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Mr. WEICHEL. One-third of it?

Mr. GATOV. Yes.

Mr. WEICHEL. What is the other part of it?

Mr. GATOV. The other part would be in the foreign trade, to the Hawaiian Islands, and to Alaska.

Mr. WEICHEL. They do not use the Canal.

Mr. GATOV. The ships going to Alaska and Hawaii do not use the Canal. Then, we have, as you know, quite an extensive service to other destinations that do use the Canal, such as the east coast of South America, the Mediterranean, to Europe, to South Africa, and to other destinations which traditionally move east-bound rather than westbound.

Mr. WEICHEL. With reference to the so-called intercoastal trade there were some 300 ships engaged in the intercoastal trade previous to the war.

Mr. GATOV. I believe it was closer to 170, Mr. Weichel.

Mr. WEICHEL. 170?

Mr. GATOV. Yes.

Mr. WEICHEL. And now there are about 45 altogether engaged in the intercoastal trade?

Mr. GATOV. I believe it is closer to 55.

Mr. WEICHEL. What accounts for that decrease?

Mr. GATOV. Well, there are several factors involved in that. One of them has been the high cost factor of vessel operation, the inability to revive a service which was not converted to war, as were the other forms of transportation like the railroads and the truck lines. The intercoastal service was abolished, as you recall, and all of the vessels were requisitioned during the war. There was no commercial service in the intercoastal trade at all during the war. The service just disappeared, and they have been confronted with all of the inherent difficulties and problems of actually reestablishing the service.

Mr. WEICHEL. As soon as the war was over the Government operated in the intercoastal service for at least 3 or 4 years. The Government operated ships on a competitive fee basis, but there was not any business. The Government operated under general agency in this intercoastal business from 1945 through 1948.

Mr. GATOV. Yes; I recall that experience very well, and I think that points up my statement. It was like trying to change the course of a river. The traffic pattern had been set at that time, and the land carriers had the traffic. The traditional users of water transportation were in a position where they could use other forms of transportation. To cite one example, there was a tremendous rush for commodities to take care of country-wide or Nation-wide shortages, and there was use of the faster forms of transportation apparently in that particular domestic market. The cost of transportation was not a factor, and they used the fastest form of transportation. On the other hand, the habit or pattern was set in use during the war, and there was no need to go back to the old established routes of the water users, but they came back very slightly, as you recall.

Mr. WEICHEL. Do you mean that the shippers should give you a share of the traffic whether they want it or not or that you should get it on a competitive basis?

Mr. GATOV. I believe the factor which leads any businessman to use one form of transportation over another is the economic factor,

and the determination is, of course, his. It is not a question of sentiment or being willing to support one form of transportation out of friendship. It is a dollars-and-cents proposition as it always has been. Mr. WEICHEL. Are the rates too high in intercoastal transportation? Mr. GATOV. What rates?

Mr. WEICHEL. Are the rates too high on water?

Mr. GATOV. I think that should be answered by a shipper.

Mr. WEICHEL. Is it not sort of answered by the fact that you had 300 ships in the intercoastal service before and now you have only 45 ships in it?

Mr. GATOV. No; I do not think so. I think the intercoastal services are still in the process of being reconstructed.

Mr. WEICHEL. How, by somebody giving them some money through an increase in rates or what?

Mr. GATOV. There are several factors involved. One of them is the fact that the buyers' market and sellers' market situation is developing to a point where there are many instances where inventories have been taken care of, and the rush to get goods to market quickly has disappeared and there is a more orderly method of inventorying and warehousing. As a result of this they revert to the most economical form of transportation which is, and traditionally has been, water transportation.

Mr. WEICHEL. Referring to the intercoastal shipping operations and with reference to the carriage of freight, have they not had an application before the Interstate Commerce Commission which has been pending for the last 4 years, an application for a higher rate?

Mr. GATOV. I think you are speaking of Docket 164, Mr. Weichel, and I do not know the details of that.

Mr. WEICHEL. Is there such an application pending for increased rates?

Mr. GATOV. No; there is not-increased rates?

Mr. WEICHEL. Yes; increased rates for water transportation intercoastally?

Mr. GATOV. I am not a rate expert, but I believe that I am correct in saying that there is no such an application pending before the ICC by the water carriers.

Mr. WEICHEL. They have not asked for increased rates over those that they received in 1939?

Mr. GATOV. As I explained before, I will preface my remark by saying that I am not a rate expert.

Mr. WEICHEL. I mean as a general thing, I thought that was true. Mr. GATOV. The water-transportation segment, the intercoastal segment of the American merchant marine is in the position of being guided on rate matters by the rate determinations, or the rate practices established to support the railroads.

Mr. WEICHEL. No, I did not mean that. We had some testimony given before this committee by one of the Commissioners of the Interstate Commerce Commission, and it was my understanding from that testimony, and for some of the ship operators, that they have asked for an increase in rates on intercoastal carriage as common carriers. I understand that application is still pending. I also understand that

the increased cost of loading and unloading vessels, the increased cost of stevedoring was from 100 to 200 or 300 percent, and that those engaged in water transportation claimed that they were not getting enough money to haul freight from the east coast to the west coast, and from the west coast to the east coast. That was my understanding from the testimony given before this committee.

Now, do I understand from you that they have not asked for anything like that, that they are satisfied with the present rates, but that they want the toll cut down so as to be able to compete, is that the proposition now?

Mr. GATOV. No; it is not. First of all, I am not familiar with the proceedings before the ICC in that connection.

Mr. WEICHEL. If you are operating ships intercoastally I thought you might know whether you were asking for an increase in rates, whether you were satisfied with existing rates, or whether they were high enough to bear the stevedoring charges in the rates?

Mr. GATOV. I do not believe that the ICC has any regulatory powers over setting stevedoring rates. That is a cost factor in determining them, perhaps.

Mr. WEICHEL. Yes, they do not set those rates.

Mr. GATOV. I must say again, that I am not familiar with the proceeding which you mentioned, Mr. Weichel.

Mr. WEICHEL. I mentioned that in view of the fact that you operate intercoastal ships.

Mr. GATOV. I believe you have reference to a docket before the ICC that had to do with the competitive situation of the railroads on certain noncompensatory rates. It had to do with the proposed investigation of certain noncompensatory transcontinental rates.

Mr. WEICHEL. On the basis that the railroads are not important enough, or that the shipping companies should get more, is that correct?

Mr. GATOV. I do not believe that is substantially the issue before the ICC, if it is still there, and I am not sure that it is.

Mr. WEICHEL. Is marine transportation getting enough return, or is the rate high enough to carry intercoastal and stevedoring rates?

Mr. GATOV. I cannot answer that. It is beyond the province of the work that I do with the association.

Mr. WEICHEL. Does not your association have any idea whether they are getting enough money for hauling freight back and forth? Mr. GATOV. Our association has no rate making in it

Mr. WEICHEL (interposing). Then they do not care with reference to the rates received for hauling freight back and forth?

Mr. GATOV. Yes; we have a great interest in it, but we do not handle rate proceedings.

Mr. WEICHEL. The only rate proceeding you are interested in is the question of the tolls

Mr. GATOV. I am interested in the factors, and among them is the Canal toll and the rate.

Mr. WEICHEL. But you are not interested in these other factors with reference to the cost of hauling freight from the east coast to the west coast and the rates set by the ICC?

Mr. GATOV. I am very much interested in those matters, but our association does not delve into those matters.

Mr. WEICHEL. They just take up one phase of it, just the toll phase? Mr. GATOV. No; we have other matters under consideration, but in respect to the intercoastal shipping, and in respect to my testimony here I am talking about the factors that go into making toll rates and everything that is competitive with shipping and the carriers in that trade, not only the intercoastal trade, but offshore.

Mr. WEICHEL. With reference to the intercoastal trade, the only thing your association is interested in with reference to what it costs for hauling from the east coast to the west coast, or the only part they are interested in is the toll part, they are not interested in the other part?

Mr. GATOV. Our interest is in the Panama Canal toll rate situation.. and one segment of the members of our association in the intercoastal trade is affected by that. That is, they are interested and influenced to that extent, but we are approaching it from a broader view than just the domestic carriers. We are talking for Pacific coast interests. which have occasion to use the Canal.

Mr. WEICHEL. You said that two-thirds of the Pacific coast operators, as I understood you, would not use the Canal because their operations are in the Pacific.

Mr. GATOV. No; I believe I said that approximately 64 percent of the waterborne commerce from the Pacific goes through the Canal.. Mr. WEICHEL. What amount of that is intercoastal?

Mr. GATOV. The intercoastal trade is included in that. We have quite an extensive service to the east coast of South America, the Caribbean area and to Africa.

Mr. WEICHEL. From the west coast?

Mr. GATOV. Yes; from the west coast, going down through the Canal, to these various areas and localities I just mentioned.

Mr. WEICHEL. How much tonnage a year goes from the west coast through the Panama Canal outside of the intercoastal tonnage?

Mr. GATOV. I am sorry, I do not have that figure with me, Mr. Weichel. I shall be glad to provide it for the record, but I am sorry I do not have it with me.

Mr. WEICHEL. And I would like also the amount of tonnage that moves from the east coast to the west coast through the Panama Canal.

Mr. O'TOOLE. May I interrupt for just a moment, Mr. Weichel? Mr. WEICHEL. Surely.

Mr. O'TOOLE. Are there any other people here who desire to make statements this morning? I am trying to figure out how to apportion the time. Thank you.

Proceed, Mr. Weichel.

Mr. WEICHEL. If you have the figures on how much tonnage moves from the west coast through the Panama Canal intercoastally and nonintercoastally, as you mentioned, going to the east coast of South America, the Mediterranean, and to Africa, I would be glad to have those figures.

Mr. GATOV. I shall be very happy to supply them, Mr. Weichel. Mr. WEICHEL. Thank you.

(The information requested follows:)

Hon. DONALD L. O'TOOLE,

PACIFIC AMERICAN STEAMSHIP ASSOCIATION,

San Francsico 11, Calif., June 30, 1950.

Chairman, Subcommittee on the Panama Canal, Merchant Marine and Fisheries Committee,

United States House of Representatives, Washington, D. C.

DEAR MR. O'TOOLE: At hearings on H. R. 8677, was asked to provide the amount of tonnage that goes from the east coast to the west coast through the Panama Canal, and from the west coast through the Panama Canal intercoastally and nonintercoastally, going to the east coast of South America, the Mediterranean, and to Africa.

The 1949 report of the Governor shows the following traffic for fiscal 1949 in these categories at pages 123 to 139 of the report:

1. Total shipments from east coast of the United States to west coast of the United States via Panama Canal__

2. Total shipments from west coast of the United States east-bound through Panama Canal___.

Destination of 2 above:

Tons

1, 449, 561

East coast of United States__

Mediterranean Europe (including all France, Spain, Italy and
Portugal).

Other Europe_

East coast South America_.

Africa___

Other areas__.

Total

2,839, 985

1, 641, 159

600, 066

83, 170

117, 803

203, 362

2, 839, 985

For your information, I enclose herewith a copy of the report of the Governor which will give you more detailed information on the subject at the pages mentioned.

Very truly yours,

A. W. GATOV,

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