contractors, especially some of the larger ones, have resorted to the practice of creating subsidiary corporations for that purpose, to which much Government aid has been poured through the parent company; others are intercoastal almost exclusively in their business, but have been permitted to receive mail contracts and pay because they happen to touch at some foreign port on their intercoastal routes.

"All American operators in the protected trade should receive the same treatment. Aid in that particular trade should be given to all or none, and any change in policy or law should carry with it the same kind of protection and benefits to all."

Upon this assumption it seems to me that the definition of "foreign trade" should be rewritten so as to exclude from that definition any vessel which makes an intermediate stop at a port of the United States unless it is permitted to do so by special permission of the United States Maritime Authority created by the act. I am afraid that vessels which have been the recipients of subsidies may engaged in a very considerable amount of domestic trade under the lati tude permitted in the definition to which I am taking exception. It would seem that all concerned should be satisfied to leave the matter to the discretion of the Authority, which should have the power to prohibit the transportation of passengers or property between domestic ports even though the vessel may continue from the last domestic port of call to a foreign destination.

While this was the only point covered by my oral statement, availing myself of the privilege granted by the chairman, I should like to mention specially the desirability of including in the bill at the appropriate place an amendment thereto suggested by Senator Black, of Alabama, at the time a similar bill was being considered by the Senate committee. The so-called "Black amendment", as I understand it, would provide that section 509 (a) be amended so as to include the following language:

*

"No contractor under a contract in force under this title, or no holding company of such contractor or no officer, director, or executive, or no member of the immediate family of any of such officers, directors, or executives of such contractor or such holding company shall ** own, operate, or charter any vessel or vessels engaged in the domestic intercoastal or coastwise service. or own any pecuniary interest in any person that owns, charters, or operates any vessel or vessels in the domestic intercoastal or coastwise service."

The purpose of this amendment is to prevent indirect subsidies to vessels engaged in purely dometic commerce through the medium of holding companies or subsidiaries. We respectfully submit that unless an amendment of this kind is adopted the purpose of the bill will be to some extent defeated.

In making these observations I am not to be understood as approving the regulatory features of the bill. It is the view of those whom I represent that it would be far better to place the regulation of domestic commerce, at least, under the Interstate Commerce Commission substantially as set out in H. R. 5379, another bill which your committee is hearing.

In making this statement I am speaking for the Association of American Railroads, which constitutes about 98 percent of the mileage of the class I railroads of the United States.

Respectfully submitted.

R. V. FLETCHER,

Vice President and General Counsel,
Association of American Railroads.

STATEMENT OF KENNETH GARDNER, NEW YORK, REPRESENTING THE SHEPARD STEAMSHIP CO.

(The following statement was made before the Senate Committee on Commerce on S. 2582, a companion bill)

The CHAIRMAN. Mr. Gardner, do you represent an American shipping line?

Mr. GARDNER. Yes; I represent a constituent of Senator White's. Senator WHITE. Now, that is worth while.

The CHAIRMAN. Will you just wave the American flag a little bit?

Mr. GARDNER. Unfortunately, I do not carry an American flag on

my person.

I am here for the Shepard Steamship Co., Inc.

The Shepard Steamship Co., incorporated in the State of Maine, has its eastern terminal at Boston. They engaged in the coastwise trade.

Senator WHITE. May I interpolate right there that these Bostonians think that Maine is a part of Massachusetts.

Mr. GARDNER. I would like to say, Senator Gibson, if I can get it up to Burlington before I get through, I will do so.

We have in the East the ports of Boston, New Bedford, Mass.; New London and Bridgeport, Conn.; New York; the port of Albany in New York State. In fact, they incorporated, I think, about the first regular service to go into the port of Albany.

Senator WHITE. Albany gets very close to Vermont.

Mr. GARDNER. If we get back to these Vermont grants, it would be right next door, within a few feet.

Senator GIBSON. You know we have the proposal up now to make a survey of a canal through to Lake Champlain.

Mr. GARDNER. Yes.

Senator WHITE. Then we'll bring those ports on the ocean front, practically.

Mr. GARDNER. There is no reason why Burlington should not be an ocean port. You can run a canal out there.

The CHAIRMAN. I can see plainly New York will become simply a side port. This is a race between Burlington and Duluth.

Senator GIBSON. The Port Authority of New York is very much in favor of these canal possibilities of Burlington.

Mr. GARDNER. I am not sure that I mentioned the port of Philadelphia. That is one of our ports.

On the west coast we have the ports Seattle, Portland, San Francisco, Los Angeles, and many smaller ports. In particular, I want to mention the port of Saeramento, Calif. I am sorry Senator Johnson is not here.

The CHAIRMAN. How many ships do you operate!

Mr. GARDNER. We operate 4 ships, 2 of which were purchased from the Shipping Board, carrying Shipping Board mortgages. I am happy to state that all payments are up-to-date and they have never been in default. This line is one of the smaller intercoastal lines. Operating four vessels under the classifications in the intercoastal service, it was classed as a C" line. The "A" lines were the larger lines operating vessels that had frequent sailings and relatively fast speed. The "B" lines were those that operated sailing every 16 days or less, and the "C" lines were those that had a sailing every 22 days or less. In other words, 22 days or more apart.

Now, this line, the Shepard Line, is coming here in support of this bill. It will not be benefited in any way by the subsidy provision of the bill. But they are very much in favor of the bill as the bill stands. We do not want to criticize any of the provisions of the bill or take anything away from the bill.

We would like, however, to suggest a slight addition to two paragraphs of the bill in order to provide for a differential in the service that we operate as distinguished from other services to and from the

west coast from the east coast. The Shepard Line would like inserted on page 42, line 14, of the committee bill no. 2, or, I mean, page 32, line 11, of committee bill no. 2, which is now page 42, line 14, in committee bill no. 3, the following provision with respect to the fixing or the prescribing of rates, the following words:

Provided, That in prescribing such maximum and minimum rates, fares, and charges

The CHAIRMAN. Let me see if I have the right place.

Mr. GARDNER. Which bill do you have?

The CHAIRMAN. No. 3.

Mr. GARDNER. You have got no. 3?

The CHAIRMAN. Yes.

Mr. GARDNER. On page 42 at the end of line 14.

The CHAIRMAN. All right.

Mr. GARDNER. Just before that section referring to the common carriers.

The CHAIRMAN. Yes.

Mr. GARDNER. You would insert this additional provision:

Provided, That in prescribing such maximum and minimum rates, fares, and charges, differentials shall be established on differences in the service rendered, to the end that small water carriers operating in the domestic commerce of the United States shall be adequately protected.

Then at page 38, line 20, of print no. 2, on page 44, line 7, of print no. 3, you would again insert the same provision.

Senator WHITE. Now, where is the second insertion?

Mr. GARDNER. Page 44, if you have the print no. 3.

Senator WHITE. Yes.

Mr. GARDNER. At the end of line 7, where it says "Charges which may be charged and enforced." Then you would put in the section right in the middle

Senator WHITE. Yes.

Mr. GARDNER (continuing). Of what is there now.

Senator WHITE. At the end of line 7.

Mr. GARDNER. Paragraph 4 of section 701 of title VII of the bill. Senator WHITE. I understand.

Mr. GARDNER. The sections of the bill referred to would effect a change in the law by conferring upon the new Federal Maritime Authority the power to prescribe minimum rates for water carriers operating in interstate and intercoastal trade. The effect of the additional language offered herein would be to insure (1) that this new power would be exercised in such a way as to allow each class or type of water transportation to serve the need to which it is economically best adapted; and (2) that it will not be used so as to create a shipping monopoly and to deprive the shippers and consumers of this country of the economic advantage of paying less for a type of service which it costs less to provide.

The CHAIRMAN. Now, Mr. Gardner, if I may interrupt you without breaking the train of your thought.

Mr. GARDNER. You may.

The CHAIRMAN. There is not any doubt but that the Authority has that power, if it is not specifically described.

Mr. GARDNER. I don't think there would be any question but that the Authority has that power as the bill is now written. This is

merely a suggestion in the light of the experience of the past that it would be wise for the Congress to declare that policy rather than to leave it entirely to the Authority to which you would set up. The CHAIRMAN. Mr. Gardner, what other lines would be in the same position as yours? Would there be a number of them?

Mr. GARDNER. Yes. At the present time, on page 4 of this brief you have in your hand, is set forth the lines which are now the A, B, and C lines.

Senator WHITE. This would really permit the regulatory body, the Maritime Authority, to classify the services and to provide maximum and minimum rates for the different classes of service?

Mr. GARDNER. Exactly. It would do what the Interstate Commerce Commission has been doing for years with the railroads. When we in New York wanted to go to our old home in Indiana-when I wanted to go West I could go to the New York Central and get a ticket that would insure me a comfortable, fast journey home, but for that service the Interstate Commerce Commission required me to pay $2 or $5 more than I could ride for on the Erie. I could ride for from $2 to $5 less on the Erie, and I could ride on the Baltimore & Ohio for that much less. Only the Pennsylvania and the New York Central were class I carriers from New York to Chicago. All other lines were in a differential class, although they were all American, all flew the American flag, and they were all railroads employing American citizens. We have no services abroad at the present time. Well-recognized principles of differential in classes of services which are provided

The CHAIRMAN. Let me ask, Senator White, in your bill was there a legal provision made for this sort of classification? Senator WHITE. In which bill do you mean?

The CHAIRMAN. In
any one of your bills?
Senator WHITE. No.

The CHAIRMAN. There was no provision made where they could classify them like this?

Senator WHITE. I think not.

The CHAIRMAN. There is not any question, of course, under the power we have given them in this bill but that could be done. I suppose Mr. Gardner's anxiety is to make it mandatory.

Mr. GARDNER. It was suggested it be made a principle laid down by Congress and we would like to ask that you require in the fixing of these minimum rates and charges that the difference in the classes of service be recognized by the Maritime Authority. Today we are having a very difficult situation. There is a great deal of confusion under the act of 1933, the Intercoastal Act, which is sometimes known as the "Copeland Act ", and we have here a decision which comes down on Saturday of the past week involving this very question.

The CHAIRMAN. What was the decision? Did they decide they could establish the minimum rate?

Mr. GARDNER. The decision is a bit obscure; from my reading of it, I understand they discussed it but did not make a decision. I think the Bureau-the Shipping Board Bureau-in making its decision, is naturally rather concerned at the present time. There have been a great many suggestions of changing this situation, all manner of suggestions, this last act, 1362, that we have here discussed. This Shipping Board Bureau has had a number of differences to contend

with and I don't blame them for not making a clear-out decision under the circumstances.

The CHAIRMAN. You recall, Mr. Gardner, when this act you gave my name to a little while ago was passed, there was stricken out of it in conference the right to fix a minimum rate?

Mr. GARDNER. Yes.

The CHAIRMAN. So, I suppose there has always been a hesitation on the part of the Shipping Board

Mr. GARDNER. Naturally.

The CHAIRMAN (continuing). To act in accordance with the way we really wanted to do, because we were thwarted right in this very room from accomplishing what we have in mind.

Mr. GARDNER. I remember that very well. I attended those hearings.

Senator WHITE. Could you tell us what interest, if any, would be likely to oppose if the definite authority that you ask be established? Mr. GARDKER. I would assume that the so-called "A" and possibly some of the "B" lines would be opposed to this. During the course of the past couple of years, since the passage of the 1933 act there have been repeated hearings to determine just what could be done in this intercoastal trade. At those hearings certain of the "A" line representatives came and testified with regard to what they thought ought to be done. Mr. Quevedo in the course of his examination of Mr. Luckenbach asked him:

Mr. Luckenbach, why is it that you advocate one single rate in the intercoastal operation?

Answer. Well, from my experience. I am competing with fast ships, and I am perfectly willing to do that, and I think everybody else should be in the same boat.

Now, he spoke from the standpoint of that one operator as to what he feels should be done with regard to this service. It is interesting to note, however, that Mr. Luckenbach, who in that hearing denied the right to these slower vessels subsidies, went right on to testify that he insisted that his business must be allowed a differential under the transcontinental railroad rate, because, "I would not get any business if I did not."

Now, because there is this difference in the service furnished, it would seem highly desirable that this committee recommend to the Congress generally in this new bill that we are setting up here this matter of differentials and make it a mandatory part of the things which must be considered by the Authority in fixing freight rates. It would not only be for the purpose particularly of the shipping business, but it would be of benefit to the shippers who use the different classes of service.

The railroads have different classes of passenger service. They likewise have different classes of freight service, and all of our steamships also do. Who would think, for instance, of going on the Queen Mary and expect to buy a ticket on the Queen Mary at a rate for the passage that would be comparable to the cost of a ticket on one of these smaller or so-called "cabin " liners? He expects to pay for the better service rendered by the better and faster vessel. Even in the same vessel, we have first-class, second-class, third-class, and tourist third. So that you pay on the same vessel different prices.