we 1 know what subsidy we were paying and not be covered up mail words, and so forth!

M- Seoran. I can answer that by saying that the principle of 1 contracts resting on the carriage of the mail is practically done with all over the world except in 5 or 6 lines, 4 of them British

and 2 Japanese. The rest are all known broadly as contract services and they rest primarily upon the political necessities of certain countries to keep in touch with their colonial holdings.

Mr. HAMLIN. Just one question more: As I understood you, the carrying of foreign mails is very closely guarded by the French Government; at least, and I do not know but what it is forbidden under penalties, is it?

Mr. SAUGSTAD. No, sir. The ships are under contract to accept any mail tendered the vessel, or the captain of the vessel, by a representative or the French Postal Administration. If the French Postal Administration chooses to carry or to take under contract any foreign mail, they may tender it and the ship must accept it. The CHAIRMAN. And in the meantime they can send the mail by other ships if they want to?

Mr. SAUGSTAD. Certainly.

Mr. SIROVICH. Can you explain for my benefit, and the committee's benefit, what the Universal Postal rate means? You have been referring to it through your discussion.

Mr. SAUGSTAD. The latest information I have on the Universal Postal rates-now may I say that I have not taken this statement out of the Universal Postal Union regulations; I have taken it from the postal laws and regulations of this country, and

Mr. SIROVICH. Is there an international agreement between nations of the world as to what they should charge each other?

Mr. SAUGSTAD. Yes.

Mr. SIROVICH. For carrying their mail?

Mr. SAUGSTAD. There is, and there is also a universal postal regulation which provides for how much all of them shall pay for seaborne mail.

Mr. SIROVICH. And that is what we call the universal postal rate? Mr. SAUGSTAD. Yes, sir.

Mr. SIROVICH. Sort of an international agreement.

Mr. SAUGSTAD. Yes, sir.

Mr. SIROVICH. Of the various nations of the world as to the universal rate they would charge each other in the transportation of mail?

Mr. SAUGSTAD. Yes, sir. The rates, for instance, that our Post Office Department pays foreign ships for carrying the mails under the Universal Postal Union agreement

Mr. SIROVICH. And that is reciprocal between all nations of the world?

Mr. SAUGSTAD. Yes, sir; as follows: For a distance not exceeding 300 nautical miles, 6.57 cents a pound, or 75 centimes a kilogram, for letters and post cards

Mr. SIROVICH. 6.57 cents for a pound?

Mr. SAUGSTAD. Yes, sir.

Mr. SIROVICH. How much would that mean per letter? Is there any way of determining how many letters make a pound?

Mr. SAUGSTAD. I think, roughly, we figured at one time it took 40, or thereabout.

Mr. SIROVICH. That would be 4 cents a letter?

Mr. SAUGSTAD. I think we figured 40 letters to the pound at the time we established the 80-cent rate to American ships for carrying

The other rates are 10×7 cents a pound, or 10 centimes a for matis consisting of other articles including parcel I at is for 300 miles.

fitare between 300 and 1,500 nautical miles: 17.3 cents 1, or 2 franes a kilogram for letters and post cards, and 2.2 pad or 25 centimes a kilogram for mails consisting of rarts including parcel post.

RAICH. How does that compare per pound with cargo? SAGSTAD. Oh, it is the best business any ship could do.

SIROVICH. You mean letter carrying is the best business any cold do!

Mr SAUGSTAD. Yes, certainly. The third classification is: For all statexveding 1,500 nautical miles, 26.3 a pound or 3 francs ogram for letters and post cards, and 3.5 cents a pound or 40

a kilogram for mails consisting of other articles including

SAICH. So in answer to our colleague, Mr. Hamlin from to government can really make any money from the standt of the universal postal rate, because it applies equally to all! Vr SAUGSTAD. They might, under certain postal traffic conditions. CHAIRMAN. In the Report of the Post Office Department, refer to the foreign poundage basis. Is that the universal rate! SAUGSTAD. I presume that is what they refer to.. 1. CHAIRMAN. And then they refer to the American poundage What is the distinction there! The American poundage rate to be very much higher.

Mr SAUGSTAD. The United States Post Office is authorized to pay :t a pound for first-class mail and 26 cents a pound for ass or other articles,

CHAIRMAN. And that is on their own ships, on American

M- Saugstad. On American vessels.

The CHAIRMAN. That is higher than the universal rate?
Mr. SAUGSTAD. Yes, sir.

I ́ CHAIRMAN. Does that apply on anything else but ocean-going
I presume it applies to all American ships, does it not?
SAUGSTAD. American ships.

M

CHAIRMAN. That was before the passage of the Ocean Mail trat At!

SAUGSTAD. Yes, sir.

I CHAIRMAN. And the American poundage rates applied to all whether under ocean-mail contracts or not?

Mr SAUGSTAD. Yes, sir.

- WALLGREN. I merely want to ask, Mr. Saugstad, do you have i knowledge as to the interest rates on construction loans by Freh Government ?

Mr. Saugstad, Yes, sir; we are coming to that. Do you want to t to that now, or do you want to wait until we treat that subject? Lave not gotten to that subject yet.

M». WALLGREN. I see.

Mr. MANSFIELD. Now, the President in his message refers to the arts paid for carrying the ocean mails as being approximately **** $27,000,000 of which he classes as subsidy. I presume

the $3,000,000 would be what it would have amounted to under the Universal Postal Union rates that you speak of?

Mr. SAUGSTAD. I am not familiar with whether that figure is derived from the Universal Postal Union rates, or from the American preferential rates; I do not know. That is the American poundage rates, I am told.

The CHAIRMAN. In a statement by Mr. Farley, he said that if the mail had been carried on the foreign poundage basis, which I assume was the Universal Union basis

Mr. SAUGSTAD. Yes, sir.

The CHAIRMAN. Up to June 30, 1934, the cost would have been $6,802,434.90, and on the American poundage rate, which is 80 cents. to which you refer

Mr. SAUGSTAD. Yes, sir.

The CHAIRMAN. The poundage rate would have amounted to $15,534,509.10, and the excess over those American poundage rates would be what the President evidently terms as subsidy."

Mr. SIROVICH. To correlate the statement made by our chairman, the fact the French Government gave 410,000,000 francs as loans and other investments in their merchant marine at the prevailing standard of exchange, international exchange of 16 francs to the dollar, means that the French Government has practically given almost 25 to 26 million dollars of subsidies, which is almost the same as the amount the President's message states we gave-$27,000,000as indirect mail subsidies to the American merchant marine. Is that right? In other words, 410,000,000 francs is the amount of money that the French Government invested in their merchant marine; is that right-either as a direct partner or as money to be paid back later?

Mr. SAUGSTAD. Now you are discussing the loans, are you not? Mr. SIROVICH. I am discussing the fact you stated this year the French Government appropriated 410,000,000 francs.

Mr. SAUGSTAD. 405,650,000 francs.

Mr. WALLGREN. Is part of that loan in the form of a direct subsidy?

Mr. SAUGSTAD. That is called a "direct annual payment by appropriation, for contract services."

Mr. SIROVICH. Which, taken at the international exchange at the present rate, amounts to almost $26,000,000?

Mr. SAUGSTAD. Twenty-six million, about eight hundred thousand dollars.

Mr. SIROVICH. And the President's message states we contribute through appropriations the sum of 30 million, 3 million of which is the exact amount of money which would have gone for postage, based upon the American standard, and the other $27,000,000 is a direct subsidy?

Mr. SAUGSTAD. Yes, sir.

Mr. MANSFIELD. I understand the merchant marine in France has a Minister at the head of it.

Mr. SAUGSTAD. Yes, sir.

Mr. MANSFIELD. Is he a regular cabinet officer?

Mr. SAUGSTAD. He is.

Mr. MANSFIELD. Of the same standing as other cabinet officers?

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