7 bringing back under American flag the vessel which had been converted abroad? Mr. WANG. None, sir. Mr. DREWRY. And which had even been under foreign flag? Mr. DREWRY. That is all, Mr. Chairman. The CHAIRMAN. How many ships does this corporation, General Cargo, operate? Mr. WANG. Through affiliations, six ships. The CHAIRMAN. Under the name of "General Cargo"? Mr. WANG. No; just this single ship. The CHAIRMAN. The Spitfire is the only ship owned by this General Cargo Corp.? Mr. WANG. That is correct, sir. The CHAIRMAN. That is all. Thank you. The next witness is Mr. Marvin Coles. All right, Mr. Coles. STATEMENT OF MARVIN J. COLES, ATTORNEY, WASHINGTON, D.C., Mr. COLES. Mr. Chairman, for purposes of the record, may I say that my name is Marvin Coles. I am an attorney having offices in Washington, and I appear today in opposition to this bill on behalf of Penn Shipping Co. & Affiliates, and Cargo Ships & Tankers, Inc. Both of these companies own American-flag vessels. I have a prepared statement, Mr. Chairman, which I hope may be STATEMENT BY MARVIN J. COLES, COUNSEL, PENN SHIPPING Co. & AFFILIATES, My name is Marvin J. Coles. I am an attorney having offices in Washington, My clients oppose this bill not because of ill will toward its proponent, but because of the adverse economic effect which its enactment would have upon their vessels. If this bill were to be enacted and the Spitfire permitted to carry 50-50 cargoes, it would mean that existing American-flag vessels of smaller size and speed would be required to go into layup. It would further mean that additional American seamen would become unemployed and that construction in American shipyards would be discouraged. It would give the owner of the Spitfire an unwarranted benefit to which my clients believe his actions do not entitle him. More important, however, such unwarranted benefits to the owner of the Spitfire would be to the detriment of existing American shipowners, seamen, and shipyards. The proponents of this legislation seek to give the impression that, through no fault of their own, they have been deprived of certain statutory rights. Therefore, they ask that these statutory rights be extended as a matter of equity. My clients do not view this situation in this light. The "rights" of the proponents under existing law expired over 9 months ago. They are now asking Congress to enact new legislation to give them a special privilege not given to others. We therefore suggest that the burden is upon the proponents to show, with a preponderance of the evidence, that they have affirmatively acted so as to be entitled to this special treatment. More important, we believe the burden is upon them to show that others will not be hurt. Pursuant to 901 (b) of the Merchant Marine Act, 1936, as amended, privately owned American-flag vessels are required to be used to carry at least 50 percent of Government-financed aid cargoes. These 50-50 cargoes are the backbone of the American tramp fleet and most important to American tanker and liner operators. In 1961, it became evident that many people were documenting under American registry foreign vessels and vessels rebuilt abroad in order to take advantage of the 50-50 cargoes. The result of such redocumentation was an overtonnaging of the American market with serious detriment to owners of American-flag ships, American labor, American shipyards, and American shipyard workers. Accordingly, Congress considered legislation to provide that all vessels which were foreign built, foreign rebuilt, or under foreign registry, which were subsequently put under U.S. registry after the enactment of the proposed legislation, would not be entitled to 50-50 privileges. During the course of hearings on that legislation, testimony was introduced by several American owners that they had contracted abroad to rebuild their vessels but that they would not be completed in time to be documented under American flag by the date of enactment. Accordingly, the Congress approved an amendment which provided a year of grace in which to bring back these vessels. The owner of the Spitfire had until September 21, 1962, in which to redocument the ship under the American flag. Had this been done, the vessel would have had 50-50 privileges: it was not done. Last year, the owner of the Spitfire and the owners of two other vessels came before this committee to request that the date in which they could redocument the vessels and retain 50-50 privileges be extended. The Maritime Administrator testified (p. 24 of the transcript) that: "We think these vessels should be returned to the United States for documenting prior to December 31; we see no reason why the delays should not have been compensated for in this extension of time from September 21 to December 31." This committee and the House passed a bill covering the Spitfire which would have granted this extension until December 31, 1962. Now, however, the proponents of the pending legislation ask for an indefinite extension of time in which to redocument this vessel. But while they ask for this extension, we know of no further grounds for granting such extension beyond the December 31, 1962, date previously specified by the Maritime Administrator and this committee. As Mr. Alexander testified last year, the delay caused by the strikes upon which the proponents relied last year had certainly been more than made up by December 31. Over 7 months have elapsed since December 31, and the Spitfire is still not ready for documentation. My clients have asked me to state that they have no desire to injure or prejudice the owner of the Spitfire. While they do not have any objection to his getting what he is normally entitled to as an American owner, they do not wish themselves to be prejudiced through special legislation benefiting him. May we point out that the Spitfire, with a speed of over 14 knots and a carrying capacity of close to 25,000 tons deadweight, would replace three American-flag Liberty ships, or two Victories or C-2's, or almost two T-2's. This would mean that, with the limitation on the volume of cargo available to American-flag ships, the operation of this vessel would put into layup three Liberties or a lesser number of other types. Parenthically, let me add that when Mr. Wang chartered the Spitfire last year, three American Liberties were at that time expressly denied 50-50 cargoes. It was only when the Spitfire was unable to tender that the three Liberties were taken to carry such cargo. Thus we have actual proof of what the reintroduction of this vessel would mean to existing American ships and their owners. American labor would also be hurt by the redocumentation of the Spitfire with 50-50 rights. While the Spitfire would probably employ about 50 men, it should be noted that the 3 Liberties which it would replace employ approximately 120. Thus, approximately 70 American seamen would be put on the beach if this special legislation were to be enacted. Moreover, may I point out that American shipyards will build the vessels which are required for the American merchant marine. Were the Spitfire to be given 50-50 privileges after being rebuilt in a foreign yard, it would mean that one less vessel would be built in an American yard. But perhaps even more important, it would mean that American owners would be discouraged from building unsubsidized vessels in American yards so long as there is the possibility of special legislation which would permit ships built or rebuilt in foreign yards to be documented with rights to carry 50-50 cargoes. Our shipyards will lose this business and, as a result, our shipyard labor will lose jobs. Under existing law, the Spitfire is not entitled to carry 50-50 cargoes as an American-flag vessel. The vessel's owner asks that this privilege now be given to the ship as a matter of "equity." But may I point out that the owners must show that it is not only equitable to them, but that it is also equitable to other Americans. As we have pointed out, this bill would give a great benefit to the owners of the Spitfire, but it would be inequitable to other American shipowners, shipyards, and labor. We submit that no equity can thus be shown in support of the bill. If foreign-built vessels could be documented under the American flag with 50-50 privileges, there are many people who would be delighted to bring such ships into the American merchant marine. Such ships could be better than the Spitfire. The Congress, however, has decided, and we believe most rightfully, that foreign-built and foreign-rebuilt ships should be kept out. The Spitfire merely falls into this category of the foreign-rebuilt ship, and we suggest that there is no reason for a special exemption in this case. In these presentations last year, the owners of the Spitfire stated that strikes delayed the completion of the vessel: it is possible that strikes did so. But the Maritime Administrator clearly pointed out to this committee that the extension of the period for redocumentation until the end of 1962 was ample to make up for any strike delay. The question arises as to what new reasons have arisen for the further delay. We know of no reasons. My clients are of the opinion that the delays in the delivery of the Spitfire are largely the result of the action of the vessel's owner. In this connection, may I say that the evidence which we have is second hand. While we believe it is correct, the proponents of the legislation and the vessel owner are here present and thus can answer if there is any error. We are of the belief that the reason for the long delays is the failure of the owner of this vessel to meet his payment schedules to the yard. In the hearing held before the Senate Committee on Commerce last September 6, 1962, Mr. Wang testified that the total price to be paid to the yard on the Spitfire, would be about $1.1 to $1.2 million. He stated that on the Spitfire he then owed $903,000 to the yard (Senate transcript, pp. 42 and 43). It would appear, therefore, that Mr. Wang had paid to the Spanish shipyard only a small proportion of the total contract. We are informed, and I again emphasize that this is second hand, that the Spanish yard refused to perform because of the fact that they were not paid. Mr. Wang has alleged that matters were in dispute. It would appear, however, that there was a great deal of unpaid money, and one would doubt that the amount of any dispute could be in the neighborhood of 80 percent of the total contract price to the yard. According to the report of the Department of Commerce to this committee, they are informed by the owner of the Spitfire that the vessel is not completed according to contract specifications, although the yard claims that the vessel is finished. Mr. Wang has now apparently arranged to have approximately $750,000 placed in escrow in a bank acceptable to the yard so that payments can be made. We would suggest the questions be placed to Mr. Wang as to when his financial arrangements were made, and why they were not made sooner. Also, we wonder if this letter of credit arrangement is contingent on this legislation being enacted. We also think that the shipyard's version of the story should be sought. This bill would result in a windfall to the owners of the Spitfire. In his testimony before the Senate, Mr. Wang stated that the total cost of the vessel would be approximately $1,800,000. We are told by a well-known ship sale broker that the present market value of this ship under American flag, with privileges to engage in the carriage of 50-50 cargoes, would be approximately $2,500,000. We are further informed that the value of this vessel under foreign flag would only be the amount of approximately $1,500,000. This in large measure explains the great desire of the vessel's owners to see "equity" done. As for the question of who gets the windfall, we have been told that the owner of the stock of General Cargo Corp. which owns the Spitfire, is a moneylending company called Empire Commercial Corp. and not Mr. Wang. We believe that this matter should be be determined in view of both the size of the windfall sought and the question of to whom should "equity" be done. May we also point out that the delay in the delivery of the Spitfire also results from the selection by its owner of a Spanish shipyard. We are informed the Spanish yards are well known to be slow in the performance of work. They are among the world's low-cost yards: work can be performed in Spanish yards at a lesser cost than elsewhere in Europe because of low wage scales. Last year, testimony was given that pay was as low as $25 a week for a skilled shipyard worker. The committee will note that the original work in joining the two vessels was done in Italy, but that the vessel was then towed to the Spanish yard in order to get the lowest possible contract price. With low cost came slow speed in delivery. This was a gamble the owner lost. Is that owner to be bailed out of his lost gamble to the detriment of others in our shipping industry? Since last year, we know of no further delays in the Spanish yards which would have resulted in an additional 7 months' delay past the December 31, 1962, deadline which this committee approved last year. Moreover, we believe that there will still be a substantial period of time before the Spitfire can be brought to the United States, pass Coast Guard requirements, and be documented as an American-flag ship. What the proponents of the bill seek are an indefinite right to document under U.S. registry and still get 50-50 privileges. May we point out that the U.S. Merchant Marine will not suffer by refusing to pass this bill. The Spitfire is an American ship: it cannot be transferred foreign without the approval of the Maritime Administration. If brought back to the United States, it can engage in trades other than 50-50 for a period of 3 years. At the end of the 3 years it will entitled to all 50-50 privileges. The basic question is that whether during these 3 years the owner of the Spitfire should be required to take the financial loss which would probably result, or whether owners of other American ships should be required to take that loss. We respectfully submit to the committee that it should be the owners of the Spitfire, and therefore that this legislation should not be enacted. Basically, the question before the committee is whether or not Public Law 87-266 is sound legislation. That amendment determined that only American ships, built or rebuilt in American yards by American shipyard workers, should be privileged to carry the American portion of 50-50 cargoes. We believe that legislation was and is sound policy, necessary to encourage the development of our American merchant marine and American shipyards. The pending bill would just be one of a long line of exceptions to that policy were it to be enacted. If it were determined, and we believe it should not be, that foreign-built ships should have 50-50 privileges when documented under U.S. registry, then let us have a policy statement to that effect letting the bars down to all. But may we respectfully suggest instead that a policy as valid as limiting 50-50 cargoes to American built and rebuilt ships not be weakened or avoided by enactment of H.R. 2457. Mr. COLES. Mr. Chairman, we oppose this bill not because of ill will but because of the fact that enactment of this bill will directly injure my clients. It will result in the layup of an equivalent amount of tonnage of other ships. It will also result in American seamen being unemployment and will result in the American shipyards being prejudiced. The CHAIRMAN. You say it will result in American seamen being unemployed? Mr. COLES. Precisely, Mr. Chairman. If you like I can answer that. The CHAIRMAN. We are going to put this ship under American flag. Mr. COLES. Mr. Chairman, yes, but may I say how that works? We now have an almost complete dependence upon 50-50 cargoes by the American-flag tramp fleet and to a large extent by the Americanflag tanker fleet. The American-flag liners require this 50-50 cargo. There is only so much of it and, to the extent that there are more ships than there are cargoes to carry, those ships must go into layup. The last report I have from the Maritime Administration, which is dated March 31 but came to my desk only in the past week, shows that at the end of March there were 13 tramp ships laid up under the American flag for lack of business. Mr. Earl Smith, who will testify later, tells me today that there are 12 tramp ships laid up for lack of business. What will happen is that the Spitfire with its 25,000 tons deadweight and its speed of over 14 knots has a carrying capacity in excess of three Liberty ships and by coming into the trade with the limited amount of cargo it will replace three Liberty ships. That means that the owners of these three Liberty ships suffer financially. From the labor point of view, I would estimate that the Spitfire will employ perhaps 50 men. Each of the Libertys employed 40 men for a total of 120 men. As a result, there will be a net loss of jobs of 70 men. As far as the shipyards of America are concerned, they build and rebuild those vessels needed for the American-flag merchant marine. The CHAIRMAN. That is all right, Mr. Coles. I did not want to go into a long discussion. I understand that. Mr. COLES. Now, Mr. Chairman, this is basically special-privilege legislation. The vessel today has no rights. They are asking that "equity" be done, but by doing equity they are doing inequity to my clients. May I suggest, therefore, that the burden is upon the proponents of this legislation to prove by a clear preponderance of evidence both, (a) that equity requires this be done to them and (b) that no inequity will be done to others. I have already spoken, Mr. Chairman, of the 50-50 cargoes importance. You will recall that back in about 1961, we ran across a situation where many, many foreign-flag ships, foreign-built ships and foreignrebuilt ships, were coming back under American registry in order to take advantage of the 50-50 cargoes. This resulted in a great overtonnaging of this trade and the Congress most wisely decided that this should not be permitted. However, during the hearings, you will recall certain owners came in and said, "We have already made commitments. We have notified the Maritime Administration of these commitments and we will not be able to document these vessels because they won't be completed by the time this legislation becomes law." Accordingly, the Congress added a 1-year period of grace. Now, this was for bona fide owners in order to permit those who had made commitments to come back in. Last year, the owners of the Spitfire came before this committee and stated that they had made these commitments and that the vessel would have normally come back by the September 21, 1962, cutoff date but that, because of strikes in the Spanish shipyard, they could not do it. Perhaps there were strikes, perhaps they caused delay, but may I invite the committee's attention to the statement by the Maritime Administration before this committee where it states: We think these vessels should be returned to the United States for documenting prior to December 31; we see no reason why the delays should not have been compensated for in this extension of time from September 21 to December 31 which is of last year. In other words, Mr. Chairman, whatever delays occurred in the strikes were compensated for by the extension of slightly over 3 months |