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76TH CONGRESS H. J. RES. 509
IN THE HOUSE OF REPRESENTATIVES
APRIL 9, 1940
to the Committee on Merchant Marine and Fisheries
during the present European war.
UNITED STATES MARITIME COMMISSION,
Washington, April 19, 1940. Hon. S. O. BLAND, Chairman, Committee on Merchant Marine and Fisheries,
House of Representatives DEAR JUDGE BLAND: You have requested the views and recommendations of the Commission with respect to House Joint Resolution 509, a joint resolution to suspend section 510 (g) of the Merchant Marine Act, 1936, during the present European war.
The resolution would suspend, during the present European war, section 510 (g) of the Merchant Marine Act, 1936, as amended (Public, No. 259, 76th Cong., approved August 4, 1939), which provides as follows:
“(g) An obsolete vessel acquired by the Commission under this section which is or becomes twenty years old or more, and vessels presently in the Commission's laid-up fleet, which are or become twenty years old or more, shall in no case be used for commercial operation, except that any such obsolete vessel, or any such vessel in the laid-up fleet may be used during any period in which vessels may be requisitioned under section 902 of this Act, as amended, and except as otherwise provided in this Act for the employment of the Commission's vessels in steamship lines on trade routes exclusively serving the foreign trade of the United States."
Subsection (g) is a part of section 510, which was enacted on August 4, 1939, as an amendment to the 1936 act. The section provides for a “turn-inand-build” program designed to facilitate the removal from service of old or obsolete tonnage (whether in domestic or foreign trade) and the replacement thereof with modern vessels. The program was recommended to Congress on the basis of the Commission's survey of coastwise and intercoastal shipping. The survey showed an excess of tonnage in the coastwise and intercoastal trades, arising from the disposition at bargain prices of Government-owned vessels built during and just after the World War. It also showed an unsatisfactory financial condition of carriers in such trades, the obsolescence of their fleets, and a failure to provide adequate vessel replacements.
Subsection (g) prohibits the use for commercial operation (except in certain limited cases) of vessels over 20 years old, which were in the Commission's laid-up fleet on August 4, 1939, or are turned in under section 510. It was designed to prevent any increasing of an already excessive obsolete tonnage and to remove a hindrance to new construction arising from the possibility or probability of acquiring from the Government old or obsolete vessels at bargain prices for use in the domestic trades. The joint resolution by suspending section 510 (g) would restore to the Commission, for the period of the European war, its discretionary authority to sell, charter, or otherwise dispose of its old vessels for commercial operation, pursuant to the provisions of the merchant marine acts in force prior to the enactment of section 510.
There are at present 116 vessels in the laid-up fleet, some 96 of which, being over 20 years old, are "sterilized" by subsection (g). No vessels have as yet been turned in under section 510. The vessels in the laid-up fleet consist of cargo vessels (except four ex-German passenger vessels) constructed during or immediately after the World War. These vessels have been classified as being of sufficient military or commercial value to warrant their preservation for possible use in case of a commercial or national emergency.
Changed conditions arising largely in connection with the war in Europe, which broke out a few weeks after the enactment of section 510, impel a reconsideration of the problems involved in section 510 (g). The possibility of a large increase in the Commission's holdings of obsolete
vessels under section 510 has not materialized (probably because of war conditions) and, on the other hand, conditions attendant upon the war have brought about a reduction in the amount of tonnage employed in the domestic trades, especially the intercoastal trade. The Commission has had under way for some time a survey of the problems involved, including the need for using Government vessels for private operation in the affected trades. The unsettled and rapidly changing conditions prevent any final conclusions on these matters, but certain tentative conclusions as to current conditions can be made on the basis of this survey, which will be continued in order to meet conditions as they arise. Much helpful information is being acquired through the Commission's investigation of the intercoastal rate structure.
Considerable concern has been manifested as to the effect of the changing conditions in intercoastal shipping. Since the outbreak of the war, there has been transferred to foreign ownership and registry an appreciable percentage (about 12 percent) of the gross tonnage then employed in the intercoastal trade. Since that time an appreciable percentage (about 22 percent) of the tonnage has been removed from the intercoastal trade by charter or other diversion to offshore trade. This diversion results from steps taken by the intercoastal operators to take advantage of greater return in the off-shore trade. During this period, however, a few vessels have been brought into the intercoastal trade from other trades.
While the net diversion to tonnage from the intercoastal trade is considerable on the basis of tonnage figures alone, it must be remembered that up to the beginning of the war the tonnage was definitely in excess of needs. From the available data, it does not appear that any emergency exists in the intercoastal trade so far as available space is concerned at this time. Insofar as there exist increased demands for cargo space in the intercoastal trade, this increase in considerable part is based on an anticipation of increased rates, possibly of shortage of space, and the desire to protect against possibilities of the future rather than present conditions. There has been a considerable amount of advanced booking, some for the protection against increased rates on future sales, and some of which is wholly speculative in character. The complaints as to lack of cargo space must also, to some extent, be attributed to lack of space at the rates existing, rather than to an absolute lack of space. To offset possible adverse effects of the reduction in tonnage, the cargo-carrying capacity of the vessels remaining in the trade and the earning capacity of these vessels may well be increased by rearrangement and speeding-up of schedules and by carrying fuller cargoes at remunerative rates. Steps to this end have been taken by some of the operators.
Notwithstanding the preceding considerations, it is possible that an emergency may develop in intercoastal or coastwise trades, or also in some foreign trades. It is, therefore, desirable that the Commission have discretion to meet problems as they arise, insofar as they can be met by some use or disposition of the Commission's vessels. The Commission consequently favors the enactment of the joint resolution to suspend during the European war the restrictions of section 510 (g) on the use or disposition of vessels in the Commission's laid-up fleet, together with an amendment which would vest in the Commission complete authority to make effective disposition of its vessels as needs therefor may arise during the continuance of the war.
Such amendment should vest in the Commission general authority, during the European war, to sell or charter its vessels, including those in the laid-up fleet, under such terms and conditions and subject to such limitations as the Commission deems necessary or desirable. It is impossible to foresee just what emergent conditions may require use of the Commission's vessels in commercial operation, and a broad flexibility of authority to meet such conditions promptly in the national interest is necessary to make really effective use of such vessels.
To attain such flexibility, it is desirable that the Commission have certain authority in addition to and in modification of existing law. For example, it would be desirable that the Commission have authority to charter vessels for use in the coastwise or intercoastal trades, as well as to charter vessels for operation in foreign trades other than in lines or on essential routes in the foreign trade of the United States. It would also be desirable in attaining the objectives of the joint resolution to broaden the Commission's authority to sell vessels individually for operation in other than lines or essential trade routes.
Such a grant of wide discretion does not mean that any unreasonable or unlimited use of the authority is contemplated as either necessary or desirable. Such grant is suggested only because it is impossible to foresee exactly what restrictions will be necessary or desirable in meeting conditions which cannot be predicted at the present time. Some conditions and limitations will necessarily be imposed by the Commission in connection with any sale or charter under the joint resolution amended as suggested. Such action by the Commission will be necessary in order to avoid harmful results and to insure attainment of the benefits contemplated by Congress from making the Commission's vessels available for sale or charter.
The Commission urges the prompt enactment of the joint resolution with an amendment as suggested. If the committee desires to consider such an amendment, the Commission will be pleased to assist in drafting the necessary legislative language.
In view of the urgency of this matter, this report is being transmitted to you without the comment of the Director of the Bureau of the Budget. When such comment is received in this office, it will be transmitted to you. Sincerely yours,
E. S. LAND, Chairman. The CHAIRMAN. Without objection, I will insert in the record at this point for the information of the committee a letter written by the chairman of the United States Maritime Commission to a member of the United States Senate. (The letter is as follows:)
APRIL 6, 1940.
United States Senate, Washington, D. C. DEAR SENATOR: Thanks very much for your letter of April 3 regarding the intercoastal shipping situation. I am glad to advise you on the subject in rather a comprehensive manner as I quite appreciate your position in receiving many inquiries.
The subject matter of your letter has been one of intensive study for the past 6 months. A great deal of correspondence has been received, many conferences have been held, and some hearings have taken place with regard to the general subject covered by your letter. Various executive departments of the Government have been consulted and the matter has been discussed at some length with congressional representatives directly and indirectly concerned with the matter.
It is essential that the Commission advise you that it is without authority to either direct or control the operators in either the coastwise or intercoastal commerce of the United States. The legal functions given by Congress to the Maritime Commission with regard to such commerce are primarily concerned with the question of regulations and rates. No matter what our ideas may be with regard to coastwise and intercoastal operations, these matters are primarily the functions and the prerogatives of the owners of the vessels. The principal exception to the foregoing is the legal requirement contained in section 9 of the Shipping Act of 1916, as amended, with regard to the transfer of registry from American flag to some foreign flag. As the constitutional rights of American citizens are involved in this matter, it is one that should be carefully handled, giving full consideration to the merits of each individual In carrying out its legal functions, the Commission has been very careful to consider each case on its merits and has recently revised its questionnaire with regard to the information required when any transfer of registry is proposed.
At best the problem is a complicated one and in the ultimate resolves itself into two primary questions:
a. National defense.
b. Relative rights and obligations of operators on the one hand versus shippers on the other.
The Commission's survey of the coastwise and intercoastal commerce of the United States very definitely indicated that this commerce was overtonnaged (for the greater part with antiquated ships) and that the financial structure of the operators engaged in these trades was, to say the least, precarious. The over-all picture showed that the coastwise and intercoastal industry as a whole might very properly be termed "a sick industry.” Under existing circumstances, one obvious conclusion may well be that the only hope for modern ships in the domestic trade is to permit some of the operators engaged in the trade to dispose of some of their obsolete ships at prices now obtainable.
This brief summary of the over-all picture will undoubtedly show you that there is no solution to the problem which will be satisfactory to all concerned. In view of this situation, the Commisison is exercising its best judgment in order to accomplish not only its statute directives but also the policy directives of the Merchant Marine Act of 1936, as amended. We are using our utmost endeavors to carry out a utilitarian policy so that the greatest good to the greatest number may be accomplished.
Reference is frequently made to the Commission's laid-up fleet of which there are about 109 cargo vessels of wartime construction. This fleet is primarily "a war reserve” and action taken by the Congress in August 1939 sterilized this fleet insofar as vessels in the fleet are 20 years of age or older. There are at this time about 20 of these vessels which are not so sterilized as they have not yet reached the 20-year age limit. With the exception of these 20, action by the Commission is restricted by statute except as outlined in the Merchant Marine Act of 1936, as amended, particularly inviting attention to section 902 which requires a Presidential proclamation to release this fleet as outlined in this section. Any other general action with regard to the release of this fleet would require congressional authority.
In order to give the general situation a thorough test, the Commission recently determined to advertise for sale 12 of these 20 nonsterilized vessels in the laid-up fleet. This advertisement has gone out and in brief is divided into 3 parts:
a. Four vessels for sale without restrictions.
b. Four vessels for sale to citizens of the United States for use in the coastwise and intercoastal commerce.
c. Four vessels for sale to United States citizens on essential trade routes with replacement by new ships as a primary provision of the sale.
In addition to the above, there are given below some ideas which may be worthy of your serious consideration.
There is also a broad question of policy in connection with this question of transfer foreign of coastal and/or intercoastal vessels. It has to do with what might be termed an ethical, a moral, or an equ ty problem.
Water transportation is not an industry but a service—in the matter under consideration a public service.
The shippers are the customers and the operators carry on the service for which the shippers pay.
It stands to reason as a matter of ethics, moral or equity, that the operators having given service in normal times for which they have been paid should not walk out or desert their customers (the shippers) in abnormal times merely because they see an opportunity for extra profits. It is pertinent to consider that these extra profits may only be temporary.
This is a problem that cannot be either settled or adjudicated by the United States Maritime Commission but it is one in which those in official life in the community served might well take a hand to determine a reasonable adjustment for the interests of all concerned. With kind regards, Sincerely yours,
(Signed) E. S. LAND, Chairman.
The CHAIRMAN. Congressman William T. Byrne, of the Twentyeighth Congressional District of New York, who is also representing the Albany Port Authority, is unable to be present but wishes a notation to be made in the record that he is very much in favor of House Joint Resolution 519, which is the amended resolution, and as I recall the amendment is matter added to the original resolution.
STATEMENT OF HON. FRANK H. BUCK, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CALIFORNIA
Mr. Buck. Mr. Chairman, I am appearing as author of the joint resolution which is before you today. I wish to speak very briefly and give a little of the background.
The shippers of cargo from the Pacific coast have been very greatly disturbed and hampered by the gradual decrease in the number of ships in the Atlantic-Pacific intercoastal trade since the outbreak of the present world war. Whether or not, as some contend, the trade was overstocked prior to that period, it certainly is far understocked at the present time.
There are available ships for replacements, and I have no doubt there may be others in the coastal trade and nonessential foreign trade routes which have suffered likewise, some 100 ships which constitute what is known as the sterilized fleet of the American Maritime Commission. These are ships that are over 20 years of age.
The purpose of the resolution which I originally introduced was to repeal section 510 (g) of the Merchant Marine Act of 1936, as amended, which provides as follows, and for the information of the committee I should like to read that subsection:
(g) An obsolete vessel acquired by the Commission under this section which is or becomes twenty years old or more, and vessels presently in the Commission's laid-up fleet which are or become twenty years old or more, shall in no case be used for commercial operation, except that any such obsolete vessel, or any such vessel in the laid-up fleet may be used during any period in which vessels may be requisitioned under section 902 of this Act, as amended, and except as otherwise provided in this Act for the employment of the Commission's vessels in steamship lines on trade routes exclusively serving the foreign trade of the United States.
The exception provides that, in the event the President shall find that a national emergency exists, these vessels may be utilized otherwise than as set out in subsection (g). We do not contend that a national emergency exists. In fact, I think that the President would find it rather difficult to justify a proclamation to that effect which would release these vessels. We do contend, however, that an emergency exists in the intercoastal and in the coastal trades, and it has been lately pointed out to me that, perhaps, one exists in the trade between New England ports and the Bay of Fundy, due to the fact that the English have immobilized or interned Norwegian ships that have been carriers of pulp from that territory.
In view of this emergency condition, which has been growing for the last 2 or 3 months particularly, I introduced this resolution, and in turn your chairman submitted it to the Maritime Commission, which has rendered a report favoring the purposes of the resolution in general and suggesting that certain additional provisions be in