Mr. O'LEARY. Yes; a schedule of sailings, the same as they did for the North Atlantic routes?

Mr. HALLORAN. Yes; the schedule provided in the contract is practically the schedule we now maintain.

Mr. SIROVICH. Do you have to compete with tramp lines, too?. Mr. HALLORAN. Oh, yes; we are competing with all lines of all flags.

Mr. SIROVICH. What are the main lines of European traffic that compete with you, the American Republics Line, or with the Munson Line in trade to South America?

Mr. HALLORAN. The Prince Line, Moore & McCormack, Garcia & Diaz

Mr. SIROVICH. I mean in terms of nationalities?

Mr. HALLORAN. British and Norwegian, principally.

Mr. O'LEARY. What lines that are subsidized by the Government at present are in competition with you?

Mr. HALLORAN. The only line in that trade subsidized by the Government is the Munson Line. I do not think we are in competition with them.

Mr. O'LEARY. Have you any idea of that deficit? That is a lump sum paid per voyage on those boats, is it not?

Mr. HALLORAN. Those boats receive an annual mail pay approximately of $900,000.

Mr. O'LEARY. Per boat?

Mr. HALLORAN. And they make 26 sailings.

The CHAIRMAN. That is the total subsidy?

Mr. HALLORAN. That is the total subsidy, $900,000 a year, and they make 26 sailings.

Mr. O'LEARY. That would be about $38,000 a trip, or something of that kind?

Mr. HALLORAN. Yes, sir.

Mr. O'LEARY. At what deficit are you operating on your boats, per trip?

Mr. HALLORAN. We make 36 trips per year, and I suppose we would run $225,000.

Mr. O'LEARY. You make 36 trips and have $225,000 deficit; the Munson Line makes 26 trips, at a cost to the Government of $900,000; is that right?

Mr. HALLORAN. I think that is right; yes, sir.

Mr. SIROVICH. Is the tonnage of their ships the same as yours? Mr. HALLORAN. Oh, no; they are an altogether different type. They operate passenger ships of the 525-foot class, and they are quite a different type of vessel from ours.

Mr. SIROVICH. Are they passenger ships or cargo ships, or combi

nation?

Mr. HALLORAN. Their ship is a combination passenger and cargo; our ship is purely cargo.

Mr. SIROVICH. In other words, your line does practically what the America-France Line does-carries cargo?

Mr. HALLORAN. Just about; yes.

Mr. OLIVER. Is your company an independently owned and operated company?

Mr. HALLORAN. Yes, sir.

Mr. WELCH. Would your company be in any better financial condition after the expiration of 2 years?

Mr. HALLORAN. No; I would not say it would be in any better financial condition after the expiration of 2 years. We are in a good financial condition right now.

Mr. O'LEARY. But you would be, in the event the policies of the Maritime Commission were promulgated, to the extent of their subsidy and operating differentials?

Mr. HALLORAN. Oh, yes.

The CHAIRMAN. You would not be in any better financial condition, but you would be in a better position to bid on the boats and know what you are going to do?

Mr. HALLORAN. We have developed this line to where it is really a factor in this trade, and we want to remain in it.

Mr. SIROVICH. If you were successful, as you should be, in obtaining the American Republics Line and the trade route was given to you, is it the policy of your organization, since you have ships that seem to be old and obsolescent, ultimately to build new ships and develop a kind of ship that could compete against the European ships?

Mr. HALLORAN. Yes, sir.

Mr. SIROVICH. With better speed, fuel consumption, and so on? Mr. HALLORAN. It certainly would be; yes, sir.

Mr. O'LEARY. Mr. Halloran, you are somewhat in the same position as the other operators on the North American routes; you own the organization and the Maritime Commission owns the boats. Is that right?

Mr. HALLORAN. Exactly, sir. We have our own office in Buenos Aires.

Mr. O'LEARY. Now assume you may be unsuccessful in your bid, would you go out of business or continue to operate under some foreign flag until such time as the Maritime Commission clarified its policies?

Mr. HALLORAN. I would say we would remain in the trade.

Mr. Chairman, there is one question I think ought to be mentioned, that has not been brought out here; that is, the cost of transferring from the present contract into the new one. This charterparty agreement is a very exacting one. It specifies that there shall be no warranty as to the condition of these ships, when you take them over, and in referring to that I am amplifying what I said when I expressed the view that it could not be done within the time of a month. With a contract of this kind, with no warranty implied as to the condition of the ships, it would mean a most minute survey and possibly repair work on these ships, in order for any company to take them over and guarantee their condition for a year. That is going to be an expensive proposition.

Mr. O'LEARY. Is there any provision in the contract for betterments?

Mr. HALLORAN. No.

Mr. O'LEARY. At the expiration of that year's time?

Mr. HALLORAN. No, sir.

Mr. O'LEARY. In other words, the Maritime Commission wants you to take the boats as is, maintain them in a seaworthy condition, make

the various betterments on them, and then give you no credit whatever at the expiration of the year?

Mr. HALLORAN. No; it is not exactly that. They agree to put these ships into a condition where they shall be tight, staunch, strong, and sufficiently well tackled, appareled, furnished, and equipped, and shall be in every respect seaworthy and in good running order and condition so far as due diligence can make them to. That is quite a sizable contract to take on with ships that are 17 to 18 years old.

Mr. O'LEARY. I was just going to ask the age of those ships. Mr. HALLORAN. The average age, I would say, is 18 years. With the present operators, if these ships were left with the present operators, I suppose that 75 percent of their cost would be saved; because, to speak in terms that are, perhaps, more easily understood, if you had 20 houses under lease and you suddenly dumped out the 20 tenants and re-leased them to 20 new ones, you can just imagine the repair work, the cleaning and changing you would have to do on those houses; whereas, if the 20 old tenants remained over the year, they would probably get along with one-quarter of what you would have to do for the new tenants.

Mr. O'LEARY. In that contract you are holding in your hand, is a performance bond necessary to carry out the terms and conditions of that contract?

Mr. HALLORAN. I think so; yes, sir. specified.

There is a performance bond

Mr. O'LEARY. Do you know just the amount of that performance bond?

Mr. HALLORAN. I think in our case it is $100,000.

Mr. O'LEARY. One hundred thousand dollars?

Mr. HALLORAN. Yes, sir.

Mr. O'LEARY. And it has been demonstrated by the deficit it would take $225,000 per year?

Mr. HALLORAN. Yes.

Mr. O'LEARY. Well I will cross-examine the Maritime Commission on that point.

The CHAIRMAN. Are there any further questions, gentlemen? If not, I will call Mr. Taylor, of the Southgate Nelson Corporation.

STATEMENT OF W. F. TAYLOR, PRESIDENT, SOUTHGATE NELSON CORPORATION, NORFOLK, VA.

Mr. TAYLOR. Mr. Chairman and gentlemen of the committee: I am W. F. Taylor, president of the Southgate Nelson Corporation, of Norfolk, Va. We are managing operators of the American Hampton Roads Yankee Line and of the Oriole Line, for account of the United States Maritime Commission.

The CHAIRMAN. You are the one that has the Hampton Roads Line, Oriole, and Yankee Lines; is that right?

Mr. TAYLOR. Yes, sir. We are managing operators of the Hampton Roads Yankee Line, which is a combination service represented by some five ships serving both those trades, and of the Oriole Line's four ships serving the west coast of the United Kingdom.

When we received the letter from our principals, the United States Maritime Commission, under date of January 6, 1937, that in pur

suance of the provisions of section 704 of the Merchant Marine Act of 1936, all operations under our agreement must be discontinued prior to June 29, 1937, and that the funds of the Commission could not be available for the payment of expenses incurred after that date, it threw us into some considerable consternation. And, as the news came out through the press dispatches at the same time, it also threw our communities-our home communities and others that are served by those lines-into considerable consternation. For it meant. that, in order to come within that arbitrary date limit for the termination of all of our operations, our last sailing would be, on the American Hampton Roads Yankee Line, April 17, and on the Oriole Line, April 28. We were at that time dealing with current business of these lines in the matter of future bookings of freight, which extended even then beyond the termination date we would be required to meet under those conditions.

The reference in the letter to the provisions of section 704 and the fact that we received about the same time a copy of the first report of the present United States Maritime Commission, signed by the present three members, dated January 4, led us to believe that the unfortunate condition of the abrupt termination of these lines, which had been operating for some 15 years, or more, was due entirely to the fact, unfortunately, that Congress had placed an arbitrary restriction on the exercise of the Maritime Commission's discretion by providing, in section 704, that the services must be terminated by June 29.

The first report-and I imagine you gentlemen are all familiar with it-of the United States Maritime Commission to Congress, dated February 4, reads, if I may quote with reference to the act:

The act stipulates that the Commission shall at the beginning of each regular session make a report to Congress which shall include (1) results of its investigations; (2) a summary of its transactions; (3) recommendations for legislation (4) a statement of all receipts and expenditures.

With respect to investigations of the Commission, it has been obviously impossible for the Commission, in the short time it has been organized, to do anything more than initiate these investigations. However, the progress that has been made on them is covered in the accompanying report.

The same situation is substantially true with reference to the recommendations for new legislation. The Commission feels that it has not had sufficient experience as yet with the act in its present form to justify the Commission in making recommendations at the beginning of this session of Congress for legislation. The Commission, however, believes that before the present session of the Congress is adjourned, it may be found advisable to make recommendations for legislation which will clarify the present act in divers particulars and strengthen the means now provided in it to accomplish its purposes.

In the portion of this United States Maritime Commission's report to Congress dealing with the subject more directly before us here, there is this statement:

With the object of determining essential trade routes for the Nation's waterborne commerce and to effect a consolidation for elimination of such routes over which American ships are now operating at a loss, and to extend and expand the routes where traffic justifies it, the Commission is making a survey of the various foreign services in which American-flag ships are now engaged. Closely related to this survey is the study which the Commission is making of the operation of its own lines through managing agents. Those operations, apparently, are far from satisfactory. The Commission is required, under the act to end this method of operation within 1 year after the passage of the act.

That coincident with the advice on practically the same date from the Commission, stating that this section 704 and the mandate of Congress required them to discontinue these sailings, I think was reasonable grounds to cause us to believe that the mistake was on the part of Congress, if you please, in limiting the discretion of the Commission to the extent that it had. We realized, too, that the present members of the Commission were appointed, I believe, only on October 28 of last year, and that their time and attention had been engrossed very largely by labor matters and troubles that were then pending, and it did not seem conceivable to us that the Commission could possibly have had an opportunity, with all deference to them, to have studied the situation out so as to make a move of such a drastic nature as this and of such far-reaching effect unless their hand had been forced by a condition beyond their control, which condition, as we see it, is this time limit provided in section 704.

Mr. SIROVICH. Do you think it is fair for a Maritime Commission of three to determine the policy when Congress had decreed there should be a commission of five, and they are temporary appointments at that? Do not you think that we should have a full commission in order to formulate a far-reaching program that embraces the development of the American merchant marine, that we have fought for in Congress and out, and determining there should be five members on the Commission and every part of the country should be considered in those appointments, and now we find three men appointed only temporarily to formulate the policy which five were empowered to do?

Mr. TAYLOR. It seems to us, Doctor, that the three members comprising the present appointees would naturally prefer to have their number brought up to the full membership provided for in the act itself, so as to share responsibility amongst the five who were intended to form the Commission, and particularly that Congress itself, which seemed to set certain conditions precedent in the act of 1936, would themselves like to see that Commission appointed in full and given a reasonable opportunity to make these investigations and studies which, according to the wording of the Act and a reading of it, as we see it, was contemplated before this time limit would have been reached.

Mr. SIROVICH. Can you tell me which one of the three present members of the Maritime Commission is an expert on merchant marine work and has the experience that embraces the heartaches and headaches which you people represent?

Mr. TAYLOR. I am hardly qualified to pass upon the qualifications of the present appointees on the Maritime Commission.

Mr. SIROVICH. I would like to know. I do not know who the three men are. Would you name the three present members of the Maritime Commission?

Mr. TAYLOR. Could I name them?

Mr. SIROVICH. Yes.

Mr. TAYLOR. Yes, sir; I can read from the report. H. A. Wiley, rear admiral, United States Navy, retired.