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The declaration of policy of the Merchant Marine Act of 1936, orders that all vessels constructed under the provisions of this act shall be constructed in American shipyards, as follows:



SEC. 101. It is necessary for the national defense and development of its foreign and domestic commerce that the United States shall have a merchant marine (a) (b)

*, (d) composed of the best equipped, safest, and most suitable types of vessels, constructed in the United States and manned with a trained and efficient citizen personnel. It is hereby declared to be the policy of the United States to foster the development and encourage the maintenance of such a merchant marine.

This declaration of policy and the provisions of the merchant-marine act allow no American vessel to be constructed in a foreign shipyard and then transferred to American registry. That foreign construction or operation was never intended, under this law, is clearly set forth by Senator E. W. Gibson, coauthor, in his statement to the editor of the magazine Marine Age, and as published in the April 1936 issue, quotations :

"My opinions and connections on the merchant marine are set forth in the enclosed bill (S. 4332) and the statement of purpose. "With respect to point 4 of your letter, chartering is an international busi

If, however, any American changes over to financing, building, owning, and operating foreign-flag vessels which automatically builds up the naval auxiliaries of those foreign nations, then they might just as fell go the full way and become foreign citizens for we can very well do without them.

“Further than that all I can say at the moment is that I am firmly convinced this bill (S. 4332) will provide a strong American merchant marine and a real and effective naval auxiliary.”

Senator Gibson's sound judgment is confirmed by the fact that the national defense features of the Maritime Act are taken directly from the Gibson merchant-marine bill, and, but recently, the Standard Oil Co., in cooperation with the Maritime Commission, awarded contracts for the construction of 12 highspeed oil tankers, to be constructed in American yards at a total cost of approximately $36,500,000, of which some $10,000,000 was paid by the Commission as an allowance for the national-defense features of these vessels.

The rehabilitation of the American merchant marine, from a shipbuilding point of view, is a "large order," involving some $500,000,0CO worth of new construction, to replace our present obsolete vessels and those vessels approaching obsolescence within the next 4 years. Under the present law, this business is confined strictly to American shipyards. It is estimated that 80 percent of the cost of a vessel is paid to labor, so that this construction program involves a labor disbursement amounting to $400,000,000.

The first indication that an effort would be made to modify the present law, came, in the Economic Survey of the American Merchant rine, published by the United States Maritime Commission under date of November 10, 1937. Its discussion and findings on "Shipbuilding Facilities" points to foreign construction. This report reads as follows (pp. 21–22):


"Before embarking on a building program, the Commission made a survey of the shipyards of the United States in order to determine the exact facilities available. Representatives were sent to every yard on the Atlantic coast, the Gulf coast, and the Pacific coast, to inspect all ways and other facilities, to determine the probable capacity of each yard, and to appraise the labor supply. The survey covered 20 yards with a total capacity of 106 ways.

Fifteen ways in six yards, 10 ways located on the east coast and 5 on the west coast, are available for immediate building. Twenty-seven additional ways in 12 yards, 18 ways on the east coast, and 9 on the west coast, now occupied, will be available within a period of from 3 to 6 months as the work now on hand is completed. The remaining 61 ways are either occupied by work that will take some time to complete or need to be reconditioned or lengthened before undertaking the construction of ocean-going vessels. Such reconditioning or lengthening would involve the expenditure, in most cases, of a considerable sum of money. In addition to building ways available in private yards, there are three ways on west coast navy yards which possibly conld be secured in an emergency.

On the east coast it appears that there are sufficient facilities and an adequate supply of personnel for any building the Commission is likely to require.

While there has been no ocean-going tonnage built on the Pacific coast in the past 10 years, there are available at this time a sufficient number of skilled workmen to undertake a conservative building program. The most difficult personnel problem would be the recruiting of loftsmen, shipfitters, and draftsmen. Some of the private yards would also be rather seriously embarrassed in securing properly qualified personnel in the higher brackets, in both technical and executive branches. However, the personnel now engaged in repair work or in such minor construction as barges, tugs, fishing vessels, and yachts is believed sufficient to provide a nucleus around which a proper working force could be developed in the west coast yards. This is especially true of the San Francisco Bay area. A program for construction on all available ways on the west coast would result in a shortage of skilled workers.

Relations between labor and management seem to be fairly stable on both the east and west coasts.

The Commission's study indicates that, so far as the available shipbuilding facilities are concerned, it would be extremely unwise for the Government to launch a spectacular shipbuilding program. Instead, a small volume of work should be put out at once, and additional contracts placed in an orderly manner. Also, the construction program should be inaugurated, so far as practicable, with the simpler types of vessels. To permit standardization and thus reduce costs the smaller types should be built in groups of four or perhaps eight vessels. The gradual building up of the program, as suggested, would tend to insure more active bidding, would tend to keep prices down, and would permit the yards to build up their forces in an orderly manner."

The Commission's findings seek to establish the fact that a physical condition exists in American shipyards that bars a large construction program. This automatically creates doubt that American shipyards are capable of handling such a program.

On the other hand, little or no mention is made of their ability to expand their present yards for increased production, and the setting up of new yards on the Gulf and Pacific coasts. Assuming no new yards are contemplated on the Atlantic coast.

Following publication of the Maritime Commission's Economic Survey, there was introduced in the Senate, a bill (S. 3078), and a companion bill in the House (H. R. 8532), reported to contain the United States Maritime Commission's proposed amendments to the Merchant Marine Act. Examination of the Senate bill (S. 3078) reveals, on pages 7, 8, 9, an amendment containing a proposal to allow American vessel construction in foreign shipyards. This amendment reads as follows:

SEC. 9. Section 502 (b) of the Merchant Marine Act, 1936, is hereby amended to read as follows:

“(b) The amount of the reduction in selling price which is herein termed the construction-differential subsidy' may equal, but not exceed, the excess bid of the domestic shipbuilder constructing the proposed vessel (excluding the cost of any features incorporated in the vessel for national-defense uses, which shall be paid by the Commission in addition to the subsidy), over the fair and reasonable estimate of cost, as determined by the Commission, of the construction of the proposed vessel if it were constructed under similar plans and specifications (excluding national-defense features as above provided) in a principal foreign shipbuilding center which is a vailable to the principal foreign competitors in the service in which the vessel is to be operated and which is deemed by the Commission to furnish a fair and representative example for the determination of the estimated cost of construction in foreign countries of vessels of the type proposed to be constructed. The construction differential approved by the Commission shall not exceed 3313 percent of the construction cost of the vessel paid by the Commission (excluding the cost of nationaldefense features as above provided), except that in cases where the Commission possesses convincing evidence that the actual differential is greater than that percentage, the Commission may approve an allowance not to exceed 50 percent of the cost, upon the affirmative vote of four members, except as otherwise provided in subsection 201 (a). In any case where the Commission finds that the construction differential exceeds 3313 percent but does not exceed 50 percent of such cost, and that the lowest bid of a responsible domestic shipbuilder is unreasonable, excessive, or collusive, the Commission may authorize the applicant to have the vessel built in a foreign shipyard, without financial aid from the United States, if the applicant agrees to document such vessel

under the laws of the United States as soon as practicable after its completion. Where the Commission finds that the construction differential exceeds 50 percent of such cost, the applicant may have such vessel built in a foreign shipyard without the consent of the Commission. The Commission shall reimburse the applicant for the cost of the national-defense features incorporated in such vessels constructed in foreign yards under this section. Notwithstanding any other provision of the law, such vessels shall be eligible for an operatingdifferential subsidy upon being documented under the laws of the United States, under the sanie terms and conditions as if such vessels had been constructed in a domestic shipyard under the provisions of this act."

If the Maritime Act is amended according to the above-quoted amendment, reported to have been recommended by the United States Maritime Commission, the ultimate result will be that of a break-down of our shipyards, the imposition of economic penalties upon American labor, the imposition of unfair penalties upon American capital investments in shipyards, the development of foreign-flag ship operation by American operators who established their business using American vessels and American subsidies, and a break-down of our merchant marine naval auxiliaries.

With but one or two emergency exceptions American laws have traditionally guaranteed protection of American shipyards from unfair foreign competition, and, in my opinion, there exists at the present time no justification whatsoever for any modification of the present laws. Shipbuilding should be one of our major industries with every reasonable protection under American laws.

From a labor point of view our needed replacement program involves an expenditure of approximately $500,000,000 within the next 5 years, or an average expenditure for ship construction of $100,000,000 per year. To American labor this means a payment of $400,000,000, or 80 percent of the construction cost in American yards. In October 1937 the labor cost was $0.83 per hour. In June 1933 the labor cost was $0.56 per hour. The mean labor cost for this period is $0.695 per hour. Taking $0.70 per hour as an average contemplated labor cost for this construction program, this involves 571,428,571 man-hours of work for a period of 5 years, or 142,851,143 man-hours of labor per year. Any portion of this construction program that, by reason of this proposed amendment, places any portion of this work in foreign shipyards automatically penalizes American labor.

American shipyards represent a huge capital investment. This investment has provided facilities for employment of thousands of people, and the results of their employment means dividends to the stockholders and increased tax revenues to the Government. Any break-down of this capital structure of investment will not only penalize the stockholders but bring about a proportionate reduction in dividends and revenue taxes.

The amendment reads, on page 8, lines 14, 15, 16: "If the applicant agrees to document such vessel under the laws of the United States as soon as practicable after its completion.” As this now reads, an American ship operator who has built his business up with American vessels under subsidy may place contracts for vessels in foreign yards with their financial assistance for construction costs, with such financing to be secured by a mortgage on the vessels. Then, upon completion and delivery of the vessels, turn back all American vessels or lay them up and replace them with foreign-flag ships, employing foreign crews, and find it "impractical” to place them under American registry, due to mortgage indebtedness and an inability to transfer such vessel to American registry as long as a foreign yard holds such mortgages against the vessels.

There exists no means whereby a determination can be made of the payment of a hidden subsidy by a foreign nation to its shipyards in an effort to secure the business, by making it possible for such foreign shipyards to submit a false bid that exceeds the construction differential now existing under the present law, and thus forcing the Maritime Commission to allow foreign ship construction as proposed under this amendment.

The primary object of a merchant marine is to provide adequate auxiliaries for our Navy and national defense. This proposed amendment leaves the way for foreign ship construction and foreign-lag ship operation by American shipping companies in such a manner that all such vessels are subject to requisition by their nationals in time of war or national emergency.

Shipbuilding, in years past, made America the leading nation of the world for American-built ships were the finest, the fastest, and the best ships. They were manned by American seamen who established world records for sailor men.

Types of ships have changed, but, inherently, we are a shipbuilding nation, and, as was proven during the late war, we can build ships in large numbers. However, the advantage we possess today, over 20 years ago, lies in the fact that we have profited by our experiences, and any ships built in the future will be modern, efficient, and competitive in every sense of the word.

Our national security is partly dependent upon the maintenance of a proper and sufficient number of shipyards on our Atlantic, Gulf, and Pacific coasts so that they may be available for naval construction and commercial construction of a kind that is adaptable for immediate conversion into naval auxiliaries In my opinion, expansion of existing yards, reopening of older yards that have been shut down, and a spreading out of the technical staffs and skilled labor can build any amount of vessels that may be needed for the proper maintenance of our merchant marine and national defense.

Japan is probably our lowest competitor in shipbuilding. At the present time Japanese vessels constitute the major competitive factor in the Pacific trade routes, except to Australia. Under this proposed amendment it would be very possible, if not highly probable, that Japanese shipyards would submit an over 50-percent construction differential bid on all new vessels planned for service on North Pacific and mid-Pacific trade routes. The entire Dollar Line fleet, with the exception of one vessel, will be subject to replacement within 4 or 5 years This amendment opens the door to Japanese construction and, by reason of their present commercial and economic condition, the retention of all such vessels under the Japanese flag making them subject to requisition for military purposes at any time that suits the Japanese Government. In other words, American capital would be used to build up a fleet of auxiliaries for the Japanese Navy.

In the final analysis this proposed amendment lays the way open for arhitrary decisions by the Maritime Commission. It strikes at the very fundamental and basic policy of the Maritime Act in such a way as to weaken the entire structure. One of the reasons why our merchant marine failed under previous maritime acts is because the laws were so designed that the adininistrators of the law were able to place various interpretations on the provisions therein so that the ultimate result of failure was due in part to the weaknesses of the laws. The present Maritime Act is so designed as to eliminate, as far as is possible, any interpretation of the law that is contrary to the interests of the Government and the development of a necessary merchant marine. If this proposed amendment becomes law, foreign shipbuilding nations will capitalize on it and secure such commercial and economic benefits as is humanly possible by their own means and methods, and the American shipbuilding industry will be unfairly and unjustly penalized to the same extent.

For the above-stated reasons I am definitely opposed to this proposed amendment to the Merchant Marine Act of 1936. Respectfully submitted.



Washington, D. C., December 30, 1937. Hon. ROYAL S. COPELAND, Chairman, Senate Commerce Committee,

United States Senate, Washington, D. C. MY DEAR SENATOR COPELAND: When I appeared before your committee December 7 with respect to S. 3078, a bill to amend the Merchant Marine Act of 1936, and for other purposes, you requested me to submit to you such amendments as I deemed desirable to clear up the matters covered by my statement before the committee. These matters have to do with the elimination of the possibility of conflict between certain provisions of S. 3078 and the National Labor Relations Act.

I am accordingly submitting below suggested amendments having the purpose stated :

In section 1002 (1. 12, p. 35) insert after the word "Paragraph" the word “Third." This would have the effect of leaving questions involving interference with the right of self-organization to be resolved in accordance with the provisions of the National Labor Relations Act, including both the substantive unfair labor practices relating to the right of self-organization and the procedure for preventing such unfair labor practices as contained in the National Labor Relations Act.

In section 1002 (1. 15, p. 35) strike out the numerals "1102" and insert the numerals “1001.” This amendment is to correct what appears to be a typographical error.

Strike out section 1003 and insert in lieu thereof the following:

“Sec. 1003. Questions concerning the representation of employees of a maritime employer shall be considered and determined by the National Labor Relations Board in accordance with the provisions of the National Labor Relations Act for the designation or selection of representatives for the purposes of col. lective bargaining, and the National Labor Relations Board shall certify to the parties and to the maritime employer in writing the name or names of the indi. viduals or organizations that have been so designated or selected. Upon receipt of such certification the maritime employer shall treat with the representatives so certified as the representatives of such employees.”

The purpose of the foregoing amendment is to make it clear that matters concerning the designation or selection of representatives for the purposes of collective bargaining shall be the same as provided in the National Labor Relations Act, except that the amendment above suggested retains the provisions of the original section that the certification shall go to the maritime employer as well as to the parties to the representation proceeding and that upon receipt of such certification employers shall treat with the representatives so certified.

Add a new section reading as follows:

"SEC. The provisions of sections 1004, 1005, and 1006, with respect to disputes and grievances, shall not in any manner affect or be construed to limit the provisions of the National Labor Relations Act governing the prevention, under the provisions of the National Labor Relations Act, of the unfair labor practices set forth in section 8 thereof."

In section 1007 (11, 12, and 13, p. 40) strike out the words “except as provided in this title with respect to maritime employers and their employees," so that such section shall read as follows:

“SEC. 1007. Nothing herein shall be construed to repeal or amend any provision of the National Labor Relations Act or to restrict the powers and duties conferred upon the National Labor Relations Board by said act.”

The purpose of the last two suggested amendments is to make it clear that the adjustment of disputes and grievances referred to in S. 3078 shall not preclude employees from their statutory rights with respect to unfair labor practices under the National Labor Relations Act and that the intention of Chairman Kennedy, as stated to the committee December 8, that unfair labor practices and questions concerning representation should be left as provided in the National Labor Relations Act is not left indefinite in the wording of the statute.

There remains the problem, referred to in my statement, of the broad scope of the definition of "maritime employer" and "employee" contained in section 1001 (a) and 1001 (b). I am not submitting at this time any specific suggested amendment to solve this problem, because the phraseology of the amendment would depend upon the scope which Congress desires to give to his new legislation. As pointed out in my statement to your committee, the scope of the labor provisions seem very broad and are not readily understandable. They seem to include teamsters, bus drivers, and might include warehousemen as well as express services and other activities remote from the maritime industry.

As pointed out by the National Mediation Board in its letter to you of December 14, there is likely to arise conflict or confusion as to jurisdiction between the Maritime Commission and the National Labor Relations Board unless the definitions of “maritime employer" and "employee" are more precise. Yours sincerely,



December 17, 19.37. Hon. ROYAL S. COPELAND, Chairman, Committee on Commerce, United States Senate,

Washington, D. C. DEAR SENATOR COPELAND: The Shippers' Conference, at a meeting December 8, had under consideration H. R. 8532, introduced by you, amending the Merchant Marine Act of 1936. The activity of the Shippers' Conference does not extend to certain portions of this legislation, but it does cover the regulatory provisions

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