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McDONOUGH IRON 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: The proposed Merchant Marine Act of 1935 contains under Section 511 a provision designed to relieve the unjust and un-American discrimination that we as taxpayers and ship repairers are laboring under at the present time.
We heartily endorse the spirit of fairness that prompted the author to insert this section in the act. We believe, however, that the present wording of the section is not adequate to produce the results desired or the intent of the author.
The section would prohibit steamship companies, operating under Government contract, from performing stevedoring, ship repairing, etc., under subsidiary companies but does not prohibit the same companies from performing the same services under a separate division of their own company. The steamship companies interpreting the section in the same manner, have already begun to disdolve their subsidiary companies and establish in lieu thereof a separate depart ment, within their own company, for this performance. This, of course, defeats the intent of the proposed section and offers no relief whatever to those now suffering from this monopoly.
We believe also that the authority to administer this act should remain vested in some Government department and not vested in a group of private individuals, so that impartial decisions may be rendered at all times.
We have been in business as ship repairers for over 30 years and during this period we have built up a modern, well-equipped repair plant. During the days of the Shipping Board we rendered the Government speedy and efficient service at a minimum cost based on keen competitive prices. Since the award of mail contracts, however, we have not been allowed to even bid on the repairs.
There is no need to go into the evils of the present system of operation, as this was brought out fully in the Black and post-office investigation and hearing. As taxpayers we are contributing to the steamship companies through the mail contracts, but as ship repairers we are not allowed to bid on the repairs of ships that we are financially helping to maintain.
May we suggest that section 511 be reworded so that the relief, so urgently needed, may be realized. Respectfully,
McDonougH IRON WORKS, INC., By R. C. JOHNSON, Secretary.
KNOWLES IRON WORKS, INC.,
Galveston, Tex., May 7, 1935. Hon. SCHUYLER OTIS BLAND, Chairman Merchant Marine and Fisheries Committee,
House of Representatives. DEAR CONGRESSMAN: We understand that there is now before Congress the Merchant Marine Act of 1935. We are particularly interested in section 511, which states that no subsidized steamship company may operate subsidiary companies to serve the subsidized ships except with the written consent of the Authority.
Under the conditions permitted by the mail contracts, the steamship companies are allowed to place all of their ship repairing, towing, stevedoring, etc., with their own subsidiary companies. This practice causes a Government-sponsored monopoly against all private firms who have invested large sums of money in various lines of business almost entirely for the purpose of serving these subsidized ships. We have already filed protests against these business-strangling methods with the Post Office Deparment and the committee headed by Senator Black.
During the time when these ships were operated by the Government, the private business firms each had a part in serving the vessels. This was because of the fact that all services to these ships were performed strictly on a competitive contract basis. All private firms who were approved by the Government were allowed to. bid on the services that each of them was equipped to furnish. In that way the Government received the benefit of the lowest competitive prices, and each private business had a part in the service and also was able to make a decent living. This
method of distributing the subsidy money, in the form of business, among several legitimate firms is certainly a much fairer arrangement than the present one, whereby all of the subsidy goes as dishonest profit into the pockets of a few wealthy men.
It appears that some of the present holders of mail contracts are arranging their affairs so that they will be in a position to easily evade section 511 of the proposed Merchant Marine Act. These operators have begun to “abolish” most of their subsidiaries. In reality, they still own and operate these same subsidiary services, but the name "subsidiary” has been changed to "department” of the parent company. There is no doubt that this move is simply to evade section 511 of the act.
To the private business man who is equipped to serve these ships, these services may as well be performed by a subsidiary of the operator as to be performed by
“department” of the operator's shipping company. In either way, the monopoly is still there and the private business is left out in the cold. We do not know how well acquainted you are with the conditions which now exist in Texas ports as a direct result of this monopoly, but we wish to remind you that they are really serious. The private firms who have equipped themselves for serving these subsidized ships are almost ready to close their doors because of the monopoly held by the subsidized operators. Of course, this is made possible by taxpayers' money, to which we are all forced to contribute.
It has been proven recently that the present methods have resulted in fraud, improper accounting of expenditures, and ridiculously high operating costs, These evils can easily be eliminated by strictly competitive bidding under close Government supervision. This would also give the private industries and taxpayers a chance to receive some of the business to which they are justly entitled. We respectfully request that private firms be protected in the award and performance of all work which indirectly is paid for by the Government and that the Merchant Marine Act of 1935 be so worded that all services necessary for the operation of the subsidized ships be performed on a strictly competitive contract basis by private firms approved by the Government.
We fail to understand why the authority should be allowed to make exceptions to the new law. This would merely be the loophole for which the subsidized operators are looking. The record and the many questionable decisions rendered in the past by the Shipping Board plainly show the necessity to have the act itself prohibit the operation of subsidiary companies, departments”, or "divisions."
Also, we feel that no subsidized company nor any of its officials should be permitted to be financially interested in any firm with whom the steamship company may do business. This will eliminate favoritism and reduce the consequent excessive operating costs.
We will appreciate your kind consideration of our request, as we feel that the time has now come for us to be released from the oppression to which we have been subjected. Yours very truly,
S. H. KEMP, Secretary-Treasurer.
GRAY'S IRON WORKS, INC.,
Galveston, Tex., May 7, 1935. Hon. SCHUYLER OTIS BLAND, Chairman Merchant Marine and Fisheries Committee,
House of Representatives. DEAR CONGRESSMAN: In the proposed Merchant Marine Act of 1935, which is now before Congress, we are very much interested in section 511, which deals with the operation of subsidiary companies by the subsidized operating companies.
Under the conditions of the mail-contract system, the subsidized steamship companies are allowed to place all their ship repairing, etc., with their own subsidiary companies. This practice causes a Government-sponsored monoply against the numerous private concerns who have invested large sums of money in plants and equipment for the servicing of these subsidized vessels. We believe that the real intent of section 511 of the act is to prohibit such monopolies. However, we do not believe that this purpose will be accomplished unless the wording of the act is changed.
Some of the present mail-contract holders have no doubt been informed as to the probable wording of the proposed act. Therefore, they have abolished their subsidiary companies and have taken these subsidiaries into the parent companies in the form of “departments” and “divisions." This was done to evade section 511 of the act. If the wording of the proposed act remains as it now is, this monopolistic evil will remain as it has been for the past few years.
In the eyes of the private business man who has invested his life and money in order to be able to serve these ships, these services may as well be performed by a subsidiary company as to be performed by a "department” of the parent company. In either case, the evil is still there. The private companies and individuals who contribute to the subsidy, by paying their taxes, are left with their plants going to ruin and their former employees going on Government relief while the treasuries of the subsidized companies are swelled considerably.
It has been recently proven that the present conditions have resulted in fraud, misappropriated expenditures, and exhorbitant operating costs. These erils would be eliminated if the act were so worded that all services to these vessels must be performed by private companies, approved by the Government, through competitive contracts and under strict Government supervision.
We realize that the new act is intended to be fair to all concerned, but we fail to understand why the authority should be allowed to make exceptions to the law. This would merely provide the big loophole for which the subsidized operators are looking The record and the many questionable decisions rendered in the past by the Shipping Board plainly show the necessity for having the act within itself prohibit the operation of subsidiary companies, "departments", or "divisions" for the purpose of ship repairing, towing, stevedoring, or any other servicing.
Also, we feel that no subsidized company nor any of its officials should be permitted to be financially interested in any firm with whom the steamship company may do business. This will eliminate favoritism and collusion and will reduce the consequent exorbitant operating costs. We will greatly appreciate your full consideration of our petition. Respectfully yours,
J. WALMSLEY. President.
FARMER'S MARINE COPPER WORKS,
GALVESTON, TEX., May 7, 1995. Hon. SCHUYLER OTIS BLAND, Chairman Committee on Merchant Marine and Fisheries,
House of Representatives. DEAR CONGRESSMAN: Section 511 of the proposed Merchant Marine Act of 1935 now before Congress prohibits any subsidized steamship company from operating subsidiary companies serving the subsidized vessels, except with the written consent of the authority.
The present system under the mail contracts has proven most unsatisfactory, as a distinct monopoly is created. The steamship companies are operating their own subsidiary companies, doing their own repairs, towing, stevedoring, etc., thereby freezing out all private firms that heretofore had been able to make s legitimate living in their lines of businss.
Under the old system of operation, while the Government was operating the ships, everybody who was a taxpayer had an equal opportunity to bid on the work that their respective plants were equipped to do. The Government at that time was only interested in keeping the ships on the seas and did not allow shipping companies using Government aid to freeze out small businesses, who, in paying taxes, contributed their share of the subsidy.
In spite of the disclosures brought out by the Black committee and Post Office Department in the recent hearings, it seems that the steamship companies still have their "ace in the hole” in the form of “the written consent of the authority.", as several of the steamship companies have liquidated their subsidiary companies and have formed departments under their own names, which are still performing the same services as were performed by their subsidiary companies, the result being the same as before, that is, the total elimination of all private businesses not interested in the steamship companies.
We respectfully request that the act be so worded that it will protect the private firms and give them an equal opportunity to again work on subsidized vessels, reducing costs and giving the private firms a fair deal, to which they are justly entitled. Yours very truly,
LESLIE G. FARMER, Manager.
THE VOIGT MACHINE SHOP,
Galveston, Tex., May 7, 1935. Hon, SCHUILER OTIS BLAND, Chairman Merchant Marine and Fisheries Committee,
House of Representatives. DEAR CONGRESSMAN: We note that section 511, of the Merchant Marine Act of 1935, now before Congress, states that “no contractor under a contract in force under this part shall suffer or permit any insurance, stevedoring, terminal ship repairing, towboat, or other services of like character to be supplied vessels operated under such contract by any subsidiary or other corporation directly or indirectly controlled by such contractor, except with the written consent of the Authority.”
We have discontinued ship work, in fact we were forced to do so on account of the existing conditions. If this law is passed and the loophole left in it, we will be worse off than before.
When considering this act, we hope that you will note what we have to say in reference to giving the Authority permission to let contractors do their own work in their own shops, plants, departments, divisions, or whatever they may call their subsidiary. Very truly yours,
ALBERT P. J. VOIGT, Owner.
MARINE SPECIALTY & Mill SUPPLY Co., INC.,
New Orleans, La., May 8, 1935. Hon. Congressman S. O. BLAND, Chairman Merchant Marine and Fisheries Committee,
Washington, D. C. DEAR CONGRESSMAN BLAND: I have been reading the proposed Merchant Marine Act of 1935, known as the “Copeland bill”, and am particularly interested in section 511, which states that no subsidized steamship company shall operate any subsidiary companies except with the written consent of the Authority. I do not believe that the purpose of section 511 has been thoroughly covered, inasmuch that it does not prohibit a subsidized company from creating departments' to perform the same work that the subsidiary companies are doing now.
Prior to the awarding of the mail contracts in the Gulf, we were called on by the United States Shipping Board to bid on all classes of supplies furnished the vessels. In order that we be in position to submit bids and properly carry out the contracts, if successful, it was necessary that we carry on hand a large supply of special marine stock. Under the present arrangement, where the subsidized steamship companies buy from their subsidiary supply companies only, we have been left with thousands of dollars of material on hand and have no opportunity at all to sell to companies that are being operated with money that we contribute, through taxation, to support them.
This letter is a request for protection from the evils of the past that we believe, as taxpayers, we are justly entitled to, and respectfully ask that you give some attention to our request and amend section 511 of the Copeland bill to protect us. Thanking you for any consideration, we remain Yours very truly,
FRANK VIOLa, President.
CHAMBER OF COMMERCE OF THE UNITED STATES
(Report of special committee on merchant marine) To the board of directors:
In November 1934 your special committee on merchant marine submitted & preliminary report. The present report supplements the preliminary report and recommends principles for application in revision of the present policy of Government aid to the merchant marine and in dealing with ocean shipping conferences.
IMPORTANCE OF THE MERCHANT MARINE In the preliminary report it was pointed out that an adequate merchant marine is essential in the development of our export and import trade; to secure fair consideration of the interests of American exporters and importers in the making of ocean freight rates and their adjustment on a fair competitive basis as compared with foreign shippers; to gain the trade-building benefits from regular American steamship services and their agencies abroad; and to meet the needs of the national defense.
EFFECT ON SHIPBUILDING INDUSTRY The committee also pointed out that the maintenance of adequate, efficient shipyards and trained personnel is a matter of national importance. This industry has several times, during the past 10 years, been on the verge of virtual disintegration due to lack of work. Any lasting solution of the merchant-marine problem will assist in solving the shipbuilding problem and incidentally provide work for the many durable-goods industries on which it draws for material for shipbuilding.
STATUS OF AMERICAN SHIPPING The report brought out that during the past 10 years our contributions to world tonnage have been relatively small, amounting to only 843,000 tons out of a total of 15,570,000 tons for the world as a whole. It also showed that we have a small number of passenger and combination vessels under 10 years of age, representing largely the new construction under the Merchant Marine Act, 1928, and well suited to trade and defense requirements; but hat we have an almost total lack of fast modern cargo vessels and tankers and are largely dependent for freighters upon the slow and inefficient war-built fleet now nearing the end of its economic life and increasingly expensive to maintain and operate.
ESSENTIALS OF NATIONAL POLICY From its study of the world shipping situation and the relative position of the American merchant fleet in foreign trade, the committee felt that an effective and consistent national shipping policy is clearly essential for the United States at this time; that without a consistent program to provide the necessary degree of permanency, even the merchant marine we have been able to build up since the World War will gradually but surely disappear; that the rehabilitation of our merchant marine is of paramount importance to our commerce and military security; and that our higher shipbuilding and operating costs, resulting from the higher standards of living in this country, make it essential that the Government provide the necessary assistance to offset these handicaps and assure the maintenance of an adequate American merchant marine.
PRESENT MAIL SUBSIDIES
The major principles laid down in the Merchant Marine Acts of 1920 and 1928 are sound. The mail-contract system established under the latter act is largely responsible for such improvements in our ocean shipping services as we have been able to attain and has made it possible for vessels under the American flag to live in foreign trade. While it is recognized that the present system is lacking in important respects and needs readjustment, the public interest in the merchant marine, as well as protection of the legitimate interests of shipping lines under their present contracts, requires that the aid afforded under them should be continued until some other form of assistance to the merchant marine has been adopted and its substitution for the present form has been arranged by agreement with the individual holders of existing contracts.
PROPOSED DIRECT SUBSIDIES
The fact that the present system of Government aid to the merchant marine seems to link such aid to the carriage of the mails has caused a great deal of misunderstanding in the public mind as to the service which the payments cover and this in turn has brought about much uncertainty within the shipping industry, making it difficult to provide adequately for the future. The mail-contract system should therefore be revised to eliminate connection with the carriage of the mails which should in future be paid for on a poundage basis. The subsidy under the new arrangement should be granted to American-built vessels used in establishing and maintaining regular service on essential trade routes between the United States and foreign ports, but preferably not to more than one line in the same trade route.