report is that the court is not to consider this bill in respect of the determination of the issues currently before the court.

Mr. MAILLIARD. Yet that does, however, eliminate the argument, does it not, and pretty effectively, too, that this case is more important than just the interests of the particular litigants, that it involves a very much broader field?

I just wonder whether in your opinion the mere passage of the bill in the present form would tend to make it less likely that the appellants can get reconsideration by the circuit court or could get the Supreme Court to take it?

Mr. DAVIS. Well, I could only engage in conjecture.

Mr. MAILLIARD. Í am just asking your opinion, I am not an attorney. Mr. DAVIS. I will give you my opinion.

The petitions for reconsideration by the court of appeals have been pending for a long period of time. I have my own views as to why the court has not acted upon those petitions for reconsideration. Maybe I am not saying they are, but maybe they are waiting to see what will happen to this legislation.

Mr. MIALLIARD. That is what I cannot quite figure out in my own mind, whether the passage of the legislation, in fact, is going to influence the court even if we say we do not intend it should.

Mr. DAVIS. Arguments can be made both ways. I can think of arguments you can make on either side of the question, and they just about cancel each other out.

Mr. MAILLIARD. Thank you, I have no further questions.

Mr. DOWNING. Mr. Murphy?

Mr. MURPHY. No questions.

Mr. DOWNING. Mr. Pelly?

Mr. PELLY. Mr. Chairman, I wonder if Mr. Davis would spell out for the record the statement made in the committee report on S. 2118, which says that the Seafarers International Union opposed the bill introduced on the grounds it would nullify the Westhampton decision, and would enable aliens to acquire control of American vessels through a trust indenture mortgage device and that the bill had been amended by the committee to meet these objections.

Was the objection of the Seafarers Union to foreign control of American-flag vessels? It did not in any way affect any liens that labor might have, did it?

Mr. DAVIS. Well, that was not exactly their position, Congressman Pelly.

Those are two questions. As concerns the question of the Seafarers Union opposing the bill as introduced on the ground it nullified the Westhampton decision, the bill we are considering has the retroactive provisions removed from it.

Mr. PELLY. It says in the report, the bill has been amended to meet these objections.

Mr. DAVIS. Now, with respect to the matter of protection of American-flag vessels from falling into the hands of aliens, I personally do not think it was a real problem at all. I think I am sup

ported entirely by the long period of time when we have been operating under the old laws in which we have not had any problems in that respect. As I testified before the Senate committee, I have personally

appeared in many foreign courts, asserting our American law and all the comity I have appear in have accepted it as a matter of economy. For a trustee of a preferred mortgage to deliver an American-flag vessel into the hands of a foreign power, in the first place he would have to be a citizen. But any citizen is entitled, if he has the money, to go out and buy an American-flag vessel, and he could go out and deliver it into the hands of the foreigner direct without putting the liens on it and waiting until there is a default.

That is a long way around to do something that can be done very simply straight; if the citizen wanted to take a chance on the sanctions, both criminal and civil, that he would be subjecting himself to if he was willing to do a thing of this nature.

However, in respect of the operation, you notice there has been the change in this bill from the original proposed bill to require any approved trustee who is asked to operate a vessel to obtain the approval of the Secretary of Commerce. That is one of the changes that has been made by reason of the objections.

And the other is the requirement for the Secretary of Commerce to approve trustees, something we did not have to do heretofore except under the title XI program.

These are additional administrative burdens which we are taking on, but we can do it without additional staff.

Mr. PELLY. But there is nothing in their objection which in any way sought to protect the lien that any wages or other benefits their membership would have in connection with the

Mr. DAVIS. Crew's wages are always superior to a mortgage anyway. Mr. PELLY. In other words, they had no objection to that.

Mr. DAVIS. That is right, or to any tort liens that are always superior.

Mr. DOWNING. Mr. Dingell?

Mr. DINGELL. I have no questions, Mr. Chairman, thank you.

Mr. DOWNING. Mr. Grover?

Mr. GROVER. No questions.

Mr. DOWNING. Mr. Edwards?

Mr. EDWARDS. No questions.

Mr. DOWNING. Mr. Davis, in your statement on page 5 you say that the bonds mortgaged, and so forth, in litigation on the date of the enactment of the act are not affected by the legislation.

Are you specifically referring to the Westhampton case?

Mr. DAVIS. And two other pending cases.

Mr. DOWNING. And two other pending cases?

Mr. DAVIS. Yes, all three of the ships which I referred to a minute ago. I think it is the Westhampton, the Easthampton, and the Bridgehampton, which are in litigation at this time. Two of them are in foreign courts.

I might say, Mr. Chairman, that the foreign courts exercising jurisdiction over the other two vessels have issued orders complying with our laws with respect to the sale of the vessels.

Mr. DOWNING. Without objection, I would like to read into the record at this time a telegram just received from H. C. Stuelcken.

It is addressed to the chairman of the Committee on Merchant Marine and Fisheries:

The undersigned, H. C. Stuelcken Sohn Shipyard, Hamburg, is most affected

and the wording of the telegram is "mot," but I assume that is "most"

is most affected financially by the provisions of the last sentence of section 4 of S. 2118 which is being considered by your committee as H.R. 9494 and believe that such provision is most discriminatory against it and its future business existence.

Furthermore, the undersigned believes that the justification offered for such sentence in the Senate Report on S. 2118 is open to serious question and is based on misunderstanding. The wrong to be righted is not the fault of the undersigned, but stems from an erroneous administrative interpretation of your statutes as made by the Maritime Administration.

The undersigned respectfully requests an opportunity to present these views in open hearing before your committee or an appropriate subcommittee thereof, preferably by a witness who should be allowed a reasonable time for preparation, let us say for 2 weeks, in view of the recent issue of the Senate committee report and the undersigned's present lack of U.S. counsel and undersigned's necessity to return promptly to Hamburg to bring its files to the United States. Please wire response collect.

H. C. STUELCKEN SOHN. Care of Dr. PRINZ REUSS.

That is basically what we have been discussing here today.
What is your reply to that telegram?

Mr. DAVIS. Well, it is a matter of time. I have no-my feeling is that all interested parties should be heard.

Mr. DOWNING. Did they appear before the Senate when it handled the matter?

Mr. DAVIS. No, they did not appear before the Senate.

Mr. PELLY. Will the chairman yield for a question on that point? Mr. DOWNING. Yes.

Mr. PELLY. The telegram states that this was an erroneous Administration interpretation, as I recall.

Now, I thought it was from the court order and not the Maritime Administration's interpretation.

Mr. DAVIS. If you will remember, in my statement I said that prior to the Westhampton decision we had received numerous inquiries with respect to the need for Secretary approval for noncitizens holding of bonds and we had informed these people, and it had been the position of the Admiralty Bar that no such approval was necessary with respect to noncitizen holding of bonds.

Now, the court has disagreed with us on it. So, in that respect that telegram is accurate.

Mr. PELLY. Well then, the statement in the telegram was correct. That is all I wanted to get.

Mr. DAVIS. That is right.

Mr. PELLY. Thank you.

Mr. DOWNING. Any further questions of this witness?

Mr. DINGELL. Mr. Chairman, I would like to clarify a couple of questions in my own mind. The Westhampton decision to which you referred was decided that the mortgages were void on grounds that they failed to comply with the statutes or on the grounds of public policy, or on what grounds were these mortgages held void?

Mr. DAVIS. On the grounds that a bond was an interest in a vessel. Mr. DINGELL. And, in fact, not a mortgage-that they were a possessory interest?

Mr. DAVIS. Well, no. The statute merely says "interest in a vessel."

Mr. DINGELL. In other words, there is no question raised in that de cision as to whether or not is was an attempt to evade the statutes of the United States, the public policy of the United States with regard to title, ownership of the vessels!

Mr. DAVIS. No; because they were relying upon opinions of the Maritime Administration and upon opinions by well-qualified admiralty lawyers of the United States.

Mr. DINGELL. I see.

Now, just to summarize briefly the question that lies in my mind: is there anything in this legislation which would weaken the control of the United States over American-flag vessels by now approving the validity of mortgage and bonds on American-flag vessels held by persons other than U.S. citizens?

Mr. DAVIS. No; in fact, quite the contrary. Now we have the additional administrative burden of approving the trustee, seeing that he meets the standards set forth therein. We are going to issue-we will have to promulgate and issue regulations to carry out the additional standards that have been set forth, and we have to approve the operation of a vessel by an approved trustee.

This is where he does not choose to foreclose, but operates the vessel to protect the security.

Mr. DINGELL. What is the law with regard to operation of American-flag vessels by American citizens? They have to be operated by American citizens, do they not?

Mr. DAVIS. Yes; generally speaking.

Mr. DINGELL. And they have to be under effective control?

Mr. DAVIS. You can get the Secretary's approval to charter, sell, or whatnot foreign

Mr. DINGELL. How about operation and a permanent basis by corporations or individuals who are not American citizens?

Mr. DAVIS. Well, generally it is 51 percent of the stock has to be owned.

Mr. DINGELL. Fifty-one percent. But this would be approved as a temporary device?

Mr. DAVIS. Well, you are talking about two different things.

Mr. DINGELL. I am talking about allowing foreign citizens to operate an American-flag vessel for the protection of their security. This would be simply temporary.

Mr. DAVIS. You are not having a foreign citizen operate the vessel; you are having an American citizen operate the vessel, because the trustee must always be an American citizen.

But as to whether or not he can operate it where the bonds are in the hands of aliens, he must get the approval of the Secretary of Commerce under the proposed bill.

Mr. DINGELL. Thank you. You have answered my questions.

Mr. DOWNING. Thank you, Mr. Davis. I wonder if you and Mr. Tankard would hold yourselves available for further questions if

necessary.

Mr. DAVIS. Thank you.

Mr. DOWNING. Our next witness will be Mr. Odell Kominers, representing the Committee of American Steamship Lines.

Welcome to the committee, Mr. Kominers. I see you are accompanied by Mr. Robert S. Hope.

Mr. KOMINERS. I am, sir. I am accompanied by Robert S. Hope, one of my partners, who has assisted me in connection with this legislation.

STATEMENT OF ODELL KOMINERS, COMMITTEE OF AMERICAN STEAMSHIP LINES, ACCOMPANIED BY ROBERT S. HOPE, FIRM OF KOMINERS & FORT

Mr. KOMINERS. Mr. Chairman and members of the committee, my name is Odell Kominers. I am a partner in the law firm of Kominers & Fort with offices in the Tower Building, Washington, D.C. I appear today as counsel for the Committee of American Steamship Lines in support of H.R. 10883.

As Mr. Garmatz stated earlier this morning, H.R. 10883 contains the same language as revised Senate bill S. 2118. That bill was reported by the Senate Commerce Committee on September 1, 1965, and passed by the Senate on September 8, 1965.

My testimony is substantially the same as the statement I presented to the Senate Commerce Committee. However, I have (1) excluded the summary of legislative history of the amendments made to title XI of the Merchant Marine Act, 1936, and (2) added a brief analysis of H.R. 10883. The legislative history contained in my earlier statement can be made available for this record if the committee so desires. CASL is an association of 14 American-flag steamship lines, which lines maintain essential common-carrier steamship services in foreign commerce under operating-differential subsidy agreements with the United States.

These companies have issued, under trust indentures, title XI Government-insured bonds aggregating $241,989,940. Title XI of the Merchant Marine Act, 1936, was enacted, and amended from time to time to encourage the private financing of the vessel replacement programs of American-flag shipowners. Public issues of bonds secured by mortgages insured under title XI are the principal and least costly method of financing available to the CASL companies to carry out their replacemtn obligations. Two of the CASL lines are now negotiating and must conclude in the very near future, additional title XI bond financing in the aggregate amount of about $50 million.

The vessel replacement program has been seriously jeopardized not only because questions have been raised regarding the validity of some title XI bonds already sold, but more importantly because the marketability of future title XI bond issues is impaired, as the result of a recent decision of the U.S. Court of Appeals for the Fourth Circuit in the case of Chemical Bank New York Trust Co. v. The Steamship Westhampton (Nos. 9637 and 9638, decided April 5, 1965).

The proposed legislation would overcome the implications of the Westhampton decision by amending sections 9 and 37 of the Shipping Act, 1916, and subsection O of the Ship Mortgage Act, 1920. Enactment of this general legislation will correct the situation for bonds issued in connection with the financing of American-flag vessels whether or not insured under title XI.

CASL has no desire to seek to affect the outcome of pending litigation by legislation, whether such litigation involves the Westhamp