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consequently, can go to more ports. You can go to more ports by virtue of the lower draft. In turn, this may enable savings in harbor improvements.

We are towing two barges with one tug today, and this is entirely practical. There is no problem, or I believe would be no problem in one large tug towing two barges of, for instance, 25,000 tons deadweight carrying capacity on a 30-foot draft. This would mean, first of all, that you would be able to carry about 50,000 tons of cargo with 30foot draft, and when you get to destination, the tug would drop off one barge in one port, and go on to the second port with the second barge. Or, in areas where discharging time is slow, you would have more barges than tugs in the trade, and you would simply leave the barge there for the slow discharge, or waiting for berth, and/or act as a warehouse.

To answer the Department of Commerce's statement, all I can say is that I am in this business. There is, in my opinion, no doubt whatsoever that this method is proven. It is being done on the west coast and it is being done on the east coast.

I am perfectly prepared, if this legislation is passed, and the application submitted and approved for this type of units to invest on my personal fortune, which amounts in excess of a million dollars, which I do believe adequately demonstrates that I do believe in the practicability, feasibility, and economic advantages of the system. The government should have very substantial amounts to save. The U.S. Government is financing transportation programs to India. If you used that one country as an example, even if we were only to save $5 a ton under the 50/50 provision of the American flag, this would mean on an average yearly shipment, an average yearly saving to the U.S. Government of $25 million.

Now, all I can say is that the industry is willing, private capital is willing, we have every confidence that we can demonstrate this practical approach to bulk cargo transportation over any distance to any port in the world, and we do believe that this will, given a good crack at, get back á large volume of imports and exports that are carried to and from the United States where today we are carrying a very insignificant percentage.

Thank you, Mr. Chairman.
(Mr. Hvide's prepared statement follows:)


Gentlemen, my name is H. J. Hvide. I reside in Boca Raton, Florida and conduct a business in Fort Lauderdale, Florida, under the name of Port Everglades Towing Company, Ltd.

I have with me my Associate, Captain Frank J. Knudsen, and my Attorney, Robert Whitehead. After I complete my statement, we will be happy to answer any questions you may have.

Captain Knudsen entered the Maritime service as an apprentice deckhand in 1938. Captain Knudsen was employed by Cities Service Oil Company as Chief Pilot for eighteen and one-half years until his resignation in July 1967 when he joined my operations. Captain Knudsen is a past Chairman of the Harbor Improvements Committee of the American Merchant Marine Institute and was Chairman of the Pilotage Committee of the American Merchant Marine Institute, until his resignation in July.

Mr. Whitehead is an attorney, who has for the past fifteen years advised with businesses as to financing and is serving me in that capacity.

I myself have been continuously engaged in oceangoing shipping since 1935. I am descended from an active Norwegian shipping family and have been a


naturalized citizen of this country since 1947. I very early became interested in more efficient oceangoing bulk carriers, and had design and construction work in this area performed for me as early as 1953. I owned one of the first roll-on, roll off ship operations in this country, operating under a certificate from the Interstate Commerce Commission.

During recent years, I have developed and operated some of the larger tugs and barges presently employed in the United States maritime service. I am currently engaged in maritime work at Cape Canaveral, Florida as a subcontractor of Pan American World Airways, and I am engaged in bulk carriage work in commercial fields. Most of my present work is performed by the use of large tugs and barges. Technology and economics now make it feasiable for large tugs and barges to operate in foreign and domestic trade and on the high seas. The design of these larger tugs and barges is more sophisticated than the type with which you are now familiar. The barges are fast, molded hull carriers, rather than the square type which you normally see. The tugs are larger and operate with much higher horsepower than those presently in use. I now own and operate the only dual speed reduction gear tug in existence in the United States.

Under 46 USC 1274, the Secretary of Commerce has the authority to insure mortgages on almost all types of ships up to 8742% of the cost. His ability to insure to 8742% of cost applies to vessels of no less than 3,500 gross tons and capable of speeds of not less than 14 knots. Below these minimums, the authority of the Secretary of Commerce to insure is only to the extent of 75% of cost. This law was enacted prior to the development of modern tugs and barges.

It is the purpose of the proposed legislation to extend the 8772% insurance to the larger oceangoing tugs and barges, which I have mentioned, by reducing the tonnage requirement under the law to 2,500 gross tons and substituting for the speed requirement a requirement of 2,500 horsepower.

Enactment of the proposed legislation will enable the immediate building of oceangoing tugs and oceangoing barges which will be employed in the commerce of the country. Part of their employment could be in the delivery of grain to India. At the present time, under the 50/50 law, there is a wide divergence between the cost of these grain shipments in American ships and foreign ships. At pres the cost of shipment of this grain in American ships is approximately twice the cost of shipment in foreign ships. The proposed tugs and barges will be able to deliver this grain at a cost closer to that now being charged by foreign ships. Each one dollar per ton reduction would save the United States from eight to twelve million dollars a year.

The proposed legislation does not involve any outlay on the part of the United States Government, only a guarantee of economically sound mortgages. In order to obtain financing for the proposed oceangoing tugs and barges, in light of the uncertainties facing the entire United States maritime industry, it is necessary to have the advantage of mortgage insurance to the extent of 8742% of cost.

The proposed legislation amends only 46 USC 1274, the Ship Mortgage Insurance Section of the Merchant Marine Act of 1936, and does not extend any of the subsidy features of that act.

My associates and I wholeheartedly recommend to you enactment of the proposed legislation as it will enable the United States maritime industry to build bulk carriers which will more closely compete with foreign fag vessels, without any outlay on behalf of the United States Government.

Senator BARTLETT. Thank you. Mr. Barer? Mr. BARER. With reference to the present drafting of the form of S. 2247, the title of the bill reads, “To Amend the Merchant Marine Act, 1936, To Increase the Federal Ship Mortgage Insurance Available in the Case of Certain Oceangoing Tugs and Barges.'

The substantive language following that states no limitations. Would the language, as it is presently drafted, perhaps your attorney would want to respond to this, does this not open the benefits of this type of legislation to tugs and barges operating on inland waterways?

VOICE. If I may answer that, the bill was drafted in consultation with Mr. Davis' staff, who testified today, and discussing this with Mr. Davis yesterday, he concurred that we may invite trouble if we insert "oceangoing” in the act itself, because that may be subject to definitions that would cause all kinds of problems, like, does it have to

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e oceangoing at all times, and what about coastwise trade? I think it is ne intent that our minimums of 2,500 tons and 2,500 horsepower ould not include the inland waterways tugs and barges of which you speak. | Mr. BARER. In earlier questioning of Mr. Davis, there was discussion of the possibility of accomplishing the purpose of S. 2247 for tugs and barges through utilization of section 509 of the act, and hen you wouldn't have to mention descriptive words such as "oceangoing,” but by the existing provisions of section 509, any vessel operating solely on inland waterways carrying cargo would be excluded. Therefore, you would get the net result of it being applicable to so-called “oceangoing” tugs and barges, only you wouldn't have the definition problems. Without expressing an opinion as to whether that would serve your purposes

VOICE. We have avoided ending 509, because 509 is an aid section. We are interested only in the mortgage guarantee section, although 509 has not been used in some time. It does provide aid provisions in direct mortgages. We were attempting to demonstrate that this program does not need any aid or direct expenditure by the Federal Government, and therefore are attempting to demonstrate it by attaching our exceptions only to title 11, the mortgage guarantee section, which appears to be workable, technically, because the section we're amending already has two exceptions to it.

Mr. BARER. If section 509 were utilized, though, you would still be eligible for title 11 insurance by the incorporation of section 509 into title 11, under section 1104(a), I believe it is.

VOICE. We would be as happy with the amendment of section 509 if we did not therein stir up opposition of those who thought we were seeking Government aid, which we are not seeking.

Mr. BARER. But your intention would be to seek an 877 percent mortgage guarantee, rather than direct construction aid?


Mr. BARER. Well, let's get this down more firmly. You would have no intention whatsoever, as I understand it, of seeking any assistance from the Federal Government, other than by way of a guaranteed mortgage.

Mr. WHITEHEAD. Yes, sir; that's correct. Positively. Mr. Chairman, we have no intention other than to seek mortgage insurance, as I think is demonstrated by our present request that only the mortgage insurance section be amended, not to even possibly give us the benefit of the other, but should it become more technically desirable to amend section 509, of course

Senator BARTLETT. It occurs to me that Mr. Barer's inquiry is very important, because should it occur that the committee approves the bill, we wouldn't want it to hit the floor and get in a great big argument about possible complications on inland waterways, competition which would be advanced toward the trucking and railroad industries.

This has nothing to do with that. Captain Vincent, what are living conditions aboard these tugs that make extended trips out to sea?

Captain KNUDSEN. Well, the proposed living conditions are a private room for every man, with a private bath. It would be completely air conditioned.

Senator BARTLETT. Any room left for applications?
Captain KNUDSEN. Yes, very much so.

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Senator Bartlett. Very few tugs of today are thus equipped, right?

Captain KNUDSEN. That's right. In fact, I don't believe there are any tugs that provide a separate room for every crew member, plus his own private bath.

Senator Bartlett. How big would these tugs be?

Captain KNUDSEN. The larger units would be in the 220-to 210-foot. class, overall length, in the neighborhood of 1,200 horsepower.

8 Senator BARTLETT. Now, these barges that Mr. Hvide referred to would be in what size?

P Captain KNUDSEN. In the neighborhood of 25,000 deadweight tons. Senator BARTLETT. Draft? Captain KNUDSEN. Thirty feet, loaded. Senator BARTLETT. Thirty feet? Captain KNUDSEN. Yes, sir.

Senator BARTLETT. Mr. Hvide, you excited me when you said you were willing to put a million dollars of your own money into this. How many barges and tugs do you have in mind to build? In the first few years, if this program were to go through? Let me withdraw that question. That is an inquiry into your business plans that I ought not to have made. Skip that one.

What would a tug such as Captain Knudsen described cost?

Mr. HVIDE. The approximate price will be close to bidding on the maritime- it is calculated that it will be probably about $272 million.

Senator BARTLETT. In one barge of the size described?

Mr. HVIDE. I'm sorry, Mr. Chairman. The price estimated on the tug was about $2,800,000 to $2,900,000.

Senator BARTLETT. Beg pardon?

Mr. Hvide. The price I gave you on the tug is incorrect. The price would be about $2,800,000 on the tug.

Senator BARTLETT. On the barge?
Mr. HVIDE. The barge will be about $3,200,000.
Senator BARTLETT. How long will that barge be?
Mr. HVIDE. It will be about 650 feet long.
Senator BARTLETT. Any such barge roaming the seas today?

Mr. Hvide. Not quite that size, although contracts have been let for barges approaching that size. The biggest barge today, I believe, is about 18,000 tons deadweight capacity.

Senator BARTLETT. And where does that operate?

Mr. HVIDE. The one I had in mind operates between Puerto Rico and the North Atlantic-east coast.

Senator BARTLETT. Of the United States?

Mr. HVIDE. Of the United States. There is, I believe, a larger barge on the Great Lakes.

Senator BARTLETT. That carries iron ore?
Mr. HvIDE. Iron ore, coal, or both; I'm not sure.

Senator BARTLETT. Did you say that one such tug is of the type you had in mind that will haul two barges?

Mr. HVIDE. Yes, sir.

Senator BARTLETT. Now, you have suggested the use of tugs and barges to haul grain to India.

Mr. HVIDE. Yes, sir.

Senator BARTLETT. Has there been any such barge operation to date?

Mr. HviDE. No.

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Senator BARTLETT. Would there be a refueling problem here insofar as the tugs are concerned? i Mr. HvIDE. No; there will be no refueling problem. The tugs can carry a very large amount of fuel. They do have to refuel en route, but this is no more of a problem than refueling a vessel. The barges will be equipped with self-contained anchors, controllable from the tug, and you would simply arrive off the port and you would anchor the barges, and bring the tug in to load your fuel, Its designed fuel capacity is about 35 days.

Senator BARTLETT. How long would it take to go to India?
Mr. HyIDE. About 30 days.
Senator BARTLETT, So, ordinarily, you wouldn't have to refuel

Mr. HVIDE. The 30 days is going through the canal, but going around, it would be another 4 or 5 days.

Senator BARTLETT. Would there be any cargo to be brought back from India?

Mr. HVIDE. There are possibilities of other cargoes.
Senator BARTLETT. What kind?

Mr. HvIDE. Manganese ore coming from India, and there might be other cargo. I haven't looked that up for some time, but our determining economic feasibility is based on coming back empty, even if we come back empty, it is economically feasible. And we say that anything we can pick up coming back will be just that much better.

Senator BARTLETT. How many tugs and barges do you now have?

Mr. HvIDE. My company owns 10 tugs. We operate additional vessels owned by the U.S. Government. All of the barges we tow are owned by others.

Senator BARTLETT. And the operations are between what points?

Mr. HVIDE. For the most part, they are, and have been in the U.S. Gulf, between Florida and Texas, and Louisiana, up to New Orleans.

Senator BARTLETT. Have you ever previously sought legislative relief contemplated by the type of S. 2247?

Mr. HYIDE. No, sir.

Senator BARTLETT. What made you apply for this type of Government help now?

Mr. HvIDE. The fact that I am convinced that to be successful I need to be able to build a sufficient number of units to be able to make them count, to demonstrate this practicability, you do need several units, and it requires that much more invested capital. The general uncertainty about the American merchant marine makes it necessary to get greater mortgage percentage financing in order to attract other equity capital in addition to my own.

Senator BARTLETT. Insofar as you know, do the Norwegians have any tug and barge operations?

Mr. HyIDE. They don't have any of any consequence.

Senator BARTLETT. Insofar as you know does the Norwegian Government give any assistance to the maritime industry?

Mr. HVIDE. Their tax law, in many ways, favor the maritime industry. Their tax laws are certainly more favorable toward the Norwegian merchant marine than the American tax laws are to the American merchant marine.

Senator BARTLETT. All right, gentlemen. We thank you very much for your appearance. Thank you very much.


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