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Paragraph 4 (a) page 4:
Operating differential subsidy.---A bidder should base his bid upon some fixed subsidy rate for the life of the contract. This paragraph provides that the subsidy may be modified during the term of the contract whenever deemed necessary or advisable by individuals or authorities unnamed but whose discretion seems unlimited.
Similar difficulties confront us in a number of the succeeding terms of the invitation, but the few above set forth are some of the more important reasons that have compelled us to take the decision we have reached.
It is unnecessary at this time to detail the length of time this company has been operating the America France Line, for these facts are well known to you, but, suffice it to say, our company established the original French service of America steamers in 1918 and has been continuously operating your ships, exclusively, in that service and other trades for the last 18 years.
It has been our policy and objective at all times, and still is, to cooperate with the Government in the management and disposal to private operation of the America France Line, and we have on every occasion, when opportunity to bid has been offered, submitted our bids either for the charter or purchase of the line under conditions which we felt, due to our long and thorough knowledge of the trade, then represented a fair business risk. In this respect we beg to refer to our letter of June 14, 1937, transmitting our latest bid. Many of the problems there outlined still confront us in our consideration of the present call for bids, and we believe they can best be disposed of in the manner contemplated in the two bills referred to below.
Accordingly, we are supporting the O'Leary bill (H. R. 2382) and the Barbour bill (S. 656) now before the committees of both the Houses, which, if enacted into law, would empower you, and would give us the opportunity, to discuss and analyze all factors and circumstances which should be taken into account in arriving at the objectives that we both desire, namely, a workable operating arrangement which is fair both to the Government and to the private operator, and which would assure the continuance of this essential service into the future in accordance with your long-range policy. An important purpose of the bills above-mentioned is to permit just such negotiations to arrive at a working agreement that would secure that result.
We understand Congress has always desired, as long as the public interest is fully protected, that the operators who have devoted their careers to the development of such American lines, to service these trade routes, be granted a preference in the acquisition of such lines for private operation, particularly when the reputation of the operator arising out of his long dealings with the Government assures his complete reliability.
A condition which has been uppermost in our minds since 1932 lies in the possibility that you will decide to eliminate competition between two overlapping private operators, both subsidized by the Government, which results in no definite benefit to the public, but is destructive to both lines, and we hope that before final disposition of the America France Line to private interests such an anomaly will not be permitted to exist.
In line with the request for suggestions for consideration in connection with future proposals, and dealing only with the America France Line, we believe that a return to the 10-day sailing schedule from New York would make the charter of the line much more attractive and would more adequately meet the requirements of the trade at the present time by giving a better service from all North Atlantic ports in our range.
Again, a most determining factor is the uncertainty as to the amount of subsidy that will be ultimately allowed under the present invitation, for we know that the percentages stipulated in your addendum of February 3 in the case of the America France Line, in view of your present interpretation of the act, would be inadequate unless a countervailing subsidy is provided for the American private operator of the line to meet the similar subsidy paid by the French Government itself to our only foreign-flag competitor, the Compagnie Generale Trans-Atlantique, for the purpose of meeting the lower operating costs of its foreign competitors. This subject is outlined in our letter to you of February 11, 1939. The subsidy contemplated under the policy of the Merchant Marine Act, 1936, is clearly intended to counterbalance such foreign-flag advantages.
Because the conditions and terms of the invitation are so fixed and unalterable, and because there are so many factors which must be taken into consideration and provided for, which cannot be incorporated in the designated form of þid and which involve elements that must be defined with certainty so as to
permit any bidder to formulate a reliable and acceptable bid which would
COSMOPOLITAN SHIPPING CO., INC.,
COPY OF LETTER FROM COSMOPOLITAN SHIPPING CO., INC., AGENTS, 42 BROADWAY,
NEW YORK CITY
FEBRUARY 26, 1939. Hon. John H. OVERTON, Chairman, Senate Subcommittee on Merchant Marine,
Senate Office Building, Washington, D. C.
SENATE BILL s. 1516
DEAR SENATOR OVERTON : Pursuant to the permission of the subcommittee at the close of the session on last Saturday, I beg to enclose herewith a copy of my letter of February 11, 1939, to Admiral Land, Chairman of the United States Maritime Commission, to which no reply has been received, in confirmation of my talks with him with respect to the necessity for the allowance of a countervailing, subsidy authorized by Congress under section 604 of the Merchant Marine Act of 1936, and its incorporation as part of the data under the invitation for bids for the three Government-owned lines then outstanding.
The position in which this company was placed in the call for bids by the Maritime Commission under date of January 16, 1939, is clearly apparent. Prior to February 6 we could not know what subsidy would be allowed, and it was not our object in writing the enclosed letter to obtain more money for ourselves, as was suggested during the hearings, but simply to carry out the intent of Congress so that we could bid upon our line with an adequate subsidy, which would reach a reasonable parity with our foreign competition in the European trade.
Our latest bid of June 14, 1937, which the Maritime Commission is to supply as part of the record, was more than double the present bid of the United States Lines for the America France Line, and was principally conditioned upon the allowance of the necessary and proper countervailing subsidy contemplated by the act. We believe that the total amount so allocated to this line, in its unique situation arising from the direct subsidy given by the French Government to meet high French operating costs, would then be more equal to that granted other private lines in the European trades, and would correct the glaring disparity shown on the addendum to the invitation, dated February 3, 1939.
Under the paragraph in the invitation providing for the substitution by the Commission of new ships now nearing completion, the uncertainty is such that even the lines that were operating under mail contracts have yet to agree to accept such new ships under similar elements of uncertainty, nor has the United States Lines, most of whose ships have also reached the same degree of obsolescence as those of the America France Line, agreed to accept any of these newly constructed ships, as far as any published reports are concerned, which is undoubtedly due to the prohibitive cost and the possibility of change in the law.
References were made as to the possibilities of enhancement of ship values in the event of war. Surely in such an event the Government would appropriate such benefits as partial recoupment for its prior losses and would immediately invoke the provisions of clause 55 of the pro forma charter party accompanying this invitation for bids and already a part of the record.
I also refer to Admiral Land's testimony that the Government would benefit by the savings in overhead if the present bid is accepted. We do not agree with the accuracy of this conclusion, because such overhead savings as were described, in the event of charter by the United States Lines, would accrue to the United States Lines rather than to the Government, and, we believe, would be more than offset by decrease in business, as Mr. Campbell of the firm of its attorneys specifically pointed out in the report of his committee addressed to the President of the United States under date of December 3, 1930, and a part of this record.
During December 1938, in attempting to negotiate for a charter of the America France Line, after we had failed to obtain the line under our last bid, we submitted the matter to the Maritime Commission in a letter referred to by the General Counsel in his report, dated January 18, 1939, which appears on page 130 of the Record of Hearings before the House Committee on the O'Leary bili (H. R. 2382), in which he expressed the opinion that such procedure was not authorized by the present act.
We again confirm that our objective in supporting this bill is to secure a definite agreement resulting from negotiation, in accordance with repeated precedent in the disposal of Shipping Board Lines, and we are motivated by the belief that the policy of the Government to sell or charter its property upon definite terms, when directly applied to the peculiar conditions affecting this line, would be thus obtained.
I would greatly appreciate it if this covering letter, together with the enclosures, is made part of the record of the hearings conducted by your committee on this bill. Respectfully yours,
INMAN H. PAYNE, Vice President.
FEBRUARY 11, 1939. Admiral EMORY S. LAND,
Chairman, United States Maritime Commission, Washington, D. C. DEAR ADMIRAL LAND: With further reference to the facts discussed during our conference at your office on the 8th instant, I wish to confirm the statements that I made for the consideration of the Maritime Commission.
The enclosed copy of the addendum to be attached to the invitation for bids of the American Hampton Roads-Yankee, Oriole Lines, and the America France Line, shows so great a variance in the amounts to be paid as subsidy to the respective operators over the period of the next 3 years, as provided in the invitation, that we felt it necessary to call to your attention the enclosed letters received from our Paris office, giving the wage scale as well as the detailed subsidies received by the Compagnie Generale Transatlantique.
The America France Line is the only American line from any point in the United States that terminates its service exclusively at French ports and, consequently, is directly competitive with the Compagnie Generale Transatlantique. As the enclosures state, that latter company receives a very substantial subsidy from the French Government, and it would be impossible for the America France Line to compete successfully with that line under today's conditions unless it is granted a proper portion of that amount in addition, so as to put the America France Line on a competitive basis. Obviously the French Government themselves foresaw the necessity of granting extra subsidies to that line because of its higher operating costs in order to place it on a stronger competitive basis with its foreign-flag competitors in the passenger-carrying trade.
The subsidy proposed in the case of each of the lines offered is based upon the lowest operating costs incident to their foreign ports of call. Other American lines concerned have terminal points outside the French Republic and, accordingly, have their subsidies based upon the lowest operating costs prevailing in the competitive services to any of such ports.
I wish to point out again, however, that the subsidy contained in the addendum would more nearly become adequate if the America France Line, in private hands, were to be relieved of the uneconomic cargo competition now existing at Havre by another American line. With the America France Line in private hands, and receiving a Government subsidy, in our opinion it should not be forced to compete with another Government-subsidized line, which itself was established to compete with foreign-flag vessels and cargo carriers in the German trade, particularly when the other private line running into Havre would receive a higher rate of subsidy, based upon the much lower German costs of operation, than the America France Line, also receiving a Government subsidy. Under these circumstances, there will be a preference to another American line against the America France Line and not in favor of the operator of the America France Line as the law requires, according to our interpretation of it. We therefore trust that these facts will be given due consideration. Yours very truly,
INMAN H. PAYNE,
ADDENDUM No. 1 TO INVITATION FOR SEALED BIDS FOR THE PURCHASE OF CHARTER
OF VESSELS FOR OPERATION IN THE AMERICA FRANCE LINE, THE ORIOLE LINES, AND THE AMERICAN HAMPTON ROADS-YANKEE LINES (PROPOSAL P. AND S. 270, DATED JANUARY 16, 1939)
(U. S. Maritime Commission, Washington, February 3, 1939)
The United States Maritime Commission hereby supplements and amends the invitation, dated January 16, 1939, for sealed bids for the purchase or charter of vessels for operation in the America France Line, the Oriole Lines, and the American Hampton Roads-Yankee Line, as follows:
1. By striking out the items in paragraph (b) of clause 4 of “Information and instructions to bidders” and inserting in lieu thereof the following items, together with the percentages of differential set opposite each item for such lines therein designated A, B, and C, respectively :
2. By striking out of item 3 (a) of the invitation the words and figures "fifty-two (52) outward sailings," specified as the number of sailings to be made per year with the vessels for operation in American Hampton RoadsYankee Line, and inserting in lieu thereof the words and figures "fifty (50) outward sailings.”
UNITED STATES MARITIME COMMISSION, By E. S. LAND, Chairman.
AMERICA FRANCE LINE
Subsidy allowance, July 1, 1937, to Oct. 31, 1938, America France Line and
American Hampton Roads Line-Percentages compared
79, 847 129, 212 170, 629
34.0 $146, 227
ductibles Hull insurance.
Average per voyage, 55 voyages.
voyage over American France Line allowance
36, 290 56, 724 86, 372 12, 467 49, 752 466, 107
3,837 99,762 138, 132
CABLE RECEIVED VIA RCA-FEBRUARY 7, 1939
PARIS. L. C. PAYNE,
Cosmopolitan Shipping Co., Inc., New York, N. Y.: 20 your 43 no changes since our letters 291 and 338. Increase salaries crew corresponding raise index cost living 9 percent recently submitted arbitration.
FEBRUARY 6, 1939. LA PORTE,
Cosmopolitan Shipping Co., Inc., Paris : 43 cable today present subsidies French Line and any change wages since last information.
CONSORTIUM MARITIME FRANCO AMERICAIN,
Paris, July 8, 1938.
New York, N. Y.
COMPAGNIE GENERALE TRANSATLANTIQUE
DEAR MR. PAYNE: We wish to confirm our cable No. 24 of July 4 reading as follows:
"Ourlet June 14, 291, Trans-Atlantique decree law published Journal Officiel June 30, raising normal subsidy to maximum 200 million francs if previous amount 135 millions does not cover operating losses.
We are enclosing, herewith, copy of our letter of yesterday, on the same subject, to Mr. J. T. Lykes who, as you know, is now in London. Yours very truly,
P. LA PORTE, President.
CONSORTIUM MARITIME FRANCO AMERICAIN,
Paris, June 14, 1938.
New York, N. Y.
COMPAGNIE GENERALE TRANSATLANTIQUE
DEAR MR. PAYNE: We duly received your cable No. 10 of June 9, reading as follows:
"Please forward earliest possible present amounts aid granted French Line as well as present wages paid French seamen ships comparable ours."
And we confirm our cable of yesterday, No. 11, as follows:
“Your 10 French Line yearly normal subsidy 135,000,000 francs Normandie financial charges 91,947,334 francs. Tasso Act extended through December 1940. See our letter May 13, No. 229. Expected subsidy under Tasso Act not to exceed 5,000,000 francs yearly in 1938. Additional subsidy granted under law August 26, 1936, which amounted to 27,977,250 francs in 1936 discontinued after April 1, 1937, owing improvement traffic French Line now requiring reestablishment additional subsidy. Regarding wages French seamen writing."
We wish to refer you to our circular letter of January 12 relative to the prospective sale of a large number of vessels owned by the Compagnie Generale Transatlantique. The various items of the State subsidy granted to the Compagnie Generale Transatlantique in 1936 were summarized on page 3 of this letter as follows: Normal subsidy
Fr. 135, 000, 000 Additional subsidy
27,977, 250 Tasso Act subsidy
9, 570, 855 Normandie financial charges..
91, 947, 334
264, 495, 439