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quite a surprise to me. Do you tell this committee that in your trade the seaworthiness of the foreign boats is generally better than the seaworthiness of the American-flag ships that ply the trade?

Mr. ESCHEN. Unequivocably true. We handle 32 steamship lines, most of which are foreign. Outside of the five new Mariners and some of the American container ships our average ship is over 20 years old. After 16 years it is normally normal for the steamship company to only do maintenance enough to keep them running. After 20 years they are obsolete so the ships that we handle for the military on the west coast will probably average 25 years old. We have worked ones 40 years old. We have worked ones in such shape that you would never believe. We have had them go to the repair yards three times while we are working them. We unloaded the mail on them a month after they sailed and never got there. The condition of our ships is deplorable. We have got to get our own merchant marine in order. We have got to make it possible to build ships and we are in a position now that many of these old C-2's we are working, we work with the most modern of cargo, we stick it in deep tanks in ships that are worn out and it has got to be recognized and ship after ship just barely makes it.

Senator MORSE. In regard to the ships that Waterman Steamship Co. and Weyerhauser and other American companies have turned over to the U.S. Government, to the military, do they fall, by and large, in the class of obsolescence as you just testified to?

Mr. ESCHEN. Many of them do; it varies. I don't like to be stuck particularly on the ones, the ships that Weyerhauser turned over, had been extended Liberties. They are very good ships. They have been rebuilt and kept up. They are far better than the average ships we get. The Waterman ships, many of them have steam winches and they are C-2's and they are pretty well worn out just from operation.

What worries me is when you turn around and see them lay up 16 Victory ships that are in damn good shape and keep running C-2's that are worn out that take longer to load and are less practical for the handling of the type of cargo we handle today, I think something should be done to help our operators. We should make these better ships and there aren't too many available to our operators and keep them running. The key is to build more.

Senator MORSE. Speaking hypothetically now, suppose you take 10 ships that have been turned over by a company to the Government for operation in the shipment of goods to Vietnam. Are they, in those instances, operated by the military or are they leased out to some private entrepreneur to operate?

Mr. ESCHEN. They are usually operated by the military but even the regular MSTS ships usually average over 20 years of age and they are pretty well worn out.

Senator MORSE. Again, hypothetically, keeping in mind your statement that they are not in some instances very seaworthy, suppose when those military-operated ships are being loaded in San Pedro, an accident occurs to a longshoreman. What is the legal relationship, then, that develops between the stevedoring company and the longshoremen and between the Government and the longshoremen in respect to potentiality of third-party suits?

Mr. ESCHEN. Normally the stevedore company has to carry very high insurance to protect the Government. The BLS is doing a fine job now going after the problems but these old ships steadily get worse. Their gear is worn out. You will have more accidents with an old obsolete ship than you will with a new one. The Government is pretty well protected. It goes back to the stevedoring company that is working them and they have to buy the insurance to protect the Government, so it still comes back as a cost.

Senator MORSE. That isn't exactly the answer I expected but I want to point out, Mr. Chairman, that we had better explore and pursue this. It is very interesting. After all, the Government ends up almost whole, and the stevedoring company ends up much less than whole, if I understand the factual situation you have outlined here. It also bears on what Mr. Robertson had to say in his testimony; to a degree, also, it is related to what Mr. Dewey had to say about whether or not consideration ought to be given by this committee to see to it that so-called expenses of operating the system, once it is put on the book, aren't transferred to the companies. However, we ought to recognize that here is a place where the Government ought to pay the costs and in this last hypothetical, it seems to me, it ought to also participate in liability and pay its share there.

This entices me, this hypothetical, and I am not going to curbstone it up here, I hope I am too good a lawyer to do that, but all the assistants I have will dig into this one. I think it is very important testimony.

Mr. Escury. Let's go a little bit further. By the 30th of this month we will be putting in bids for over $50 million in our company for four major military bases. In being self-insured we have no recourse for these costs running up on our insurance. When we go in with those rates and bid our insurance on the extra labor, on the overtime and the insurance that is in our rates, we have to live with that for 2 years. There are escalation clauses for wage increases and things of that sort, but we take an outright gamble. We have found that there are far less third-party suits where the Government is involved. They seem much more anxious to take on, oh, any steamship company, Pacific Far Fast States. States Marine or any of those far faster than they will take on the ship that is run for the Government.

We find another thing, the Government ships do not need to meet L..S. standards, not by a damn sight. Many of the Government operated ships are-I have gotten in trouble for saying this for one day but I will state it again-they are worse than anything we handle except the Greeks.

Senator YARBOROUGH, Mr. Eschen

Mr. Fsours. It is pitiful when the greatest Nation in the world has got the lens'est merchant marine

Senator YARBOROUGH, Mr. Eschen, a few years ago while I was on the Commerce Committee there was a hearing there on a bill introduced in that committee to recuire that these forem ships that came into American ports be as safe as an American shin, meet Coast Guard standands Introduced before that committee were many photographs of forefam freighters that came into ports that one handhold was missing of the ladders that went down into the Holds had loose boards on dock, "kes of dangerous defective nams of the shin, and the test mony before that committee was American resse's had to meet

the Coast Guard standards of safety, that many of the foreign lines didn't, particularly the-there were four, five countries. I am not certain it was testified but it was indicated that most of these vessels were American owned with a foreign register, a vast number of unsafe ships coming in. The gist of that testimony was that the American ship in the American port was far safer than the foreign ship. What you say is astonishing to me because this is not what the testimony was before the Commerce Committee a few years ago. Now, it is true, this was before this Vietnamese war.

I want to ask, is the condition of these ships due to ships being pulled out of mothballs in being used to supply the forces in Vietnam or is that with reference to all American shipping you are testifying about here?

Mr. ESCHEN. It is largely the result of the emergency. The regular berth lying American ships have been high quality and low maintained. Senator YARBOROUGH. You are speaking mainly of ships used to carry supplies to Vietnam?

Mr. ESCHEN. Yes. We worked with Greeks, the Government paid us to unload them and other people to unload them and maybe $350,000 for cargo hauling and they may have been in a scrap iron run for a couple times, all the ladders are knocked out, they are all beat up. What I am fearful of, some of these have been culled out but they are eating up our foreign exchange and we are still operating some bad ones and now it is getting worse again.

Senator YARBOROUGH. Eating up foreign exchange, you mean those you described that are under some foreign flag?

Mr. ESCHEN. A Greek ship or Norwegian ship, the only ones they will give you are the ones that are worse.

Senator YARBOROUGH. You mean the only one they will furnish you to use in Vietnam supply are the worst ones?

Mr. ESCHEN. Yes, the worst ones they can't afford to run. I have known cases where we paid twice as much as someone else chartering the ship. We get these to work. What I am worried about it was getting a little better, lately it is better balanced over there, they eliminated some of the real dogs, but now the crisis is getting worse and they will grab more of them. This is a danger to everybody in the industry. Some of these ships are pitiful. Most of the ships that are left up there in the so-called reserve fleet are worthless, the ones that sit out in the mud backs. Someone has got to realize that the whole industry is in a deplorable state.

What you have to do is talk to some of these longshoremen about some of the ships they go aboard and the conditions. We have had time after time that the military, our safety engineers wouldn't let the men go aboard until things were corrected. We all stood by on the Government's time.

Senator YARBOROUGH. Thank you very much.

Mr. ESCHEN. I am ashamed to say we should have done it more often than we did but the Government is our client and they don't get happy when we refuse to work their ships.

Senator YARBOROUGH. And they wanted to get the ships loaded and out to sea.

Mr. ESCHEN. Regardless. Time and again we have violated BLS regulation. They didn't have the hatch boards, the proper gear, the

proper gangplanks, hadn't been inspected properly, winches won't hold, I have seen them run backward or hoist the lift truck in No. 3 and you drop the one in No. 5 because there isn't enough steam and they can't give you more steam because it will blow the pipes.

Senator MORSE. I wouldn't want to be around one of those ships. Mr. ESCHEN. Well, we always undergang the ships because we know something is going to break down so we will have to have a place to shift the men. These things cause problems, too.

Senator YARBOROUGH. Thank you, Mr. Eschen, for contributing so much to this hearing and some of these problems. It indicates problems get more difficult instead of simpler.

(The prepared statement of Mr. Eschen follows:)


My name is Chester Eschen, Jr. I am from the San Francisco Bay Area and am President of the California Stevedore & Ballast Company. I have been in the Terminal, Stevedore and Shipping Industry for over thirty years.

I am testifying before you today because it is believed that I can present some of the facts on how the proposed changes will be seriously detrimental to the Foreign Trade of the United States.

The other members of the Industry testifying have ably presented the tremendous increase in costs and problems caused by the third party suits which make us uneconomic in our competition with Canadian Ports and to even some extent, Mexican Ports.

Because of over 100 years of experience in the stevedoring business and over 40 years of self-insurance, our company understands these problems extremely well. We realize that there must be reasonable increases in the Longshore and Harbor Workers Compensation Act, but at the same time we must not get so liberal that we kill the jobs through eliminating the foreign trade.

The proposed changes will raise direct labor costs by 10 or 15%, or the Compensation Insurance Costs will be raised between 100 and 150%. In our industry, about 85% of the cost is directly tied to physical labor.

We do the work for a majority of members of the European Conference running from San Francisco Bay Area, Sacramento and Stockton to Europe. At the present time, the stevedoring, terminal and port charges take 40 to 50% of the gross income dollar of the Steamship Company obtained from freight revenues.

A 10% increase in cost would amount to $1.50 to $2.00 a short ton on steamship costs. This would more than eliminate any profit of the steamship Company whatsoever. Most of them are losing money right now.

There are over 300,000 tons per year of Canned Goods, Dried Fruit and Nuts moving in the European Trade alone. With the extreme competition of the European Common Market, North Africa, Australia, Taiwan, the American products are barely able to keep in the market. We have been informed by the canners and packing houses that the freight rates must be reduced, not increased.

In the Los Angeles Area over 3,000,000 tons of bulk iron ore are moving through the Ports of Long Beach and Los Angeles. Just 2¢ or 3¢ increase in the cost per ton will be enough to divert these sales to Chile, Canada, Australia or Africa. There also is over 1,000,000 tons of surplus scrap iron on the Pacific Coast which can only be sold to the Asiatics, if the present extremely cheap handling charges are maintained.

With the development of the Van Ships and intermodal transportation the huge amount of Vanned Cargo to and from the Far East can just as well move over Canadian railroads from Vancouver to Chicago as by American railroads from the West Coast.

There are practically no third party suits in Canada. Yet in the United States the third party suits have caused the insurance costs on Vans to run between $2.00 and $7.00 each time one is loaded or discharged from a ship. This places our ports at an extreme disadvantage.

The third party suits are already seriously interfering with the movement of this cargo when it is realized that sometimes these awards are made in excess of $300,000 in a single case. Many other cargoes can be shown to be hanging in

the balance. The basic problem is probably half of the insurance premiums are being eaten by attorneys.

If the third party actions can be eliminated, very sizable increases can be made in the compensation to the men and the industry can still bear the burden of cost. We can enumerate many other low cost bulk cargoes, such as Alfalfa Pellets, Corn, Barley, Wood Chips and Potash. Carbon Coke is a special case with over a million and a half tons presently moving to Japan. However, there are still millions of tons sitting in stockpiles, because it is unsalable. This great increase in Carbon Coke arises from increased production of gas in the loss of the market for diesel fuel because of air pollution regulations.

The net result of this would be to increase our already very unfavorable balance of trade by many millions of dollars.

We appreciate your consideration of the fact that the Steamship people are tired of the time and expense of third party suits and unless something is done we will lose a great deal of trade.

By eliminating third party suits as much as possible we can enhance our foreign trade and at the same time increase the benefits to the longshoremen and no-one will be the loser except the ambulance chasing lawyers that are a leach on a long suffering industry.

Senator YARBOROUGH. The next witness is Mr. Greenough, San Francisco.


Mr. GREENOUGH. Mr. Chairman, Senator Morse, and other members of the committee. I appreciate very much the honor of being permitted to appear today to present the view of my employer with regard to the proposed S. 2485.

My material will give information but I must comment I feel Mr. Eschen's act is pretty difficult to follow.

My name is Britton Greenough. I am senior claims adjuster for Matson Navigation Co. and its subsidiary, Matson Terminals, Inc. Matson Navigation Co. is a steamship operator whose ships ply between the west coast, Hawaii and Japan. Matson Terminals, Inc., is a stevedoring company which serves Matson Navigation Co. vessels as well as those of many other companies. I am appearing on behalf of both companies in opposition to certain provisions of S. 2485.

At the outset I should like to say that the Matson Companies believe that their reputation for fairness and integrity has been established in the field of workmen's compensation. I should like it to be understood that we are not opposed to a reasonable increase in benefits payable under the Longshoremen's and Harbor Workers' Compensation Act. On the contrary, we recognize that it is timely to grant such an increase. We do not, however, believe that all of the increases granted by this bill are reasonable.

An increase of the maximum and minimum benefits by amendment of section 6(b) of the act from $70 to $105 and from $18 to $35, respectively, would obviously increase pure compensation costs by 50 percent, assuming all cases to be paid at maximum or by about 95 percent if all are paid at minimum. Since, in our own operation at feast, virtually all claims are paid at maximum, and since most longshoremen have at least one dependent, our pure compensation (disability benefits as distinguished from medical charges, et cetera) would be increased by very nearly 50 percent. If we reduce this for medical

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