Mr. SCHELL. Yes.

Mr. OLIVER. Did you say that was compared with 50 days at the present time?

Mr. SCHELL. No; it compares with 70 days at the present time that the American-Hampton Roads Yankee Line makes and 50 days for the America-France Line.

Mr. OLIVER. I see.

Mr. SCHELL. You see, there are shorter voyages and they make fewer ports on the other side.

Mr. OLIVER. So, as a matter of fact, you do not consider this proposed schedule you have submitted here will be of any detriment to these lines in going in competition with their foreign-ship competitors or other American lines traversing, perhaps, the same routes?

Mr. SCHELL. We believe-and this is the result of the conferences we have had amongst our own people who are very familiar with that trade, both in traffic accounting and operation-that this consolidated service will provide an adequate service for the foreign trade that is being served by those lines. Whether there will be any detriment— it might improve; as a matter of fact, it might improve the service.

Mr. OLIVER. The thing that bothers me is whether or not under this proposed merger in routings, and so forth, the organization or whoever is to operate these lines will be able to go out in competition and get the freight business that justifies it.

Mr. SCHELL. We believe they will, under the consolidated service. Mr. SIROVICH. Suppose, for the sake of argument, you fuse the America-France Line and the Hampton Roads together, and those men who represent either the organization of the America-France Line or the Hampton Roads Line lose their contracts because they are scared that some other bidder will come in, no one knows from where, and the Maritime Commission approved the bids of the others and deprived these people of their line, is not there a possibility for the organization that they have in New York and in Hampton Roads to lease tramp steamers from Norway and Sweden and, having the organization they have, as a matter of protection of their investment, to use these steamers and make the same routes, competing against this consolidated line you have spoken of, make better time and undercut them in the prices, and ruin the consolidation you have agreed to?

Mr. SCHELL. I will answer it this way, Mr. Sirovich: These present managing agents will be given every opportunity in the world to bid. The Commission cannot accept the bid of any so-called fly-by-night organization that is unknown. The law requires that he must show sufficient financial resources, adequate ability and capacity to maintain the service, and section 809 requires the Commission to make the man show that he has the support of the domestic community. Now, if our present managing agents do not bid, of course, that is a different thing; but they have the opportunity to bid and then the Commission will have the alternative between some so-called fly-bynight, inexperienced person, and our own managing agents, who are thoroughly familiar with the trade. Now the law says that they must accept

Mr. SIROVICH. And a great agency operating some great North Atlantic steamship company, that has all of the qualifications enumerated in the law, can bid.

Mr. SCHELL. That is true; the bids are open to the public.

Mr. SIROVICH. Therefore the agency that has all of the money, the influence and the prestige of their superior line can develop a local kind of support through propaganda and acquire this service for the purpose of destroying it and getting a monopoly of their own enlarged.

Mr. SCHELL. I believe the law will obligate the Commission to require positive proof of genuine domestic support and in our instructions to bidders we require them to submit this statement. In answer to Congressman O'Leary's question whether or not we pointed out the law, yesterday, I now have before me the instructions to bidders, and this is under information for bidders:

All bids will be awarded in accordance with the provisions of the Merchant Marine Act, 1936. The attention of all bidders is directed to the provisions of titles VII and VIII of that act.

Each bidder is required to submit with his bid a statement enclosing the name of all persons having any pecuniary interest, direct or indirect, in the bidder, and the names of all stockholders owning in excess of 10 percent of the capital stock of the bidder, and a statement as to his practical experience in the operation of vessels and a statement showing that he has the support, financial and otherwise, of the domestic communities primarily interested in the American Republics Line. The United States Maritime Commission reserves the right to verify this information or to request additional information if it deems necessary.

That happens to be the invitation for bids on the American Republics Line.

Mr. SIROVICH. Do you think that is sufficient to protect the present existing lines by giving them seniority rights and preferential rights? Mr. SCHELL. Yes, sir; I do; and the action of the Commission in making the award will do that. All this does is to make sure that we get adequate information and as to the difference between a large corporation with enormous financial resources, the law does not require as to the enormity of the amount of resources; it says it must have adequate resources. So the criterion will not be an enormous one against a smaller one, if the smaller one is adequate. That is my approach to the problem. But, as I say, that is entirely a matter for the Commission to decide when the bids are in and the factual data is before them.

Mr. CULKIN. I did not hear you answer Dr. Sirovich's question, which I think is very interesting. What he asked you was whether or not these present operators of these lines which may be merged or sunk so far as the American lines are concerned-whether or not they might not go under foreign flags and successfully get the business?

Mr. SCHELL. I answered that question of Dr. Sirovich by saying I could not tell what the present managing agents would do, but I followed by saying that the bids were open to them to bid.

Mr. CULKIN. That does not answer his question.

Mr. SCHELL. I do not know.

Mr. CULKIN. The question is whether or not, in view of world conditions and the lower expense of operating these foreign ships, that would afford formidable competition to the present program under this Merchant Marine Act? That was your point, was it not, Doctor?

Mr. SIROVICH. My point was exactly what the Judge stated, with this material difference: That the foreign-operated line, like the Norwegian or Swedish, from the testimony adduced before our committee, does not have to live up to the standards of American seamanship that we have; it does not pay American wages; it does not purchase from American organizations; and is not compelled to live up to the rules and regulations that we provide for our subsidized American lines; therefore they can operate as tramp steamers, going anywhere they please, and underbidding, and having their organization intact. It is my humble opinion, with such circumstances to contend with, that foreign steamship lines leased to American organizations like the America-France Line and the Hampton Roads Line, with their organizations intact, would absolutely ruin the consolidated group you are trying to bring about.

Mr. SCHELL. Just hypothetically.

Mr. SIROVICH. I am speaking hypothetically.

Mr. SCHELL. Let us think the thing through now from a practical operating standpoint. One of the main things in establishing a line is regularity of service, and that gives the shipper the knowledge that on a certain date there will be a vessel there ready to lift his cargo. Now there are conferences established in the trans-Atlantic trade. If these foreign-flag ships run as tramps, they would have the disadvantage of not giving regular and frequent and sure service to the shippers; whereas the American consolidated line will give

that.

Mr. SIROVICH. But they do not have to run as tramp lines; they can run as regular lines along the same channel.

Mr. SCHELL. That eliminates the operation as a tramp. They have that disadvantage as a tramp.

If they are going to run as regular lines in foreign-flag services and continue to compete with regular services such as our Americanflag services, the American operator or American charterer, if he expects to get an operating differential, will only be confronted with those foreign costs. The Government would absorb the difference.

Mr. SIROVICH. Therefore, you are adding on this $500,000 you expected to save by not giving the lines to these people; then you are operating the other way and paying the operating differential.

Mr. SCHELL. The fact undoubtedly is that the more operating costs we will have, the more the operating-differential subsidy will be and the more operating subsidy we will have to pay.

Mr. SIROVICH. Exactly. I am glad you agree with my contention that it would cost more than if we retained the American Hampton Roads Line and the America-France Line and operated them independently.

Mr. CULKIN. Assuming this contingency the doctor foresees would come about, it would not be possible for some of these lines to have, as was testified here during the other hearings, four floors of vice presidents, or anything of that kind? They would have to cut down on the overhead?

Mr. SCHELL. That is a question I believe the Martime Commission must study during the current operations in determining the operating differential subsidy, because the law says, and it is quite logical,

that there should be efficient operation. Section 606 says that the payments shall be adjusted every year, so the contract for the operat ing differential subsidy can be adjusted every year, so that if the Commission finds that the contractor or subsidized operator is maintaining four floors of vice presidents, that would not ordinarily be efficient operation and the Commission can say, "Here, boys, you have too much overhead administrative expense. You are pouring money down a rat hole.”

Mr. CULKIN. It is very gratifying to hear the witness state that. Mr. WELCH. Will the law permit a monopoly by the large operators, regardless of the fact that in so doing it will result in an additional financial loss to the Government?

Mr. SCHELL, I think, Congressman Welch, that is largely a matter of administration in the control of those who administer the law. Monopolies are things that are hard to define in some instances, because just because a thing is large there may be something just as large or just as strong in the same activity. But I think those monopolies under this control can be avoided through administrative policies in the administration of the law. I am not prepared to tell you now

Mr. WELCH. Does the law permit the Commission to create a monopoly?

Mr. SCHELL. Well, the law specifically says, in section 809, I think it is, that the services shall be equitably distributed along the coasts of the United States. It also prevents the use of affilates, subsidaries, and associates in the operation of these subsidized lines. So my best judgment or my best belief is that the matter is largely one of administrative control.

The CHAIRMAN. Are there any further questions? If not, you may stand aside.

STATEMENT OF H. M. THOMPSON, EXECUTIVE MANAGER, HAMPTON ROADS MARITIME EXCHANGE, NORFOLK, VA.

The CHAIRMAN. State your name.

Mr. THOMPSON. H. M. Thompson, executive manager, Hampton Roads Maritime Exchange, Norfolk, Va,

I am here, Mr. Chairman and members of the committee, in behalf of the Hampton Roads Maritime Exchange by authority of its board of directors who are interested in this matter before you today.

The CHAIRMAN. Tell us what the Hampton Roads Maritime Exchange is.

Mr. THOMPSON. The Hampton Roads Maritime Exchange is an organization comprised of people who are interested in the development of the Hampton Roads ports of Virginia, Norfolk, Portsmouth, and Newport News, and supported by public subscription by people and civic organizations interested in the development work and interested particularly in the welfare of the ports, composed primarily of shipping people.

Hampton Roads, of course, is primarily a port, and the business of Hampton Roads centers around its port. Of course we naturally have a great interest in anything which affects the shipping situa

tion. We consider the operation of the steamship line by interests which are domesticated in and around Hampton Roads is of material importance to the development of the port, likewise, because they naturally enjoy the confidence of the community, and it aids materially in developing good will, and their interest is to protect the commerce of the port.

The operations of these lines to Hampton Roads, particularly that of the American Hampton Roads-Yankee and Oriole Lines have been considered highly successful, and Hampton Roads has always supplied a large amount of the cargoes to American-flag vessels-not only those vessels which are domesticated in Virginia, but those which are operated there from other parts and serve Virginia ports, which includes the America-France Line under discussion here today, the American Pioneer Line, and the Baltimore Mail Line, which may or may not be under consideration at this time.

We naturally do not wish to see anything happen to any of these lines which would in any way disturb or disrupt their services. We believe it is a fact that any discussion or consideration, even, of a rearrangement of services is a detriment to those services. The competing lines immediately take advantage of the fact that there may be some disruption of the service and bear down in their solicitation efforts and attempt to get business away from the lines which have been years in developing it.

With respect to this particular bill of Congressman O'Leary, which proposes to extend the time of the transfer of the operation of these vessels from the 1935 operating agreement to the new charter basis, we feel an additional amount of time is necessary and desirable in order that the studies which are being made, or which should be made, can be completed. And we feel, when a change is made, that it should be on the basis of a final determination of what is in the best interests of the American merchant marine. To kick the American merchant marine around as a football from year to year is not conducive to the best development of the American merchant marine, in our opinion.

That is all I have to say, sir.

The CHAIRMAN. You are in favor of an extension?

Mr. THOMPSON. Very strongly so.

The CHAIRMAN. And believe it is to the best interests of the ports and of the public?

Mr. THOMPSON. That is my opinion and the considered opinion of the board of directors of the organization which I represent, sir.

Mr. HART. What is your position with reference to the proposed consolidation of the Hampton Roads and America-France Lines, Mr. Thompson? Do you think the matter ought to remain in status quo? Mr. THOMPSON. That is a matter which probably you gentlemen may know more about than I do; but my personal belief with respect to such matters as that is that competition makes business, and you will not have the volume of business with the consolidated lines that you have with the two lines. Two sets of operations to my mind, mean a greater amount of business, and the mere little bit of saving which you may effect on the first year's or the first 2 or 3 years operation would be offset in years to come by the loss in volume of business which you might have if you put this thing on a firm basis and give men a chance to go out and develop business who