cannot reach his foreign markets in competition with foreign competitorsshipping as between foreign countries-an important condition which was mentioned here yesterday.

So long as the American shipper is afforded that opportunity to reach his foreign markets, he should have no complaint about the level of rates which are charged in the foreign trades, and he should be content to pay the rate which enables the steamship company to make a living in the trade.

A desire was quite manifest to me on the part of some shippers who appeared here to have freedom to make their own rates in particular cases, irrespective of whether they need a reduction in order to enable them to reach foreign markets. That desire is purely individual, and while I have no objection to proper individualism, I do say that it must be subordinated to the great public policy of this country, as evidenced in the 1920 act and in the 1916 act for the building up and protection of our shipping.

I think the first step is the issuance of rules and regulations, under section 19, which will definitely require the filing of rates; which will prescribe, where a conference is operating on a particular route, that no nonconference line on that route shall be permitted to reduce its rates below the conference level, unless 30 days prior notice be given. That is the first step, and I mention the latter portion of the proposed rule for the reason which was emphasized here, by many witnesses, that the nonconference lines avail of the shelter and the protection that is given them by the stabilizing efforts of the conference lines to compete with the conference lines to their great disadvantage. In shipping code parlance that is an unfair practice under today's conditions. The conference lines, which, pursuant to the mandate, as I call it, of the 1916 act, have attempted stabilization not only for their own benefit but for benefit of the commerce of the country, may well feel sardonic when realizing that the very efforts which they have made to carry out the great purposes of the shipping acts are really being turned to their destruction. That is what this competition over a long term, competition of the kind described here, amounts to, because it is practically without capital investment, and it is "catch as catch can", it is quoting a rate which in any event is lower than the conference rate and directed to securing of the business, taking a disproportionate amount of the business away from the conference lines, without reference to whether the rates of the nonconference lines are really economically sound and legal rates or not.

If you will permit me, I will read the substance of a rule directed to the desired end, and then I will make further comment upon it.

"Every common carrier by water in foreign commerce shall on and after" a certain date "keep its tariffs of rates and charges (including rules and regulations affecting the same) for the transportation of property as they may then exist, and as they may be amended from time to time, on file with the Board, where they shall be open to public inspection, and shall also keep them open to public inspection at its principal business offices at the United States ports from which its vessels operate.

"All the rates and charges contained in said tariffs shall be just and reasonable as between carriers and shippers and as concerns competing carriers, and no such common carrier not a member of a conference approved under section 15 of this act shall reduce any of its rates and charges below the levels currently maintained on the route to which any such tariff applies by such an approved conference operating on such route unless on 30 days' notice to the Board.

"The Board shall have the power to cancel any rate or charge which it finds to be either unduly high or unduly low or noncompensatory or unduly competi tive and operating to the detriment either of the commerce of the United States or of shippers or carriers engaged therein and, pending hearing to determine the propriety of any such rate or charge, may suspend the same for a period not exceeding 60 days."

That states the essence of what the Board should immediately provide by regulation.

It is not my purpose, however, to exclude the possibility of further amendment of the Shipping Act, so as to make the regulation of shipping more positive and complete. And it is my view that the exact language which I have read to you just now should be promulgated not only in a rule to be issued under section 19 of the 1920 act, but should also be embodied in an amendment to section 17 of the 1916 act.

It is obvious to everyone that the rate supervision which is thus suggested leaves the initiation of rates to the common carrier. That must always be so in

the foreign trade for this reason: Shippers and carriers from and out of this country are always in competition with shippers and carriers operating as between foreign countries, a carriage which does not touch any point in this country, a carriage which the Shipping Board, no matter how positive the Shipping Act, could not in any way regulate.

Therefore the carriers here and the shippers here must always, if foreign shipping is to survive and flourish, have the prompt initiative of the rates. The question of control over the rates is something else.

It is proposed by this rule, by this possible amendment of the statute, that the Shipping Board shall have control over rates that are unduly low, as well as unduly high, and it will be apparent to you that if you protect both the shipper as against the unduly high rate, if it turns out to be such, and the carrier against its competitor on the unduly low rate, if there be such, you have done something pretty substantial for the shipping industry. At the same time you have not fettered the carrying on of business by an absolute prescription in the first instance or at any time of the rates which shall be charged.

I repeat again, and I emphasize it, that in providing the proposed regulation, initiative over the rates to be charged from day to day must be left to the carriers and to the shippers who are engaged in the particular trade.

The conference system which has been in vogue these many years, or particularly if you have all the carriers in a trade in the conference, offers the most efficient, intelligent, and complete method of initiating the proper rate from day to day.

The purpose of this rule with its limitation of 30 days on the right of nonconference carriers to slash their rates below conference levels is to prevent, what shall I call it, a sort of maverick competition, from striking down the stabilization which the conference establish.

We are quite within our rights, the shipping industry and the Shipping Board, in laying ever-recurring emphasis on the conference system. While it is true that under the law as now written, no line can be compelled to become a member of a conference, nevertheless it is equally true that it is highly desirable that every line operating in a trade where there is a conference should be compelled to become a member, in harmony with the public policy of the United States in the maintenance and protection of its foreign trade.

The rules which have been proposed here by Mr. Turk and by myself only go, so far as they apply to nonconference lines, to the proposition that the nonconference lines shall be required to observe the conference rates and practices in the interest of stability.

I will now go a little further and suggest that it would be appropriate, at the earliest possible moment, to have an amendment of the 1916 statute, section 15, by inserting a new paragraph after section 1, which will read substantially this way and I want to say, in suggesting this language, that I am not proposing anything which I consider well worked out. I am only offering personal suggestions. I am not making these suggestions on behalf of any line or group of lines, because I realize that the propositions which I am putting forward here will be subject to a good deal of discussion and consideration. But I do say that the general principle which is covered by the language which I am about to read is one that I am prepared to recommend to my several clients, and I couple with that the statement that I think such amendments as are made to the Shipping Act should be simple and concise and not attempt to tamper with the general principles which have been carried into the 1916 act and the 1920 act, and which, as principles, have worked well all these years.

It would be appropriate to have an amendment to section 15 of the 1916 act by adding a new paragraph after the first paragraph to read as follows:

"Conferences shall be open to the membership of all common carriers operat ing on any trade route, and whenever two-thirds or more of the common carriers operating on any trade route "-we might have to have some definition by lines or tonnage there" operating on any trade route are parties to a conference agreement applicable to such route, no vessels shall be operated as a common carrier on such route unless the owner, operator, manager, or agent of such vessels shall first become party to such conference agreement, subject to the Board's approval thereof, as hereinafter provided for."

Some of my friends will say that is pretty strong medicine; I agree, and it is so intended, but there are several precedents or analogies which might be cited. You all know that within a few weeks Congress has passed an amendment to the Bankruptcy Act, which enables two-thirds of the creditors of a

company to force a reorganization. It is not the old "knock-down-and-dragout " business, but two-thirds of the creditors, with appropriate action under that statute, can compel a reorganization, and at the same time the business goes on. If that principle is sound there, it is sound here in respect of our shipping, particularly in view of the declared policy of the 1916 and 1920 acts.

I think there is another analogy in the regulation of securities and exchanges, the Stock Exchange Act. Strong medicine was applied there touching dealing in securities. The individual interest has been subordinated to the public interest. It is high time that something be done in respect of our shipping and shipping laws to subordinate these individual rights, the exercise of which we have heard so much about here this week, to the broad public interest, which is represented not only by the shippers of this country but represented also by the steamship lines, both American flag and foreign flag, which operates in the maintenance of our commerce. The maintenance of our commerce in full vigor is of much greater interest to this country than the individual rights of any of our friends which have been asserted here.

I want to point out to you a great benefit that would result from the amendment of the 1916 act in this respect. You are aware of the contract rate system. Those contracts containing rates which are generally lower than the open-tariff rates are available to all members of the conference. They are also available to all shippers who ship by the conference lines. You may recall that in the W. T. Rawleigh case, which involved a contract rate, your Board in making its decision laid particular emphasis on the proposition that since these contracts are open to all shippers, they are of great benefit to shippers as well as to carriers, and they were upheld and cancelation was refused largely on that ground. The more you expand the conference to include all lines operating in the trade, the greater benefit you give to the shippers who have such contracts, because it automatically expands the number of lines by which they can ship their goods. It is a system or practice which probably has brought more benefit to the shipping industry, shippers as well as steamship companies, than any that your Board has had to consider in the recent past or at any time that I know of. That contract system is doubtless preferable to the old system of deferred rebates. It may well be that a deferred rebate system, with the sanctions that it imposes from the fact that money is held in the hands of the carrier until the shipper performs his contract, would have salutary results in foreign trade. It might be worth while for your Board and for Congress to consider reestablishing it. It would require some amendment to section 14 of the act to reestablish it, and there should be some provision for publicity. It is not an entirely uncommon practice as between foreign countries. The time might well come when the shipping industry here would think, and your Board would think, and so would Congress, that in order to meet competitive situations prevailing abroad some such rebate system should be reestablished. But until that time comes there is nothing that can operate so effectively to the upbuilding of the steamship trade and expanding the facilities which shippers are offered as the contract-rate system. That system is still appropriate and necessary, even though you sometimes get all the common carriers in a trade into a conference. There are other carriers not common carriers, and if a shipper chooses to support the common-carrier service and avail of the greater benefits which they offer year in and year out, week in and week out, it is only fair that he should confine his shipments to them, provided he chooses one of these contracts.

That leads me to another point. We are well aware of the tramp competition which exists on most of the foreign-trade routes. I am not here to belittle the tramp operation or its importance to the commerce of this country. I recall that shipping men with long experience, and of most excellent judgment, emphasize in the code hearings, "You must not forget the tramp", and I quite agree that that is so. At the same time the tramp must not forget the liner operation, with liners built at great expense.

It is in evidence in this proceeding, by testimony taken not only here but at New Orleans, and to some extent on the Pacific coast, that there has in recent years been a substantial encroachment by the tramp operators on the regular common-carrier liner business, business which fairly should go to the liner. You will recall the testimony here just a couple of days ago that ships have come to our ports as tramps, and have converted themselves into liners when they sail out from our ports, operated by some of the nonconference operators.

It is not proper that they should be permitted to do that. If they choose, in their common-carrier operations, not to come into the conferences of course, the purpose of this amendment of section 15 which I suggest is that they should; but if for some reason they should not, then their common-carrier operations should be limited and it should not be permissible for a ship which is really a tramp to load up three-fourths or four-fifths with cotton or some bulk commodity, or any commodity that is not regularly carried by liner services, and then fill out her space with general cargo which is appropriate to liner operation, cargo which normally would be carried by the liners, at rates less than the conference rates fixed for the liner operation.

There is no question that that is an abuse, and while the individual's right to carry on that kind of business is not questioned, nevertheless it is not consistent with that public policy which must be enforced to improve the status of our shipping.

It is appropriate, therefore, that there should be an amendment at the end of the first paragraph of section 1 of the Shipping Act of 1916, defining therein more closely in relation to cargo the ocean tramp that is to be excluded from the operation of the act as alternation, for regulation as a common carrier. My suggestion on that point is that the provision in the first paragraph of section 1 of the Shipping Act should be amended to read this way:

Provided, That a cargo boat commonly called an ocean tramp', when not laid on the berth, and loading only bulk cargo without mark or count shipped by a single shipper under a single contract of affreightment, shall not be deemed such common carrier by water in foreign commerce"."

The purpose of that, gentlemen, is to preserve to the liners and to the tramps their legitimate fields of operation, and it is to prevent either one from encroaching on the proper field of the other.

It is not the purpose of that amendment to drive the tramps out of business. In the shipping-code discussions the charge was made that the code stabilization clause, as it was framed, was such that the tramps would have no place to operate. Whether that was so I do not pretend to say, but I do say that the suggested amendment of section 1 of the act is not directed to excluding the tramps from their legitimate field of operation.

Down in the Gulf I am told that the situation is most serious. Liner services have been established there, with the aid of this Government, charging reasonable rates. They are trying to build up services which the Gulf is entitled to, and at the same moment tramp competition has developed to such an extent that it is with the utmost difficulty that these liner operations survive. That is a situation to which the Board should direct its attention, and by some such charge in the statute as this the situation could be castly improved, not only in the Gulf but the North Atlantic as well.

These conference agreements, which have been in force many, many years, worked very well by and large, but comment is made from time to time that this member or that one, perhaps, has violated the agreement or has not fully respected the spirit of it. It seems to me the time has come to make the conference agreements rather more important than they have been, and it is my proposal personally that every line in a trade, when two-thirds of the other lines are in conference, shall be required to come into the conference; every line in the trade acting as a common carrier shall fist become a party to the conference agreement. When I say "become a party to the conference agreement", I do not mean under terms impossible to agree to, because, after all, you have got to reserve some freedom of action and decision. But you will recall well that the second paragraph of section 15 of the Shipping Act gives the Board power to approve agreements that are fair as between carriers and in relation to shippers; gives it the power to disapprove agreements that are unfair or discriminatory as between carriers and shippers. In view of this power there should be no extraordinary amount of difficulty in reaching agreement for conference membership with the aid of the Shipping Board.

Continuing from that point, I think we would do well to make some amendment of the final paragraph of section 15 of the Shipping Act, which imposes a penalty of $1,000 a day for violation of that section of the act. It may well be that as the law stands now anybody who violates a conference agreement, approved under that act, is subject to investigation as to whether he has violated the act. So far as I know, no such investigation has been undertaken, or if it has, it has not gone very far. To remove the subject from the field of doubt, perhaps the final paragraph of section 15 should read like this:

"Whoever violates any provision of this section or any provision of an agreement as defined in this section shall be liable to a penalty of $1,000 for each day such violation continues, to be recovered by the United States in a civil action."

That would do away with the necessity of bonds under conference agreements.

I have not very much doubt that a good many people would think that such a provision would really put teeth in the conference agreements.

I have taken up perhaps an undue amount of time here, Mr. Examiner, but the whole subject is one of the utmost importance. As I said at the beginning this case here is of the utmost importance. I consider that you have very great powers in this proceeding and I sincerely hope that the Board will exercise them. I think it is a fair implication that when our nonconference friends on the North Atlantic fail to come here and present their evidence, they are entitled to be foreclosed, and to have applied to them the proposi tion which has been applied to some lawyers in some courts, at various times, that when they did not produce full evidence on their client's behalf, the supposition was that the evidence if produced would have been against them and therefore the decision ought to be against them on that ground.

I repeat that the suggestions I have made here for amendment of the statutes are my own ideas and are subject to revision, discard, or anything else you please. But this is the time to secure stabilization, in view of the code activities which went on for many months, directed to it, and your own activities directed to the same end, and the activities of the Secretary of Commerce's Survey Committee, directed to the same end, and to the purpose of making appropriate recommendations to Congress. We should give at this moment, as I have tried to do, great emphasis to these propositions, for I honestly believe that they are directed to great improvement of conditions in our foreign trade.

I am exceedingly obliged to you.

Examiner TIBBOTT. Thank you, Mr. Hupper.

The CHAIRMAN. Gentlemen, we will adjourn the hearings on the subsidy bill at this point and proceed with the consideration of the water carrier bill (H. R. 5379).

(Whereupon, at 11:40 a. m., the hearings on H. R. 7521 were adjourned.)