abuses which the President mentions should have been wiped out long ago, it is also true that had the Government exercised its rights of foreclosure at the time they were legally entitled to do so and resold or reorganized the various companies which are in arrears as a bank or private capital would have done, they could undoubtedly have gotten these various companies into the hands of people who would fulfill their obligations to the Government. Unfortunately, this was not done."

HON. SCHUYLER OTIS BLAND,

MIDDLE WEST FOREIGN TRADE COMMITTEE,
Cincinnati, Ohio, April 30, 1935.

Chairman House Merchant Marine and Fisheries Committee, House Office Building, Washington, D. C. DEAR MR. BLAND: We have had the pleasure for many years of working with you and the House Merchant Marine and Fisheries Committee, in the interest of the American merchant marine, and we are indeed gratified that the administration is at this time sponsoring an adequate American merchant marine, so vigorously. We are further pleased indeed that this question has never become a partisan political question, but has been viewed by the members of both major parties as a national question, having to do with our economic well-being and our national defense, two of the most important aspects of our national life, that do not lend themselves to partisan politics.

I am writing you with special reference to Senate 2582 (Committee Print No. 2). On the whole, the parties who had a hand in drafting this bill are to be congratulated upon its comprehensiveness and the intelligent and patriotic understanding of the merchant marine question. We believe that "Title 1, Declaration of Policy", is a sound statement, and cannot be reiterated too often. Our committee is thoroughly in accord with the establishment of a United States Maritime Authority to be composed of five members. However, we have some misgivings with reference to the said authority, and should it not be regional in its composition? We believe that wide-spread participation in the building up of the American merchant marine creates a broader interest in its problems, and feel that it should be regional to the extent of having one member from the States touching the Atlantic, one from the Gulf, one from the Pacific and two from the interior, and one of these may be appointed from a Great Lakes State. These men should be selected for their executive ability and enthusiasm for and knowledge of the tremendous problems confronting the American merchant marine.

With reference to title 3, it is our view that the mail contract system is not a complete failure, and that the defects in the 1928 Merchant Marine Act were largely due to failure to provide proper administration of the mail contracts.

If the mail contracts are continued on a per voyage basis, we feel that this should be sufficient to overcome operating differentials, and in this case all American steamship lines receiving this mail subsidy should be required to carry United States mail without any further charge to the Government. Of course, if in the future mail contracts are not included in any subsidy and it is contemplated to pay for the mail on a poundage rate, there would be no necessity for such contracts. However, as we view it, it would seem wiser to provide for a continuance of the ocean-mail contracts for the carriage of mail and commerce on essential trade routes as determined by the Maritime Authority. If these mail contracts were not sufficient, there should be provided adequate compensation to the ship lines in trade promotion service.

We are in hearty agreement with the suggestion in the bill to provide for compensation to shipowners for such alterations and additions to their vessels as to make them available for the Army and Navy in case of national emergency or national defense.

Our committee is on record as supporting the ideas suggested in title 5, providing for a construction differential subsidy, as it is well known and is common knowledge that the cost of shipbuilding in the United States is far in excess of that of any country with which we compete.

With reference to title 6, it is our view that the construction loan fund should be continued, and administered by the United States Maritime Authority.

We would like to suggest that aid should only be given to vessels operating on regular foreign trade routes which have been determined essential by the Maritime Authority, and that such aid should be distributed so as to equitably serve the commerce of the ports of the Atlantic, Gulf, and Pacific.

We are somewhat at a loss to interpret the reference to section 7 of Merchant Marine Act of 1920, and believe that if the Congress intends that the Maritime Authority shall in establishing the American merchant marine carry out the principles of section 7 of the 1920 act, which was reaffirmed by the 1928 act, this ought to be specifically stated in the present bill, in order that preference should be given to steamship lines and services who have the support, financial and otherwise, of the domestic communities primarily interested in the maintenance of the lines. In other words, we should be very much gratified if section 7 were incorporated in the new act, unequivocably and specifically.

In support of this, we believe that wide-spread ownership of steamship lines, traffic control put into the hands of those who are familiar with their own local problems is much more desirable and will have a tendency to prevent monopolies and the domination of one section of our country by interest radicated in some other section of the country. The South Atlantic States, the Gulf States, and the Middle Western States will be more greatly interested in the full development of the American merchant marine, if they know and are assured that they are adequately protected in the matter of independence of ownership and operation of these services from the various coastal sections of the United States. Should you desire that our committee be represented at the hearings, in the person of the chairman, I am at your command.

Very sincerely yours,

MALCOLM M. STEWART, Chairman.

[Telegram]

Hon. SCHUYLER OTIS BLAND,

CINCINNATI, OHIO, May 7, 1935.

House Office Building Washington, D. C.: Thanks for your letter May 3. It is our view that we could be more helpful in suggestions for merchant-marine legislation by personal appearance before your committee. However, we appreciate that you are willing to submit our letter of April 30 as part of the record in the hearings on the Merchant Marine Act of 1935 and hope that you will do so. We have seen a new committee print. Title 5 under construction and operating subsidy has been rewritten and it is not clear what operating subsidy, if any, is planned for vessels now in service, in fact, many of the provisions are not clear. It is our view that these provisions should be more clear and specific. Control of rates by conferences on the part of the Authority will not be helpful to American ships in meeting foreign competition, as the same differentials will still exist. Our committee firmly believes that private interests should be encouraged by all means in the establishment of the American merchant marine. We feel that the construction loan feature of previous acts should be continued and view with great regret the suggestion that navy yards be permitted to compete with private shipbuilding companies for the construction of merchant ships. We are not sure that section 204 of title 2 definitely reaffirms section 7 of the 1928 act, but assume that section 1015 of committee print, number 3, title 10, takes care of that point. The Middle West is interested in the independence of the lines operating out of the various coastal divisions of the United States and feels that every safeguard should be provided for ownership and traffic control of the lines operating out of the Atlantic, Gulf, and Pacific to be placed in the hands of local companies having the support, financial and otherwise, of the communities primarily interested in these routes and services. We believe the Authority should be instructed by Congress to equitably distribute the benefits of the legislation and appropriations made by Congress from time to time widely among the various coastal divisions of the United States in order that there may be no dominance in our shipping of one section of the United States over another section. Such dominance is fraught with great danger to the public interest as well as the shippers and receivers. We are hearily in favor of Government aid to take care of construction differentials, operating differentials, additional cost caused by recommendations of Navy and War Departments and also to take care of added expense in developing and pioneering trade routes to new and undeveloped sections of the world. However, we feel that these can all be taken care of in the form of mail contracts if all vessels are required to carry all the mail offered by the Government without further cost, and the Congress specifically makes it clear that the mail pay is for the purpose indicated and is not merely for carrying the mail.

MALCOM M. Stewart, Chairman Middle West Foreign Trade Committee.

135956-35--73

Hon. PAUL H. MALONEY,

NEW ORLEANS, February 28, 1935.

Congressional Office Building, Washington, D. C.

DEAR PAUL: I note with keen interest that the President has determined to present to Congress a bill which will subsidize American ships in foreign trades. In this connection, I am of the opinion that no nation has paid more and received less than our country has under the various forms of contracts entered into between the operators and the Government since the very beginning of the Government building and owning ships.

The first contract entered into was during President Wilson's administration, at which time the United States Shipping Board was created. The title of this contract was the "M. O.-4 contract. As I recall this contract, without having one before me now, it specifically stated that the operators were to receive a fixed commission for handling the ships, based on the revenue obtained; and further, that all special contracts, refunds, etc., that they were able to make should be turned over to the Government as credits. This form of contract, I might say, had teeth in it, and had it not been changed and new contracts entered into with the senatorial investigation and lastly the Post Office investigation, I am quite sure the Government would have been able to obtain considerable refunds, which would have necessarily offset some of their losses.

The next contract entered into was known as the "lump-sum contract." Very naturally, every possible cost was built yp so that the Government would pay the highest possible amount for the operation of their vessels. In the above investigations referred to, I feel quite sure that the records will sustain this assertion.

Under the present set-up of mail subvention, the same conditions exist as under the lump sum, except that there were, I understand, certain provisions providing for the setting aside of funds for replacement of the present ships with new ones as these became old and obsolete, and, according to a great many experts regarding obsoleteness, time for replacement is pretty near at hand. In fact, in the Far East trades our ships today can just about make half the speed of the ships they are competing with.

I am 100 percent for an American merchant marine. First of all, in my opinion, it is absolutely necessary that every officer and most of the men employed on the vessels should be members of the Naval Reserve. I think recent accidents at sea on American-flag ships justifies strict Government supervision of the personnel aboard its ships. The next thing that would encourage the citizens of this country to endorse and make provisions for an adequate merchant marine would be that, as long as the Government provides the money for same and pays a subsidy which enables these vessels to operate, every safeguard regarding costs should be strictly supervised by the Government, and that all purchases or services required should be submitted by bids to competent American firms, copies of same presented to the Government before final action by the operators for a decision, and that in no case, excepting emergencies, should the operators be permitted to expend for the purchase of anything needed, repairs or services, for amount exceeding $200 without receiving bids for same. In this way the Government would know just as much as amy operator about the cost of operating the American merchant marine.

I am sure that if this system is put into effect that those of our Government who are in charge of our American merchant marine will be surprised at the difference between the present cost of operation and that which would result under the system as suggested above.

I note in some of our papers where it is the purpose of the President to make comparisons of costs of operation of foreign ships with our present set-up on our ships, and to make that difference available for the American shipowners, due to a different standard of living, etc., in this country as compared with the standard of living of other countries. This should be. I feel certain that after a policy of building ships with some degree of standardizing same the President will be surprised at the little difference in cost of building same as against the cost of building ships in foreign shipyards.

There is no doubt but that repairs in this country, as compared with costs of repairs in other countries, are and should be somewhat higher.

When I say standardization of ships, I mean for instance, in the Far East trade, and I am particularly thinking of our Gulf trade, we should have ships of say

10,000 tons deadweight, either Diesel or steam using fuel oil instead of coal on these long voyages, which very necessarily is essential as most of the freight is measurement both ways, and by using oil as fuel considerable space for cargo is available as against that of the use of coal. These ships should have a speed of not less than 18 or 20 knots, and by building five or six of these ships of the same type in our shipyards in this country, I am quite certain the spread in costs between this and that of foreign countries would not be nearly as great as some of our friends seem to think it is.

In summing up, if we give American steamship operators carte blanche in arriving at their costs, the conditions as reported in both the senatorial investigation and the Post Office investigation cannot help but continue as in the past. Trusting that you will appreciate the motives of this letter are simply to keep our American merchant marine at the very highest possible degree of efficiency and economy, and with kindest personal regards, I am,

Very truly yours,

W. S. SMITH.

NAVY DEPARTMENT'S VIEWS

NAVY DEPARTMENT, Washington, May 10, 1935.

The CHAIRMAN, COMMITTEE ON MERCHANT MARINE AND FISHERIES,
House of Representatives, Washington, D. C.

MY DEAR MR. CHAIRMAN: The Navy Department has noted the introduction of the bill R. H. 7521 "To develop a strong American merchant marine, to promote the commerce of the United States, to aid national defense, and for other purposes", and its reference to your committee.

The Navy Department recommends certain amendments to the sections of the bill listed below.

Section 1: The wording of policy by inference ignores the coastwise merchant marine. Ships and their personnel engaged in coastwise trade are just as important to the national defense as those engaged in foreign trade. It is recom

mended that lines 4 to 7 of section 1, page 1, be amended to read as follows: "SECTION 1. It is necessary for the national defense and development of its foreign and domestic commerce that the United States shall have a merchant marine (1) sufficient to carry its domestic water-borne commerce and at least one-half of the foreign commerce, etc."

Section 201: In order that the two departments of the Government most interested in the development of the merchant marine shall be represented on the Authority with the power to vote equally with the other members, and in order to increase the stability of the Authority without corresponding increase of expense, the Navy Department recommends that the Secretary of the Navy and the Secretary of Commerce also be members of the Authority, in addition to the five persons authorized in section 201. They would serve without any additional pay, and would not be subject to the restrictions as to political party, State of origin, or length of term. It is recommended, therefore, that section 201 be amended by adding thereto a new subparagraph (b) as follows:

"(b) The Secretary of the Navy and the Secretary of Commerce shall be members ex-officio of the Authority.'

""

Section 510 (b) (2) makes no provision for determining what vessels would be otherwise useful to the United States in time of national emergency. This determination should be made by the Authority and the Secretary of the Navy. It is recommended that section 510 (b) (2) be amended to read as follows:

"(2) a vessel which has been determined by the Authority and the Secretary of the Navy to be otherwise useful to the United States in time of national

emergency.

Section 802: In the interest of national defense it is highly desirable that the personnel under instruction at the Merchant Marine Academy and the training schools be enrolled in the Merchant Marine Naval Reserve in appropriate grades and ratings, and that graduates of the Merchant Marine Academy be commissioned as officers in the Merchant Marine Naval Reserve. It is also desirable that the regulations issued by the Navy Department govern the training of the personnel insofar as it relates to their duties as members of the Merchant Marine Naval Reserve, since in time of war the ships would be under the jurisdiction of

the Navy Department. Provision should be made authorizing the loan or transfer of water-front property under the control of other departments of the Government to the Department of Commerce to provide space for the Merchant Marine Academy and training schools. It is recommended, therefore, that section 802 be amended to read as follows:

"802. (a) The Secretary of Commerce, with the approval of the President, is hereby authorized and directed to establish a Merchant Marine Academy for the training of citizens of the United States as officers for service on vessels documented under the laws of the United States, and to qualify them for commissions as officers of the Merchant Marine Naval Reserve. The Secretary of Commerce, with the approval of the President, is hereby authorized and directed to establish, in such principal ports of the United States as he deems advisable, schools for the training of citizens of the United States as seamen for service on vessels documented under the laws of the United States. Citizens enrolled as students at the Merchant Marine Academy and under instruction at the training schools for seamen shall be enrolled in the Merchant Marine Naval Reserve in appropriate grades or ratings. The Secretary of Commerce shall make the necessary rules and regulations for the education and training of such citizens and such rules and regulations shall include instructions prepared by the Secretary of the Navy to govern the training of such citizens in their duties as members of the Merchant Marine Naval Reserve. Citizens under instruction at the training schools for seamen shall be trained in seamanship, particularly in the manning, handling, and rowing of lifeboats, and in knowledge of the construction and use of all appliances and equipment used on board modern passenger and cargo ships with which seamen are concerned, with a view to making American seamen the most efficient and skilled and to create an adequate Merchant Marine Naval Reserve.

"(b) Upon successful completion of the prescribed course of instruction at the Merchant Marine Academy students shall receive certificates from the Secretary of Commerce showing that such course has been satisfactorily completed, and such students shall be eligible for commissions as officers in the Merchant Marine Naval Reserve. On the conclusion of training at the training schools for seamen, certificates showing that such training has been had shall be issued by the Secretary of Commerce to each individual who has satisfactorily demonstrated his skill and capacity, and the holding of such certificate shall be a condition to the procurement of a certificate as an able seaman as now provided by law.

"(c) Water-front property under the control of other departments of the Government may be loaned or transferred to the Department of Commerce for use in establishing the Merchant Marine Academy and the schools for the training of citizens as seamen."

Section 804: The exceptions at the end of this section for obvious reasons should include salvage vessels. It is recommended that lines 1 and 2, page 40, of section 804, be changed to read as follows:

"section shall not apply to fishing or whaling vessels, or yachts, or vessels engaged in salvage operations."

Section 1004: The Navy Department has already submitted to Congress a proposed amendment to section 702 (a) of the Merchant Marine Act of 1928 which would authorize the President to take and purchase or use any vessel documented under the laws of the United States for national defense when war is imminent. The importance of such an amendment to the national defense cannot be overemphasized. It has the approval of the War Department and the Department of Commerce and, so far as is known, there has been no opposition from the merchant marine industry.

It is imperative that the President have authority to take and purchase or use for national defense prior to the declaration of war not only those ships which have received financial aid from the United States but also all other vessels enjoying the protection of our flag. No enhancement of the value of such vessels by reason of the causes necessitating the taking should be permitted. It is recommended that the amendment to section 702 (a) of the Merchant Marine Act of 1928 as contained in section 1004 of H. R. 7521 be changed to read as follows:

"SEC. 702. (a) Any vessel registered, enrolled, or licensed under the laws of the United States may be taken and purchased or used by the United States for national defense in time of war or when war is imminent.

The Navy Department recommends the inclusion of the above suggested amendments in the bill H. R. 7521.

Sincerely yours,

W. H. STANDLEY, Acting.