detriment of American shippers. The maintenance of fair competition alone calls for American flag ships of sufficient tonnage to carry a reasonable portion of our foreign commerce.

Second, in the event of a major war in which the United States is not involved, our commerce, in the absence of an adequate American merchant marine, might find itself seriously crippled because of its inability to secure bottoms for neutral peaceful foreign trade.

Third, in the event of a war in which the United States itself might be engaged, American flag ships are obviously needed not only for naval auxiliaries, but also for the maintenance of reasonable and necessary commercial intercourse with other nations. We should remember lessons learned in the last war.

In many instances in our history the Congress has provided for various kinds of disguised subsidies to American shipping. In recent years the Congress has provided this aid in the form of lending money at low rates of interest to American shipping companies for the purpose of building new ships for foreign trade. has, in addition, appropriated large annual sums under the guise of payments for ocean-mail contracts.

It

This lending of money for shipbuilding has in practice been a failure. Few ships have been built and many difficulties have arisen over the repayment of the loans. Similar difficulties have attended the granting of ocean-mail contracts. The Government today is paying annually about $30,000,000 for the carrying of mails which would cost, under normal ocean rates, only $3,000,000. The difference, $27,000,000, is a subsidy, and nothing but a subsidy. But given under this disguised form it is an unsatisfactory and not an honest way of providing the aid that Governemtn ought to give to shipping.

I propose that we end this subterfuge. If the Congress decides that it will maintain a reasonably adequate American merchant marine I believe that it can well afford honestly to call a subsidy by its right name.

Approached in this way a subsidy amounts to a comparatively simple thing. It must be be based upon providing for American shipping-Government aid to make up the differential between American and foreign shipping costs. It should cover first the difference in the cost of building ships; second, the difference in the cost of operating ships; and finally, it should take into consideration the liberal subsidies that many foreign governments provide for their shipping. Only by meeting this threefold differential can we expect to maintain a reasonable place in ocean commerce for ships flying the American flag, and at the same time maintain American standards.

In setting up adequate provisions for subsidies for American shipping the Congress should provide for the termination of existing ocean-mail contracts as rapidly as possible and it should terminate the practice of lending Government money for shipbuilding. It should provide annual appropriations for subsidies sufficiently large to cover the differentials that I have described.

I am submitting to you herewith two reports dealing with American shipping: A report of an interdepartmental committee known as the “Committee on Shipping Policy", appointed June 18, 1934, by the Secretary of Commerce, and a report to me from the Postmaster General on ocean-mail contracts prepared pursuant to an Executive order of July 11, 1934.

Reports which have been made to me by appropriate authorities in the executive branch of the Government have shown that some American shipping companies have engaged in practices and abuses which should and must be ended. Some of these have to do with the improper operating of subsidiary companies, the payment of excessive salaries, the engaging in businesses not directly a part of shipping, and other abuses which have made for poor management, improper use or profits, and scattered efforts.

Legislation providing for adequate aid to the American merchant marine should include not only adequate appropriation for such purposes and appropriate safeguards for its expenditure, but a reorganization of the machinery for its administration. The quasi-judicial and quasi-legislative duties of the present Shipping Board Bureau of the Department of Commerce should be transferred for the present to the Interstate Commerce Commission. Purely administrative functions, however, such as information and planning, ship inspection, and the maintenance of aids to navigation should, of course, remain in the Department of Commerce.

An American merchant marine is one of our most firmly established traditions. It was, during the first half of our national existence, a great and growing asset. Since then it has declined in value and importance. The time has come to square this traditional ideal with effective performance.

Free competition among the nations in the building of modern shipping facilities is a manifestation of wholly desirable and wholesome national ambition. In such free competition the American people want us to be properly represented. The American people want to use American ships. Their Government owes it to them to make certain that such ships are in keeping with our national pride and national needs. FRANKLIN D. ROOSEVELT.

THE WHITE HOUSE, March 4, 1935.

The CHAIRMAN. In response to the recommendations of the President, Judge Bland, of the House, and I conferred regarding proposed legislation. We had the active assistance of Senator White, whose name is associated with the Jones-White Act and its various amendments. We had the assistance also of Mr. Lehlbach, ranking minority member of the House Committee on Merchant Marine and Fisheries. Out of these conferences came the bill which was introduced in the Senate, S. 2582. In the House a companion bill, H. R. 7521, was introduced.

We have before us this morning a rewrite of S. 2582, and I hope that all persons here present who are interested will possess themselves of copies of this bill. I hope you will do that now, because I desire, for your benefit, to point out what changes have been made. I regret that by reason of the fact that our group did not finish its deliberations until late last night, there has been no opportunity to prepare in advance the designation of these various amendments. The bill did not come from the printer until a few moments ago. Even at this moment I regret that I have not the copy before me, but I shall attempt to point out the changes that have been made in this print. We will insert in the record at this point Committee Print No. 2, which is a revision of S. 2582.

(The bill is here printed in full as follows:)

[S. 2582, 74th Cong., 1st Sess., Committee Print No. 2]

A BILL To develop a strong American merchant marine, to promote the commerce of the United States, to aid national defense, and for other purpos es

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

TITLE I-DECLARATION OF POLICY

SECTION 1. It is necessary for the national defense and development of its foreign and domestic commerce that the United States shall have a merchant marine (1) sufficient to carry at least one-half of the foreign commerce of the United States and to provide shipping service on all routes essential for maintaining the flow of national commerce at all times, (2) capable of serving as a naval and military auxiliary in time of war or national emergency, (3) owned and operated under the United States flag by citizens of the United States and so operated and regulated as to secure to the shipper of American products adequate service and parity of rates to foreign markets, and (4) composed of the best equipped, safest, and most suitable types of vessels, constructed in the United States and manned with a trained and efficient citizen personnel. It is hereby declared to be the policy of the United States to foster the development and encourage the maintenance of such a merchant marine by the means hereafter expressly provided in this Act and by any other means which the Congress from time to time may deem necessary. Insofar as not inconsistent with the express provisions of this Act, the agencies of the United States Government charged with the administration of this Act and shipping laws shall, in such administration and in the making of rules and regulations, keep always in view the purpose and object of the policies herein expressed as the primary end to be attained.

TITLE II-UNITED STATES MARITIME AUTHORITY SECTION 201. (a) A board is hereby created to be known as the "United States Maritime Authority", and hereinafter referred to as the "Authority." The Authority shall be composed of five persons, hereinafter referred to as "members", to be appointed by the President by and with the advice and consent of the Senate; and the President shall designate the member to act as chairman of the Authority, and the Authority may elect one of its members as vice chairman. The members of the Authority shall be appointed as soon as practicable after the enactment of this Act, and shall continue in office for terms of three, four, five, six, and seven years, respectively, from the date of their appointment, the term of each to be designated by the President, but their successors shall be appointed for terms of seven years, except that any person chosen to fill a vacancy shall be appointed only for the unexpired term of the member whom he succeeds. The members shall be appointed with due regard to their fitness for the efficient discharge of the duties imposed upon them by this Act. Not more than one member shall be appointed from the same State.

Not more than three

of the members shall be appointed from the same political party. A vacancy in the Authority shall be filled in the same manner as the original appointment. No member shall take any part in the consideration or decision of any claim or particular controversy in which he has a pecuniary interest.

(b) No member shall be appointed who is in the employ of, or holds any official relation to, any common carrier by water or other person subject to this Act or the shipping laws, or owns any stock or bonds thereof, or is pecuniarily interested, directly or indirectly, in any person subject to this Act. No member while in office shall engage in any other business, vocation, or employment, or hold any official relation to any common carrier by water or other person subject to this Act or the shipping laws, or own any stock or bonds thereof, or be in any manner pecuniarily interested, directly or indirectly, in such person.

(c) The duties of the Authority may be so divided that under its supervision the directorship of various activities may be assigned to one or more members. Any member may be removed by the President for inefficiency, neglect of duty, or malfeasance in office. In case of a vacancy in the Authority the remaining members shall exercise all its powers. The Authority shall have an official seal, which shall be judicially noticed.

(d) The Authority may adopt rules and regulations in regard to its procedure and the conduct of its business. It may employ, within the limits of appropriations made therefor by Congress, such attorneys as it finds necessary in the conduct of its work, or for proper representation of the public interest in investi-gations made by it or in proceedings pending before it, whether at the Authority's own instance or upon complaint, or to appear for or represent the Authority in any case in court or other tribunal.

(e) Each member shall receive a salary of $12,000 per annum. The Authority shall appoint a secretary at a salary of $7,500 per annum, and employ and fix the compensation of such attorneys, officers, naval architects, special experts, examiners, clerks, and other employees as it may find necessary for the proper performance of its duties and as may be appropriated for by the Congress, and shall, whenever possible, in such employment, employ qualified present employees of the United States Shipping Board Bureau or United States Shipping Board Merchant Fleet Corporation. The President, upon the request of the Authority, may authorize the detail of officers of the military, naval, or other services of the United States for such duties as the Authority may deem necessary in connection with its business.

(f) With the exception of the secretary, a clerk to each member, the attorneys, naval architects, and such other special experts and examiners as the Authority may from time to time find necessary to employ for the conduct of its work, all employees of the Authority shall be appointed from qualified present employees of the United States Shipping Board Bureau or United States Shipping Board Merchant Fleet Corporation, or from lists of eligibles to be supplied by the Civil Service Commission and in accordance with the civil-service law, when no such qualified Shipping Board employee is available.

(g) The expenses of the Authority in the conduct of its business, including. necessary expenses for transportation, incurred by the members of the Authority or designated employees under its orders, in making any investigation, or upon official business in any other place than in the city of Washington, shall be allowed and paid on the presentation of itemized vouchers therefor approved by the Chairman of the Authority, or a designated employee of the Authority.

SEC. 202. The Authority is authorized and directed:

(1) To study all national maritime problems, and their proper relationship to trade and commerce;

(2) To analyze and edit pertinent data and develop plans for construction and efficient operation of vessels, taking into consideration the benefits accruing from standardized production where practicable;

(3) To determine, under rules and regulations to be prescribed by the Authority, the amounts of direct financial aid to be paid under contracts awarded pursuant to titles III and V of this Act; and

(4) To study means by which the revenue of contractors may be increased by advertising and solicitation on the part of operators, and wherein economies may be effected.

(5) To establish and maintain liaison with such other departments and boards of the Federal Government, and with representative trade organizations throughout the United States, as may be concerned, directly or indirectly, with any movement of commodities in foreign commerce, for the purpose of securing preference to vessels of United States register in such shipments.

INVESTIGATIONS

SEC. 203. The Authority shall make studies of and make a report to Congress as soon as practicable on

(1) The scrapping of old or obsolete tonnage owned by the United States or in use in the merchant marine;

(2) Tramp shipping service and the advisability of participating in such service with vessels under United States register;

(3) The construction by or with the aid of the United States of superliners, especially with a view to their use in national emergency.

(4) The relative cost of construction of comparable ocean vessels in the various coastal districts of the United States, together with recommendations as to how such differential may be equalized.

SEC. 204. In the execution of its duties under this Act the Authority is authorized and directed to investigate, determine, and keep current records of: (1) The essential services, routes, and lines for the development of the American merchant marine pursuant to section 7, Merchant Marine Act, 1920 (U. S. C., title 46, sec. 866); (2) the relative cost of construction or reconditioning of comparable vessels of the United States and in foreign countries; (3) the relative cost of marine insurance, maintenance repairs, wages and subsistence of officers and crews, in the operation of comparable vessels on particular routes, services, and lines under the laws, rules, and regulations of the United States and under those of the foreign countries whose vessels are the competitors of such American service, route, or line; (4) the extent and character of the governmental aid and subsidies granted by foreign governments to their merchant marine; (5) the number, location, and efficiency of the shipyards now existing or which may hereafter be built in the United States; and (6) such other matters, as such Authority may from time to time determine to be necessary, relating to the development of the merchant marine and the cost of maintenance and operation of the various services, routes, and lines compared with the cost of similar services, routes, and lines under foreign flags.

TITLE III-ADJUSTMENT OF OCEAN-MAIL CONTRACTS

SECTION 301. Sections 401 to 413, inclusive, of Title IV of the Merchant Marine Act, 1928, are hereby repealed, subject to the limitations and exceptions hereinafter in this Act provided.

All rights, interests, or remedies accruing or to accrue as the result of any contract or agreement lawfully entered into before the passage of this Act, under or in pursuance of the sections of the law hereby repealed, shall be in all respects as valid and may be exercised and enforced in like manner as if this Act had not been passed.

SEC. 302. The Authority is hereby authorized to negotiate privately with the holder of any contract entered into under the provisions of Title IV of the Merchant Marine Act, 1928, without advertisement or the taking of bids, for the adjustment, modification, settlement, or cancelation of said contract on such terms and conditions as the Authority may deem advisable. The Authority may enter into a new contract with such holder for the performance of services and the payment therefor in accordance with the terms and conditions of this Act. In arriving at an adjustment, modification, or settlement of such contract, the Authority,

in accordance with the principles set forth in sections 501 and 502 of this Act, may determine the amount of the construction differential with respect to any vessel or vessels constructed or reconditioned by virtue of mail contracts, as well as the expenses paid or incurred on account of such construction differential, and may agree to pay to the holder such part thereof as the Authority considers fair and equitable, or at the option of either party the sum so determined may be deducted from any sums due from the said holder to the United States on loan agreements entered into under the Merchant Marine Act, 1928.

If it is impossible to reach an agreement for such substituted contract, then the Authority, with the consent of the President, may approve the continuance of the existing contract, or the President may cancel or modify such contract and determine just compensation therefor, and if the amount of the compensation so determined by the President is unsatisfactory to the holder of such contract, the latter shall be entitled to receive such portion thereof as the President shall determine, and shall be entitled to sue the United States to recover such further sum as, added to said portion so received, will make up such amount as will be just compensation therefor, in the manner provided by paragraph 20 of section 41 and section 250 of title 28 of the United States Code.

TITLE IV-NEW CONSTRUCTION

SECTION 401. (a) In awarding contracts under this Act, the Authority shall require the construction of such new vessels as may be necessary to effectuate the purposes of this Act.

(b) In case the new vessel or vessels to be constructed will replace a vessel or vessels which are old, slow, or otherwise inadequate or obsolete for the service in which engaged, the Authority is authorized in its discretion to buy such vessel or vessels from the owner at a reasonable value (which in no event shall exceed the cost plus reconditioning expense and improvements of such vessel or vessels to the owner, less a reasonable and proper depreciation thereon), and apply the purchase price to that part of the cost of the construction of such new vessel or vessels to be borne by the owner. The Authority may lay up or scrap said vessel or vessels, or may sell, charter, or otherwise provide for the operation of said purchased vessel or vessels in some other service or route for which the vessel or vessels may be suitable.

TITLE V.-FINANCIAL AID TO THE MERCHANT MARINE

PART I.-CONSTRUCTION DIFFERENTIAL SUBSIDY

SECTION 501. (a) The Authority is authorized and directed to consider the application of any citizen of the United States as defined in section 38 of the Merchant Marine Act, 1920 (U. S. C., title 46, sec. 802), for financial aid in the construction, outfitting, and equipment of new vessels, or the reconditioning of vessels already built, to be used on an essential service, route, or line in the foreign commerce of the United States. If the Authority determines that (1) the service, route, or line requires a new vessel of modern and economical design or the reconditioning of a vessel already built, to meet competitive conditions or to further promote the foreign commerce of the United States, or if it is found after consultation with the Navy Department that the construction of such vessel is advisable for national-defense purposes; (2) the plans and specifications of the proposed vessel meet the requirements of commerce; and (3) the applicant possesses the ability, experience, financial resources, and character necessary successfully to operate and maintain such vessel in the proposed service, the Authority shall then, pursuant to the provisions of this Act, determine the difference between the domestic and foreign construction cost of a vessel of the type proposed to be built, or the difference between the domestic and foreign reconditioning cost of a vessel of the type proposed to be reconditioned.

(b) (1) The said specifications shall be submitted to the Navy Department, who shall have the right to suggest such changes therein as it may deem necessary or proper in order that the proposed vessel may be adequate as a naval or military auxiliary and otherwise suitable for the use of the Government in case of national emergency or for the national defense.

(2) In case the said specifications shall be satisfactory to the Authority and shall be approved by the Authority and the Navy Department, the Authority shall have the authority to grant a subsidy of such amount as will equal, but not to exceed, the difference between the cost of construction of the said vessel in an