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We feel the issue of jobs for American seamen and the future of a segment of the American merchant marine in the Pacific is clearly at stake and we strongly recommend, therefore, that your committee report favorably on H.R. 7028, either in its present form, or preferably, amended so as to restrict the trade to vessels under U.S.-flag registry.

MORRIS WEISBERGER, Secretary-Treasurer, Sailors' Union by the Pacific, and Executive Vice President, Seafarers International Union of North America, Pacific

District, San Francisco, Calif. The CHAIRMAN. The committee is also in receipt of a statement of the Honorable Jack Westland supporting H.R. 7028. This statement will be included in the record at this point.

(The statement referred to follows:)

STATEMENT OF HON. JACK WESTLAND, A REPRESENTATIVE IN CONGRESS FROM THE

STATE OF WASHINGTON As you are aware, I introduced H.R. 7081 as a companion bill to H.R. 7028 introduced by yourself on June 13, 1903. I did so because, in my opinion, the provisions contained in these bills are necessary in order to assure a continuity of service by American-flag vessels serving Guam, to and from the United States.

Specifically, H.R. 7028 would accomplish three important objectives. It would, first, exempt Guam from the application of coastwise shipping laws and would, secondly, permit U.S.-flag vessels engaged in commerce between the United States and Guam to receive the operation and construction subsidies currently available to U.S.-flag vessels engaged in foreign commerce. As a third factor, it would define United States-Guam trade as “foreign" for ratemaking purposes even though Guam is, of course, an American territory,

American Samoa and the Virgin Islands are already exempt from the application of coastwise shipping laws. H.R. 7028 would grant a similar exemption to Guam and, in my opinion, would bring about improved service for the territory. The definition of United States-Guam trade as “foreign commerce," for example, would permit subsidized U.S. carriers to serve Guam without return or reduction-of-subsidy payments. The result would be the end of a financial burden that in the past has been reflected in high freight rates.

U.S.-flag ships engaged in "foreign" trade with Guam also would be eligible for construction subsidies. The bulk of the ocean cargo between the U.S. mainland and Guam is transported in four vessels that have now been in service for 21 years. They are approaching obsolescence and the problem becomes more critical in the light of estimates that it will probably take at least another 5 Fears for the planning and construction of new ships. It is estimated, too, that replacement vessels will cost in the neighborhood of $13 million each. Without subsidy, these ships could be built only if freight rates were increased to the point where American-flag vessels could no longer meet foreign competition.

In the above connection, it is interesting to note a unique factor with respect to United States-Guam trade. Financially, the success of any voyage to Guam must necessarily depend upon the outbound cargo carried Guam imports over 8 percent of her food and almost all of her other consumer goods. The economy of Guam produces virtually no tonnage for return shipment to this country.

Since the lifting of Guamanian security regulations by Executive order in 1962, Guam has been open to foreign-flag ressels. Not only American ships, but American producers have become competitors with other nations of the world for Guam trade. Japanese plumbing and electrical supplies, Formosan cement, and Hong Kong and Philippine furniture are only a few of the foreign-made and flag-carried products that have found their way into Guam's economy. Previously, American goods and products enjoyed an almost exclusive market on Guam.

A comparison of the dollar value of foreign-manufactured and produced products imported to Guam documents the inroads made by foreign competition. In 1959, the value of foreign products imported to Guam was $3,318,110. In 1962, the comparable figure was $6,519,781, representing an increase of almost 100 percent.

If American goods are to have a continued market on Guam, it is necessary to insure that adequate transport for these products will be available in the future as in the past. A reduction or discontinuance of the transport service now provided by U.S.-flag vessels obviously would affect this outlook adversely; it also would aggravate our already serious balance-of-payments problem.

More than economic interest, however, suggests the need for affirmative action on this legislation. Also to be considered is the possibiilty that any lessening of Guam-American trade could result in the weakening of traditional ties between Guam and the U.S. mainland. Guamanians became American nationals when Guam was ceded to the United States by Spain under the Treaty of Paris in 1898, and the Guamanians became American citizens by act of Congress on August 1, 1950. Guam has not only been tied economically and commercially with the U.S. mainland, it has also been politically, culturally, and socially bound to the continental United States. The role played by the Guam Military Establishment in the security of the free world is substantial, and has further strengthened GuamUnited States ties.

Yet, some Guamanians have cautioned that the way of life of the people of any area is determined, to a great extent, by the nature of its trade ties with other areas of the world. Guam is today what its residents consider "the showcase of American democracy" in the Orient. The people of Guam have no desire to see any weakening of trade relations with the United States.

Mr. Chairman, in closing, I want to stress that the reasons for requesting favorable action on this legislation are many. I have outlined some of them here, and I hope you will give them your earnest consideration.

The CHAIRMAN. If there are no other questions, you are excused. Admiral HARLLEE. Thank you, Mr. Chairman. The CHAIRMAN. Are there any other witnesses? Mr. PELLY. Mr. Chairman, could I have permission to insert in the record any communications I may receive from my chamber of commerce and others who might be interested in this whole matter?

The CHAIRMAN. Unless there is objection by other members it will be perfectly all right with the Chair.

Mr. PELLY. I have not received any, but I thought expressions of opinion on this legislation might be helpful if I do.

The CHAIRMAN. The committee will stand adjourned.

(Whereupon, at 11:20 a.m., the subcommittee adjourned, subject to call of the Chair.)

MISCELLANEOUS MERCHANT MARINE LEGISLATION

PENALTY EXEMPTIONS RE CERTAIN TERMINAL

LEASES

FRIDAY, JANUARY 24, 1964

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 committee will come to order.

The Subcommittee on Merchant Marine will take under consideration this morning the bill H.R. 9153 and similar bills to amend the provisions of section 15 of the Shipping Act of 1916, to provide for the exemption of certain terminal leases from penalties.

(H.R. 9153, H.R. 8926, H.R. 9715, S. 2317, Executive Communication 1371, and agency reports follow :) . [H.R. 9153, H.R. 9146, H.R. 9157, H.R. 9183, H.R. 9188, H.R. 9438, 88th Cong., 1st sess.) A BILL To amend the provisions of section 15 of the Shipping Act, 1916, to provide for

the exemption of certain terminal leases from penalties

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That section 15 of the Shipping Act, 1916 (46 U.S.C. 814), be amended by inserting at the end thereof the following: "Provided, however, That the penalty provisions of this section shall not apply to leases, licenses, or assignments of terminal facilities which were entered into before October 1, 1963, and submitted to the Federal Maritime Commission for approval prior to or within ninety days after the enactment of this Act, unless such leases, licenses, or assignments are disapproved, modified, or canceled by the Commission and are continued in operation without regard to the Commission's action thereon. The Commission shall promptly approve, disapprove, cancel, or modify each such agreement in accordance with the provisions of this section."

(H.R. 8926, 88th Cong., 1st sess.] À BILL To amend the Shipping Act, 1916, as it relates to certain leases, licenses, or

assignments of ocean terminal facilities Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That section 15 of the Shipping Act of 1916, is amended by adding at the end thereof the following new paragraph:

"The preceding paragraph of this section shall not apply to any lease, license, or assignment of ocean terminal facilities which was entered into before the date of enactment of this paragraph and which is submitted to the Federal Maritime

Commission for approval not later than the ninetieth day after the date of enactment of this paragraph. Any lease, license, or assignment submitted to such Commission within such ninety-day period shall be lawful and permitted to continue in effect until disapproved, canceled, or modified by such Commission. Such Commission shall promptly approve, disapprove, cancel, or modify each such lease, license, or assignment in accordance with the provisions of this Act."

(H.R. 9715, 88th Cong., 2d sess.) A BILL To amend the provisions of section 15 of the Shipping Act, 1916, to provide for

the exemption of certain terminal leases from penalties

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That section 15 of the Shipping Act of 1916, (46 U.S.C. 814), be amended by inserting at the end thereof the following: “Provided, however, That the penalty provisions of this section shall not apply to leases, licenses, assignments, or other agreements of similar character for the use of terminal property or facilities which were entered into before the date of enactment of this Act, and, if continued in effect beyond said date. submitted to the Federal Maritime Commission for approval prior to or within ninety days after the enactment of this Act, unless such leases, licenses, assignments, or other agreements for the use of terminal facilities are disapproved, modified or canceled by the Commission and are continued in operation without regard to the Commission's action thereon. The Commission shall promptly approve, disapprove, cancel, or modify each such agreement in accordance with the provisions of this section.”

[S. 2317, 88th Cong., 1st sess 1

AN ACT To amend the provisions of section 15 of the Shipping Act, 1916, to provide for

the exemption of certain terminal leases from penalties

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That section 15 of the Shipping Act, 1916 (46 U.S.C. 814), be amended by inserting at the end thereof the following: Providing, however, That the penalty provisions of this section shall not apply to leases, licenses, assignments, or other agreements of similar character for the use of terminal property or facilities which were entered into before the date of enactment of this Act, and, if continued in effect beyond said date, submitted to the Federal Maritime Commission for approval prior to or within ninety days after the enactment of this Act, unless such leases, licenses, assignments, or other agreements for the use of terminal facilities are disapproved, modified, or canceled by the Commission and are continued in operation without regard to the Coinmission's action thereon. The Commission shall promptly approve, disapprove, cancel, or modify each such agreement in accordance with the provisions of this section."

Passed the Senate December 13, 1963.
Attest:

FELTON M. JOHNSTON,

Secretary.

(Executive Communication 1371)

FEDERAL MARITIME COMMISSION,

OFFICE OF THE CHAIRMAN,

Washington, D.C., November 13, 1963. Hon. John W. McCORMACK, Speaker of the House of Representatives, Washington, D.O.

DEAR MR. SPEAKER: There are submitted herewith four copies of a proposed bill, together with a statement of purpose and need for the draft bill, to amend the provisions of section 15 of the Shipping Act, 1916, to provide for the exemption of certain terminal leases from penalties.

The need for and purpose of the proposed bill' are set forth in the accompany. ing statement.

1 See reprint of H.R. 9153 on p. 115.

The Federal Maritime Commission urges enactment of the bill at the 1st session of the 88th Congress for the reasons set forth in the accompanying statement,

The Bureau of the Budget has advised that, from the standpoint of the administration's program, there is no objection to the submission of this proposed legislation to the Congress. Sincerely yours,

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

JUSTIFICATION FOR BILL TO AMEND SECTION 15, SHIPPING ACT, 1916 The bill would amend section 15 of the Shipping Act, 1916, so as to exempt from the penalty provisions of that section currently existing leases of terminals provided they are filed with the Federal Maritime Commission within 90 days from the date the bill is enacted into law. The need for the bill stems from the fact that until the former Federal Maritime Board's decision in agreements Nos. 8225 and 8225-1, 5 F.M.B. 648 (1959) and the subsequent affirmation of the Board's decision by the U.S. Court of Appeals for the Fifth Circuit in Baton Rouge Port Commission v. United States, 287 F. 2d 86, cert, den. 368 U.S. 985, neither the agency nor the industry were clear as to the full circumstances under which leases of terminal facilities fall within the coverage of section 15 of the Shipping Act.

Section 15 provides that all agreements between two persons subject to the Shipping Act which provides for the "fixing or regulating transportation rates or fares; giving or receiving special rates, accommodations, or other special privileges or advantages; controlling, regulating, preventing, or destroying competition, * * * or in any manner providing for an exclusive, preferential, or cooperative working arrangement," must be filed with and approved by the Commission in order to be lawful. The penalty for carrying out such an agreement prior to Commission approval is up to $1,000 per day.

Leases of terminal facilities quite customarily contain, in addition to the usual grants of estates in land, covenants requiring that the lessee operate the terminal facility according to specified standards and in some instances grant future rights to the lessee. For example, the lease in the Baton Rouge case, above, required that the lessee charge rates “competitive with, and not greater than, rates for similar services and privileges charged at other gulf ports," and gave to the lessee the right of first refusal to lease any similar additional facility which the lessor might construct. The Maritime Board found that these and other cove nants brought the lease within the purview of section 15 and the fifth circuit affirmed.

In due course the Maritime Board informed the Department of Justice of its findings in the Baton Rouge case and the Department brought suit against the lessee for civil penalties due under section 15. As other unapproved leases have been determined to be subject to section 15, the Maritime Board and now the Maritime Commission have informed the Attorney General in order that his Department might take such action as it thought warranted. Several additional suits for civil penalties have been filed.

Thus, lessees and lessors of terminal facilities have found themselves in the position of having entered into long-term leases some years ago which they believed not to be subject to section 15 of the Shipping Act, 1916, but which under the holding of the Baton Rouge case may be subject to that section. The practical choices open to such persons are to submit their leases to the Commission and seek approval knowing that they may be subject to a suit for fairly enormous penalties or not to file their agreements with the hope that they would not be discovered or that they could successfully distinguish between their lease and the Baton Rouge lease.

It is the Commission's position in suggesting the instant bill that, while a sound regulatory purpose is served in requiring that terminal leases which in any fashion limit or control competition be first submitted to the agency for approval, the needs of justice are not served by exacting penalties for past behavior under what amounts to a new or different construction of the law. In short, it is the consensus of the Commission that a new construction of a statute should be given prospective effect and should not result in penalties for past behavior innocently engaged in.

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