has been given study at the Canal and the statistics show that there would be many American vessels who would be penalized by such a system. I refer to the vessels that are in the foreign trade in competition with foreign vessels who make long trips and, therefore, few transits through the Canal per year. It would certainly help the large cargo vessels that are making weekly or biweekly trips through the Canal. It would also help this tanker group that the steamship representatives have seemed to think should not be helped on such a scheme. It would return to the Canal under the present rates a considerable increase in revenue, but a large portion of this increase would be borne by American vessels. Senator DUFFY. Why is that, if 55 percent of the total is foreign and 45 percent is ours and some of these big vessels and others come through only once a year? Mr. SILL. There are many foreign vessels that make more frequent trips through the Canal than the American vessels. Senator DUFFY. Yes; but on general runs American vessels make more trips through than foreigners, just in the nature of things, wouldn't they? They are closer here-the ports they are going to are and I think it would be the opposite of what you stated. Mr. SILL. A study developed that phase of it, and it was disapproved of. Senator FLETCHER. You mean foreign-flag vessels and not merely those engaged in foreign trade? Mr. SILL. I mean foreign-flag vessels make frequent trips through the Canal. It also might tend to set up what they call a "feeder system", where the large vessels would not go through the Canal; they would come to the terminals and then be fed by smaller ships, who could run back and forth through the Canal and after their first five trips would be going through free; so that you would have a condition where the large ships would never go through the Canal, and the little ones would go through 5 times, pay 5 tolls, and then stop paying and keep on going. That Mr. MCCARTHY. That is ridiculous, because you couldn't have any business on that basis where you are transshipping cargo. sounds all right in theory, but in practice it could not be done. Mr. SILL. You don't know what shippers will do to save money. Mr. MCCARTHY. In arriving at this percentage of 55 and 45, they arrive at it on the basis of the number of transits of American vessels and foreign vessels, but there are fewer American vessels making that number of transits on account of the shorter haul than there are foreign vessels. If you took the actual vessels by name, you would find a very much larger percentage of foreign vessels going through the Canal. Mr. SILL. I beg your pardon, Mr. McCarthy. Mr. MCCARTHY. American vessels make more transits, and to arrive at their figures they take the number of American vessels that go through and the number of foreign vessels. It is not by name. Senator DUFFY. That is, one little one would offset one big one. Mr. SILL. I will have to correct that impression, because all the figures at the Canal are based on number of tons, regardless of the number of transits each particular ship makes. Of course, when we made the study of the 5 transits we took the tonnage that went through 5 times, and it is all based on tonnage and return from that tonnage and not from any particular ship. The CHAIRMAN. Now this 55 percent of foreign vessels and 45 percent of American vessels-just what does that mean? Mr. SILL. That means tons. That doesn't mean the number of vessels that went through. It means tonnage. Mr. MCCARTHY. Does it mean tons of cargo? Mr. SILL. No, sir; it means tons that we charge on-tons of Panama Canal tonnage and tons of registered tonnage. Senator FLETCHER. American vessels going through the Canal to Japan, China, and so forth, and then vessels passing through the Canal from the west coast to cape ports-those are not considered foreign? Mr. SILL. No, sir; they are considered American vessels. We consider them American vessels in foreign trade, and they are in competition with foreign ships in foreign trade; but American vessels in intercoastal trade have no foreign competition because foreign vessels are not allowed to enter the intercoastal trade. Mr. MCCARTHY. Take it by transit. Here is a statement in the Canal Record which shows the number of transits. British vessels, 1,208 during the year, American vessels, 2,269. That is the number of transits. The CHAIRMAN. Do you have it for other countries? Mr. MCCARTHY. I have, sir. British, 1,208; Chileans, 7; Colombian, 1; Danish, 135; Danzig, 70; Finnish, 7; French, 92; German, 301; Greek, 13; Honduran, 9; Italian, 68; Japanese, 258; Mexican, 1; Netherland, 91; Norwegian, 450; Panamanian, 383; Peruvian, 14; Russian, 3; Spanish, 1; Swedish, 122; United States, 2,269. The CHAIRMAN. Mr. McCarthy, have you given any thought to the possibility of working out a combination of tolls based partly on the tonnage of the ship and partly on the freight actually in cargo? Mr. MCCARTHY. I have given no study to that, Senator; no. I would like the committee to give consideration to that scheme of assessing tolls based upon a maximum number of transits. I think it is one where you can do some real good for the American merchant marine as against the foreign, without violating any of your treaties. The CHAIRMAN. At present the law permits, I believe, a toll of $1.50 per passenger. Is that it? Mr. MCCARTHY. Yes. The CHAIRMAN. It never has been imposed. Mr. MCCARTHY. No. The CHAIRMAN. So all your passengers go through toll free. enough toll for the amount we get out of it. We think we pay The CHAIRMAN. I believe you are a little eccentric on that point, Mr. McCarthy. [Laughter.] Mr. MCCARTHY. I think we are making a very substantial contribution to the upkeep of the Panama Canal. I think it is a very large contribution. The CHAIRMAN. You don't have the earnings. I believe you said you were not making a profit. Mr. MCCARTHY. We are not, sir. When these vessels first came out, one came out in 1927, one in 1928, one in 1929, and they were running full capacity with passengers. The CHAIRMAN. You were optimists then, weren't you? Mr. MCCARTHY. Since 1929 the passengers have been cut in half, and we are still paying our canal tolls. The CHAIRMAN. The whole country has been cut in half, literally, Mr. McCarthy. Mr. MCCARTHY. When you do half the amount of business you don't expect to have the same expenses that you had. Senator FLETCHER. Your earning capacity is largely from freight? Mr. MCCARTHY. I think it is about equally divided, although I think the freight earnings are a little to the good against the passenger. They are a combination type of vessels that have to rely not only on the passenger earnings but on the cargo earnings to have them come out whole. We have invested $20,000,000 in those three ships. We don't get any return. Senator FLETCHER. Have you any mail contracts? Mr. MCCARTHY. We have a contract between New York and Balboa. The CHAIRMAN. Any subsidies? Mr. MCCARTHY. No subsidies. We call it a mail contract. We don't call it a subsidy. The CHAIRMAN. You are eccentric again, Mr. McCarthy. [Laughter.] Mr. MCCARTHY. If it were not that we had a mail contract we probably would have had fewer sailings than that. We have a contract to maintain and we have to run the ships whether we make money or not in order to carry that out. I don't know that there is anything more I can add, Mr. Chairman. I think that some of the other passenger lines that follow me can add something. (The chairman swore the next witness.) STATEMENT OF R. R. ADAMS, NEW YORK CITY, VICE PRESIDENT, GRACE LINE, INC. Mr. ADAMS. Mr. Chairman and gentlemen. The company which I represent operates a number of American-flag ships. The CHAIRMAN. How many? Mr. ADAMS. Thirteen at the moment, in the services from the Atlantic coast of the United States to 10 Latin-American countries, extending from Mexico to Chile on the west coast of Central and South America and touching at Cuba on the return voyage. Senator FLETCHER. None to the east coast? Mr. ADAMS. None to the east coast at all, except insofar as they touch the east coast of Colombia which is adjacent to the Panama Canal. These vessels are all of the combination passenger-and-cargo type, have relatively high speed, and here we fall into the category of the lines who would be called upon under this proposed legislation to bear the greatest burden of the redistribution of tolls. The CHAIRMAN. Can you state the percentage of your net tonnage to your gross tonnage? Mr. ADAMS. I can't give you those figures offhand, Senator. I can tell you, however, the amount of tolls that we pay and what we would pay under this proposed legislation. Being on relatively fast schedules and short turn-arounds we fall in the class described by Mr. Sill this morning as the Canal's best customers. These vessels are paying today 872,000-odd dollars per year in tolls. Under this bill, at the 90-cent rate which is now proposed, they would pay an increase of within $24 of $400,000 per year. At the maximum rate of $1 proposed in the bill the amount of increased tolls would be 541,000-odd dollars per year. It is quite obvious that increases in expenses of this magnitude insofar as they could be passed on in increased freight rates would adversely affect foreign trade of this country with all of these Latin-American countries. This would be a particularly unfortunate time to have that happen as the Latin-American countries are just beginning to get back on their feet a little bit after a very severe time in the depression, and their foreign trade is beginning again to pick up slightly. We have at the moment and have had for the past year or so increasingly severe competition in those countries with Japanese goods. The Japanese ships trading with these countries do not have to pass through the Panama Canal and they don't pay any Canal tolls. It would not be in our judgment at all beneficial to the foreign trade of this country to have to increase to a considerable extent freight rates on American goods to these countries at this time. It must be recognized, of course, that it is not always possible to pass all of these increases on for competitive reasons on different commodities, and to the extent that could not be done the increased expenses would have to be absorbed by us, which would seriously embarrass our operations and perhaps make it impossible to continue these very vital foreign services. I would just like to say one word in support of Mr. McCarthy's contention about the measurement of passenger spaces under the Panama Canal rules. It is our opinion that to the extent that the Panama Canal rules do not differentiate between space in the passenger part of the ship and under deck space in the cargo part of the ship, they do not fulfill the ideal of earning capacity to which they aspire. I understand that some suggestion has been made that a revision of the rules may give consideration to this point. It is our opinion that such consideration should be given not alone to this particular point but to other disputed points in the present Panama Canal rules before the enactment of this measure and not after it. We think that proper study of all these points could be made in a reasonably short time and a definite draft of a set of rules put forward which all owners could have a chance to comment on and to make suggestion on, and when that had been done it would then, and not until then, be possible to set a proper and an equitable rate per ton based on a definite set of rules from which everybody knew what they were going to have to pay. We would, therefore, hope that the enactment of this particular bill would at least be suspended until a definite study had been made. That comprises generally the main points that I wanted to put before the committee and I will be very glad to answer any questions. Senator FLETCHER. Have you thought anything about this tonnage basis? Mr. ADAMS. Yes; we have given consideration to that, and while I don't know exactly how it would work out with respect to different American services, it seems to us that there might very likely be something in the idea. The CHAIRMAN. You mean the number of transits? Mr. ADAMS. Yes; the number of transits. These ships, as I say, make relatively short voyages. These 13 ships make 104 transits in the Canal a year, and certainly some limitation-a basis of a commutation ticket, if you please, or something of that sort-might be worked out for those American ships to nearby ports or intercoastal trade which would relieve them of the extraordinary increase which would accrue to them through the bill as now written. Senator FLETCHER. You have mail contracts? Mr. ADAMS. We have. From San Francisco to Colombia to Habana on the east coast. The CHAIRMAN. You don't think it would be possible to send your big ships down to this side of the Canal from the Atlantic ports, load small vessels, and go through after they have made their five appointed trips, and reload larger vessels on the other side? Mr. ADAMS. Insofar as our business is concerned, Senator, that would be absolutely impracticable. Senator FLETCHER. Those are combination cargo-and-passenger ships? Mr. ADAMS. Yes. The CHAIRMAN. Taking your largest ships, how many passengers do they carry or can they carry? Mr. ADAMS. Approximately 200, Senator. The CHAIRMAN. And that space is largely exempt now? Mr. ADAMS. It is. The CHAIRMAN. And no toll on the passengers. Mr. ADAMS. That is correct. Senator DUFFY. I made the statement this morning that it wouldn't result in the aggregate in any more tolls being levied. I am just wondering where that comes in. Certainly all these lines would have to pay considerably more. Who is it that is going to pay that much less? Mr. SILL. Senator, as I pointed out this morning, when a vessel is in ballast it pays on the Panama Canal tonnage at the established rate, 72 cents. Theoretically that is 40-percent reduction off the loaded rate, but actually it is not a 40-percent reduction. It is less than a 30-percent reduction on the loaded rate, so that the vessels in ballast that are now paying on the Panama Canal tonnage at 72 cents a ton, no matter what the rate set by the President after the bill passes, they will receive that directly as a reduction in tolls on their ballast trips, because they are already paying on their Panama Canal tonnage at 72 cents. Any rate that we make for the ballast trips54 cents, or anything like that-will be directly reflected in a saving to those ships that now go through in ballast, so that the vessels that are now going through the Canal in ballast will have the biggest savings, but the aggregate tolls collected from all American vessels will be less at the 90-cent rate than is now received on the 1934 figures. Senator DUFFY. Do you think these lines that are assisting us in carrying on our trade with these South American countries, which we certainly want to have continue and improved, if possible, really then would be the ones that would suffer the greatest additional burden? Mr. SILL. It is unfortunate that they would be the ones that would suffer the most. Therefore, we had that in mind when we suggested a modification of the Panama Canal rules of measurement to do just what Mr. McCarthy suggested, eliminate from the tonnage these |
