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Then we shall have the shift of out-bound shipping from the east coast to the Pacific area, over routes that are 100 to 300 percent longer than those between our east coast and Europe. It is harder going in the Pacific but the merchant fleet has met every test in every theater thus far. It will not fail in the final push into Tokyo.

Now to get down to the Budget proper.

FISCAL STATUS OF WAR SHIPPING ADMINISTRATION, 1945 AND 1946

We estimate that the total expenses for W. S. A. in fiscal 1946 will be $3,096,400,000. A break-down of those items is given in chart 16. We estimate that operating revenues from lend-lease will be $1,153,800,000 and from civilian freight $275,400,000, for a total of $1,429,200,000.

This will leave a budgetary deficiency of $1,667,200,000.

Unoblige ted balances carried forward from prior years will total approximately $1,181,900,000-$1,181,200,000 from the revolving fund and $700,000 from the maritime training fund-leaving a balance of $485,300,000 to be appropriated. Of this amount, $407,000,000 is required for the revolving fund and $78,300,000 for the training fund. An additional $50,000,000 will be transferred to the revolving fund from the insurance fund to supply a reserve of working capital, leaving an unobligated balance of $50,000,000 at the end of fiscal year

1946.

A comparison of expenses for the fiscal year of 1944 with estimated expenses for fiscal 1945 and 1946 is shown in chart 17.

The gross cost of all W. S. A. operations will be 19 percent higher in 1946 than in 1945, increasing from $2,610,200,000 to $3,096,400,000. The size of the W. S. A. fleet will increase 22 percent, from an average of 3,774 vessels during 1945 to 4,615 during 1946. Expenses for vessel operation, charter hire, vessel management, and other items will tend to increase with the size of the fleet. Administrative expenses will increase less than 10 percent, and manning and training expenses are slightly reduced.

In addition to current requirements for 1946, there is provision for estimated repairs to vessels amounting to $115,000,000. This work, to be performed in the year, was postponed during the period of critical shipping shortages.

We estimate that revenues will increase more than 32 percent, from $1,077,900,000 in 1945 to $1,429,200,000 in 1946. This increase of $351,000,000 largely offsets the increase of $486,200,000 in expense. The difference is chargeable to expanded military operations.

Now, Mr. Chairman, the following pages, of which there are 12, contain a discussion of specific items. It is rather long but it covers historically and from a legal point of view many of the points that are usually raised in these hearings in connection with the W. S. A.

I shall be very glad to read it, but I do not want to take too much of the time of the committee unless you feel it is desirable.

Mr. TABER. I would almost believe that it might save time if it was read.

Mr. CANNON. You may continue, Admiral.

DISCUSSION OF SPECIFIC ITEMS

Admiral LAND. In passing now from general matters to a discussion of some of the specific items, I wish at the outset to point out that we have tried to make our justification reasonably complete in order that the committee may have before it a full statement of our activities. We have also supplied the committee with copies of House Merchant Marine Committee documents 55 and 55-A, Seventy-eighth Congress. and Document 4 of the Seventy-ninth Congress. Documents 55 and 55-A embrace substantially all of the laws, proclamations, and Executive orders applicable to the operations of the W. S. A., including pertinent opinions of the Attorney General, the rules of the Advisory Board, and various other matters of legal significance. Document 4 is a compilation of substantially all of the important basic forms of agreements used by the W. S. A. and is 969 pages in length. These documents include the various international agreements such as the waiver of claims agreements, agreements creating the United Maritime Authority, and the master lend-lease agreement. We have also furnished each member of the committee copies of Documents 20-A through 20-H published by the House Committee on the Merchant Marine and Fisheries during the last Congress. The series 20 publications contain a full outline of the policies of the W. S. A. with respect to the terms of rates and values for the charter and total loss of freighters, tankers, and also contain specific reports regarding settlement for just compensation claims involving passenger and other special type vessels.

I believe that with all this material and certain additional items covered in this statement, we will have presented a fairly complete published record of the various activities of the W. S. A. for the use of this committee and others interested in following our operations.

JUST COMPENSATION PROBLEMS

We discussed the subject of just compensation rather extensively in connection with our hearings on the appropriation for the fiscal year of 1945. The subject is also treated in the justification (see pp. 16, 23, 68, 69, 112-114) and it is further amplified in the materials published by the House Merchant Marine Committee Document 20 series. The published material would appear to make any extensive comment on this subject unnecessary.

Under the Rules of the Advisory Board, we have made substantial headway in cleaning up our just compensation problems. Our tenders have been modest and we have had about 90 percent acceptance. As explained in the material above referred to, our basic bareboat charter rate is $1.15 per dead-weight ton for tankers and $1.25 per dead-weight ton for freighters. These rates are less than onethird of the comparable rates paid in World War I. They are fixed until July 1, 1945, when they may be reopened. Our basic insurance values were fixed for the year ending April 20, 1945, at $56.25. For the current year the values are automatically reduced under the terms of the charters by 12% percent to $47.50, which represents a reduction of 121⁄2 percent per annum from the $75 basic values of 1942. The

1942-45 values may in turn be contrasted with the insurance values of $165 in the First War. We have also succeeded in liquidating a vast majority of the claims for interest due to delay in payment for the very low rate of seven-eighths of 1 percent. Charter hire for passenger and special type ships has only recently been determined. I should like to insert in the record a table showing the rates fixed, since this information has not been previously published.

(The information is as follows:)

Comparison of current passenger vessel bare-boat charter hire rates with those of 1917

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Comparison of direct voyage profit for the calendar year 1939, with bare-boat charter hire (subsidized operators)

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This table includes a comparison of rates paid with 1939 earnings and also the rates paid in the First World War for similar tonnage which would seem to leave no doubt as to the reasonableness of our results.

Mr. CANNON. I notice, Admiral, that you refer to 28 of the more prominent steamship companies. Are they under your jurisdiction? Admiral LAND. They were in part in 1939, and those ships are all under our jurisdiction now. We requisitioned the United States-flag fleet, and when we requisitioned those vessels, at the time of our requisitioning in 1942, they came fully under our jurisdiction. Previously they were only under our jurisdiction insofar as the Maritime Act of 1936 applied.

Mr. CANNON. These vessels were under private ownership, originally?

Admiral LAND. Yes.

Mr. CANNON. The Maritime Commission has been producing ships?

Admiral LAND. Yes, sir.

Mr. CANNON. How are they produced, through lease, or through construction?

Admiral LAND. Through construction, through purchase, and through lease.

Mr. CANNON. Some of the private companies are under lease and it is merely the operations that you deal with?

Admiral LAND. That is correct.

Wherever possible, we have tried to tie our settlements for just compensation with commitments for new replacement vessels. In one case involving a tanker of the Sun Oil Co., which was a total loss while chartered to the W. S. A., we are working out a payment in kind agreement using our broad powers to compromise in settlement claims of an insurance nature. We believe we can liquidate this claim by transferring to that company ownership of a similar tanker owned by the Government with appropriate adjustment for depreciation. We should like to develop a greater use of the settlement-in-kind technique and believe prompt passage of ship sales legislation will facilitate the accomplishment of that objective.

The record last year makes reference to comparative steamship earnings since 1939. I should like to bring these figures down to date by inserting the following table in the record at this point:

Aggregate earnings of 28 of the more prominent steamship companies based on company reports

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The committee will note that the downward trend of earnings referred to last year is still continuing which factor demonstrates that shipowners are not enjoying excessive wartime profits, but their earnings are considered fair and reasonable. For any who may still be skeptical as to our accomplishments in this field, I can only suggest that they read the material which I have just referred to, and particularly Document 20-A.

CHARTER DISPUTES

We have made considerable headway during the past year in settling accumulated charter disputes and restating the terms of charter operation so as to eliminate the causes of disputes and to facilitate wartime operations. Our current basic charter forms will be found on pages 74, 148, and 170 of Document 4. Many disputes had developed under our original charter forms with respect to adjustments of overtime earnings and defensing time, payment of cargo damage, and other miscellaneous items. I am happy to report that

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