SEC. 2. Section 705 of the Merchant Marine Act, 1936, as amended (U. S. C., 1934 edition, Supp. IV, title 46, sec. 1195), is amended to read as follows:

"SEC. 705. As soon as practicable after the passage of this Act, and continuing thereafter, the Commission shall arrange for the employment of its vessels in steamship lines on such trade routes, exclusively serving the foreign trade of the United States, as the Commission shall determine are necessary and essential for the development and maintenance of the commerce of the United States and the national defense: Provided, That such needs are not being adequately served by existing steamship lines privately owned and operated by citizens of the United States and documented under the laws of the United States. It shall be the policy of the Commission, except as otherwise provided in section 704 of this Act, as amended, to encourage private operation of each essential steamship line now owned by the United States by selling such lines to citizens of the United States in the manner provided in section 7 of the Merchant Marine Act, 1920, and in strict accordance with the provisions of section 5 of said Act, or by demising its vessels on bare-boat charter to citizens of the United States who shall agree to maintain such line or lines in the manner hereinafter provided."

SEC. 3. Section 706 of the Merchant Marine Act, 1936, as amended (U. S. C., 1934 edition, Supp. IV, title 46, sec. 1196), is amended to read as follows: "SEC. 706. (a) Except as otherwise provided in section 704 of this Act, as amended, the Commission shall not charter its vessels to private operators except upon competitive sealed bids submitted in strict compliance with all the terms and conditions of a public advertisement soliciting such bids. Each and very advertisement for bids to charter the Commission's vessels shall state the number, type, and tonnage of the vessels the Commission is offering for bare-boat charter for operation as a steamship line on a designated trade route, the minimum number of sailings that will be required, the length of time for which the charter will be given, and all other information the Commission shall deem necessary for the information of prospective bidders.

"(b) The Commission shall have authority to, and shall announce in its advertisements for bids that the Commission reserves the right to reject any and all bids submitted."

SEC. 4. Section 707 of the Merchant Marine Act, 1936, as amended (U. S. C., 1934 edition, Supp. IV, title 46, sec. 1197), is amended to read as follows:

"SEC. 707. Except as otherwise provided in section 704 of this Act, as amended— "(a) The Commission shall award the charter to the bidder proposing to pay the highest monthly charter hire unless the Commission shall reject such bid for the reasons set forth in subsection (b) of this section.

"(b) The Commission may reject the highest or most advantageous or any other bid, if, in the Commission's discretion, the charter hire offered is deemed too low, or the Commission determines that the bidder lacks sufficient capital, credit, or experience to operate successfully the line; but the reason or reasons for rejection of any bid, upon request of the bidder, shall be stated to such bidder in writing. "(c) If the highest bid is rejected, the Commission may award the charter to the next highest bidder, or may reject all bids and readvertise the line: Provided, however, That the Commission may operate the line until conditions appear to be more favorable for a reoffering of the line for private charter."

Amendment No. 2: Amend the title to read as follows: "A bill to amend sections 704, 705, 706, and 707 of the Merchant Marine Act, 1936, as amended."

EXPLANATION OF AMENDMENTS

Section 704 is amended to delete a provision thereof requiring the discontinuance of operation of lines by the Commission under certain operating agreements, because this requirement has been fully carried out by such discontinuance. The section, as amended, authorizes the Commission, pending sale or charter of its lines, to operate them for its own account. In case of a line operated by the Commission on February 1, 1939, preference in the operation, sale, or charter thereof shall be accorded the agent of the Commission operating the line on such date. The Commission, prior to advertising any such line for sale or charter, shall negotiate with the agent of the Com

mission operating such line on February 1, 1939, and may negotiate with other persons, for the sale or charter of the line. The Commission, after such negotiation, may enter into an agreement for sale or charter upon such terms and conditions as will give preference to the agent operating the line on February 1, 1939, insofar as it may be possible to do so consistently with the purposes and policy of the Merchant Marine Act, 1936, including section 809 thereof. In case such negotiation does not result in an agreement satisfactory to the Commission, the Commission may call for bids for the sale or charter of such lines in accordance with the provisions of the Merchant Marine Act, 1936.

If any sale or charter is negotiated, the Commission is required to make a full report thereof, with reasons therefor, to Congress at the earliest opportunity.

A clarifying amendment is inserted in the proviso referring to section 705 in order to make section 704, as amended, and section 705 conform.

Section 705 is amended by the insertion of the words "except as otherwise provided in section 704 of this act, as amended" in the last sentence of the section. The purpose is to make these several sections conform.

Section 706 is amended by inserting in subsection (a) the words "except as otherwise provided in section 704 of this Act, as amended". This explanation is the same as above and the amendment is made for the purpose of harmonizing the sections affected by the amendment to section 704.

Section 707 is amended by the insertion of the words "except as otherwise provided in section 704 of this Act, as amended" so as to make that section apply to subsection (a), (b), and (c). The same explanation obtains for this amendment.

Amendment No. 2: The bill as originally referred to your committee amended only sections 704 and 706 (a). The amendments proposed above, however, effect changes in sections 704, 705, 706, and 707 and the title has been amended to show changes in all of these sections.

PURPOSE

The purpose of this bill is to provide more effective means of disposing of Government-owned lines in the best interests of the United States; to give full force, vitality, and effect to the provision of existing law whereby it is provided that in disposing of Governmentowned lines under this act, preference shall be given to persons who are citizens of the United States and who have the support, financial and otherwise, of the domestic communities primarily interested; to give full force, vitality, and effect to the provisions of existing law whereby it is required that Government-owned vessels which, at the time of the enactment of the Merchant Marine Act, 1936, were being operated by private operators on lines in foreign commerce of the United States, should be chartered or sold, but that preference should be given to the operators then operating said vessels, and to require contracts under said act to be entered into so as to serve equitably, insofar as possible, the foreign-trade requirements of the Atlantic, Gulf, and Pacific ports of the United States.

The sections providing for the preference asserted are (a) section 704 where it is provided that in making charter of vessels then being operated by private operators on lines in the foreign commerce of the United States "preference is to be given to present operators," and (b) section 809 which reads as follows:

SEC. 809. Contracts under this Act shall be entered into so as to equitably serve, insofar as possible, the foreign trade requirements of the Atlantic, Gulf, and Pacific ports of the United States. In awarding contracts under this Act, preference shall be given to persons who are citizens of the United States and who have the support, financial and otherwise, of the domestic communities primarily interested.

The lines that are affected by this legislation are Governmentowned lines and are as follows:

1. The America France Line;

2. The Oriole Lines;

3. The American Hampton Roads-Yankee Line;

4. The American Pioneer Line.

The number of ships involved in these lines are about 28, and are all around 20 years in age.

Recently the United States Maritime Commission has invited bids for the purchase of the trade name and goodwill of the America France Line, the Oriole Lines, and the American Hampton RoadsYankee Line, together with the steel cargo vessels named in the invitation and now operated on said lines. Since the hearing upon this bill the Commission has authorized the advertisement of the American Pioneer Line. Said bids are (a) for purchase of the trade name and goodwill of said lines, respectively, with the vessels operated on said lines, for operation on routes therein specified, or (b) for charter on bare-boat basis, of the same vessels and lines for operation on the same schedules as in (a).

The invitation in connection with the America France Line covers 4 vessels for operation from United States North Atlantic ports, north of Cape Hatteras, to French Atlantic and French channel ports on the following sailing schedules: Not less than 24 outward sailings per year on a fortnightly schedule from Philadelphia, Baltimore, Hampton Roads, and New York to Havre, of which not less than í sailing per month shall include calls at the ports of Boston, Dunkirk, Bordeaux, and St. Nazaire.

The invitation in connection with the Oriole Lines covers 4 vessels for operation from United States Atlantic ports north of Cape Hatteras to west coast of United Kingdom and Irish ports on not less than 24 outward sailings per year on a fortnightly schedule from the ports of Philadelphia, Baltimore, Hampton Roads, and New York to the ports of Manchester, Liverpool, Dublin, Belfast, and Glasgow, and the port of Cork, when cargo offerings warrant.

The invitation in connection with the American Hampton RoadsYankee Line covers 8 vessels for operation from United States ports north of Cape Hatteras to ports on the east coast of the United Kingdom, and Hamburg-Bremen (except from the port of New York to the ports of London and Hamburg-Bremen) on the following sailing schedules: Not less than 52 outward sailings per year from the ports of Philadelphia, Baltimore, and Hampton Roads to the ports of London and Hamburg, which schedules shall include fortnightly calls at the ports of Boston, Bremen, Hull, and Dundee, and

a regular monthly call at the port of Leith, the operator to have the privilege of calling at New York (except between New York, Hamburg-Bremen, and London), Portland, Maine, and Avonmouth and Southampton as cargo offerings warrant.

Alternative bids are called for in various combinations, combining (a) all of said lines, (b) America France and the Oriole Lines, (c) America France and American Hampton Roads-Yankee Line, and (d) Oriole and American Hampton Roads-Yankee Lines.

The invitation calls for suggestions for the acquisition of any or all of the aforesaid vessels for operation on any combination of all or any part of the services, routes, or lines for consideration in connection with future proposals in the event an award is not made under any of the terms and conditions outlined in the proposal. In this respect the invitation is really an invitation to negotiate and to submit bases of conference and negotiation, but omits such elements of certainty as affords bidders the opportunity to make stable bids. The invitation contains various provisions for substitution of new ships in the process of construction or hereafter to be constructed for the United States Maritime Commission upon terms hereafter to be affixed or by the Commission deemed equitable, with penalty of forfeiture if the purchaser or charterer should not submit to such terms as the Commission may deem equitable but which to the operator may appear and, in fact, may be onerous.

The bid, pursuant to the invitation, must be accompanied by a guaranty in the sum of $50,000 with additional provision for surety bonds.

The invitation is in such form that the interests of the United States may not be protected, the preferences created in existing la v to present operators may be invalidated, and the equitable distribution among ports may be endangered (a) by a "fly-by-night" or speculative operator, or (b) by the creation of a monopoly serving diverse ports but primarily interested in the development of only some of the ports served. The invitation might be considered as designed to elicit suggestions which might be used as the basis for subsequent invitations or negotiations, but the Maritime Commission considers that private negotiations are not authorized by the present law.

There is appended the letter of the Chairman of the Commission, dated January 31, 1939, transmitting to your committee the opinion of the General Counsel that negotiations are illegal under the law. The opinion is as follows:

The provisions of the Merchant Marine Act, 1936, as amended, affords no basis whatsoever for the interpretation suggested by the Cosmopolitan Shipping Co., Inc., but, on the contrary, the act expressly provides that the commission shall not charter its vessels to private operators except upon competitive sealed bids submitted in strict compliance with all the terms and conditions of a public advertisement soliciting such bids, and, in addition, specifies certain detail information shall be included in the advertisement.

If this is a correct interpretation and as a result other provisions of the law cannot be carried into effect for lack of power to negotiate, then the proposed bill will supply that hiatus which exists in the law.

The granting of additional preferences, is not involved here, but the bill perfects the machinery by which already existing preferences, repeatedly declared in the laws of Congress enacted in the past 15 years, may be carried into effect if in the best interest of the United States.

For reasons which satisfied the Congress, the law already provides expressly for preferences and equitable distribution of services among ports. The commission's agents have valuable trade connections, goodwill, and affiliations built up through years of experience which should not be lost to the various ports which the law expressly provides shall be taken care of by the execution of contracts under this act; i. e., the Merchant Marine Act, 1936, so as to serve equitably, insofar as possible, the foreign trade requirements of the Atlantic, Gulf, and Pacific ports of the United States. The proposed legislation, therefore, provides a means of doing that which the commission is of the opinion that existing provisions of law will not permit to be done.

The trade areas served by these lines are of such importance that service by American-flag ships should be continued. Your committee is trying to provide, by this legislation, machinery whereby this may be done, and to protect against possible future strangulation of these most important areas by interests primarily interested in other localities. It is for this reason that this preference and the provisions of section 809 have been affirmed and reaffirmed by Congress many times. Your committee desires to assure, so far as possible, that the important trade areas referred to shall be adequately served by Americanflag ships and not be forced to resort to foreign-flag lines for the development of their ports.

The Commission advises:

There is considerable doubt, however, whether those portions of the Government lines which parallel services of privately owned subsidized lines should be continued in their present form and under separate management with an attendant duplication of overhead and other operating expense.

This declaration emphasizes the need for negotiation in a settlement of these problems. Surely a commission that has settled by negotiation for the comparatively small sum of $6,945,873.33 claims asserted against the Government aggregating $109,029,294.17 growing out of the cancelation of ocean-mail contracts, can adjust the much more limited problems involved in the negotiations authorized by this act, and especially since the proposed legislation authorizes negotiations and bids. The competitive bidding method will be open to the Commission in the event it is unable to negotiate satisfactory contracts.

The policy declared in the Merchant Marine Act, 1936, that the merchant marine of the United States shall be privately owned and operated insofar as practicable rather than owned and operated by the Government, will be effected more nearly by the methods permitted by this bill than by sole dependence upon competitive bidding. It is difficult to see why private negotiations should be against public policy in the case of the particular lines affected by this legislation when it was not against public policy in the adjustment of operations under the ocean-mail contracts. Under the Merchant Marine Act, 1936, the Commission is authorized to negotiate for the leasing of terminal properties under its control. The committee is advised that the transaction whereby the Commission acquired approximately 90 percent of the stock of the American President Lines, Ltd., was negotiated. In the case of the lines involved in this controversy, the Government owns the ships but not the operators. In the case of the American President Lines the Maritime Commission owns approximately 90 percent of the stock in the operating company and through