The 1929 decree provides for 14 gradations of speed. The rate of hearty granted to ships legally entitled to qualify for constructionbounty provisions is payable on a percentage basis, such percentage applicable to the three factors laid down by the 1926 law.

The bounty-earning speed of any ship under the 1929 provisions is to be determined upon the basis of average speed developed during a %-hour trial run with the vessel immersed to a line half way between the water line and full-load line, the ship in all respects to be fully eqapped and seaworthy. Fuel-consumption efficiency tests will be rade during the last 3 hours of the trial run in order to determine the rate upon which basic bounties will be established.

The increases allowed by the speed bounty on new ships under the 1929 law were as follows:

Mr SAUGSTAD. That is the increased percent bounty allowed a stup for her increased speed. It is a special provision which is supposed to take care of the larger and faster ships, such as the Mr SIROVICH (interposing). The Rer?

Mr SAUGSTAD. The Rez and others. And it is paid to the shipbaders as a bounty in connection with their building of the ship, and not in connection with the operation. If they build that type of wer in her, they receive additional subsidies.

Mr SIROVICH. As a bonus?

Mr SAUGSTAD. As a bonus, or as an increased percentage of the total allowances under all bounty provisions.

Mr SIROVICH. In other words, if a ship were built that was designed to run 26 knots and would, upon trial, run 28 knots, the ship company would get the difference between the percentage for 26 knots and the percentage for 28 knots?

Mr SAUGSTAD. No, sir. Construction bounties are all paid to the stupbuilders.

Mr. SIROVICH. I am talking about the shipbuilders.

Mr. SAUGSTAD. You said the ship companies.

Mr. SIROVICH. I meant the shipbuilders.

Mr. SAUGSTAD. It is assumed that the designer and the construction company know what the speed is going to be before the ship is bit. They have to prove it by a trial run before they can get the subsidy. If, as you say, upon trial, she should show more speed than the original design called for, she would get more bounty.

Mr. SIROVICH. Yes.

Mr. SAUGSTAD. Another bounty provision is based upon boilers used exclusively to supply steam to auxiliaries on which a manufacturing subsidy of 11 lire per 100 kilos is effective; and on auxiliary equipment not a part of the main propelling unit, on which the bounty is 12 lire per 100 kilos. This amounts to $5.78 per ton on such boiler equipment and to $6.31 per ton as a direct bounty allowance on the manufacture of auxiliaries, and is designed to offset extra material costs and to encourage the construction of such units in Italy in place of purchasing them outright in foreign markets. The sum of these bounties will vary widely with the equipment of the vessel.

To show the relative effect of the speed bounties in the constructionbounty laws of Italy, there have been some calculations made by Italian technicians, and these calculations have been published in Italian trade papers. An example was made of taking the construction of a 10-knot cargo ship as 100. If a 16-knot vessel of the same class were built, the cost would be about double that of the 10-knot ship, or 200. Due to the increased bounty for increased speed, the actual cost of the 16-knot ship as compared with the cost of the 10-knot ship, would be 194.85. In other words, the extra speed bounty on that type of ship would reduce the extra cost by only 5.15 percent.

Now, if the speed bounty law is applied to the highest types of ships and a 20-knot passenger ship was taken as a base, or 100, the cost of a 27-knot ship would 177. Due to the application of the speed bounty provisions of the 1929 act the actual cost of this ship would be 152.62. The influence of the extra bounty in this case is said to reduce the extra cost by 27.5 percent, a slight inconsistancy.

In other words, if we apply the speed provisions to cargo ships in the lower categories, the increase of speed will have little effect; but if we apply them to the high-class ships, they will probably cut the extra construction cost by about 25 percent.

In order to explain the various provisions of the construction bounties, we have prepared a hypothetical example. We have taken a vessel of known specifications and applied thereto all the various factors, to show what the result would be. At the time this table was prepared we had fairly complete engineering information on the Bremen. The new Italian ships were not then completed, so the application of the hypothetical case is made on a ship of the Bremen type.

Mr. SIROVICH. The Bremen has a tonnage of about 50,000?

Mr. SAUGSTAD. I want to confine this whole construction-bounty to the Bremen type, since, almost coincidentally with the promulgation of the new law unofficial announcement was made of the intention to construct two large, fast passenger vessels in Italy. It was thought that vessels of the Bremen type would illustrate the probable workings for vessels of that category. According to Lloyd's Register, the gross tonnage of the Bremen is 51,656 gross tons. The guaranteed or contract speed of the Bremen was 26.25 knots. It was rated at 26 knots, next to the highest speed recognized by the 1929 Italian law. Thus, in addition to the basic rate of 32 lire per gross ton, such a vessel would be entitled to an additional tonnage bounty of 180 percent of the basic rate, which, applied to 51,656 gross tons, would result in a basic bounty of about $87,000, which, increased by 180 percent, or $156,600, would result in a total hull bounty of $243,600.

Te power plant of the Bremen is rated at 106,000 shaft horsepower at norms! speed, and the fuel efficiency is reported as 0.31 kilo, or Sipo and of oil per shaft horsepower-hour for all purposes, includg the ship service plant. While this is not a true figure for the p.. g unit alone, it will serve to establish the power-plant bounty Tate upon the scale of 300 to 349 grams of fuel per horsepower-hour, as per the It shan scale inserted in the record, or 28 lire or $1.47 per power-hour, resulting in $156,000 as the basic power-plant * སྩ This, increased by 180 percent, or $280,000, would result total of more than $430,000 for the main propelling unit. je huil of a vesey of the Bremen type will include approximately pounds in the pistes, frames, angles, rivets, and so forth. or the base Italian construction bounty law of 1926, 480 kilos 45 pounds) are allowed free entry as hull material for each gross T ́is will account for about one-half of the weight of the material. "e remainder manufactured in Italy, a bounty of $4.07 per metric 1 alowed Accordingly, this will amount to approximately so that all in all, on a vessel of about the Bremen's type, the ation of all the various categories of construction bounties in would amount to possibly between $700,000 and $800,000, to the shipbuilder.

dr SLZOVICH. Do you mean 22,000 tons of steel for the Bremen ? 'T SATONIAD Yes, sir.

SIROVICH. For the hull?

SATESTAD I was informed at the time that we considered Lynottctical case, that we should include steel and material it of out 22,000 tons in the vessel.

joneve you asked this morning concerning the application of use constraction bounties to reconditioned vessels.

Mr SIROVICH. Yes,

Mr. SAUGSTAD Late in 1934, the problem of speeding up Italian vessels received its second official impetus. It was decreed that seed bounties provided by the law should be made available not only to new vessels but to vessels reconditioned for the purpose of increas"Leir speed.

To obtain the shiding scale speed allowances provided by the 1929 doerce, Italian vessels reconditioned for increase of speed must comwith the following conditions:

First The vessels must be of not less than 18,000 gross tons.

Second They must be fitted with new engines or motors, and must have their hulls modified to meet conditions imposed by new propelling

ird The new vessel speed must be not less than 20 knots, or at Past 3 knots faster than average speed shown during voyages by the Vessel during the last 12-months period prior to reconditioning.

Fourth. Vessels must have been built in Italy, all reconditioning work must be carried out in Italian shipyards, and must be completed by June 30, 1938.

If auxilary engines and the shafting of the original propelling achinery are retained or utilized in part or in whole, in carrying out reet gining and reconditioning work, bounty reductions due to imported material, provided by the 1926 Construction Bounty Act on ported materials, shall not apply.

In encouragement of ship construction in Italy, there was placed in effect a plan in 1934, authorized by royal decree, which provides for first and second prizes of 120,000 and 30,000 lire, respectively, for the preparation of plans of typical cargo ships by Italian naval architects. The subsidy is allotted from the general shipbuilding subsidy funds; and the contest is to be conducted under rules to be laid down by the Minister of Merchant Marine and is generally restricted to design for "a cargo vessel which shall combine all modern technical prerequisites and also fulfill the ideal conditions for meeting present traffic conditions."

That is in the nature of development of naval architects, training, technical schools, and so on.

This morning we referred to the provision for ship scrapping; and I said that provisions had been made under the extension of the subsidy law in 1931 to provide for the scrapping of 800,000 gross tons. There has since come to my notice a schedule showing some of the results of that plan in reducing the world tonnage on the Italian registry as follows

Mr. SIROVICH. Over how long a period is this 800,000 tons to be scrapped?

Mr. SAUGSTAD. During 1931, 1932, and 1933, a ship-scrapping program was n effect in Italy, covering 600,000 gross tons and a public expenditure of 15,000,000 lire at 25 lire per gross ton-200,000 tons to be scrapped each year. By royal decree of December 21, 1933, a further contingent of 200,000 tons was authorized scrapped for a subsidy of 4,400,000 lire. This brings the authorization for ship scrapping in Italy up to 800,000 tons, against an authorized expenditure of 19,400,000 lire. The fourth contingent is effective until June 30, 1935. The results as at the end of 1933 show that 155 vessels have been demolished, of which 104 were Italian and 51 were foreign. That is, about one-third of the vessels demolished have been ships which were originally built in Italian yards; and the gross tonnage up to the end of 1933 was reported to be 353,169 gross tons. Mr. SIROVICH. Of that, what percentage would come from the indispensable type and what percentage from the useful type? Mr. SAUGSTAD. I have not the slightest idea on that.

I cannot say whether the foreign grouping in this category is tonnage that is imported for the purpose of breaking up or whether it is tonnage that had originally been built in foreign yards and purchased by Italian operators for Italian operation and I know of no way of segregating particular vessels that are included in this break-up program.

Mr. Chairman, there are a few, one or two, preferential arrangements in connection with Italian subsidies that I would like to state at this time.

The CHAIRMAN. Go ahead.

Mr. SAUGSTAD. The first refers to depreciation allowances on Italian vessels. As we know, depreciation allowances play a considerable part in the financing of vessel tonnage by operators and is usually quite restrictive usually to 4 percent or 5 percent annually. The Italian depreciation allowances are 8 percent on vessels of 17,000 to 35,000 gross tons; and 7 percent on vessels of 10,000 to 17,000 gross tons; and 6 percent on vessels below 10,000 gross tons; and a special

depreciation allowance of 7 percent is allowed on vessels of special ts, such as tankers and refrigerators.

There is a condition in Italy which makes the basic allowance on italian lines dependent somewhat upon the price of coal. ay has no coal and is therefore totally dependent on imported sup

and certain of the indispensible contracts depend upon the variation in the fuel prices for allowances.

It follows that Italy is in a position to do some trading on the basis fal and during the last 2 years there has been a very interesting eve. pment in that respect.

On November 29, 1933, the Polish Transatlantic Steamship Co. sed a contract with the Italian shipyards Cantieri Riuniti di Mfalcone, near Trieste, for the construction of two vessels for the (V.1-America Line, to be delivered in July and December 1935, and to cost 30,000,000 zlote, $2,670,000 at par of exchange.

In return for the order placed with the Trieste firm, the Italian Government agreed to buy, in addition to the import contingent, 100 metric tons of Polish coal during a period of 4 years, at the rate of 400 000 tons per annum. In addition, the builders undertake to purchase certain quantities of iron in Poland, to be used for the es estruction of vessels, as well as other raw materials and industrial picts. The agreement with the builders provides for payment inert annual installments.

Is arrangement, which was made in 1933, has been an important factor in the increase of Italian imports of Polish coal. The total Ita..an coal imports in recent years and the proportion imported from Fand, have been as follows:

In 1927, the total imports of coal into Italy was 14,058,721 tons, of which 1 157,702 tons were from Poland.

In 1932, the total coal imports into Italy amounted to 8,017,862 tas of which 487,173 tons were from Poland.

la 1933, at the time the agreement was signed, the total imports of al into Italy were 8,790,509 tons and of that amount 649,175 tons were from Poland: in 1934, for the 11-month period from January to November, inclusive, the total imports of coal into Italy were 10,415,6 tons of which 993,596 tons were imported from Poland, or practica..v double the amount of the 1932 importations from Poland.

Mr SIROVICH. Is that in spite of the development of hydroelectric power in Italy?

Mr SAUGSTAD. Yes, sir. I explained just before you came in that th..s is a barter arrangement, whereby the Polish Gdynia-America Lme agreed to have two ships built for its New York service in Italian yards, in return for which the Italian Government agreed to buy 160 tons of Polish coal, at the rate of 400,000 tons annually; - the net result of the barter had been that the coal imports from Poland into Italy has doubled in 2 years.

Mr. SIROVICH. Where does Italy get its main supply of coal from, Faciand

Mr. SAUGSTAD. I presume so; yes, sir; there is an increasing amount, of course, from Poland; and there is quite a substantial amount comng in from Turkey. Turkish coal is moving into Italy.

Mr. SIROVICH. Is that under a barter trade arrangement?