Mr. FARLEY. Mr. Wagner brought in the question of the Shipping Board line. I merely pointed out that the Shipping Board line does not operate more cheaply than our line. Our line operates more cheaply, but we ask no favors on that account. We will compete with them on the same terms. We do not ask them to raise their rates to ours. It does not make any difference what the level is if it is all one rate. We do not want them to fill their ships by charging lower. The Panama-Pacific was mentioned. They have faster ships than ours. They take the freight away from us. We do not object to that. We will have to build some day to meet that competition. That is fair competition. They have put the money into it, and we can do it if we want to. If we do not, we deserve to lose. We do not ask the Government to hold us up. I do not say that everybody is a chiseler who charges a lower rate, but I say a man is a chiseler who says "You must hold your rate up and give me a lower rate so that I can live." Mr. Sheppard has gone before the Shipping Board and made that statement through his attorney or his representative, and I believe he made that statement himself in August of 1933. Hon. CORDELL HULL, Secretary of State, AMERICAN-HAWAIIAN STEAMSHIP Co., Department of State, Washington, D. C. DEAR MR. SECRETARY: Mr. Sayre has very kindly sent me a copy of the State Department's release to the press of May 28th, to which is appended a copy of your letter of May 16 to Senator Wheeler objecting to the regulation of water carriers in the foreign trade of the United States, as provided for in S. 1632. You express the opinion that such regulation is not "in harmony with that basic principle in our treaty structure under which we have granted to foreign shipping the right of free access to our ports and in return have obtained for our ships the right of free access to foreign ports." I am not sure whether, by this statement, you desire to convey the impression that the provisions of the bill violate any treaties of the United States. If your statement was not so intended, then, I think, it might well be clarified as possibly some may not so readily distinguish a violation of the provisions of our treaties from a failure to adhere to a basic principle of our treaty structure. 66 Your letter continues, Certainly such regulation would be in conflict with the generally accepted practices of international law", but does not specify what principle of international law is violated. Moreover, I have been advised that there is ample authority to support the sovereign's right to regulate access to its ports. As the Supreme Court pointed out in Cunard S. S. Co. v. Mellon (262 U. S. 100, 124) the rule of international law regarding shipping, now generally recognized, is containued in The Exchange (7 Cranch, 116, 136, 144) where Chief Justice Marshall, speaking for the Court said: "The jurisdiction of the Nation within its own territory is necessarily exclusive and absolute. It is susceptible of no limitation not imposed by itself. Any restriction upon it, deriving validity from an external source, would imply a diminution of its sovereignty to the extent of the restriction, and an investment of that sovereignty to the same extent in that power which could impose such resriction. "All exceptions, therefore, to the full and complete power of a nation, within its own territories, must be traced up to the consent of the nation itself. They can flow from no other legitimate source. "When private individuals of one nation spread themselves through another, as business or caprice may direct, mingling indiscriminately with the inhabitants of that other, or when merchant vessels enter for the purposes of trade, it would be obviously inconvenient and dangerous to society, and would subject the laws to continual infraction, and the government to degradation, if such individuals or merchants did not owe temporary and local allegiance, and were not amenable to the jurisdiction of the country. Nor can the foreign Sovereign have any motive for wishing such exemption. His subjects thus passing into foreign countries, are not employed by him, nor are they engaged in national pursuits. Consequently, there are powerful motives for not ex-empting persons of this description from the jurisdiction of the country in which they are found, and no one motive for requiring it. The implied license, therefore, under which they enter, can never be construed to grant such exemption." On this question, the following two sentences from Mr. Charles Cheney Hyde's work on International Law, volume 1, section 187, are also relevant: "As no civilized State appears to be regarded as having the right to isolate itself wholly from the outside world or to remain aloof from all commercial or economic intercourse with it, there would seem to be a corresponding obligation imposed upon each maritime power not to deprive foreign vessels of commerce of access to all of its ports. The territorial sovereign possesses, nevertheless, the broadest right to determine which of them shall be open to commerce, as well as to regulate access thereto." I think it appropriate to point out that the first sentence of this quotation has been cited by Mr. Charles S. Haight, attorney for certain foreign shipowners, in opposing this legislation and in support of the view expressed in your letter. I cannot escape the conclusion that by quoting one sentence without the other, Mr. Haight has sought to cite Mr. Hyde in support of a conclusion which is at direct variance with that expressed by the author in the sentence immediately following the one quoted. Furthermore, I think it is not irrelevant to point out that Mr. Haight's very plausible plea is made on behalf of some of the same foreign-owned ships that are responsible for the abuses and unfair competition which this bill seeks to correct. Nor do I think it proper that the views of these shipowners should be considered by the Department unless equal consideration is likewise given to the American and to other foreign shipowners who have suffered from these practices. I find it difficult to follow your reasoning in this matter as it is not very clear as to just what you mean by "free access to our ports ", nor do you point out in what respect such access is denied or restricted by the pending bill. I think it must be accepted as axiomatic that the concept of freedom inherently implies the obligation to respect the right of others, and that the right of free access to our ports conveys no license to damage American or other foreign shipping or our foreign commerce. If any American or foreign ship in exercising this right so conducts itself as to do wanton damage to American commerce and to other American and foreign ships in our foreign trade, I do not think it should be contended that the United States, and some such general phrase as "right of free access to our ports" is obligated by international comity to permit the wanton damage to continue. Clearly, the foreign ship should not have access to our harbors that have been improved and are being maintained at large public expense, without contributing its fair share to this cost. Similarly, it must be recognized that such access is properly conditioned on compliance with other regulations too numerous to mention, which derive their authority from statutes dealing with custom imposts, public health, immigration, safety of life and property, national defense, and other matters which are proper subjects for either State or Federal legislation. I have no doubt you recognize the propriety of these conditions surrounding the use of our ports and do not view them as denying "free access to the ships of other nations. Your letter gives no clue as to why regulation of rates and practices alone, of all these restrictions, should be deemed to deny to the foreign ship the right of free access to our ports. In my judgment, legislation on this subject by our national Congress is equally appropriate and amply justified. Your letter gives one the impression that possibly adequate consideration has not been given to the fact that the rates and practices of foreign ships have been subject to Federal regulation since 1916, and that the bill against which you have interposed such strenuous objection is, in a large measure, merely a more orderly restatement of existing authority which clarifies the provisions of existing law and explicitly delegates certain powers which many have felt were already conferred indirectly. Moreover, the bill transfers the exercise of these powers to an independent, quasi-judicial commission, from an administrative department of the Government which is charged by law with pro moting and encouraging the development of the American Merchant Marine in competition with those of other maritime nations. I am sure it is not neces sary to recite here the many ways in which the Department of Commerce now regulates the rates and practices of water carriers in foreign commerce. However, I think it might be illuminating to cite section 17 of the Shipping Act, 1916, and part of section 19 of the Merchant Marine Act, 1920, as illustrative of the very broad powers already conferred: SHIPPING ACT, 1916 "SEC. 17. That no common carrier by water in foreign commerce shall de-' mand, charge, or collect any rate, fare, or charge, which is unjustly discrim inatory between shippers or ports, or unjustly prejudicial to exporters of the United States as compared with their foreign competitors. Whenever the board finds that any such rate, fare, or charge is demanded, charged, or collected it may alter the same to the extent necessary to correct such unjust discrimination or prejudice and make an order that the carrier shall discontinue demanding, charging, or collecting any such unjustly discriminatory or prejudicial rate, fare or charge. 66 Every such carrier and every other person subject to this Act shall establish, observe, and enforce just and reasonable regulations and practices relating to or connected with the receiving, handling, storing, or delivering of property. Whenever the Board finds that any such regulation or practice is unjust or unreasonable it may determine, prescribe, and order enforced a just and reasonable regulation or practice.” MERCHANT MARINE ACT, 1920 "SEC. 19. (1) The Board is authorized and directed in aid of the accomplishment of the purposes of this Act: “(a) To make all necessary rules and regulations to carry out the provisions of this Act'; 66 (b) To make rules and regulations affecting shipping in the foreign trade not in conflict with law in order to adjust or meet general or special conditions unfavorable to shipping in the foreign trade, whether in any parparticular route or in commerce generally and ticular trade or up from foreign laws, rules, or regulation or from which arise out of or competitive methods or practices employed by owners, operators, agents, or masters of vessels of a foreign country; and * * If any foreign power has contended that these provisions of existing laws deny to its ships the right of free access to our ports, or violate its treaties with us, I am unaware of it. Nor, I believe, have retaliatory measures resulted from the enforcement of these provisions. I think these facts are particularly significant as the powers delegated under S. 1632 are essentially similar in character. a most In your letter to Senator Wheeler, you also express the opinion that serious objection to any unilateral attempt by this Government to fix rates" in foreign commerce lies in the fact that this procedure would add one more' form of restriction to the entangled and conflicting mass of nationalistic restrictions from which our foreign trade is suffering today" Do you feel that, it is entirely consistent with the facts to characterize the provisions of S. 1632 as nationalistic restrictions within the usually accepted meaning of this term? To me, this characterization would imply that the bill impose restrictions on foreign ships that are not 'imposed on ships flying our own flag, or that it grants preferences to the American ship to the prejudice of its foreign competitor. This is not the case with S. 1632, since it prescribes the same kind and degree of regulation of the rates and practices of American ships as of foreign, and creates uniform standards with which ships of all nations would be required to comply without discrimination against one or favor to the other. 66 Your letter also refers to the impracticability of unilateral regulation, and points out the impasse that you fear would result should another government prescribe rates covering its trade with us differing from those our authorities prescribed for the very same trade." I think this difficulty is largely theoretical. Other nations may, and frequently have, passed laws dealing with safety requirements of ships, bills of lading, collisions, and all sorts of other matters relating to shipping, which have conflicted with those of the United States, yet no serious impasse has resulted as these conflicting requirements have been resolved on mutually satisfactory terms in international conventions to which the maritime nations have adhered. Moreover, this criticism seems to me to be directed to the possible maladministration of the regulatory power rather than to its delegation. As I have already pointed out, similar power has been vested in the United States Shipping Board and in the Department of Commerce, since 1916, yet I know of no case where it has been so exercised as to create a conflict of jurisdiction such as you have pictured. I do not doubt that if the power to prescribed minimum rates should be delegated under the proposed bill, it will be exercised judiciously and without infringing upon the rights of other nations or adversely affecting their interests. Nevertheless, it seems desirable to me that such power should be delegated in terms sufficiently broad to embrace the entire field of possible action, and that the regulating agency should not be precluded in advance from dealing effectively with all competitive situations requiring a remedy. Your letter also transmits a resolution of the executive committee on commercial policy, expressing objections similar to those discussed above. However, the committee is also apprehensive lest our foreign trade be handicapped by the rigidity of rate structure that they fear will result from such regulation. Is it not apparent that this argument is based on the assumption that the regulatory agency will so exercise its authority as to defeat the expressly stated purpose for which the power is granted, that is, to "foster and preserve, in the public interest, a transportation system properly adapted to the needs of the commerce of the United States * * It further assumes that the carriers themselves, both American and foreign, would initiate such rates as would prevent the movement of traffic from American ports. I think that both the self-interest of the carriers and the mandate of the proposed law would combine to prevent any such result. Furthermore, it seems to me that your letter does not deal with what, in my judgment, is the principal issue involved in this legislation. As I see it, the vital issue involved here is not so much whether foreign ships should or should not have the right of free access to our ports but, rather, whether this right gives the foreign shipowner a license to engage in practices which our Government, after a most thorough and impartial investigation, has condemned as improper and unfair, and injurious both to our commerce and to our merchant marine. I feel very deeply that this issue should not be avoided and, until it is dealt with frankly and fully, your department should withhold its objections to this legislation. I think there can be no question as to the unfair competition that exists. That it does exist is not merely my own view or that of other American shipowners, but this is also the considered conclusion arrived at by the Department of Commerce after a most thorough and impartial investigation of some of our foreign trades lasting for almost a year. The report of the Shipping Board Bureau in this case (Docket No. 128) recites in considerable detail the competitive practices uncovered in this investigation, and demonstrates with great clarity the detrimental effect of these practices on both our commerce and on our merchant marine. Anyone dealing with this question will find this an impartial and illuminating report. Practices specifically condemned are referred to in the following paragraph, quoted therefrom: "From the record in this investigation it is clear that there exist today and have existed in the past conditions unfavorable to shipping in the foreign trade arising out of and resulting from competitive methods employed by owners and/or operators of vessels of foreign countries, and that the effects of the world-wide depression upon our export trade have been intensified by these competitive methods. The Bureau specifically condemns the following practices as unfair and detrimental to the commerce of the United States and the development of an adequate American merchant marine: "1. The solicitation or procurement of freight by offers to underquote any rate which another carrier or carriers may quote. "2. The use of rate cutting as a club to compel other carriers to adopt pooling agreements, rate differentials, spacing of sailings agreements, or other measures." Moreover, the report very properly calls attention to the "vulnerability of our conferences, rate agreements between shipping lines which, by the Shipping Act, 1916, are prohibited from using the deferred rebate system employed almost universally in the export trades of other countries as a protection against such competition." Clearly, this handicap against our ships in dealing with competition should either be removed or compensated for by making available an equally effective weapon. I appreciate and am in accord with the policy which your Department has successfully carried out, of maintaining friendly relations with other sovereign powers. However, I feel warranted in suggesting, with every deference to your views in this matter, that this objective is not permanently attained by failure to remedy practices which are condemned as unfair by the Government bureau charged with the administration of these matters and which this Bureau finds to be detrimental to the commerce of the United States and to the development of its merchant marine. Moreover, I feel that the objections advanced by you to the remedial legislation confuse the right of free access to our ports with a license to injure our foreign trade and the medium of transportation upon which it depends, by the use of unfair practices. Sincerely yours, (Whereupon, at 12: 15 p. m., the hearings were closed.) |