ticipate in the carriage of the portion of preference cargo which is reserved for privately owned U.S.-flag commercial vessels.

We have been informed by the owner of the Montauk that the vessel is still in the Spanish shipyard; that it will be completed in May; that the yard estimates that their total bill will be approximately $600,000 before claims; that he has paid them $250,000 of this amount; that the yard estimates that he has valid claims of $90,000 whereas he estimates he has valid claims in three times this amount; that the contract will undoubtedly end up in arbitration and will become involved in lengthy law suits; and that if the vessel is not to be permitted to participate in the portion of preference cargoes which is reserved to privately owned U.S.-flag commercial vessels, he will ask our permission to transfer the vessel to foreign registry.

We have been informed by the owner of the Spitfire that the vessel is still in the Spanish shipyard; that the yard claims the vessel is finished; that he claims the vessel has not been completed according to contract specifications; that he has requested arbitration of the dispute; that the yard has for this reason charged him with anticipatory breach of contract; that the yard claims that $660,000 is due and payable; that he wants to get the vessel released; that he has arranged to have approximately $750,000 placed in escrow in a bank acceptable to the yard; that it would cost him $50,000 to bring the vessel to the United States and an additional $75,000 to bring wiring and some other features up to Coast Guard specifications; and that if the vessel is not to be permitted to carry that portion of preference cargoes which is reserved for privately owned U.S.-flag commercial vessels he will have to ask our permission to transfer the vessel to foreign registry. These vessels cannot be kept in operation under the American flag unless they can participate in preference cargo reserved for privately owned U.S.-flag commercial vessels. It is perfectly clear that the vessels could have been reconstructed only with the expectation that they would be able to qualify to carry this cargo. It appears to us that there are only three courses of action open with respect to these ships. One is for Congress to enact legislation permitting them to carry the portion of preference cargo reserved to privately owned U.S.-flag commercial ships. The second is for the Secretary of Commerce to permit the transfer of the vessels to foreign registry. The third is to do neither of the foregoing and take the risk that the vessels will be libeled in a foreign court and be sold by the court for foreign-flag documentation without our consent.

These are excellent vessels which we would like to have in operation under the American flag. They are far superior to the Liberty ships which comprise most of the American-flag tramp fleet. In view of this, we do not think we should consent to the transfer of these vessels to foreign registry. It appears to us that the only reasonable solution, in the light of the merchant marine policy of the United States, is for the Congress to enact the bills so as to permit these vessels to participate in preference cargo reserved for privately owned U.S.flag commercial vessels.

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

ROBERT E. GILES.

CHRONOLOGY OF NOTIFICATION OF INTENT OR NOTIFICATION OF CONTRACT, AND FILING OF CONTRACT, WITH RESPECT TO THE "GLENBROOK," THE "MONTAUK," AND THE "SPITFIRE," UNDER THE PROVISO TO SECTION 901 (r) oF THE MERCHANT MARINE ACT, 1936

THE "GLENBROOK"

With respect to the Glenbrook, the attorneys for Wall Street Traders, Inc. (the owner of the vessel), on September 8, 1961, filed their letter of the same date with the Maritime Administration stating, in part, that "Arrangements have been made by the owner to convert the vessel to a 23,000-deadweight-ton bulk carrier in the Spanish shipyard, Empresa Nacional 'Bazan'" and that "The vessel will not be transferred to foreign flag, but upon completion, will be documented under U.S. flag and registry." At the end the letter stated, "There is enclosed copy of a letter confirming arrangements with the shipyard, and we are authorized to inform you that it is the owner's intent not to change the registry of the vessel."

Enclosed with this letter was a photostat of a letter dated September 7, 1961, from Jacq. Pierot, Jr. & Sons to Wall Street Traders, Inc., which states, in part, that "this will confirm our telephone conversation of September 1 and

subsequent conversations regarding the jumboizing of your T-2 tanker Glenbrook into a 23,000-ton bulk carrier, and we are pleased to confirm having made such arrangements for you with Empresa Nacional 'Bazan,' in Spain, on the following terms and conditions ***" and that "the yard has advised us that they will shortly send us the complete specifications and proposed contract for your signature."

On October 26, 1961, we wrote a letter to Wall Street Traders, Inc., requesting them to furnish a certified copy of the contract for rebuilding the Glenbrook abroad that was entered into prior to September 21, 1961.

On February 21, 1962, in response to the foregoing request, the attorneys for Wall Street Traders, Inc., filed with the Maritime Administration a letter of the same date stating that though they had notified us in their letter of September 8, 1961, that the reconstruction work would be done by Empresa Nacional "Bazan" that after the letter was filed "it was ascertained that that yard could not guarantee the required delivery"; and that Wall Street Traders, Inc., therefore, "entered into a contract dated September 19, 1961, with Progressive Steamship Corp., Inc., for the conversion of the vessel at the yard of Sociedad Espanola de Construction Naval, Madrid"; and that "as requested in your letter of October 26, 1961, we enclosed an executed copy of the contract between Wall Street Traders, Inc., and Progressive Steamship Corp." and "a photostatic copy of the contract between Progressive Steamship Corp. and the Sociedad Espanola de Construction Naval."

On March 14, 1962, we wrote to the attorneys for Wall Street Traders, Inc., in response to their letter of February 21, 1962, that “it has been determined that the T-2 tanker Glenbrook, if and when reconstructed in a Spanish shipyard as a bulk carrier and if redocumented under U.S. laws on or before September 21, 1962, would be eligible as a privately owned U.S.-flag vessel for the carriage of cargoes under section 901 of the Merchant Marine Act, 1936, as amended by Public Law 87-266, 46 U.S.C. 1241, inasmuch as Wall Street Traders, Inc., owner of the Glenbrook, by letter dated September 20, 1961 [sic] filed its intent to redocument the vessel, after reconstruction in Spain, under U.S. laws." The September 20 date above should have been September 8.

Our foregoing letter was plainly based on the opinion that an American-flag vessel can qualify under subsection (1) to the proviso to section 901 (b). That subdivision is not expressly confined to foreign-flag vessels, and to conclude that it is, by implication, confined to such vessel would be to conclude that Congress intended that an American-flag vessel which had served the same notice required of a foreign-flag vessel to become eligible would nevertheless remain ineligible. We do not believe Congress intended this result. The September 8, 1961, letter of Wall Street Traders, Inc., contained the notice of intent to document under U.S. laws which is required by subdivision (1) of the proviso.

On September 24, 1962, Wall Street Traders, Inc., informed the Maritime Administration that the contract with Progressive Steamship Corp., Inc., for reconstruction of the Glenbrook, dated September 19, 1961, which they had filed with the Maritime Administration was executed in February 1962, and that they had an oral contract with that company for conversion of the vessel which was entered into on September 19, 1961. We have completed our investigation of this matter. The only evidence which we have been able to obtain that there was such an oral contract are the statements of the principal that they entered into such a contract.

With regard to the September 8, 1961, letter which has been referred to above, we have a statement, dated November 7, 1962, which is signed by the president of Wall Street Traders, Inc., and which reads, in part, as follows:

"In September 1961, I was negotiating to have the Glenbrook converted to a bulk carrier through the firm of Jacq. Pierot, Jr. & Sons, in the shipyard of Empresa Nacional 'Bazan' in Spain, and I so advised the Administration through my attorneys, by letter dated September 8, 1961, and planned to keep the ship registered under American flag after conversion. Negotiations with this yard did not materialize in a contract. This situation led to the contract I now have with the Progressive Steamship Corp. under which the Glenbrook is being converted."

THE "MONTAUK"

With respect to the Montauk, the owner of the vessel (Mercantile Steamship Corp.), on August 29, 1961, filed their letter dated August 28, 1961, notifying us that it had a contract for conversion of the vessel in a foreign shipyard.

On

January 24, 1962, in response to our request of October 26, 1961, the owner filed with us a copy of a contract between Progressive Steamship Corp. and a Spanish shipyard for conversion of the Montauk. Our investigation discloses that there was no assignment of the contract from Progressive Steamship Corp. to Mercantile Steamship Corp., but that these two corporations were under common ownership.

THE "SPITFIRE”

With regard to the Spitfire, this vessel is being reconstructed from parts of the Esso Buffalo and Esso Syracuse. On February 1, 1961, we consented to the sale of the latter two vessels to an Italian corporation for scrapping. This corporation applied to us for permission to sell the vessels (instead of scrapping them) to General Cargo Corp., a Delaware corporation, which proposed to construct from them a 25,000-deadweight-ton bulk carrier for U.S.-flag documentation. In consideration for carrying out this proposal, we consented to this sale on August 25, 1961, and General Cargo Corp. contracted with us, on this date, for completion and documentation of the vessel before August 25, 1962. We have extended the time for performance under this contract to June 24, 1963.

On October 10, 1961, we wrote to the attorney for General Cargo Corp. with respect to eligibility under section 901 (b), in part, as follows:

"The Maritime Administration acknowledges the intent of General Cargo Corp. to document, under U.S. laws, a dry cargo bulk carrier to be constructed from portions of the tankers Esso Buffalo and Esso Syracuse. In that connection, it is requested that General Cargo Corp. furnish the Maritime Administration with a certified copy of the executed contract with the shipyard for the construction of the new ship."

This letter is based upon General Cargo Corp.'s August 25, 1961, contract with the Maritime Administration, and upon our opinion (for the reasons stated in our discussion of the Glenbrook) that this vessel is eligible to qualify under subdivision (1) of the proviso to section 901 (b).

On November 9, 1961, General Cargo Corp. filed, with the Maritime Administration, a copy of an assignment to it, dated August 16, 1961, of a contract between Progressive Steamship Corp., Inc., and a Spanish shipyard, dated August 2, 1961, for the conversion of the Esso Buffalo or substitute vessel.

STATEMENT OF J. W. GULICK, DEPUTY MARITIME ADMINIS-
TRATOR; ACCOMPANIED BY ROBERT J. ABLES, GENERAL
COUNSEL, MARITIME ADMINISTRATION, DEPARTMENT OF COM-
MERCE

Mr. GULICK. Yes, Mr. Chairman. Thank you.
The CHAIRMAN. You may proceed.

Mr. GULICK. My name is James W. Gulick. I am Deputy Maritime Administrator and I am appearing today as Acting Maritime Administrator in the absence of Mr. Alexander who is out of the city. With your permission, I am accompanied by Mr. Robert J. Ables, our General Counsel.

The bill would provide that the vessel Spitfire, owned by General Cargo Corp., shall be deemed to be a "privately owned U.S.-flag commercial vessel" for the purposes of subsection (b) (the cargo preference statute), section 901 of the Merchant Marine Act, 1936, not withstanding the time limitations in the last sentence of such subsection if such vessel is documented under U.S. registry on its first arrival at a U.S. port.

Section 901 (b) of the Merchant Marine Act, 1936, as amended by Public Law 87-266, provides that for purposes of determining eligibility for participation in cargoes reserved for "privately owned U.S.flag commercial vessels" under that section the term "privately owned U.S.-flag commercial vessels" shall not be deemed to include any vessel which, subsequent to the date of enactment of that amendment

(September 21, 1961), is documented under foreign laws, or is rebuilt outside the United States, until such vessel has been documented under the laws of the United States for a period of 3 years.

The section, as amended, contains a proviso which makes an exception to the foregoing exclusion if prior to the enactment of the amendment (September 21, 1961), (1) the owner of a vessel, or contractor for the purchase of a vessel, originally constructed in the United States and rebuilt abroad or contracted to be rebuilt abroad, has notified the Maritime Administration in writing of its intent to document such vessel under U.S. registry, and such vessel is so documented on its first arrival at a U.S. port not later than 1 year subsequent to the date of enactment of the amendment, or (2) the owner of a vessel under U.S. registry has made a contract for the rebuilding abroad of such vessel and has notified the Maritime Administration of such contract, and such rebuilding is completed and such vessel is thereafter documented unde U.S. registry on its first arrival at a U.S. port not later than 1 year subsequent to the date of enactment of the amendment. For the reasons hereinafter stated, we recommended favorable consideration of the bill.

The Spitfire is being reconstructed from parts of the Esso Buffalo and Esso Syracuse. On February 1, 1961, we consented to the sale of the latter two vessels to an Italian corporation for scrapping. This corporation applied to us for permission to sell the vessels, instead of scrapping them, to General Cargo Corp., a Delaware corporation, which proposed to construct from them a 25,000-deadweight-ton bulk carrier for U.S.-flag documentation.

In consideration for carrying out this proposal, we consented to this sale on August 25, 1961, and General Cargo Corp. contracted with us, on this date, for completion and documentation of the vessel before August 25, 1962. We have extended the time for performance under this contract to August 8, 1963.

On October 10, 1961, we wrote the attorney for General Cargo Corp. with respect to eligibility under section 901 (b), in part, as follows: The Maritime Administration acknowledges the intent of General Cargo Corp. to document, under U.S. laws, a dry cargo bulk carrier to be constructed from portions of the tankers Esso Buffalo and Esso Syracuse.

In that connection, it is requested that General Cargo Corp. furnish the Maritime Administration with a certified copy of the executed contract with the shipyard for the construction of the new ship.

This letter is based upon General Cargo Corp.'s August 25, 1961, contract with the Maritime Administration, and upon our opinion that this vessel is eligible to qualify under subdivision (1) of the proviso to section 901 (b).

That subdivision is not expressly confined to foreign-flag vessels and to conclude that it is by implication confined to such vessels would be to conclude that Congress intended that an American-flag vessel which had served the same notice required of a foreign-flag vessel to become eligible would nevertheless remain ineligible. We do not believe Congress intended this result.

On November 9, 1961, General Cargo Corp. filed with the Maritime Administration a copy of an assignment to it, dated August 16, 1961, of a contract between Progressive Steamship Corp., Inc., and a Spanish shipyard, dated August 2, 1961, for the conversion of the Esso Buffalo or substitute vessel.

If the Spitfire had returned to a U.S. port and been redocumented under U.S. laws on or before September 21, 1962, we would have certified that it is a privately owned U.S.-flag commercial vessel for purposes of section 901 (b) of the act.

We have been informed by the owner of the Spitfire that the vessel did not return to the United States prior to September 21, 1962, because of a strike in the Spanish shipyard; that the vessel is still in the Spanish shipyard; that the yard claims the vessel is finished; that he claims the vessel has not been completed according to contract specifications; that he has requested arbitration of the dispute; that the yard has for this reason charged him with anticipatory breach of contract; that the yard claims that $660,000 is due and payable; that he wants toget the vessel released; that he has arranged to have approximately $750,000 in escrow placed in a bank acceptable to the yard; that it would cost him $50,000 to bring the vessel to the United States and an additional $75,000 to bring wiring and some other features up to Coast Guard specifications; and that if the vessel is not to be permitted to carry that portion of preference cargoes which is reserved for privately owned U.S.-flag commercial vessels he will have to ask our permission to transfer the vessel to foreign registry.

This vessel cannot be kept in operation under the American flag unless it can participate in preference cargo reserved for privately owned U.S.-flag commercial vessels. It is perfectly clear that the vessel could have been reconstructed only with the expectation that it would be able to qualify to carry this cargo.

It appears to us that there are only three courses of action open with respect to this ship. One is for Congress to enact legislation permitting it to carry the portion of preference cargo reserved to privately owned U.S.-flag commercial ships.

The second is for the Secretary of Commerce to permit the transfer of the vessels to foreign registry. The third is to do neither of the foregoing and take the risk that the vessel will be libeled in a foreign court and be sold by the court for foreign-flag documentation without our consent.

This is an excellent vessel which we would like to have in operation under the American flag. It is far superior to the Liberty ships which comprise most of the American-flag tramp fleet. In view of this, we do not think we should consent to the transfer of this vessel to foreign registry.

It appears to us that the only reasonable solution, in the light of the merchant marine policy of the United States, is for the Congress to enact the bill so as to permit the vessel to participate in preference cargo reserved for privately owned U.S.-flag commercial vessels.

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

Mr. Chairman, this concludes my statement.

The CHAIRMAN. Mrs. Sullivan?

Mrs. SULLIVAN. I haven't any question of Mr. Gulick, Mr. Clairman. I studied the report they sent in at an earlier date and I feel there is every reason for this bill to be enacted.

The CHAIRMAN. Mr. Mailliard?

Mr. MAILLIARD. I yield to Mr. Tollefson.