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public rooms on which they do not receive any actual revenue. Of course, we know that when the vessel is well appointed, with nice social halls and other public rooms, passengers are attracted to the vessel and they are enabled to charge a higher rate for the accommodations on that vessel, and, therefore, they do have a potential value in their earning capacity, but as a matter of fact after the vessel has sold all of its cabins then it ceases to earn so they can't get any more.

Our contention is that under the present system it isn't right for the American steamship owner because he is saving a small amount, or an appreciable amount, I will say, because he is saving anything, to refuse to have an equitable system put into effect which will stop foreigners from getting that same and more consideration.

This is a report of a board that came down to the Canal in no way connected with the Canal, the Efficiency Bureau, and they sent down people who generally investigate your department to find out what is wrong with it. In their report-I will just read this one paragraph:

Referring to paragraph 2 of exhibit C, it will be noted that this saving to American shipping during the past 17 years has been $20,443,663 for coastwise vessels and $6,498,401 for vessels engaged in foreign trade, a total of $26,942,035.

They figured at the $1.20 rate. If the Canal had been allowed to charge the original rate that the President prescribed at the opening of the Canal, $1.20 on Panama Canal tonnage, we would have collected that much more from American ships. [Reading:]

During the same period, due to the fact that all ships using the Canal must be treated alike, foreign ships shared in these same benefits to the extent of $32,032,769.

For every dollar saved to American shipping it has been necessary to forfeit slightly more than $1 in legitimate revenues from foreign shipping. It would be far more economical to charge tolls to all shipping in accordance with the principle of taxing full earning capacity and increase present subventions to American shipping by whatever amount may appear necessary without reference to tolls. For example, in 1931, the United States rules saved American shipping from payment of $3,115,892.

The CHAIRMAN. What year?

Mr. SILL. 1931. They were down to the Canal in 1932 so they took the last year available. [Reading:]

While foreign shipping was saved $3,965,417, it would seem in the interest of good business administration to collect $7,000,000 and increase subvention by some $3,000,000 if necessary rather than forfeit $4,000,000 in order to achieve the same result. If the present Canal dual system is to be permitted to continue on the theory that American shipping must be protected from any increase in tolls, a supposition which will bear close analysis before being accepted, it constitutes one of the most costly forms of indirect subsidy which could well be devised.

In other words it costs the United States Government $7,000,000 to assist our American steamships $3,000,000, $4,000,000 of it going to the foreigner. I am, rather, for ship subsidy direct.

The CHAIRMAN. Is that a report of the Bureau of Efficiency?
Mr. SILL. Yes, sir.

Mr. ADAMS. Senator, may I suggest that those savings are to a large extent hypothetical, in talking about savings to American ships? What you really mean is that you could have collected that much more if Congress hadn't written the law the way it did. Actually the fact remains that the Canal has collected ample revenue to carry its expenses and its capital charges during that period. By the same token, you can easily say that if you made the rate $2 you could have collected a couple of hundred more million dollars.

The CHAIRMAN. Is that quite the point?

Mr. ADAMS. It seems so to me, Senator.

The CHAIRMAN. It seems so to me.

Senator FLETCHER. Assuming, too, that the same amount of traffic would have continued. If you had had higher rates you might not have had the same amount of traffic.

Mr. ADAMS. Exactly.

Mr. SILL. In regard to that statement of the way the law read, I would have to take exception to that. It was the way the law was interpreted.

Mr. ADAMS. At least I have the Attorney General on my side.
Mr. SILL. The Attorney General's opinion.

Senator DUFFY. We will have to consider that is the way it read. then, if that is the way he interpreted it.

Mr. SILL. In the report of the hearings had at the time the bill was being considered this took place:

Mr. STEVENS. The point I wanted made plain was this: The bill the chairman introduced contained the words "American measurement", and the President was authorized to make rules relative to measurement by displacement, or American measurement. Now, there is nothing in that language to authorize him to make such a limitation, is there?

Dr. JOHNSON. There is not, and I should say a clause should be added giving the Executive some latitude.

Mr. J. A. MARTIN. What do you think of the use of the words "American measurement" in the law? Is that the best word?

Dr. JOHNSON. You are asking for my opinion now?

Mr. J. A. MARTIN. Yes, sir; as to the use of the word "American" in the law. Dr. JOHNSON. I would prefer not to use it.

Mr COVINGTON. What would you use?

Dr. JOHNSON. Net registered tonnage.

The CHAIRMAN. Not say anything about whether American, British, or Constantinople?

We might find

Dr. JOHNSON. No; we might want to adopt the Suez rules. our American rules were unnecessarily favorable to foreign ships. The CHAIRMAN. Then you would vest in the President discretion to make any change in the rules, both as to measurement, tonnage, and tolls?

Dr. JOHNSON. I would, yes, sir; and I particularly would in this matter of measurement, because I think it should be dealt with not only before the Canal opens, but after the Canal is opened, when experience shows what types of vessels are actually using the Canal and how their net and gross register ratios run in actual practice.

Mr. J. A. MARTIN. You would not suggest we should not have some fixed standard to go by? For instance, it is all right in your opinion for us to fix the net-register system of measurement?

Dr. JOHNSON. For merchant vessels; yes, sir.

Mr. E. W. MARTIN. Is it your suggestion that we should have a permanent standard, both of measurement and tolls, but that you think the problem is not sufficiently definite yet, so that in passing this legislation at this session we can determine the matter wisely, but ought to leave some discretion to someone? Dr. JOHNSON. That is my judgment. If you put into law "American measurement" and find out American measurement is different from the British, it will apply, unfortunately, to comparatively few ships that use the Canal. You would have to measure every ship, practically, that used the Canal.

Mr. E. W. MARTIN. If you think our present measurements are crude and we use, as the chairman's bill calls for, "American measurement", that would be subject to such changes of the law as we might adopt afterward; in other words would we not in this legislation say to the world that the measurement of ships, in arriving at the net tonnage, will be by American system, and that if we from time to time change that system by legislative enactment they must conform to it. Dr. JOHNSON. My only fear is Congress may not change our navigation laws so as to make our rules the same as the Biritish, and may not give the Commissioner of Navigation a force of inspectors that will enable him to enforce uniformity in the application of these rules along our Pacific, Gulf, and Atlantic seaboards.

Mr. STEVENS. Do you know how many years the Commissioner of Navigation has been recommending and seeking to have our laws amended to compel uniformity?

Dr. JOHNSON. I do not know, but I know he began before 1895.

""

It is evident that the action of the committee in eliminating from the bill the words American measurement" was taken with full realization of its import and could only have transpired as the result of a decision that it would be inadvisable for Congress to commit the President to the application of the American rules for the purpose of determining maximum tolls..

Senator DUFFY. What ships are these that go in ballast and would get the large benefit? Are they owned by some private lines?

Mr. SILL. They are bulk oil carriers, tankers. They have to go to the west coast light and bring back their cargoes.

Senator FLETCHER. American vessels?

Mr. SILL. A great many American vessels but some are foreign. They use foreign vessels in that trade too.

Senator DUFFY. It really would be mostly the tankers.

Mr. SILL. Yes. And some of the ore ships that go to South America for ore, that go through in ballast and come back with ore because there is no commodity they can take. Their tolls they figure on the round trip.

The CHAIRMAN. Mr. Adams, you say you are with the Grace Line? Mr. ADAMS. Yes.

The CHAIRMAN. How many ships are they running through the Canal?

Mr. ADAMS. Thirteen at the moment. That varies somewhat. The CHAIRMAN. What is your annual subvention on the mail contract?

Mr. ADAMS. I can't give you those figures offhand. It is in the neighborhood of $2,000,000.

The CHAIRMAN. At this point, Mr. McCarthy, can you tell what your mail contracts amount to?

Mr. SILL. Senator Gore, Mr. McCarthy has left the room for a

moment.

The CHAIRMAN. Mr. Petersen, can you tell?

Mr. PETERSEN. We will furnish those figures if you want them. The CHAIRMAN. I wish you would.

Is there anyone else I failed to ask that?

(Mr. McCarthy submitted that the mail contracts paid approximately $16,000 per voyage, or approximately $416,000 per year.)

Mr. ADAMS. I would like to say, Senator, that in spite of Mr. Sill's discussion of the question of the proper development of the interpretation of the law, and so on, my only purpose in appearing here today and making this statement was to point out to you the inescapable fact that the enactment of this law will result in a very great burden to the particular foreign trades in which my company is engaged.

The CHAIRMAN. That is in spite of full allowance for social halls, recreaton halls, lounges, and space for the crew that serves the passengers, and so on.

Mr. ADAMS. We have no possible way of determining, Senator, what difference that may make if, as, and when some modification is made in the existing rules that will take cognizance of that.

The CHAIRMAN. You are discounting the words, I see that.

Mr. ADAMS. We would like to see that determination made in advance of the legislation fixing the definite rate of tolls.

It might be of just a little interest to you in passing in connection with a question you asked one of the previous witnesses about any system of assessments anywhere in the world that took into cognizance the earning capacity of vessels. If it would interest you I could tell you of one. In the port of Callao in Peru they have just completed a modern terminal of breakwaters, and so forth, and the Government has just instituted a new system of charging for the use of those new facilities, which is based not alone on the net registered tonnage of the vessel but also upon the actual tonnage of cargo handled at the terminal by the ship, either discharged or loaded, and a rather complicated scale is set up of the ratio between the actual cargo handled and the net tonnage of the vessel.

I might add that when I say net tonnage there I mean the net tonnage as determined under the rules of the nation whose flag the ship flies. We call at upwards of 50 different ports in many different countries and only one place in the whole itinerary of these ships is there any question of using any tonnage other than that of the United States net registry, and that is at the Panama Canal.

The CHAIRMAN. This ratio you speak of, is that an arbitrary and fixed ratio?

Mr. ADAMS. No, sir; it varies with the ratio of the cargo handled to the net tonnage. It falls into a number of different categories on a varying scale, the vessel paying so much per net registered ton if the amount of cargo bears a certain ratio to the net registered tonnage, another rate per net registered ton if the cargo bears a greater relation to the vessel's net registered tonnage.

The CHAIRMAN. I should think that point would be important considering, because a large ship ought to pay a larger toll than a smaller one, and yet it seems to me that it might be well to consider the amount of cargo it is actually carrying on the particular trip through.

Mr. EWERS. I would like to insert in the record that the three companies for whom I spoke will not receive any Government assistance.

(The chairman swore the next witness, Mr. Warley.)

STATEMENT OF H. W. WARLEY, NEW YORK, N. Y., VICE PRESIDENT OF CALMAR STEAMSHIP CORPORATION AND ORE STEAMSHIP CORPORATION

Mr. WARLEY. Mr. Chairman, I appear for Calmar Steamship Corporation, a common carrier in the intercoastal trade, and Ore Steamship Corporation, a bulk carrier owning and operating American ships in the Chile-United States trade. These interests own 21 vessels, 19 of which have transited the Panama Canal with a Panama net tonnage of 89,417 tons. In a full year's operation-1929-the actual tolls paid by us totaled $1,055,000.

The CHAIRMAN. That is 1929?

Mr. WARLEY. 1929, and in 1930, $1,022,000, representing almost 4 percent of the total tolls received by the Canal during those years. Senator DUFFY. Are you going to give us what you paid recently? Mr. WARLEY. I can give you that.

Senator DUFFY. I would like to know, for instance, last year and the year before.

Mr. WARLEY. I have those figures. In the year 1934 we paid $663,178.

The CHAIRMAN. Same number of vessels both years.

Mr. WARLEY. No; we were operating at a very much reduced number of vessels.

On a full operation basis we pay $1,138,000 a year.

The CHAIRMAN. Do you know what percentage your net tonnage bears to your gross tonnage?

Mr. WARLEY. I couldn't give you that offhand, but I can get it for you and have it inserted in the record if you desire.

I believe we are the largest or pay more Canal tolls than any other line, at least I think we must be very near the top.

The CHAIRMAN. That is your two concerns taken together.

Mr. WARLEY. Yes.

The CHAIRMAN. Do they have any interlocking arrangement?

Mr. WARLEY. They are owned by the same or affiliated companies. Senator FLETCHER. Cargo ships?

Mr. WARLEY. The intercoastal ships are cargo boats and the ore ships that run to Chile are specially designed bulk ore carriers. The CHAIRMAN. They carry no passengers?

Mr. WARLEY. None of them carry any passengers. We are opposed to legislation which will increase the tolls on any American vessel as we believe the shipping industry is in no position at the present time to stand any further increases in costs. We are especially concerned about our American-built ore vessels, which vessels are engaged in trade to a foreign country in competition with foreign vessels carrying ore at very low freight rates from other foreign countries, without any charges for tolls, and our Americanflag vessels competing without benefit of any Governmental assistance whatsoever in the form of loans or subsidies.

The CHAIRMAN. When you say without payment of tolls, what is the point?

Mr. WARLEY. The point is this, that these American ships in order to compete are using the Panama Canal and carrying ore from Chile. They are in competition with foreign-flag ships carrying ore from Scandinavia, the Mediterranean, Russia, and various other foreign countries, and they have no Panama Canal tolls whatever to pay. The CHAIRMAN. With common destination: Is that the point? Mr. WARLEY. Common destination in this country.

Senator DUFFY. I must be awfully stupid. Why wouldn't they have to pay?

Mr. WARLEY. They don't use the Canal.

Senator DUFFY. Going from Chile to this country?

Mr. WARLEY. They don't run from Chile. They come from Sweden and the various ore-producing countries, and principally the Mediterranean.

In the case of our ore vessels, our Panama Canal tolls represent 25 percent of our operating costs on today's basis.

The present bill, S. 2288, compared with S. 162: If legislation is necessary to simplify the work of measurement at the Canal and with the object of distributing the tolls more equitably we prefer the provisions of S. 162, with amendments to define "vessel-tons" as tons of 100 cubic feet and the changes in the maximum tolls loaded to 90 cents and in ballast to 60-percent less (as recommended by the

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