ments recommended by the Treasury Department, and in part by the Commerce Department.

We have no objection to these amendments as they are largely consistent with the amendments we suggested in our report on S. 1864. As stated in the report, the main issue involved is one of legislative policy for determination by the Congress. We have no objection to favorable consideration of the bill amended as suggested. Senator BUTLER. Thank you ever so much.

Are there any questions, Mr. Bourbon?

Mr. BOURBON. No, sir.

Senator BUTLER. Thank you, Mr. Ackerson.

Our next witness is Mr. L. R. Sanford, president, Shipbuilders' Council of America.

STATEMENT OF L. R. SANFORD, PRESIDENT, SHIPBUILDERS' COUNCIL OF AMERICA

Senator BUTLER. Have you a prepared statement?

Mr. SANFORD. No, I have not, Mr. Chairman. I didn't have notice of this hearing until yesterday, and I was detoured from a trip to the west coast to come down here and didn't have any opportunity to prepare a statement.

Senator BUTLER. We will be glad to have your comments on the bill.

Mr. SANFORD. This bill, as you have already outlined, Mr. Chairman, is merely to extend the protection afforded to the shipbuilding and ship repairing industry against the construction of foreign vessels going into the domestic trades to include American-flag vessels rebuilt abroad. In other words, it merely extends that coverage to that extent. And that is the sole purpose of the bill.

The bill, as has been brought out by Mr. Ackerson, at the time of the hearing before the House committee-Mr. Bonner, the chairman, suggested that I get together with representatives of the Bureau of Customs and see if we couldn't incorporate some amendments in the bill as originally submitted which would be completely satisfactory to the Bureau of Customs, because they had made some suggestions in their appearance before the House committee. That was done. We worked on it for a couple of days and finally came up with a bill which is the bill that has been favorably recommended by the House committee, and which I understand is the bill that we are now considering here before this committee.

As far as those amendments are concerned they are entirely satisfactory to the shipbuilding interests, and I understand that they are entirely satisfactory to the Treasury and to Customs, and Mr. Ackerson said this morning that there was no objection on the part of the Maritime Administration to the amended bill.

I would like to point out that there is considerable urgency in connection with this bill at the present time for two reasons: There is a program going on along the coast of increasing the size of T-2 tankers. It is called in the vernacular "jumboizing the tankers." It means cutting them in two, putting in a length of parallel middle body, and increasing their capacity very substantially. Some of those are under contract at the present time and there has been considerable intimation

that some of the operators of T-2 tankers are thinking about having such vessels "jumboized" abroad.

This particular bill would of course prevent that because that essentially would be a rebuilding of a vessel now in the domestic trade, and that is the purpose of the bill, to prevent that. If that should get to be a rather large program it would do considerable damage to the American yards in that they would lose a lot of business to foreign yards.

The second reason why this bill is urgent at the present time is because of the condition on the Great Lakes. The Great Lakes yards depend, as you undoubtedly know, to a very large extent on the socalled winter repair and conversion work, because they have no new construction contracts on the Great Lakes at the present time.

The vessels are in operation all summer, and the only repair work during the summer is casualty work, or emergency work. So that most of the repair, rebuilding, reengining and items of that kind are taken care of on the Great Lakes ore carrier fleet during the winter season when those vessels are laid up and cannot operate.

The Canadian yards across the lakes from the American yards operate at considerably lower costs than the American yards; as a matter of fact, about a third lower cost. There is considerable speculation going on today on the part of some of the lakes operators with respect to taking American-flag ore carriers across to Canada yards and having them rebuilt or repowered, or whatever may be necessary, because they can get the work done cheaper over there than they can in the American yards. If that got to be quite a program that would put a further hardship on the American Great Lakes yards which are already in a great deal of difficulty because they have no new construc

tion work.

Incidentally, we have a bill before this committee, as you know now, to try to promote some new construction work in the Great Lakes yards.

For those two reasons, the "jumboizing" of the T-2 tankers and the possibility of lake ore carrier rebuilding in Canadian yards, we feel that this bill at the present time is rather urgent and if the bill is reported out and passed it will close those two doors, both of which would permit work to get away from American yards which is very badly needed at the present time.

I would like to point out-I think it is worth pointing out-that the passage of this bill involves no cost to the Government whatsoever. It is purely commercial work. There is not a dollar of Government money that would be involved if the bill is passed.

Senator BUTLER. That is work that has historically gone to the American yards?

Mr. SANFORD. Yes.

I also would like to point out that if the bill is passed, to the extent that it keeps work in the American yards it will help to maintain the 36,000 minimum employment that was recommended, as you recall, in the Murray report.

Senator BUTLER. And also, as was said by the Comptroller General in his letter, it would be consonant with the spirit and purpose of the fundamental act, the Merchant Marine Act of 1920.

Mr. SANFORD. It would also help to ward off block obsolescence. To the extent that these vessels can be rebuilt they are improved and they have a longer life because of that fact.

All in all it seems to me that this bill is entirely consistent with the principle of protecting the American shipbuilding yards and shiprepair yards, and of limiting the domestic trade to vessels built in the United States by extending that protection to vessels rebuilt outside the United States, to make them ineligible to reenter the domestic trade after they have been so rebuilt.

I could go on and talk some more but it doesn't seem to me it is necessary, Mr. Chairman. It seems to me that covers the situation pretty well.

There is here in the hearing room today a representative of one of the Great Lakes shipyards, Mr. Hoen, who, if you care to hear him, might like to make a brief statement on behalf of the Great Lakes shipyards in connection with this bill.

Thank you, sir.

Senator BUTLER. Thank you.

Mr. BOURBON. Mr. Sanford, it has been said by some of the people who are against this bill that there doesn't seem to be any likelihood of any such work being done outside the United States.

Mr. SANFORD. Mr. Morse, of the Maritime Administration, made that statement before the House committee. And at that time I took exception to the statement and I cited the two instances that I have cited here this morning as to the jumboizing of the tankers and the possibility of Great Lakes work going to Canada, as to me at least controverting the thought that was in Mr. Morse's mind that there was no immediate prospect of any such work going abroad.

Senator BUTLER. If there is no immediate prospect nobody can be hurt by it.

Mr. SANFORD. That is exactly it. We want to close the door in any event.

Senator BUTLER. That's right.

Mr. BOURBON. About a year ago it seems to me that the shipbuilding people were somewhat upset and disturbed at the plans for building the Gibbs Yard in the Dominican Republic. I wonder if that yard has had any effect to you, or if the 45 cents an hour labor rate down there has bothered you.

Mr. SANFORD. So far it has not. As a matter of fact the yard is still underway and has not been completed. I believe they have one drydock down there. You are aware that Mr. Gibbs is no longer connected with that project, that Mr. Trujillo has taken it over in toto and Mr. Gibbs is no longer in it. It is no longer an American interest involved. It is a Dominican project pure and simple. To what extent they will complete it down there and to what extent they will compete with us for repair work or shipbuilding work, we don't know, of course.

We have another project as you possibly have heard, the possibility of a yard in Bermuda, which perhaps might do a little more damage than the Dominican yard. But that is still in the paper stages.

Senator BUTLER. If it is one of those so-called bicycle yards, it will be right in the vogue in Bermuda.

Mr. SANDFORD. It is not of that character, but it certainly would be.

Senator BUTLER. Thank you, Mr. Sanford.
Mr. SANFORD. Thank you, Mr. Chairman.

I would like to correct myself. I said Bermuda. I should have said. Bahamas. That is where the yard is indicated.

Senator BUTLER. Then I will have to modify my statement.
Mr. Riley, legislative representative of the AFL-CIO.

Mr. BOURBON. He had to leave, Mr. Chairman, and asked that his statement be made a part of the record.

Senator BUTLER. It will be made a part of the record. I will read it.

STATEMENT OF GEORGE D. RILEY, LEGISLATIVE REPRESENTATIVE, AMERICAN FEDERATION OF LABOR AND CONGRESS OF INDUSTRIAL ORGANIZATIONS

(The statement is as follows :)

The AFL-CIO endorses the purposes of S. 1864, which I assume would apply to H. R. 6025

which is the Klein bill, which we will report out of this subcommittee

dealing with the operation of the coastwise trade vessels "rebuilt" outside the United States.

We regard the practice of permitting such vessels in such trade as just another form of runaway industry, seeking as it does, supposed benefits on the use of low-wage, if not inferior, labor in the alteration of vessels designed to benefit from rebuilding outside the United States.

The term "rebuilt" has come to bear a rather clear definition to include any material changes in size of displacement or length of vessels in the "rebuilt" category.

For this reason, I find no purpose in suggesting any clearer definition as contained in section 3 of the bill.

The House has included certain improvements and refinements in its own bill H. R. 6025. These improvements I believe, serve a useful purpose, and I hope your own committee includes them in your bill.

We hope the committee will report promptly S. 1864 largely in its present form.

These remarks also represent the views of the Metal Trades Department of the AFL-CIO.

Senator BUTLER. Mr. Alvin Shapiro, vice president, American Merchant Marine Institute.

STATEMENT OF ALVIN SHAPIRO, VICE PRESIDENT, AMERICAN MERCHANT MARINE INSTITUTE, ON BEHALF OF AMERICAN MERCHANT MARINE INSTITUTE, PACIFIC AMERICAN STEAMSHIP ASSOCIATION, AND ASSOCIATION OF AMERICAN SHIP OWNERS

Senator BUTLER. I see you have a statement.

Mr. SHAPIRO. It is a very brief one. If it is all right with you, I would like to read it.

Seantor BUTLER. Fine. You may proceed.

Mr. SHAPIRO. My name is Alvin Shapiro. The American Merchant Marine Institute, the Pacific American Steamship Association, and the Association of American Ship Owners, herein represented, have membership of seventy-odd shipping companies operating all types of vessels in all American trades on the three coasts of the United States.

81982-56-3

We are fully aware of the vital role played by our shipbuilding industry and the necessity for continued existence of a strong and healthy nucleus industry for mobilization expansion. Nevertheless, our organizations must oppose S. 1864, for we believe that the bill under consideration would further limit the sum total of operational choices available to American shipping companies without any real prospect of a compensating advantage to other interested parties.

Initially, we do not believe that the fundamental health of our shipbuilding and repair industry could be significantly affected one way or the other by the relatively rare instances in which vessels rebuilt outside of the United States may enter the coastwise trades of the United States upon the completion of that work.

The committee is fully aware of the significant differential in cost in shipyard work as between American and foreign yards. It is completely conceivable that the heavy capital outlay involved in the initial rebuilding project, if required to be performed here, may frustrate the entire enterprise.

The relatively lower cost in foreign yards would encourage the alteration in physical structure of the vessel to make it more advantageous to operate in our domestic trades. In addition to the pure cost aspect, the problem of time may be such that an owner, in order to take advantage of a relatively healthy market situation, whose duration is always subject to doubt, will proceed with quick rebuilding in the foreign yard, while the condition in American yards may be such that the project would be more time-consuming, hence depriving him of the opportunity of participating therein.

For either of the aforementioned two, and perhaps other reasons, a rebuilding project may be undertaken in a foreign yard and the vessel entered into our coastwise trade, which might for economic reasons not take place otherwise.

Should the ship instead be laid up or transferred/sold abroad or otherwise not made part of the coastwise fleet, it appears to us that there are long-range unfavorable aspects for the American shipbuilding and ship-repair industry. Upon its entry into the domestic trade, a rebuilt vessel, we believe, will be a continuing customer of the American shipbuilding and repair industry. If a project is not undertaken and the vessel is not therefore engaged in coastwise service, the American shipbuilding and repair industry could be denied that customer in perpetuity.

Senator BUTLER. Mr. Shapiro, isn't it true, that this bill historically follows the lines of American policy, in connection with the coast wise trade?

Mr. SHAPIRO. Yes. I would say there is very little question that the coastwise trade should be confined to American vessels and that it is that sort of vessel activity that generates a large part of the backbone for the healthy nucleus of the American merchant marine. And I must further add to that, in all honesty, if this were a consequential manner for the shipbuilding industry, if this were the straw that would break the camel's back, I am absolutely convinced that our members, being very reasonable people, and having a fundamental stake in the shipbuilding industry, as well as in the operating industry, would not be assuming the position we are herein taking.