Mr. MORGAN. It does not necessarily. If you have got a large proportion of world trade directed into American ships by the Government, as has been the case since the war, it makes it somewhat easier for those that remain under the American flag. It strengthens them. Senator SMATHERS. Every time we let a ship go under a foreign registry it does increase the competition, does it not, for those ships that remain in American flag service?

Mr. MORGAN. And it does increase the competition for business that we do not get anyway.

Senator SMATHERS. That is not your contention, that foreign flag ships get only that business which American ships would not want anyway?

Mr. MORGAN. No.

Senator MAGNUSON. But when you transfer one to foreign you say it might go into a trade that we would not get anyway. But that relieves another ship that probably comes into our stuff that we can get.

Mr. MORGAN. That is right.

Transfers to foreign registry of ships that are uneconomic under the American flag would have at tendency to strengthen the ones that would remain under registry here. Activity in the world market of transferred vessels would at least tend to discourage construction abroad of vessels that are newer and more modern than those that exist in our merchant marine.

Senator BUTLER. And by a like token when we give them money or aid for the purpose of building a dam or reservoir that releases money they would have put into ships, so it is all part of the same thing.

Senator MAGNUSON. I hate to leave, Mr. Chairman, but I have an appointment at 5 o'clock.

Mr. MORGAN. I hate to see Senator Magnuson leave because I know of his interest in this matter.

Before discussing the possible compromise that I suggested above, there are some general considerations with respect to the present law that I should like to bring to your attention.

Personal interests are of course subordinate to the national interest in time of war and the soundness of the requirement that approval of a foreign-flag transfer be obtained in a period of emergency cannot be questioned. But it does seem unreasonable that the unsubsidized owner in peacetime should have to seek Government approval before he can sell his own property in a foreign market, which will generally be the one in which he can get the best price and may well be the only market available. It seems that some people want to make it even more difficult than it is at present for an owner to exercise one of the customary rights incident to the ownership of property in common law jurisdictions, which is the right to dispose of it in the best available market. The restrictions contained in section 9 of the Shipping Act of 1916 are, I think, more severe than those provisions of law that limit the rights of Americans to export or sell other types of property in foreign markets. And I make reference to the Neutrality Act and the Export Control Act of 1949.

For example, the Export Control Act of 1949, which was designed to reduce the inflationary effect of foreign demand upon our supplies when we were faced with shortages in important commodities, is

simply emergency legislation that is temporary in character and that will expire according to its own terms on June 30, 1956. Section 9 of the Shipping Act, on the other hand, is permanent legislation.

Another example is the Neutrality Act, which requires licenses for the export of arms, ammunition or implements of war. But licenses must be issued unless the exports would violate the Neutrality Act or a treaty to which the United States is a party. Under that statute merchant vessels were not listed as implements of war and no licenses have been required for their exportation.

In its administration of section 9, the Maritime Commission seemed to be aware of the apparent conflict between the provisions of the section and our fundamental concept of peacetime property rights, and I think Mr. Rothschild, this afternoon, was also aware of the same principle.

In 1941, Admiral Land, then Chairman of the Commission, in a memorandum to Judge Bland, chairman of the House Committee on the Merchant Marine and Fisheries, said in part:

In administering the section, the Maritime Commission has borne in mind that the extremely broad power granted to it obviously should be applied judiciously and with great care, in a manner harmonious with other statutes and constitutional guaranties affecting property rights, and that its arbitrary exercise not only would be wholly inconsistent with American principles of respect for rights in the ownership of private property, materially decreasing the value of vessels to their owners, but would tend to defeat the interests of the United States by discouraging private investment in vessels required for the national defense.

In that passage from his memorandum I think Admiral Land pointed to one important economic fact of life—namely, that if we want private capital to provide a privately owned merchant marine, we should not discourage investment in shipping by restrictive measures. But it also contains a thought that deserves very serious consideration-the suggestion that so broad a power has been granted by the Congress that the protection of constitutional guaranties lies only in the manner of its administration. That sounds like government by men rather than government by law, and I think, Mr. Chairman, if Mr. Rothschild's statement and the principles which he said apply are compared with the principles that Secretary Sawyer said were applied and they are in the study that you have permitted to be introduced in the record at the end of this statement-you will see that the standards prescribed are entirely different, and if they can be shifting they must be man-made and not defined in the law.

This brings me to the possible compromise that I referred to above and that I am encouraged to think may be acceptable to the unions. Another, but unquoted, portion of Admiral Land's memorandum to Judge Bland reminds us that when section 9 was originally enacted it required, as a prerequisite to a foreign transfer, only that the ship be first tendered to the United States at the price in good faith offered by others or, if there were no such offer, at a fair price to be determined by appraisal. With such a requirement there could be no reasonable objection on the part of the shipowners. Nor could there be objection if there were submitted in lieu of appraisal of fair value by arbitration, a judicial determination thereof.

There is attached to this statement a copy of section 9 as it was originally enacted as a part of Public Law 260, 84th Congress. Also

attached is a copy of section 10, which contained the appraisal provisions. In both sections the language relating particularly to the requirement of tender and appraisal is underlined.

May that be placed in the record at the end of my statement, Mr. Chairman?

Senator BUTLER. It will be so done.

Mr. MORGAN. Economic pressures influence an American shipowner in his desire to transfer a ship to foreign registry and accordingly a remedy for the foreign transfer problem should be sought in the economic field. A broader subsidy program would, no doubt, be an effective remedy but it seems clear that no amount of restrictive legislation will promote American-flag ship operation when such operation must be conducted at a loss. If losses under private American-flag operation are inevitable and if transfer to foreign-flag is prevented, there is no alternative but to lay up the unprofitable vessel. Under such circumstances, it would seem that the interests of national defense would be better served through the availability of foreign-flag ships in actual operation than through the mere existence of American ships in lay-up. The merchant marine needs a better economic enviroment instead of restrictive legislation.

(Excerpts from Public Law 260, 64th Congress (H. R. 15455) :)

EXCERPTS FROM PUBLIC LAW 260, 64TH CONGRESS (H. R. 15455)

SEC. 9. That any vessel purchased, chartered, or leased from the board may be registered or enrolled and licensed, or both registered and enrolled and licensed, as a vessel of the United States and entitled to the benefits and privileges appertaining thereto: Provided, That foreign-built vessels admitted to American registry or enrollment and license under this Act, and vessels owned, chartered, or leased by any corporation in which the United States is a stockholder, and vessels sold, leased, or chartered to any person a citizen of the United States, as provided in this Act, may engage in the coastwise trade of the United States. Every vessel purchased, chartered, or leased from the board shall, unless otherwise authorized by the board, be operated only under such registry or enrollment and license. Such vessels while employed solely as merchant vessels

shall be subject to all laws, regulations, and liabilities governing merchant vessels, whether the United States be interested therein as owner, in whole or in part, or hold any mortgage, lien, or other interest therein. No such vessel, without the approval of the board, shall be transferred to a foreign registry or flag, or sold; nor, except under regulations prescribed by the board, be chartered or leased.

When the United States is at war, or during any national emergency the existence of which is declared by proclamation of the President, no vessel registered or enrolled and licensed under the laws of the United States shall, without the approval of the board, be sold, leased, or chartered to any person not a citizen of the United States, or transferred to a foreign registry or flag. No vessel registered or enrolled and licensed under the laws of the United States, or owned by any person a citizen of the United States, except one which the board is prohibited from purchasing, shall be sold to any person not a citizen of the United States or transferred to a foreign registry or flag, unless such vessel is first tendered to the board at the price in good faith offered by others, or, if no such offer, at a fair price to be determined in the manner provided in section ten.

Any vessel sold, chartered, leased, transferred, or operated in violation of this section shall be forfeited to the United States, and whoever violates any provision of this section shall be guilty of a misdemeanor and subject to a fine of not more than $5,000 or to imprisonment of not more than five years, or both such fine and imprisonment.

SEC. 10. That the President, upon giving to the person interested such reasonable notice in writing as in his judgment the circumstances permit, may take possession, absolutely or temporarily, for any naval or military purpose, of any vessel purchased, leased, or chartered from the board: Provided, That if, in the

judgment of the President, an emergency exists requiring such action he may take possession of any such vessel without notice.

Thereafter, upon ascertainment by agreement or otherwise, the United States shall pay the person interested the fair actual value based upon normal conditions at the time of taking of the interest of such person in every vessel taken absolutely, or if taken for a limited period, the fair charter value under normal conditions for such period. In case of disagreement as to such fair value it shall be determined by appraisers, one to be appointed by the board, one by the person interested, and a third by the two so appointed. The finding of such appraisers shall be final and binding upon both parties. [Italics ours.]

Senator BUTLER. Mr. Zito and Mr. Stuart, we have got to go to the floor. There have been two quorum calls. What we will do is to hold the record open. You have given very fine statements. We can incorporate them in the record.

Mr. STUART. Might we have just one moment, Mr. Chairman? Mr. WEBSTER. Would you like to submit your statement, Mr. Zito? Mr. ZITO. Yes, and I would like to supplement it.

Mr. WEBSTER. In writing?

Mr. ZITO. Yes, sir.

Mr. WEBSTER. Very well.

Senator BUTLER. In view of the fact that we have to leave to go to the floor immediately, perhaps we could go down to the Vice President's room just off the Senate floor and continue this hearing and if we have an opportunity to come back into the room we will do so. (Whereupon, at 5:08 p. m., the hearing resumed in the President's room in the Capitol.)

Mr. STUART. Is it all right to proceed now, Mr. Chairman?
Senator BUTLER. Yes.

STATEMENT OF JAMES B. STUART, AMERICAN TRAMP
SHIPOWNERS' ASSOCIATION, INC.

Mr. STUART. My name is James B. Stuart. I am president of Starboard Shipping, Inc., which operates four American-flag vessels engaged in the so-called tramp trades. I appear today, however, in my capacity as president of the American Tramp Shipowner's Association, which association represents approximately 95 percent of the American-flag vessels engaged in the tramp trades.

As we see it, the basic question before this subcommittee and the Maritime Administration is whether or not it is necessary and desirable to maintain the tramp segment of our American merchant marine. As well over 50 percent of the total export and import dry-cargo commerce of the United States today is carried on tramp vessels, we feel an American-flag tramp fleet is vital to service our peacetime commerce. As to the value of the tramp vessel in time of war, may I point to the experience in World War II and the recent Korean emergency where the American tramp vessels carried a great bulk of our total Government shipments. With the end of World War II and the cessation of hostilities in Korea, American shipping needs have been drastically curtailed. As a result of this, approximately 100 vessels of the American tramp fleet have been forced into lay-up because of their inability to compete in the worldwide market with foreign-flag ships which operate at one-third or less than the cost of similar vessels under the American flag engaged in similar service.

Important public officials, members of our armed services, Members of the Senate and House of Representatives, members of industry,

and representatives of labor, all interested in maritime affairs, have all strongly urged and suggested that Government aid should be given to this segment of the American merchant marine. Public hearings, studies, and reports on this subject have been submitted. It is an ironic fact that in spite of all the recommendations, hearings, studies, and reports recommending operating subsidy aid to the American tramp fleet, nothing has been accomplished to date. Further procrastination can be likened to "doctors engaging in prolonged conference discussing remedies while the patient is on the verge of imminent death."

Our association appears today for the purpose of advocating the transfer of half of the existing tramp fleet. It is the only immediate solution available. We do this, however, not because of advantages to be obtained from that transfer as such, but because we believe that such transfer is necessary if the remaining half of the fleet is to be able to continue under American registry. Our point of view and objective is to preserve half of our tramp fleet for future American operation, rather than to permit the entire fleet to disappear from the seas. It is our position that unless Government subsidies are forthcoming immediately, such transfers offer the only hope of saving that half of our tramp fleet which will remain indefinitely under American registry.

At the present time, over 50 percent of the import and export tonnage of the United States is carried on tramp type vessels. Neverthelessfi almost 100 of a total of 150 American-flag tramp ships are now laid up for lack of profitable employment. Each of these laid-up tramp vessels is reducing the net worth to the American owner thereof by approximately $5,000 per month for each ship. Moreover, even the few American tramp vessels still in operation are losing sums of money approaching or exceeding the monthly loss on the vessels in lay-up. As a result, in a short period of time the American-flag tramp owners, who are basically the small business of the American shipping industry, will soon be insolvent and their ships off the seas.

Our purpose iu appearing today is to suggest a means of preserving a part of the American tramp fleet with (a) no cost to the United States, (b) no loss of business to American seamen, and (c) no loss of availability of the vessels in the event of national emergency.

We believe that there are only two alternatives to the proposal set forth below: The first of these is payment of operating subsidies to the tramp owners. This would require amendment of the Merchant Marine Act of 1936 so as to include tramp ships within the coverage of the statute, and appropriation of the necessary fund by Congress. The second alternative is bankruptcy of the present independent tramp operators, foreclosure of their vessels bearing mortgages, and the scrapping of those vessels which are unincumbered.

The basic plan advanced by the American Tramp Shipowners Association is to authorize the transfer to friendly foreign registry but American ownership of approximately 50 percent of the existing American-flag Liberty type dry-cargo vessels engaged in the tramp trades. By so doing, the serious overtonnage which is resulting in the present tremendous financial losses to the tramp operators will be cured. By removing this overtonnaging, the law of supply and demand should permit the remaining American vessels to obtain cargoes at compensatory rates. To protect the Government's inter