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Sections 26 and 27 relate to the cancelation of the mail contracts. Mr. WEARIN. May I interrupt you there, Mr. Moran: Does your bill provide for the discontinuance of these mail contracts, or the provisions of law under which mail contracts have been operated in the past?

Mr. MORAN. Yes.
Mr. WEARIN. It completely abrogates them?
Mr. MORAN. That is right.

Mr. Hamlin. And, if I may ask a question, it provides new contracts may be entered into?

Mr. MORAN. That is right.
Mr. WEARIN. Not under the terms of the old act?

Mr. Moran. Not under the terms of the old act. I think another sentence I will very shortly get to directly answers your question, but I will say now not under the terms of the old act.

Sections 28, 29, and 30 contain further restrictive provisions relating to the chartering of vessels.

Section 31 provides for manning the vessels with native-born or completely naturalized citizens.

Section 32 relates to suits against the Corporation.

Section 33 provides marine-insurance business to be carried on by the corporation.

Sections 34 and 35 relate to the reports the Corporation shall make to Congress and the audit of its financial transactions.

Section 36 provides penalties for collusive bidding on Corporation contracts.

Title II deals with the United States Maritime Commission.

Sections 201 to 205 relate to the organization of the regulatory commission, its powers and duties.

Section 206 provides for appropriations for the Commission, office quarters, and employment of personnel; also provides for the accounts of the Commission and its report to Congress.

Section 207 authorizes the Commission to inspect the books of account of all common carriers by water subject to the act, and to prescribe uniform systems of accounts to be kept by all carriers.

Section 208 provides for establishment of minimum manning scales and minimum wage scales for all officers and crews employed on American-flag vessels.

Title III has to do with repeals. Under this title appropriate repeals are made of existing laws conflicting with the new act and the Merchant Marine Act of 1928 is repealed in its entirety.

Section 302 re-defines the term “American citizens” as used in the act.

Section 303 gives the new Commission the minimum rate-fixing power.

Section 304 clarifies obscurities in the Intercoastal Shipping Act, 1933.

Title IV pertains to Merchant Marine Training School. This title provides for a training school to be maintained by the corporation to train officers for the American merchant vessels, the candidates for such school to be nominated by Members of Congress, Senators, and by the President of the United States.

Title V contains miscellaneous provisions.


Section 501 requires officials traveling on Government business to use American-flag vessels.

Section 502 provides for the compensation to be paid when vessels are taken by eminent domain in national emergencies.

Section 503 relates to transfer of appropriations from the Fleet Corporation to the new Corporation.

Section 504 provides that sums already appropriated for mail contracts may be used for carriage of the mails on poundage basis.

Section 505 is the separability provision.

The bill I have introduced does not contemplate the Government going in business in competition with our carriers engaged in coastal and intercoastal trade. Even in foreign trade we do not propose to have the Government compete with existing American-flag lines which are able to give adequate service without Government assistance. It does put the Government back of private operators in our foreign commerce, who have to meet the severe competition of foreign-flag lines. The Government furnishes the ships, and subsidizes the private operator by providing a nominal charter hire, or in some instances no charter hire, and makes provision for the Government bearing some proportion of the operator's voyage expense through contribution to the expense of the crews. This policy would be very beneficial to insure employment for our American seamen at a decent scale of wages and under better working conditions. But the bill also provides that when economic conditions improve so that our steamship lines operating in foreign trade can operate at a profit, the Government shall share in the operator's prosperity and recoup some of the expenditures the Government has made to maintain these lines in times of depression.

Mr. Chairman, I have completed my statement and appreciate the opportunity to present the statement as a complete statement. I will be very glad to attempt to answer any inquiries that you or members of the committee may wish to propound.

I regret exceedingly, I wish again to repeat, that the bill is not here; because I can realize your point of view, as I assume it is, that the bill should have been here. But this is the first time, in the limited time I have been here, that a bill introduced the day before was not in printed form upon my desk the next morning.

The CHAIRMAN. We had fixed the time to hear certain witnesses this morning and I would not have fixed a time for the presentation of : new bill and thus displaced witnesses who were already presenting their arguments to the committee, except I thought I was showing you the courtesy, as a Member of Congress, by giving you an opportunity for a 10-minute statement, as I understood, and not for a vicious attack on the framers of the bill we are considering.

Mr. HAMLIN. May I ask, Mr. Chairman, whether this bill will come up again, when we can have the bill in printed form, for investigation?

The CHAIRMAN. It evidently will be referred to this committee and will be distributed to the members of this committee, just as all bills are distributed

Nir. Hamlin. But with no further hearing on it?

The CHAIRMAN. That will be entirely up to the committee. So far as I am concerned, I do not care for any more hearings.

Mr. LEHLBACH. I think this is a plenty.
The CHAIRMAN. Now, Mr. Campbell, you may proceed.


Mr. CAMPBELL. Mr. Chairman and gentlemen, I should like to correct what may have been an erroneous impression that I left yesterday with respect to section 504 as it appears on page 12 of the draft. That section, I believe, met with substantial if not complete unanimity of the members of the association and it is either in the identical words or in substantially the same words as appeared in the original bill. · We simply transposed it from one position to another. As you will observe, that provides:

No such contract shall be made with respect to a vessel to be operated on & 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.

That is designed very apparently to prevent an overtonnaging of services so that you may not have two subsidized lines or ships competing with each other where the route is already adequately served by one line. It is a safeguard. And I do not want to leave the impression, as some thought I did, and there was any particular dissent on the part of any of the owners toward it. If there was any dissent, it was limited to one or two companies.

I believe I had progressed to the point of the operating differential subsidy, so I start this morning with the consideration of section 506, on page 13. I am now discussing original section 505 which, in my redraft, is numbered 506:

The Authority is authorized and directed to consider the application of any citizen of the United States as defined in section 38 of the Merchant Marine Act, 1920, as amended (U. S. C., title 46, sec. 802), for financial aid in the operation of a vessel or vessels documented under the laws of the United States on April 1, 1935, or hereafter constructed in American shipyards, to be used in an essential service in the foreign commerce of the United States. If the Authority determines that (1) the operation of such vessel or vessels is required to meet competitive conditions or to further promote the foreign commerce of the United States; (2) the applicant possesses satisfactory ability, experience, financial resources and character, and already owns, or can and will build or purchase, a vessel or vessels of the size, type, speed, and number required, and has the proper equipment and other characteristics to enable him to operate and maintain a service, route, line, vessel, or vessels in such manner as may be necessary to meet competitive conditions and to promote commerce; and (3) the payment of an operating differential subsidy is necessary to place the operation of such vessel or vessels on a parity with foreign competitors, it shall then determine the amount of operating differential as herein provided.

Now I may skip on down to paragraph (c). We have some changes to suggest there:

Such contract shall provide that the operating differential subsidy shall be paid the applicant and shall be an amount per voyage for the operation and maintenance of said service, route, line, vessel, or vessels, based on the amount and the difference in cost of insurance

Because, you see, it is now defining the differential subsidy, and there should be added to it also "amount and the difference in cost of insurance"* * * maintenance, repairs, and the wages and subsistence of officers and crews, and all other items of expense in the operation of vessels under the laws, rules, and regulations of the United States as compared with those of the foreign country of lowest cost whose vessels are competitors, directly or indirectly, of such service, route, line, vessels, or vessels, including the effect of governmental aid or subsidies in such foreign country as determined by the Authority.

What you are doing by that section is to provide an operating differential which is designed to place the American owners on a parity with foreign owners in the operation of competitive services. In calculating the difference, if you are going to place them on a true parity, you must take into consideration not only the cost of insurance but the amount, and it will not suffice to confine these items to the cost of maintenance repairs and the wages and subsistence of officers and crews, but there are other items of expense in connection with the operation of the shipping business which must receive consideration. And so we suggest the addition of those words " and all other items of expense”, so that the Authority will have the scope of authority necessary to attain true parity.

Now I do suggest that the parity ought to be established with respect to the operation of vessels of the country of lowest cost which are competitors, directly or indirectly, and I illustrate: In the service, for example, from New York to the Far East or to the Pacific coast and, indeed, from the Gulf ports to the Far East, you have American vessels, you have Scandinavian vessels, British and Japanese vessels. Now the lowest costs are the Japanese, and they are the severest competitors in that service; so that if you are going to prepare and pass legislation which will put us on a parity, then you must take into consideration the lowest-cost country whose vessels are operating in the service. And that competition is not only a direct competition, but it is an indirect competition, and I suggest this thought: Take, for example, from here to Buenos Airesyou have an American line and you have a British line, at least, but you also have lines running from Europe to Buenos Aires which are not in direct competition with the lines out of American ports to Buenos Aires, but they are in indirect competition. They are carrying merchandise which is competing in the South American markets with the manufacturers of merchandise in America. So that to attain true parity, to measure parity and attain true parity, you must take into consideration not only direct but indirect competition.

Mr. WELCH. Mr. Campbell, you seem to be confining your argument to operating costs.

Mr. CAMPBELL. This section of the bill, Mr. Congressman, is dealing only with operating costs.

Mr. WELCH. Is it you intention to give consideration to construction costs before you complete your argument?

Mr. CAMPBELL. I did that yesterday afternoon. If you care to have me go back on it, I will be pleased to do so.

Mr. WELCH. No; I do not care to have you return to it.

Mr. CAMPBELL. That provision for the construction costs is made in section 501 through to section 505 and was what we discussed during the latter part of yesterday afternoon.

Mr. Welch. Perhaps I was not here; I am sorry.

Mr. CAMPBELL. No; I think you were not here. Do you care to have me repeat it?

Mr. WELCH. No; except that consideration should be given to construction costs in ihe diferent sections of the United States.


Mr. WELCH. It is impossible for the west coast to compete with the east coast in construction costs.

Mr. CAMPBELL. Yes. Mr. WELCH. It is as impossible as it is for the east coast to compete with Europe in construction costs. This bill is in the interest of the national defense, and it is not in the interest of the national defense to have all of the ships constructed in the United States built within a radius of 500 miles of the Capitol. No merchant ships have been built on the Pacific coast since the war, and we never will build another merchant ship on the Pacific coast unless some consideration is şiven by the Government, either in this measure or in some other way, through the reduction of interest rates in favor of Pacific coast construction for vessels that ply from Pacific coast ports and make Pacific coast ports their home ports.

Mr. CAMPBELL. There is a provision for that in the bill, Congressman,

The CHAIRMAN. For a study.

The CHAIRMAN. But Mr. Welch has in contemplation definite language placed in the bill that would do away with the study and require a differential in favor of the west coast. Mr. CAMPBELL. I see.

Mr. WELCH. We have been studying it, Mr. Chairman, for 20 long years, the result of which is that the Pacific coast shipyards have gone to wreck and ruin. There is not a shipyard between Puget Sound and San Diego that can lay a keel for a large merchant vessel tomorrow, in case of an emergency.

Mr. CAMPBELL. Mr. Congressman, in the scheme of this bill and under the plan of Mr. Haag which was submitted as an amendment to the bill, that will be a matter that is entirely in the hands of the Government; because both this bill and the proposed amendment contemplate the sale of the new ships to the shipowners at European costs, and the excess cost of building in America over the European cost is to be absorbed by the Government; so that the Government would be in a position to absorb that differential just as any differential.

Mr. Welch. It can be done by making a difference in the interest rate charged by the Government; it can and should be provided for in this bill. I hope it will be provided for.

Mr. CAMPBELL. From the point of view of the shipowner, we naturally see no reason why the Government should not, if it feels that is a desirable thing to do in the national interest, bave the ships built on the Pacific coast or the Gulf coast or on the Atlantic coast, as the Government determines public policy requires; because if the ships are, as the theory of this new legislation seems to me, to be turned over, to be sold to the shipowners at European costs, then the actual American cost of construction really does not concern the shipowner.

Mr. WELCH. You referred to ships. Confine it to some ships~ some ships that may be built on the Pacific coast in order to revive shipbuilding, which is a lost art on the Pacific coast except for repair work and the ship construction that is taking place in the two navy yards, the navy yard at Mare Island and the navy yard at Bremerton.

Mr. CAMPBELL. Yes; I am thoroughly familiar with that situation. Mr. Welch. It is not in the interest of the national defense to have

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