that could be done and many ships did come in. We never had any objection nor would we have the right to take any objection.

Repeating what I said to Mr. Tollefson, we object to this ship coming in a year after the expiration date.

Mr. STUBBLEFIELD. That is all.

The CHAIRMAN. Mr. Glenn?

Mr. GLENN. Sir, on the first page of your statement, you say that if we pass this bill it will cause smaller American vessels to lay up and cause unemployment of American seamen. Would not the same situation develop if we built new ships in American yards to compete with these ships?

Mr. COLES. Mr. Glenn, it would and, in all candor, I hope we will build new ships because we cannot stand in the way of progress and I don't advocate standing in the way of progress. If anyone comes in to build a new ship of 50,000 tons and 141⁄2 knots in an American shipyard, I would say "hurrah," and I think my clients would, although it might hurt.

What we object to is special legislation to permit a foreign-built vessel to come into this country contrary to congressional enactment. Mr. GLENN. Then the arguments you make in your statement are not too important.

Mr. COLES. No; they are the reason why we are against the bill. In other words, we cannot stand in the way of people acting within the law, people building ships under the law. We have no recourse. We may bite our fingernails. But the economic factor is what determines our opposition to the bill. We are hurt severely in the pocketbook nerve. We would be driven out of business by special-privilege legislation and we do not feel that is fair.

Mr. GLENN. You will be driven out of business by competition, too, will you not?

Mr. COLES. When it comes. It hasn't come. It will come and when it does there is nothing we can do except build, but how can we build to compete with this vessel? You cannot build in an American yard a vessel for anything like $1,800,000. Not only are we hurt today but we are hurt tomorrow because we can't build a ship to compete with this in an American yard.

Mr. GLENN. That is all. Thank you, Mr. Chairman.

The CHAIRMAN. Mr. Drewry?

Mr. DREWRY. Mr. Coles, you keep referring to special-privilege legislation. Was not the Public Law 87-266 itself special-privilege legislation?

Mr. COLES. No, sir. I don't think so. Quite the contrary. And I say that for two reasons: It was a law of general applicability affecting everybody in the shipping industry equally.

Secondly, the proviso clause affected everybody in the same condition equally.

The legislation itself was for a public purpose, to protect American shipyards and to protect American shipowners against the competition of foreign-built and foreign-rebuilt ships coming in and robbing the 50-50 cargo.

Mr. DREWRY. It was limited only to cargo preference law. It was not limited to other operations.

Mr. COLES. That is completely true, and I think the reason for that is that cargo preference laws are the backbone of the unsubsidized

segment of the American merchant marine and are a very important part of the revenues of the subsidized section.

Mr. DREWRY. But it was not general in the sense that it was broadened to the point that it included the coastwise prohibition. It was limited only to cargo preference and limited to a period of 3 years. Mr. COLES. Mr. Drewry, the coastwise preference prohibiting foreign rebuilt or converted ships was on the books, as I recall, a year or two years before that, and that is absolute.

Under the Public Law 87-266, provision was made that if someone wanted to bring a vessel back and keep it out of the 50-50 trade for 3 years it could after the 3 years have 50-50 privileges and we have no objection to that. If Mr. Wang brings this vessel back at the end of 3 years he is just like anybody else and we can't yell. But it was not special privilege legislation because it did not deal with one ship but dealt with everybody in the merchant marine identically. Mr. DREWRY. In a specific class?

Mr. COLES. It dealt with only those brought back from foreign register.

Mr. DREWRY. To a limited class and a limited type of trade.

Mr. COLES. All legislation is so limited. I don't want to use semantics.

Mr. DREWRY. I do not want to belabor this, either, but as to the provisos, let's say that the basic part of the law prohibiting the carriage of cargo preference cargoes on foreign-rebuilt ships is general legislation. Aren't the provisos which were added by amendment in hearings special-privilege legislation?

Mr. COLES. No. They were legislation which covered everybody. As I recall there were some 30-odd ships involved in that. It covered all of those people equally and everybody who met the congressional requirements was in.

Mr. Wang's ship did not meet the requirements.

Now he is saying, "I want a special exception so that for me you will extend this date which was the limit for everybody else."

Mr. DREWRY. There were also several others who wanted to do the same thing.

Mr. COLES. There were two other ships.

Mr. DREWRY. In your testimony on the basic legislation, you say:

May I say, Mr. Chairman, that while we support this bill completely, as being necessary for American shipping, American seafaring labor, American shipyards, and also for American shipyard labor, we would like to suggest and support an amendment. This amendment is made necessary by the fact that under existing law certain American owners have made commitments to rebuild ships abroad. These people are bound by contract. In some cases, they will not be eligible in the sense they will not be completed in time to be redocumented, and hence, this means that this amendment would protect these people who prior to date of enactment of this law have notified the Maritime Administration of their intent to bring it back, have entered into contracts for the repairing, and on the first arrival of that vessel at an American port, no more than 12 months after passage of this act, it is documented or redocumented United States.

The chairman asked a question in regard to the exemption for the operators who had already contracted for rebuilding. Then it goes

on:

Mr. COLES. We cannot see how a vessel which has previously been redocumented under existing law could be deprived of the right to operate as a normal American vessel. There would be in the back of my mind a constitutional

objection to that. This bill, Mr. Pelly, only would affect vessels which are redocumented after its enactment and not those which have previously been brought in. This is merely a carryover for it. What this provides is, and I believe that there is a maximum of 15 ships involved, that people who have actually made commitments, who before this bill became law notified Maritime of their intent to redocument, should not be barred from coming under. It is just common fairness.

Now, this amendment which you offered was to take care of a special situation of a handful or a couple of handfuls of people who had made commitments.

Are you denying that there was any slowdown or difficulty in the Spanish yard?

Mr. COLES. Mr. Drewry, no. In the first place, I was advocating and still advocate the amendment. In other words, I stand by what I said. That was that there were a number of vessels which I then estimated at 15 which had made commitments. It subsequently turned out, I believe, that there were over 30, and I felt and do feel that we were correct in so stating that there should be 1 year of grace for them to come in.

I am going to assume that Mr. Wang's vessel was one of the 30. So he should have been able to come in.

I agree that there may have been strikes in the Spanish yard, but I think, as the Maritime Administrator points out, those strikes did not delay the vessel more than 3 months and 10 days.

Now what I say is that that law of general applicability to the 15 or 30 ships was fair and reasonable. It protected people, including Mr. Wang. Now Mr. Wang says, "No, we want another law which strikes out the September 21, 1962, deadline which is applicable to every one of these other ships and gives me an indefinite period in which to bring it in."

Mr. DREWRY. If there had been 15 ships that were caught in the Spanish industrial slowdown, would that have made it general legislation?

Mr. COLES. Sir, it could have, but only a few ships chose the lowcost Spanish yards and the slow yards. Others were built in Japan and Germany and elsewhere at higher costs, I presume, and were delivered on time.

Mr. DREWRY. Mr. Coles, do you know anybody in the shipping industry who has the opportunity to choose a lowest cost yard that would do the work that will not choose it?

Mr. COLES. I daresay that every one would look for the lowest cost shipyard that could do the work properly. Now, when you have a time limit, Mr. Drewry, I would much rather go to a yard which has a reputation for delivery and pay more than take the risk of a cheaper price and a possible delay.

Now, if I did take the risk of a possible delay in order to get a cheaper price, I think I must reap the rewards of my folly, if you will. Mr. DREWRY. Now, you have made the point that you thought this was terrible that Mr. Wang should be coming in a year or more after the expiration of the date. You are aware of the fact that there was a bill last year which was introduced and considered actually to some extent prior to the expiration of the date?

Mr. COLES. I can't recall the precise time. You will recall that there were bills introduced on the Montauk and Glenbrook.

Mr. Wang proposed an amendment when hearings were first held on the Senate side. The House hearings were held in July, September, and October, and I think that the hearings on this bill were the September hearings but I am not certain, Mr. Drewry. I could check it.

Mr. DREWRY. I do not think that that lack of timeliness, if there is any, would be attributed to this bill. True, it is coming up a year later but it was reintroduced in January.

Mr. COLES. Mr. Drewry, that is not my objection.

Mr. DREWRY. You made the point.

Mr. COLES. No, sir; I don't make that point.

I make the point that, if the strikes caused the delay until December 31 of last year, I can't argue with that and at least Mr. Wang can say there is some equity; but the delay from December 31 to now and the extra months, and I am told it will be many before the ship is delivered, cannot be attributed to the strike. It cannot be attributed to the bill. It cannot be attributed to anything which justifies extending the date. Mr. DREWRY. Well, that is a matter of another problem. It well could have been attributed to the bill.

Mr. COLES. Mr. Drewry, if you are saying that because Congress failed to act I can blame the Congress, I do not agree with that.

Mr. DREWRY. No, I do not think you can but I think there is a question of business judgment. If a man has gone off in one direction anticipating that the law was going to remain the same and then found a barrier, then he might well have to make some readjustments in his own thinking as to what he would do from there on.

Mr. COLES. Mr. Drewry, a man has made a contract. He must live up to his contract.

What you have here is a situation in which, since last September, apparently work has been progressing, but payments have not been made. There have been disputes. Now, I would like to see a copy of the contract. I think the committee should find out what the yard's position is, when was this money first offered by Mr. Wang to get the yard to deliver. Once you have made the contract, once you have taken the risk, taken the loss, you can't afford to do anything but go ahead.

Mr. DREWRY. I do not think it is up to the legislation to attempt to enforce or not enforce the contract.

Mr. COLES. I say the burden of proof is on him who asked the Congress to give him special legislation.

Mr. DREWRY. You keep referring to the shipyards and to American labor. We have given full notice of the holding of these hearings and have not heard from representatives of either the shipyards or seagoing labor.

According to the committee report, the purpose of the original bill was to provide an incentive to American tramp operators to build and replace their fleets in American yards. How many ships have your clients rebuilt or built new by way of replacements since the enactment of the original legislation?

Mr. COLES. At the present time I only know of one application for new building. I know of two rebuildings. I am not counting the midbody, Mr. Drewry. There is presently pending the AP-5 program with the Maritime Administration which obviously will be hurt by this because you can't buy a 14,000 tonner for $2 million and compete with a 25,000 tonner.

Mr. DREWRY. My question is, How many tramps have your clients built by way of new replacements since the enactment of the original legislation in August of 1961?

Mr. COLES. I only know of two, and it is not these particular clients, it is other clients.

Mr. DREWRY. That is all, Mr. Chairman.

The CHAIRMAN. Mr. Coles, what would happen if this bill failed to pass? What would be the situation with respect to this ship?

Mr. COLES. I would say this, Mr. Chairman: I am going to assume that Mr. Wang would pay his obligations under his contract to the Spanish shipyard because he has to. He says he has the money and has made a letter of credit so I would assume the possibility of a foreign foreclosure is out the window. That would mean the vessel would come back to the United States as an American-flag vessel. Mr. Wang would have to seek cargoes for that vessel other than 50-50 cargoes.

I am told he is seeking to get military cargoes for the ship on the argument, which may or may not be valid, that he can carry that. He would also have to seek whatever cargoes there are for an American vessel. I daresay he would take a loss. That is my best guess. For 3 years he would take a loss.

The question is, Does he take a loss or do other people have to lay up ships and take the loss? That is the basic issue here, Mr. Chairman. ican vessel. I daresay he would take a loss. That is my best guess. The CHAIRMAN. Are there any other questions?

Thank you, Mr. Coles.

Mr. COLES. Thank you.

The CHAIRMAN. The next witness is Mr. Shapiro.

STATEMENT OF ALVIN SHAPIRO, VICE PRESIDENT, AMERICAN MERCHANT MARINE INSTITUTE

Mr. SHAPIRO. Mr. Chairman, I will be extremely brief, with your permission. My name is Alvin Shapiro and I am vice president of the American Merchant Marine Institute.

There is, of course, no question that this bill represents specialized legislation to extend the privilege to an individual operator. I want to make it crystal clear, however, that we do not believe in being punitive for its own sake but we oppose this legislation for a variety of reasons already presented to the committee and for one particular reason which impresses us greatly. This reflects on the claim of the carrier that for reasons completely beyond his control, the Spitfire could not return in time to qualify under section 901 (b) of the 1936 act as an American carrier.

We are not an investigatory agency. We do believe, however, after examining the record most carefully, that there was no timely contract for the construction of the Spitfire from hulls of the Esso Buffalo and the Esso Syracuse. Now, this is of utmost significance.

Now, it is true that there was a timely contract for the alteration and jumboizing of the SS Buffalo or substitute and another contract for the alteration and jumboizing of the Esso Syracuse as individual vessels. These contracts were not made by the applicant, General Cargo Carriers, but were assigned to it by Progressive Steamship Co., which had the original contract.