view of the Treasury Department that these regulations were intended to merely outline a basic minimum of safety standards for the carriage of grain aboard vessels and that additional enabling legislation is required to further effectuate this phase of the safety of life at sea program.

Accordingly, the Treasury Department has prepared the attached legislation which will authorize the Secretary of the Treasury to make such rules and regulations and to prescribe such restrictions and conditions as he deems necessary for the loading, stowage, and securing of grains and other similar bulk cargoes that present hazards to the stability of vessels by shifting.

Under this proposed legislation, the Secretary of the Treasury may avail himself of the advice, services, and facilities of any private nonprofit organization, or, with the consent of the head thereof, of any executive department, independent establishment, or other agency of the Government.

The proposed legislation, if enacted, will not entail any additional expenditure of Government funds.

It would be appreciated if you would lay the proposed bill before the Senate. A similar proposed bill has been transmitted to the Speaker of the House of Representatives.

The Department has been advised by the Bureau of the Budget that there is no objection to the submission of this proposed legislation to the Congress.

Very truly yours,

JOHN S. GRAHAM, Acting Secretary of the Treasury.

Senator PAYNE. Admiral, I wonder if you could answer this: Is the National Cargo Bureau, Inc., engaged in a competition with the private marine surveyors on the Pacific coast?

Admiral SHEPHEARD. Insofar as grain cargoes are concerned, I would say no. Insofar as other dangerous cargoes, which are covered by Coast Guard regulations, I believe they are.

Senator PAYNE. Can you tell us in what phase of cargo survey the functions of the National Cargo Bureau, Inc., and the private surveyor overlap on a competitive basis?

Admiral SHEPHEARD. Well, the private surveyor might seek to obtain the survey work on dangerous cargoes which are to be shipped, and if that is the case, the shipowner would certainly not engage the National Cargo Bureau, and vice versa, they would not engage, generally speaking, both organizations.

Senator PAYNE. In other words, you think there would be an overlapping there?

Admiral SHEPHEARD. I don't think there would be any question about it.

Senator PAYNE. Would you say that if the National Cargo Bureau is to have official standing from the Coast Guard with respect to grain cargoes, this would give them definite competitive advantage or some competitive advantage in other fields of cargo survey work in which they do compete with the private surveyor?

Admiral SHEPHEARD. It definitely would.

Senator PAYNE. Would you want to elaborate on it any, or don't you think it is necessary?

Admiral SHEPHEARD. I don't think it is necessary other than to give you my view, that I don't believe that in the administration of any safety function that there should be competition.

Senator PAYNE. If the National Cargo Bureau, Inc., is to receive the support of the Coast Guard with respect to grain cargoes, would you object to a provision which would preclude it from utilizing this competitive advantage with respect to other cargoes? In other words, if a private organization is to have official enforcement functions, delegated to it, don't you think it would be proper to confine its

activities to the functions that are specifically delegated to it so it will not assure a competitive advantage in other phases of marine surveying?

Admiral SHEPHEARD. I am not too certain that I follow you, but the

Senator PAYNE. This, as proposed, gives to the National Cargo Bureau the support of the Coast Guard and would authorize them as the legal agency with respect to surveying grain cargoes-that is correct, isn't it?

Admiral SHEPHEARD. That is correct.

Senator PAYNE. Now, would you object, or would the Bureau object, in your opinion, to a provision that would preclude their utilizing this competitive provision or advantage with respect to other cargoes, cargoes other than grain?

Admiral SHEPHEARD. Yes; I think objection should be raised to that for the reason that I just stated, that I don't believe there should be any competition in this field, and the Coast Guard today supervises the loading of class A explosives, and they likewise supervise other types of cargoes, depending upon the degree of hazard, insofar as personnel and facilities permit.

There is no reason why a shipowner, if he wishes to, could not engage all the private surveyors that he cares to, but where the regulations require either the nonprofit organization or the Coast Guard, that is going to be in addition.

Now, that is not unusual insofar as the utilization of marine surveyors generally are concerned. The Congress has recognized the American Bureau of Shipping in the assignment of loadlines. It just parallels this exactly, but if a shipowner believes that the loadline being assigned by his own organization was in error, he could appeal to a naval architect or a marine surveyor to question that. We have no objection to that.

But if the day comes-I want to be perfectly frank about this, too, now that attention is focused on this-when the day comes that appropriations are not forthcoming for the Coast Guard to supervise the loading and unloading of class A explosives and other similar cargoes, then I think that regulation would be in order which would require either the Coast Guard or a nonprofit organization to perform that work to the exclusion of these private surveyors.

Senator PAYNE. You referred on page 8, I think it was, at the top of page 8, that with regard to having the Congress handle the particular problems of cargo surveys, it would also involve the expenditure of considerable Government funds to provide for employment of additional inspection personnel.

My question is whether or not there was a fee charge or license fee charge made by the Coast Guard in such inspections.

Admiral SHEPHEARD. As of today there are no fee charges made by the Coast Guard.

Senator PAYNE. Would you figure that such a fee charge could be properly provided for that would underwrite the costs of such inspection if that were carried out by Coast Guard personnel?

Admiral SHEPHEARD. Well, sir, I think you are familiar that we are under directive to establish fees for all services rendered, and this would be one of them when that time comes.

Senator PAYNE. Would you feel that such fees would cover the costs of such additional personnel?

Admiral SHEPHEARD. I haven't had any experience whatsoever on fee charges.

Senator PAYNE. It would be pretty difficult to tell whether it would or wouldn't.

Admiral SHEPHEARD. That is correct, sir.

Senator PAYNE. Going back to page 5, you mention there about the Dangerous Cargo Act (46 U. S. C. 170) that provides:

In establishment of regulations relating to dangerous cargoes and with respect to inspections incident to such regulations, "The Commandant of the Coast Guard may utilize the services of the bureau for the safe transportation of explosives and other dangerous articles, and of such other organizations whose services he may deem to be helpful."

Would you feel that that particular provision might be properly considered to be included in section 4, which appears on page 2 of the proposed bill, S. 602?

Admiral SHEPHEARD. Sir, I am not a lawyer. I am just a seaman. Senator PAYNE. I am not, either. I sympathize with you.

Admiral SHEPHEARD. I am not too certain, but we do have our general counsel here.

Senator PAYNE. Would you do this, because I think it is only fair: take that suggestion and perhaps submit the thoughts of the Bureau to us so that the committee can have that for its information? Admiral SHEPHEARD. I would be pleased to, sir.

Senator PAYNE. Do you have any questions, counsel?

Mr. WEBSTER. I do, Senator. I think for the completeness of the record, Admiral Shepheard, and since I am sure you are aware that the Pacific coast marine surveyors are objecting to the language in section 4 which Senator Payne just quoted, that it would be well to have you refer to certain provisions, certain statements, made in the printed protest of the Pacific coast marine surveyors. I have marked them.

I think that it

They mention you in certain instances by name. would be helpful for our record, and in order to give you an opportunity to comment, if you care to, on those provisions, to have you do it now for us.

I will hand you this printed copy of the protest and direct your attention to the last paragraph on page 10, going down to the end of the third paragraph on page 11, and ask you if you would like to comment on that for us, sir.

Admiral SHEPHEARD. For the record I would be very happy if you would give me another 5 minutes to read a complete reply to this protest.

Mr. WEBSTER. I think that would probably suit the purpose which I had in mind quite adequately, and then you won't have to bother referring to various statements in there. I am sure your reply probably covers it; doesn't it?

Admiral SHEPHEARD. Yes.

Senator PAYNE. You have read the protest?

Admiral SHEPHEARD. Yes, and this is a reply to the protest.

Senator PAYNE. All right, sir; go ahead that way.

Admiral SHEPHEARD. Exception is taken to this protest not only as it is factually inaccurate, but primarily because the protest emphasizes

only the interests of a few private marine surveyors on the west coast. The National Cargo Bureau, on the other hand, was created to meet serious problems of the safety of life and property at sea, and was designed from the standpoint of the public interest involved, as well as being set up to enhance marine safety at the least possible expense, inconvenience or injury to the public, the Government or the industry, including the marine surveyors.

The International Convention for the Safety of Life at Sea of 1948 included provisions as to the manner of loading of grain cargoes. If improperly loaded, such cargoes shift and consequently are a danger to the safety of property and life at sea. Regulation 6 of chapter I of the International Convention's regulations provided that each country carry out the necessary inspection and survey of ships and "the government of each country may entrust the inspection and survey either to surveyors nominated for the purpose or to organizations recognized by it."

The United States delegation to the Convention advocated this language as it contemplated the creation of an organization such as the National Cargo Bureau to make the necessary surveys to insure safe loading of ships. However, it was also recognized that certain countries, particularly those with extremely small merchant marines, might wish to utilize the services of private surveyors, and so the clause "to surveyors nominated for the purpose" was intended both to meet that contingency and to cover the use of government surveyors should a government decide to do the surveying itself. The wording of article 9 of the Load Line Convention of 1930 is essentially the same as that quoted from regulation 6. However, the Coast Guard has not entrusted the survey and marking of load lines on ships to private surveyors because of reasons of principle similar to those involved here.

It is the position of the Coast Guard that there are only two feasible alternatives for inspection work related to the safety of property and life at sea. These alternatives are either to have the work done by official Coast Guard surveyors, or by a nonprofit organization similar to the National Cargo Bureau.

The reason for this conclusion is very simple. Safety of life and property at sea is not only an objective of the various provisions of the International Convention, including the grain-loading provisions, but is also the first and most vital function of the Coast Guard as provided in many statutes, including those dealing with dangerous cargoes, the inspection laws and so forth. However, while safety of life and property at sea is a primary congressional purpose as stated in the marine statutes, the equipment necessary for such safety is often relatively expensive. That is, it costs more to equip a vessel with necessary lifeboats than to omit them. It costs more to load a ship carefully than to do it in a completely careless, haphazard manner. Consequently, if safety work such as inspection, survey of loading, and so forth, were to be done on a competitive, profit basis, the temptations to relax safety standards would be almost irresistible. The temptation would be great for shipowners to give their inspection and loading survey business to the individual surveyors or inspectors who let them off the easiest without insisting on expensive requirements which might in fact be essential to safety.

Similarly, the private surveyor or inspector who depended for his profits and his livelihood on how much business he could get from the various shipping interests would be under economic pressure to relax his safety standards in the hope of attracting further business. That is an important reason why reliance on licensing individual surveyors would be an inadequate safeguard as they would represent only the owners rather than the public, the insurers and the owners.

However, if the alternative chosen were to have the Government do the inspecting and surveying, as is done in all other principal maritime pations, there would be considerable extra expense to the Government and the taxpayer since the Coast Guard would have to set up a new unit to handle problems of cargo survey. Furthermore, it is obvious that such an alternative would completely shut out recognition of any private surveyor doing cargo survey work impinging on safety. Almost all of the eight cargo surveyors working for the Bureau are former west coast surveyors working in a civilian capacity, and their employment by the Bureau, to that extent, lessened the number of individuals competing for private survey work. Any concern for the livelihood of marine surveyors might more appropriately be directed toward the Bureau surveyors, who are full-time employees whose entire livelihood would, in fact, be cut off by abolition or curtailment of the Bureau, while the private surveyors derive only a fraction of their income from cargo surveying.

However, if the Coast Guard were to seek to avoid the burden on the public purse of adding cargo survey to Coast Guard inspection work, it was necessary to assure that the organization chosen to do the cargo surveying in the interest of safety was subject to none of the objections above cited against placing safety inspection in the realm of private profit competition.

For that reason the National Cargo Bureau was sponsored by the Government as a nonprofit organization including representatives of the Government, namely, the Commandant of the Coast Guard and the Maritime Administrator (the protest is in error in stating that both Admiral O'Neill and Admiral Shepheard are directors of the Bureau; only Admiral O'Neill is a director) and representatives of the underwriters and the shipowners.

The inclusion of representatives of both the underwriters and the shipowners, in addition to Government representatives, is an obvious check and balance to assure that safety will be the primary concern of the Bureau. Shipowners and underwriters are on opposite sides of the insurance contract and therefore are prone to make certain that the Bureau does not permit relaxation of reasonable safety standards in the interest of either side.

The Coast Guard's only reasonable alternative to direct Government action, was the sponsoring of a nonprofit organization like the National Cargo Bureau. Actually, the factors above cited make it necessary that if a private organization were to do cargo surveying in the interest of safety, its functions necessarily had to be mandatory as the only alternative to the Coast Guard itself taking over these surveys. Therefore, the Coast Guard does, and must, insist that where surveys of grain cargo loading from a safety standpoint is involved, use of the National Cargo Bureau shall be mandatory. Actually, this is not "monopoly" but elementary protection of the public safety. The Pacific Coast Marine Surveyors stress governmental "favoritism" and