In 1926, the budget estimates for the system for the year 1933-34 »unted to 207,485,000 hire. By 1933, the budget estimate for the sn; e system for 1933-34 had been increased to 260,035,000 lire - an sse of 52,550,000 lire. the past 4 years and I cite this to show the flexibility of the the number of decrees issued by the Ministry of mi ations, and laws enacted by the Parliament of Italy, reeting to shipping and shipbuilding for 4 years, for the period of © to 153 inclusive, is about 250, and the approximate number of rees and laws relating to changes in contract services for the vear period is about 65 I may add that during the calendar year -4 we have had 10 changes in the contract system of Italy and t'ese changes is the organization of a new express service tween italy and South Africa by the Italia Co. at an annual subsidy of I8 7770000 lire Mr CUIKIN How much is a lira now? Mr. SAUGSTAD The current exchange as of this period we have er cons.deration was 8.5 cents. Vr Sovich About 12 lire for a dollar? Vr SAUGSTAD. Yes The stabilized rate is $0 0526. Mr SIHOVICH Originally you had about 20 lire for a dollar? As stated among the changes made in 1934 was the organization of new express service between Italy and South Africa by the Italia Cat an annual subsidy of 18,750,000 lire for 5 years, with 20,000tr. anot vessels; a revision of the African and Pacific North Arterioan services of the Triestina Co. of Trieste for 5 years, at an and badly of 19,450,000 hire, and a revision of the Sicilian and Art. Europe services of the Adria Co for a 14-year term at an annual ⚫y of 10,150 000 lire. its covers the broader aspects of the contract system as a whole. Mr CULKIN Have you testified as to that line between Bombay az : Genos, do you know anything about that? Mr SAUGSTAD Under the Italian system? Mr CULKIN, Yes T: CHAIRMAN. You are going to take up the lines separately? Mr SAUGSTAD I was going to take up that line particularly Mr Culkin, All right. Mr SIROVICH. Is that called an "indispensable" line" Mr. SAUGSTAD. That is a "useful" line. Any line that connects an italian port with a foreign port is known as a "useful" line. The CHAIRMAN. There seem to be two systems, the "indispene and the "useful" lines, and Mr. Saugstad is going to take up Mr SIROVICH. An "indispensable" line would then be defined as a ane operating between various sections of Italy itself? Mr. SAUGSTAD. Yes, sir. Mr SILOVICH, And the islands and the mainland? Mr SAUGSTAD. Yes, sir. Mr SIROVICH. A "useful" line is one operating to any foreign Mr. SALGSTAD. Yes, sir. The "indispensable" system consisted enanally of 14 groups. Besides many provisions contained in their tracts, rules, and regulations, there was an elaborate regulatory provision containing 36 articles which covered the services of all the lines. Among the most interesting provisions of these regulations, I will cite the following: (1) Contracts may be entered into by bids or by private negotiation. I emphasize this, because in many cases the question of restricted bidding has been considered by foreign governments and under those circumstances the administration in charge goes before the legislative body concerned and explains the reason for setting aside the general principle of public bidding, and it is usually based on the lack of competition in the prospective service. Mr. SIROVICH. Is that what brings about private negotiations, then? Mr. SAUGSTAD. Yes, sir. Mr. SIROVICH. Where there is a lack of competitive bidding? Mr. SAUGSTAD. The French Government repeatedly has gone before the Parliament and explained the setting aside of the principle of public bidding because of the certain knowledge there was only one competent bidder. Mr. SIROVICH. What would they do in the event of tremendous prices asked for transportation and so on, by virtue of a monopoly in the particular line? I notice in construction they have protected themselves, according to your statement, so that when it reaches beyond a certain limit they have the privilege of going to a foreign country to build their ships? Mr. SAUGSTAD. Yes, sir. Mr. SIROVICH. Suppose the price asked for the transportation of products, men, or troops, or other things is excessive, what then? Do they go through private negotiations? Mr. SAUGSTAD. I do not know. The CHAIRMAN. I think it would be safe to say that the Government still prevails with Mr. Mussolini in charge. Mr. SAUGSTAD. The second interesting provision is that vessels assigned to subsidized lines may be expropriated by the Government and turned over to any new operator who may undertake a service, such vessels to be priced by 5 experts, 2 representing the retiring operators, 2 representing the new operators, and the fifth to be named by the president of the Supreme Court of Italy. The CHAIRMAN. Is that the highest court in Italy? Third. Operators who are compelled to build new vessels for services may be authorized to issue bonds redeemable during the period of concession in amounts not to exceed three-fourths of the value of the vessel nor more than 40 percent, which was later increased to 60 percent, of the subsidy due at the time authority is granted. Fourth. All mail up to 30 percent of the measurement capacity of the vessel is to be carried without charge. Moreover, all mail is to be collected from and delivered to post offices by the operator for his own account. Mr. SIROVICH. Do you mean 30 percent of all mail that is carried without any governmental charge? Mr. SAUGSTAD. No, sir. A ship must accept all mail provided, that mail does not occupy more than 30 percent of the space of the ship. Mr. SIROVICH. Of the net space, or the gross space? Mr. SAUGSTAD. Of the cargo space. Of course, this may seem fantastic, but when one considers that the system includes many sma.! vessels plying around the Italian mainland, the result might v be that a great deal of their space would be taken up by mail. M. SIKOVICH Is that large space contingent upon the indirect that a slip receives, or the company receives? You say 30 pt of the space is put away for mail, without any compensation *e carrier. Mr. Satostad. The space is not set aside to the Government, but the company is compelled to carry mail tendered up to 30 percent of the capacity of the ship. The owner has the privilege of using the »; unless it is occupied by mail. Mr SIROVICH. I mean he gets no compensation for it? Mr. SAUGSTAD. He gets no extra compensation for it. All mails are carried free under the Italian system. F..th. All passengers, cargo, livestock, and valuables are carried at state-aproved tariffs. Syn The Government undertakes to provide permanent berths for the contract ships throughout the kingdom. Mr. SIROVICH. Is that "state-approved tariffs" equivalent to our Interstate Commerce Commission regulation - that state-tariff sys Mr SAUGSTAD. I do not know. I do know that the tariffs must proved by the Ministry of Communications before they become else but as to the competitive features that may lie in them, I ate to say. eventh. In national emergencies, foodstuffs are to be carried at - reent of regular rates. ...th. The Government may increase subsidies to meet any tal conditions. Nata Reduction in passenger tariffs: Free transportation to be anted to othcinis of the Merchant Marine Administration on duty status as well as certain other officials and their families, including ers of Parliament in going to or from sessions; missionaries; destit te nationals and shipwrecked sailors, upon consular request; ---rent reduction to Government employees and families, to and enlisted personnel of the Military Establishment, to students of nautical schools, to participants in congresses, fairs, and extent ots, to groups of workers or farmers and families of 30 or over, to scientite expeditions, and to the consular corps, teachers, an. 1 their famines; 50-percent reduction to disabled war veterans who Ang to Rome for special patriotic anniversaries; 75-percent ton to citizens traveling to take part in political elections and st „dents from colonies or other foreign countries going to Italy to is a subsequent decree following the 1926 provisions, some annual it. resses were allowed in the entire system. These were projected for a period from 1928 to 1946 and, for the current year, the extra provision is about 20,845,000 lire. The "useful" lines under the new subsidy system agreementsT. CHAIRMAN. Those are the lines running to foreign ports? Mr SAUGSTAD. Yes, sir; lines running to foreign ports- the contracts or the agreements for the "useful" services are so worded as to leave the contractors free to organize each service. The contract rerements are less rigorous than those for the "indispensable" lines, beruse it is considered of greater importance to operate a commercial ize than to assure a service that may be of but general public interest. It is recognized that successful commercial operation must include an element of flexibility. To prevent competition between subsidized lines and free commercial Italian lines, there is this provision in the "useful" contract: The Minister of Communications will have the option to modify the above routes when, in his absolute judgment, they may constitute an unlawful competition with preexisting national regular lines, whether private or subsidized. The different agreements have a life of 5 or 10 years. A more recent one indicates a period of 13 years. The original fleet provided for the "useful" group under the original agreements consisted of 131 vessels of 597,735 gross tons. That is an answer to your question. Mr. SIROVICH. That is for the whole world? Mr. SAUGSTAD. Yes, sir; that is the original agreement. I think I may say that that has now been increased, but I have not compiled the tonnage figures to show. Under the contracts, the original contractors agreed to buy or to construct additional fast steamers. These were invariably of higher speed and usually of larger size than those that had been in the service previously. Referring again to the postal provisions; the postal provisions of the "useful" system provide that all contractors must carry mails, whether originating in Italy or destined thereto, or whether originating in foreign countries or destined thereto. Such mail includes parcel-post packages and the handling of empty mail bags, the packages being limited to 22 pounds in weight. No additional compensation is granted the contractor for this service unless the space occupied by the parcels sent from Italy exceeds 3 percent of the capacity of the ship's hold. You are now dealing with the large ocean-going ships. Mr. SIROVICH. So the 30 percent does not apply to the "useful" lines? Mr. SAUGSTAD. No, sir. Mr. SIROVICH. It is only 3 percent there? Mr. SAUGSTAD. Yes, sir-in which case the extra compensation will be determined by the Ministry of Communications. All contracts concluded by the contractor with foreign powers for the handling of foreign mail must be approved by the Italian Postal Adminis tration. Mr. SIROVICH. Why this divergence between the "indispensable lines and the "useful" lines of from 30 percent to 3 percent without any compensation? Mr. SAUGSTAD. I should say, sir, that the "indispensable" lines include a considerable number of very small vessels, passenger ships and with Mr. SIROVICH. Very little cargo? Mr. SAUGSTAD. Very little cargo space; whereas the "useful" system includes cargo ships of six, seven, and eight thousand tons, where obviously there would be no possibility of that amount of space of that kind being taken up by mail. CONTROL OF THE ITALIAN LINES Article 10 of all "useful" contracts specifies that the Ministry of Communication has the right to control the operation of the service in whatever manner may be considered most expedient. To that end e vor tractor compiles statistics covering the movement of passenand caryo for each line and the various revenues received, which ta he submits to the Ministry of Communications four times each " or together with any other documents required. Within 6 months ti e caustig of each fiscal year, the contractor also submits to the V. istry of Communications, along with the balance sheets, a techa. and economic report showing the distribution of revenues, as as te expenses for each line. Final payment of the amounts due ontractor is not made until all such documentary evidence is ம். .ses incurred by the personnel detailed by the Ministry of in ations for supervision of the operations of the services and e suoat of the required statements are for the account of the Pra tor. On the "useful" contracts the basic annual subsidy is * *, ed by 4 percent. This reduction, however, may be offset by preased service, extension of lines, or by the establishment of new ~, and under such circumstances the 4 percent deduction will not NATIONAL-DEFENSE REQUIREMENTS As to the national-defense requirements, the contract steamers on fl" routes, and on those "indispensable" routes where a port is served, are required to carry an extra certified captain a. d an extra certified engineer as students. Each is bound to serve ; var on the ship, and the company is required to provide a similar •. stitute in case the designated officer fails to report. The subsidized steamers to Italian colonial ports and to foreign s are alike required, when Italy mobilizes its forces, to give prefence at embarkation to Italians called to the colors, and such Lars are entitled to transportation at a reduction of 30 percent of e reglar fare. This reduced fare is also allowed to Italians en te to perform their periodical military duties or returning to their after such service has been rendered. I understand it is customary on the large express ships of Italy to ave what might be termed a dual comn.and; that is, at no time are me vessels under the authority of any but fully qualified masters 4: 1 1. f engmeers, even if the master and chief engineer of the ship 1 be ashore. They maintain an extremely large and efficient. l personnel on the larger vessējs, 1 it may be of interest to the committee to consider the financing of blowing the war, the Italian s.bsidized lines were very hard $d for funds with which to build new ships required under the revised sidy system. Various plans were proposed and abandresi, when, abo it a year after the ratification of the debt settlement w. h Italy by the United States Government, the Italian Government ¤ gotiated a loan in London and New York through the Consortium restits for Public Works. This loan was arranged March 22, 1927, a! 1.4 000 pounds was placed in London and $12,000,000 in New The bonds are of two series, $7,500,000 payable in 10 years 4 $12,5 0,600 in 20 years. A the part of the Government of Italy, the loan was negotiated by the Consortium of Credits for Public Works, which is responsible to the British and American syndicates advancing the credits The |