the mails. The other rates are .087 cents a pound, or 10 centimes a kilogram, for mails consisting of other articles including parcei post. That is for 300 miles.

For distances between 300 and 1,500 nautical miles: 17.5 cents a pound, or 2 francs a kilogram for letters and post cards, and 2.2 cents a pound or 25 centimes a kilogram for mails consisting of other articles including parcel post.

Mr. SIROVICH. How does that compare per pound with cargo? Mr. SAUGSTAD. Oh, it is the best business any ship could do.

Mr. SIROVICH. You mean letter carrying is the best business any ship could do?

Mr. SAUGSTAD. Yes, certainly. The third classification is: For ali distances exceeding 1,500 nautical miles, 26.3 a pound or 3 francs a kilogram for letters and post cards, and 3.5 cents a pound or 40 centimes a kilogram for mails consisting of other articles including parcel post.

Mr. SIROVICH. So in answer to our colleague, Mr. Hamlin from Maine, no government can really make any money from the standpoint of the universal postal rate, because it applies equally to all? Mr. SAUGSTAD. They might, under certain postal traffic conditions. The CHAIRMAN. In the Report of the Post Office Department, they refer to the foreign poundage basis. Is that the universal rate? Mr. SAUGSTAD. I presume that is what they refer to.

The CHAIRMAN. And then they refer to the American poundage rate. What is the distinction there? The American poundage rate seems to be very much higher.

Mr. SAUGSTAD. The United States Post Office is authorized to pay 80 cents a pound for first-class mail and 26 cents a pound for second-class or other articles.

The CHAIRMAN. And that is on their own ships, on American ships?

Mr. SAUGSTAD. On American vessels.

The CHAIRMAN. That is higher than the universal rate?
Mr. SAUGSTAD. Yes, sir.

The CHAIRMAN. Does that apply on anything else but ocean-going ships? I presume it applies to all American ships, does it not? Mr. SAUGSTAD. American ships.

The CHAIRMAN. That was before the passage of the Ocean Mail Contract Act?

Mr. SAUGSTAD. Yes, sir.

The CHAIRMAN. And the American poundage rates applied to all ships, whether under ocean-mail contracts or not?

Mr. SAUGSTAD. Yes, sir.

Mr. WALLGREN. I merely want to ask, Mr. Saugstad, do you have any knowledge as to the interest rates on construction loans by the French Government?

Mr. SAUGSTAD. Yes, sir; we are coming to that. Do you want to get to that now, or do you want to wait until we treat that subject? We have not gotten to that subject yet.

Mr. WALLGREN. I see.

Mr. MANSFIELD. Now, the President in his message refers to the amounts paid for carrying the ocean mails as being approximately $30.000.000, $27,000,000 of which he classes as subsidy. I presume

the $3,000,000 would be what it would have amounted to under the Universal Postal Union rates that you speak of?

Mr. SAUGSTAD. I am not familiar with whether that figure is derived from the Universal Postal Union rates, or from the American preferential rates; I do not know. That is the American poundage rates, I am told.

The CHAIRMAN. In a statement by Mr. Farley, he said that if the mail had been carried on the foreign poundage basis, which I assume was the Universal Union basis

Mr. SAUGSTAD. Yes, sir.

The CHAIRMAN. Up to June 30, 1934, the cost would have been $6,802,434.90, and on the American poundage rate, which is 80 cents, to which you refer

Mr. SAUGSTAD. Yes, sir.

The CHAIRMAN. The poundage rate would have amounted to $15,534,509.10, and the excess over those American poundage rates would be what the President evidently terms as "subsidy."

Mr. SIROVICH. To correlate the statement made by our chairman, the fact the French Government gave 410,000,000 francs as loans and other investments in their merchant marine at the prevailing standard of exchange, international exchange of 16 francs to the dollar, means that the French Government has practically given almost 25 to 26 million dollars of subsidies, which is almost the same as the amount the President's message states we gave-$27,000,000as indirect mail subsidies to the American merchant marine. Is that right? In other words, 410,000,000 francs is the amount of money that the French Government invested in their merchant marine; is that right—either as a direct partner or as money to be paid back later?

Mr. SAUGSTAD. Now you are discussing the loans, are you not? Mr. SIROVICH. I am discussing the fact you stated this year the French Government appropriated 410,000,000 francs.

Mr. SAUGSTAD. 405,650,000 francs.

Mr. WALLGREN. Is part of that loan in the form of a direct subsidy!

Mr. SAUGSTAD. That is called a "direct annual payment by appropriation, for contract services."

Mr. SIROVICH. Which, taken at the international exchange at the present rate, amounts to almost $26,000,000?

Mr. SAUGSTAD. Twenty-six million, about eight hundred thousand dollars.

Mr. SIROVICH. And the President's message states we contribute through appropriations the sum of 30 million, 3 million of which is the exact amount of money which would have gone for postage, based upon the American standard, and the other $27,000,000 is a direct subsidy?

Mr. SAUGSTAD. Yes, sir.

Mr. MANSFIELD. I understand the merchant marine in France has a Minister at the head of it.

Mr. SAUGSTAD. Yes, sir.

Mr. MANSFIELD. Is he a regular cabinet officer?

Mr. SAUGSTAD. He is.

Mr. MANSFIELD. Of the same standing as other cabinet officers?

Mr. SAUGSTAD. Yes, sir.

Mr. MANSFIELD. Can you tell us how it is in England, Italy, and Germany?

The CHAIRMAN. I think he is going to take up, Mr. Mansfield, each one of those countries separately. I have no objection to his answering that question right now, however.

Mr. SAUGSTAD. I expect to deal with it as we go along, Mr. Chair'man, if it is convenient to the committee.

Mr. WALLGREN. According to those figures, then, we have spent about the same amount of money as France and we have not as good a merchant marine as they have?

Mr. SAUGSTAD. I do not know.

The CHAIRMAN. This witness undertakes to speak only as to facts and not to give opinions.

Mr. SIROVICH. He has qualified his statement by saying he is only reporting things and not commenting.

The CHAIRMAN. And is not giving opinions. Proceed, Mr. Saugstad.

Mr. SAUGSTAD. The next subject is subsidies to tramp shipping in France. By a law enacted last July, on the 12th day thereof, which became effective a month later, the French Government undertakes to subsidize noncontract ships for operating on the seas and in the long coastal trades of France, under certain restrictions. The interesting part of that program is not the navigation-bounty principle which is applied, but the way the funds are raised. The means of obtaining funds for the management of this policy is to increase the import duties by a maximum amount not to exceed 4 percent, and thereby raise funds which are to be redistributed to the French cargo ships.

The original appropriation for the first year's operation is 90,000,000 francs. That is for the year 1935.

Mr. SIROVICH. Is this 4 percent an import duty on everything? Mr. SAUGSTAD. The categories are not mentioned in the law, but are to be determined by a decree to follow. It was estimated before the House of Deputies at the time the bill was under consideration that this would produce a revenue of 140,000,000 francs a year. The effective period

The CHAIRMAN. How much would that be?

Mr. Saugstad. About $9,000,000. The first year's operation of 90,000,000 francs at gold par is about $3,500,000, and at current rates of exchange about $6,000,000.

The effective period for this policy is 2 years. There are certain nationalistic restrictions. The vessel must be manned by French citizens, the majority ownership must be French citizens, any French company chartering or having an interest in foreign ships is not eligible under the law, and no ships built or purchased abroad after May 1, 1934, are eligible.

The principle of payment is known as a "ton-day basis "; that is, the number of days that a ship is on a voyage is multiplied by the number of gross tons of the vessel and to the result are applied certain basic rates, which are qualified through a system of coefficients determined by speed and by other considerations.

Mr. Chairman, do you want me to state for the record all of the details of that system?

The CHAIRMAN. I think it would be very interesting.
Mr. SAUGSTAD. All right.

Mr. SIROVICH. You say they utilized the gross tonnage or the net tonnage?

Mr. SAUGSTAD. The gross tonnage. On power-driven vessels up to 500 tons gross there is paid 30 centimes per ton per day; from 500 to 1,000 tons gross an amount of 25 centimes per day; from 1,000 to 3,000 tons gross, 20 centimes per ton per day; from 3,000 to 5,000 tons gross, 17 centimes per ton per day; and from 5,000 to 10,000 tons gross, 14 centimes per day. For ships over 10,000 tons, 10 centimes per day.

Mr. SIROVICH. For tramp steamers?

Mr. SAUGSTAD. Yes, sir; general-cargo vessels, which are not confined necessarily to any contract route.

There is an increased allowance for speed. For vessels making from 10 to 14 knots a 10-percent allowance is added and a 30-percent allowance is made if they are passenger ships. I said cargo and charter vessels. Passenger vessels may come under the charter classification. From 14 to 16 knots

Mr. SIROVICH. You would not consider a passenger vessel a tramp steamer, would you?

Mr. SAUGSTAD. She may be on a cruise.

Mr. SIROVICH. I see.

The CHAIRMAN. You draw the distinction of not running on a regular line?

Mr. SAUGSTAD. Yes, sir; or I would rather make the distinction of not operating under a contract line.

For 14 to 16 knots, 30 percent additional is granted on cargo vessels and 50 percent on passenger vessels; from 16 to 19 knots, 60 percent additional; from 19 to 23 knots, 90 percent additional; and over 23 knots, 120 percent additional.

Mr. SIROVICH. And have they such tramp steamers?

Mr. SAUGSTAD. Not unless they would take the Normandie and put her in a cruise sometime, and that would not mean anything. Mr. SIROVICH. Then this is only for window dressing? Mr. SAUGSTAD. It is the law.

Mr. SIROVICH. Anticipating the future.

Mr. SAUGSTAD. To qualify for these subsidies, these vessels must produce a certain number of miles per day on an average per voyage. Thus the 14-knot vessels or more must make good 90 miles per day on the average; those that make 12 to 14 knots, 85 miles per day average; 11 to 12 knots, 65 miles per day average; 9 to 11 knots, 55 miles per day; and less than 9 knots, 35 miles per day.

There are certain variables within certain trades and these variables are managed through a mathematical coefficient system which is applied to each trade and ranges from zero to two. In other words in certain trades, the coefficient means that certain ships get nothing and in other trades, they may get twice the allowance if the two coefficient is applied to them. These vessels may receive postal pay under exactly the same conditions as contract ships.

The first results of this law, which went into effect in August, were published at the end of September 1934, and indicated that as a result of the law 147,000 gross tons of vessels had come out

of lay-up and been recommissioned; 40,900 gross tons had been laid up, resulting in a net gain of about 106,000 gross tons in employment of French ships at sea.

That, Mr. Chairman, is all I have to say on the subject of subsidies to tramp shipping in France.

Mr. WELCH. Mr. Chairman, by way of comparison, according to the statement of the witness, it should be noted that the French Government pays $27,000,000 for subsidies to only 4 lines, whereas the United States Government pays approximately the same amount in subsidies to 44 lines.

Mr. SIROVICH. How about the tonnage of the 44 lines as compared to the tonnage of the 4 French lines?

Mr. SAUGSTAD. I cannot answer that question. I can only suggest that the lines you refer to are systems; that they include more than one trade route; that the C. G. T. Line, for instance, includes four different operations. So that it is not strictly comparable to say that these are four lines. At the outside, I presume the French system will not have more than 10 routes, as compared with the number you mention.

Mr. SIROVICH. How about the tonnage of the vessels on those 10 routes?

Mr. SAUGSTAD. I cannot answer that question without a comparison of the record.

Mr. WALLGREN. Have you any knowledge as to private lines that are operating without subsidies?

Mr. SAUGSTAD. No, sir; I have not. We have some estimates, but I do not now have before me what percentage of the total French fleet is included in subsidized lines. I do not recall the figures and would not want to guess at them.

Mr. SIROVICH. Is there any registration of French ships under any foreign flags? I mean is there any French company that operates under different nationalities than their own?

Mr. SAUGSTAD. I have no knowledge of that.

Mr. SIROVICH. Because I understand in reading over the reports that we have certain American ships that have been built here that are operating under foreign government registries.

Mr. SAUGSTAD. I am not familiar with that.

Mr. WALLGREN. There are, however, private lines operating and that have been operating for many years; is that not so? Mr. SAUGSTAD. Oh, certainly.

Mr. WALLGREN. Is there any preference given in the matter of carrying mail?

Mr. SAUGSTAD. No. Any French ship is entitled to carry mails tendered it by the French Postal Administration and to receive therefor the Universal Postal Union rates, or perhaps other rates fixed by the French Government.

Mr. MANSFIELD. Do tramp ships engage in it?

Mr. SAUGSTAD. Yes, sir.

Mr. SIROVICH. Does the French Government avail itself of the option of taking 25 percent of the cargo space and passenger space on most of the ships on the different routes?

Mr. SAUGSTAD. I do not know.

The CHAIRMAN. Presumably that is with its colonial possessions.