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desirable to eliminate any unnecessary increased cost in a new shipping act.
Believing that shipbuilding under draft no. 3 would be more costly than under
draft no. 2, I am submitting this statement on behalf of the members of the
National Council of American Shipbuilders, assuring you of our desire to cooper-
ate in any way possible in the presentation of facts necessary to the enactment of
legislation that will develop an adequate merchant marine for domestic trade and
one that will carry the greater part of our goods in foreign trade.
Very truly yours,

H. GERRISH SMITH, President.



Mr. FLETCHER. My name is R. V. Fletcher; I live in Washington. I am with the Association of American Railroads. I appear to make just one single observation, that is, there is a definition of " foreign trade" here in the act—vessels in the foreign trade. I would like to suggest that be changed so as to provide that a vessel in foreign trade may not stop at an intermediate domestic port without the consent of the Authority, the whole thought being that the bill is not intended to subsidize transportation which will be competitive with existing forms of transportation, whether by rail, water, or otherwise, now engaged in domestic commerce.

We would be satisfied to leave that question with the Authority, but we think it ought to be discretionary with the Authority to exclude a vessel from the privilege of a subsidy if it is engaged in any form in domestic commerce, although it may, after making a stop at an American port, go on to the foreign port.

That is all I have to say. The CHAIRMAN. You may supplement your statement with a brief, if you desire. (Mr. Fletcher submitted the following for the record :)


Washington, D. C., May 9, 1935.
Chairman Committee on Merchant Marine and Fisheries,

House of Representatives, Washington, D.O. DEAR SIR: You will recall that on May 8 you kindly permitted me to say a word with reference to H. R. 7521, a bill develop a strong American merchant marine, to promote the commerce of the United States, to aid national defense, and for other purposes, known as the “ Merchant Marine Act, 1935,My statement to the committee dealt only with a single feature of the bill. This was section 1010, subsection (a), which reads:

" The words foreign trade mean trade between the United States, its territories, or possessions, or the District of Columbia, and a foreign country. The loading or unloading of cargo, mail, or passengers at any port in any territory or possession of the United States shall be deemed to be foreign trade if the stop at such territory or possession is an intermediate stop on what would otherwise be a voyage in foreign trade.”

I would understand that the purpose of the bill is to encourage in the way of subsidies our foreign commerce and that it is outside the purpose of the bill to extend Government aid to vessels which are competitive with transportation agencies owned and operated by American citizens now engaged in domestic trade. In other words, I have assumed that the committee agrees with thie statement made by the Postmaster General in his report to the President bearing date of January 11, 1935, where it is stated :

"It has not been the intention of Congress that operators of vessels engaged in the protected intercoastal and coastwise trade should be given aid to stifle out their other American competitors who receive no Government aid. Nevertheless, by one subterfuge or another, a very great many of the ocean-mail

contractors, especially some of the larger ones, have resorted to the practice of creating subsidiary corporations for that purpose, to which much Government aid has been poured through the parent company; others are intercoastal almost exclusively in their business, but have been permitted to receive mail contracts and pay because they happen to touch at some foreign port on their intercoastal routes.

“All American operators in the protected trade should receive the same treatment. Aid in that particular trade should be given to all or none, and any change in policy or law should carry with it the same kind of protection and benefits to all."

Upon this assumption it seems to me that the definition of " foreign trade" should be rewritten so as to exclude from that definition any vessel which makes an intermediate stop at a port of the United States unless it is permitted to do so by special permission of the United States Maritime Authority created by the act. I am afraid that vessels which have been the recipients of subsidies may engaged in a very considerable amount of domestic trade under the lati. tude permitted in the definition to which I am taking exception. It would sem that all concerned should be satisfied to leave the matter to the discretion of the Authority, which should have the power to prohibit the transportation of passengers or property between domestic ports even though the vessel may continue from the last domestic port of call to a foreign destination.

While this was the only point covered by my oral statement, availing myself of the privilege granted by the chairman, I should like to mention specially the desirability of including in the bill at the appropriate place an amendment thereto suggested by Senator Black, of Alabama, at the time a similar bill was being considered by the Senate committee. The so-called “ Black amendment", as I understand it, would provide that section 509 (a) be amended so as to include the following language:

“No contractor under a contract in force under this title, or no holding company of such contractor or no officer, director, or executive, or no member of the immediate family of any of such officers, directors, or executives of such contractor or such holding company shall

own, operate, or charter any vessel or vessels engaged in the domestic intercoastal or coastwise service, or own any pecuniary interest in any person that owns, charters, or operates any vessel or vessels in the domestic intercoastal or coastwise service."

The purpose of this amendment is to prevent indirect subsidies to vessels engaged in purely dometic commerce through the medium of holding companies or subsidiaries. We respectfully submit that unless an amendment of this kind is adopted the purpose of the bill will be to some extent defeated.

In making these observations I am not to be understood as approving the regulatory features of the bill. It is the view of those whom I represent that it would be far better to place the regulation of domestic commerce, at least, under the Interstate Commerce Commission substantially as set out in H, R. 5379, another bill which your committee is hearing.

In making this statement I am speaking for the Association of American
Railroads, which constitutes about 98 percent of the mileage of the class I
railroads of the United States.
Respectfully submitted.

Vice President and General Counsel,

Association of American Railroads.

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ING THE SHEPARD STEAMSHIP CO. (The following statement was made before the Senate Committee on Commerce

on S. 2582, a companion bill) The CHAIRMAN. Mr. Gardner, do you represent an American shipping line?

Mr. GARDNER. Yes; I represent a constituent of Senator White's.
Senator WHITE. Now, that is worth while.
The CHAIRMAN. Will you just wave the American flag a little bit?

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Mr. GARDNER. Unfortunately, I do not carry an American flag on my person.

I am here for the Shepard Steamship Co., Inc. The Shepard Steamship Co., incorporated in the State of Maine, has its eastern terminal at Boston. They engaged in the coastwise trade.

Senator WHITE. May I interpolate right there that these Bostonians think that Maine is a part of Massachusetts.

Mr. GARDNER. I would like to say, Senator Gibson, if I can get it up to Burlington before I get through, I will do so.

We have in the East the ports of Boston, New Bedford, Mass.; New London and Bridgeport, Conn.; New York; the port of Albany in New York State. In fact, they incorporated, I think, about the first regular service to go into the port of Albany.

Senator WHITE. Albany gets very close to Vermont.

Mr. GARDNER. If we get back to these Vermont grants, it would be right next door, within a few feet.

Senator Gibson. You know we have the proposal up now to make a survey of a canal through to Lake Champlain.


Senator WHITE. Then we'll bring those ports on the ocean front, practically.

Mr. GARDNER. There is no reason why Burlington should not be an ocean port. You can run a canal out there.

The CHAIRMAN. I can see plainly New York will become simply a side port. This is a race between Burlington and Duluth.

Senator Gibson. The Port Authority of New York is very much in favor of these canal possibilities of Burlington.

Mr. GARDNER. I am not sure that I mentioned the port of Philadelphia. That is one of our ports.

On the west coast we have the ports Seattle, Portland, San Francisco, Los Angeles, and many smaller ports. In particular, I want to mention the port of Sacramento, Calif. I am sorry Senator Johnson is not here.

The CHAIRMAN. How many ships do you operate!

Mr. GARDNER. We operate 4 ships, 2 of which were purchased from the Shipping Board, carrying Shipping Board mortgages. I am happy to state that all payments are up-to-date and they have never been in default. This line is one of the smaller intercoastal lines. Operating four vessels under the classifications in the intercoastal service, it was classed as a “C” line. The “A” lines were the larger lines operating vessels that had frequent sailings and relatively fast speed. The “B” lines were those that operated sailing every 16 days or less, and the “ (” lines were those that had a sailing every 22 days or less. In other words, 22 days or more apart.

Now, this line, the Shepard Line, is coming here in support of this bill. It will not be benefited in any way by the subsidy provision of the bill. But they are very much in favor of the bill as the bill stands. We do not want to criticize any of the provisions of the bill or take anything away from the bill.

We would like, however, to suggest a slight addition to two paragraphs of the bill in order to provide for a differential in the service that we operate as distinguished from other services to and from the

west coast from the east coast. The Shepard Line would like inserted on page 42, line 14, of the committee bill no. 2, or, I mean, page 32, line 11, of committee bill no. 2, which is now page 42, line 14, in committee bill no. 3, the following provision with respect to the fixing or the prescribing of rates, the following words:

Provided, That in prescribing such maximum and minimum rates, fares, and charges

The CHAIRMAN. Let me see if I have the right place.
Mr. GARDNER. Which bill do you have?
The CHAIRMAN. No. 3.
Mr. GARDNER. You have got no. 3!
Mr. GARDNER. On page 42 at the end of line 14.
The CHAIRMAN. All right.

Mr. GARDNER. Just before that section referring to the common carriers.

The CHAIRMAN. Yes. Mr. GARDNER. You would insert this additional provision: Provided, That in prescribing such maximum and minimum rates, fares, and charges, differentials shall be established on differences in the service rendered. to the end that small water carriers operating in the domestic commerce of the United States shall be adequately protected.

Then at page 38, line 20, of print no. 2, on page 44, line 7, of print no. 3, you would again insert the same provision.

Senator WHITE. Now, where is the second insertion?
Mr. GARDNER. Page 44, if you have the print no. 3.
Senator WHITE. Yes.

Mr. GARDNER. At the end of line 7, where it says “ Charges which
may be charged and enforced.” Then you would put in the section
right in the middle-
Senator WHITE. Yes.
Mr. GARDNER (continuing). Of what is there now.
Senator WHITE. At the end of line 7.
Mr. GARDNER. Paragraph 4 of section 701 of title VII of the bill.
Senator WHITE. I understand.

Mr. GARDNER. The sections of the bill referred to would effect a change in the law by conferring upon the new Federal Maritime Authority the power to prescribe minimum rates for water carriers operating in interstate and intercoastal trade. The effect of the additional language offered herein would be to insure (1) that this new power would be exercised in such a way as to allow each class or type of water transportation to serve the need to which it is economically best adapted; and (2) that it will not be used so as to create a shipping monopoly and to deprive the shippers and consumers of this country of the economic advantage of paying less for a type of service which it costs less to provide.

The CHAIRMAN. Now, Mr. Gardner, if I may interrupt you without breaking the train of your thought.

Mr. GARDNER. You may.

The CHAIRMAN. There is not any doubt but that the Authority has that power, if it is not specifically described.

Mr. GARDNER. I don't think there would be any question but that the Authority has that power as the bill is now written. This is


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merely a suggestion in the light of the experience of the past that
it would be wise for the Congress to declare that policy rather
than to leave it entirely to the Authority to which you would set up.

The CHAIRMAN. Mr. Gardner, what other lines would be in the
same position as yours? Would there be a number of them?

Mr. GARDNER. Yes. At the present time, on page 4 of this brief
you have in your hand, is set forth the lines which are now the A, B,
and C lines.

Senator WHITE. This would really permit the regulatory body, the
Maritime Authority, to classify the services and to provide maximum
and minimum rates for the different classes of service?

Mr. GARDNER. Exactly. It would do what the Interstate Com-
merce Commission has been doing for years with the railroads. When
we in New York wanted to go to our old home in Indiana-when I
wanted to go West I could go to the New York Central and get a
ticket that would insure me a comfortable, fast journey home, but for
that service the Interstate Commerce Commission required me to
pay $2 or $5 more than I could ride for on the Erie. I could ride
for from $2 to $5 less on the Erie, and I could ride on the Baltimore
& Ohio for that much less. Only the Pennsylvania and the New
York Central were class I carriers from New York to Chicago.
All other lines were in a differential class, although they were all
American, all flew the American flag, and they were all railroads
employing American citizens. We have no services abroad at the
present time. Well-recognized principles of differential in classes
of services which are provided-

The CHAIRMAN. Let me ask, Senator White, in your bill was there
a legal provision made for this sort of classification?

Senator WHITE. In which bill do you mean?
The CHAIRMAN. In any one of your bills?
Senator WHITE. No.

The CHAIRMAN. There was no provision made where they could
classify them like this?

Senator WHITE. I think not.

The CHAIRMAN. There is not any question, of course, under the power we have given them in this bill but that could be done. I suppose Mr. Gardner's anxiety is to make it mandatory.

Mr. GARDNER. It was suggested it be made a principle laid down by Congress and we would like to ask that you require in the fixing of these minimum rates and charges that the difference in the classes of service be recognized by the Maritime Authority. Today we are having a very difficult situation. There is a great deal of confusion under the act of 1933, the Intercoastal Act, which is sometimes known as the " Copeland Act”, and we have here a decision which comes down on Saturday of the past week involving this very question.

The CHAIRMAN. What was the decision? Did they decide they could establish the minimum rate!

Mr. GARDNER. The decision is a bit obscure; from my reading of it, I understand they discussed it but did not make a decision. I think the Bureau-the Shipping Board Bureau-in making its decision, is naturally rather concerned at the present time. There have been a great many suggestions of changing this situation, all manner of suggestions, this last act, 1362, that we have here discussed. This Shipping Board Bureau has had a number of differences to contend

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