and this midwater trawl is going to result in the utilization of some of these species, and this new industry is starting now in the States of Washington and Oregon.

There will be a midwater trawl fishery for hake this year. So, this is what we are doing.

Mr. KEITH. I got a letter the other day complaining that you were recommending a particular insurance company with reference to insurance on fleets.

Mr. McKERNAN. Mr. Chairman.

Mr. KEITH. The letter, I might say, indicated that the company that you were recommending was undercapitalized.

Mr. McKERNAN. Mr. Chairman, this has been brought to our attention also. About 2 years ago we began to study the ratio of claims paid to premiums collected on these vessels upon which we had loans, and you will recall that industry from your area, Mr. Keith, the fishermen and boatowners from time to time have come in and have recommended various programs because of the increasing costs of in

surance.

Mr. KEITH. I might say, Mr. Chairman, that the costs of insurance in the domestic industry are about four times what they are intended. That is a very significant factor.

Mr. THOMPSON. I am glad the gentlement brought it up. It is a problem that is not necessarily connected with the matter under consideration and, inasmuch as we are trying to wind up this morning, could we go into that at a later date?

Mr. KEITH. Yes. I would be glad to defer this question to a later date and I will discuss it with Mr. McKernan.

Mr. PELLY. Would the gentleman yield?

Mr. KEITH. Yes.

Mr. PELLY. I had a number of criticisms and complaints, and I think it deserves a special hearing so that we can have the Department up here to explain its position.

Mr. THOMPSON. I am sure that the subcommittee will have a hearing in this area.

Mr. McKERNAN. We would be most pleased to comment to the subcommittee in this regard.

Mr. TUPPER. Mr. Chairman, on this point, I might say that I inquired into this from Mr. McKernan, and that I am satisfied, and I am sure the committee will be, with the explanation.

Mr. PELLY. I hope the gentleman will answer my mail for me.
Mr. TUPPER. They make a very good case.

Mr. THOMPSON. There is another area to be considered on that particular subject matter and that is whether or not the jurisdiction would lie in the committee anyway. I am thinking about the setting of insurance rates.

Nevertheless, gentlemen, we will proceed.

Mr. KEITH. I have no further questions with reference to this specific bill.

Mr. TUPPER. I have just one question, Mr. Chairman, if I may. I want to thank the Chair and the committee for allowing me to sit in on this committee hearing this morning.

Mr. McKernan, is there any limitation as to size imposed by Department regulation in regard to this program we are discussing? Mr. McKERNAN. Size of individual vessel?

Mr. TUPPER. Size of individual vessel.

Mr. McKERNAN. No.

Mr. TUPPER. None whatsoever. In other words, it takes everything from a 38-foot lobster boat up to presumably a 5-ton vessel? Mr. McKERNAN. Yes.

Mr. TUPPER. That is all I have, Mr. Chairman.

Mr. THOMPSON. Thank you, Mr. McKernan. We appreciate your coming this morning. I assure you that you will be given consideration.

Mr. McKERNAN. Thank you, Mr. Chairman.

Mr. THOMPSON. We have Mr. Charles R. Carry with the Tuna Research Foundation scheduled to be here this morning.

Mr. Carry, of course, you realize the time limitations.

STATEMENT OF CHARLES R. CARRY, EXECUTIVE DIRECTOR, TUNA RESEARCH FOUNDATION, TERMINAL ISLAND, CALIF.

Mr. CARRY. Mr. Chairman, I am the executive director of the Tuna Research Foundation. I represent primarily canners of tuna and other species. They do have interests in boats as well.

Along with me today are two representatives of the unions in our industry and they, too, would like just to say that they favor this program. So, if you can spare them a minute, they would appreciate it. It won't take them any more than that.

Mr. Chairman, I have no statement. I just wanted to come and tell you that, insofar as the tuna industry is concerned, this has been a very successful program, one of the most successful programs the Government has ever had.

I would like to see it continued. We would like to see it amended in the form that Mr. McKernan referred to. We would also like to see it carried on for 10 years instead of 5.

I do not think I will say any more other than that we are very happy with the program. It has been well administered. The men are very competent that are handling it, and you couldn't find a better program. It is one to be proud of.

Mr. THOMPSON. Your support is significant to the subcommittee. We have heard your testimony before.

Are there any questions?

If the two gentlemen with you will identify themselves for the record, they may indicate their feelings about this.

Mr. CARRY. This is Mr. Calise and Mr. Balinger, both of AFL-CIO Unions, one from San Pedro and the other from San Diego.

STATEMENT OF LESTER BALINGER, SECRETARY-TREASURER, CANNERY WORKERS & FISHERMEN'S UNION OF SAN DIEGO, CALIF., AND VICE PRESIDENT, SEAFARERS INTERNATIONAL UNION OF NORTH AMERICA, AFL-CIO

Mr. BALINGER. I am Lester Balinger, secretary-treasurer of the Cannery Workers & Fishermen's Union of San Diego, Calif., vice president of the Seafarers International Union of North America; chairman of the Legislative Conference of the Fish Field of the Seafarers International Union of North America.

For Mr. Pelly's benefit, I would like to say that Brother Johanson from his part of the country is also a member of my committee. We have discussed this bill and he has assured me that he is in favor of it.

I would like to say that, as far as the local of the San Diego area which I am from, we testified for the original appropriation on this, and we think it has done a tremendous amount of good for our tuna people.

Many of our older boats have been modernized and converted to this program, and it has been a tremendous benefit.

There is just one thing I might say in regard to this which I don't want to be construed as opposition because I don't really know whether the provision of a loan provides for this. We feel that any subsidy or loan program should be for the benefit of the economy of the United States of America.

We are cognizant of the fact that a boatowner making such a loan would have to hire U.S. citizens. That was our principal concern to begin with. However, we are concerned now as to whether this fish once caught, and hiring U.S. citizens, would be delivered back to the continental United States, which would stimulate the economy of this country.

I don't know whether this is one of the provisions of a loan or whether it is not. We would like that provision. However, we are not opposed to the bill if it does not have that provision.

We would like for that to be one of the requirements of the loan if it is at all possible to do so.

Other than that, we are pleased to be here to testify in favor of this bill. We think it has been very beneficial to us in general. Thank

you.

Mr. THOMPSON. We appreciate your coming. I do want to say for the record at this time that, when this original legislation was proposed, every member of this subcommittee had problems about it. Some had some apprehension about it and all the members of this subcommittee just worked intolerable hours in cleaning up a bill that could pass, that would be of real help to our people and to the industry.

I just want the record to show that we appreciate the fact that you came in to tell us that we did a good job.

Mr. BALINGER. It has been, Mr. Chairman, and we are really appreciative. Thank you.

STATEMENT OF JOHN CALISE, SECRETARY-BUSINESS AGENT, SEINE & LINE FISHERMEN'S UNION, AFL-CIO, SAN PEDRO, CALIF.

Mr. CALISE. My name is John Calise. I am from the Seine & Line Fishermen's Union of San Pedro, affiliated with the Seafarers International, which is having a convention here.

I couldn't afford to come here to testify on this bill. The fishing industry at San Pedro is paying the bill.

Actually, seine fishing originated in San Pedro and, like Mr. McKernan testified, we have the original now, but with the amendments as they are and with the Secretary's statement of May 10, I think it will help a lot of our people in San Pedro maybe to get started and be able to buy a boat of their own.

I concur in everything that was said here and I am very much in favor of this bill which has created jobs for our dying industry in San Pedro.

Mr. PELLY. With reference to the dying industry, I noticed the other day that the number of tuna fish boats since, I think, 1945, had declined in your area from 800 to 200.

Mr. CALISE. Yes. We had a 300-boat sardine fleet that has declined to 40, and right now we are trying to get legislation in California for anchovies, and today the bill comes up, and there are fine anchovies off the coast of California, but it is needed for the sportsmen, not the fishermen, to get. Thank you very much.

Mr. THOMPSON. Gentlemen, I think that is all the testimony that is to be heard today. The subcommittee will go into executive session. Before we adjourn, I would like to have inserted into the record some of the documents received concerning this legislation.

(The documents mentioned follow :)

STATEMENT OF AUGUST FELANDO ON BEHALF OF THE AMERICAN TUNABOAT

ASSOCIATION

My name is August Felando. I am appearing before this subcommittee on behalf of the American Tunaboat Association. I am the general manager of this nonprofit cooperative association incorporated under the laws of California, with its principal office of business in San Diego, Calif.

The membership of the association is comprised exclusively of tuna fishing vessel owners. In 1964, the members caught and unloaded over 60 percent of all the tropical tunas landed in the United States by vessels operating from the United States. Our members also unload catches of tuna in the Commonwealth of Puerto Rico. The frozen tuna carrying capacity of the American tuna fleet is about 39,000 tons. Of this total about 25,000 tons is represented by the American Tunaboat Association.

We support the passage of H.R. 4227. It is the position of the American Tunaboat Association that the fisheries loan fund must continue to exist and function.

The fisheries loan program has worked extremely well in the tuna industry. In our opinion, but for the existence of the fund, the conversion of tuna bait boats and surplus military vessels would have been severely delayed, if not prevented. Without the fund, many of our members would not have been able to obtain the financing required to convert their vessels. During the period, January 1960 through December 1964, our records reveal that 22 bait vessels and surplus military vessels were converted under the fisheries loans program. Approximately, $3,102,000 was involved in these loans. The events affecting the San Diego tuna fleet since 1959 give strong and effective evidence for support of the continued existence of the fisheries loan program.

It is also the position of the American Tunaboat Association that the fisheries loan program be amended so as to provide for the financing of a vessel or majority interest in a vessel.

Need for a change in the law

According to regulations published Thursday, July 19, 1962, part 250.4, paragraph (b), entitled "Applications for financial assistance cannot be considered if the loan is to be used for:

"4(1) Effecting any change in ownership of a fishing vessel (except for replacement of a vessel or purchase of the interest of a deceased partner), (ii) replenishing working capital used for such purpose, or (iii) liquidating a mortgage given for such purpose less than 2 years prior to the date of receipt of the application."

I have been informed that while the law does not expressly prohibit the Secretary from financing the purchase of a vessel, such prohibition can be implied from the language used in paragraph (a), section 742c, title 16, USCA. As such, it appears that this bill would require the insertion of language expressly giving the Secretary the authority to make loans to commercial fishermen for the purpose of purchasing fishing vessels.

Need for Government financing in the area of vessel purchases

Long-term credit is still not generally available to fishing vessel operators. It is true that the success of the fisheries loan program has encouraged some banks to reenter the field of fishing vessel financing, however, banks impose burdens on individuals making application for a loan to purchase a tuna vessel. Most young men, the type needed in the proper continuation of this industry of the sea, do not have the financial resources necessary to satisfy the asset requirements set by the banks. With regards to tuna vessels, the banks normally,

if not always, establish a 5-year note, plus a large cash outlay. These terms are especially difficult in the tuna industry because of the sizable capital investment required to get started in the business. For instance, a vessel built in 1951, was purchased some months ago for $325,000. In August 1964, a vessel built in 1946, was purchased for $385,000. Besides the purchase cost, the fishermen have to have funds available to cover the cost of hull and machinery insurance. The annual premium for this coverage runs about 5 to 7 percent of the insured value. The annual premium for protection and indemnity coverage is about $3,000 to $3,500. Trip expense credit is usually provided, but for the first trip, the cost involves $10,000 to $15,000. Minor expenditures to get the vessel out to sea runs to about $1,000. Thus, besides the customary cash that must be provided in a purchase, a person who wants to buy a tuna vessel must have sufficient cash to cover the costs of insurance and operating expense. It is these facts that cause financial difficulties for a young fisherman who wants to get a larger and better vessel for himself.

It is our opinion that if the loan fund is permitted to operate for the purpose of purchasing vessels, a few more banks or other financial institutions would be stimulated by the Government intervention to a degree beneficial to the fishing industry of the United States. The easing of credit financing will create a used commercial fishing vessel market.

Other reasons exist for the need to have the fisheries loan fund extended, whether it includes our suggestion for amendment or not. Namely, the fact that foreign competition on traditional U.S. fishing grounds and on the high seas is getting stronger and more effective. In addition, imports of frozen tuna continue to increase, and it is true to say that in recent years, imports constitute an increasing percentage of the total supply of fish marketed in the United States. Further, the Fishing Vessel Subsidy Act will affect the value of existing fishing vessels. These are facts that cause lending institutions to be extremely cautious, if not unwilling to take the risks involved in long-term financing of fishing vessels and equipment.

In cases where they do decide to finance, the banks will loan only to vessel owners that have exceptionally good credit rating. To the young fisherman, who desires to better himself and the industry, he is faced with almost insurmountable financing problems in attempting to get a loan for the purchase of a used fishing vessel.

We urge the passage of H.R. 4227, and hope that you will also provide language that will permit loans for the purchase of fishing vessels.

[Telegram]

BOSTON, MASS., May 26, 1965.

Hon. T. A. THOMPSON,
Chairman, Subcommittee on Fisheries and Wildlife Conservation, Longworth
House Office Building, Washington, D.C.:

The Federated Fishing Boats of New York and New England wish to be recorded in favor of H.R. 4227. The continuance of the Fish and Wildlife Act of 1956 permitting fishery loans plays a most important part in maintaining our fishing fleet. We respectfully request your committee's endorsement of H.R. 4227.

Thank you.

GEORGE DAVIDSON,

President, Federated Fishing Boats New York & New England.

[Telegram]

NEW BERN, N.C., May 21, 1965.

Hon. T. ASHTON THOMPSON,

Chairman, Subcommittee on Wildlife and Fishery, House of Representatives, Washington D.C.:

Will appreciate your support to extend Boat Subsidy H.R. 4227, H.R. 5153, S. 998, and other similar bills. The seafood industry needs this assistance to survive.

Kindest regards,

GEORGE B. GARNER,

Executive Secretary, North Carolina Fisheries Association, Inc.