points, to try and find the answers to the problem. It is not so much a matter of agreeing as of trying to find the answers to problems that your committee and the Maritime Commission and everybody is struggling with. Mr. CHURCH. How much more time do you need to come to an agreement on the matter of restrictions? Mr. ROTH. I would not know. Mr. CHURCH. A week or two? [Laughter from the audience.] Mr. ROTH. You hear the gentlemen in the back give their answer. The CHAIRMAN. You and we can come nearer determining that when we hear the various gentlemen who are here to testify this morning. Is there anything else? Mr. CHURCH. Were the meetings at Rye a part of conferences held a while ago at which Admiral Waesche was Chairman? Mr. ROTH. No; that is a different matter. That is a question of preparation for a future international conference on safety at sea. This is preliminary work being done in anticipation that such a conference will be held after the war. The CHAIRMAN. That is purely safety at sea. That is the Maritime Council. Mr. CHURCH. But that is an important factor here, too is it not? Mr. ROTH. It is. The State Department has asked the Coast Guard to prepare for a conference to be held in the future looking to a revision of our present international codes on safety at sea, and the Coast Guard nas invited in representatives of all various interests in the industry to participate in that preparation, and the steamship industry in all of its various branches is participating in that preliminary work. Mr. CHURCH. Is not the question involved there one of our industry competing with, say, lower standards-standards of wages and health and all that sort of thing-and is that not very important? Mr. ROTH. It is very important, because this country has the highest standards in the world, and it costs to maintain standards of safety. These various things which we do conform to in the operation of our vessels other nations have not come up to in their standards, and this is an effort, I think, to equalize, if we can, the standards of different countries. Mr. CHURCH. That will not be settled until further treaties or international conferences. Mr. ROTH. That is right. The CHAIRMAN. Are there any further questions? If not, stand aside. The next witness is H. Gerrish Smith, president of the Shipbuilders Council of America. Mr. Smith is unable to be here, but his statement will be inserted in the record at this point. STATEMENT OF H. GERRISH SMITH, PRESIDENT, SHIPBUILDERS COUNCIL OF AMERICA, NEW YORK, N. Y. Members of the Shipbuilders Council of America have had under consideration H. R. 1425, a bill to provide for the sale of certain Government-owned merchant vessels, and for other purposes. We have been advised officially by your committee that hearings on this bill will be started on March 1. Please accept our thanks for the courtesy of this notice. 71770-45-pt. 1-4 Shipbuilders are seriously concerned with proposed legislation dealing with the sale of ships; for the disposal of the Government's vast tonnage inevitably will affect the future of the shipbuilding industry, as well as American ship ownership and operation. I am glad to be able to say that most of the provisions in the pending measure are not such as to require any comment from the industry. However, there are two parts of the bill on which I trust you will permit me to offer suggestions on behalf of the industry. Paragraph (b) of section 3, beginning on line 22, page 5, appears to the shipbuilders to offer to prospective purchasers in the coastwise trade extremely liberal terms, to wit: The sale of modern American-built vessels on the basis of pre-war foreign costs, which are recognized as approximately one-half of the domestic costs. These prices would be minus depreciation. Nevertheless, the Shipbuilders Council advances no opinion in support or opposition to these terms. It does say to your committee, however, that, if there is to be any shipbuilding in the future for the coastwise trade, a time limit most certainly must be applied to the period in which ships may be purchased at the proposed low price. To carry into effect this safeguard, I. therefore, respectfully submit, on behalf of the Shipbuilders Council of America, the following amendment for your consideration: "Page 6, Line 6, after the word States, strike the period, insert in lieu therefor a semicolon, and add the following proviso: 'Provided, That the period of time in which ships shall be sold for coastwise operation under the provisions of this section shall not continue for more than one year after the vessels are made available for sale.'" It is earnestly hoped by the members of the Shipbuilders Council that this proposed amendment shall receive your favorable consideration, and that it shall be incorporated in the bill as finally enacted. Preservation of an efficient American shipbuilding industry is vitally essential to the maintenance and operation of an adequate American merchant marine, as well as to national defense. Obviously, if the ships which shall be available after the war are held by the Government for an indefinite period, awaiting purchase, there shall be no building of new vessels as long as the old, cheap ones are available. If the ships in question which are left after the close of the suggested 1-year-sale period could not be otherwise disposed of to advantage, they should be consigned to the proposed sanctuary, where they would be available in the event of another national emergency, or else they should be scrapped. The second part of H. R. 1425 to which we wish to urge an amendment is paragraph (c), section 10, titled, "General provisions." Under the language of this paragraph as it now stands, it appears to us that it might be possible to bring under the American flag and operate in the coastwise trade vessels which were especially barred under Public Law 191, Seventy-fourth Congress, approved July 2, 1935. This act specifically amended section 27 of the Merchant Marine Act of 1920, by inserting the following language: "No vessel having at any time acquired the lawful right to engage in the coastwise trade, either by virtue of having been built in, or documented in whole or in part under the laws of the United States, and later sold foreign in whole or in part, or placed under foreign register, shall hereafter acquire the right to engage in the coastwise trade." The provision in the pending bill, paragraph (c), section 10, as above referred to, is designed to meet an entirely legitimate need, but it should be relieved of all possible ambiguity that might possibly open it up to a wider interpretation permitting entry into the coastwise trade of vessels which properly do not belong there. This purpose can be accomplished by adopting the following to amend ments: "Page 18, line 5, after the word 'vessel' insert: 'which has been constructed by the Commission within the continental limits of the United States or so constructed under contracts executed on behalf of the Commission and which has been.'" "Page 18, line 10, after 'registry' insert: 'but where title was retained by the United States or any agency thereof.'" These two amendments would make the paragraph read as follows: "(c) Notwithstanding the provisions of section 27 of the Merchant Marine Act, 1920, as amended (U. S. C., title 46, sec. 883), no vessel which has been constructed by the Commission within the continental limits of the United States or so constructed under contracts executed on behalf of the Commission and which has been sold or chartered by the Commission under this Act to a citizen of the United States shall be prohibited from engaging in the coastwise trade of the United States while owned by or chartered to such citizen or citizen successors in interest merely because it was under foreign registry but where title was re tained by the United States or any agency thereof subsequent to May 27, 1941, and prior to its sale or charter under this Act to such citizen, if it is otherwise entitled under the laws of the United States to engage in such trade." I would be pleased to have your reaction to the foregoing suggestions. The CHAIRMAN. Is Mr. George W. Morgan, representing the Association of American Ship Owners, in the room? STATEMENT OF GEORGE W. MORGAN, ASSOCIATION OF AMERICAN SHIP OWNERS, NEW YORK, N. Y. Mr. MORGAN. My name is George W. Morgan. I am an attorney at law, and I represent the Association of American Ship Owners. The Association of American Ship Owners is composed of 16 of the oldest and most substantial American steamship companies. Prior to the war these companies owned and operated in domestic and foreign commerce 237 ocean-going American-flag freight and passenger vessels aggregating 1,813,921 deadweight tons. None were subsidized under the Merchant Marine Act, 1936. A large number of their vessels have been lost either through enemy action or by requisition for title. All of their remaining ships have been taken for use by the War Shipping Administration and are being operated for Government account. problem. These companies face a serious replacement The majority of the members of this association do not feel that they can justify investment in replacement ships at the prices and under the restrictive conditions contemplated by this bill. So far as we know, no data have been developed to justify the proposed prices on the basis of post-war earnings prospects of Americaflag ships. The Maritime Commission's last annual report to Congress states that it is making studies along these lines. It would seem that an opportunity to make use of such data would be extremely helpful to this committee and to the industry prior to enactment of a bill. We call your attention to the fact that the purchase and sale of ships will be greatly affected by the international situation after the war. This is presently obscure. At the present time the United States Government, in cooperation with the Governments of Belgium, Canada, Greece, the Netherlands, Norway, Poland, Great Britain, and France have entered into an agreement, extending until 6 months after the cessation of hostilities. It provides that all merchant shipping will be operated under the joint control of these Governments. Thus they will not be operated for private account. It is true that this agreement appears to contemplate possible restoration of some private operations at an earlier date but the fact remains that any ship bought by a citizen today would immediately be taken back for use by this Government. While we all agree that a proper ship disposal bill should be passed, the foregoing indicates that there is ample time to give the provisions of the bill thorough consideration. Before the war, the unsubsidized American owner had its ships and was free to use them or charter them or sell them for operation anywhere in the world. There were no restrictions clouding their titles. The bill proposes sales at two different prices first, pre-war domestic cost and second, pre-war foreign cost, which may be lower by 50 percent than the domestic figure. Vessels sold to citizens at the lower price are to be restricted. No restriction is imposed on the foreign buyer who pays the same price, so, if citizens wish to acquire free and unrestricted ships, such as were taken from them for war service, they are asked to pay twice as much as anyone else. The foreigner who cannot be effectively restricted, pays the lower price without restrictions so that the bill prefers foreigners over citizens. We had intended to discuss this phase of the bill at some length but in view of Admiral Land's statement yesterday, this discrimination against the American owner has been clearly presented to the committee. The Commission's memorandum on this bill states the general question as to restrictions upon our own citizens is a major policy question. The erasing of such distinctions would be a departure from the theory of the 1936 act which limited price concessions below prevailing domestic construction costs to operations in the "essential trade routes." But are there any price concessions in this bill? Admiral Land testified before the subcommittee of the House Committee on Appropriations when hearings were held on the independent offices appropriations bill for 1946 in part as follows: * * * Actually, my original idea was to sell them at a little better than 50 percent because that is all you are going to realize. You cannot do much better than 50percent. We are trying to sell a surplus commodity, and in order to do so you have to get a buyer. The chances are if your price is high your buyer will not buy. In other words, Admiral Land does not think that he will find buyers. at full domestic cost. He believes that a price that will attract buyers cannot exceed about 50 percent of that figure. That is a market value approach and the sale of anything at market value involves no price concessions. The pre-war unsubsidized American merchant marine was far greater in numbers of ships and in tonnages than was the subsidized merchant marine. Two-thirds of the pre-war American merchant marine-including tankers-was engaged in the unsubsidized domestic trades and more than one-half of the ships engaged in the foreign trades operated without subsidies. There has never been at any one time more that 155 vessels with respect to which operating subsidies were paid. As of June 30, 1942, by which time construction had been stimulated by the war, construction subsidies had been granted for only 158 ships and of those only 108 had been delivered. On the other hand, over 1,000 ocean-going vessels were requisitioned for war service by the War Shipping Administration. The subsidized lines have received not only construction and operating differential subsidies but also exemption of their earnings from taxes, which exemption has not been accorded the unsubsidized owners who have paid taxes on their earnings ranging up to 95 percent. By reason of this situation the subsidized lines are now in a position to expand and modernize their fleets with tax-exempt money to an extent out of all proportion to what the unsubsidized lines can do with funds remaining after the payment of taxes. This is a situation that we think requires attention when this committee considers the suggestions that Admiral Land made yesterday morning. To solve the restriction problem he offered two alternatives. The first was that ships be sold at one price but that all sales to Amer icans be subject to restrictions. This would not solve the problem, however, because the foreigner, who cannot effectively be restricted, is still in a preferred position. The second was that if individual operators wanted no restrictions they pay 20 percent additional for both foreign and domestic services. If this means that foreign buyers shall have two prices offered to them-one for ships with restrictions and 20 percent higher without restrictions-it seems unworkable, since restrictions could not be enforced as to foreign buyers. If the proposal is that the difference in price be offered only to American buyers, it leaves a discrimination against our citizens and in favor of foreigners. Restrictions are a bar to the investment of private capital in American ships. Prudent financial institutions will be reluctant to lend mortgage money on a vessel, the fortunes of which are tied to the economic or political destiny of a particular trade route. We are, therefore, unalterably opposed to restrictions that run with and cloud the titles of ships and that impair their earning power and value. The charter provisions of the bill are, in our opinion, unworkable. Rates and conditions on which American vessels are offered for charter must be predicated on competitive rates and conditions. Otherwise, cargoes intended for American chartered, vessels will be carried by foreign vessels. This principle is, in our judgment, important, but we also believe that American vessels should only be chartered when it is in the best interests of our Merchant Marine and our foreign or domestic commerce. ASSOCIATION OF AMERICAN SHIPOWNERS' LIST OF MEMBERS Alaska Steamship Co., Seattle, Wash. New York, N. Y. A. H. Bull & Co., Inc., New York, N. Y. Eastern Steamship Lines, Inc., Boston, Luckenbach Steamship Co., Inc., New Merchants & Miners Transportation Pacific-Atlantic Steamship Co., Van- Pope & Talbot, Inc., San Francisco, Seatrain Lines, Inc., New York, N. Y. States Steamship Co., Vancouver, Wash. Waterman Steamship Corporation, Mobile, Ala. The CHAIRMAN. Have you any amendments or anything of that kind to suggest, Mr. Morgan? Mr. MORGAN. No, sir. The CHAIRMAN. Any suggestions for the improvement of the bill? Mr. MORGAN. Well, Mr. Chairman, at the moment I have not. The problems that I have covered in my statement I think need to have careful consideration. There is a great deal that is unknown today that we would like to know. We are in favor of a bill; we would like to see a bill passed, but we would like to have all available information before it is passed. The CHAIRMAN. Are there any questions? Mr. BRADLEY. Mr. Morgan, I take it from your argument here that in effect you think this bill as it is now written is almost Fascist in character. In other words, you will be permitted to buy boats |