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Mr. CAMPBELL. Certainly. Certainly the operator in a given service ought to know more about what ship he needs in that particular service. What we want is a full opportunity of participating in the design and in the construction.

Section 504 on page 12 is a new provision. It reads:

No such contractthat is, a contract for new constructionshall be made with respect to a vessel to be operated on a service, route, or line served by citizens of the United States, unless the Authority shall determine that the service already provided by American vessels in such service, route, or line is inadequate, and that in the public interest additional vessels should be oper. ated thereon.

That is a suggestion that was put before the association. It did not meet with unanimous approval. In connection with it, quite a serious dispute arose between some of the members. It may be that in the course of these hearings you will have some of the members of the association present their views on the question with which it is concerned, so that I do not care to discuss it any further than I have now. I will leave it to them. But this particular proposal comes from the association. You will note it is that no contract shall be made with respect to a vessel to be operated on a service, route or line served by citizens of the United States, unless the authority shall determine that the service already provided by American vessels in such service, route or line is inadequate, and that in the public interest additional vessels should be operated thereon.

We suggest the deletion of old section 504 and a rewrite of it. This goes to the question of a rebate of the construction differential in the case of participation of the vessel in domestic, as well as foreign, commerce.

No vessel, in respect of which a construction subsidy has been paid pursuant to sections 501 and 502 other than pursuant to section 302, shall be operated other than exclusively in foreign trade unless (a) the owner shall receive the consent thereto of the Authority and agrees to repay the United States, and furnishes a satisfactory bond or other security to the Authority to secure such payment, in equal semiannual installments over the remaining economic life of the vessel, of an amount which bears the same proportion to the amount of subsidy paid by reason of paragraph (a) of section 501 as the period during which the vessel is operated exclusively in domestic service bears to the entire economic life of the vessel, with interest at 4 percent per annum on the unpaid installments; and (b) during the time such vessel is operated, with consent of the Authority, in joint domestic and foreign trade, the owner shall resund a proportion of the reparments payable for such period equal to the ratio of the revenues derived froni its domestic trade to the total revenues derived from all trade: Provided, hoveter, That the Authority shall not grant new vessels, other than oil tankers, built under a contract pursuant to this title, permission to operate wholly or partially in domestic trade, except to replace a vessel engaged in such trade, or where there are not available vessels to serve adequately the needs of commerce.

The exception of tankers is made there because the tankers will be built under this title pursuant to the provision in section 501. But inasmuch as they are being paid only for the naval features of the vessel and must be used in coastwise and domestic and foreign trade, this exception has to appear.

Otherwise you would have them excluded from the domestic trade where they are required, simply because they happen to have naval equipment or naval speed put into the vessels for naval purposes. Yet they will be needed in the coastwise service as well as the foreign service.

The effect of that provision is substantially the same as the effect of the provision of which we suggest a redraft. It is more for clarification. It does provide for a proportionate refund of the construction subsidy if the vessel is used either exclusively in domestic service or partly in domestic and foreign trade. In principle it is not different from that which was contained in your original bill.

Mr. LEHLBACH. The provision that these new vessels may not be used to augment the tonnage in the coastwise and intercoastal trades is new, is it not, that last proviso?

Mr. CAMPBELL. Yes.

Mr. LEHLBACH. That is to prevent the augmenting of tonnage in coastwise and intercoastal trade?

Mr. CAMPBELL. Yes. You see above, it cannot operate other than exclusively in foreign trade unless the owner receives the consent of the Authority, and agrees to make these repayments. Then it provides that the Authority shall not grant new vessels other than oil. tankers built under a contract permission to operate wholly or partially in domestic trade, except to replace a vessel engaged in such trade, or where there are not other vessels adequate to the service.

Mr. SIROVICH. I was not in the room when you began to speak of domestic construction. How would you finance domestic construction? Would you use the foreign standard there, too?

Mr. Campbell. No, that is purely a loan.
Mr. SIROVICH. How would you finance it?

Mr. CAMPBELL. So far as construction in the coastwise trade is concerned, the proposal is that the Government act simply as a banker under the construction loan fund.

Mr. SIROVICH. You mean like we did under construction for foreign ships, loan them 75 percent of the money?

Mr. CAMPBELL. Yes, sir.

Mr. SIROVICH. And have that amortized over a period of over 20 years?

Mr. CAMPBELL. Yes, at 4 percent interest, exactly the same interest you are charging the railroads. You are lending money to the railroads today at 4 percent to build up domestic transportation of that character. We suggest that you lend to the domestic companies here 75 percent of the cost of the vessel at 4 percent.

The CHAIRMAN. That is merely a power in the Authority to make the loan?

Mr. CAMPBELL. Yes, sir.

Mr. O'LEARY. What rate of interest do the shipowners pay the bankers in this coastwise trade now?

Mr. CAMPBELL. I do not think any of them are borrowing any money from the bankers in the coastwise trade. I do not think they could borrow a dollar. We had a discussion yesterday before the Senate committee, and the opinion was expressed by some of the owners whose views were sought that the situation is such that it is doubtful whether they could borrow any money for the construction of new hips in the coastwise trade.

Mr. SIROVICH. It would apply to all documented ships?
Mr. CAMPBELL. Yes.
Mr. SIROVICH. Over 5 tons?
Mr. CAMPBELL. Yes, sir; as it is now written.

Mr. SIROVICH. How much money would the Government have to loan, according to that?

Mr. CAMPBELL. I do not know.
The CHAIRMAN. I suggest we should go over 5 tons.

Mr. CAMPBELL. If it is going to rebuild the fleet, as the bill contemplates, it is going to take an enormous amount of money.

Mr. SIROVICH. Where is the Government going to get all that money? Mr. CAMPBELL. Out of your income and mine.

Mr. SIROVICH. I know you have a good income and I know we members of Congress have not, and we make more eloquent pleas even

than you.

The CHAIRMAN. Have you finished on that construction differential?

Mr. CAMPBELL. I have, Mr. Chairman; yes, sir.
The CHAIRMAN. Is your next subject the operating differential?
Mr. CAMPBELL. The operating-differential subsidy.

The CHAIRMAN. We will excuse you at this time, Mr. Campbell, and resume your testimony in the morning.

STATEMENT OF ERNEST M. BULL, PRESIDENT A. H. BULL

STEAMSHIP CO.

Mr. Sirovich. Will you please give your name?
Mr. Bull. Ernest M. Bull, president A. H. Bull Steamship Co.
Mr. Sirovich. What kind of company is that?
Mr. BULL. We own and operate 34 ocean steamers.
Mr. Sirovich. Where do you operate, from and to where?

Mr. BULL. We operate along the coast, coastwise, and to Puerto Rico, to Santo Domingo, and the Virgin Islands. We owe the Gorernment no money. We have no mail contract under the JonesWhite bill.

Mr. Sirovich. Is that the same as the Luckenbach Line?
Mr. Bull. No, it is not the same as the Luckenbach Line.
Mr. SIROVICH. They claim they have no subsidy either.

Mr. BULL. We have no subsidy nor any loans. We have paid cash for everything we have bought from the Board.

The CHAIRMAN. It is a very representative steamship company.

Mr. Bull. We have built two ships, delivered last year, of 7,400 tons dead weight, built by the Newport News Shipbuilding & Dry Dock Co., cargo vessels. I do not think there are any finer ships built anywhere in the world.

Mr. Sirovich. Have you much competition?

Mr. Bull. Plenty. That is what I am going to talk about in a minute.

What I want to say first is that I heartily endorse the provisions of this bill in reference to the supervision of rates and the Authority that you have set up to coordinate the shipping industry and the I. C. C. I heartily approve of the idea of having somebody who is charged with the interest of looking after shipping and of that combination.

The CHAIRMAN. We have not transferred the rates to the Interstate Commerce Commission, though.

Mr. Bull. You cannot transfer the rates to the Interstate Commerce Commission directly, I presume, but still perhaps when that coordinating committee gets functioning some way or another it will accomplish something.

Mr. WEARIN. In other words, you think there should be a separate and distinct regulatory body?

Mr. Bull. Yes, I do; but I think there should be representation of the steamship people on that body.

The CHAIRMAN. When you say the "coordinating body" you mean the reference in the act to an interrelation between the Maritime Authority and the Interstate Commerce Commission?

Mr. Bull. Yes, sir.

The CHAIRMAN. As I recall, two Interstate Commerce Commissioners and two members of the Maritime Authority under the chairmanship of the Secretary of Commerce form the coordinating body.

Mr. LEHLBACH. It is also made obligatory for them to meet at least once a month.

The CHAIRMAN. Yes.

Mr. SIROVICH. Would you be kind enough to give me for my information the fundamental characteristics that have kept your company in such fine and liquid state as contrasted with the condition of other steamship lines?

The CHAIRMAN. I think that is partly Mr. Bull himself.

Mr. Bull. We never had any Santa Claus. We had to save out of what we made sufficient to protect our company and build up our business.

Mr. SIROVICA. Your business has been built up from the profits of the business?

Mr. BULL. Do not misunderstand me; I do not want to say we have not had any advantage, because we have had the advantage of the coastwise laws; and we have not confined our business to that. I feel that we need this subsidy. I am not against that in any way at all. I think we need it. For our foreign trade we have to have it, and we must have ships for the foreign trade. But we just had to get along, that is all, or we went out.

Mr. SIROVICH. If you got a construction subsidy now and an operating subsidy now, you would be getting along pretty well, would

Mr. BULL. I am not asking for it in the coastwise trade.
The CHAIRMAN. Suppose we hear what Mr. Bull has to say.

Mr. SIROVICH. You are doing business with foreign countries, too, are you not?

Mr. Bull. With Santo Domingo, that is ail. We did have some American ships in that trade, but we find that we have to charter foreign ships to operate that trade because we have no subsidy, and it is cheaper for us to lay up our own American ships that we had bought for that business than it is to operate them in that trade. That is the only trade we have.

Mr. SIROVICH. If we adopted that bill, it would give you a chance for your construction subsidy and your operating subsidy and you would have American working men and seamen?

Mr. BULL. I hope we can.
Mr. O'LEARY. You stated you have no mail contract?
Mr. BULL. We have not, no, sir.
Mr. O'LEARY. Has your competitor a mail contract?

you not?

Mr. Bull. That is one thing I want to speak of right here. In our service to Puerto Rico we are the only line-we run a weekly service out of New York and weekly service out of Baltimore to that island—that has not either directly or indirectly through subsidiaries a mail contract under the Jones-White bill. In this bill you note that you said under section 504, I think in the old bill, 505, that any ship that gets a subsidy shall be operated exclusively in the foreign trade.

Then if you turn back to the definitions that are in this typewritten article here, on page 38, section 1011, you will see after the first two lines, then commencing there, that it cuts out that requirement as far as Puerto Rico is concerned; and the same competition that we are having at the present time with subsidized lines will continue under this bill. That, I think, is unfair. In the case of a rate war, how could we compete with them?

Mr. LEHLBACH. Is not that a request of some years' standing of the Governor of Puerto Rico?

Mr. Bull. I do not know who put it in there, sir, but even so, that does not make it fair that we have to use our own money. If he wants me to have that instead of competing, all right, give me a subsidy down there. But I do not know who put it in.

The CHAIRMAN. In other words, the provision of which you complain provides for subsidized lines to Puerto Rico.

Mr. Bull. It provides for their going in there. How can I build another ship or go on building for that trade?

The CHAIRMAN. Puerto Rico is in our coastwise trade.

Mr. Bull. It is in our coastwise service. The Governor says, “You ought to build more ships." I say, “ All right, I will build more ships.” But I cannot go in and run the risk if every line going to South America has a subsidy and can stop at Puerto Rico and compete

How can I? Mr. LEHLBACH. You may recall, Mr. Chairman, that the Governors of Puerto Rico have for some years been agitating the question of letting ships in foreign commerce make calls there in order to give Puerto Rico more adequate service and better connection with the United States.

The CHAIRMAN. I did not recall that as to Puerto Rico. I recall that very distinctly as to the Virgin Islands. One reason that we have not granted that permission to the Virgin Islands is because we are satisfied the minute we did it Puerto Rico would be right in the same boat.

Mr. LEHLBACH. We have never done it. It is proposed in this bill as new legislation.

The CHAIRMAN. That provision is in the bill.

Mr. Bull. Last year there was a bill introduced in Congress by Mr. Lanzetta to open up the trade there.

The CHAIRMAN. I think there was, and I think there is such a bill pending now. It has never been considered by the committee.

Mr. Bull. The Chamber of Commerce of Puerto Rico at that time made a very exhaustive study, and I should be very glad to send the committee a copy of that. They have no complaint, and they say they have no complaint of the service we have rendered out there; and I think you will find that the Government will say the same thing.

with me.

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