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What I mean to convey is that wages are not the only difference in the costs of construction. That the variety of design that each yard must be prepared to construct to meet the wishes of his customers adds more to the cost of American ships than the difference in wages. I thank you. Very truly yours,

Geo. C. SHEPARD.

FOLLOWING AMENDMENT WAS SUBMITTED BY CONGRESSMAN MONRAD C.

WALLGREN
Add to section 501 (b) the following paragraph:

“(3) If it is found, after consultation with the Navy Department, that the construction of oil tankers of higher speed than is required for ordinary usage, together with other changes, additions, or improvements is necessary and advisable for the national defense as naval auxiliaries, then the Authority shall have authority to grant a construction subsidy hereunder of such amount as will equal, but not exceed, the extra cost of so constructing or equipping such vessels. The specifications for any such vessels shall be approved by the Navy Department and be satisfactory to the Authority. A contract for such construction subsidy shall be made by the Authority with the owner and shipbuilder and shall provide for the payment of said subsidy direct to the shipbuilder. Such vessels shall be built within the continental limits of the United States as a result of competitive bidding, with the right on the part of the owner or the authority or the Navy Department to reject any or all bids. Said subsidy shall be paid by the Authority out of the construction loan fund created by section 11 Merchant Marine Act 1920 as amended, or out of other available funds. The contract shall provide that tankers constructed under this section shall not be required to operate in foreign trade in the manner required of cargo ships assisted under this act. Tankers constructed under the provisions of this paragraph shall not be eligible for construction loans nor operating subsidies."

Mr. Louis R. Ford, Editor, Motorship, New York City, states that his publication has in the past thrown its influence in the scale in favor of ship subsidies and it will continue to do so in the future, and is particularly interested in exteading aid to stimulate construction of cargo ships, this type of ship not having been built for some 12 years and our present cargo fleet being woefully inadequate to compete with the fine, modern motorships possessed by other maritime nations.

SUBSIDIARY COMPANIES

HARBOR CARRIERS OF THE PORT OF NEW YORK,

New York, March 22, 1935. Hon, SCAUYLER OTIS BLAND, Chairman Committee on Merchant Marine, Radio and Fisheries,

House of Representatives, Washington, D. C. DEAR Mr. BLAND: In connection with the hearings which you have been conducting with a view of drafting legislation to give effect to the recommendations of the President for the creation of an adequate American merchant marine, we wish to direct your attention to the statement contained in the general report of the Postmaster General to the President, under date of January 11, 1935 (p. 11, H. Doc. No. 118, 74th Cong., 1st sess.), reading in part:

“In order to pipe these funds away from the mail contracting company, they have organized holding companies, operating companies, terminal companies, agency companies, stevedoring companies, repair companies, towboat companies, and supply companies, thus freezing out independent firms."

We have no quarrel with any steamship owner or operator who acquires Alloating equipment to render adjunct service for his or its own account, exclusively. However, it is the feeling of a number of our members, independent owners and operators of floating equipment, largely non-self-propelled, that if governmental aid, by way of subsidy or otherwise, is extended to a steamship owner or operator for the construction or acquisition and operation of floating equipment, other than steamships, that corresponding governmental aid be extended to all independent owners and operators maintaining and operating like or similar equipment; and further, that if governmental aid is extended for the purpose stated,

that steamship owners and operators, beneficiaries thereof, be restricted and confined in the use of such adjunct floating equipment to their own business, exclusively, and not be permitted to compete with independent owners and operators maintaining such equipment and facilities for hire.

The statement of the Postmaster General suggests our directing your attention to an existing evil in the port of New York, which in the interest of the development of this port and others, where the same or a similar situation prevails, should be eliminated where governmental aid is extended. For a number of years, it has been the practice of certain steamship owners and operators to lease piers, for the berthing of their vessels, in the name of a subsidiary corporation, which corporation exacts the statutory wharfage charge from floating equipment receiving or delivering freight to or from the steamsnip or pier, notwithstanding that such floating equipment is brought alongside the steamsnip or pier at the invitation of the steamship owner or operator for the purpose of transporting cargo therefrom.

In the drafting of the proposed legislation we ask that consideration be given to the foregoing. Yours very truly,

JOSEPH J. GLATZMAYER, Executive Vice President.

Houston TOWING Co.,

Houston, Tex., May 4, 1935. Hon. SCHUYLER OTIS BLAND, Chairman Merchant Marine and Fisheries Committee,

House of Representatives, Washington, D. C. MY DEAR MR. BLAND: My attention has been called to section 511 of the proposed Merchant Marine Act of 1935, and this company wishes to file its protest against the passage of this section in its present form, believing that it would per. mit loopholes for the evasion of the intention of the act.

However, by the elimination of the last portion of this section, that is, "except with the written consent of the Authority", this section would be much more effective in eliminating conditions that prevailed under the old method of operation of these vessels and also correct the present tendency to create divisions or departments to perform work heretofore done by subsidiary companies.

It is not advisable, to our way of thinking, to leave such important decisions to be made by the newly created Authority. We believe the records of the old Shipping Board will reveal many questionable decisions in the past by that body, and this would indicate the advisability and necessity for the act itself prohibiting the operation of subsidiary companies, departments, or divisions.

We respectfully request that due protection be given private firms and individ: uals that will permit them to furnish such service that these subsidized vessels may require, which they are not permitted to do today.

After all, some of the people who pay the tax to the Federal Government which permits them to subsidize these vessels are entitled to a portion of this work; otherwise they will not be able to pay the tax and in a number of cases be eliminated.

This company felt the force of this unfair competition a few years ago and we protested before Senator Black's committee, and we feel that we were justified in protesting.

We are heartily in favor of a subsidized merchant marine; but we believe that the operators of these vessels should be steamship operators and not be permitted to engage in every phase of the industry to the elimination and detriment of other taxpayers.

We felt the force of this unfair competition by the proposal of the operators of subsidized vessels, who also had subsidiaries, one of which was a towing company, who approached our customers with the proposition that if they would give the subsidized operators towboat work on their vessels, the subsidized operators would purchase fuel oil and other supplies from them.

This was a form of competition that we could not overcome, and therefore made our protest to Senator Black's committee, and we think that we were right in doing so.

We did not want to tear down the American merchant marine but believe that our action was toward the building up of the American merchant marine and placing it on a sound footing. Yours very truly,

W. A. WANSLEY

MARINE WELDING, SCALING & SALES Co.,

New Orleans, La., May 1, 1935. Hon. Congressman S. O. BLAND, Chairman Merchant Marine and Fisheries Committee,

House Office Building, Washington, D. C. DEAR CONGRESSMAN BLAND: Section 511 of the proposed Merchant Marine Act of 1935, now before Congress, prohibits any subsidized steamship companies to operate subsidiary companies serving the subsidized vessels except with the written consent of the Authority.

The present system of operation, under the mail contracts, has proven most unsatisfactory. Under this system the steamship companies who are permitted to operate subsidiary companies performing repairs, Stevedoring, towboat, supply business, etc., thereby creating a monopoly on the entire shipping industry and at the same time freezing out all private and disassociated firms.

Protests against this un-American method of doing business was filed both with the Black committee and the Post Office Department during the recent hearings by firms which heretofore had been able to make a legitimate living in their line of business. Prior to award of the present mail contracts and while the vessels were operated by the Government, all services were performed on a competitive contract basis and all qualified firms whose equipment was satisfactory to the Government were invited to submit bids. In other words, everybody who was paying taxes and thereby contributed their share of the mail pay was given an opportunity to bid.

The Government at that time was nat engaged in stevedoring, towboat, repairs, and any other similar lines of business competing with private interest. It appears that the Government, at that time, did not approve of such unfair competition, but at the same time the Government is now permitting the steamship companies to use Federal aid in squeezing out all business firms who, in paying taxes, had made the Federal aid available.

After award of the present contracts, the steamship companies organized ship-repair companies, towboat companies, stevedoring companies, terminal companies, etc. The records of the investigation committee conclusively proved that the operation of these companies was detrimental to private interest and were making fantastic profits at the expense of the Government. Some of the mail contractors have recently commenced to liquidate some of their subsidiary companies and in lieu thereof have formed divisions or departments, performing the same services which heretofore were performed by their subsidiary companies.

This apparently was done so that section 511 of the proposed act may not apply as only the written consent of the Authority under the terms of the act would be necessary if the various services were performed by a subsidiary company, but not required if performed by a division or department of the steamship company.

It can readily be understood that insofar as the individual, private, or disassociated firms are concerned, it makes no difference whether the services are performed by a subsidiary company or by the steamship company itself through one of its newly created divisions or departments. In either case the steamship company will retain its present monopoly, whereas all private firms will remain paralyzed and not be given an opportunity to bid or work or render services which they are qualified to perform and which in reality is paid for by them through taxation.

The recent investigation conclusively proves that the elimination of competitive bidding for all services required for the operation of the vessels invited and actually did result in fraud, by padding of pay rolls, improper allocation of operating expenditures, excessive costs for services rendered, etc. Strictly competitive bidding under Government supervision would appear to be the only solution to eliminate the evils of the past and at the same time giving the taxpayers the protection to which they are entitled. It may be contended, and justly so, that the profit made by the private firms would be eliminated if all services were performed by a division or department of the steamship company. However, these profits will only be small due to keen competitive competition and it appears certain that these profits would be far less than the amount the vessels would be and in the past have been overcharged by elimination of such competitive bidding.

We respectfully request that due protection be given private firms in the award and performance of all work which indirectly is paid for by the Government and that the act be so worded that all services necessary for the operation of the subsidized vessels be performed under competitive-contract basis by firms approved by the Government.

In our opinion, it is not advisable to leave such important decisions to be made by the new created Authority. The record and many questionable decisions rendered in the past by the Shipping Board would indicate the advisability and necessity to have the act itself prohibit the operation of subsidiary companies, departments, or divisions.

It is also felt that the steamship company itself or any of its officials should not be permitted to be financially interested in any firm with whom the steamship company may do business, nor should any firm be permitted to be financially interested in any steamship company with whom they may do business. This condition exists today and has resulted in favoritism and consequent excessive operating costs of the subsidized mail vessels.

Anything you may be able to do to give to the private and disassociated firms the protection to which they consider themselves entitled, and to which to date they have looked to in vain, will be greatly appreciated. Yours very truly,

JAMES VIAVANT.

Bay TOWING Co.,

Galveston, Tex., May 1, 1935. Hon. SCHOYLER Otis BLAND, Chairman Merchant Marine and Fisheries Committee,

House of Representatives, Washington, D. C. MY DEAR MR. BLAND: I take this occasion to write you in connection with & matter that is of much concern to various interests that furnish supplies, service, and repairs to vessels owned by the Federal Government and operated through agencies, such vessels being subsidized by the Federal Government.

Section 511 of the proposed Merchant Marine Act now before Congress prohibits subsidized steamship companies to operate subsidiary companies serving the subsidized subsidiary "except with the written consent of the Authority." This section is all right, but permit us to suggest that the last portion of this section reading “except with the written consent of the Authority" be eliminated.

This company made protest before the Black committee against the method of doing business by companies operating ships owned and subsidized by the Federal Government and who had subsidiaries in the form of tugboat companies, machine shops, stevedoring companies, and so forth, and who not only did all the work on the subsidized vessels requiring any services named above but went so far as to approach customers of ours with the proposition that if they would favor the towing company owned by the subsidized operators of Government vessels with their towboat work, that they would purchase fuel oil and other supplies for their vessels from them.

Their large purchases along these lines had great weight with the oil companies and naturally they were trying to get all of the business they could and took away from this company business which we had been favored with for 15 years and gave to the towboat company of the subsidized operators in consideration of the operators' purchasing fuel oil and other similar products from them. This was a class of competition that we could not overcome. Therefore, our protest before the Black committee.

And we think the Government would make a serious mistake unless this last portion of section 511 is eliminated and make it positive that contractors cannot have subsidiary companies, or create divisions or departments and thereby accomplish the same results.

The final analysis of the whole situation is this: The independent towing companies, machine shops, ship chandlers, stevedoring companies, and so forth, are part of the people that pay the tax that enables the Government to subsidize these vessels and to permit the creation of these subsidiary companies, divisions, or departments would not afford the relief prayed for by the independent companies, and we respectfully request that due protection be given to private firms in the performance of work in connection with these vessels, the subsidizing of which is paid for by the Government and indirectly by the individual taxpayers, and we request that the act be so worded that private firms or individuals may perform such work or furnish such service as may be required.

We do not believe it advisable that such important decisions be made by the Authority to be created. The past record of the Shipping Board shows many questionable decisions rendered, and a review of some of these decisions would indicate the advisability and necessity to have the act prohibit the operation of subsidiary companies, departments, or divisions.

We are in favor of a subsidized merchant marine, but believe the operators of these vessels should be steamship operators and not be permitted to engage in every phase of the industry to the elimination and detriment of taxpayers.

We respectfully submit the above for your consideration and ask that due protection be given to private firms and individuals. Yours very truly,

Bay TOWING Co.
J. R. GUYTON.

ELECTRIC SUPPLY Co., Inc.,

Galveston, Tex., May 7, 1935. Hon. SCHUYLER OTIB BLAND, Chairman, and Members of House of Representatives,

Merchant Marine and Fisheries Committee. DEAR CONGRESSMAN: Regarding the new Merchant Marine Act, which is before Congress at this time, we wish to call your attention to the wording of section 511. It is our belief that when the authors of this act inserted section 511, their intention was to stop the subsidized operators from their present practice of monopolizing all of the business connected with the furnishing of services, such as terminal ship repairing, stevedoring, towing, etc., to the subsidized vessels.

Some of the subsidized operators are already taking advantage of the wording of section 511 of the proposed act. They have taken their subsidiaries into their own companies in the form of “departments." We believe that this was done to evade the intent of the act. If the wording of section 511 remains as it now is, the present evils of monopoly and discrimination against private industry wilí continue.

We believe that the subsidized operators should be operators only, and that the services mentioned above should be furnished, on a competitive basis, by the private firms who are equipped for these services. This can be accomplished by wording section 511 so as to prohibit the ship operators from operating subsidiary companies, departments, or divisions for the purpose of furnishing these services. Also, we believe that there should be no exceptions allowed by the Authority. We will appreciate you kind consideration of our requests. Yours very truly,

ELECTRIC SUPPLY Co., By R. K. LLOYD, President.

KANE BOILER WORKS, INC.,

Galveston, Tex., May 7, 1935. Hon. SCHUYLER Otis BLAND, Chairman, and Members of House of Representatives,

Merchant Marine and Fisheries Committee. DEAR CONGRESSMAN: Relative to the proposed Merchant Marine Act of 1935, which is now before Congress, we wish to register our objection to the wording of section 511, which states that no subsidized steamship company may operate subsidiary companies serving the ships without written consent of the Authority.

Present ship operators holding mail contracts are now operating their own repair departments instead of their former subsidiary companies. These changes have recently been made in view of the anticipated wording of the new act, and of course they have not relieved the evil practices of monopoly against private business firms.

We recommend that the new act be worded so that no subsidized ship operator will be permitted to own or operate subsidiary companies, departments, or divisions for the purpose of furnishing services to subsidized ships in competition with private industry. We believe that all services should be furnished by private companies on a strict competitive basis. Also, it is our opinion that the portion of section 511 which reads, "except with the written consent of the Authority”, should be eliminated. We will appreciate your consideration of the above points. Yours very truly,

J. J. KANE, President. 13595635- -76

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