This concludes the American companies operating in Export's territory. It is to be noted that two companies, Export and Dollar Line-now American President Lines-were subsidized. One company, although American, operated foreign tonnage and the fourth American company, although operating American vessels, was not subsidized.

We now come to the competition that Export had to meet with foreign lines.

The Ellerman Line, an old established British company, operated during the year in question some 18 British vessels from North Atlantic ports to the Mediterranean.

The Bank Line, also British, operated three vessels from North Atlantic ports to the Mediterranean.

Garcia & Diaz represented the Cia. Espanola De Navegacion Maritime, S. A., a Spanish line, and during the year in question handled six vessels in the Mediterranean, serving principally Spanish and Portuguese ports, but only two of these vessels flew the Spanish flag. The others flew the Norwegian or the Danish flag. The vessels were all of good size with a dead-weight tonnage of 8,000.

The Spanish Transatlantic Line, an old established line, operated three combination passenger and freight vessels of good size with a speed in excess of 14 knots. These vessels operated from New York to various ports in Spain.

The Fabre Line, sometimes called the Franco-Iberian Line, operated from North Atlantic ports to Casablanca in French Morocco, to various ports in Portugal and Spain and to Marseilles in France. Curiously enough, during the year in question, this line operated no French vessels. The entire fleet was made up of six time-chartered Norwegian vessels.

Navigazione Libera Triestina, usually shorted to Italia N. L. T., operated a freight service of some six vessels from North Atlantic ports to Italian ports and to Piraeus in Greece. The vessels were from 7,300 to 9,500 dead-weight tons.

The second Italian Line, formerly the Cosulich Line but now referred to as the Cosulich-Italia Line, operated a freight service with six vessels from North Atlantic to Italian ports, with its home port at Trieste, and to Patras in Greece. The vessels were of about 8,500 dead-weight-ton capacity.

The principal Italian line is know nsimply as Italia and is owner of the magnificent passenger vessels, S. S. Rex and S. S. Conte de Savoia, and operated those vessels from New York to Naples and Genoa and operated other passenger and freight vessels from New York to Italian ports, to Algiers, and to Patras in Greece.

Many of these other vessels had been operated by other companies prior to the First World War, but after the First World War Italy grouped its services, incidentally partly as a result of Government aid that Italy was given to the various lines, and such vessels as the S. S. Roma, the S. S. Augustus, the S. S. Vulcania and the S. S. Saturnia and a number of smaller vessels were operated between New York and various ports in the Mediterranean, principally Italian.

The foregoing gives what might be called the regular services between the Mediterranean and North Atlantic ports. In addition to the so-called liner services we have, of course, the so-called tramp,

a vessel often operated under charter and not operating on a regular service or line but only as cargo offers.

Mr. BRADLEY. I am very much interested in these contracts that you have got for your subsidy, both construction and operation. I wonder if you can secure some of those contracts for us, or perhaps. we can get them from the Maritime Commission.

Colonel GARDNER. I think it would be well, sir, if they would be obtained in the Maritime Commission. Naturally those are official. documents. They have copies of every single contract, and they also receive complete reports. They have their inspectors and auditors with us at all times. They are kept right up to date.

Mr. BRADLEY. As I understand this question of the operating dif ferential subsidy, that is designed to offset the difference in cost of operating an American-flag ship, with its larger crews, higher wage scales, and so forth, as against the lower cost of foreign-flag competition.

Colonel GARDNER. That is correct. That is the theory under which this arrangement was made. That is the underlying theory back of the act of Congress.

Mr. BRADLEY. How do you arrive at those differentials? What is the method by which those differentials are arrived at?

Colonel GARDNER. Well, through their various contacts the Maritime Commission had all the information it could with respect to rates of wages paid. Those are to a certain extent public information in all countries. They get the information as to the wages, as to the cost of subsistence, and as to the cost of materials and supplies that are used, like fuel and lubricating oil; other commodities such as rope, material, paint, and so on, that the foreign companies pay. Also information as to what it costs to repair a vessel-all the different items. of expense that go to make up the maintenance of a vessel under, we will say, the Italian flag. Then they get the corresponding costs here. Mr. BRADLEY. Well now, of course in the case of the wage rates they would have to know, then, how many crew members they had and so on to get the total wage cost.

Colonel GARDNER. That is right. They take comparable vessels and get the total over-all cost. That, of course, would include the question that if one operated with some 30 seamen and the other with 40, of course you would have an extra 10 to take care of.

Mr. BRADLEY. At that point let me ask you this: How accurate do you assume the information that the Maritime Commission is able to get is? Is it very accurate? In other words, are the foreigners trying to hide some of their costs, or "up" their costs, if you please, so that you get a lower differential, and thereby they have got something hidden in the basket whereby they can still undercut you when it comes to bidding for the business?

Colonel GARDNER. Naturally, of course, in seeking information of that kind, of a technical character, if it is to be used against the foreigner by our setting up a service like we have set up, he is not going to be too helpful, too cooperative, but still the information on the whole, I think, is fairly accurate. It is the same type of accuracy that we get in submitting technical or professional information in connection with any controversial matter.

The CHAIRMAN. That is reexamined every year, is it not?

Colonel GARDNER. Yes. Every year the Maritime Commission, under the act, can reexamine the comparable cost and can reduce this differential operating subsidy at the end of any year. They cannot, as I said yesterday, under the law, do it oftener than once a year, but every year they can do that.

Mr. BRADLEY. The point I am trying to get at is this: Does the Maritime Commission establish your differential, or is it a matter of negotiation between your company and the Maritime Commission! Colonel GARDNER. It is a matter of the company, of course, itself submitting its proposal with regard to a different route, and they have a long questionnaire. You fill out all that information as to what you do, the kind of commodities you carry, the competition you have, the names of the lines that operate in that territory, the details as to the cost of operation of your boats down to the last dollar. All of those items you submit to the Maritime Commission. They take that, and then they check it against their own information which they obtain separately and independently. They have a group, a committee, especially appointed to make a complete investigation of this information. That report of that committee-I think they refer to it as the examining committee, or some such name, in the Maritime Commission; at least they did in 1938-is then turned over to the Commission itself, and then they vote on the recommendation of their own committees as to how much the differential shall be.

Mr. BRADLEY. And then you take it or leave it?

Colonel GARDNER. That is right, sir. You, of course, could try to make a better case. You could point out any inaccuracies they have in their situation.

Mr. BRADLEY. That is what I am getting at. Then it is a matter of negotiation.

Colonel GARDNER. I would not call it exactly that. It is not like you bargain for it. You have to have the information that backs up your proposition. They take that independently and pass on it, just like a court or commission would pass on information submitted to it.

Mr. BRADLEY. Well now, supposing on a certain route you are not satisfied with the differential, and you say that "We just simply cannot afford to operate in that service any longer at this low differential." Do you then have the privilege of pulling out of the route?

Colonel GARDNER. There is a provision in the law that if you found yourself just going into bankruptcy in spite of the subsidy and could not possibly go on, there is a provision whereby it can be taken up and you can get out of it. There is somewhat of a heavy penalty, however.

Mr. BRADLEY. If you get out, who then picks up the service? Does the Maritime Commission look around for another operator who thinks he can operate it?

Colonel GARDNER. I will best illustrate that by this: Under the Jones-White Act of 1928 we had many more services operating than we have today. As I mentioned yesterday, there was a service to the West Coast of Africa. There was a service by the Black Diamond Line to Belgium. There was a Government service called the American-France service to France. There was a service from the southern part of the United States to various points in Europe by the Waterman Steamship Corporation. None of those services is filled today

and all could be filled tomorrow if you or anyone else having a fleet and experience and the proper kind of a case would apply for those

routes.

Now, if a route that is operated today by Export is given up by Export, then that route would be in the same position of these discontinued routes that operated under the Jones-White Act that are now available to anybody who wants to fill them.

Mr. BRADLEY. The reason I bring that up is this: Let us make a hypothetical case. We will assume that American Export were operating in the Mediterranean service with slow, inefficient type ships, maybe reciprocating engines, and you found because of that efficiency that you could not operate under the differential given you by the Martime Commission and you gave up your route, whereas another fellow who perhaps was operating with Diesel-electric power or perhaps turbines could do a better job and still operate under the differential set up by Maritime. Is that the way the thing works out? They would then take over the route?

Colonel GARDNER. There was a special provision in the Merchant Marine Act for that. In the case of an American line that has a subsidy, not furnishing a service that was adequate, that does not furnish the right competition to the foreigner with the better boats, the lower cost of operation; right today the Maritime Commission, under the act of 1936, can put another American operator into that service, if the man who has the contract does not build new boats and keep his line up to the satisfaction of the Maritime Commission.

Mr. BRADLEY. In other words, the Maritime Commission can put him out of the route and substitute another operator?

Colonel GARDNER. That is right, if they do not keep it up. I can give you the quotation on that section if you would like to have it. It is under 605 (c) of the act.

Mr. BRADLEY. Now, Colonel Gardner, I am particularly interested, and we all are, I am sure, in trying to determine what is best to do with this bill, just how it should be amended. I think we are all pretty much in agreement that some amendments will have to be offered to it, and I have been thinking this matter over pretty carefully in my own mind and I want to give you the benefit of my thoughts on it, and get your suggestions, if any.

As I see this over-all question in this bill, the subsidized lines, as I understand it, under this bill will be permitted to buy these surplus ships when the war is over, getting the money out of this $157,000,000 that you have still got in the kitty as you testified yesterday under questioning by Mr. Weichel, and on which you paid no taxes.

Colonel GARDNER. Part of it was tax fee anyhow. It is all tax free in this situation, but part of it would have been anyhow.

Mr. BRADLEY. Nevertheless, there have no taxes been paid on it? Colonel GARDNER. That is right.

Mr. BRADLEY. And you have that $157,000,000 in the kitty.

You said also that any of the other lines who were now unsubsidized could decide to accept a subsidy if they want and come in; but you also testified, if I understood you correctly, that the Maritime Commission could not assign to them any of the routes in which the subsidized lines are now operating. Is that correct?

Colonel GARDNER. If the routes are properly serviced and run, no.

Mr. BRADLEY. In other words, then, there is nothing to your argument about the unsubsidized lines coming in to accept a subsidy, because there are no routes left.

Colonel GARDNER. Oh, yes there are; just as I said a moment ago, there are quite a number of routes which were served in previous times which are still available.

Mr. BRADLEY. And they quit serving them because there wasn't any business there.

Čolonel GARDNER. In some cases they quit for that purpose. As a matter of fact, they quit for some other reasons, too, in some cases. Mr. BRADLEY. What are the other reasons?

Colonel GARDNER. There are other reasons, where they wanted to make various other arrangements, not submit to the close controls the subsidized lines must submit to.

Mr. BRADLEY. In other words, your 12 subsidized lines right now have the business bottled up, have they not?

Colonel GARDNER. No; they have not. As I just said to you, the service to the West Coast of Africa is operated today by the same people that had it under the Jones-White Act. If they wanted to take out a subsidy there, and comply with the controls of the Merchant Marine Act of '36, they could get a subsidy there.

Mr. BRADLEY. But they must have found it too burdensome to accept, and they probably would still find it too burdensome to accept again, so to all practical purposes your 12 lines, as I see it-and I want to be set right if I am wrong-have a virtual monopoly on the subsidized routes.

Colonel GARDNER. They have a priority.

Mr. BRADLEY. On the desirable subsidized routes.

Colonel GARDNER. They have a priority on those 12 subsidized routes which they must maintain by keeping up the service in a proper manner with new ships, regular service, to the complete satisfaction not only of the merchant marine, the Maritime Commission, but of the Congress, under the act.

Mr. BRADLEY. Now then, you can have two forms of competition set up in the post-war world on those particular routes. First of all you can have the unsubsidized American operator who, as I understand it, can operate any place he wants.

Colonel GARDNER. That is right.

Mr. BRADLEY. So long as he puts up his own money. True, he has made more profit, perhaps, than ever before in the history of the business, during this war effort.

Colonel GARDNER. You mean this war effort?

Mr. BRADLEY. Yes.

Colonel GARDNER. We must not think of profit for anybody in shipping as being excessive in this war compared with the last war. That is closely restricted as to American vessels, for everybody.

Mr. BRADLEY. What I am getting at is this: Whatever profits he has made have, in large measure, been taken away from him by taxation?

Colonel GARDNER. A substantial amount. I want to give some information to you on that, as to what the exact situation is on taxes, if I may, a little later.

Mr. BRADLEY. That is Mr. Weichel's field.