Mr. DAVIS. My attention was detracted for the moment; were you proposing to close as to those in favor of the amendment? The CHAIRMAN. Well I had not gotten that far yet; I was just asking if there was any one here from out of the city who desired to be heard at this time. Mr. BLAND. That is in favor of the amendment? The CHAIRMAN. In favor of the amendment; we are putting on the affirmative side of the case now. Mr. DAVIS. I have some written statements; but, if there are any others present who want to be heard, I will postpone that. The CHAIRMAN. Then, if there are not, I think we want to hear from the members of the Shipping Board, without regard to whether they are for or against it. I would suggest that Chairman O'Connor take the chair and give us his views. STATEMENT OF T. V. O'CONNOR, CHAIRMAN, UNITED STATES SHIPPING BOARD Mr. O'CONNOR. Mr. Chairman and members of the committee, I wish to state that this bill is along the line that the Shipping Board has been trying to work since 1924. In 1924, we put paragraph 19 in the operating agreement, which read: Foreign-flag vessels: Except with the specific approval of the owner, the agent shall not be permitted to operate either as agent, owner, or charterer foreign flag vessels competing with lines operated by or for the United States Shipping Board. That was reaffirmed in 1927 by a resolution of the board passed on September 7, 1927, as follows: Whereas on November 30, 1923, the United States Shipping Board adopted resolution reading: "(5) Except with the approval of the board, no managing agent shall be employed who operates, either as agent, owner or charterer, foreign-flag vessels competing with lines operated by or for the United States Shipping Board." And Whereas the continued experience of the board emphasizes the insidiousness of foreign competition and the effectiveness of developing American marine agents and operators of undivided interests: Now, therefore, be it Resolved, That on and after November 1, 1927, no managing operator or agent shall continue to be or be contracted with as such by the United States Shipping Board Merchant Fleet Corporation who operates either as agent, owner or charterer of foreign-flag vessels competing either directly or indirectly with lines operated by or for the United States Shipping Board. Of course you understand when we sell a line we lose control of it and they can go out then and do as they please with the line that they bought. While we had those on our backs, we tried to carry it out. In some cases, we could not altogether carry out the real intent of the resolution. I could cite some instances to you, but I do not know as you want them. The CHAIRMAN. Now the two resolutions there, to which you have made reference, indicate the past policy of the board? Mr. O'CONNOR. Yes. The CHAIRMAN. And is that the present attitude of the board? Mr. O'CONNOR. Well the board members are here to speak for themselves. It is my attitude. The CHAIRMAN. I will ask you specifically has the board formally acted on this pending bill, H. R. 8361? Mr. O'CONNOR. No; they have not. The CHAIRMAN. Then will you give us your individual views about it? Mr. O'CONNOR. That is all I am going to try to do. The CHAIRMAN. And then we will ask the other board members for their views. Mr. BLAND. May I ask, in that connection, whether the board has considered this pending bill and failed to act? Mr. O'CONNOR. They have all had copies of it and are here to speak for themselves. The CHAIRMAN. But the board, acting as a board, has not taken any action on it? Mr. O'CONNOR. They have not taken any action on it. Mr. BLAND. Have they specifically refused to take any action? Mr. O'CONNOR. No. They have all had it before them. Now I had a suggestion on this but, after thinking it over, I do not know whether it would be just the thing, or not. I suggest the following modification to Mr. Davis's bill: * * * unless, in his discretion, the Postmaster General is convinced that the interest of the Government demands an exception be made in particular cases. I do not know whether that goes far enough to modify the thing. There has got to be some discretion shown in the matter; Mr. Davis concedes that. Mr. DAVIS. No; I beg your pardon. Mr. O'CONNOR. You do, when you say there has got to be some time. 1 Mr. DAVIS. NO; I have not said that, except such time as I indicated in my questions. Mr. O'CONNOR. In your bill, you practically say three years. Mr. DAVIS. That is in the statute, that the Postmaster General can withhold, under the present statute, the awarding of a contract for three years. Mr. O'CONNOR. That is what I meant. Mr. DAVIS. Before he awards the contract. Mr. O'CONNOR. Before he awards the contract Mr. BLAND. And the three years, if I may ask right there, to clarify that, that is mentioned in the amendment, is in the performance of the contract rather than the award of the contract? Mr. DAVIS. That second paragraph in the amendment is the present law. Mr. BLAND. Yes. Mrs. DAVIS. The only portion of my amendment is the proviso. Mr. BLAND. I understand that. Mr. DAVIS. In other words, the proviso is my amendment; the other is existing law. I do not undertake to change the three-year proposition. Mr. BLAND. I understand that; but, for my information, and it may serve to clarify it, is the 3-year power or discretion, which you say rests with the Postmaster Genearl to award that contract, a power that arises under some other language of the merchant marine act of 1928, or is it under this particular language? Mr. DAVIS. This particular language. The CHAIRMAN. You will find it in section 404 of the 1928 act. 97876-30 4 Mr. BLAND. If it is under this particular language, I question whether it would be an award of a contract or performance of a contract when awarded. Mr. DAVIS. Well, if my amendment is adopted to the present law, the Postmaster General could withhold the commencement of a contract until the owner divested himself of any foreign flag ships; in other words, he could not award it and commence making pay to any operator who is operating foreign flag ships and I do not think he should be permitted. That is the intent of my amendment. Mr. O'CONNOR. My point on the proposition is that there are particular cases where it might work a hardship. I am going to mention names when I talk. You take the United Fruit Co. All their vessels were built abroad. Now they have come in and want to build six ships in this country. They will be the first ships as I recall that they ever built in this country. That kind of gets me a little, to get that company building ships here, something that is bringing people here who are getting their ships built abroad, and we get them built here, and if they are coming here now and see their error, or something, and start to building their ships in this country, I think something ought to done in that case. Now there are other matters that have to be taken into consideration. Take the Barber Steamship Co. I am just citing cases as they occur to me. They bought a line from us; they have a mail contract; they are also agents for a British line and a Japanese line. Now, through their being agents for those two lines, they have been able to control the freights and the rates on that particular service— the West African service. Now if Barber did not have those two particular lines, somebody else would have them and it would mean a rate war. Now those are two particular cases, as I say, which should be taken care of by something passed in a bill that should be handled by somebody, whether it is the Postmaster General, the Shipping Board, or somebody else. It would be drastic, I think, to tell Barber that he could not handle those vessels; to turn them over to some British or Japanese agency, that would simply start in cutting rates and put the three lines on the bum, instead of having them going the way it is now, in a fairly harmonious condition. I do not know whether that was Mr. Davis' idea-thinking of a line of that kind. Mr. DAVIS. Mr. O'Connor, in the first place, whether it should or should not, my proposed amendment does not prevent the recipient of a mail contract from acting as agent for foreign lines, unless the agent controls the operation of the line. Mr. O'CONNOR. Well, he does not. I thought he did. Mr. DAVIS. Well this amendment does not apply. Mr. O'CONNOR. Well that clears that end of it. Mr. DAVIS. Because is says "Who performs or controls the operation of the line." Mr. O'CONNOR. Now, about the United Fruit Co. agreeing to come here and build six ships-I believe that is what they agreed to do— that is what we need, American ships to be built in American yards to keep them busy. They have agreed to come in and build six ships, provided they can get a mail contract and the Postmaster General has certified that particular route for a mail contract, and all the et, probably 40 per cent, of their boats are foreign flag; but they were all built under foreign flag and transferred under the American flag. Now, they do a great deal of business. I am not here defending them; there is nobody I know personally connected with the United Fruit Co., except one man, and I have not seen him in three years. I am just simply taking the viewpoint, Do we want to do something to stop that line from becoming American, if they show an inclination to become an American line? Mr. ABERNETHY. Is that the only one you have in mind? Mr. O'CONNOR. Oh, no; there are other lines. I want to see this law apply to lines 100 per cent. Mr. ABERNETHY. I mean is that the only line you think ought to be excepted? Mr. O'CONNOR. No, I have other lines I want to mention. Mr. ABERNETHY. Do you not think it ought to be put into the record, because if you are going to make exceptions Mr. O'CONNOR. Take the Moore & McCormack Line: They were operating one of our lines and we took it away from them and we picked out a new operator. Just as soon as we did that, Moore & McCormack got foreign boats and some American boats and they are operating them in competition to boats the United States Shipping Board is operating between New York and South America, and they have a mail contract on their boats operating to Danish ports on the Scandinavian route; they have a mail contract on that, and they are operating foreign boats in competition with the United States Shipping Board. Mr. DAVIS. And you think it is right? Mr. O'CONNOR. No, I do not think it is right. That is the point I said is not right. Mr. ABERNETHY. The only thing that is in my mind, Mr. Chairman, is if you are going to make an exception, which is very doubtful in my mind, whether there should be any exception Mr. O'CONNOR. That is for you to say. Mr. ABERNETHY (continuing). It would be for you to specify the lines and, as chairman of the Shipping Board, give the particular reasons why you think exceptions should be made; so that when we go to pass upon whether we should pass this amendment, or not, we could have that in our minds, with a view of deciding whether we should take your view or not. Mr. O'CONNOR. If Congress thinks we are wrong in those two exceptions we suggest, we will follow out the acts of Congress. Mr. ABERNETHY. I mean, are they the only two? Mr. O'CONNOR. They are the only two, outside of Moore & McCormack. The CHAIRMAN. What about Likes Brothers? Mr. DAVIS. Likes does not operate any foreign ships, does he? Mr. DAVIS. He does not operate any and does not act as agent for any now, does he? Mr. O'CONNOR. All we have kept track of, Mr. Chairman, are the people who have come in competition with American flag ships. Mr. REID. What about the Munson Line? Mr. O'CONNOR. They have operated foreign ships against us. I am not talking about the sugar ships; I do not think we ought to get into the seasonal proposition. There is only a three or four months' season of carrying the sugar and I do not think we would get any vessels here in this country to go into that trade. It is a tramp trade and we are not behind the tramp proposition. But where he is operating vessels as against the Mississippi Line, where he is operating foreign vessels, he should not be given a contract for carrying the United States foreign mails-neither he nor anybody else. And if we could. get something in this bill, Mr. Davis, I want to agree and we will agree if we could get something like this put in, on line 10, on the second page, I do not know whether that would meet with your approval, or not * * * foreign-flag ships in competition with any established line of American-flag ships. If that could be changed that way, I want to say to this committee that there has got to be something done on this proposition. This man was right when he spoke here a few minutes ago about paying money to a man who is operating foreign-flag ships and gets a mail contract from the United States Government for operating our boats, that it is not a good thing, was never intended to be and should not. continue to be done. Mr. ABERNETHY. Do you not think, Mr. Chairman, taking the United Fruit Co., that the Postmaster General, within the 3-year limit provided for in Judge Davis's bill, could work out some equitable situation with the United Fruit Line, rather than to make an exception here showing that we were taking one class? Do you not think that could be worked out along that line, rather than put it in the law? Mr. O'CONNOR. There may be something worked out along that line. Congressman Davis says that is not his idea-that 3-year contract. I thought it was. Mr. DAVIS. You thought it was what, Mr. Chairman? Mr. O'CONNOR. That you had three years to work this thing out; but you do not seem to agree with that. Mr. DAVIS. No; I think under my amendment and under the law he could state to the company, "I will award you a mail contract. provided you divest yourself of foreign-flag ships within two years, performance to commence and the pay to commence, as soon as you do divest yourself of it," within three years. That is my interpretation of it. But, if my amendment, as it stands, becomes the law, he could not commence paying him Mr. O'CONNOR. Until the three years. Mr. DAVIS. Well, until he divested himself of foreign-flag ships and, under the law, he could not defer the performance for longer than three years under any particular advertisement. Mr. O'CONNOR. Yes. Mr. DAVIS. But he could come along and advertise again; there is no limit on the number of times that he can advertise. Mr. O'CONNOR. Now, we have had a case out on the Pacific coast,. I think three or four months ago. One of our lines out there had more fruit than they could carry; there was no boat that they could get; that is, there was no American-flag ship that they could get and they wired in to us asking permission to charter a foreign-flag ship for that particular load. The board investigated the information and gave them authority to do it, just for that one trip. That is another proposition. If that operator had refused to take that load, probably the |