because it would create a monopoly and allow only those who have a jot of money to go into the building; it would not give the little fellow a chance. You say that the Hang amendment which you have just been condering, and which I have not had a chance to read, provides that the Government of the United States will give a construction loan of 80 tercent of the foreign cost? Mr CAMPBELL. The Government will build the ship first. Mr CAMPBELL. Then sell it at the European cost with 20 percent down and the balance of 80 percent over 20 years. Mr SIROVICH That is even better than before. I am in favor of that I am willing to do anything that will help to build new mercant-marine ships. But that is a better proposition than the old ele Mr CAMPBELL Yes; of course it is better for the owner financially. Mr SIROVICH. You say you have to consider with your association to whether they will be satisfied? Mr CAMPBELL. That is not the only proposal in the Hang pro71. Mr SIROVICH. What are the other proposals? Mr CAMPBELL. Let me come to them in just a second, if I may. If we come to an acceptance of the Haag proposal, or that phase of the Hang proposal, then we do want to make a modification of the provision and write into it something which will give the owner a !..! participation in determining the character of the vessel which is to be built, a participation in the course of construction through exatuination, survey, and the like of that, so as to put the owner in the same position as he would be under the other proposal. Mr SIROVICH. That is all right. In other words, you do not ant him to buy a cat in a bag. Mr CAMPBELL. Right. Mr LEHLBACH Can we not go along with the old bill first, and then take up the Haag proposals” Mr. CAMPBELL. That is the difference between those two. The authority shall require the proposed cor struction, outfitting, and equipt or reconditioning to be done in a shipyard within the continental limits of thelited States as the result of competitive bidding between the shipyards desgated by agreement between the authority and the applicant with the right in the a ithority or the appheant to reject any or all bids. It seems to us that inasmuch as under this bill the contract is to be made by the owner with the shipyard, and he is to put up 25 percent of the European cost, the owner as well as the Government ought to have the right to reject the bid. I think there could be no dispute over that. Mr. SIROVICH. Does any particular operator see the designs of a st.. before it is ben to be built? The CHAIRMAN. Oh, yes Mr. CAMPBELI.. Yes, of course. That is what we want. We want to participate in the design of the ship. Mr. SIROVICH. And make suggestions about changes and correc Mr. CAMPBELL. Certainly. Certainly the operator in a given service ought to know more about what ship he needs in that particular service. What we want is a full opportunity of participating in the design and in the construction. Section 504 on page 12 is a new provision. It reads: No such contract that is, a contract for new construction shall be made with respect to a vessel to be operated on a service, route, or line served by citizens of the United States, unless the Authority shall determine that the service already provided by American vessels in such service, route, or line is inadequate, and that in the public interest additional vessels should be operated thereon. That is a suggestion that was put before the association. It did not meet with unanimous approval. In connection with it, quite a serious dispute arose between some of the members. It may be that in the course of these hearings you will have some of the members of the association present their views on the question with which it is concerned, so that I do not care to discuss it any further than I have now. I will leave it to them. But this particular proposal comes from the association. You will note it is that no contract shall be made with respect to a vessel to be operated on a service, route or line served by citizens of the United States, unless the authority shall determine that the service already provided by American vessels in such service, route or line is inadequate, and that in the public interest additional vessels should be operated thereon. We suggest the deletion of old section 504 and a rewrite of it. This goes to the question of a rebate of the construction differential in the case of participation of the vessel in domestic, as well as foreign, commerce. No vessel, in respect of which a construction subsidy has been paid pursuant to sections 501 and 502 other than pursuant to section 302, shall be operated other than exclusively in foreign trade unless (a) the owner shall receive the consent thereto of the Authority and agrees to repay the United States, and furnishes a satisfactory bond or other security to the Authority to secure such payment, in equal semiannual installments over the remaining economic life of the vessel, of an amount which bears the same proportion to the amount of subsidy paid by reason of paragraph (a) of section 501 as the period during which the vessel is operated exclusively in domestic service bears to the entire economic life of the vessel, with interest at 4 percent per annum on the unpaid installments; and (b) during the time such vessel is operated, with consent of the Authority, in joint domestic and foreign trade, the owner shall refund a proportion of the repayments payable for such period equal to the ratio of the revenues derived from its domestic trade to the total revenues derived from all trade: Provided, however, That the Authority shall not grant new vessels, other than oil tankers, built under a contract pursuant to this title, permission to operate wholly or partially in domestic trade, except to replace a vessel engaged in such trade, or where there are not available vessels to serve adequately the needs of commerce. The exception of tankers is made there because the tankers will be built under this title pursuant to the provision in section 501. But inasmuch as they are being paid only for the naval features of the vessel and must be used in coastwise, and domestic and foreign trade, this exception has to appear. Otherwise you would have them excluded from the domestic trade where they are required, simply because they happen to have naval equipment or naval speed put into the vessels for naval purposes. Yet they will be needed in the coastwise service as well as the foreign service. The effect of that provision is substantially the same as the effect of the provision of which we suggest a redraft. It is more for clariLcation It does provide for a proportionate refund of the construction subsidy if the vessel is used either exclusively in domestic service or partly in domestic and foreign trade. In principle it is not different from that which was contained in your original bill. Mr. LEHLBACH. The provision that these new vessels may not be 1.sed to augment the tonnage in the coastwise and intercoastal trades is new, is it not, that last proviso? Mr. CAMPBELL. Yes. Mr. LEHLBACH. That is to prevent the augmenting of tonnage in coastwise and intercoastal trade? Mr CAMPBELL. Yes. You see above, it cannot operate other than exclusively in foreign trade unless the owner receives the consent of the Authority, and agrees to make these repayments. Then it proNades that the Authority shall not grant new vessels other than oil tankers built under a contract permission to operate wholly or partially in domestic trade, except to replace a vessel engaged in such trade, or where there are not other vessels adequate to the service. Mr SIROVICH. I was not in the room when you began to speak of domestic construction. How would you finance domestic constructon' Would you use the foreign standard there, too? Mr Campbell. No, that is purely a loan. Mr. SIROVICH. How would you finance it? Mr CAMPBELL. So far as construction in the coastwise trade is concerned, the proposal is that the Government act simply as a banker under the construction loan fund. Mr. SIROVICH. You mean like we did under construction for foreign ship, loan them 75 percent of the money? Mr. CAMPBELL. Yes, sir. Mr SIROVICH. And have that amortized over a period of over 20 years? Mr. CAMPBELL. Yes, at 4 percent interest, exactly the same interest you are charging the railroads. You are lending money to the raroads today at 4 percent to build up domestic transportation of that character. We suggest that you lend to the domestic companies here 75 percent of the cost of the vessel at 4 percent. The CHAIRMAN. That is merely a power in the Authority to make the loan? Mr. CAMPBELL. Yes, sir. Mr O'LEARY. What rate of interest do the shipowners pay the bankers in this coastwise trade now? Mr CAMPBELL. I do not think any of them are borrowing any money from the bankers in the coastwise trade. I do not think they could borrow a dollar. We had a discussion yesterday before the Senate committee, and the opinion was expressed by some of the owners whose views were sought that the situation is such that it is doubtful whether they could borrow any money for the construction of new shup in the coast wise trade M- SIROVICH. It would apply to al doc nened ships? Mr. SIROVICH. Over 5 tons? Mr. CAMPBELL. Yes, sir; as it is now written. Mr. SIROVICH. How much money would the Government have to loan, according to that? Mr. CAMPBELL. I do not know. The CHAIRMAN. I suggest we should go over 5 tons. Mr. CAMPBELL. If it is going to rebuild the fleet, as the bill contemplates, it is going to take an enormous amount of money. Mr. SIROVICH. Where is the Government going to get all that money? Mr. CAMPBELL. Out of your income and mine. Mr. SIROVICH. I know you have a good income and I know we members of Congress have not, and we make more eloquent pleas even than you. The CHAIRMAN. Have you finished on that construction differential? Mr. CAMPBELL. I have, Mr. Chairman; yes, sir. The CHAIRMAN. Is your next subject the operating differential? Mr. CAMPBELL. The operating-differential subsidy. The CHAIRMAN. We will excuse you at this time, Mr. Campbell, and resume your testimony in the morning. STATEMENT OF ERNEST M. BULL, PRESIDENT A. H. BULL STEAMSHIP CO. Mr. SIROVICH. Will you please give your name? Mr. BULL. Ernest M. Bull, president A. H. Bull Steamship Co. Mr. SIROVICH. What kind of company is that? Mr. BULL. We own and operate 34 ocean steamers. Mr. SIROVICH. Where do you operate, from and to where? Mr. BULL. We operate along the coast, coastwise, and to Puerto Rico, to Santo Domingo, and the Virgin Islands. We owe the Government no money. We have no mail contract under the JonesWhite bill. Mr. SIROVICH. Is that the same as the Luckenbach Line? Mr. BULL. We have no subsidy nor any loans. We have paid cash for everything we have bought from the Board. The CHAIRMAN. It is a very representative steamship company. Mr. BULL. We have built two ships, delivered last year, of 7,400 tons dead weight, built by the Newport News Shipbuilding & Dry Dock Co., cargo vessels. I do not think there are any finer ships built anywhere in the world. Mr. SIROVICH. Have you much competition? Mr. BULL. Plenty. That is what I am going to talk about in a minute. What I want to say first is that I heartily endorse the provisions of this bill in reference to the supervision of rates and the Authority that you have set up to coordinate the shipping industry and the I. C. C. I heartily approve of the idea of having somebody who is charged with the interest of looking after shipping and of that combination. The CHAIRMAN. We have not transferred the rates to the Interstate Commerce Commission, though. Mr. BULL. You cannot transfer the rates to the Interstate Commerce Commission directly, I presume, but still perhaps when that Coordinating committee gets functioning some way or another it will accomplish something. Mr. WEARIN. In other words, you think there should be a separate and distinct regulatory body? Mr. BULL. Yes, I do; but I think there should be representation of the steamship people on that body. The CHAIRMAN. When you say the "coordinating body" you mean the reference in the act to an interrelation between the Maritime Authority and the Interstate Commerce Commission? Mr. BULL. Yes, sir. The CHAIRMAN. As I recall, two Interstate Commerce Commissoners and two members of the Maritime Authority under the chairmanship of the Secretary of Commerce form the coordinating body. Mr. LEHLBACH. It is also made obligatory for them to meet at least once a month. The CHAIRMAN. Yes. Mr. SIROVICH. Would you be kind enough to give me for my information the fundamental characteristics that have kept your company in such fine and liquid state as contrasted with the condition of other steamship lines? The CHAIRMAN. I think that is partly Mr. Bull himself. Mr BULL. We never had any Santa Claus. We had to save out of what we made sufficient to protect our company and build up our business. Mr. SIROVICH. Your business has been built up from the profits of the business? Mr BULL. Do not misunderstand me; I do not want to say we have not had any advantage, because we have had the advantage of the coastwise laws; and we have not confined our business to that. I feel that we need this subsidy. I am not against that in any way at all. I think we need it. For our foreign trade we have to have it, and we must have ships for the foreign trade. But we just had to get along, that is all, or we went out. Mr. SIROVICH. If you got a construction subsidy now and an operating subsidy now, you would be getting along pretty well, would you not? Mr BULL. I am not asking for it in the coastwise trade. The CHAIRMAN. Suppose we hear what Mr. Bull has to say. Mr. SIROVICH. You are doing business with foreign countries, too, are you not? Mr BULL. With Santo Domingo, that is al. We did have some American ships in that trade, but we find that we have to charter foreign ships to operate that trade because we have no subsidy, and it is cheaper for us to lay up our own American ships that we had bought for that business than it is to operate them in that trade. That is the only trade we have. Mr. SIROVICH. If we adopted that bill, it would give you a chance for your construction subsidy and your operating subsidy and you would have American working men and seamen? Mr. BULL. I hope we can. Mr. O'LEARY. You stated you have no mail contract? Mr. BULL. We have not, no, sir. Mr. O'LEARY. Has your competitor a mail contract? |