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Mr. SaugsTAD. I might say, as a general statement, on the whole system that only two lines are considered as mail lines--the line from Yokohama to London, and the line from Yokohama to Melbourne, Australia.

Mr. SIROVICH. What did you mean by that last statement?

Mr. Saugstad. The other day, Mr. Congressman, we referred here to the general principles of mail subsidies; and I, at that time, made the statement that, so far as I know, among the principal maritime nations of the world today there are only six contract services or group lines which were officially called 'mail services, outside of our own system in this country. I referred to 4 British and the 2 Japanese. That is, the British packet service, the Far East, American and others that we cited, plus 2 of the Japanese system, that go to London and to Australia. In other words, the Japanese Government does not consider the rest of its contract services as based on the mail to be transported.

Mr. Sirovich. But on these lines between Yokohama and London and between Melbourne and Yokohama, the Japanese Government considers the subvention that they pay there as a mail subsidy? Is that it?

Mr. SAUGSTAD. That is apparently so, from the latest information that we have on it; and I might say that the information on the Japanese system of services is not altogether very complete. The so-called "mail services” were a post-war development. În 1920 and 1921 the Japanese Diet made a provision for a system of postal payments, to be applied to the European and Australian lines and the line to Seattle, all served by the N. Y. K.

It is stated that the contracts of this company with the Government during the period of the World War prevented the company from taking advantage of the high freight market then prevailing, and, also, that the company proposed to the Government the high mail-pay principle, with reduction of Government supervision over the commercial operations of the company. Accordingly the mail payments were then established on a basis known as “measurementmileage basis"; that is, measurement of space occupied by the mails on board ship, according to the following schedule: 3.3 sen (an equivalent of a little less than % of a cent in United States currency) for 100 cubic feet of space per nautical mile; 4.6 sen for 200 cubic feet; 5.9 sen for 300 cubic feet; 7.5 sen for 400 cubic feet; 9.2 sen for 500 cubic feet; 11.10 sen for 600 cubic feet; 13 sen for 700 cubic feet; 15.10 sen for 800 cubic feet; 17.03 sen for 900 cubic feet; and 19.6 sen for 1,000 cubic feet per nautical mile.

For all space in excess of 1,000 cubic feet the rate was 2 sen per 100 cubic feet.

Upon the expiration of the contracts, due to end in 1929, the mail pay principle was retained on two lines, those to London and to Melbourne.

As of particular interest, perhaps, at this time, we might state that the three subsidized lines, from Japan to Seattle, San Francisco, and the west coast of South America are now operated by the N. Y. K. And I think, Mr. Chairman, that it would probably be just as simple to insert in this record the specifications of those contracts. There is no point in reading all the allowances and all the details in connection with them.

The CHAIRMAN. All right. Without objection, they may be shown. (A summary of the main conditions of the contracts with the Nippon Yusen Kaisha lines follows:)

JAPAN-SEATTLE LINE

Duration of contract.—January to December 1934.
Frequency of service.—Once or more in 3 weeks.

Vessel equipment.--Three under 15 years, 11,000 to 12,000 gross tons each, and of 17 to 19 knots speed.

Subsidies.—For the service between Japan and Seattle, the following amounts were authorized as subsidies for the 5-year period of the contract: 1929–30, 322,269 yen ($160,490); 1930–31, 1,415,908 yen ($705,122); 1931-32, 1,702,580 yen ($848,885); 1933-34, 1,702,580 yen ($848,885); 1934-35, 1,702,580 yen (8848,885).

JAPAN-SAN FRANCISCO LINE

Duration of contract.January 1930 to December 1934. Frequency of sailings.Once or more every 4 weeks. Vessel equipment.— Three under 15 years, 13,000 to 14,000 gross tons each, and of 18 to 20 knots speed.

Subsidies.—The subsidies covering this service have been considerably increased with the new contract, as compared with recent amounts authorized under the contract which expired in 1929: Old contract: 1928–29, 534,427 yen ($266,145); 1929–30, 943,488 yen ($469,857). New contract: 1930–31, 2,341,449 yen ($1,166,042); 1931-32, 2,865,140 yen ($1,426,840); 1932–33, 2,865,140 yen ($1,426,840); 1933–34, 2,856,713 yen ($1,422,643); 1934–35, 2,747,163 yen ($1,368,087).

JAPAN-WEST COAST OF SOUTH AMERICA LINE

Duration of contract.-January 1930 to December 1934. Frequency of sailings.-Once or more in 2 months. Vessel equipment.---Three under 15 years, 7,000 to 9,700 gross tons each, and of 14 to 16 knots speed.

Subsidy.—The authorized subsidy for the new west coast of South America service has been increased somewhat as compared with the amounts under the contract which expired in 1929: Old contract: 1928–29, 1,791,416 yen ($892,125); 1929–30, 1,825,403 yen ($909,050). New contract: 1930–31, 2,227,026 yen $1,109,059); 1931-32, 2,186,932 yen ($1,089,092); 1932–33, 2,218,078 yen $1,104,603); 1933–34, 2,043,672 yen ($1,017,749); 1934–35, 2,058,454 yen ($1,025,110).

Mr. SAUGSTAD. Now, unless there are some further questions on that point, I have no further comment to make on the contract system of Japan; and I may suggest that the next subject is that of the shipbuilding and the scrap-and-build plan, construction subsidy plan, of Japan. We have a close analysis of that, which is going to take a long time, and I do not know whether you want me to proceed on that now or not.

The CHAIRMAN. I think we might just as well take that up in the morning. Mr. Newton, did you prefer to go on this afternoon or in the morning?

Mr. Newton. I prefer to go on in the morning. I need a little more data.

The CHAIRMAN. I do not know just how to arrange that. I promised to hear Mr. Smith in the morning.

Mr. NEWTON. I can wait.
The CHAIRMAN. You can wait?
Mr. NEWTON. Yes; I can wait until Mr. Smith gets through.

The CHAIRMAN. I would much rather go into this particular question which Mr. Saugstad is going to take up now, and which Mr. Smith will probably discuss also tomorrow morning, when there will be a possibility of having a few more men present.

If there is no one else who wants to be heard at this time, we will adjourn until 10 o'clock tomorrow morning.

(Whereupon, at 5:30 p. m., an adjournment was taken until Wednesday, Mar. 27, 1935, at 10 a. m.)

TO DEVELOP AN AMERICAN MERCHANT MARINE

PART I. MERCHANT MARINE POLICY

WEDNESDAY, MARCH 27, 1935

HOUSE OF REPRESENTATIVES,
COMMITTEE ON THE MERCHANT MARINE AND FISHERIES,

Washington, D. C. The committee met at 10 a. m., Hon. Schuyler O. Bland (chairman), presiding.

The CHAIRMAN. You may proceed, Mr. Saugstad.

STATEMENT OF J. E. SAUGSTAD-Resumed

Mr. SAUGSTAD. Mr. Chairman, we will close the consideration of subsidies in Japan by reciting the results of the Japanese ship replacement law of 1932, which is in the nature of a scrap-and-build plan. The plan has been so successful and so popular that the Marine Affairs Commission of the Communications Department recommended the continuation of the plan in principle for another 5 years, beginning April 1, 1935.

The Communications Department's first proposal was to extend the project for 5 years, to build 100,000 gross tons and to scrap 100,000 gross tons each year. The proposed subsidy was 48 yen per gross ton built, a total amount of 24,000,000 yen for 500,000 gross tons. This was the proposal made last year.

The Department of Finance proposed that the subsidy should be at the rate of 20 yen per ton, limited to 50,000 tons, the keels of the new vessels to be laid before April 1, 1936. The Finance Department's proposal led the Communications Department to put forth a revised plan to include building 240,000 gross tons in 3 years on the condition that an equal amount of tonnage was to be scrapped, the subsidy to be at the rate of 42.70 yen per ton. When the proposal reached the Minister of Finance, however, it was disapproved and a counter proposal by the Finance Minister was made as follows: (1) The Government was to grant a subsidy of 30 yen per gross ton up to 50,000 gross tons, provided keels were laid down by April 1, 1936; (2) one-half of the subsidy was to be granted immediately after laying of the keels and the balance on completion; the whole sum of 1,500,000 yen was to be expended within the fiscal years 1935-36 or 1936–37; (3) the subsidy of 30 yen was to include a 4-yen subsidy for special provisions of national defense, required by the Imperial Navy; (4) simultaneously with the construction, a similar total tonnage of old vessels registered in Japan, Formosa, Korea, or the Kwangtung province was to be scrapped.

The Department of Communications, convinced that it was impossible to obtain an increase in the rate of 30 yen, asked to have the tonnage increased to 80,000 tons. The Finance Department, however, declined to accept this suggestion.

That is the present status of the proposed continuation of the scrapand-build plan in Japan.

The scrap-and-build plan of Japan, which ends on the 31st of March this year, is a project for building 200,000 tons of fast freighters to replace the 400,000 gross tons of obsolete tonnage to be demolished. I want to state for the record the terms of that plan. The salient facts may be summarized somewhat as follows:

DATE AND TERM OF PLAN

It was first considered by the Marine Affairs Commission in July 1932. A bill was introduced in the extraordinary session of the diet in August 1932. Departmental decrees were issued on September 27, 1932, effective for a 3-year period from October 1, 1932, to March 31, 1935.

PURPOSE OF THE PLAN The purpose of the plan was to renew the fleet and replace obsolete tonnage, to reduce tonnage in the market, and to give work to shipyards.

TONNAGE TO BE BUILT Two hundred thousand gross tons of vessels of not less than 4,000 gross tons and not less than 13%knots speed, unless authorized by the Minister of Communications, were to be built.

TONNAGE TO BE SCRAPPED

Four hundred thousand gross tons, not less than 25 years old nor smaller than 1,000 gross tons, unless authorized by the Minister of Communications, were to be scrapped.

TOTAL SUBSIDY

Eleven million yen, of which 1,250,000 yen in the period 1932-33; 5,500,000 yen in the period 1933–34, and 4,250,000 yen in the period 1934–35 were to be granted as subsidies.

RATE OF SUBSIDY The subsidy paid to the owner who builds the ship depends on the speed of the vessel and ranges from 45 yen for ships of less than 14 knots, to 54 yen for ships of 18 knots or over. Mr. Chairman, I would like to submit a table of the subsidy rate, by speed.

The CHAIRMAN. Without objection, it will be incorporated.
(The table referred to follows:)

Rate of subsidies, per gross ton, according to speed of vessels
Speed (knots):
Less than 14.

45 14..

46 1472

47 15.

48 1572

49 16.

50 1672

51 17.

52 1742

53 18.

54

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