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Mr. CANNON. The cost average of all the vessels is about $25,000?
Admiral LAND. Yes, sir.
Mr. CANNON. Are there any questions, gentleman, on charter hire?

REASON FOR DIFFERENT CHARGES FOR CHARTER HIRE

Mr. TABER. I have some questions on charter hire.

How does it come that your charges on charter hire for dry-cargo boats are $31,000, approximately, while your charges for tankers are about $40,000 and your charges for passenger boats are a little more than that, $45,000? How does that happen?

Admiral LAND. I don't follow your figures there at all.
Mr. TABER. All right. We will do a little multiplying and dividing.
Admiral LAND. You said $45,000.

Mr. Taber. Is not that right? No; I see it is wrong. It is $450. It is $317 a ton for dry-cargo boats and it is $400 for tankers, approximately. Those figures are rough, but approximate. How does it happen that there is such an increase over the tanker charge as compared with the dry-cargo charge?

Mr. Johnson. Do you mean, why does the charter rate increase?

Mr. TABER. Why does it run more for the tankers than it does for the dry-cargo boats?

Mr. JOHNSON. That is on the basis of the time charter. Is that the line headed "Time charter''?

Mr. TABER. I am going over on page 67.
Mr. JOHNSON. Which line do you refer to?

Mr. TĄBER. You have 5,387,000 tons at $217,174,000, which is practically $400 a ton.

Mr. Johnson. Yes, sir.

Mr. TABER. Not exactly, but practically. You have got 667,000 tons of passenger tonnage and you are putting in here $30,083,000, and that produces approximately $450 a ton. You have got 3,018,000 tons of dry cargo at $95,844,000, which produces $317 a ton. Do you have to pay more for the dry cargo than you do for the other?

Admiral LAND. It depends altogether on the characteristics of the ship, the type of the charter, the speed of the ship; and of course when you get into passenger ships you naturally have to carry more

Mr. TABER. I can see a difference there. These are bareboat charters. Tankers cost less to build than dry-cargo ships, do they not?

Admiral LAND. No, sir; they do not.
Mr. TABER. More?
Admiral LAND. Generally speaking, they run a little bit higher.

Mr. WIGGLESWORTH. I thought you said it was $1.15 a dead-weight ton per tanker and $1.25 a dead-weight ton for the dry-cargo vessels.

Admiral LAND. Yes.
Mr. WIGGLESWORTH. The differential ought to be the other way.

Mr. Johnson. Mr. Taber and Mr. Wigglesworth, may I point out that in connection with the dry-cargo ships more than one-third of the ships are bareboat chartered. In the case of tankers only 23 tankers out of 397 are bareboat chartered, whereas 145 dry-cargo vessels out of 373 are bareboat chartered. I presume you understand the difference.

crew.

Admiral LAND. One is a time charter which costs a lot more.
Mr. TABER. Why?

Admiral LAND. Because the owner of a time-chartered ship has to furnish the crew, subsistence, maintenance, and so forth., and under the bareboat charter the owner merely furnishes the ship.

Mr. TABER. The operator furnishes the crew?

Admiral LAND. Yes, sir. I did not see what you were driving at, before.

Mr. Rabaut. When you furnish the crew you furnish clothing, too? Admiral LAND. Subsistence, not clothing.

REASON FOR INCREASE FOR 1946

Mr. TABER. I am wondering if you have not got $10,000,000 too much in this figure of $367,000,000 that you have given us in this estimate on page 11. You show an increase of $9,906,000, and your 1945 figure was $346,000,000. Am I wrong there?

Mr. Johnson. The point there, Mr. Taber, is that, as you will see on page 70, the 1945 figure does not include full operation throughout the year of all the ships under charter during the year. An adjustment has been made, therefore, to the 1945 costs to bring those costs to the proper base for 1946. It has not been the practice in the past to use the base statement as we are doing this year; but you will note that there are net adjustments to the 1945 costs of $10,467,000 which are explained in detail on base statement A-3, page 70. Mr. TABER. You have casualties in there. Is that an increase? Admiral LAND. That is a decrease.

Mr. TABER. And you are expecting to charter more vessels in 1946 than you did in 1945?

Admiral LAND. Yes.
Mr. TABER. Why? Where are you going to get them?

Admiral LAND. We are gradually allocating ships to some of the United Nations.

Mr. TABER. I should think that would cause a reduction rather than an increase. Do you mean that you are allocating them to the United Nations and then chartering them back?

Admiral LAND. Yes. We bareboat out and time-charter back. That is correct.

Mr. TABER. So that they are operating the ships and are paid on a time-charter basis?

Admiral LAND. That is right.
Mr. TABER. After you turn them over to them?
Admiral LAND. Yes.

USE OF TIME-CHARTER VESSELS

Mr. Taber. What are they used forhauling stuff to those same people?

Admiral Land. No. They are used as part of the pool, the combined pools of all the United Nations.

Mr. TABER. They go wherever you send them?
Admiral LAND. They go wherever they are sent.

Mr. TABER. What is the object of turning them over to these other nations? Do they furnish the crews?

Admiral LAND. Yes, sir. They furnish the crews. They have a lot of men available, many of them expert, particularly the Norwegians. We are now doing the same thing with the French, who have a great many expert seamen available. We have done the same with another of our allies, as we indicated this morning at some length.

Mr. TABER. Does that give you the ships more cheaply than you would get them the other way, or does it simply make the crews available?

Admiral LAND. It makes the crews available primarily. It is also a part of this unified effort in the war. It is an accommodation to the allies.

Mr. TABER. That is all I have.

Mr. CANNON. Are there any further questions? If not, the next item is "Management costs and compensation.”

MANAGEMENT COSTS AND COMPENSATION

You are asking for an increase of $21,025,000, an increase of nearly 25 percent over 1945.

Mr. Johnson. That is directly in proportion to the number of ships.

Admiral LAND. There is a 23-percent increase in the ships, and this is a 23-percent increase.

Mr. CANNON. Of course this is an expense and a cost that is difficult to control and, on that account, should have careful attention. I note you refer to bona fide, reasonable, and eligible expenses. What is your guide in determining what expenses are reasonable?

Admiral LAND. Our estimates are based on costs that have been submitted over a period of years. When we first came up here we were a little at sea ourselves on those things. But most of our present estimates are based on recent results of a thousand voyages or a thousand ships.

Mr. Cannon. You have statistics enough on hand to be able to make a fair comparison?

Admiral LAND. Yes.
The CHAIRMAN. Are there any questions, gentlemen?
Mr. TABER. What does it consist of?

page 72.

page 72.

DISCUSSION OF PAYMENT OF AGENTS' FEES Admiral Land. It consists of compensation paid general agents, berth agents, and time-charter agents for operating the vessels. The agents operate them. The explanation of it is found in table A-4 on

Mr. Johnson. Subparagraphs 1, 2, 3, and 4 at the bottom of

Admiral Land. There are four paragraphs there that give a complete explanation of what these are and how they are subdivided.

Mr. WIGGLESWORTH. Are these agents mostly the owners of the ships?

Admiral Land. When you say "mostly," no, sir, because they do not own most of the ships. There are something like 800 or 900 that are owned, and the rest of the 4,600 ships that we expect to operate in 1946 belong to us.

Mr. WIGGLESWORTH. How about the 800 or 900; do you pay them agency fees also?

Admiral LAND. It depends on the basis on which they operate.

Mr. WIGGLESWORTH. In other words, they get an agency fee over and above the charter hire?

Mr. Johnson. In the case of owned vessels, there is no charter hire.

Admiral LAND. If they own the vessels they do not have any charter hire.

Mr. WIGGLESWORTH. Do we pay charter hire and agency fees to the same individual or company with respect to the 800 or 900 ships?

Admiral LAND. Yes, sir.

RECAPTURE OF 20 PERCENT OF GROSS ALLOWANCE FOR A GENTS'

COMPENSATION

a

Mr. Case. On page 17 of the justifications I see the following (reading]:

The estimates for both 1945 and 1946 reflect an estimated recapture of 20 percent of the gross allowance for agents' compensation, which continues 1944 experience.

If your experience indicates that much of a recapture, why did you allow it in the first place?

Mr. Johnson. The estimate is based on the net cost, you see. It was, however, calculated at gross fees less recapture.

Mr. CASE. Then the 20 percent is 20 percent of gross cost?
Admiral LAND. Yes.

Mr. CASE. Why in making your contract can you not price it more closely on the basis of your experience?

Admiral LAND. I am told that we are already negotiating for reductions to meet your point, and we hope we may be able to put them across. It is a constant shifting over. We may be able to do it.

Mr. Case. In successive years the experience of other procurement agencies has been that their percentage of recapture or renegotiation is . Admiral LAND. It reflects a price reduction, and that is what we are

; attempting to work on now.

Mr. Case. Your statement would indicate that you are just proceeding on the basis of anticipation.

Admiral LAND. If we can renegotiate a price reduction on these agency fees, we expect to do it.

Mr. TABER. This $65 a day means approximately $18,000 for each vessel a year. Then you are paying $15 a day for accounting. That means approximately $4,000 for each vessel a year for accounting. Does not that run into a good deal of money? What do these people do for that amount of money?

Admiral LAND. They operate the ships.
Mr. TABER. That is the fee that they get for operating the ship?
Admiral LAND. That is right.

Mr. TABER. How many of them does each of these agencies control; and are they located in one place or in several places?

Admiral LAND. I have a complete break-down here of all the agents and the number of vessels they have, the cost to War Shipping Administration, the list running about 100. Mr. TABER. One hundred agents?

Admiral Land. Yes. There are more than a hundred, I think, all together.

Mr. TABER. That means only 34 ships to the agent?

Admiral Land. No; not at all. We have 100 agents and 4,600 ships.

Mr. Taber. They operate all the ships?
Admiral LAND. Absolutely.

Mr. WIGGLESWORTH. That means about $1,000,000 average per agent?

Admiral Land. It depends altogether on the number. As I say, there is a complete break-down of it here.

Mr. TABER. Are these people who have been in the shipping business for years?

Admiral LAND. Yes.
Mr. TABER. Operating shipping companies?
Admiral Land. Yes.

Mr. WIGGLESWORTH. Could you add another column that would show those agents who are also receiving charter hire and, if so, how much?

Admiral LAND. Yes.
Mr. TABER. Can we have that in the record ?
Admiral Land. Surely.

The specific information requested cannot be fully compiled within the time permitted. A substantial portion of this information is being furnished in an elaborate 4-page analysis which may be too extensive for incorporation in the record. However, we have no objection to this material being inserted in the record.

INSURANCE PREMIUMS PAID TO UNDERWRITERS AND TO MARINE AND

WAR RISK INSURANCE FUND

Mr. Cannon. The next item is on page 18, Insurance premiums. We have a decrease there of about $20,900,000. These premiums are paid to commercial underwriters. Why, Admiral Land, would it not be advisable for the Government to carry its own risk? As a matter of fact, in the last 3 or 4 years could the Government possibly have carried its own risk?

Admiral LAND. We have carried most of the risk, but we did not want the industry to die. In accordance with the policy of the Merchant Marine Act of 1936 we did our best to build up an insurance syndicate so we would not be forced to go abroad. We have kept them alive, and in my judgment it is a fine policy and we have continued to do it. Only recently they are attempting to get insurance on foreign bottoms, which means that post-war we will have a proper marine-insurance syndicate in this country and will not be dependent upon foreigners. But we have carried most of the insurance risks ourselves in the insurance fund.

The CHAIRMAN. Are there any questions, gentlemen?

REDUCTION OF INSURANCE

Mr. Taber. It seems that the number of ships are going to be maybe an average of 800 through the year, and you have got only : small deduction and you are dropping the price per ton that is insured down from $56, if I remember correctly, to $47. It would seem as if we ought to get more reduction than that. On top of that the rate ought to go down with the change in the war-risk picture.

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