Mr. BRADLEY. Under normal competition. Therefore, we have no ship in the North Atlantic trade which is able to compete in that commerce on a profitable basis. Admiral SMITH. That is correct. Mr. BRADLEY. We were speaking of construction, of the shipyards, and the matter of empty shipyards was brought up. Is not one of the reasons why they are empty the fact that we have not been able to give a guaranty subsidy for 20 years? Admiral SMITH. That is correct. Mr. BRADLEY. As I understand it, some builders might build if they could get this guaranty subsidy for 20 years. Admiral SMITH. One was ready to sign his contract 2 weeks ago if guaranteed the 10-year subsidy. Mr. BRADLEY. I talked to the chairman of the Appropriations Committee on that subject, and he assures me that it will be taken care of in the appropriation bill in the very near future. Admiral SMITH. That was originally the Bureau of the Budget's idea. Mr. BRADLEY. The chairman of the Appropriations Committee maintains that it never was his idea. Admiral SMITH. Yes, sir. Mr. BRADLEY. It may be blamed on Congress, but the blame does not belong there. That is his contention. When you speak of operation by Government corporations, such as the American President Line, wherein we own 92 percent, do we get any dividends there? Is it paying? Admiral SMITH. It is making money; yes, sir. With its chartered ships it is turning into the Treasury a great deal of money. But, so far as I know, it has not declared a dividend. Mr. BRADLEY. You are collecting on charter? Admiral SMITH. Yes, sir. Mr. BRADLEY. But you have not collected yet on the 92 percent of the stock? Admiral SMITH. No, sir. But the stock is much more valuable than it was 2 years ago. Mr. BRADLEY. The board of directors of that company is composed of whom? Not the individuals, I mean, but in relation to the Maritime Commission. Admiral SMITH. None. They are mostly individuals who are in various lines of business in San Francisco. Mr. BRADLEY. If the Government owns 92 percent, why does it not have some representation on the board? Not that I criticize the board, but it would just seem to me to be common sense. Admiral SMITH. Of course, being the majority stockholder, it was influential in naming the president of the company, who, in my opinion, is doing an excellent job. Mr. BRADLEY. I have no criticism of the president of the company or of the operation. I am wondering why, with the Government owning 92 percent of the stock, the Government should not have some direct representative-probably some Commissioners of the Maritime Commission-on the board of that company to look after its interests. Perhaps you do not feel you should answer that. Admiral SMITH. Well, it is rather difficult to answer. If we had a Commissioner on the board of directors, we would be in a very diffi cult position. The board of directors meets every 2 weeks, so it would mean constant travel or keeping a Commissioner on the west coast. Mr. BRADLEY. They meet on the west coast? Admiral SMITH. Yes, sir. They meet in San Francisco every 2 weeks. Mr. ALLEN. May I interrupt? Mr. ALLEN. Admiral, is Mr. Lutz not in a very responsible position there and practically a direct representative of the Commission? Admiral SMITH. Yes, sir. He was in the Commission in the legal department, and he is executive vice president, and has been for a number of years. Mr. ALLEN. Is not Mr. Killian virtually your direct representative? Admiral SMITH. Yes, sir. Mr. ALLEN. Do not those two, more than anyone else, control all the policies of the company? Admiral SMITH. Correct. And Mr. Killian makes frequent trips to Washington and sits with the Commission and talks about the affairs of the company. Mr. BRADLEY. You spoke of the delivery of ships out of the reserve pool and into it, which brought forth some rather animated conversation. I can understand very well how the charterer will accept delivery at a port, we will say, nearest your pool or where the ship is overhauled. Why is it not practicable to require redelivery to the nearest port of your reserve pool rather than having to tow your ship for long distances? Mr. HEIMBOLD. We arranged that, Captain, Bradley, so far as possible. We must, however, look out for a reasonable distribution of vessels as between your respective reserve fleets. Mr. BRALEY. In other words, sometimes it is more convenient to you to have the ship in your own hands so you can put it where you want it, rather than having it delivered where it was before? Mr. HEIMBOLD. Yes, sir. Mr. BRADLEY. I can see the point of view. It had not occurred to me at all in considering it. This ship is not turned over until it has been given an overhaul; is that correct? Mr. HEIMBOLD. That is correct. The ship is delivered in working condition and in seaworthy condition. Mr. BRADLEY. I think those are all the questions I have, except to observe that unless we include the Coast Guard waiver provision in this legislation we are simply keeping the whole shipping industry on edge for another month because we will have to go through these emergency hearings again toward the end of March, and no one will know whether he can work beyond the end of March or not. Thank you very much, Adiniral. The CHAIRMAN. Mr. Bonner. Mr. TOLLEFSON. I have no questions. Mr. BROPHY. No questions. The CHAIRMAN. Mr. Meade. Mr. MEADE. What do you mean by "bare-boat charter"? Mr. HEIMBOLD. A bare-boat charter is the rental of the ship, with its equipment, with an obligation on the part of the charterer to maintain the ship, to operate it and return it in the same condition, ordinary wear and tear excepted. Admiral SMITH. And he furnishes the crew. Mr. BLAND. Empty house. Mr. MEADE. It is just the ship as is, without crew or anything else? Mr. HEIMBOLD. That is correct. Ship and equipment. Mr. MEADE. How much more does it cost to operate an American ship, or a ship under the American flag, than the ordinary foreign ship? Admiral SMITH. We have those figures. It varies with different types. I do not have them with me, but I will be glad to supply them. Mr. MEADE. I do not mean, Admiral, necessarily in terms of dollars, but would you say 50 percent more, or 40 percent more? Admiral SMITH. I should say at least 50 percent more. Mr. MEADE. What is the amount of subsidy which is usually given? Is it a 50-percent subsidy, or is it fixed definitely in each case? Admiral SMITH. It is fixed in each case. Operating subsidy, you mean? Mr. MEADE. Yes. Admiral SMITH. It is fixed in each case, on the run, and compared with the cost of the crew wages, subsistence of passengers and crew, maintenance and insurance of the principal foreign competitor on that route. Mr. MEADE. Is that subsidy limited to 50 percent? Admiral SMITH. Yes, sir. Mr. MEADE. You cannot give more than 50 percent, regardless of what the difference in actual costs of operations is? Admiral SMITH. That is the construction subsidy. That is limited to 50 percent. Mr. MEADE. What about the operating subsidies? Admiral SMITH. I don't know; that is limited, but it never goe that high. 1 Mr. MEADE. Do you recommend the scrapping of our excess ships! Admiral SMITH. Ships that are undamaged? Mr. MEADE. Yes. Admiral SMITH. No: I do not.. Mr. MEADE. Is there anything in the present law to prevent an American from buying ships, and, after he actually receives the ships and he is the owner, immediately turing around and selling them himself to any foreign government? Admiral SMITH. No, sir. He can sell to another American operator, but to sell foreign he must do it under section 9 with the approval of the Maritime Commission. Mr. BLAND. He cannot sell foreign without a Maritime Commission approval? Admiral SMITH. If the Maritime Commission approves, he can; yes. The CHAIRMAN. Suppose he does sell and delivers the ship? Do you have any redress there? Mr. SKINNER. He pays a penalty, and there is imprisonment. Mr. MEADE. Then you have a strict check on that. Admiral SMITH. Yes. Mr. MEADE. There is another thing I want to get cleared up. The chairman yesterday referred several times to this business of taking a ship out, delivering it, chartering it for a 15-day period and then going through all the process of returning it. As a matter of fact, is there much of that kind of business going on? Admiral SMITH. No, sir. He can return it on 15 days' notice, and, as the freight market has fallen off, we have had 400 returned since September, but most of those have been operating during the year. Mr. MEADE. It would be most unusual to have a charter issued and find the same ship coming back 15 days later? Admiral SMITH. The minimum charter period is 60 days before he can give us the 15-day notice. Mr. MEADE. That is all. Thank you. The CHAIRMAN. Mr. Burke. Mr. BURKE. I have no questions. The CHAIRMAN. That is all at the present time, Mr. Smith. Mr. Bailey, you represent the National Federation of American Shipping? Do you have a statement which you would desire to give. Mr. BAILEY. I have, sir. The CHAIRMAN. Proceed. STATEMENT OF FRAZER BAILEY, PRESIDENT, NATIONAL Mr. BAILEY. I am president of the National Federation of American Shipping, a federation of four steamship associations representing the owners of approximately 70 percent of the privately owned American-flag dry-cargo oceangoing steamships. At the suggestion of your chairman, I am appearing in connection with the request of the Martime Commission for an extension of its authority to sell and charter war-built vessels under the Ship Sales Act approved March 8, 1946, as amended; and also an extension of its authority to continue to operate vessels by general agency under the authority granted by Public Law 127, Eightieth Congress, approved June 28, 1947. May I also invite your attention to a message from the President of the United States under date of December 1, 1947, recommending that authority be extended to the Maritime Commission to operate, sell, and charter Government-owned vessels until June 30, 1949. I think the record is not perfectly clear that the President did request all these authorities. We are pleased to state to you the views and opinions of shipping industry members represented by this federation, as follows: 1. With respect to an extension of the Maritime Commission's authority to sell war-built vessels under the terms of the Ship Sales Act until June 30, 1949, to American-citizen purchasers, we support the request of both the Maritime Commission and of the President, and respectfully recommend that such authority be so extended. 2. With respect to the authority of the Maritime Commission to sell war-built vessels to persons who are not citizens of the United States under the terms of section 6 of the Ship Sales Act of 1946, which authority now expires on February 29, 1948, we are opposed to the sale of any further war-built vessels to noncitizen purchasers, and accordingly to the extension of the Marittime Commission's authority. We base our opposition on the well-established fact that considering the shipbuilding programs of foreign nations, the aggregate tonnage of their oceangoing fleets, as now projected, exceeds the size and tonnage of such fleets prewar. It is unnecessary to stress before your committee, accustomed to dealing with shipping matters, that in view of the higher wages paid and higher standards maintained aboard American ships, vessels of this Nation cannot meet, on a strictly price basis, the competition of foreign vessels using cheap foreign labor. While there may have been some obligation, moral or otherwise, to assist our allies and friendly neutrals who lost ship tonnage in the war to recover some or all of these losses, it certainly cannot be successfully maintained that we would be justified in selling them ships from our war-built fleet to an extent which would elevate the capacities of their merchant marines beyond a point higher than 1938, at which time we were carrying less than 30 percent of our own commerce. The United States for a great many years has not maintained upon the seas a merchant marine commensurate with its importance in world affairs. If we are to maintain our present position as a leader in international affairs in the United Nations, we must not be dependent upon ships of other nations to carry our commerce and to furnish logistical and auxiliary support to our military forces. If we build up their fleets to a position beyond that which they occupied prior to the war, there is grave danger that we will not improve but decrease our prewar position of carrying less than 30 percent of our commerce. For these and other substantial reasons, we are opposed to the extension of authority to sell additional war-built vessels to noncitizens. We call to your attention that even though the authority existed, it has been substantially the policy of the Maritime Commission for some months past, to follow the course we are now advocating. 3. As to the extension of Maritime Commission authority to charter war-built vessels to citizens as provided in section 5 of the Ship Sales Act of 1946, we are in favor of the extension of this authority until June 30, 1949, as recommended by the President and by the Maritime Commission. Fundamentally, we are opposed to the continuance of the Government in the shipping business. We believe this to be a national policy based upon many declarations of the Congress. In the present instance, however, the transition from war operations to a normal peacetime basis has been considerably longer and more difficult than was envisioned when the Ship Sales Act of 1946 was passed. This has been complicated by the necessity of transporting large tonnages of relief and rehabilitation cargoes overseas. It is a well-recognized fact that such cargoes will continue to move for a period continuing but gradually diminishing during the next 4 years. We believe it is important that American-flag ships continue to service this trade, to keep the flag upon the seas, and to provide employment for American officers and seamen. The proposals which have been put forward in the Marshall plan concerning the movement of coal and grain to Europe-constituting a |