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MISCELLANEOUS MERCHANT MARINE LEGISLATION

GUAM SHIPPING LEGISLATION

WEDNESDAY, OCTOBER 23, 1963

HOUSE OF REPRESENTATIVES,
SUBCOMMITTEE ON MERCHANT MARINE OF THE
COMMITTEE ON MERCHANT MARINE AND FISHERIES,

Washington, D.C. The subcommittee met at 10 a.m., pursuant to call, in room 219, Cannon House Office Building, Hon. Herbert C. Bonner (chairman of the subcommittee) presiding.

The CHAIRMAN. The subcommittee will come to order.
The subcommittee meets this morning to consider H.R. 7028.

Let the record show that identical bills were introduced by Mr. Westland, H.R. 7081; Mr. Mailliard, H.R. 7104; Mr. Tollefson, H.R. 7148; and Mr. Aspinall, H.R. 8177.

A copy of these bills will be inserted in the record at this point. (The bills mentioned and agency reports follow :)

[H.R. 7028, H.R. 7081, H.R. 7104, H.R. 7148, H.R. 8177, 88th Cong., 1st sess. ] A BILL To amend section 21 of the Merchant Marine Act, 1920, as amended (46 U.S.C.

887), and for other purposes Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That section 21 of the Merchant Marine Act, 1920, as amended (46 U.S.C. 887), is further amended by changing the concluding period of the section to a semicolon and adding a proviso as follows: "And provided further, That the coastwise laws of the United States shall not extend to Guam."

Sec. 2. Section 905 (a) of the Merchant Marine Act, 1936 (46 U.S.C. 1244(a)) is amended by changing the concluding period to a semicolon and adding a proviso as follows: Provided, That the words 'foreign commerce' or 'foreign trade', shall include the commerce or trade between the United States, its Territories or possessions other than Guam, or the District of Columbia, and Guam."

SEC. 3. For purposes of sections 17-19 of the Shipping Act, 1916, as amended (46 U.S.C. 816-818), and sections 2-4 of the Intercoastal Shipping Act, 1933, as amended (46 U.S.C. 844-846) common carriers by water engaged in transportation between the United States or any of its districts, territories, or possessions other than Guam, and Guam shall be treated as common carriers by water in foreign commerce.

Sec. 4. The Secretary of Commerce may, with the consent of the parties thereto, modify the provisions of any contract heretofore entered into pursuant to the Merchant Marine Act, 1936, as amended, requiring reduction or repayment of subsidy for service in the domestic, intercoastal, or coastwise trades, to the extent necessary to give prospective effect to the amendment made by this Act.

GENERAL COUNSEL OF THE DEPARTMENT OF COMMERCE,

Washington, D.C., November 8, 1963. Hon. HERBERT C. BONNER, Chairman, Committee on Merchant Marine and Fisheries, House of Representatives, Washington, D.C.

DEAR MR. CHAIRMAN: This is in response to your request of June 18, 1963, for the views of this Department regarding H.R. 7028, a bill to amend section 21 of the Merchant Marine Act, 1920, as amended (46 U.S.C. 887), and for other purposes.

The bill would amend section 21 of the Merchant Marine Act, 1920, as amended by adding the further proviso exempting Guam from the coastwise laws of the United States. The other provisions of the bill make the necessary changes in other maritime legislation so as to realize all of the benefits of this exemption. Section 905 (a) of the Merchant Marine Act, 1936, as amended (46 U.S.C. 1244 (a)), would be amended so as to include commerce between the United States and Guam as part of the "foreign commerce" and "foreign trade" as those terms are used in the 1936 act. The bill also provides that for the purposes of sections 17 and 18 of the Shipping Act, 1916, as amended (46 U.S.C. 816-818), and sections 2 to 4 of the Intercoastal Shipping Act, 1933, as amended (46 U.S.C. 844 846), common carriers by water engaged in transportation between the United States, its districts, possessions, and territories other than Guam and Guam shall “* * * be treated as common carriers by water in foreign commerce." The bill further provides that the Secretary of Commerce, with the consent of the parties thereto, may amend the provisions of any contract entered into pursuant to the Merchant Marine Act, 1936, as amended, to the extent made necessary by making Guam a part of the foreign commerce under the provisions of the 1936 act.

For the following reasons, we recommend against favorable consideration of the bill.

Prior to August 21, 1962, Guam was closed to all foreign shipping. On that date, Executive Order No. 11045 opened the Guam trade to foreign-flag shipping between Guam and foreign countries. As for the trade between the United States and Guam, the coastwise laws prohibit the use of foreign-flag vessels. On January 22, 1963, the Guam Legislature passed a resolution requesting that Congress and appropriate executive agencies of the United States study the possibility of allowing subsidy to U.S. vessels carrying cargoes to and from Guam, because of the belief that shipping costs between the United States and Guam were exorbitantly high. The proposed legislation would implement the intent of the resolution.

There is no assurance that the payment of subsidy would achieve the desired results. It is reasoned, no doubt, that the opening of Guam to foreign shipping to and from the United States will create competition with the present Americanflag carriers and would, therefore, tend to reduce the existing shipping rates, and that the granting of subsidy would permit the U.S. operators to meet this competition. However, it is not at all certain that foreign-flag shippers will enter to any great extent the trade between the United States and Guam because that trade is composed to a significant degree of military cargo which can only be carried by American-flag operators under the present law. Certainly, some commercial cargoes will be handled by foreign operators but it will be on a piecemeal basis which will not produce the expected competition. Even should significant foreign competition develop, there is no assurance that shipping rates between the United States and Guam will decrease or remain stable, or that service will be improved.

In addition, Guam has a remedy under the existing law to assure reasonable shipping rates. Shipping rates for the carriage of cargo between Guam and the United States must be filed with and approved by the Federal Maritime Commission in accordance with sections 2 to 4 of the Intercoastal Shipping Act, 1933, as amended (46 U.S.C. 844–846), which also authorizes the Commission to enforce just and reasonable minimum-maximum rates. It should be noted that the proposed legislation would also remove these shipping rates from the ambit of this type of regulation, thus reducing to a degree the protection against unreasonable rates now enjoyed by residents of Guam.

The bill would also set an undesirable precedent regarding the protected domestic trade. Similar legislation could be introduced regarding all other noncontiguous States and territories. This, when viewed in the context of the uncertainty of such legislation reducing existing shipping rates, and the protection already contained under the present law to asure reasonable and just rates, compels our recommending against favorable consideration of the bill.

The Bureau of the Budget advises there is no objection to the submission of this report from the standpoint of the administration's program. Sincerely,

LAWRENCE JONES, Acting General Counsel.

4

FEDERAL MARITIME COMMISSION,

Washington, D.C., November 9, 1963. JIon. HERBERT C. BONNER, Chairman, Committee on Merchant Marine and Fisheries, House of Representatives, Washington, D.C.

DEAR MR, CHAIRMAN: This is in response to your request of June 14, 1963, for the views of the Federal Maritime Commission with respect to H.R. 7028, a bill to amend section 21 of the Merchant Marine Act, 1920, as amended (46 O.S.C. 887), and for other purposes.

Sections 1 and 2 of the bill would amend the coastwise laws of the United States to permit foreign-flag vessels to engage in trade between “the United States, its Territories or possessions other than Guam, or the District of Columl'ia, and Guam.” This trade has heretofore been limited to U.S.-flag shipping.

Section 3 of the bill would amend sections 17 to 19 of the Shipping Act, 1916, and sections 2 to 4 of the Intercoastal Shipping Act, 1933, to provide that "common carriers by water engaging in transportation between the United States or any of its districts, territories, or possessions other than Guam, and Guam shall be treated as common carriers by water in foreign commerce." Section 4 of the bill authorizes the Secretary of Commerce to modify provisions of contracts “entered into pursuant to the Merchant Marine Act, 1936, as amended, requiring reduction or repayment of subsidy for service in the domestic, intercoastal, or coastwise trades, * * *" to effect the purposes of the bill.

The comments of the Federal Martime Commission are limited to those sections of the bill which would amend the Shipping Act, 1916, and the Intercoastal Shipping Act, 1933. Under the provisions of the Intercoastal Shipping Act, 1933, the Federal Maritime Commission has authority to determine the reasonableness of rates and is authorized to prescribe minimum and maximum rates. If the bill is enacted, the Commission's authority over rates in the Guam trade would be limited to that authority which it presently has in the foreign commerce of the United States. Briefly, such authority extends only to rates found to be so unreasonably high or low as to be detrimental to the commerce of the United States. The Commission is of the opinion that the public interest and the interest of shippers in the Guam trade can best be protected if that trade remains subject to the provisions of the Intercoastal Shipping Act, 1933. Under that act the Commission can disapprove a rate which is unjust or unreasonable and substitute therefor reasonable maximum or minimum or maximum and minimum rates or charges. If the trade is subject only to the provisions of the Shipping Act, 1916, dealing with the foreign commerce of the United States, the Commission's authority would be limited to a finding that the rate is so unreasonably high or low as to be detrimental to the commerce of the United States. Even assuming such a finding, the Commission cannot then substitute a specific rate or charge of its own. For these reasons, the Commission opposes enactment of this legislation.

The Bureau of the Budget has advised that there would be no objection to the subrnission of this letter from the standpoint of the administration's program. Sincerely yours,

JOHN HARLLEE,
Rear Admiral, U.S. Navy (Retired), Chairman.

COMPTROLLER GENERAL OF THE UNITED STATES,

Washington, D.C., July 18, 1963. Hon. HERBERT C. BONNER, Chairman, Committee on Merchant Marine and Fisheries, House of Representatives.

DEAR MR. CHAIRMAN: Further reference is made to your letter of June 14, 1963, acknowledged on June 17, requesting the comments of the General Accounting Office concerning H.R. 7028, 88th Congress, 1st session, entitled "A bill to amend section 21 of the Merchant Marine Act, 1920, as amended (46 U.S.C. 887), and for other purposes."

We observe that section 1 of the bill would amend section 21 of the Merchant Marine Act, 1920, to make the coastwise laws of the United States inapplicable to Guam; and would thereby remove the present prohibition against the operation of foreign-flag vessels in the trade between Guam and points in the United States. Also, section 2 of the measure would amend the definitions of “foreign trade" and "foreign commerce" in section 905 (a) of the Merchant Marine Act, 1936, to include commerce or trade between the United States and Guam ; and in so doing, would eliminate the present requirements of sections 506 and 605 (a) of the act for repayment or reduction of subsidy for periods in which subsidized operators engage in the trade between Guam and the United States.

Section 3 of the bill would alter the authority of the Federal Maritime Commission with respect to regulation of common carriers employed in the trade between Guam and the United States. Under present law (46 U.S.C. 817 and 46 U.S.C. 845 (a)) the Commission may determine and prescribe "just and reasonable" rates, fares, charges, classifications, tariffs, regulations, or practices; under the proposed amendment, the Commissions' authority would be governed by sections 17 and 18(b) of the Shipping Act, 1916, which generally limit the Commission's power to the alteration or disapproval of rates in foreign commerce to those situations in which rates are unjustly discriminatory or prejudicial or where they are so unreasonably high or low as to be detrimental to the commerce of the United States.

Since the question whether the purposes to be served by the present bill are of sufficient merit and importance to justify the proposed relaxation in the application of the coastwise laws to Guam involves a matter of congressional policy, and due to the further fact that we have no special information or knowledge as to the desirability of the proposed legislation, we make no recommendation with respect to its enactment.

We observe, however, that the reference to "46 U.S.C. 887" in the title and on line 4, page 1, of the bill should be corrected to read “46 U.S.C. 877." Sincerely yours,

JOSEPH CAMPBELL, Comptroller General of the United States.

DEPARTMENT OF THE INTERIOR,

OFFICE OF THE SECRETARY,

Washington, D.C., November 5, 1963. Hon. HERBERT C. BONNER, Chairman, Committee on Merchant Marine and Fisheries, House of Representatives, Washington, D.C.

DEAR MR. BONNER: This responds to your request for the views of this Department on H.R. 7028, a bill to amend section 21 of the Merchant Marine Act, 1920, as amended (46 U.S.C. 887), and for other purposes.

We recommend enactment of this bill with a technical amendment which appears below.

This bill, if enacted, would accomplish several important objectives; all, we believe, will have a beneficial effect upon the economy of Guam and, indirectly, upon the Trust Territory of the Pacific Islands, an area geographically associated with Guam, and within the area of our concern. Guam is a small island territory of the United States, almost wholly dependent upon imported goods, supplies, and materials. The civilian population is approximately 45,000, while the United States military population including dependents is about 20,000. Guam is situated 5,053 miles from San Francisco, 3,006 miles from Sydney, 1,499 miles from Manila, and 1,352 miles from Yokohama.

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