Mr. SIROVICH. Are you going to bring out about the Rex and the Conte di Savoia, the Vulcania and those ships?

Mr. SAUGSTAD. As individual ships?

Mr. SIROVICH. No; I mean the company that owns and operates them, and the subsidies they received.

Mr. SAUGSTAD. The Conte di Savoia and the Rex

Mr. SIROVICH. And also how they were constructed, the loans of the Government to them, and how they are being amortized.

Mr. SAUGSTAD. I can give you some details of the loans; I can give you nothing on the operative subsidies, because the ships operate principally on the New York run and that is not a subsidized line of the Italian Government. There is only one subsidized line into this country from Italy, and that is the one I have stated which terminates on the Pacific North American coast.

Mr. SIROVICH. Of course, the statement has been made here by witnesses that these super liners are losing a tremendous amount of money and, if they are not being subsidized by the Italian Government, I would like to know how they defray their deficiency.

Mr. SAUGSTAD. That is something I cannot tell you. When we get to the construction and the insurance policy on those vessels, we will consider that.

Mr. SIROVICH. Very well; let us hear what you have to say first. Mr. SAUGSTAD. If there are no further questions on the operative features of the Italian subsidized lines

Mr. SIROVICH. Oh, yes; I would like to ask you regarding the personnel. Are the men trained who act as seamen on all of these Italian ships; do they get paid by the company just for the trip they make, or are they paid by the year; do they receive old-age security; do they get protection when they are injured? Give us all of the facts about that.

Mr. SAUGSTAD. I shall refer to Italian social legislation, as included under this contract system, at the close of this discussion, if you please. Mr. SIROVICH. All right.

Mr. SAUGSTAD. I might say we have obtained a good deal of information on it, but it has been impossible for me to study the regulations and all the conditions that are there. I can say, only briefly, in answer to your question now, that at least on the two principal groups the contracts cover not only operation of the lines but provide a definite plan of security for both the sea-going and office personnel of the contracting lines. That is a general statement.

Mr. WEARIN. Is that personnel generally composed of Italian citizens?

Mr. SAUGSTAD. It is probably all Italian citizens.

Mr. CULKIN. You said a few minutes ago, as I understood you, that in all the contract services the requirements are that the Italian ships should be manned by Italians.

Mr. SAUGSTAD. Yes.

Mr. CULKIN. You made some such reference.

Mr. SAUGSTAD. Yes, in the "indispensable" lines that is true. I assume that it holds good on the "useful" lines, also.

Mr. SIROVICH. And you made use of the expression in the "useful" lines that even the officers in ports can only be foreigners with the consent of the Government?

Mr. SAUGSTAD. Yes, sir.

Mr. SIROVICH. So I assume everybody else must be Italians.

Mr. SAUGSTAD. I should assume every person in the crew of an Italian ship is an Italian citizen.

Mr. CULKIN. I understand you to say now it is written into these contracts as to the details of handling the personnel, the wages paid, the old-age security, and that sort of thing?

Mr. SAUGSTAD. Yes, sir.

Mr. CULKIN. Now is that pursuant to law that that is written in, or is it simply a matter of contract?

Mr. SAUGSTAD. That comes under the general provisions, first, of the social insurance laws of Italy as a whole, I presume, and, secondly, under the decrees that cover regulations under which all subsidized lines operate.

Mr. CULKIN. So that hand in hand with granting a subsidy or some beneficial treatment, the Government takes a hand in the question of the status of the personnel?

Mr. SAUGSTAD. Yes, sir; positively. During the past year there has been some reduction in pay of the personnel. This does not necessarily apply to the subsidized lines

Mr. CULKIN. Well, that was general in all employments in Italy, was it not?

Mr. SAUGSTAD. I presume so; yes, sir.

Mr. CULKIN. That was part of the national policy.

Mr. SIROVICH. The National Economy Act of Italy.

Mr. CULKIN. That is my understanding, that it was part of the policy of the Government.

Mr. SAUGSTAD. If there are no further questions on the subsidized lines, the next subject is

SUBSIDIES TO TRAMP SHIPPING IN ITALY

In 1932 the Government of Italy enacted a cargo ship bounty law for the purpose of giving subsidies to operators of ordinary cargo ships. For the period this policy has been in force, the annual expenditure has been 70,000,000 lire annually, an amount equal to $3,682,000 at gold par value of the lire, and $5,900,000 at current exchange. We have just received notice that this policy has been extended to the end of 1935 and that the amount has been reduced from 70,000,000 to 50,000 000 lire for this year.

Originally the law provided for a period of 1 year beginning January 1, 1932. The basic bounty rates were established on the basis of gross tonnage of the vessels by an amount per nautical mile sailed and these rates were reduced according to the age of the ship through a coefficient system which covers the age of a vessel from 1 year to 50 years of age.

In order to place a limit on what ships might earn under this policy, the Italian Government established limitations as to the amount of mileage for which a vessel could claim bounties during a single year. Thus, for vessels of from 1 to 1,500 gross tons, a limit of 18,000 miles was established; for vessels of from 1,500 to 2,500 gross tons, a limit of 30,000 miles; and, from 2,500 gross tons and upwards, a limit of 40,000 miles.

The subsidy was available for ships operating between Italian ports, but in calculating subsidies only two-thirds of the authorized amount was allowed under those circumstances.

The eligibility requirements provide that steam and motor ships of less than 100 gross tons were ineligible; sailing vessels, vessels already in the subsidized services; vessels more than 12 years old, and vessels whose owners did not submit claims under the law prior to January 31, 1935.

Mr. CULKIN. Right there: Do you know whether or not there is any requirement under the Italian law or regulations that requires service on sailing ships on the part of the officers?

Mr. SAUGSTAD. No, sir, I do not know.

Mr. CULKIN. And the men in the merchant marine?

Mr. SAUGSTAD. I do not know that.

Mr. CULKIN. Do you know what nationals do require that?

Mr. SAUGSTAD. I do not know, but I believe we have available sufficient information on the school and training systems so that I might find it.

Mr. CULKIN. I would like to see that in reference to the Germans and Italians. You understand what I mean.

Mr. SAUGSTAD. Yes, sir, I understand.

Mr. CULKIN. That is a requirement as to preliminary training in sailing vessels.

Mr. SAUGSTAD. I have no direct knowledge on that, but I believe we have some information we can supply.

The cargo ship bounty system has worked about the same as the system described under France, with various limitations, I can say that we applied all conditions to a test case of a ship sailing from Genoa to the Gulf of Mexico and we found, in that instance, that a 5,000-ton ship was capable under the service of earning something like 33 cents per mile which, Mr. Chairman, is practically the amount calculated for cargo ship bounties in the proposed 1922 subsidy bill, which you recall. It works out at about the same amount.

There is in force in Italy a policy to scrap ships. This policy has now been in force for 4 years and the fourth contingent is effective until June 30, 1935. The authorized expenditures have been 5,000,000 lire annually, with 4,400,000 lire for 1934-35.

The total tonnage to be broken up under the provisions is reported to be 800,000 gross tons, and the subsidy rate is 25 lire per gross ton for each ton broken up.

The CHAIRMAN. Is that a payment to the ship owner?

Mr. SAUGSTAD. Yes; to the owner of the ship.

The CHAIRMAN. To be used in new construction?

Mr. SAUGSTAD. No, sir. The next subject, unless there are questions

Mr. HART. May I ask the period over which this 800,000 gross tons were destroyed, please? I did not get that.

Mr. SAUGSTAD. It is supposed to be over the period of 4 years. A recent extension of time has been made for completion of the program which finally is to end June 30, 1936.

In Italy, as in France, the maritime credit is provided through loans available through private channels. Thus, a specially organized bank was authorized to lend 400,000,000 lire for 1928-29; 300,000,000 lire for 1929-30; 300,000,000 lire for 1930-31; and not to exceed 200,000,000 lire during the 4-year period 1931-32 to 1934-35in other words, the entire amount is not to exceed 1,200,000,000 lire. To raise funds for this purpose, the credit institute was authorized to sell bonds. The total authorized amount at gold lira is about

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$63,000,000 and at current exchange about $102,000,000. The interesting part of this loan fund is the fact that in the creation of the Maritime Credit Institute the Government authorized the use of various deposit and loan funds, social security funds, such as invalid foundations, social insurance funds, and other types. It authorized also the use of trust funds which, under other circumstances, could not be utilized for this purpose.

To these loans, the Government contributes annually 1 percent of the interest on ships purchased in foreign countries; 21⁄2 percent on vessels built in Italy with a special provision, as of November 1932, to increase this by 2% percent, or an equivalent of a total of 5 percent, on vessels built in Italy which are of 45,000 gross tons and of a speed of more than 26 knots.

Mr. SIROVICH. In other words, she only contributes 5 percent as a subsidy for building the ships over 46,000 tons?

Mr. SAUGSTAD. Interest contribution on the financing of the ship; yes, sir.

Mr. SIROVICH. The ship that is under construction?

Mr. SAUGSTAD. There are other contributions made on the construction itself. We are now dealing solely with the finance provisions. The added contribution is effective until June 1935.

In 1934, an added high-speed interest provision was applied to projected renewal and speed-up programs.

Mr. SIROVICH. Outside of the Conte di Savoia and the Rex, are there any Italian ships that have more than 26 knots?

Mr. SAUGSTAD. I do not know, sir; I do not believe so. I think those ships are the only ones capable of that speed, although I know there is under reconstruction at this time some of the other vessels with new power plants.

Mr. SIROVICH. That will make more than 26 knots?

Mr. SAUGSTAD. I cannot say they will make more than 26 knots, but they are being speeded up.

Have you any questions on the Maritime Credit Institute?

Mr. SIROVICH. Yes; I was out of the room at the time you spoke of construction. Do I understand there is no construction fund of Italy at all; but it is controlled under a banking organization which loans direct for construction?

Mr. SAUGSTAD. There is a banking fund which provides for financing.

Mr. SIROVICH. Who controls this banking fund-a private organization?

Mr. SAUGSTAD. It is a special organization under special charter issued by the Italian Government.

Mr. SIROVICH. And is the money subscribed to by individuals or groups, or does the Government contribute to that at all?

Mr. SAUGSTAD. I have no knowledge that the Government directly contributes to the capital of the institute.

Mr. SIROVICH. In other words, you have no organization there that is comparable to our own construction loan fund for shipbuilding? Mr. SAUGSTAD. No, sir; there is no such thing.

Mr. SIROVICH. There is no such thing?

Mr. SAUGSTAD. There is no such thing; it is a credit plan.

Mr. SIROVICH. It is really private banking, then.

Mr. SAUGSTAD. Yes, sir. I might say, if you would like, I have the capital subscriptions of the original subscribers.

Mr. SIROVICH. No, I do not want the subscriptions; I just wanted to know whether it was a private or governmental agency.

Mr. SAUGSTAD. It is a private agency under a special charter.

Mr. HART. And the private agency is empowered to sell bonds; is

that so?

Mr. SAUGSTAD. Yes, sir-to raise funds.

The CHAIRMAN. Are they guaranteed in any way by the Government?

Mr. SAUGSTAD. Not the bonds but the loans issued by the Maritime Credit Institute are guaranteed by the Italian Government, both as to interest and principal.

Mr. SIROVICH. Then really it is an indirect subsidy?

Mr. SAUGSTAD. Certainly; but there is financing of tonnage through commercial channels. That is the object of it.

Mr. SIROVICH. That may be true, but the ordinary private channel is assured of one thing, that is, these men or women who subscribe to their stocks and bonds cannot lose, because the Government guarantees them so far as principal and interest is concerned.

Mr. SAUGSTAD. At least 2% percent of the interest; yes, sir.

Mr. SIROVICH. And about how much is that construction fund, in terms of American dollars?

Mr. SAUGSTAD. At gold par of the lira, the entire authorization would amount to about $63,000,000 and, at current exchange, to about $102,000,000.

Mr. SIROVICH. And that is over a period of how many years-21 years?

Mr. SAUGSTAD. The authorization period runs from 1928 to 1935. Mr. SIROVICH. In other words for a 7-year period?

Mr. SAUGSTAD. Yes, sir.

Mr. SIROVICH. They have an opportunity, then, to spend about $8,000,000 a year for construction and the change of obsolete vessels? Mr. SAUGSTAD. Yes, sir.

Mr. SIROVICH. Does that embrace also the reconditioning of ships? Mr. SAUGSTAD. Yes, sir, it does now-during the past year.

Mr. SIROVICH. Now, are the seamen on board of the Italian ships members of the Italian Naval Reserve?

Mr. SAUGSTAD. I cannot say. I assume the officers are, but I do not know about the seamen.

Mr. SIROVICH. Does the Italian Government give any concessions to seamen when they retire, the same as the French do, as you stated, who give them a monopoly of fishing after they retire?

Mr. SAUGSTAD. There are certain pension funds; yes, sir. I am not familiar with the details of those.

In order not to confuse this public Maritime Credit Institution with an entirely private Italian credit institute, I want to explain that there is in Italy another institute which carries practically the same title, which is known as the Italian Maritime Credit Institute. That is a private organization which has about 100 branches in Italy and on the loans of which the Minister of Finance may extend the same interest contributions as he does on the semiofficial loan fund, which is also a maritime credit institution.