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Section 608: No comments.

Section 609: (a) The third word "shall" should be stricken out and in its place the words "may in its discretion" be substituted. It may not at times be in the public interest to have this mandatory, and we believe discretion in each instance should be vested in the Maritime Commission.

(b) No comments.

Section 610: (1) There should be stricken out the words "shall be as nearly fireproof as practicable," so that (1) would then read: "The vessel shall be of steel or other acceptable metal, shall be propelled by steam or motor, shall be built in a domestic yard or shall have been documented under the laws of the United States not later than February 1, 1928,” etc. On an older vessel with a short remaining period in which subsidy may be paid, the cost to make it “as nearly fireproof as practicable" may be prohibitive.

Under (2) it should be corrected by inserting after the word "be" the words “as nearly fireproof as practicable and shall be." (2) Would then read: "if the vessel shall be constructed after the passage of this Act it shall be as nearly fireproof as practicable and shall be either a vessel constructed according to plans," etc., the balance remaining unchanged.


Section 701 : To be amended to read as follows:

"Whenever the Commission shall find and determine, that the national policy declared in section 101 of this Act, and the objectives set forth in section 210 of this Act, cannot be fully realized within a reasonable time, in whole or in part, under the provisions of titles V and VI, the Commission is hereby directed to determine the reasons why it has been found impossible under the provisions of said titles to carry out the said objectives, to propose to Congress such amendments as shall in its judgment be necessary to effectuate the said purposes of the Act, and Congress shall act thereon before the Commission shall proceed to complete its long-range program previously adopted as hereinafter provided in this title.”

Section 702 : Insert at the beginning, before the words “The Commission is authorized", the words "After the provisions of section 701 have been fully complied with and the Commission and the President determine that the objectives therein set forth cannot be fully realized within a reasonable time", the Commission is authorized, etc., continuing to end of 702 without any change.

Section 703: (a) No comments.

(b) No comments. (Attention is called to the suggested amendments made by us in title V.)

(c) No comments. Section 704: This section was amended April 1, 1937, to read as follows:

“Sæc. 704. All vessels transferred to or otherwise acquired by the Commission in any manner may be chartered or sold by the Commission pursuant to the further provisions of this Act. All vessels transferred to the Commission by this Act and now being operated by private operators on lines in foreign commerce of the United States shall be temporarily operated by the Commission for its account by private operators until such time and upon such operating agreements as the Commission may deem advantageous, but the Commission shall arrange as soon as practicable to offer all such lines of vessels for (sale or) charter as hereinafter provided, preference to be given to present operators, and all operation of the Commission's vessels by private operators under such operating agreements shall be discontinued within one year after the passage of this Act : Provided, That nothing herein contained shall prevent private operators, under such operating agreements, commencing voyages prior to said expiration date and completing them thereafter: Provided further, That nothing contained herein shall be construed as limiting or affecting the power of sale under provisions of section 705 of this Act."

This amended section should be further amended by inserting after the words "such lines of vessels for the words “sale or" before the word "charter", about the middle of the article as shown in parenthesis in the quoted amendment.

Section 705: Near end of paragraph, after the word "Act”, insert the words “or in case such sale cannot be made at a reasonable price within a reasonable time" continuing with “or by demising its vessels", etc.

Section 706: (a) No comments. (b) No comments.

Section 707 : (a) No comments. (b) No comments.

(c) Last line, after the words "of the line for” insert “sale or" continuing with "private charter",

Section 708: No comments. Section 709: (a) We have previously in this report dealt with the principle of recapture. It puts the American charterer at a disadvantage when chartering American vessels from the Maritime Commission compared with chartering foreign vessels. It also gives an advantage to the foreigner through not having any part of his profits subject to recapture. The arrangement proposed in this subsection (a) is also open to the criticism of creating uncertainty and instability.

(b) No comments.

Section 710: We recommend the elimination of section 710 for the reason that in section 707 (b) and in section 713, it is provided that the Commission shall determine whether the charterer shall have sufficient capital, credit, or experience to operate successfully, and it is not considered fair or reasonable to compel the charterer to furnish security through a performance bond as this imposes additional cost and is unnecessary. The furnishing of a bond not only involves the cost of a bond but the freezing of certain assets of the company to indemnify the security company. It is not the practice in the world-wide shipping trade to exact a surety bond from a charterer by an owner.

Section 711: No comments.

Section 712: (a) Insert the word “reasonable" before word "amounts” in third line.

The proviso "That in accordance with existing law, some or all of such insurance risks may be underwritten by the Commission itself as, in its discretion, it may determine" will have to be explored further. Does this mean that the Commission may elect to carry some of the risk without any payment by the charterer or does it mean that the charterer may be called upon to pay premium to the Maritime Commission in accordance with some rate or conditions set by the Commission that may vary froin the rates commercially available?

(b) This should be amended by the insertion of the word “reasonable" before the word “repairs" so that the provision would read: “That the charterer shall at its own expense keep the chartered vessel in good state of repair and in efficient operating condition and shall at its own expense make any and all reasonable repairs as may be required by the Commission.”

(c) Is to be amended by inserting the word “reasonable" before the word "times" so that the paragraph will read :

"(c) That the Commission shall have the right to inspect the vessel at any and all reasonable times to ascertain its condition."

(d) This should be amended by striking out after the word "charter” the words "without cost to the United States" and at the end of the sentence after the word “determine" add “Provided, however, That the United States shall indemnify the charterer for and against all losses and liabilities caused by such termination.” The corrected paragraph (d) will then read:

"(d) That in any national emergency as proclaimed by the President of the United States, the Commission may terminate the charter upon such notice to the charterers as the President of the United States shall determine, Provided, however, That the United States shall indemnify the charterer for and against all losses and liabilities caused by such termination.”

Section 713: No comments, other than to refer to our comments in connection with Section 710.

Section 714: This section should be amended by adding the words underJined so that it will read:

"Sec. 714. If the Commission shall find that any foreign trade route (determined by the Commission to be an essential trade route as provided in section 211 of this Act) cannot be successfully developed and maintained and the Commission's replacement program cannot be achieved under private operation of such trade route by a citizen of the Uuited States with vessels registered under the laws thereof, without further Government aid in addition to the financial aids authorized under title V and VI of this Act, the Commission is authorized to have constructed, in private shipyards or in navy yards, in case no reasonable bids can be obtained from private shipyards, the vessel or vessels of the types deemed necessary for such foreign trade route," etc., the balance of the section remaining unchanged.


Section 801: After (1) omit the following "that” and after the third word "the contractor" omit "and every affiliate, domestic agent, subsidiary, or holding company connected with, or directly or indirectly controlling or controlled by, the contractor," so that (1) shall read : "the contractor to keep its books, records, and accounts, relating to the maintenance, operation, and servicing of the vessels, services, routes, and lines covered by the contract, in such form and under such regulations as may be prescribed by the Commission”.

(2) Strike out the first word “that” and after the words "the contractor” strike out "and every affiliate, domestic agent, subsidiary, or holding company connected with, or directly or indirectly controlling or controlled by, the contractor," so that (2) as amended shall read : “the contractor to file, upon notice from the Commission, balance sheets, profit and loss statements, and such other statements of financial operations, special report, memoranda of any facts and transactions," etc., down to the end of (2) without change.

(3) Strike out the word “persons" and substitute the word “contractors" so that (3) as corrected will read “that the Commission shall be authorized to examine and audit the books, records, and accounts of all contractors referred to in this section whenever it may deem it necessary or desirable."

(4) Strike out the word “person" and substitute the word “contractor" and before the word “rescind” insert "apply to a United States court of competent jurisdiction to” so that (4) as revised would read : “that upon the willful failure or refusal of any contractor described in this section to comply with the contract provisions required by this section, the Commission shall have the right to apply to a United States court of competent jurisdiction to rescind the contract, and upon such rescission the United States shall be relieved of all further liability on such contract."

Section 802: After the words “the owner shall be paid therefor,” strike out the words "the fair actual value thereof, but in no event shall such payment exceed the actual depreciated construction cost thereof (together with the actual depreciated cost of capital improvements thereon, but excluding the cost of national-defense features) less the depreciated amount of construction subsidy theretofore paid incident to the construction or reconditioning of such vessel or vessels", and insert in its place “his purchase price plus his expenditures for betterments, less depreciation : Provided, however, That the United States shall indemnify the owner for and against all losses and liabilities caused by such acquisition." ('ontinue from there on unchanged so that 802 as corrected would read: "Every contract executed by the Commission under authority of title V of this act shall provide that:

"In the event the United States shall, through purchase or requisition, acquire ownership of the vessel or vessels on which a construction-differential subsidy was paid, the owner shall be paid therefor his purchase price plus his expenditures for betterments, less depreciation, Provided, however, That the United States shall indemnify the owner for and against all losses and liabilities caused by such acquisition." Continue as in the act.

Section 803: This section, in our opinion, should be deleted entirely for the following reasons: It would be impossible for any contractor to know whether any employee or any member of the family of any officer, director, or employee had any investment in the company which was to render services to the vessel in question. It would be equally impossible with all the ramifications of corporate ownerships extending all over the world for a director, officer, or employee of such contractor or any member of the immediate family, etc., to be sure of the ramifications due to stock ownership for instance in a domestic concern doing a world-wide business, This position is wholly impossible of policing and puts a restriction upon an American operation such as no other country in the world does. Furthermore, there is no reason why any service should not be performed by any affiliated company or anyone else under the conditions laid down in the law hy which the strictest scrutiny and the broadest authority is given to the Maritime ('ommission to go into every transaction. The committee submits that the only test to be applied to any service performed by any affiliate, connection, or anyone else should be the question whether the service and charge therefor a re reasonable, which can be very easily determined.

Foreign competitors have no such restrictions. On the contrary, to our knowledge, they engage in many activities prohibited to a contractor under this act. The diversified activities of foreign competitors is referred to in paragraph 10, earlier in this report.

Section 804: We recommend this section be amended to read :

"SEC. 804. It shall be unlawful for any contractor receiving an operatingdifferential subsidy under title VI or for any charterer of vessels under title VII of this Act, or any holding company, subsidiary, affiliate, or associate of such coutractor or such charterer, or any officer, director, agent, or executive thereof, directly or indirectly, to own, charter, act as agent or broker for, or operate any foreign-flag vessel which competes with any American-flag service uetermined by the Commission to be essential as provided in Section 211 or this Act: Provided, however, That under special circumstances and for good cause shown, the Commission inay, in its discretion, waive the provisions of this section as tu any contractor, by attirmative vote of a majority of its members, except as otherwise provided in subsection 201 (a). Abu Iurwer provided, that this section shall not apply to any such contractor or other person above described who or whose predecessor in interest directly or indirectly owned or chartered or acted as agent or broker for or operated any foreign flag vessel or vessels or service or services prior to 1936, which competes with any American flag service determined by the Commission to be essential as provided in Section 211 of this Act, unless such operations extend substantially to services other than services in which such contractor, person, or predecessor thus char tered or acted as agent or broker for or operated such foreign flag vessel or vessels prior to the year 1936. Under special circumstances and for good cause shown, the Commission may waive the provisions of this Section as to any other contractor, by an affirmative vote of a majority of its members, except as otherwise provided in subsection 201 (a)."

We asume that the Commission will take into consideration the effect on established steamship organizations presently handling both American and foreign ships and the possible resulting replacing of American personnel of such established organizations by foreign employees through foreign companies opening their own offices. Some of our most competent and experienced American shipping concerns have for many years operated or acted as agent for foreign vessels and their experience and skill should not be lost to the American merchant marine. Foreign competitors have no such restriction upon them. ,

Section 805: (a) We recommend that section 805 (a) be deleted in its entirety. Provision is made in section 607 for the disposition of all earnings. Therefore, such restrictions as contained in this section are unnecessary, and they will tend to prevent the development of strong shipping companies with diversified interests, such as is the case with the foreign companies referred to earlier in this report. There should be no trouble under the provisions of the act to segregate earnings of subsidized ships; and inasmuch as the disposition of all such earnings is to be provided for by the act in regulations to be issued by the Maritime Commission, there seems no valid reason for such a provision.

(b) No comments.
(c) In our opinion this subsection (c) should be entirely eliminated.

We believe it is not possible to fairly place by statute a limitation upon the salary value of any individual's services to the industry. There are no such statutory limitations upon the salaries paid in any other form of transportation in the world of which we have knowledge. The American-flag ships under the provisions of this act cannot secure any advantage over foreign competitors. We believe they will be distinctly at a disadvantage under the act and as they will nevertheless be in competition with the most experienced shipowners and operators in the world, the latter with no restrictions whatever upon their ability to employ the best brains obtainable and pay any salary necessary to secure them, a further serious handicap is placed upon the American operator by such a provision. We know that salaries greatly in excess of the $25,000 limitation are paid to the officers of some of our foreign steamship coinpetitors, notwithstanding the generally lower scale of living costs and wages abroad, and if we are compelled to compete and be restricted to a lower scale of salaries than foreigners pay, we will be put at a substantial competitive disadvantage.

We are therefore unalterably opposed to any salary limitation being placed in the act. We observe that the limitation now in section 805 (c) is more onerous than the limitation placed upon salaries in the shipbuilding industry (section 50.5 (c)) when building vessels that will secure the construction differential. That is to say, there is no limitation upon the salary that may be paid to any shipbuilder, although there is a limitation upon the amount of salary that can be charged as an item of cost. It is therefore obviously unfair to shipping operators where the experience of private enterprise shows it will be economy to pay higher salaries to obtain cheaper and more efficient operation to place an absolute limitation upon the total amount that can be obtained from any or all the specified sources. We repeat we do not think there should be a limitation of any kind placed upon salaries and cannot see the slightest reason why the same principle should not be applied (if despite our views a limitation is placed), as applies to shipbuilding, namely, that in calculating the operating or other differentials required by the shipowners, no salary in excess of $25,000 paid by the contractor shall be figured in arriving at the operating differential required. The act itself contains so many other restrictive features such as prescribed accounting methods, supervision, etc., that it is in our opinion impossible for any charges to be properly incurred in this act that are in any respects unreasonable.

If any such provision is retained, we suggest that this subdivision (c) read as follows:

"In computing the amount of aid to be given under this Act to any contractor holding a contract authorized by title VI or title VII of this Act, only salary, wages, and allowances for compensation up to $25,000.00 a year to any one individual paid by the contractor shall be considered as a part of the cost of the operation of any vessel or vessels receiving the benefits of title VI or VII of this Act: Provided, That in no event shall the charges made to the Contractor for services rendered by its subsidiary or affiliate on account of such subsidized operation exceed the reasonable value thereof."

(d) No comments. (e) No comments.

(f) To be amended by deletions and additions so that it will read: "Any wilful violation of any provision of this section determined by a court of competent jurisdiction shall constitute a breach of the contract or charter in force under this Act and upon such determination the court or the Commission may forthwith declare such contract or charter rescinded."

Section 806 : (a) The first sentence should be amended to read: "Whoever shall knowingly and wilfully consult with,” etc. The words "knowingly and wilfully" are inserted for the reason that obviously to be punishable the act should be knowingly and wilfully done as these words are frequently used in sections of the United States Criminal Code.

(b) To be substantially amended. As amended it would read:

“(b) Whenever any natural person or corporation is found guilty in any district court of the United States of any act or acts declared in this Act to constitute a misdemeanor, he or it shall be punished by a fine of not more than $5,000 and not less than $1,000.”

Obviously someone might innocently inform another bidder as to the conditions of any bid submitted to the Commission. To render such an act or acts punishable by 5 years in prison or a fine of $25,000 savors more of the rigorous punishments of early times and does not comport with the present enlightened era.

(c) No comments.

Section 807 : This section in our opinion should be eliminated. It is indignified in our opinion and unnecessarily burdensome. Any citizen should have the right to petition Congress or any governmental agency or committee or consult a Congressman or Senator, without complying with the complicated requirements required by this section.

Section 808: This section should be amended to read:

“It shall be unlawful for any contractor receiving an operating-differential subsidy under title VI or for any charterer under title VII of this Act wilfully and unjustly to discriminate in any manner so as to give preference directly or indirectly in respect to cargo in which such contractor or charterer has a direct or indirect ownership, or purchase, or veuding interest; and whosoever shall violate this provision shall be subject to injunction in a suit brought in a United States District Court of competent jurisdiction by the Commission to enjoin such violation."

Section 809: No comments.

Section 810: Your committee believes that this section should be eliminated in its entirety for the reason that the matters therein contained are covered by section 14 of the Shipping Act of 1916. These provisions have provided ample protection for more than 20 years and we see no need of any change in the public interest.

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