Further, S. 2378 would, as presented, provide severe competition for American ship operators in the trade in coal and on the return leg the ships would be free to compete with American ships in all commodities.

Belgium's fleet is already 20 percent larger than prewar, largely due to American assistance. She purchased 15 vessels under our Ship Sales Act. She is having built for her own flag twice the tonnage she is seeking under S. 2378. In fact, she is even building today in her own yards for non-Belgian registry. We strongly urge the committee not to favor S. 2378.

S. 2265 visualizes a total of 8 ships (4 Libertys, 2 Victorys, and 2 Cl-M-AVI's, or tonnage the equivalent thereto) to be sold to Uruguay or its citizens, these vessels to be used in the coastal service not of that country but of all of South America. Regardless of language indicating otherwise, this operation would definitely be competitive with American-flag operators. It would thus unquestionably affect American operators now in the South American trade and to the extent that some of these are subsidized, such competition would adversely affect, at the very least, the United States Government's interest in these operations.

Another trading privilege provided in section 2 of this bill would enable totally free operation of vessels (except for trade with Communist-controlled nations), provided said trading is not competitive with American-flag ships. Since vessel operation is thoroughly fluid, it appears to us virtually impossible to add to the ship supply without indirectly, if not directly, affecting the competitive situation for American-flag vessels. Obviously, if the vessels envisaged in S. 2265 are put in any trade which now or in the future may be overtonnaged, a certain number of ships in this trade will tend to gravitate to American waters where they become directly competitive with American-owned ships.

Section 4 of this bill alters our earlier concept of floor prices under the Merchant Ship Sales Act of 1946 by converting said prices into ceilings. In this particular bill, the sale is to be made at fair market value considering age and condition and the area of operation but not in excess of former floor prices. We strongly oppose S. 2265.

S. 2249 contemplates the sale of 8 Libertys to citizens of Austria at floor prices. It further provides that the ships not be used in any liner trade or in any trade with the United States except for the movement of bulk cargo to the Mediterranean. When valid economical factors determined her maritime position both before World War II and since, Austria had a "nothing" merchant marine. Her entry into this area should not be encouraged by the United States today on the basis of uneconomic considerations, or the sales to her of instruments of competition at sea at unrealistic prices.

As in other ship sales legislative proposals before this committee, we are struck with the language contained therein, particularly when the bills are read in conjunction with each other. Each proposal envisages some area of operation for the vessels involved which will not be competitive with United States ships, directly or indirectly, or some commodity which United States ships do not carry and therefore cannot be hurt by the proposed sales. No commodity falls in the latter category. This is an inescapable fact whether one identifies the commodity as coal, grain, or just "bulk."

As to areas, it would appear that proponents of the legislation are slicing up the world and indicating where ships can be operated without hurting the United States fleet. So far, these areas include India, Latin America, Northern Europe, and the Mediterranean. Before the record closes, other areas will be named. We take this opportunity respectfully to suggest to the committee that such lines of demarcation cannot be drawn and should not be drawn so long as we are in the midst of a struggle to develop a rounded, well-balanced American fleet for our commerce and defense.

Finally, among the group of ship sales bills for foreign registry, we come to Senate Joint Resolution 116. This is by all means the most extreme of all of the proposals. It calls for the sale to the Philippines of 30 ships, which would be the equivalent of providing a 300 percent increase in the size of her present fleet. The bill calls for the sale of 10 Liberty ships of the John Sargent and Thomas Nelson type, plus 10 AP-2 Victorys and 10 AP-3 Victorys. The sales price formula is to be at a ceiling price equivalent of that which has consistently been the floor price under the Ship Sales Act of 1946.

There is but one John Sargent and one Thomas Nelson available. It would appear to us regardless of the numbers involved that this proposal calls for the sale at about $500,000 apiece of 2 vessels on which we have just spent $3 million and $3 million respectively to reconvert to more modern type. Section

of the bill provides that the sales shall be made if "it is determined that such ales would not adversely affect the defense of the United States." This is a horoughly remarkable provision in that the expenditure of over $6 million for he reconversion of these 2 vessels was for the defense purpose of upgrading me reserve fleet. Is it conceivable that the Secretary of Defense could specify hat they could be sold abroad after the expenditure of this sum for defense urposes and not adversely affect the defense of the United States?

Section 3 of the bill specifies that there is a limited field of operation for these essels which we of course realize is not the case, and which, as a matter of act, the bill does not in any place provide.

The committee will be most interested to learn, we are sure, that 11 of the 8 vessels in the Philippine fleet are the result of the beneficence of the United tates Government, and 5 of those 11 were sold under very special terms through ublic Law 114 of the 84th Congress, approved June 30, 1955. It would appear at so long as a reserve fleet exists, some of our friends abroad will think that r beneficence, at least in regard to surplus ship sales, is unlimited. Further, we believe that the committee is aware of the fact that the recent le to the Philippines in 1955 called for the operation of those vessels in the terisland trade except with the prior approval of the Secretary of Commerce. oday, those vessels are operating in noninterisland trade over the objection of e industry.

So far as the 20 Victory vessels are concerned, we cannot conceive that they ould be available for sale foreign, particularly since all 30 vessels, as provided Senate Joint Resolution 116, called for unlimited operation, and we are reasonly certain that the bulk if not all of that operation would be directly comtitive with established American steamship service. For these reasons we el reasonably certain that Senate Joint Resolution 116 will be rejected by the mmittee. As the committee realizes, the industry is seriously concerned with the rehabilition of American domestic trades which prewar gave employment to 53 percent our nontanker tonnage. Today, this figure is but 20.6 percent. We see little stification, however, for using the reserve fleet as the sole source of that habilitation, for the age of the vessels involved would limit its duration. This particularly so when it comes at the expense of operators presently in the siness and frequently with vessels which they themselves may have purchased der the Ship Sales Act with the conviction that vessels unsold at the closing the act would remain in the reserve fleet except for emergency purposes. To nove such vessels from the reserve fleet for sale to American citizens in mpetition with those who are presently in the business, and at greatly reduced ces, strikes us as being eminently unfair.

enate Joint Resolution 93 is one such proposal. It calls for the sale of 12 e's for use on the Great Lakes or (and this is of great concern to the instie) on voyages to anywhere which either originate or terminate at a Great ces port. Said operation obviously visualizes the opening of the seaway. e vessels are to be sold at a floor of $1 million or only two-thirds of the floor es under the Ship Sales Act. We are not authorities on Great Lakes operaand, therefore, cannot indicate the necessity for the expansion of common rier service in this area. We do know, however, that the Maritime Admination has plans and is encouraging the use of new and modern vessels for way operation when once this project becomes a reality. We think it can little but discourage the realization of a fleet increased by ideal types for service to sell C-4's unsuited for such service but nonetheless excellent buys e price contemplated.

he above comments also hold true for Senate Joint Resolution 110 except 1 by its very language there is no doubt that it contemplates an operation ctly competitive with at least six shipping companies in the ocean trade. enate Joint Resolution 109 is a bill which contemplates the sale of one Vicfor conversion to the ore and coal trade exclusively on the Great Lakes. ay well be that such a service is needed in that area. We do believe, how

, that if the need and economic justification is great enough, there is no on for the discounted price, by some one-third, particularly in today's ket.

s indicative of the nature of some of the ship-sales proposals that have been re you in the past, we would like particularly to comment on Senate Joint lution 111, which calls for an additional year's time under which Public 938 of the 84th Congress can be effectuated. Public Law 938, after a ber of variations of the original proposal were heard, called for the sale

of two war-built vessels to be operated on trade routes 3 and 4. The Congress, in its wisdom, made this proposal quite attractive, so much so, in fact, that I doubt if many contemplated that 12 months would go by before it could be put into operation. We see no reason for extending the authority contained herein unless the Congress is convinced for reasons beyond our knowledge that the extension should be granted. Frankly, we are very much disturbed that Senate Joint Resolution 111 will set a precedent by which, regardless of the specified time limitation for any of the proposals, there will be undue and unreasonable requests made in the future to extend the time limit for any of the bills you may authorize during the course of the present hearings. It is dangerous and unwise, in our opinion, to authorize a transaction under one set of circumstances which become extremely unrealistic under another set of circumstances which may exist when as long a period as 24 months is allowed. We respectfully suggest that Senate Joint Resolution 111 be disapproved.

S. 2241 calls for the sale of an unspecified number of N3-M-A1-type cargo vessels to American citizens for operation in the intercoastal and/or coastwise trade of the United States including trading privileges to the Territory of Alaska. Another bill, Senate Joint Resolution 101, calls for the sale to a specific citizen corporation of one specified N3-M-A1-type cargo vessel. Unlike S. 2241, Senate Joint Resolution 101 does not designate the area in which the vessel is to be operated, although from its physical characteristics we would assume the coastwise trade of the United States was involved.

We are, as the committee knows, greatly dedicated to the rehabilitation of our domestic trade, but we cannot support legislation which calls for the breaking of the ship sales price formula as in the case of Senate Joint Resolution 101 when such formula has prevailed in justice and equity for almost 10 years. S. 2241 has the pricing formula which is stated to be similar to that contained in Public Law 553 of the 83d Congress. Said law provides for a specific price for a particular vessel. If it is intended by S. 2241 to keep within the framework of the Ship Sales Act of 1946, we find it less objectionable than the other bills heard here today.

S. 2403 calls for the sale of 50 vessels, preferably of the Victory class, to nonsubsidized operators under American flag. It further provides that purchasers shall commit themselves to build 1 new vessel for each 5 vessels acquired under the act.

S. 2403 is subject to the same criticism as was covered in our comments in connection with other similar legislation, i. e., it calls for the sale of vessels not only at considerably below present value but considerably below floor price of the old Merchant Ship Sales Act as well. It goes one stage further, however, and provides that there shall be deducted from the price of the vessel all costs required to put the vessel in class. This could and finally would provide for a phenomenally low price for a vessel of the Victory class.

The cornerstone upon which this bill rests is that it seeks to use the ship sales device to get commitments ultimately to build new vessels. The bill envisions a level of profitable operation with the vessels purchased to an extent that appropriated construction-differential money would not be required in order to complete new vessels (on a 1 new ship to 5 old ships basis).

It should first be noted that vessels trading in international trade are all eligible for construction-differential subsidy, not only vessels of subsidized operators. This bill, however, is entirely discriminatory in that it seeks to overcome the shortage of construction-differential money but confines the procedure to nonsubsidized operators. It should be noted, however, that an overwhelming proportion of the construction-differential moneys requested are for application against subsidized line vessels. This, however, is only the reality of the situation and not a result of any legal limitation. By allowing only nonsubsidized operators the privileges under the act, it is clear that the bill could not go very far in overcoming the inadequate construction-differential subsidy funds available, since that inadequacy exists as noted overwhelmingly in connection with subsidized lines' obligations. Moreover, since the fundamental premises of S. 2403 depart so drastically from our national maritime policy as established in the 1936 act, we believe the closest scrutiny is required before any precedent for such departure is established through any bill which is as limited in scope as S. 2403.

Moreover, the bill overlooks the impact which might be created on all vessels presently in the American fleet trading internationally whether subsidized or nonsubsidized. The addition of 50 Victory-type ships with such a minimum

pital outlay as required by S. 2403 could be a very fortunate thing for the rchasers of the 50 vessels involved but at the same time could have serious verse competitive effects on the balance of our merchant marine. The bill envisions a continued period of prosperity in the ocean-shipping d which would enable the recovery from the operation of the purchased sels of enough money in a very short period of time to enable the ship chasers to recover in addition to normal business profits enough additionally meet 45 percent approximately of the cost of building new ships (which on -to-1 basis would be almost 10 percent of such cost per ship). It is highly estionable that this is economically probable. The legislation involves binding purchaser to construct new vessels but does not specify how this shall be permed. It is completely possible that if this legislation were enacted and if the sperity of the shipping market were reasonably maintained in the future, chasers of vessels under the act would benefit by substantial profits, made so low capital costs but could, with little if any penalty at all, abstain from Iding new tonnage and forfeit at most only the ships purchased at extremely cost. In fact, a ship operator does not undertake to build a new vessel etime in the future on the basis of profits acquired through the operation of er vessels. Any reasonable businessman entertains the expansion of his ital plant on the basis of the potential profitability of the new capital equipat, not on the basis of the profitability of that equipment which he previously operated. In this respect S. 2403 goes wide of the mark by placing the cart ore the horse.

We feel certain that because of the limitation of its application, because of discriminatory treatment of subsidized versus nonsubsidized vessels, and use of the basic economic fallacies on which it rests, the committee will ct S. 2403.

à our earlier presentation we indicated that we would inform the commitof our views of the maritime draft legislation presented to the committee une 10. We are opposed to enactment of the draft bill.

he two initial provisos of the bill call for consultation with various departts and a finding that the vessels to be sold are not inconsistent or incomole with present legislation or our defense requirements. We can foresee re complications resulting therefrom because of the lack of standards by h to measure such inconsistency or incompatibility as may exist.

e bill is clearly discriminatory in that it provides sales authority for fornations but in no way considers nor makes available vessels for sale to rican citizens.

ction 2 (a), paragraph (2), should be subdivided in two separate parahs. The consideration of the payment should depend on the condition of essel being transferred as a special criterion but the balance of that parah should be incorporated in a new paragraph (3) which would provide that ninimum price shall be the Ship Sales Act of 1946 floor price. Further, graph (2) of section 2 (a) is additionally faulty since the entire bill calls ales foreign but the date of the determination of the price under the Ship Act of 1946 is January 15, 1951. To be entirely consistent with previous ns of Congress, the date of these sales for foreign ownership should be as of h 1948, when authority to sell for foreign registry ended, not January which was the date of the close of the Ship Sales Act for American registry. do recognize that the determination of the number of vessels to be sold inted to the Secretary of Commerce, but the bill itself provides no limit. mably all 2,000 vessels in the reserve fleet could, under its provisions, ailable for sale.

is our view that if the vessels to be sold under the act are to be confined e domestic trade of foreign nations, this should be done by limiting the e of the vessels sold to those strictly usable in the coastal trade. In this on there would be lessened the potential competitive impact on our fleet an-going vessels released from present domestic trade should they be re1 by vessels sold under the act.

· last phrase of section 3 (b) should, we believe, refer to requisitioning the vessel were registered under under the United States flag rather than itioning from a citizen of the United States.

nough we believe we will not be a party in interest in any ship sales transs envisoned under the draft bill, we question the propriety of excluding review of any action and determination or decision under the act as is led by section 4 of the bill.

We strongly object to the fact that determinations made under the draft bill require no public hearing in which United States interests can be heard. This is in sharp conflict with other proceedings of the Maritime Board in which even temporary charter of vessels by United States citizens is involved.

Finally, we think the bill falls seriously short of the mark in that it in no way will reduce the deluge of bills to be heard by the Congress in connection with sales for other than foreign coastal trades. So long as there is a possibility of enacting legislation favoring certain purchasers by the sale from the reserve fleet of bargain-priced vessels, there will continuously be a myriad of proposals to be heard by the Congress. This legislation will in no way significantly relieve that burden.

Senator WARREN MAGNUSON,

SEATTLE, WASH., July 9, 1957.

Chairman, Committee on Interstate and Foreign Commerce,

Washington, D. C.:

Sailors Union of the Pacific strongly favors the passage of Senate bill 2241 and urge a favorable report from your committee.

R. JOHANSEN, Sailors Union of the Pacific, Seattle Branch.

Senator WARREN G. MAGNUSON,

SEATTLE, WASH., July 9, 1957.

Chairman, Interstate and Foreign Commerce Committee,

Washington, D. C.:

Marine Cooks and Stewards, A. F. of L., favors the passage of Senate bill No. 2241 and urges favorable report from your committee.

J. WILLOUGHBY, Port Agent. SEATTLE, WASH., July 9, 1957.

Senator WARREN G. MAGNUSON,

Chairman, Interstate and Foreign Commerce Committee,
Washington, D. C.:

Puget Sound Maritime Grades Council strongly favors the passage of Senate bill No. 2241 and urges favorable report from your committee.

J. WILLOUGHBY, President, Puget Sound Maritime Trade Council.

Hon. WARREN G. MAGNUSON,

SHIPBUILDERS COUNCIL OF AMERICA,
New York, N. Y., June 13, 1957.

Committee on Interstate and Foreign Commerce,

Senate Office Building, Washington, D. C.

MY DEAR SENATOR: In connection with the hearing recently concluded by the Senate Committee on Interstate and Foreign Commerce on the sale of ships from the maritime reserve fleets to foreign nationals or Governments, the members of the Shipbuilders Council desire to go on record as strongly opposed to all sales of reserve-fleet ships for foreign-flag operation as constituting a competitive threat to the American merchant marine.

Regardless of restrictions limiting such vessels when sold to coastwise operation in the country of acquisition, nevertheless they could release other vessels for direct competition in international trade.

The possibility of obtaining such ships at the floor prices of the Ship Sales Act under present world market conditions for ships is apparently the principal inducement that activates the applicants for whom bills have been filed and the many others who the council is advised are contemplating filing applications. Practically all of the countries involved had the opportunity to purchase surplus war-built vessels under the Ship Sales Act at the floor prices stipulated in the Act during the period covered by the act and later extended by the Congress. Now that there is a worldwide demand for ships with consequent high world market values, the applicants want the opportunity to do now what they did not see fit to do 10 years ago. Why should the United States now sell ships to foreign interests at bargain prices when that same privilege is denied to United States citizens?