ocean rates adjusted to the law of supply and demand, enable American exporters to sell their goods in world markets in competition with unrestrained foreign producers. The subsidy provisions of the bill are designed to place American shipowners on a parity with foreign shipowners in respect of cost of construction and operation. It is not necessary to superimpose upon such parity the destruction of tramp ships and independent nonconference lines, whose elimination would benefit primarily foreign conference, lines. As foreign conference lines for the most part carry goods from their own countries into world markets, they could well afford to have American exporters strait-jacketed by monopoly and high rates, and reap the benefit by carrying the cargoes from their own countries to foreign markets. If, for instance, cotton from the Gulf could not be carried at competitive rate levels, Brazilian cotton producers would continue to enjoy ocean rates at competitive levels and underbid American cotton producers. Japanese textiles would enjoy lower transportation rates than American textiles. British shipowners could well afford to have high or inflexible rates from New York to South Africa so that British manufacturers could undersell American manufacturers in the markets of South Africa, and British ships would benefit at the expense of American. Section 14 of the Shipping Act, 1916, forbids in positive terms the granting of deferred rebates, which is made a misdemeanor punishable by a fine of not more than $25,000. The proposed section 1006 would authorize the Authority "to permit conference lines to grant deferred rebates" and thus violate with impunity the mandatory provisions of the Shipping Act. Independent lines and tramp ships, not members of conferences, would be still prohibited from granting deferred rebates. This tremendously powerful and unfair competitive weapon in the hands of the predominantly foreign conference lines is clearly designed to eliminate tramp ship and independent competition and to establish an absolute monopoly, to the detriment of American exporters, to whom the difference of a fraction of a cent in ocean freight rates will often mean the loss of a sale. American exporters would suffer by increased rates, decreased profits and crippled business. Moreover, the proposed section is clearly unconstitutional because it violates the guaranty of equal protection of the law. SECTION 1009 Section 1009 likewise has no relation to the system of subsidies to American shipowners which is the primary purpose of the bill. It is another "joker” designed to establish conference monopoly, which would result in benefit to predominantly foreign lines at the expense of American producers and shippers. This section proposes the "appropriation of unlimited public funds" to finance subsidized shipowners to meet "any unfair competition or practice by any foreign vessels or vessel, together with the power and authority to use said money to aid and support a 'fighting ship' as defined in paragraph 2, section 14 of the Shipping Act of 1916, and to use said money in the aid and support of such ship." It fails to set up any standard or definition of what constitutes "unfair competition or practice" which taxpayers' money is to be spent in meeting. It appropriates public funds for the express object of violating the law. Section 14 of the Shipping Act, 1916, prohibits not only the giving of deferred rebates, but the use of fighting ships, and makes their use a misdemeanor punishable by a fine of not over $25,000. In specific terms it "forbids" any common carrier by water in foreign trade to: "Use a fighting ship either separately or in conjunction with any other carrier through agreement or otherwise. The term 'fighting ship' in this act means a vessel used in a particular trade by a carrier or group of carriers for the purpose of excluding, preventing, or reducing competition by driving another carrier out of said trade.' Not only is the use of a fighting ship unequivocally condemned and made a crime by the Shipping Act, 1916, but the use of fighting ships and deferred rebates was excoriated and condemned under the anti-trust acts by the Supreme Court If the United States in Thomsen v. Cayser (243 U. S. 66). Yet section 1009 of the bill proposes not only to legalize the use of fighting ships to oppress and destroy competitors who are serving the needs of American shippers, but it would finance the use of fighting ships out of public funds! Independent operators and tramp ships would, of course, still be forbidden to use fighting ships themselves, under section 14 of the Shipping Act, 1916. Indeed, the use of fighting ships is distinctly a weapon of monopoly and for that reason was condemned by the Supreme Court. The proposed section is likewise unconstitutional because it permits and aids a favored private party to break the law while his competitor is bound by it, in violation of the constitutional guaranty of equal protection of the laws. CONCLUSION The subsidy provisions of the bill seem sound and in accordance with the recommendation of the President, although their successful operation would depend to a peculiar extent upon the wisdom, judgment and disinterestedness of the individuals who would administer them. But the additional sections which have been discussed above have nothing whatever to do with the principle of a ship subsidy for equalizing the costs of constructing and operating domestic vessels as compared with foreign vessels. These additional sections confuse legislative, judicial and administrative functions. They evidence rank favoritism to monopoly. Instead of stabilizing conditions in foreign trade for the benefit of American producers, shippers and carriers, they would foster vicious and unfair competition. They would result in the breakdown of fair competition, the elimination of independents and tramp ships and the consequent destruction of the "balance wheel" of rate levels flexibly adjusted to the needs of American exporters. They would establish an absolute monopoly in every ocean service of our import and export trade in the hands of the powerful shipping combines which are predominantly foreign; and they would have their fruits in international resentment and ill will and consequent retaliation by the nations whose tramp shipping would be harmed and whose treaty rights would be violated. APRIL 29, 1935. JOHN TILNEY CARPENTER, New York, N. Y. ROCKWOOD & Co., Brooklyn, N. Y., April 27, 1935. Re: Opposition to provisions of proposed Ship Subsidy Act, S. 2582, H. R. 7521. Hon. ROYAL S. COPELAND, Chairman Senate Committee on Commerce, Hon. SCHUYLER OTIS BLAND, Washington, D. C. Chairman House Committee on Merchant Marine and Fisheries, Washington, D. C. GENTLEMEN: This company is one of the largest manufacturers of chocolate products in the United States. One of its main raw materials is cocoa beans, which are imported into America from the following countries: Gold Coast of Africa, Brazil, Nigeria, Ivory Coast, Dominican Republic, Cameroon, Ecuador, Venezuela, Trinidad, San Thome, Togo, Grenada, and Ceylon. Records show that the United States imports approximately twice as much cocoa beans as Germany, and almost half of the world's output. Great quantities of sugar are also imported into America, another raw material used in the production of chocolate products and candy or confectionery. Upon making a digest of the proposed Ship Subsidy Act, S. 2582, H. R. 7521, it is found that there is included in the bill under title VII, Regulatory Powers, all of the objectionable provisions for regulation of overseas commerce which were contained in the Eastman bill, S. 1632, upon which hearings were held, and on March 19, in opposition, the chairman of the ocean transportation committee, National Industrial Traffic League, made a statement before the Senate Committee on Interstate Commerce. We maintain the same position of the league in connection with the proposed Ship Subsidy Act, S. 2582, herein referred to. In view of our past experiences in dealing with rate conferences monopoly covering rates for our products manufactured from cocoa beans, we believe great harm will be done and competition crushed if this proposed bill becomes a law. These conferences are combination of ocean carriers whose members fix rates and arrange sailings among themselves and otherwise act in concert in order to control competition. These lines, as is well known, are predominantly foreign in practically all of the important ocean routes in which American export trade is moved to world markets. In many instances in the movement of great quantities of cocoa beans and other commodities imported into America, the only effective barrier to conference monopoly is the competition of the tramp ships and independent lines who, by their ability and willingness to assist shippers to obtain favorable ocean rates adjusted to the law of supply and demand, enable American exporters to sell their goods in world markets in competition with unrestrained foreign producers. We respectfully request our objection to this bill to be made a part of your records on date of hearing. Very truly yours, WILLIAM R. MOORE, Traffic Manager. ANDERSON, CLayton & Co., Houston, Tex., April 26, 1935. Hon. SCHUYLER OTIS BLAND, DEAR MR. BLAND: On studying H. R. 7521 more carefully, I would like to call attention to section 1006, permitting deferred rebates, and 1009, subsidizing and supporting "fighting ships. Both of these practices are specifically unlawful today, for good reason, and they are among the main unfair practices now complained of by some shippers and some steamship companies. Why should this law having to do with direct subsidies for protection of the American merchant marine, provide for legalizing and encouraging what have always been considered unfair practices and very detrimental to the shipping trade? Certainly, President Roosevelt, in his shipping-subsidy message of March 4, 1935, did not endorse the legalizing of such practices as these. We respectfully urge you to restrict this legislation to subsidizing the American merchant marine by direct appropriation, instead of mail contracts, and to eliminate from your bill such "jokers" as sections 701, 1006, and 1009. Yours very truly, S. M. McASHAN, Jr. MCKAY, WITHERS & RAMSEY, Hon. S. O. BLAND, M. C., House Office Building, Washington, D. C. MY DEAR MR. BLAND: I thank you very much for:your courtesy in sending me a copy of H. R. 7521, being a bill introduced by the House Committee on Merchang Marine and Fisheries, in reference to the American Merchant marine. Naturally I am very much interested in the subject of this legislation, as I am counsel for three of the largest shipping companies engaged at present in operating the American merchant marine. However, I have not had very close contact with the practical operating of the shipping business, my relations with the companies being entirely that of counsel in reference to legal matters. It seems to me that the bill as drawn is quite comprehensive, and if it can be enacted into law, will probably remove the important subject of the American merchant marine, and the relation of the Government to it, from much of the disturbing controversy that has been recently going on in the different departments of the Government having to do with the subject. Permit me to suggest, however, that it would be wise, insofar as it is practicable, to eliminate from the bill arbitrary power in the officials of any of the executive departments. Recent controversies that have arisen concerning the administration of the Merchant Marine Act of 1928 demonstrate quite clearly that with the changing of the personnel of the departments under succeeding administrations, and the very natural differences of opinion that become vocal as a result thereof, the shipping companies are kept in a state of uncertainty, and are seriously handicapped in their efforts to carry out any definite comprehensive program. I realize that it will not be practicable for Congress to cover by legislation all of the minute details of the operation of the American merchant marine under Government aid, but if a formula can be devised that will be fair and that will so far as practicable assure some preference to those companies that have already established themselves in our foreign trade, and have heavy investments in it, and so as to insure that there will be a reasonable equitable distribution of opportunity to engage in the shipping business among the different sectors of our seacoast, and that will, so far as practicable, avoid the possibility of anything in the nature of favoritism, it will undoubtedly strengthen our maritime program, and go far toward accomplishing the purpose the Government has in mind. I note that the bill does not specifically require an equitable distribution of the Government aid to services out of Atlantic, Gulf, and Pacific ports as is done in the Merchant Marine Act of 1928. I am primarily interested in shipping out of the Gulf, and I am sure it would be most unfortunate if it should happen, in the event the bill is enacted, that there is a possibility of discrimination that would favor one section over another. I also would like to suggest that section 511 of the proposed act may, unless it is modified, be the cause of controversy and possible abuse. Of course the purpose of the Government in enacting this legislation is to aid the merchant marine, and I do not understand that aid to private contractors not engaged in actual shipping operations is contemplated. It has been proven by experience that steamship companies can operate their own stevedoring, terminal, ship-repairing, and towboat service much more efficiently and economically than they can get the service performed by private contract, and I can see no ethical or economic objection to steamship companies being permitted to perform these services for themselves, because necessarily they will employ the same men and use the same materials as would be required by private contractors, and the only persons who would in any wise be affected would be the private contractors. I agree that these operations, if conducted by a subsidized ship line, should be conducted by a subsidiary wholly owned by the shipping company, and that all profits realized from services to subsidized vessels should go into the treasury of the shipping company and be taken into account by the Government in fixing the operating subsidy required by the shipping company. By doing this, the requirements of the shipping company for Government aid would undoubtedly be greatly lessened. I would, of course, be very much opposed to any program that would permit the owners of a subsidized ship line to privately profit from incidental services rendered to the subsidized vessels. The only objection I have ever heard to the operation of these subsidiaries by the snip lines has come from the contractors who are deprived of the business, but even they are forced to admit that the shipping companies can do their own work more economically and efficiently than they can have it done by private contract. I am submitting these suggestions for your consideration, and if I can be of any service to you in further discussing the subject, or in securing and submitting data, I hope you will not hesitate to call upon me. Yours very sincerely, K. I. MCKAY. AMERICAN TRADING CO., INC., Re Copeland bill, S. 2582, and Bland bill, H. R. 7521. House of Representatives, Washington, D. C. DEAR SIR: now before Congress on shipping subsidies and also dealing with regulation of traffic in foreign commerce, confers upon a proposed Maritime Authority the power "to prescribe minimum and maximum rates, fares and charges, rules and practices, which may be charged and enforced by vessels documented under the laws of the United States or foreign vessels in the foreign trade of the United States." This provision, it seems to us, will result in fixing and freezing minimum freight rates, thus eliminating the competition of independent steamship lines. It will accomplish for the Conference lines what they endeavored unsuccessfully to obtain through the proposed Shipping Code and later through the Eastman bill, as originally introduced, but which was later discarded for obvious reasons. As exporters to the Far East, our competition is not simply from the United States but from Europe and often it is possible to meet such European competition by special freight rates, named solely to meet such instances. If our minimum freight rates are fixed, the European competitor knows just what exactly he has to meet and European steamship companies will undoubtedly rise to the occasion. Even if such minimum rates can be changed within discretion, once a tariff is published the time required to obtain such reduction will defeat its purpose. Business of this nature nearly always is consummated by cable and 135956-35——75 prompt action is essential: therefore, flexibility in the rate structure is of the essence. In our experience a conference of various steamship companies is, by its very nature, slow to act, often reluctant to act, especially on a reduction, and we need an independent steamship company who will give us the necessary reductions on a day's notice, to meet the highly competitive conditions under which we are forced to operate these days. We trust we have made clear to you the danger of the above provision in this proposed bill, and the harm it may do to the foreign commerce of the United States. In view of same, we hope you will see fit to modify same to meet the exigencies of the case. Yours respectfully. AMERICAN TRADING CO., INC., SEAMAN'S LEGISLATION WASHINGTON, D. C., May 13, 1935. Hon. S. O. BLAND, Chairman Committee on Merchant Marine and Fisheries, House Office Building, Washington, D. C. MY DEAR MR. CHAIRMAN: Concerning H. R. 7521, merchant marine bill, of which I spoke to you briefly the other day: Title VIII, section 2, page 49, provides "That in all merchant vessels of the United States of more than one hundred tons gross, excepting those navigating rivers, harbors, bays, and sounds exclusively", the three-watch system shall be enforced. The purpose of this language is obviously to not require the enforcement of the three-watch system on boats in the protected water where the boats have always been subject to the rule of the Bureau of Navigation requiring not more than 13 hours in any 24-hour day, and where the rule of 6-hour alternate watches has always been observed. The language of the bill, including as it does the word "exclusively", does not, however, carry out this purpose. Along the protected waters of the Gulf there are over 350 small operations which serve a large public and which boats never go to sea, but in their operations they navigate rivers, bayous, lakes, bays, sounds, harbors, and canals. For example, the Coast Transportation Co., of which I am a part owner, operates two small boats making at least two regular sailings per week each, between New Orleans, Mobile and Pensacola. The route traverses the New Orleans Inner Harbor Canal, Lake Pontchartrain, Lake Borgne, Mississippi Sound, Mobile Bay, the Intracoastal Canal, and Pensacola Bay. I am thoroughly familiar with these small operations. For about 2 years I have been chairman of what is known as the "Gulf Inland Waterways Conference," a body organized to deal with the National Recovery Administration when the Shipping Code was under consideration. Most of these operations are small, but in the aggregate they are of importance and value to the public in a region where there are few roads or railroads. This is particularly true of south Louisiana. Some of these boats still carry the United States mails. These boats have neither the accommodations, the need, or the revenues to support the three watch system. Its arbitrary enforcement would be destructive of the business and services of substantially all of these operations. Yet the bill as now drafted would surely lead to a demand for such enforcement by the representatives of certain of the organized waterway crafts. The original wording of the Shipping Act of 1916 confining its operation to vessels on the high seas and the Great Lakes would not cover this situation, for that act has been so construed as to confer jurisdiction to the limit of the tides. These operations are largely carried on upon tidal waters. If the word "exclusively" is regarded as essential, then the exception should apply to "those navigating rivers, bayous, harbors, lakes (other than the Great Lakes), bays, sounds, and canals." Otherwise the obvious purpose will not be carried out and many small operations will be put in immediate jeopardy. Will you not give this change of language your sympathetic consideration? Very respectfully, MISSISSIPPI VALLEY ASSOCIATION, |