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Maritime credit -The building of the new superliner Normandie was made possible by a Government construction loan of 665,000,000 francs (about $26,000,000) at 3 percent interest. Insurance of about 450,000,000 francs is carried by the Government. Provision is made for a Government loan of 30,000,000 frances per annum in the event of loss in operation.

A grant of 110,000,000 frances ($4,323,000) was awarded to cover estimated deficits for the French Line's operations.

In April a sum of 68,748,000 francs ($2,711,796) was loaned for the completion of a shipbuilding program for the Compagnie General Transatlantique.

I nterest allowance on ship construction loans.-For the year 1934, 18,500,000 franes advanced to pay interest on ship construction loans.

For the year 1935, 21,500,000 francs advanced for the same purpose.

In addition, the regular interest rate on loans is kept at 3 percent for passenger vessels and 2 percent for freighters, the Government contributing the difference between that rate and the commercial rate. For 1933, the interest contribution was 16,000,000 francs.

Mail pay.Total mail subventions for 1933 were 263,700,000 francs; for 1934, 349,600,000 francs, and proposed mail subventions for 1935, 405,650,000 francs. (Provision is made for replacing vessels 25 years old or over.)

Ship subsidies.-For vessels not eligible to receive mail pay, the Tasso bill (effective Aug. 14, 1934) provides 150,000,000 francs (about $9,985,000). Conditions of subsidy: Vessels must be of French registry, manned by French crews, and such shipping firms as receive 1,000,000 francs a year or more must use 20 percent for new construction in French shipyards within 5 years.

Subsidies for tankers.—A law of January 10, 1925, extended in 1926 for a period of 20 years, provided a subsidy for French-built tankers, less than 15 years old. From 1925 to 1928, the sum of 24,200,129 francs was expended on subsidies for tankers.

Exemption from taxes.-A law of August 1, 1928, exempts from business transaction taxes all deals concluded by shipowners with French shipyards where work on vessels is commenced within 5 years from March 1, 1928.

Preferences or restrictions.
1. Minimum transfer taxes on vessels.
2. Hull materials admitted duty free.

3. Shipowners exempt from business-turn-over taxes in transactions with French shipyards.

4. Coastal trade of France between France and Algeria, Tunis and Morocco restricted to French vessels.

5. Goods and materials transported for State account are given preference in national vessels.

6. Payments of bounty on colonial products conditioned upon transport on French vessels.

Source: Shipping and shipbuilding subsidies, United States Department of Commerce Trade Promotion Series No. 129, Supplements 1-3; Nautical Gazette, July-December 1934.


Maritime credit.-- Credit to the amount of 70,000,000 reichsmarks was granted in 1932 for the purpose of allowing shipping companies to meet maturing liabilities.

In addition credit of 7,000,000 reichsmarks was made available for the trampsteamer business.

The Government used its influence as a member of the supervisory council controlling shipping lines in the Reich in obtaining extension of private loans of 140,000,000 marks and 10,000,000 Dutch florins and the granting of a new loan of 46,000,000 marks. In addition the State Bank, in 1931, extended & loan of 20,000,000 marks.

In May 1933 a grant of 20,000,000 reichsmarks was advanced to German steamship interests for the purpose of avoiding additional laying-up of tonnage and in meeting depreciated currencies of foreign nations. The grant was for 6 months and the concession was extended for further 6-month period giving a total estimated at 40,000,000 reichsmarks for this purpose.

Ship construction subsidy. -A loan fund of 50,000,000 marks was authorized in 1925 for ship construction. In 1934 a tentative sum of 8,700,000 marks was set aside for this purpose. The shipowners receive a subsidy of one-fifth of the contract price of the new vessel and in addition, 4-percent interest on the remaining four-fifths, the latter being in the nature of a loan for a 6-year period.

Interest rate contribution.-An interest rate of only one-half of 1 percent is charged on the advances made during the period of construction. On other loans, wherein maritime credit is extended to shipping companies, 5 percent of the market interest rate is absorbed by the Government.

Ship scrapping.–A total subsidy of 12,000,000 reichsmarks was provided in 1932 for ship scrapping. No provision was made for replacement. The rate paid by the Government for each gross ton scrapped is 30 reichsmarks. Vessels must be of German registry, built prior to January 1, 1913, and must be scrapped in German shipyards.

Exemption from fiscal charges.-Foreign materials required for the construction, equipment, or repair of vessels other than pleasure craft are imported free of duty by German shipbuilders.

Preferences or restrictions.-Special railway tariffs on Government-owned railways are in effect for exports and imports through German seaports.

(Source: Shipping and Shipbuilding Subsidies, United States Department of Commerce, Trade Promotion Series No. 129, Supplements 1-3.)


Maritime credit.—Since 1928 the Maritime Credit Institute has set aside a capital of 100,000,000 lire for shipowners.

In addition the institute raised a loan of 300,000,000 lire to finance the construction of the superliners, Rex and Conte di Savoia.

The Italia Line recently borrowed 170,000,000 lire from the institute to settle its financial position.

Within the past year, the Cosulich Line was granted a loan of 30,000,000 lire from the institute.

Interest contribution on ship-construction loans.-The Government's contribution to the payment of interest on maritime loans has lately been increased from 2.2 percent to 5 percent.

Insurance.-Insurance required on the Rex and the Conte di Savoia amounted to about $28,500,000. Fifteen million dollars was assumed by the Government through the National Insurance Institute.

Mail-contract pay.Total subventions for the Italian mail services for the current year amount to 284,834,000 lire.

Navigation bounty.-A navigation bounty of 50,000,000 lire enables shipowners to be compensated for losses resulting from the fact that collected freights are lower than usual because of depreciated currencies.

Construction bounties.—The following appropriations have been granted by the Italian Government:

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Tariff bounties.-An annual appropriation of 26,000,000 lire is authorized until July 1938 for the benefit of Italian steel and metal manufacturers engaged in construction of shipbuilding machinery, boilers, etc. Approximately one-half of the materials for hulls may be admitted free of duty. Other materials for construction of ship machinery are admitted free,

Ship-scrapping subsidy.Italy also subsidizes ship scrapping. A total of 15,000,000 lire was appropriated for the years 1931-33. The rate paid by the Government for each ton scrapped is 25 lire.

Income-tax exemption.—Merchant vessels entitled to bounty provisions have the privilege of exemption from taxes earned during the first 5 years of their actual service. (Law in effect from 1926–34.)

An appropriation of 5,000,000 lire is made annually to meet the extra cost of constructing vessels with steel hulls according to special plans approved by the

Government so as to permit the installation of guns up to a maximum of 6-inch caliber for defensive purposes.

(Source: Shipping and Shipbuilding Subsidies, United States Department of Commerce, Trade Promotion Series No. 129, supplements 1-3, Fairplay, Nov. 8, 1934.)


Maritime credit.-A bill passed June 1930 provided for a loan fund of 30,000,000 yen ($14,950,000) to be advanced by the Industrial Bank of Japan for the period 1930–33. Loans are for 15-year periods with a 2-year nonredemption period. Advances are limited to two-thirds the value of the vessel and secured by a first mortgage. At least 18 vessels of an aggregate of 180,000 gross tons have been built under this plan.

Interest allowance on ship construction.--The Government contributes 2 percent of the market interest rate on loans.

Mail pay

For the year ending

Mar. 31, 1933

10, 500, 299 Mar. 31, 1934..

10, 400, 000 (Note.-Approximately 7,000,000 yen is allocated each year to one line, the Nippon Yusen Kaisha, operating between Japan and the United States.)

Ship-scrapping and construction subsidy.Provision is made under Japanese law for the scrapping of obsolete ships and replacement on a two-for-one plan. A total subsidy of 11,000,000 yen was awarded for the period 1932–34. Thirty-one new high-speed ships, aggregating 199,310 tons were built under this plan.

Exemption from fiscal charges. By Imperial order, dated December 1906, and still in effect, a rebate is provided of import duties on ship-building materials.

Preferences or restrictions.-Coastal trade is restricted to Japanese vessels. This includes Chosen Taiwan Kwantung Leased Territory and Karafuto.

Steel-bounty law in Japan.—A subsidy is paid to manufacturers of pig iron and steel which varies in amount from 3 to 6 yen per metric ton. The purpose of this law is to encourage the steel industry generally and the manufacture of shipbuilding materials particularly.

Additional subsidy (pending).-Effective October 1935, Japan plans to subsidize her shipbuilding industry by supplying 24,000,000 yen over a period of 5 years. Old ships are to be scrapped and replaced with new tonnage on a onefor-one plan.

(Source: Shipping and Shipbuilding Subsidies United States Department of Commerce Trade Promotion Series No. 129 Including Supplements 1-3.)

(All charts and illustrations are omitted in the printed record.)


(Reprinted from Marine Progress, March 1935)



The ocean mail contract system as a means of aiding in the upbuilding of the American merchant marine in foreign trade is destined to be replaced with some other form of subsidy. President Roosevelt's message is clear on this point, but neither the message nor the accompanying report contains any suggestion as to how the amount of the proposed outright subsidy should be determined in the case of any individual American flag steamship line.

No one yardstick can be used to measure the requirements for governmental subvention in all trades, for no two are exactly alike in their needs. The system by which all ships of a certain size and speed receive the same remuneration per mile traveled does not fit the situation. This, the basis of the mail contract subsidy, worked out in such a manner during good times that some lines received more than was actually necessary, while practically all found the subsidy to be inadequate when business fell off.

The mail contractssystem was adopted at a time our foreign commerce was practically at its peak. The rate of compensation, based on 1928 conditions, might have been sufficient in the years that followed, even though the depression more than cut available cargo tonnage in half, were it not for the fact that most of the contractors had assumed the financial obligations entailed by new construetion. Yet, any system of subvention, to be effective, must provide for the perpetuation of the merchant marine. This naturally involves the replacement of toagenn which is rapidly becoming obsolescent.


It is frequently said that the solution to the problem lies in placing the American ship on a parity as to capital and operating costs with its foreign flag competitor. But competition is always more or less flexible and any subsidy system must be equally flexible in order to meet changing conditions. A lack of such flexibility was one of the weak spots in the mail-contract system.

To illustrate: At the time the system was adopted a certain American line may have had one foreign flag line as its sole competitor in its particular trade, and the mail compensation was sufficient to place the American line on an equality with that competitor. But later, another foreign flag line entered the trade, and to further complicate the situation, the original competitor placed faster, more modern, more economical ships on the route. As a result, the American line's competition was practically doubled, and although it, too, had placed 2 or 3 new and faster ships in service, the increase in mail compensation by reason of the greater speed of the new vessels was not sufficient to overcome the altogether changed differential. The American line's ships cost considerably more to build than its competitor's--and the latter, by the way, had been granted a subsidy by its government, ostensibly to meet the still lower operating costs of the third entrant.

Can a subsidy method be worked out which will provide that much needed flexibility, and at the same time furnish some incentive to the American owner, so that eventually the necessity for subsidy may be reduced and perhaps removed entirely?

ACCURATE STATISTICS Today we are better equipped to devise ways and means to this end than we were in 1928. Of course, no one can predict the future, but to a certain extent it may be judged by the past, and in this we have readily accessible a wealth of facts and figures relating to foreign and domestic shipping and commerce. The Division of Statistics of the Shipping Board Bureau has been engaged for many years in the compilation of data and figures concerning ship and cargo tonnage, points of origin and destination, and other information of the greatest value in any study of the subsidy question. Indeed, it seems that the true worth of the work of the Division of Statistics has never been fully appreciated by the shipping industry or by the various Government agencies having to do with shipping and commerce. In the past, projects have been undertaken which were foredoomed to failure—and which could have been avoided had full use been made of the facilities for accurate statistics and information.

The facilities of the Division of Statistics may be employed to remove any future subsidy proposal from the realm of guesswork. In any projected subsidy plan, a fair test may be made by applying the actual figures of the past 5 years to that plan and thus determining how that plan would have worked out had it been in effect during that period. If the results would have proved unsatisfactory over the past 5 years, it is reasonable to believe they would not prove satisfactory over the next 5 for it is to be expected that recovery in our foreign trade is going to be a slow and gradual process.

THE "GREATER PORTION" In the Merchant Marine Act of 1920, and again in tne act of 1928, Congress declared it to be necessary for our national defense and for the proper growth of our foreign and domestic commerce that the United States have a merchant marine of the best equipped and most suitable types of vessels, sufficient to carry the “greater portion" of our commerce. This "greater portion" cannot be interpreted to mean anything less than 51 percent. At present, American ships are transporting about 34 percent by volume (not including Great Lakes cargoes), but this includes tanker cargoes transported for the most part by commercial carriers--vessels owned or operated by the owners of the cargo. Deducting tanker cargoes, American flag common carriers in foreign trade transported 31 percent of our overseas imports and exports during the calendar year 1933. The percentage for 1934 will show slight gain, if any, although actual tonnage will reflect an increase by reason of an improvement in our foreign trade.

Apparently, the attainment of the transportation of 51 percent of our overseas trade would solve the subsidy problem in most trades simply by eliminating the necessity for governmental subvention. In good times, 1921 to 1930, the oceanfreight bill for transporting our foreign commerce averaged $900,000,000 annuallyAmerican ships carried, roughly, one-third of the total and thereby earned one-third of the freight money, or $300,000,000 each year.

Since 1930, the total has dropped; the year 1933 shows our total water-borne foreign commerce to be 58,953,000 tons having an estimated value of $2,750,000,000, of which American ships transported 33 percent by volume and 35.4 percent by value. The total freight revenue for that year is estimated at about $412,500,000, of which American ships received one-third, or $137,500,000. instead of transporting one-third, American ships had carried one-half, the differ. ence in revenue would have been $68,750,000, or more than twice the present subsidy.

Mr. H. Gerrish Smith, president of the National Council of American Shipbuilders, estimates that a conservative figure for measuring our future tonnage requirements would be $3,500,000,000 a year as representing the value of our water-borne foreign trade, with one-tnird to be carried in American vessels. In this case, total freight revenue would probably amount to $525,000,000 annualiy; one-third to American ships would mean $175,000,000, while one-half would mean $262,500,000—a difference of $87,500,000 annually.



Obviously, if American ships could obtain an increase in income of between 68 and 87 million dollars annually, they would require little, if any, subsidyprovided, of course, that the job could be handled with the same number of ships as now constitute the American merchant fleet, or a fleet of equivalent carrying capacity. Until that point is reached, or at least until the time arrives when American ships carry a considerably greater percentage of our foreign trade than at present, Government assistance is an absolute necessity.

While foreign competition is a contributing factor, the volume of imports and exports in any particular trade provides a basis for determining the degree of subsidy necessary for the American line operating in that trade.

In most cases, outbound volume is the more important consideration, for the United States exports more than it imports and shipping services must be geared to handle maximum requirements, even though a favorable balance of trade necessitates our vessel making the home-bound voyage partly in ballast.

It must be remembered that in most trades American vessels constitute the minority; in very few instances do our shipping lines dominate the routes in which they operate. To Europe, the average American line must compete not only with vessels of the nations with which the trade is carried on, but those of other nationalities as well, operating in so-called “indirect” trade. To South American, while the competition provided by ships flying the flags of South American countries is not particularly strong, the "indirect” lines more than make up for this weakness. The same condition applies in certain trans-Pacific routes. Then, too, in a number of trades there is an overlapping of American services, resulting in competition between American lines, heightened in some cases by the solicitation and acceptance of cargo for transshipment abroad and ultimate delivery in territory served direct by other American lines. But that's another story

At present there seems to be no solution to the problem presented by the “indirect" carrier Our foreign treaties guarantee full freedom in this respect to the ships of every nation. In any subsidy plan, we are forced to include the indirect” carrier in our calculations.



RATIO AND PROPORTION It would appear that in any particular trade, the American line operating on that route should carry a percentage of the total cargo offered, in the same ratio that the cargo space provided by its ships bears to the total cargo space provided by all the ships in that trade, over any given period. By cargo space we mean

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