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AMENDING THE MERCHANT MARINE ACT OF 1936

MONDAY, DECEMBER 13, 1937

UNITED STATES SENATE,
COMMITTEE ON COMMERCE, AND
COMMITTEE ON EDUCATION AND LABOR,

Washington, D. C. The committees met, pursuant to call, at 10 a. m., in the Caucus Room, Senate Office Building, Senator Royal S. Copeland, chairman of the Commerce Committee, presiding.

Present: Senators Copeland (chairman of the Commerce Committee, presiding), Thomas, Sheppard, Mrs. Caraway, Biblo, Guffey, Maloney, Ellender, Vandenberg, and Gibson.

The CHAIRMAN. The committees will come to order.

Mr. Luckenbach, we will begin with you. We are going to take up the labor section.

STATEMENT OF EDGAR F. LUCKENBACH, LUCKENBACH STEAM

SHIP CO., NEW YORK CITY

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Mr. Luckenbach, we are glad to see an old friend here this morning. I mean a friend of long-time standing. What do you wish to talk about?

Mr. LUCKENBACH, I should like to talk about the bill, S. 3078.

The CHAIRMAN. Very well. Proceed. What part of the bill do you wish to discuss? Section 15?

Mr. LUCKENBACH. I wish to discuss section 507 of the Merchant Marine Act, 1936.

The CHAIRMAN. That is section 16 of the bill.

Mr. LUCKENBACH. And then I will make some suggestions which I hope the committee will take into consideration.

The CHAIRMAN. We will be glad to hear your suggestions, and they will of course be given consideration.

Mr. LUCKENBACH. When we have a toothache we go to experts, you know.

The CHAIRMAN. I am not quite sure why you came here then, Mr. Luckenbach.

Mr. LUCKENBACH. When we want advice we go to experts. And wish you would follow some of the advice we have given and what I am going to give you.

Mr. Chairman and ladies and gentlemen of the committee. It is to be assumed that vessels now receiving operating-differential subsidies cannot engage in the intercoastal service unless so authorized by the Commission at the time of the adjustment of the ocean-mail contracts.

If no such authorization has been made it is reasonable further to assume that vessels now engaged in intercoastal service shall not be subject to competition of subsidized vessels, except as provided for under section 506 of the present Merchant Marine Act, 1936, or as proposed under the amendments to that section under the bill S. 3078.

Under section 506 of the Merchant Marine Act, 1936, 'as it now is, and also the proposed amendment of that section under the bill S. 3078, vessels for which a construction differential subsidy has been paid may upon paying certain portions of such subsidy to the commission and/or waiving of the operating-differential subsidy, engage in the intercoastal service.

I vigorously objected to this section of the present bill as it now is before it was passed and wish also to do so in respect of the proposed amendment as it is a discrimination against the nonsubsidized vessels which in time would restrict the service to subsidized vessels carrying high rate cargo and nonsubsidized vessels carrying bulk cargo.

Under the present act and also the proposed amendment certain owners with the assistance of construction and operating-differential subsidies would be able to construct and operate superior types of vessels at comparatively lower costs in intercoastal service. This would enable subsidized vessels by reason of their speed to take the bulk of the high-rate cargo relegating other vessels to low-rate cargo.

Furthermore, if the bill s. 3038, introduced by Senator McAdoo, providing for a subsidy for vessels up to 20 years of age when engaged in the intercoastal service, were passed vessels operating in that trade under the present act and/or the proposed amendment would receive the subsidy to the exclusion of practically all other vessels except the present passenger vessels engaged in the service.

This condition would restrict replacement of vessels and the building up and development of a merchant marine.

It is therefore my opinion that in the interest of the intercoastal service as a whole section 506 of the bill S. 3078 should be deleted from the bill and an amendment substituted prohibiting subsidized vessels and vessels which have at any time been subsidized, from the intercoastal service.

Also that each company now operating in the intercoastal service through the Panama Canal should be exempt from the payment of tolls to the extent of the total Panama Canal net tonnage of vessels actually operated by each company in that trade as of November 1, 1937.

The CHAIRMAN. Mr. Luckenbach, how much would that reduce the Canal tolls—the total? Have you the figures?

Mr. LUCKENBACH. No; I have not. Such tolls to be deposited by each company in a special fund, such money to be free of taxation of any character whatsoever and to be used exclusively for the purpose of replacing vessel tonnage of the respective company concerned. Construction of the first vessel to start within the year following the effective date of the bill.

I believe in a law for the establishment of a merchant marine and the necessary replacements to maintain same in the interest of our industries, commerce, and as an auxiliary to our Navy, but I do not think that can be accomplished by the present Merchant Marine Act of 1936, the proposed amendments under the bill S. 3078, and other pending legislation such as Mr. McAdoo's bill, S. 3038.

I want to suggest that the Panama Canal be operated 24 hours per day when possible.

It is my opinion that any legislation should embrace vessels employed in domestic, as well as in foreign services, and should be indiscriminatory, extending assistance to all owners alike and not to certain services and owners only.

Concerning the amendment to the Intercoastal Shipping Act of 1933, as proposed on page 30, section 43, I think it will go a long way in the stabilization of that service, except the limiting of the act to "common carrier" only would probably frustrate the purpose of the amendment and therefore suggest that the proposed amendment be amended to read as follows:

Sec. 5. The provisions of this act are extended and shall apply to every common and contract carrier by water in interstate commerce, as defined in section 1 of the Shipping Act, 1916.

Since 1934 seagoing and shore personnel through strikes, inefficiency, lack of discipline, interunion friction, and numerous other causes have cost shipowners and the public millions of dollars and loss of cargo tonnage which may never be regained.

This condition is disastrous to the shipowner and costly and unsatisfactory to the public concerned.

The provisions of title X would set up the necessary organization and would go a long way toward taking care of the labor situation in the interest of all concerned and would seem to be entitled to the support of all including labor.

I was glad to hear the statement of Congressman Bland, chairman of the congressional committee who had similar hearings last week, to the effect that no legislation for the relief of the American Merchant Marine-mentioning the intercoastal lines in particular--would be beneficial unless the Pettengill bill, i. e., the repeal of the Fourth Section Act should be defeated in the Senate.

The CHAIRMAN. Thank you, Mr. Luckenbach.

Are all the matters in which you are interested and are advocating this morning, Mr. Luckenbach, included in the McAdoo bill?

Mr. LUCKENBACH. Is that S. 3078?

The CHAIRMAN. No; the bill Senator McAdoo proposed to give greater favors to intercoastal lines.

Mr. LUCKENBACH. That is what I object to-giving greater favors to some of our competitors.

The CHAIRMAN. Yes; I understand. But he does not do that. You would not expect Senator McAdoo to go back on any American institutions?

Mr. LUCKENBACH. Well, in the bill as I read it, that is what he does, practically.

The Chairman. I am surprised. We will have to bring him in as a witness.

Mr. LUCKENBACH. That is, vessels will receive a subsidy if they are under 20 years of age. All the war constructed vessels are practically 20 years old, and those are the ships that are in the intercoastal trade, with the exception of the Grace, United Fruit, and PanamaPacific.

The Chairman. If that rule were applied to all our ships, foreign as well as domestic, we would not be paying any subsidies in 2 or 3 years, would we?

Mr. LUCKENBACH. No.
The CHAIRMAN. We are much obliged to you, Mr. Luckenbach.
Mr. Shepard, we will hear you next.

STATEMENT OF OTIS N. SHEPARD, SHEPARD STEAMSHIP CO., 205

EAST FORTY-SECOND STREET, NEW YORK CITY

Mr. SHEPARD. My name is Otis N. Shepard. The Shepard Steamship Co. is a common carrier engaged in transportation of cargo and a limited number of passengers in the intercoastal trade.

They own and operate five freight steamers of from 8,500 to 9,500 dead weight tons each, between Boston, New York, and Philadelphia, on the Atlantic coast, and Los Angeles, San Francisco, Portland, and Seattle on the Pacific coast of the United States.

They also serve many other ports, such as Albany, N. Y.; New London, Conn.; New Bradford, Mass.; Tacoma, Wash.; Olympia, Wash.; Sacramento, Calif.; and many other small places on Puget Sound, Columbia River, and on the Atlantic seaboard.

The company is a corporation, incorporated under the laws of the State of Maine. They purchased their ships from the United States Shipping Board for operation in the intercoastal trade. They carry east-bound about 60 percent lumber and 40 percent miscellaneous general cargo, and west-bound entirely miscellaneous general cargo.

Except during strike periods, they have maintained continuous and regular service to date.

They have served during the past 9 years several thousands of shippers in both directions.

Mr. Chairman, and ladies and gentlemen of the committee: The Shepard Steamship Co. has appeared before your committee previously, so I understand that you are familiar with the fact that they are small common carriers in the intercoastal trade. Later, if the committee wishes further information about our company, I shall be glad to give it.

The CHAIRMAN. I think we are reasonably familiar with it.

Mr. SHEPARD. I am appearing on their behalf to protest against section 43 of S. 3078, which proposes to amend the Intercoastal Shipping Act of 1933.

The proposal which we object to particularly, is that in which it is proposed to increase the regulatory powers of the United States Maritime Commission, so that they will be empowered in future to determine, to prescribe, and order enforced minimum rates, fares, and charges in addition to their present power to determine and enforce maximum rates, fares, and charges for the protection of the shipping public.

Although we believe it is also a highly controversial matter, we are not today objecting to the other amendment, which proposes to extend regulations to interstate as well as intercoastal carriers per se.

The increase of the regulatory power which has been and still is a highly controversial subject, should not be included in this bill covering the matter of subsidies, which is represented as "emergency legislation” important to be acted upon immediately for the protection and preservation of the American Merchant Marine.

We are therefore requesting that section 43 be deleted from this bill and made the subject of separate legislation, to the end that the

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general public may have ample notice to appear and make their wishes fully known.

We believe that this extension of minimum-rate authority is not necessary, not desirable nor in the public interest at the present time.

In the light of past history, the power to enforce minimum rates is a subject giving cause for due concern and inasmuch as there appears to be no necessity for same at the present time on the intercoastal trade, should be a subject of further consideration before enactment.

There is no need for an increase of regulatory powers at the present time in the intercoastal trade.

During the decade and a half of water transportation in the intercoastal trade via the Panama Canal, and up to June 1933, there were frequent and violent fluctuations in the cargo rates. There existed many discriminatory and preferential practices between shippers, places, and kinds of commodities, all of which caused great hardships to the shipping public. Numerous rate wars between carriers occurred. Many conference agreements were created after each period of open rates. Each conference only lasted for from 6 months to a year and a half to then disband for a succeeding period of vicious rate cutting. Distress to both the competing carriers and the shipping public made it wise and proper for Congress to act. As a result the Intercoastal Shipping Act of 1933 was passed by Congress.

No such situation is prevalent in the intercoastal trade today. Since the passage of the Intercoastal Shipping Act of 1933 there has been no rate war, no cutting of rates, nor any sudden and violent changes of rates, fares, charges, rules, regulations, or practices. One conference has existed continuously for over 42 years. Its operations are continuing tranquilly and reasonably satisfactory to both steamship lines and the shipping public. There is not the slightest indication but that it will continue indefinitely. It is presently cooperating with its principle competitors the transcontinental rail lines and is at the moment appearing before the Interstate Commerce Commission. It is asking that Commission to allow increases of the all rail and the rail and water rates in order that the Intercoastal Steamship Freight Association (the present Conference Lines) may increase their water rates. The associates lines openly state that they desire and need increased freight rates, that they can not increase their rates unless the rail rates which form a ceiling or dead line for the water increases.

Since 1933 the water rates and charges have been stable and without sudden or violent fluctuations. In fact there have been but two important changes:

1. An increase in rates of approximately 10 percent was made in October 1936 and approved by the then existing United States Shipping Board

2. A similar increase, because of increased operating costs was made in June or July of this year, 1937, and was approved by the United States Maritime Commission. Shippers and competitors have 30 days notice before any material changes are made in either rates, rules or practices.

The proposed increased in rate regulation is undesirable.

Where there is an evil or wrong to the public to be righted, new legislation is justified, but when there is no wrong prevalent, Congress should refrain from enacting unnecessary legislation. The new conditions and changed requirements must be met by industry. Such

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