It is, of course, generally recognized that despite this favorable trend, all of the problems created by block obsolescene are not entirely solved. While the ship operators have entered into long-term agreements in which they have committed themselves to a certain phased schedule of new construction, there still remain tremendous financial problems to be overcome both now and in the future. The inducement of new private capital to invest in shipping is probably the most pressing of these problems. The enactment of H. R. 12739 is viewed as a necessary step to make investment in ships of the American merchant marine more attractive. By insuring prompt payment in case of default it will create greater public confidence in shipping securities. The situation that arose in connection with the recent Carib Queen guaranty under title XI pinpointed the need for a prompt payment system of some sort. The system envisioned by H. R. 12739 would seem to be appropriate and the members of the council urge enactment of the bill. Sincerely yours, Hon. HERBERT C. BONNER, L. R. SANFORD, President. LABOR-MANAGEMENT MARITIME COMMITTEE, Chairman, House Merchant Marine and Fisheries Committee, Washington, D. C. DEAR CONGRESSMAN BONNER: The Labor-Management Maritime Committee favors the enactment of H. R. 12739. This measure, if approved into law, would implement the Federal ship mortgage insurance provisions of the 1936 Merchant Marine Act, as amended. This results by having available to the Federal ship mortgage insurance fund moneys to meet claims caused by default on insured loans. Thus, the necessity of appropriating moneys for any particular default would be eliminated. The placing of the fund on an administered basis, instead of an appropriating one, should create an atmosphere conducive to : (1) Attracting private capital to the industry; (2) Lowering interest rates which the companies would pay for their ship replacements; thus, (3) Reducing overall financing expenses; and (4) Providing possible increase of recapture by the Government in the case of the subsidized lines. Obtaining of the foregoing results through approval of H. R. 12739, which in no way increases the liability of the Government, should have an overall beneficial effect on the American merchant marine. Accordingly, we favor approval of the bill by your committee and the United States House of Representatives. Respectfully yours, EARL W. CLARK, Codirectors. SHIP MORTGAGE INSURANCE LEGISLATION FRIDAY, JULY 18, 1958 HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON MERCHANT MARINE, OF THE COMMITTEE ON MERCHANT MARINE AND FISHERIES, Washington, D. C. The subcommittee met at 10 a. m., pursuant to notice, in room 219, Old House Office Building, Hon. Herbert C. Bonner (chairman) presiding. Present: Representatives Bonner, Thompson, Miller, Ashley, Allen, Van Pelt, Ray, Mailliard, and Pelly. Also present: Representatives Clark, Dingell, Young, Tollefson, Curtin, McIntosh, and Glenn. Staff members present: John M. Drewry, chief counsel, and William B. Winfield, chief clerk. The CHAIRMAN. The committee will come to order. The committee is meeting this morning for consideration of H. R. 13153, a bill introduced by our former colleague, Congressman Bennett, to amend title XI of the Merchant Marine Act, 1936, to add floating drydocks to the types of vessels that will be eligible for Federal ship-mortgage insurance. (H. R. 13153 is as follows:) [H. R. 13153, 85th Cong., 2d sess.] A BILL To amend title XI of the Merchant Marine Act, 1936, relating to Federal ship mortgage insurance, in order to include floating drydocks under the definition of the term "vessel" in such title Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That section 1101 (c) of the Merchant Marine Act, 1936, is amended by striking out "and fishing vessels" and inserting in lieu thereof "fishing vessels, and floating drydocks". The CHAIRMAN. Those in favor of this legislation contend that there is a real necessity for this amendment, because the floating drydocks presently available are inadequate to serve the larger sized tankers and bulk cargo vessels that are now under construction. They have also found that the banks and other financial institutions are unwilling to advance funds for the private financing of larger drydocks unless they are protected by Federal ship mortgage insurance. The committee has received a report from the Department of the Navy favorable to this legislation. That will be put in the record. 31 (The report referred to follows:) Hon. HERBERT C. BONNER, Chairman, Committee on Merchant Marine and Fisheries, House of Representatives, Washington, D. C. JULY 18, 1958. MY DEAR MR. CHAIRMAN: Your request for comment on H. R. 13153, a bill to amend title XI of the Merchant Marine Act, 1936, relating to Federal ship mortgage insurance, in order to include floating drydocks under the definition of the term "vessel" in such title, has been assigned to this Department by the Secretary of Defense for the preparation of a report thereon expressing the views of the Department of Defense. This bill would amend the Federal ship mortgage insurance title of the Merchant Marine Act, 1936, to include floating drydocks within the definition of "vessels" for the purposes of that title. As there may be a possible mobilization deficiency of floating drydocks in a future emergency, this Department would favor legislation which would encourage the building of additional floating drydocks. As the subject matter of H. R. 13153 is primarily the responsibility of the Department of Commerce, the Department of the Navy on behalf of the Department of Defense defers to the views of the Department of Commerce on the desirability of H. R. 13153 as a means of increasing the number of floating drydocks that would be available upon mobilization. This report has been coordinated within the Department of Defense in accordance with procedures prescribed by the Secretary of Defense. The Department of the Navy has been advised by the Bureau of the Budget that there is no objection to the submission of this report on H. R. 13153 to the Congress. Sincerely yours, R. Y. MCELROY, Captain, United States Navy, Deputy Director, Legislative Liaison (For the Secretary of the Navy). The CHAIRMAN. The committee has also received a favorable telegram from Moore Dry Dock Co., of Oakland, Calif. That will be put in the record. (The telegram referred to follows:) Chairman HERBERT C. BONNER, House Office Building, Washington, D. C.: OAKLAND, CALIF., July 17, 1958. Currently we are building for our account a 25,000-ton capacity drydock; therefore, we believe ourselves qualified to comment on the problems encountered by typical private shipyards in financing a dock. Although we might not avail ourselves of the assistance afforded by the proposed legislation that would classify drydocks as vessels for mortgage loan purposes, specifically H. R. 13153, we earnestly urge its passage in the interest of enabling United States shipyards to keep abreast of drydocking requirements entailed by the large vessels in service today. Without this legislation several United States yards may not be able to construct new large docks. In the absence of such large docks in this country much ship repair work would have to be performed in foreign ports. JAMES R. MOORE, The CHAIRMAN. There is an unfavorable report from the Department of Commerce, an unfavorable telegram from the Newport News Shipbuilding & Dry Dock Co., a telegram from the Alabama Dry Dock & Shipbuilding Co. opposing the legislation; a telegram from J. G. McCurdy, vice president and general manager of Puget Sound Bridge & Dredging Co. opposing the legislation; and a telegram from the Charleston Shipyards in favor of it. These will be put in the record. (The documents referred to follow :) Hon. HERBERT C. BONNER, THE SECRETARY OF COMMERCE, Washington, D. C. Chairman, Committee on Merchant Marine and Fisheries, House of Representatives, Washington, D. C. DEAR MR. CHAIRMAN: This letter is in reply to your request of July 1, 1958, for the views of this Department with respect to H. R. 13153, a bill to amend title XI of the Merchant Marine Act, 1936, relating to Federal ship mortgage insurance, in order to include floating drydocks under the definition of the term "vessel" in such title. The bill, by amending section 1101 (c) of title XI of the Merchant Marine Act, 1936, as amended, would include floating drydocks within the specifically named "vessels" eligible for Federal ship mortgage insurance subject, of course, to all other requirements of law as to eligibility for title XI insurance. The Department does not recommend favorable consideration of the bill. A floating drydock is, of course, a specialized facility used in the repair of ships and not used in the transportation of goods or persons. A drydock does not come within the scope of the definition of the term "vessel" in section 3 of title I of the United States Code, which provides that "vessel" includes "every description of watercraft or other artificial contrivance used, or capable of being used, as a means of transportation on water." Section 1101 (c) of title XI of the Merchant Marine Act, 1936, provides that the term "vessel" includes "all types of passenger, cargo, and combination passenger-cargo carrying vessels, tankers, tugs, towboats, and dredges documented under the laws of the United States, and fishing vessels owned by citizens of the United States." Even though the definition of "vessel" were amended as proposed by the bill, there remain other requirements of title XI which would have to be met by the vessel and by the mortgage submitted for insurance under title XI. A ship mortgage must be a preferred mortgage as defined in the Ship Mortgage Act, 1920, as amended. This requires United States documentation of the vessel in question, and requires in case of documentation for use in the domestic trade that the vessel be a United States citizen-owned vessel with 75 percent of the stock interest vested in United States citizens free of any trust or obligation in favor of a noncitizen and free of any contract or other arrangement which would place control of the corporate owner in any person not a citizen of the United States. It is not clear that floating drydocks would qualify under section 1104 (a) (8) and section 1104 (b) (2) of title XI, which require that the vessel "be designed principally for commercial use" (in the sense of transportation), nor under section 1104 (c), which requires that the property or project with respect to which the mortgage or loan is executed will, in the opinion of the Secretary of Commerce, be economically sound. The amendment of ship mortgage insurance title XI to provide 100 percent insurance was only made after very extensive and detailed legislative consideration of the importance and urgency of such provision for Federal aid and guaranty in connection with the construction of ships. It does not appear that the shipbuilding and ship-repair industry cannot secure private financing through private facilities to meet needs for expansion. While there will be some need for facilities of larger capacity because of the increased tonnages of vessels under construction or planned for in the next few years (particularly tankers and some bulk carriers), there appears to be no immediate urgency from the national viewpoint which justifies financial aid or guaranty from the Federal Government. On the contrary, the ship-repair industry has recently been short of employment during the recent slow period of operations in the shipping industry generally. There are indications that from the mobilization viewpoint facilities of a larger capacity may be needed in the next decade. However, the Department of Commerce defers to the knowledge and views of the Department of Defense with respect to mobilization needs. The Bureau of the Budget has advised that it would interpose no objection to the submission of this letter to the committee. Sincerely yours, SINCLAIR WEEKS, Secretary of Commerce. |