FIRST MORAN BILL

(H. R. 7854, 74th Cong., 1st Sess.]

A BILL To further the development and maintenance of an adequate and well-balanced American merchant marine, to provide for the separation of the regulatory functions of the Government over shipping from the Government's business interests in ships and shipping, to repeal certain former legislation, and for other purposes.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

TITLE I-UNITED STATES MERCHANT MARINE CORPORATION SECTION 1. It is hereby delcared that it is necessary for the national defense and for the proper development and maintenance of its foreign and domestic commerce that the United States shall have a merchant marine of the best equipped and most suitable types of vessels sufficient to carry the greater portion of its commerce and serve as a naval or military auxiliary in time of war or national emergency, to be owned by a Federal corporation and to be privately operated by citizens of the United States whenever practicable, and that all common carriers by water engaged in the commerce of the United States, including such Federal corporation, and other persons subject to this Act shall be subject to regulation to the same extent as common carriers by land.

SEC. 2. Within thirty days after the passage of this Act the President is hereby authorized and directed to create and organize a Federal corporation with an authorized capital stock of $500,000,000, to be subscribed for, paid in, and owned by the United States, as hereinafter provided, which corporation shall possess an entity separate from that of the United States, shall have a perpetual existence unless dissolved by Act of Congress, shall adopt a seal and make its own bylaws, shall sue and be sued in its own name as hereinafter provided, and said corporation and its income and property shall be exempt from all taxation, direct or indirect, of whatsoever kind or nature. All the capital stock in said corporation shall be issued to and held in trust ex officio by the President of the United States. The name of said corporation, hereinafter in this Act referred to as "the Corporation", shall be "United States Merchant Marine Corporation".

SEC. 3. The Corporation is hereby authorized to build, reconstruct, recondition, and repair its own vessels, or to make contracts for the building, reconstruction, reconditioning, and repair of its own vessels; to acquire vessels by purchase or by transfer from Government departments and agencies, by charter or in any other lawful manner; to operate vessels in the commerce of the United States as a common carrier by water, either directly or through subsidiary corporations; to charter its vessels as hereinafter provided; to carry on the business of underwriting marine insurance, builders' risk insurance and protection and indemnity insurance, either directly or through a subsidiary corporation; to own real estate; to issue and sell its own bonds; and to make any and all contracts necessary for the exercise of the foregoing powers, within the limitations imposed by this Act. SEC. 4. (a) The business of said corporation shall be controlled and directed by a board of directors composed of five members, to be appointed by the President, by and with the advice and consent of the Senate. Such directors shall be appointed as soon as practicable after the enactment of this Act, one for a term of one year, two for a term of three years, and two for a term of five years, the term of each to be designated by the President, but their successors shall be appointed for terms of five years, except that any person chosen to fill a vacancy shall be appointed only for the unexpired term of the director whom he succeeds. (b) The directors shall be appointed with due regard to their particular fitness for the intelligent and efficient discharge of their duties. Not more than three directors shall be affiliated with the same political party. No person shall be appointed a director, who, within three years prior to his appointment, shall have been employed by or have had any pecuniary interest in any common carrier by water or other person subject to this Act. Each director shall devote

his full time to the duties of his office. It shall be unlawful for any director, officer, or employee of the Corporation to be in the employ of any other person, firm, or corporation, or to have any pecuniary interest in, or hold any official relationship with any common carrier, shipbuilder, port authority, contractor, or other person, firm, association, or corporation with whom the United States Merchant Marine Corporation may have business relations.

(c) Any director may be removed by the President in his discretion for inefficiency, neglect of duty, malfeasance in office, or other cause. A vacancy or vacancies in the board of directors shall not impair the right of the remaining members of the board to exercise all its powers.

(d) The president of the Corporation shall be one of the board of directors and the chairman thereof and shall be designated by the President of the United States. The other principal officers of the Corporation shall be a vice president, a secretary, a treasurer, a comptroller, and a general counsel, to be elected annually by the board of directors. The president of the Corporation shall appoint all other officials and employees of the Corporation.

(e) Each director shall receive a salary of $10,000 per annum, except the director serving as president of the corporation shall receive a salary of $12,000 per annum. The board of directors shall determine the salaries of the other executive officers herein named and the president of the Corporation shall fix the salaries of all other officials and employees, but no officer, official, or employee shall receive a salary in excess of $10,000 per annum, except the president of the Corporation.

(f) In selecting the officials and employees of the Corporation the president of the Corporation shall give preference to those officials and employees of the former Shipping Board and of the United States Shipping Board Merchant Fleet Corporation, who have maintained creditable records for efficiency and devotion to the best interests of the Government and who, by reason of their past experience and technical knowledge, would be valuable to the new Corporation.

SEC. 5. The principal office of the Corporation shall be at Washington, District of Columbia, but the Corporation may maintain such branch offices elsewhere as the corporate business may require. Office space for the use of the Corporation shall be assigned to the Corporation in buildings owned by the United States and the Corporation shall not expend any of its funds for rented quarters except when suitable space in Government-owned buildings is not available.

SEC. 6. The title to and the possession of all money, notes, bonds, mortgages, and securities of any kind, contracts and contract rights, lands, vessels, docks, wharves, piers, and property and interests of every kind, owned by the United States, and now controlled by the Department of Commerce as the successor to the powers and functions of the former United States Shipping Board, by virtue of the President's Executive order of June 10, 1933, shall be transferred, sold, and assigned to the United States Merchant Marine Corporation as the owner thereof Provided, That such change of title shall become effective upon the date a majority of the board of directors of the Corporation shall have been appointed and shall have taken the oath of office. As soon as practicable, thereafter, an inventory and appraisement of all the money and property so transferred shall be made by a board of appraisers consisting of three members, one member to be designated by the Secretary of the Treasury, one member by the Secretary of the Navy, and one member by the Secretary of Commerce from their respective departments. Said inventory and appraisement shall list and place a fair valuation on all money and property so transferred and upon written approval of said inventory and appraisement by the said three Secretaries, the Corporation shall issue shares of its capital stock of equivalent par value of said money and property as so determined to be held by the President of the United States in trust for the United States.

SEC. 7. The President of the United States is authorized and directed to allot to and cause to be paid to the Corporation from time to time as may be required such further sum or sums of money as may be necessary to complete the authorized capital stock of said Corporation, and said sum or sums are hereby appropriated from public funds in the Treasury of the United States, or may be transferred from funds previously appropriated for public works as the President may direct. The Corporation shall issue shares of its capital stock of equivalent par value to the amount of money so received, to be held by the President of the United States in trust for the United States.

SEC. 8. Upon completion of the sale and transfer to the United States Merchant Marine Corporation of all the vessels transferred from the former United States Shipping Board to the Department of Commerce by the President's Executive order of June 10, 1933, the United States Shipping Board Merchant Fleet Cor135956-35-68

poration shall cease to exist and shall stand dissolved. All of the records, books, papers, and corporate property of said dissolved corporation shall be taken over by the United States Merchant Marine Corporation.

SEC. 9. The Corporation is authorized to issue and sell from time to time its short-term or long-term bonds in such denominations, bearing such rates of interest, and such maturity dates as shall be jointly approved by the regulatory commission hereinafter created and by the Secretary of the Treasury, and payment of the principal and interest on said bonds shall be guaranteed by the United States: Provided, That the total principal amount of such bonds outstanding at any time shall not exceed $500,000,000.

SEC. 10. The Corporation is directed to perfect, adopt, and carry out a longrange shipbuilding program to provide an adequate and well-balanced American merchant marine to be largely owned by the Corporation but to be privately operated, except in national emergencies as proclaimed by the President, when the Corporation's vessels shall be operated by it or as the President of the United States shall direct. Such shipbuilding program shall provide for the construction of vessels of all types, including passenger liners, combination cargo-passenger vessels, cargo carriers, tankers, and colliers, so designed as to be readily and quickly converted into transports and supply vessels for employment by the armed forces of the United States in a national emergency, and to this end the Corporation shall closely cooperate with the Navy Department as to nationaldefense needs and as to design and plan of the Corporation's new vessels. The Corporation's long-range program shall make provision for replacement and modernization of its vessels as circumstances may require, so that its fleet shall at all times be well-balanced and adequate for the needs of the Nation's water-borne commerce and as a naval auxiliary.

SEC. 11. The Corporation is authorized and directed to have constructed in American yards, on the Atlantic and Gulf and Pacific coasts, such new vessels as it shall determine may be required to carry out the objects of this Act, and to have old vessels reconditioned or remodeled in such yards: Provided, That is satisfactory contracts for such new construction or reconstruction, in accordance with the provisions of this Act, cannot be obtained from private shipbuilders, the Corporation is authorized and directed to build its vessels in its own yards. the letting of contracts for construction of vessels in private yards and in the construction of vessels in its own yards, the Corporation shall keep in view that it is desirable to have shipbuilding yards available on the Atlantic, Gulf, and Pacific coasts and to encourage the development of the art of shipbuilding on each of said coasts, even though it may be necessary for the Corporation to allow a higher cost for vessels constructed on the Pacific coast.

In

SEC. 12. (a) No contract for the building of a new vessel, or for the reconditioning, reconstruction, or repair of any other vessel, where the cost thereof shall exceed $100,000, shall be made by the Corporation with any private shipbuilder, except after due advertisement and upon sealed competitive bids: Provided, That the advertisement for bids shall specify that the vessel is to be built or the work is to be done on the Atlantic, Gulf, or Pacific coasts of the United States, as the case may be.

(b) No bid shall be considered unless submitted on a printed form of proposal prepared by the Corporation and furnished upon request to all prospective bidders.

(c) Such proposal form shall provide for an offer by the bidder to construct, or reconstruct, or recondition, or repair the vessel, according to the plans and specifications therefor, on a basis of actual cost to the contractor plus such percentage of profit on the bidder's actual cost as shall be specified in the bid.

(d) Every such proposal form shall contain a precise definition of the term "actual cost to the contractor", which definition shall have been previously approved by the United States Maritime Commission, hereinafter created. In establishing such definition and providing for the proportion of the overhead expense that may be included in "actual cost to the contractor", no credit shall be allowed for any salary paid to any one of the contractor's officials in excess of $20,000 per annum to the contractor's principal officer and in excess of $10,000 per annum to any other officer or employee.

(e) Before accepting any bid or entering into any such contract, the Corporation shall require the bidder to submit a statement, sworn to by the bidder or by the bidder's principal officer, if a corporation, setting forth at length and in such detail as the Corporation shall require all the items going to make up the bidder's annual executive, administrative, and fixed overhead expense, the volume of business transacted by the bidder during the preceding two years, and such

other information as the Corporation may require. Such information shall be treated as confidential by the Corporation and shall not be divulged to any person not employed by the Corporation or by the Commission hereinafter created.

(f) If the bidder's overhead costs are deemed by the Corporation to be out of proportion to the direct labor employed and materials used by the bidder in his operations, the Corporation shall determine the amount of overhead that may be charged by the bidder as a part of "actual cost" without increasing the percentage of profit the bidder has specified in his bid, and if the bidder agrees to such determination of overhead by the Corporation, the bid shall be considered as submitted subject to such determination. If the Corporation shall determine that all the bids submitted are unreasonably high, the Corporation shall reject all bids and readvertise for bids, or the Corporation may proceed to build the vessel or have the necessary work performed in its own yards or in navy yards owned by the United States.

SEC. 13. All bids for the construction, reconstruction, reconditioning, or repair of the Corporation's vessels, and for the chartering of the Corporation's vessels hereinafter provided for, shall be opened at the time, hour, and place stated in the advertisement for bids, and all interested persons, including representatives of the press, shall be permitted to attend and the results of such bidding shall be publicly announced.

SEC. 14. The Corporation is authorized and directed to negotiate with and, if an agreement can be reached, to purchase from the owner thereof any vessel now documented under the laws of the United States, (a) which was purchased by the owner thereof from the former Shipping Board, or (b) on which the owner thereof obtained a construction loan or a reconditioning loan from the former Shipping Board, or (c) which the owner is now operating on any mail route under contract made with the Postmaster General: Provided, That the seller of such vessel shall accept at par value the Corporation's bonds for the amount of the purchase price of such vessel in lieu of cash therefor. The price to be paid by the Corporation for any vessel so purchased shall be computed as follows: Cost of the vessel to the owner thereof, plus the sum or sums expended by the owner to recondition such vessel (excluding ordinary repairs and replacements), less an annual depreciation of 5 per centum per annum from the date such vessel was launched, less an allowance for placing the vessel in good repair in every particular, the Corporation to take credit for all cash advanced on any loan made by the Shipping Board on such vessel, with interest at 3 per centum per annum during any period the vessel was operated in foreign trade after the loan was made, irrespective of the rate charged, and interest at 54 per centum per annum for the balance of the time the loan has run, and the owner to have credit for all payments of principal and interest made on such loans. If the Corporation holds a purchase-money mortgage, transferred to it by the United States, on any such vessel, the amount of unpaid principal and interest on such mortgage shall be deducted from the purchase price to be paid by the Corporation. The purchase price so determined, if the vessels purchased are operated on a regular steamship route, shall include the transfer of the trade name and goodwill of such line, without additional cost to the Corporation.

SEC. 15. In determining the time a vessel has been engaged in foreign trade, the Corporation shall not make any allowance for any portion of a voyage from a port on the Atlantic or Gulf coasts to the Pacific coast of the United States, or from the Pacific coast to the Gulf or Atlantic coasts of the United States, by way of the Panama Canal, even though the vessel may have touched at a West Indian, South American, or Mexican port on such voyage; nor shall the Corporation make any allowance for any portion of a round voyage between a United States port and a port in the West Indies; nor on the voyage of any vessel when more than 75 per centum of the cargo carried by such vessel consisted of commodities consigned by or to the owner of such vessel, or any subsidiary, or affiliate or holding company of such owner.

SEC. 16. The Corporation shall not purchase any vessel from a private owner, unless as one of the conditions of such purchase the owner shall execute a bond, with one or more approved sureties, conditioned upon indemnifying and saving the Corporation from loss against all existing liens against such vessel arising out of prior operation thereof or otherwise. Before acceptance of such bond by the Corporation it must be approved by the Secretary of the Treasury, who shall not approve such bond unless satisfied as to the financial responsibility of the sureties.

SEC. 17. The Corporation is authorized and directed to invetsigate and determine from time to time what existing steamship lines and what new steamship

lines should be operated in the foreign commerce of the United States by American flag vessels and are necessary and essential for the development and maintenance of such commerce, and in reaching its determination the Corporation shall consider and give due weight to the cost of maintaining each of such steamship lines, the probability that any such line cannot be maintained except at a heavy loss disproportionate to the benefit accruing to our foreign trade, the number of sailings and types of vessels that should be employed in such lines, and any other facts and conditions that a prudent business man would consider when dealing with his own business, with the added consideration, however, of the intangible benefit the maintenance of any such line may afford to the foreign commerce of the United States and to the national defense.

SEC. 18. All vessels acquired by the Corporation in any manner may be operated by the Corporation, or through a subsidiary corporation which the Corporation is hereby authorized to organize under the laws of the District of Columbia and in which the Corporation shall own all the capital stock. All vessels acquired and now being operated by private operators on regular lines in the foreign commerce of the United States may be temporarily operated by the Corporation for its account by private operators until such time and upon such operating agreements as the Corporation may deem advantageous, but the Corporation shall arrange as soon as practicable to offer all its vessels for charter as hereinafter provided and all operation of the Corporation's vessels by private operators under such operating agreements shall be discontinued within one year after the passage of this Act.

SEC. 19. As soon as practicable after the passage of this Act, and continuing thereafter, the Corporation shall arrange for the employment of its vessels in steamship lines on such trade routes, exclusively serving the foreign trade of the United States, as the Corporation shall determine are necessary and essential for the development and maintenance of the foreign commerce of the United States and the national defense: Provided, That such needs are not being adequately served by existing steamship lines privately owned by citizens of the United States and operated by such citizens without direct governmental aid of any kind except the carriage of United States mails on a poundage basis. It shall be the policy of the Corporation to encourage private operation of each essential steamship line by demising the vessels on bareboat charter to citizens of the United States who shall agree to maintain the line. In determining the amount of charter hire the Corporation should receive on such bareboat charters, the Corporation is directed to observe the following objectives:

(a) During periods of economic depression which make it difficult to profitably operate any line, the Corporation is authorized to require only a nominal charter hire, and on any lines that cannot be operated except at a loss the Corporation is authorized to require no charter hire and to further assist the operator by paying a certain proportion of all of the wages of the crew of the vessels operated in such lines as the exigencies of the situation may require.

(b) During periods when, due to economic or other special conditions, any particular line should be operated profitably, the Corporation is directed to require such charter hire as may be reasonable in view of the voyage earnings of such line, so that the Corporation may recoup its losses and build up a fund for the amortization of its investment in the Corporation's entire fleet and provide for replacements thereto by new construction.

(c) The Corporation is directed to require that all operators shall limit the salaries and bonuses paid to its officials and employees and allocated to the overhead expenses of the line of vessels chartered to such operator, to $17,500 per annum for not to exceed one official or employee and to $10,000 per annum for all other officials and employees, so that the maintenance of the line shall not be burdened with excessive overhead expenses.

(d) In determining what is a reasonable charter hire, or when only a nominal charter should be required, or when the Corporation shall assist in maintenance of a particular line by payment of a portion or all of the wages of the crews employed on vessels in such line, the Corporation shall encourage the realization of a fair profit, but not an excessive profit, by the private operator, and shall also consider the desirability of providing employment for American crews.

SEC. 20. (a) The Corporation shall not charter its vessels to private operators except upon competitive sealed bids submitted in strict compliance with all the terms and conditions of the public advertisement soliciting such bids. Each and every advertisement for bids to charter the Corporation's vessels shall state the number, type, and tonnage of the vessels the Corporation is offering for bare-boat charter for operation as a steamship line on a designated trade route,