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The freight rates from continental Europe and Japan to Latin-American ports and also from New York to the east coast of South America are the same, and a review of any of the large world maps or atlases will reveal that Central and South America take in a great deal of territory. The distances as cited above, in all cases, are considerably greater than the difference in distance between New York and Los Angeles or San Francisco to the Canal Zone. As a matter of fact the rates from Europe and Japan to the Canal Zone and to points in Central and South America are about one-half the rates on cement applicable from Pacific coast ports to the same destinations notwithstanding the fact that Los Angeles, as an illustration, has an advantage over Hamburg, Germany, to Callao, Peru, of 3,536 miles and to Central American ports of 4,300 miles. The cement freight rates from New York to Buenos Aires and Rio de Janeiro are $4.50 per ton of 2,240 pounds (making a net rate of $4 per ton) for distances of from 4,770 to 5,871 miles, against paper rates, with no service, quoted from Los Angeles to the Panama Canal Zone of $7 per ton of 2,000 pounds for 2,913 miles.

Therefore, we should like to point out that the freight rates on cement are the same from Japan and Europe to practically all ports in Central and South America and from Europe and New York to points on the east coast of South America but that the differences in distances are considerably greater than the difference in distance between New York and Los Angeles/San Francisco to the Canal Zone.


As you are aware, the last session of Congress authorized, at the request of the President of the United States, the construction of additional locks at the Panama Canal at an eventual total cost of approximately $277,000,000, as well as the national-defense program of the Army and Navy which covers an expenditure of an additional several million dollars for construction of barracks, airports, etc.



The program of additional locks at the Panama Canal calls for 6,500,000 barrels of cement, and—if the Pacific-coast cement manufacturers were successful in obtaining this business—the manufacture of this quantity of cement would have the following effect on the economic life of Pacific-coast States (6,500,000 barrels of cement equals 1,235,000 tons):

Labor: 2,166,666 man-hours.
Oil: For burning purposes, 59,500,000 gallons.
Kilowatts of power: For grinding and crushing purposes, 130,000,000.

Transportation by rail or truck: Carriers would receive approximately $1.00 per ton, or $1,235,000. Port charges at Pacific-coast ports, taking Los Angeles Harbor as typical: Total port charges at Los Angeles Harbor, consisting of wharfage, stevedoring, handling, etc., amount to $1.15 per ton, or $1,420,250.

Miscellaneous supplies: Numerous supplies would be secured from local markets, i. e., paper and cloth bags, castings, machinery parts, commissary and store supplies, etc. Cement imports from the Atlantic coast to the Panama Canal Zone and to consignees in the Republic of Panama

In barrels From New York, for the 11 months of 1939..

178, 029 To consignees in the Republic of Panama--.

1 46, 577 Total.---

224, 606 1 Practically all this cement moved during months of September, October, and November.

FORMER SENATOR M'ADOO'S RESOLUTION Former Senator McAdoo introduced the following resolution in Congress on May 11, 1938:

“The Panama Railroad Co. is authorized and directed to extend the operations of the three vessels which it is now building or having built for operations between the Atlantic coast of the United States and the Panama Canal Zone, so as to provide regular service between the Atlantic coast of the United States and the cities of Los Angeles and San Francisco, California, by way of the Panama Canal, for a period of one year from and after the date when the first of said vessels is operated in said service."

Population and principal business of the following Central and South American


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Page 1, paragraph 1:

"The policy of the United States with respect to its merchant marine has been a positive one since 1916. It is designed to furnish shipping services adequate for maintaining the flow of American water-borne foreign commerce and capable of serving as a naval and military auxiliary in time of a national emergency: It provides, further, that the American merchant marine should be owned and operated under our flag by our citizens. The Government has encouraged private investment in shipping. It has subsidized it so that American labor, industry, and commercial interests would benefit from its uninterrupted services in world markets. American citizens are trained to be its officers and seamen.

(The United States Government has an investment in foreign trade routes to the extent of $195,061,000 at the present time. Source: Press release by Chairman Bland of House Committee on Merchant Marine, November 3, 1939.)

Page 3, paragraphs 1, 2, and 3:

“United States documented vessels of ocean-going size engaged in the transportation of passengers and dry cargo in our foreign trade (excluding the Great Lakes) number 326 of 2,150,000 gross tons. Forty-four of these vessels, of 308,000 tons are owned by the Government; the remaining 182 of 8,842,000 gross tons by private American operators.

Of this foreign-trade fleet of 326 vessels of 2,150,000 tons, less than half, or 150 vessels of a million tons, are operating under subsidy contracts.

As of October 2, 1939, 29 of the 326 vessels under discussion were temporarily inactive (performing repairs, awaiting schedule in particular trades, or for similar reasons). Two hundred and ninety-seven vessels of 1,923,500 tons were actively engaged in serving the foreign ocean-borne commerce of the United States."

Pages 9 and 10:

"GOVERNMENT INVESTMENT IN TRADE ROUTES "Except insofar as the Government expenditures for trade-route development may be considered written off as a premium to insure the availability of ships for the national defense, the sums expended may properly be considered an investment by the United States in the development of goodwill and in the absorption of pioneering and development expenses.

"The amount of such Government expenditure in the development of the routes it is now proposed to abandon by reason of legislation which, if enacted, would necessitate the withdrawal of our ships is stated in the following table for the period from 1923 to September 30, 1939. This table includes operating losses sustained by the Government, ocean mail payments and operating-differential subsidy. (Governmental ship operating losses prior to 1923 cannot readily be segregated by routes and services.)

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1 It is estimated that about two-thirds of the American-flag tonnage on this route could continue to operate or the present, but one-third would be immediately withdrawn.



“Rates of American-flag vessels, generally speaking, are no higher than those of any other maritime country.

“Our experience suggests that were the traffic departments of the principal exporting industries of the country aware of, or sympathetic to, the development of a stronger and more efficient American merchant marine additional services with better ships would become available as a result of the increase in traffic.”


Congress has approved, at the request of the President of the United States, the Maritime Commission's 10-year shipbuilding program, and the President in his 1941 Budget requested Congress to authorize the appropriation of $200,000,000 for Maritime Commission activities in 1941. Due to the rising construction costs, the Maritime Commission has pushed ahead of its 10-year "Fifty ships per year" program and has contracts for 141 bottoms of which 42 will be in the water by mid-February.

Associated Press dispatches dated Washington, January 16, indicate the Appropriations Committee allowed $125,000,000 for the regular amount due under the 10-year merchant marine expansion program for 1941.


THE PERIOD ENDED OCTOBER 25, 1939 (RELEASED JANUARY 2, 1940) Page 1, Introduction:

“Approximately 90 cargo and passenger vessels are prevented from participating in the American flag services to these areas which have been established with the aid of the Government during the past 20 years.

"Since the initiation of the Commission's long-range construction program on October 20, 1937, when the contract for the S. S. America was signed, 28 vessels have been launched and 12 of these already are engaged in operation on essential trade routes. Including those ships now in operation the Commission has contracted for 141 vessels, with dead-weight tonnage of 1,440,000, at a total contract price of $345,282,856.'

The American President Line, successors to the Dollar Steamship Co., is 90percent owned and controlled by the United States Maritime Commission, and has a carrying value of its 13 ships (as of Dec. 31, 1938) of $19,131,024. This amount does not include 2 vessels held for sale which are now on the books at a nominal value of $543,784, values being based on cost less accrued depreciation.

Page 10: “In its last annual report the Commission outlined the steps taken to reestablish service on the important trade routes formerly operated by the Dollar Steamship Lines, Inc., Ltd. This resulted in a plan for adjustment of the company's indebtedness being consummated in October 1938, with the Commission as majority stockholder of a successor_corporation, American President Lines, Ltd. At that time the Reconstruction Finance Corporation advanced $2,500,000 for working capital and the Commission loaned an additional $2,000,000 for vessel repairs.”

Business at the Panama Canal Zone Shipments destined to the Panama Canal Zone from the United States during the year 1938.

$14, 238, 464 Purchases made by the Panama Railroad Steamship Co. commissaries in the fiscal year 1938

2 6, 150,000 “General Imports Into the Republic of Panama” for the year 1937

(and of this amount $11,377,000 moved from the United States). 3 21, 828, 000

Source: Foreign Commerce and Navigation of the United States, published by the U. 8. Department of Commerce.

2 Source: Commerce and Economic Resources of Our Outlying Territories and Possessions, published by Chamber of Commerce of the United States. 3 Source: Foreign Commerce Yearbook, 1938, published by the U. S. Department of Commerce, p. 268

Imports into the Panama Canal Zone and the Republic of Panama consisted of the following commodities: Groceries, cold-storage products, dry goods, dairy products, raw materials, housewares, candies and tobacco, milk and cream, shoes, cattle and hogs, soaps, meats, hog lard, vegetables, distilled spirits, lumber, automobile tire casings, petroleum products, cement, iron and steel, automobiles, chemicals, medicines, perfumery, and cosmetics.

Through the construction of additional locks and the increased national-defense program the annual imports should be increased for a number of years. The majority of these products are now moving from the Atlantic coast, and if a steamer service and equitable freight rates were available from San Francisco and Los Angeles to the Canal Zone it would enable California growers, producers, and manufacturers to compete with Atlantic coast shippers, but at the present time on account of the lack of steamship service and comparable freight rates with the Atlantic coast—very little, if any, of the commodities mentioned move from California.

CONCLUSION During the debate in Congress on May 11, 1938, on the McAdoo resolution for the extension of the Panama Railroad Steamship Co. service through to San Francisco and Los Angeles, Senator Bennett Champ Clark, chairman of the Senate Committee on Interoceanic Canals, made the following comments:

“The amendment oflered by the Senator from California is one of the most remarkable presented to the Senate during my service. The operations of the Panama Railroad Co. is a 100-percent Govrenment owned line, and the only possible excuse or reason for the Government engaging in the steamship business is that the line of ships constitutes the absolute lifeline of American control of the Panama Canal so far as supplies of every kind and description are concerned. Nearly every article of food, clothing vegetables, and so forth, consumed by the American civilians, military and naval residents in the Canal Zone are conveyed by the highly organized service of these ships.”'

We are informed that you are a member of the Special Committee on National Defense and have recently visited the Panama Canal and are very familiar with the Canal Zone problems as they relate to national defense.

Is there any good reason why the United States Government should operate a steamship line from New York to the Canal Zone and refuse to operate a similar line from San Francisco and Los Angeles to the Canal Zone? (The Pacific ports on the Canal Zone and at San Francisco and Los Angeles are just as much interested in national defense as are the Atlantic ports.) Senator Clark comments on the Panama Railroad Steamship Co. as being the lifeline between the Canal Zone and the United States, but the Senator overlooks entirely the fact that the lifeline has two arms—the left arm, New York to Cristobal (Atlantic side) and the right arm, San Francisco and Los Angeles to Balboa (Pacific side), and if this lifeline were extended to San Francisco and Los Angeles it would enable the growers, producers, and manufacturers in California to compete with the Port of New York on the Atlantic coast for the various commodities that are imported into the Canal Zone and the Republic of Panama. Believe if this fact was pointed out to Senator Clark, he would correct his viewpoint as it relates to lifelines.

We appreciate the fact that this is a lengthy communication, but after a review of same you can see the extent to which the Government has invested in steamship lines and the unjust discrimination which exists between Pacific ports and the port of New York for Canal Zone business account the Government owning the Panama Railroad Steamship Co.

We sincerely hope that you can arrange with the President of the United States and the Secretary of War to have the Government inaugurate a steamship service (as part of the national defense program and the continuation of the Panama Canal lifeline) from San Francisco and Los Angeles to the Panama Canal at freight rates and service that will enable the Pacific coast ports to compete with the freight rates and steamship service available through the United States Government-owned line operating from New York to the Panama Canal Zone.

If the President and Secretary of War are not sympathetic to the removal of this unjust discrimination against Pacific coast ports is it possible to have congressional action taken establishing a steamship line between San Francisco and Los Angeles to the Panama Canal Zone? As heretofore indicated such a line would not interfere in any respect whatever with the private lines flying the American flag for the reason they are not interested and do not and will not handle tonnage to the Panama Canal Zone.

We are enclosing you a copy of a bulletin dated January 9 indicating the action taken by the board of directors of the Los Angeles Chamber of Commerce recommending the establishment of such a line.

Thanking you very much for your interest in this matter and hoping that favorable action can be secured during the third session of the Seventy-sixth Congress, I remain, Sincerely yours,

JAMES A. KELLER. JAK:MK NOTE: Since this letter was written it has developed that the constructing quartermaster will open bids for construction of 92 barracks, and so forth, at the Canal Zone requiring approximately 150,000 barrels of

See our memorandum of January 23 covering copy of letter sent to president of Los Angeles Chamber of Commerce on this subject.


Los Angeles, January 9, 1940.



To: All Members of the Pacific Coast Cement Institute.
Subject: Steamship Service From Pacific Coast Ports to the Panama Canal Zone.

The board of directors of the Los Angeles Chamber of Commerce on January 4 1940, approved the following recommendation submitted for their approval by the executive committee:

Rates on the Government-owned steamship line from New York to Panama are substantially lower than the rate from Los Angeles to Panama, and the difference is so great as to preclude Los Angeles manufacturers from selling goods in the Canal Zone. The United States Government in the next 5 years will spend approximately $277,000,000 in the building of additional lock system in Panama, some $35,000,000 in the construction of additional barracks, and it may well be that additional construction projects will require greater expenditures there.

“We are informed by the shippers that the private steamship companies operating from Los Angeles will not meet the New York-Panama rates nor do they desire to provide at low rates the necessary service to move cement and other products from Los Angeles to the Canal Zone.

“The discrimination above outlined practically prevents Los Angeles manufacturers from selling heavy goods for delivery in Panama. That discrimination must be removed. Since the private steamship companies will not make rates or establish service which will put Los Angeles in a competitive position on this Panama business, we recommend that the United States establish a service from southern California to the Canal Zone upon the same rate basis as they now operate from New York, but such service shall not engage in intercoastal traffic."

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