Reimbursements to the contractor's general funds for losses If after the above reimbursements and repayments the bal- NOTE.-Sec. 607 (f) exempts earnings, except those withdrawn and paid into contractor's general funds or distributed as dividends or bonuses per Sec. 607 (c) (4), from all Federal taxes. 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. TITLE VII. PRIVATE CHARTER OPERATION 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: "SEC. 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 discre tion, 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 from 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 underlined 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 United 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. TITLE VIII. CONTRACT PROVISIONS 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." Continue 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 by which the strictest scrutiny and the broadest authority is given to the Maritime Commission 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 are 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. |