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MOORE-McCORMACK LINES, INC. Inspection and supervision, administrative expenses and travel, engineering serv

ices and delivery of vessels to east coast of the United States in connection with the construction of 2 cargo vessels at Todd Shipyards Corp., San Pedro,

Calif., contract FMB 7172, dated Feb. 14, 1958
Cost to Moore-McCormack Lines, Inc. :

Shipboard inspection and supervision---------- $165, 804. 53
Less construction subsidy, at 45.20 percent ---- (74, 943. 65)

- $90, 860. 88 Administrative expenses and travel:

New construction employees at San Pedro------ 12, 828. 78
Less construction subsidy, at 45.20 percent--- (5, 798. 61)

1

Difference

7, 030. 17 Other employees --

2, 191, 49

9, 221. 66 Engineering services:

Total paid to X-ray Engineering International - 25, 943. 00
Less construction subsidy, at 45.20 percent ----- (11,726. 24)

14, 216.76
Delivery of vessels to east coast :
SS Mormaccape, hull 69–74, delivered by Todds
Jan. 27, 1961.--

65, 612. 62
SS Mormacglen, hull 70–75 delivered by Todds
June 20, 1961.--

60, 946. 39

126, 559.01 Cost to Moore-McCormack Lines, Inc.

240, 858. 31 The CHAIRMAN. Those you are associated with have no exception to the amendments suggested by Maritime Administration?

Mr. EWERS. No, sir.

I would like to say, Mr. Bonner, that with the assistance of this committee, the chairman, Mr. Mailliard, particularly, and Mr. Drewry, and with the assistance of the Maritime Administration and with the assistance of Mr. Bourbon of the Senate committee, the drafted bill now recommended by Mr. Alexander is identical with the bill we expect to be reported out of the Senate committee at the first executive session and is substantially identical with the bill recommended by the CASL paper. I say "substantially.” There is some minor change in the language of section 2 which is not substantial. The CASL language stated that there should be no refund until provision had been made for payment to the Government. The Maritime Administration merely paraphrases that and says that there shall be no affirmative refund unless within 1 year provision is made for payment to the Secretary of Commerce of the amount that the Government would have recovered had this legislation been in effect at that time.

I see no substantial difference in that language.
I think a year's cutoff date was probably wise.

I think that the bill as recommended by the Maritime Administration is entirely acceptable to the committee of American Steamship Lines.

The CHAIRMAN. Are there any questions?
Mr. TOLLEFson. I have no questions, Mr. Chairman.

Mr. MAILLIARD. Mr. Chairman, I would like to ask Mr. Ewers if he sees any merit in the suggestion that I made to the Maritime Administration,

Mr. Ewers. Yes, sir. I can see why it occurred to you but if I may suggest, I think if I were you I would leave it alone because if you

are going to provide it we are going to ask for the two-way street and if we have any profits you will share them and if we have any losses you should share them and American Export lost their shirt on the two voyages that were involved here.

Mr. MAILLIARD. You mean your expenses on that leg of the journey were greater than the length of time; was that the problem?

Mr. EWERS. Substantially greater. I will be happy to give you the figures prepared by the Export auditors to the effect that the vessel lost money on the complete voyage and on every leg of the voyage.

Mr. Bull is the representative of the American Export Lines here and can probably give you more details than I can.

Mr. BULL. I would like to say to Mr. Mailliard that, for the very purpose that you mentioned, we set out to get cargo for these ships in the hope of mitigating the expense of shifting them from the west to the east coast. We booked these two cargoes of grain not anticipating we were going to run into bad weather up in the Northwest which we did on one ship. One ship loaded at two ports and the other loaded at one. Notwithstanding that the rate was the prevailing rate and we hoped to make a profit which would reduce the cost of bringing the ship around, we didn't succeed. We were motivated by the very thing that you suggest.

Mr. MAILLIARD. I understand that but, of course, this would be a normal risk which in this case you took entirely for your own account because the provisions of this bill were not in effect at that time. I do not see why that would change the validity of my suggestion that, if a company were able to acquire a cargo with the expectation of making a reasonable amount of profit on it, that they should not be allowed to at least share that profit with the Government rather than to be in the position of having no incentive whatsoever to make that voyage productive.

I do not follow Mr. Ewers' reasoning at all. Mr. BULL. May I say in that connection, Mr. Mailliard, that we could not have anticipated a profit as much as it would have cost to bring the vessel around without any cargo from the west to the east coast.

Mr. MAILLIARD. No, but what you anticipated was reducing the cost of that voyage. You made a mistake or events were such that vour anticipation was not realized but I could still foresee a situation where, let us just assume for the sake of argument, an allocation was made to a west coast yard and let us suppose it was United States Lines and if they could load a substantial cargo in southern California of canned goods for the United Kingdom that could be quite a lucrative voyage and they would be better off than if they were allowed to take that cargo and retain half the profit from it. They would profit by that much and the Government would profit by that much. I cannot see what is wrong with that. Mr. EWERS. Would the Government pay half the loss!

Mr. MAILLIARD. No, because it would seem to me that, if there were any possible loss, you would come in ballast.

Mr. EWERS. May I comment on the administrative problem there, Mr. Mailliard? These ships are off their berth. They have no operating rights between the yard to which they are allocated and the yard that was the lowest responsible bidder. They, in any event, have to

get the approval of the Maritime Administration for making that voyage.

Mr. MAILLIARD. Right. Mr. EWERS. Which may involve a question also of whether they have intercoastal privileges in these cases. But we do have to get approval of Maritime.

Mr. MAILLIARD. That is right.
Mr. EWERS. For carrying cargo on the delivery voyage.

Moore-McCormack had hoped that we could work out cargo which would be attractive from the west coast to the east coast in connection with our allocations. We found, upon solicitation, however, that there was no cargo available for that position and therefore had to bring the vessels home in ballast.

Traditionally, as you understand, the movement from the west coast to the east coast is largely lumber and there was just no lumber in the market and we had to bring the ships home in ballast.

We did explore that but, as a practical matter, we couldn't work it out.

Mr. MAILLIARD. I understand that but there could be circumstances in which it could work out where there were cargoes available and yet I do not think you would bother under the provisions of this bill because it would not mean one nickel to you and it would probably mean a slight delay in time because, according to the provisions of this bill, the Government would take any profits you made on that leg of the voyage. Of course, conceivably you might have an onward cargo to some point on your trade route and conceivably there might be something attractive to that, but I would think that would be relatively remote. I do not see why there should not be an incentive. You do not have to take it.

If you come in ballast, the Government pays your excess costs, but if the cargo is available, I do not see why it should not be to the mutual advantage of the Government and the carrier for you to carry that cargo.

Mr. EWERS. I don't oppose that but I assure you it is not quite that simple when you try to find the cargo.

Mr. MAILLIARD. I am sure that is true, and I am sure that such a provision would operate only in the case where the cargo could readily be found which might not happen, but we are now thinking in terms of allocation to the west coast, and Mr. Alexander said the most recent request for allocation would be to the Great Lakes.

It is conceivable that cargo might be available under some circumstances and I do not see why it should not be carried. Mr. EWERS. It sounds reasonable.

The CHAIRMAN. Mr. Tollefson?
Mr. TOLLEFSON. I have no questions.
Mr. BRINSON. Mr. Chairman, I would like to make a statement.
The CHAIRMAN. Yes, sir.

Mr. BRINSON. In order to clarify the American President Lines' position in this matter, I would like to quote from a letter we addressed to the chairman of the Senate Committee on Commerce regarding a companion bill, S. 1963.

The American President Lines particularly and the west coast operators have steadfastly resisted the savings provision of this bill on the ground that it would most frequently be applied to west coast owners and further that the savings

would be virtually impossible to compute. As the legislation is now drafted it would be applied retroactively in order that two of our fellow steamship lines which incurred very large expenses due to allocation a few years ago may be reimbursed for this purpose. We feel their case is equitable and strongly support it.

It has been suggested, however, that the bill should be amended to provide that, before these lines are reimbursed for their expenses, any line which had a saving from allocation in recent years should be required to pay such savings to the United States.

American President Lines is alleged by the Maritime Administration to have made a savings of $41,000 in connection with the construction of two freighters that were allocated from a shipyard in San Pedro, Calif., to San Francisco. We do not agree with this estimate of savings-even though I understand that they were given orally without accurate check of the records by a company representative.

We withdraw our objection to the savings provision of the bill though we disagree with it in principle. We do this with a view of further enhancing the possibility of the Congress enacting this important legislation.

In taking this position, the American President Lines, however, would appreciate having the record of the hearings of this bill show that we in no way agree with the Maritime Administration's estimate a savings resulting from the allocation of its freighter construction contract in 1958 to San Francisco nor consider ourselves under any obligation to pay such alleged savings to the United States.

The CHAIRMAX. Then is it understood that American President Lines is in disagreement with the amount of the saving?

Mr. BRINSON. That is correct, sir. We presumably could have gotten authority to put the ship on berth at San Diego but certainly we could have put it on berth at Los Angeles and commenced loading cargo. Inclusion of the estimated cost of ballasting the ship to San Francisco is, therefore, illogical in our opinion.

Mr. EWERS. May I say something in that connection, Mr. Chairman? We don't know anything about the APL case except it involves a relatively modest sum of $10,000. I am quite satisfied from my experience with the Maritime Administration and my knowledge of APL that they can work out satisfactorily the amount of any savings which are comprehended by this proposition. However, the language of this bill is so worded deliberately that APL has no obligation to revise their contract or pay this money and it was rather a precarious position for Moore-McCormack and Export to be in to have their refund conditioned upon the APL attitude.

The language of the bill is deliberately drawn so that, if it should result that APL and the Administration reach an impasse on the amount which Maritime contends should be refunded, Moore-McCormack and Export would at least have the privilege, whether they would exercise it or not, to have the amount of their recovery reduced by the amount in disagreement.

You see, we have a potential recovery here for each, Moore-McCormack and Export, of $250,000 apiece which we believe we are equitably entitled to.

We can understand the APL's position. We don't want to argue their case. Nor do we want to have our recovery completely dependent upon what Maritime Administration and American President Lines can work out.

So you will notice the language of this section says, "until provision has been made," so that if we are satisfied that American President Lines and Maritime Administration are not going to reach an accord, rather than to have our recovery frustrated, we think we should at least have the privilege, whether we exercise it or not, of agreeing that our recovery should be reduced by the amount in dispute. and the language of this provision is deliberately worded with that possibility in minduntil provision has been made for the payment to the Secretary of an amount equal to the amount Government feels is owing to them. And, as I say, I am not familiar with the APL case. Whether they owe $40,000 or $4,000 or anything, they will have to work out with the Maritime Administration, but I have worked with both Maritime Administration and American President Lines long enough to know that they are both reasonable people and that they ought to be able to reach a figure which APL is willing to pay and which the Maritime Administration is willing to accept.

However, my professional caution caused me to anticipate a stalemate in which event at least I would like to have the privilege of not having my complete recovery frustrated and being willing to have that reduced by any amount in disa greement.

Mr. BULL. Could I say for the American Export Lines that we do not agree with Mr. Ewers' premise. We don't undertake to assume any part of any obligation that might have been incurred by the American President Lines.

Mr. BRINSON. I might add, Mr. Chairman, that we are not asking them to do so. We just want the record clearly shown that our endorsement of the two-way street deal does not imply that we will pay in to the Maritime Administration $41,000. I don't know whether we could reconcile the differences or not or whether under the terms of this bill we could actually compute the savings. We will certainly try, but we did not want the committee or Congress to assume that by endorsing the two-way provisions of this bill that we are implying that we owe them $41,000 as savings and that we would pick up the tab for that amount.

The CHAIRMAN. You do understand that there would be some recovery by Maritime?

Mr. BRINSON. We agree, Mr. Chairman, that some savings did accrue to us by the contract being allocated to San Francisco.

The CHAIRMAN. As I understand, and if I am wrong I want Mr. Ewers to correct me, by the same rule that you would be adjusted, Moore-McCormack would be adjusted, in their $250,000 claim.

Mr. EWERS. It is conceivable that to get anything of our $250,000, we might have to agree to pick up the APL tab that is in dispute but, as our friend, Brinson, so adequately expressed this so often, it is better than nothing. The CHAIRMAN. Then Export does not agree to that?

to that? Mr. EWERS. There is no obligation on our part, Mr. Chairman. It is purely a privilege. Should such an eventuality arise, the legislation is drafted so that we could avoid frustration by picking up the tab if we so decided

The CHAIRMAN. What I mean is that the same rule that is applied to APL could be applied to both Export and Moore-McCormack which might reduce the cost. Mr. EWERS. Yes, sir. The CHAIRMAN. Of reimbursement of Export and APL? Mr. Ewers. Yes, sir.

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