So that they do not have anything left for replacement in the way of ships, or reconditioning, or otherwise, and practically nothing for purchase of new ships, would they, after taking 90 percent of the profit?

Mr. WEICHEL. Could you answer that?

Colonel GARDNER. I am not in a position to answer that quite, yes

or no.

Mr. WEICHEL. From what you said, that they would get in the 90percent bracket, it is obvious that they would not have anything left to buy.

Colonel GARDNER. We know that what they paid in taxes is not available to them.

Mr. WEICHEL. If you take 90 percent of the profits there will not be much left.

Colonel GARDNER. Ten percent would be left. That is a mathematical answer.

Mr. WEICHEL. So that these unsubsidized companies would not have, at this time, very much money to buy ships under a very active program for immediate sale of ships, would they?

Colonel GARDNER. They certainly would not have the money that they spent for taxes. We all recognize that.

Mr. WEICHEL. They would not have very much. They might have a little of that 10 percent.

Colonel GARDNER. If they did not pay the 10-percent out, they would have the 10 percent. I do not know what they might do with the 10 percent.

Mr. WEICHEL. They might want to buy ships, if they had the money. Colonel GARDNER. Certainly, if they wanted to remain in shipping, of course they would want to buy ships. We all recognize that.

Mr. WEICHEL. Now, that $157,000,000 or more that is in the untaxed fund, there has been some agitation with reference to taxing that, has there not?

Colonel GARDNER. Yes.

Mr. WEICHEL. You have heard some?

Colonel GARDNER. Yes.

Mr. WEICHEL. Now, an immediate program for the sale of ships would put your 12 companies in a beautiful position to convert this $157,000,000 of untaxed funds into the purchase of ships, to the prejudice of all the other ship operators who are not subsidized and who did not have the benefit of no taxes on their profits. Is that not right?

Colonel GARDNER. Well, we are in this position on that.

Mr. WEICHEL. Could you answer that yes or no?

Colonel GARDNER. No; I would rather not. In the Merchant Marine Act of 1936 the Congress provided, under the wise provisions of that act, on the recommendation of the President, for setting up certain tax-free funds for the express purpose of seeing that the companies could replace their ships. Now, there is nothing peculiar about tax exemption, in one way. New York State many years ago passed an act exempting from taxation any company engaged in foreign commerce with ships. That applies to everybody. That act has been on the statute books for many years. Tax exemption here had a very definite purpose. Now, it is unfortunate if some companies do not get the benefit of that, and I would be the last one in the world to object to any aid that is to be paid to any kind of company like that,

to make that equal, so they could replace their fleets, but when it comes to the question of letting them use that arrangement, then, to drive out these lines which you have established under the Merchant Marine Act, I want to have proper controls exercised in any bill you pass. I would not object at all, because certainly we must expect that these coastal and intercoastal lines want to replace their fleets. They want to have an opportunity to buy these ships. Any way that that can be done, to buy ships to be used in the coastal and intercoastal trade, would certainly have my blessing.

Mr. WEICHEL. That is not an answer to the question. It surely is prejudicial to these other people, who have paid out 90 percent of their earnings in taxes, where the subsidized people have put their 100 percent in a tax-free fund, to now be able to immediately buy ships. Now, is that why you would press an immediate sales bill for socalled surplus ships, so that your people could buy them? And is that what you mean by "control," control of access to the ocean? That is one method.

Colonel GARDNER. We are not pressing this bill, Mr. Congressman. We have not pressed this bill at all. This bill was introduced a long time ago. We have never come down here and urged immediate enactment of a bill, and do not do so today. We are merely supporting the bill before the committee.

Mr. WEICHEL. The American Merchant Marine Institute has advocated it, and members of the American Merchant Marine Institute are your subsidized lines and the industrial owners; is that not true? Colonel GARDNER. When you say industrial ownersMr. WEICHEL. People who carry their own merchandise. Colonel GARDNER. Most of them are common carriers. Mr. WEICHEL. They carry their own merchandise. Colonel GARDNER. Partly.

Mr. KEOGH. May I ask you a question, please?

Can you tell us whether the people you represent would advocate that the restrictions be written directly into the bill, or whether they might better be the subject of regulations promulgated under this bill? Colonel GARDNER. As to that, if the intent was clearly written into the bill to support the carrying out of the provisions of these contracts under the Merchant Marine Act of 1936, if that was clearly expressed in the bill, whether you do it under regulation or whether you write it right into the bill should not make a great deal of difference. I think it would be preferable to have it appear in the bill, if it could be done.

Mr. BUCK. I have one short question, Mr. Chairman.

In addition to the changes recommended by Mr. Roth the other day, are we to understand that the gentleman has no specific changes to recommend in the bill now before us?

Colonel GARDNER. I do not know whether you were here when I first started my statement. I said the bill as it is, subject to these amendments that Mr. Roth has suggested, and with the expectation that you would consider his and refine it, dress it up a little bitthe bill generally, as it stands, we would support. We are not offering any amendments.

Mr. WEICHEL. With reference to the amount of money that you said was available, roughly $157,000,000, I should have asked you

at that time, what are the amounts that have been paid out since the war? Would that not make it up to about $400,000,000 that has been used already out of this fund to purchase ships, of this untaxed money? I got the idea it was somewhere around $400,000,000 somewhere. I understand that great amounts have been withdrawn hastily.

Colonel GARDNER. They have not been withdrawn hastily if by that you mean surreptitiously. The point is that we are in a position where, when we buy a ship, we pay for it. We withdraw money from these funds, just as the law intends.

Mr. WEICHEL. I know that. Do you know whether it has been $100,000,000 that has been withdrawn, or $200,000,000? Answer it yes or no, if you please.

Colonel GARDNER. I do not know, but I could get the figure for you if you would like to have it.

Mr. WEICHEL. You do not know that, even though you represent all these people?

Colonel GARDNER. That particular information I do not have at my fingertips. I still represent these people.

Mr. WEICHEL. Give it to us for the record, please.

Colonel GARDNER. I will do that.

Mr. JACKSON. What would be the net earnings of the nonsubsidized lines for the past-since 1940, we will say?

Colonel GARDNER. Well, if you mean all American lines, of course, naturally that is information that I could not possibly have.

Mr. JACKSON. Just by way of comparison. You have talked about this nontaxable fund that has been set up for the purchase of ships. Colonel GARDNER. If you take their earnings prior to taxes, of

course

Mr. JACKSON. The 90-percent bracket did not start in 1940.

Colonel GARDNER. If you take their earnings starting with the war, of course, you are in a position where the companies not entitled to put their money in reserve funds, and who did not use any of their money to purchase new ships would be in a less favorable position. than those who had during that period..

Mr. JACKSON. I think it might be helpful if we had that infor

mation.

Colonel GARDNER. I do not know whether the Maritime Commission could furnish that.

Mr. JACKSON. I would like to have the information as to the net earnings of the nonsubsidized companies since 1939 to date.

Mr. WEICHEL. Mr. Chairman, supplementing what Mr. Jackson said, I would kindly ask that the Maritime Commission submit a comparative sheet of the subsidized earnings and the taxes they paid, and the unsubsidized and the taxes they paid, so we can examine them down the line.

Mr. JACKSON. I will withdraw my request and join in your request. Colonel GARDNER. Can the witness join in the request, Mr. Chairman, to the extent of having the Maritime Commission furnish a statement of the money that has gone through these funds? Then it will be official and to the point.

Mr. WEICHEL. Thank you for the suggestion.

The CHAIRMAN. The request will be submitted.

(The information will be found on p. 531 in the appendix.)

Mr. WEICHEL. With reference to those two funds, are we asking for the same period of time everything that was paid, and what was withdrawn for the same period?

Colonel GARDNER. As to the last observation of Mr. Weichel, I would like to make just one comment. The same money may go into the fund twice. If we lose a ship, all the money we receive in insurance goes into the capital reserve fund. If we lose that one again, the money goes back into the fund again.

Mr. WEICHEL. But there are never any taxes paid on it.

Colonel GARDNER. That is right. You provided for that very wisely

in the 1936 act.

Mr. CHURCH. I want to ask you, Colonel-you say you are for this bill. But do you not recognize in this bill that there is this great preference for the sale of these ships to the foreigner as against our citizens? You recognize that, do you not?

Colonel GARDNER. I recognize that there is that situation.

Mr. CHURCH. Therefore this committee and you should be in favor of getting that corrected.

Colonel GARDNER. If it is possible to do that without injuring other established American interests.

Mr. CHURCH. Assuming we are going to pass this bill, how soon do you feel it is imperative that the bill be enacted into law?"

Colonel GARDNER. Do not put me in the embarrassing position of one of these people that is trying to guess when the war will be over. You must have this in mind. This is not in the way of any prediction. Vessels that have been taken for war service will have to continue in war service until our troops come home. They will have to continue to supply troops abroad. So that with the mere ending of hostilities the need for Government use of vessels will not break off at once. It is hard to say how long after the war the Government will continue to need ships. But I should think it would be desirable, prior to the ships being turned back into idleness or into reserve, that we have some arrangement provided whereby they can be used or turned back, if possible, to private operators.

Mr. CHURCH. In other words, Members of Congress should certainly be prepared to act quickly?

Colonel GARDNER. I would say so.

Mr. CHURCH. Before that date of importance comes?

Colonel GARDNER. That is right.

Mr. CHURCH. Rather than hastily, a year or two even in advance of the proper time?

Colonel GARDNER. My feeling is that you should anticipate, if you can-have a reasonable time-so that private companies, subsidized and unsubsidized, who want to buy ships, can get their house in order to do what they can to buy ships.

Mr. CHURCH. Is there not a possible problem here of perhaps too much building of special ships at this time?

Colonel GARDNER. Well, you know, I would much rather we would have a few too many than too little too late. That, as you know, was Mr. Churchill's good expression.

Mr. CHURCH. And, of course, I agree with him.

I wondered if you had thought of whether or not there would soon be the problem of cutting down the building of ships.

Colonel GARDNER. The Maritime Commission is already, as you possibly know, tapering off their program, and it is a matter that tapers off in two ways. One is, they are letting less orders, virtually stopping the construction of the Liberties, and they are building more of ships which they feel will go into a long-range program, these better ships. I think the Maritime Commission has done a marvelous job. I could not pay too great a tribute to Admiral Land and Admiral Vickery and the others of the staff who have done this magnificent job of building this fleet for us.

Mr. CHURCH. You spoke of your 12-year contracts. I believe you termed them that way, unexpired contracts. Do you expect the same terms of those contracts to prevail now, if the war ends, or do you. not expect the Maritime Commission to make a great deal of changes and modifications under so many terms where, in their discretion, they may make certain changes modifying your so-called 12-year contracts?

Colonel GARDNER. It is possible that they might, in their wisdom, decide to make changes. Then they would sit down with these operators and talk over any changes that were proper to be made in the light of circumstances.

Mr. HALE. I just want to ask the witness one single question, if he approved the provisions of the bill with reference to price floors.

Colonel GARDNER. As to that, in general we do, but we are not at all adamant about that. We feel that we could go along with the bill as it is, but there is probably leeway for making some changes in that respect.

Mr. HALE. Do you mean that you are emphatically in favor of having price floor provisions, but your mind is not set on these particular provisions?

Colonel GARDNER. I would not say we were arbitrary about that. We are more concerned about the question of having proper control as to how the ships are to be used in relation to our services and lines than we are about the question of price.

The CHAIRMAN. Are there any further questions?

The Chair has received a reply to a letter that we wrote the Secretary of State dated January 15, 1945, which read:

I am today introducing a new copy of the ship-disposal bill, on which it is proposed at an early date to hold hearings, and possibly the State Department will be called. I shall appreciate any additional information you are able to give me and particularly the information referred to in the above-quoted portion of your letter.

That paragraph read:

The Department is giving further consideration to the whole question of arrangements or agreements with other countries regarding shipping, particu larly Great Britain, and as soon as this matter has been thoroughly investigated I will transmit to you the pertinent information.

The reply of the Secretary of State will be printed as a committee document and distributed among the members as soon as possible. (The document referred is committee document No. 17 and will be found on p. 509.)

The CHAIRMAN. The committee stands adjourned until 10 o'clock tomorrow morning.

(Whereupon, at 12:20 p. m., the hearing was adjourned until the following day, Wednesday, March 7, 1945, at 10 a. m.)