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the Maritime Administration for completion and documentation of the new vessel (the Spitfire) on or before August 25, 1962.
Due to the circumstances which I shall detail, the Maritime Administration has extended the date of performance of our contract with it until August 8, 1963.
On October 10, 1961, we received a letter from the Maritime Administration acknowledging the eligibility of the Spitfire under section 901 (b), as amended by Public Law 87–266. The pertinent part of the letter reads 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 E880 Buffalo and E880 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 communication from the Maritime Administration was based upon our contract with it dated August 25, 1961.
In the meantime, in September 1961, the reconstruction of the new hull was begun in a shipyard at La Spezia, Italy, where the Buffalo and the Syracuse were laid up. A single hull (the new Spitfire) was there reconstructed out of portions of both vessels. This phase of the reconstruction was completed during November 1961. The new hull was thereupon renamed the Spitfire. It was immediately placed under U.S. registry and towed to Bilbao, Spain, for conversion to a bulk carrier.
Under the contract with the shipyard in Spain, it was our understanding that the conversion would be completed and the vessel delivered to the General Cargo Corp. at the shipyard early in the spring of 1962, in ample time to comply with the statutory time limit.
Unfortunately, the schedule was not adhered to by the shipyard. Early in 1962, there began a series of labor slowdowns, delays, and mass absenteeisms. Prior thereto, under the present Government of Spain, there had never occurred a strike or work stoppage. In the spring of 1962, there was a widespread industrial strike which lasted a month. This labor cataclysm existed generally in all of the basic industries of northern Spain, not only in shipyards but in steel mills and coal mines. This social upheaval was a force which neither General Cargo Corp, nor any other maritime nor other industrial enterprise could have conceivably anticipated.
Realizing the necessity for completing the work on the Spitfire within the time limit of Public Law 87–266, officials of the General Cargo Corp. visited the shipyard in Spain in an effort to expedite the conversion work. They requested permission from the shipyard management to offer incentive bonuses to the workers. This proposal was turned down. The General Cargo Corp. then offered a bonus to the shipyard management to expedite the delivery of the vessel. This was also refused. As a result of all of the foregoing, it was of course impossible to have the reconstruction completed within the time required by Public Law 87–266.
These strikes and slowdowns, never having occurred before in Spain, were events that could not reasonably or prudently be foreseen by the General Cargo Corp.
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The Spitfire is still in the Spanish shipyard. It can now be brought to the United States. However, the company has been subjected to another serious difficulty. The yard claims that the vessel is finished. The company claims that the vessel has not been completed according to contract specifications. The yard also claims that approximately $700,000 is owed to it. The owners dispute this amount, contending that a lesser sum is due. The yard has refused to release the vessel to permit its return to the United States. The controversy has gone to arbitration in London.
Pending the outcome of the arbitration, in an effort to repatriate the vessel as quickly as possible, the owners of Spitfire have offered to place in escrow in London funds in the sum of $750,000 to secure any possible decision in favor of the yard. The attorneys for the shipowners and the attorneys for the shipyard have already worked out a mutually satisfactory escrow agreement. This arrangement has been accepted by the shipowners. It is anticipated that the yard's authorization to its attorneys will soon be forthcoming, and that the yard will then permit the Spitfire to be returned to the United States forthwith. At this point it should be noted that approximately $400,000 has already been expended for the conversion work.
Besides the above expense the owners will spend about $50,000 to bring the vessel to the United States and an additional $75,000 for wiring and other features required by the U.S. Coast Guard to meet its standards and specifications. This work will be performed in a shipyard in the United States.
I am sure that the committee will agree that the efforts of the owners to complete the vessel and the additional large financial burdens for which it has obligated itself, further evidences the good faith of the owners of the Spitfire in attempting to meet the requirements of Public Law 87–266.
The committee will please note that no U.S. Government funds, Government subsidies, or other assistance such as mortgage guarantees, have been, or are to be involved in the operation of the Spitfire. It is totally a private enterprise and privately financed.
With the consent of, and under contract with, the Maritime Administration secured by a $100,000 bond, the reconstruction of the Spitfire was begun in good faith and as expeditiously as possible so that the vessel could qualify to carry preference cargo.
After a thorough investigation of the facts and circumstances concerning the eligibility of the Spitfire, the Maritime Administration has urged favorable consideration of this bill as in the best interests of the merchant marine policy of the United States. Deputy Maritime Administrator Gulick stated that the Spitfire
* * * 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 would have been reconstructed only with the expectation it would be able to qualify to carry this cargo * * *.
As the Deputy Maritime Administrator testified to this committee, there are three courses that can be followed in regard to the Spitfire:
The first is the enactment of H.R. 2457.
The second is for the Secretary of Commerce to permit the transfer of the vessel from American to foreign registry. This procedure has never been requested by the owners. The owners would never have
retrieved the E880 Buffalo and E880 Syracuse from a foreign scrap heap and then have undertaken to meet the requirements of Public Law 87–266 with the resultant substantial financial commitments, if they had not been sincerely interested in keeping the Spitfire under the American flag.
The third is the possibility that the vessel might be libeled for debt and obligations in a foreign court and sold by a foreign court for foreign-flag documentation without the consent of the Maritime Administration, if the financial situation of the owners becomes wholly distressed.
The Spitfire is an excellent ship. It will be a quality addition to the U.S. merchant fleet. Passage of this bill will not involve any additional competition for vessels presently eligible under the Cargo Preference Act than was contemplated in the original legislation. As Mr. Gulick stated on behalf of the Maritime Administration at hearings last year before the Merchant Marine Subcommittee of the Senate Commerce Committee:
On the basis of testimony given on September 6, 1962, it appears that but for the development of factors beyond the control of the owners, these ships would have been completed and would have qualified before the deadine date under the terms of the existing statute. Furthermore, the extension of time would not increase the competition beyond that authorized by the statute.
The merit of our claim was recognized during the 87th Congress. Last year this committee favorably reported a bill similar to H.R. 2457 on behalf of the Spitfire.
On October 1, 1962, it passed the House on the Suspension Calendar without a record vote. At that time the 87th Congress was concluding its work and no action was taken by the Senate during the closing days of the session.
The facts presented to the 87th Congress in regard to the Spitfire, which resulted in the passage of the bill in the House, hold true today. The Department of Commerce, in asking favorable consideration of H.R. 2457, has again satisfied itself with the merits of the claim.
At present, the need for the relief of the Spitfire is even more urgent than in 1962. This is so because of the dispute with the Spanish shipyard which involves larger and more burdensome financial obligations than those previously incurred. As I have already stated, the owners of Spitfire have undertaken to meet whatever financial requirement is necessary to bring the vessel here as soon as possible.
As Mr. Gulick testified before this committee on June 27, 1963, the only reasonable solution of the problem of the Spitfire would be the enactment of H.R. 2157. It is respectfully requested that this committee concur in that opinion.
I thank the committee for permitting me to make this statement. The CHAIRMAN. Mrs. Sullivan? Mrs. SULLIVAN. I do not have any particular questions, Mr. Chairman, of Mr. Wang, except, Mr. Wang, that from the testimony given the other day by the Maritime Administration and in the statement you are making this morning you did comply with the regulations that were set up in Public Law 87–266 in applying for approval of the Maritime Administration within the time limit set up in that bill, is that not right?
Mr. WANG. That is correct.
Mrs. SULLIVAN. And the only reason that this bill is necessary is because you were not able to have it completed by the September date that was set up in the public law ?
Mr. WANG. That is right. Mrs. SULLIVAN. Back in April of this year, there was an article in, I believe, the Baltimore Sun. I do not have the beginning of the article but only the continuation that was brought over from another page so that I do not know the author of this news article, but, from the tone of it, it looked like you were trying to get this bill passed when you had not properly complied with the regulation under the law as to the date of applying for approval. Then a month later, on May 3, there was another news article in the same newspaper which reversed everything that was said on April 1.
Do you recall those articles ?
Mrs. SULLIVAN. Do you know anything about the author of the news article published on May 3, so that we will know that what was said in the first news release was completely reversed ? Do you know why this change in the author's story?
Mr. Wang. I have invited the author of the second article to the office and also a reporter from the New York Journal of Commerce, and I have gievn them all the facts and data, documents, prints, all kinds of papers, letters, and they were quite satisfied that this is a justified case and, as a matter of fact, the parties who have written about it before have apologized.
Mrs. SULLIVAN. I noticed in the article of May 3 that there was no reference to a previous article that this reporter had written but that the article of May 3 definitely calls for and points out the need of such a vessel as the Spitfire.
Do you recall that the first article really cast reflections on the integrity, I think, of your firm and the Maritime Administration but then, in reading the second article, all that was forgotten and the impression was left to the reader that this was a vessel that should be approved. The reporter got that from the facts, then that you made available to the reporter?
Mr. WANG. That is correct, because the first article was written purely on secondhand information. Mrs. SULLIVAN. Thank you. That is all, Mr. Chairman. The CHAIRMAN. Mr. Tollefson? Mr. TOLLEFSON. Thank you, Mr. Chairman.
It appears to me that the only reason for failure to comply with Public Law 87–266 was the slowdown or sitdown strike in the Spanish shipyard. Except for your shipyard trouble, the ship would have been completed by September 1962, is that right?
Mr. WANG. Yes, sir.
Mr. WANG. The strike was settled about 3 months later. A contract was signed with the workers about 3 months later.
Mr. TOLLEFSON. There is no question in your mind now but what you will get the ship in the near future?
Mr. WANG. We have reached a final agreement. I got a letter yesterday from my lawyers. We have reached a final agreement. As
a matter of fact, I intend to go to London with the money to deposit it with the two attorneys. Mr. TOLLEFSON. I have no further questions. The CHAIRMAN. Mr. Stubblefield ? Mr. STUBBLEFIELD. Thank you, Mr. Chairman. I have no questions.
The CHAIRMAN. Mr. Glenn? Mr. GLENN. I have no questions, Mr. Chairman. The CHAIRMAN. Counsel ? Mr. DREWRY. Mr. Wang, just for the record, were these two vessels actually in the foreign shipyard at the time you conceived the idea of putting them together, or were they still in this country? Mr. WANG. No; they were in Italy. Mr. DREWRY. They were in Italy? Mr. WANG. Yes. Mr. DREWRY. Were they ever documented under foreign flag? Mr. WANG. Yes. When we purchased them, they were under the Panamanian flag.
I would like to add, Mr. Drewry, that we were not obligated to put it under American flag until the vessel arrived here. Mr. DREWRY. I understand that.
Mr. WANG. But we did it on our own the first moment it was one new vessel. We did it on our own voluntarily without any pressure or without any requirement. We did it voluntarily,
Mr. DREWRY. Now, the consent to sale was on February 1, 1961, by Maritime to sell the two vessels abroad for scrap. Mr. WANG. To the Italian company. , Mr. DREWRY. Then in your statement you say:
Shortly thereafter the plan was conceived to make a single shipWhat do you mean by "shortly thereafter"? Was it late February or early March or late March or when ?
Mr. WANG. The moment we found out that Esso had sold these two ships and to whom, I had a man go to Italy to purchase them. That was in late February. I had a man in Italy and he then advised us who bought them, and we subsequently traced it and purchased them.
Mr. DREWRY. Then that was prior to the introduction of the bill, H.R. 6732, which was intended to close the door on that sort of thing?
Mr. Wáng. I would like to make it even more specific that our approval by the American Bureau of Shipping of the plans as I have recited here, the preliminary approval of the plans was long before the bill was introduced. Mr. DREWRY. The bill was introduced on May 1, 1961.
Mr. WANG. And we had approvals of drawings on April 26 or 28 of the same year.
Mr. DŘEWRY. Then at that time, at the time you entered into this project, there was no barrier whatsoever to your taking the foreignflag or even foreign-built ship and putting it under American flag to carry cargo preference cargo; is that right? Mr. WANG. I didn't get the question.
Mr. DREWRY. I say, at the time you entered into this project and conceived the plan to put the two ships together, at the time you got the ABS approval to do that, there was no barrier of any sort to your