a thorough knowledge of the trade conditions through intimate relations with the exporters and importers, to acquire such lines upon a reasonable basis, after negotiation in which there may be taken into consideration the many complicated world factors, which basis should be fair both to the Government and the operator, and thus place the line into private operation.

Each of these operators has a highly trained organization which has been engaged in operating the lines for a long period and which is thoroughly familiar with the peculiar conditions to be met in the operation of each line as an essential service, not only at the various ports of call but with the various exporters and importers.

We are interested in acquiring the America France Line because we are confident that if it is given a reasonable opportunity to expand along business lines it can be developed into a valuable element of the American merchant marine in the French trade for, obviously, it is proper that the two Republics be represented with their own flag services for the development of business between them. The French flag is well represented by the ships of the Compagnie Generale Trans-Atlantique, without any other French-flag competition. In the case of the American flag, the ships of the American France Line should also be relieved of other American-flag subsidized competition.

The advantage of goodwill in the development of shipping services is wellknown, and this goodwill must always be a part of the program of successful operation. Ships without a proper shore personnel and proper contacts with shippers are equally as useless as shore organizations would be without ships. The two must be combined and developed as a unit in order successfully to compete with parallel foreign-flag services. It is through that combination that substantial services are built upon a sound basis.

We are interested in the passage of the Barbour bill because it will give the Maritime Commission an opportunity to negotiate directly with our company, as well as with the operators of other lines, for the private operation of the lines. We believe this procedure will work to the best interests of the Government since it will make possible the continued operation of the Governmentowned lines in the hands of experienced operators who have spent many years in the operation of their respective services and who thus have an intimate knowledge of that service and hold the confidence of the shippers who use it. Last year the Maritime Commission made a survey throughout various sections of the country for the purpose of ascertaining what the shippers require in order to attract them to increased use of American ships. I attended several of these hearings and observed that the majority of the shippers, if not all of them, insisted that regularity and frequency of sailings were paramount requirements if American ships are to receive greater support from American shippers. Of course, in order to obtain support for the service we must not only convince the shippers, but also the foreign consignees. We have encountered in the past many instances where the foreign receivers of cargo direct the routing of their business in order to support their own national-flag service. They have even a greater incentive where they are not only nationalistically inclined, but where their flag service gives more frequent sailings, with faster ships, and at an identical cost of transportation.

I feel that greater support to American ships, particularly the slower cargo vessels, may be expected if a rate differential, based upon the slow speed of our vessels, were agreed to by the faster mail and passenger ships. This is a practice that I personally have advocated for a number of years, but without apparent result. This would give the shippers the choice between an express service at a higher freight rate and a slower freight service at a comparatively lower rate. This seems to us to be particularly essential now that our ships are becoming older. It should be in effect until the new and faster ships are in commission in the various services.

This is not a new thought in transportation, for it is a well-known fact that on our rail lines different classifications are applied to fast or slow freight. The same is also recognized among the passenger lines in establishing passenger fares.

The Government has expended large sums in maintaining the operation of the Government-owned lines, during the course of which the various organizations operating these American lines have developed and benefited by the experience gained in the actual operation of essential steamship services. It is for that reason that we feel the Barbour bill will make possible a benefit to the Government in disposing of the services so established, upon a business131003-39-3

like basis with full opportunity of discussion and adjustment, so that both the Government and the experienced operators will benefit to the greatest possible extent in the disposition of these lines for private operation.

The Barbour bill also permits a thorough study as to the requirements necessary to make a successful operation of each individual service. For example, it is our belief that today is not a propitious time to offer the lines for sale or charter. The present uncertainty of the European situation makes it inadvisable, particularly as it applies to France, which has during the past 8 years gone through crisis after crisis, with corresponding effect upon its economic life, resulting in a slowing down of the natural flow of commerce between the two countries. It would seem to be an unreasonable and even an unfair gamble of no present benefit to either the Government or the operators in view of the uncertainty of the European situation.

Just recently Ambassadors Kennedy and Bullitt were reported in the press to have made the statement that war involving Europe is highly imminent during the coming year.

The passage of this bill would permit the operator and the Government, through negotiations, to take into consideration this and other important factors, and to reach a basis of agreement that would be acceptable to prudent businessmen, as well as fair to the Government.

It is practically impossible to foretell now the future of our French commerce. A certain hazard always exists for those investing money in shipping, but with the economic unrest now confronting the world, and France in particular, it would seem imperative at this time to consider carefully all of these circumstances at round-table conference, in arriving at an arrangement for the disposal of the lines to private operation, and to assure the stability of the operation in the future.

Our company has bid repeatedly either for the purchase or the charter of the line. As far back as June 1929 we bid $1,550,000 for the purchase of the line, but we did not acquire it then for any reason for which we were responsible. On various occasions since then we have bid for the charter or purchase of the line, the last time being for the charter of the line on June 14, 1937. All of these bids were rejected for one reason or other, and, therefore, we feel that it is unfair to this company to require us continually to meet competitive bids to preserve the operation of this line in the hands of an operator who is familiar with the service. Not only has the repeated offer of the line for charter or sale, without any final result, made it difficult for us to make plans for expansion, but also to retain the continued support of loyal shippers who have not known from month to month whether the service would remain in our hands or would be taken over by another, or discontinued entirely. Certainly such conditions cannot be expected to better the American Merchant Marine in its dealings with its supporters.

The foreign line in competition, although having had serious difficulties of its own, has not been subjected to this peculiar handicap and it is only natural that it should take advantage of such uncertainty engendered by this practice in the American shippers and consignees to the detriment of the AmericaFrance Line.

In spite of these obstacles, however, we have for a number of years carried the major portion of freight from United States North Atlantic to French Atlantic and Channel ports and last year, with only 20 percent of the total sailings between North. Atlantic ports and Havre only, we carried in excess of 40 percent of the cargo, which shows the advantage and essentiality of maintaining friendly relationships between the operator of the line and the shippers. Recently, however, by direction of the Maritime Commission, the services of the America-France Line have been reduced from a 10-day sailing from New York to a fortnightly sailing. This had the natural tendency to so espace the sailings that it will make it unattractive and inconvenient for many of our important shippers to continue their full support.

Again, it must be borne in mind that those who would charter the line today would not have the privilege of withdrawing ships or placing them in other trades if the business to France is further retarded, but must continue the service for a period of 3 years regardless of business conditions.

In the case of foreign lines, however, withdrawal of ships to place them in other services can be done at the discretion of the owners with no restrictions such as are implied in the proposed charters of American ships. For example, Furness Withy, after initiating a French service, withdrew its ships due to bad business conditions and strong competition and placed them in

more lucrative services. The same was also true of the Lloyd Royal Belge and, to a minor degree, of the United States Navigation Co. and Isbrandtsen Moller.

It requires no argument that if foreign service units now operated for Government account by the various operating agenices are to be disposed of upon bids, a serious danger to the success of the policies of Congress arises. If any of these lines are bid in by a larger operating company it would tend to create a monopoly, which is contrary to the policy of the Government, and the service would naturally lose much of the goodwill already established at the expense of so much investment of capital and effort. It cannot be denied that a rupture of personal contacts between the shipper and the operator will go far to destroy the long established goodwill existing between the shippers and the present operators. Before inviting this danger, such consequences should be carefully weighed. The Barbour bill takes cognizance of this condition and would make it possible to preserve this asset.

There still remains an important question of policy that should be definitely determined upon before the lines are offered for bid, in order to clear away an unfortunate condition which has existed for a number of years. That is, the overlapping of Government owned or subsidized foreign freight services.

It is well recognized that the support by the Government of two American steamship lines operating between the same ports is economically unsound unless there is enough business between those ports to support these two American lines. The present world economic conditions have reduced the movement of ocean borne freight traffic to such a point that in the case of the America France Line, for example, it can accommodate on a 10-day schedule all cargo moving east and westbound between American North Atlantic and French Atlantic and Channel ports in conjunction with the French Government-subsidized Compagnie Generale Trans-Atlantique. American shippers require for dependability a strictly cargo service to France that is not subject to the exigencies of passenger traffic.

Nevertheless, the United States Lines has been carrying cargo between New York and Havre on its New York-Hamburg service. Calls of the United States Lines at Havre resulted from the change of its French passenger and mail port from Cherbourg to Havre.

After this change of its passenger and mail port from Cherbourg to Havre, the United States Lines commenced to carry cargo between Havre and New York to the detriment of the America France Line, which up to that time had served the ports of Havre, Dunkirk, Bordeaux and St. Nazaire so satisfactorily to the shippers that with the French Line as its only foreign flag competitor the America France Line was carrying more than 50 percent of the cargo moving between American North Atlantic and French Atlantic and Channel ports. Thus the object which Congress set out to attain had been accomplished by the America France Line under the operation of the Cosmopolitan Shipping Co., Inc., and the intrusion of the United States Lines into the Havre freight service was economically unnecessary from the standpoint of that mandate of Congress in fostering an American merchant marine, and of the shippers in obtaining the prompt, safe, and regular tronsportation of their commodities.

This intrusion has worked to the disadvantage of both the America France Line and the shippers on the United States Lines to Germany. We feel that such an uneconomic condition should be corrected before a permanent disposition of the America France Line is made. We further believe that this situation does not prevail in other trade routes where American shipping is subsidized by the Government.

Accordingly, the operator who has built up the goodwill of an essential service, now Government-owned, is the logical one to acquire that service if the policy of Congress is to be recognized and accomplished. The goodwill now established could not be taken over undiminished by a strange operator. In fact, past experience has demonstrated that the goodwill created by one corps of employees cannot be transferred without serious impairment to a strange operating company.

The trade served by the America France Line has been recognized by succeeding administrations of the Shipping Board and the United States Maritime Commission as an essential service. We submit that the policy of Congress as announced in its legislation on the subject of the merchant marine can be best accomplished by the elimination of overlapping of other American Governmentaided services and by arranging for the continued operation of this service by an operator whose past performances have demonstrated its ability and who

will have a strong incentive to take over and develop the operation of the line from the standpoint of a prudent businessman.

The Barbour bill will also have a most important effect upon the present law because it will eliminate the now existing mandatory provision requiring "All operations of the Commission's vessels by private operators under such operating agreements shall be discontinued within 1 year after the passage of this act." It is our understanding that it is this provision of law that the Maritime Commission considers mandatory upon it, even in spite of the present unsettled economic conditions, again to advertise the lines for sale or charter.

This legislation should be helpful to the Maritime Commission so as to permit it to use its discretion, unhampered by any time element, for the advantageous disposal of the line for private operation, which is in the contemplation of the various shipping acts adopted by Congress.

Our company has always considered itself a part of a partnership with the Government in the operation of the French service for the continued development of America commence and it approaches this subject still with that view and with the hope and desire of continuing to function as a part of the American shipping industry.

Again, when the new ships are placed in commission, it will be necessary for them to be exmployed in existing essential trade routes, and we are hopeful that conditions will be brought about that will permit their charter to lines such as the America France Line for private operation upon a more competitive basis as to speed with their foreign competition.

The Cosmopolitan Shipping Co., Inc., has devoted all its energies for many years past to the building up and operation of the America France Lines, solely. Under all of these circumstances, we strongly and respectfully urge the favorable consideration by this committee of the Barbour bill now before it.

Mr. PAYNE. I also have a copy of a letter that we addressed to the Maritime Commission under the date of February 17, 1939, in response to their call for bids which, with your permission, I should also like to incorporate, because I think that these two documents state our position.

Senator OVERTON. The official reporter will incorporate the letter at this point in the hearing.

(The letter referred to is as follows:)

COSMOPOLITAN SHIPPING CO., INC., 42 Broadway, New York City, February 17, 1938.

UNITED STATES MARITIME COMMISSION,

Washington, D. C.

DEAR SIRS: We duly received your invitation, dated January 16, 1939, for sealed bids for the purchase of the trade name and goodwill of the America France Line, the Oriole Line, and the American Hampton Roads-Yankee Line, and/or the charter (bare-boat basis) of such vessels for such operation in the lines.

We also acknowledge receipt on February 6 of the addendum to such invitation referred to in the note at the top of page 5 of the invitation.

Under the terms of the invitation, the form of bid is unalterable according to the following language taken from paragraph 5, page 5, of the invitation as follows:

"The Commission will not receive, either directly or indirectly, from bidders or from any persons acting for them, any communication, plan, or explanation, either oral or in writing, tending to explain or modify their bids in any way whatever, unless such communication, plan, or explanation is called for by the Commission."

Under such terms and in view of several conditions contained in the invitation, we regret exceedingly that after mature thought we have reluctantly reached the conclusion that it would be impracticable to submit a bid either for the purchase or charter of any of the vessels or lines requested, and beg to set forth some of our reasons for being forced to reach this conclusion.

Without multiplying examples, we respectfully call your attention to some of the provisions in the invitation which have had a strong influence upon us. Paragraph 3 (a), page 4-Substitution of vessels by the operator: There is no limitation upon the terms and conditions that the Commission may impose or approve for the substitution of other cargo vessels to be used in a line, nor

is there any definition of the required service which might be satisfactory to the Commission.

Paragraph 3 (b), page 4-Substitution of vessels by the Commission: The Commission may substitute "presently existing or newly constructed cargo vessels" and all the provisions of the charter would be subject to provisions of law "then in effect" without any limitation or qualification as to the scope or application of such laws.

This paragraph also provides for an adjustment of basic charter hire subject to such future laws and within the discretion of the Commission. The operation of such a provision it seems would be such that a bidder would, in effect, obligate himself to perform a contract, the ultimate terms of which are now unknown.

The minimum charter hire of such new vessels, as fixed by section 714 of the Merchant Marine Act, 1936, at 5 percent of the actual construction cost of such vessel is now prohibitive.

Under the provisions of this paragraph a successful bidder, if he could not agree with the judgment of the Commission, might forfeit all his rights and, in addition, would be required to pay as liquidated damages 121⁄2 percent of the aggregate amount of any differential subsidy paid him under his charter. 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 American 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 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 wtih 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