Mr. MCCARTHY. Yes.

Mr. PETTENGILL. Do you go through the Suez Canal?

Mr. McCARTHY. We do use the Suez Canal; have ships going through it.

Mr. PETTENGILL. How are your tolls there?

Mr. MCCARTHY. That is a private canal, of course.

Mr. PETTENGILL. How do your tolls through the Suez Canal compare with the toll charges through the Panama Canal?

Mr. MCCARTHY. I could not tell you just what the tolls are I think the tolls through the Suez Canal are a little heavier. That is a privately-operated canal, and like most private companies they have got to maintain the canal and they have got to show a fair return on the investment to their stockholders.

It was not built by any particular government or operated by any particular government for military purposes. It is primarily a commercial canal. It is, therefore, unlike the Panama Canal.

Mr. PETTENGILL. Is not the company that operates the Suez Canal a subsidiary of the British Government?

Mr. MCCARTHY. Well, I think the Suez Canal today is owned more or less by private capital; its stock is on the market. You can buy it. Mr. PETTENGILL. Yes.

Mr. McCARTHY. It was built originally, I think, with the aid of the Government but it is owned and operated now by private capital. Mr. PETTENGILL. Of course, I do not know what the present facts

are.

I thought, historically, that Great Britain, in Disraeli's time, acquired the Suez Canal rights for a shorter route to India, in the same way that we wanted a shorter route through the Canal to the Pacific Coast. However, that is pretty far afield from our subject

matter.

Mr. MCCARTHY. I think it was rather built for commercial purposes than for military purposes.

Mr. WOLVERTON. You have stated that this would increase the amount you would be required to pay by 50 percent.

Mr. MCCARTHY. Yes.

Mr. WOLVERTON. In other words, your Canal charges are approximately $600,000 now, and if this bill were enacted they would be approximately $300,000 more.

Mr. MCCARTHY. Yes; the actual figures, Mr. Congressman, are $625,000 at the present time and it would be increased by $297,000. Mr. WOLVERTON. Yes.

Mr. MCCARTHY. Those are the actual figures.

Mr. WOLVERTON. Are your figures on the basis that the maximum rates provided in the bill would be charged?

Mr. McCARTHY. I do; that is on the basis of the maximum rates. The maximum rates in the bill being used in the President's proclamation.

Mr. WOLVERTON. You are aware of the fact that the bill provides that the rates shall be fixed by proclamation of the President? Mr. MCCARTHY. Yes; that has always been the case.

Mr. WOLVERTON. And notwithstanding that fact you feel that the rates would necessarily be increased to the extent that you have stated?

Mr. MCCARTHY. Yes;. I think that the rates will be the maximum. I think that is what the Governor of the Canal recommends.

Mr. WOLVERTON. You do not think that the President would be willing to take into consideration the increased cost you are now under in the operation of your ships?

Mr. MCCARTHY. Whether he would?

Mr. WOLVERTON. I refer to increased costs that are the result of the recovery program?

Mr. MCCARTHY. Perhaps if we could reach the President, but I think he would be guided by the recommendations of the men in his department who would advise him. That would be the War Department, the Canal authorities.

Mr. WOLVERTON. And do you feel that such would be the result, notwithstanding the fact that you would be able to present to the President figures which would show that by complying with the recovery program you would not be able to pay the amounts set forth in the bill without incurring a heavy loss?

Mr. MCCARTHY. I think so. I think, as I say, if we had an opportunity to present them personally to the President he would see it, but the President has other trouble on his hands just now without worrying about canal tolls.

Mr. WOLVERTON. Mr. Chairman, I think it would be very helpful to have right here, Mr. Sill's opinion as to whether there would be a 50 percent increase, or the possibility of a 50 percent increase.

Mr. MCCARTHY. I can give you the actual figures, Mr. Wolverton. Mr. WOLVERTON. I did not mean it in that way, Mr. McCarthy. Your figures, I am sure, represent your viewpoint. I am wondering whether, looked at from the other side, that is, from the Panama Canal authorities side, whether it would operate in just the way you have indicated.

Mr. MCCARTHY. The Panama Canal authorities have already determined what the United States net tonnage would be. We know what the total payment of tolls would be and we know that we would have to pay our tolls based on a $1 rate.

Mr. WOLVERTON. I think it would be helpful to have Mr. Sill give us an estimate, whether he thinks it would work out the same way as indicated by Mr. McCarthy if the bill is enacted into law.

Mr. SILL. Mr. Wolverton, I think possibly we have tried to bring out the same thought before; that the rates per ton will have to be established by the President.

If the President should place the rate at the maximum amount allowed by law, $1, then the figures that Mr. McCarthy has given for his type of ship would be correct.

However, I understood him to say that the President always has set the tolls at the maximum limit. At the time the Canal opened the maximum limit was $1.25, and the President set the toll at $1.20, thinking he was setting it 5 cents under the limit. Later on it developed through a decision of the Attorney General that the limits were not placed upon the figures that we all thought, including the steamship people, were to be used. The President did not pick the maximum tolls at the time Canal was opened.

Mr. WOLVERTON. Mr. McCarthy, let us inquire a little further into the facts concerning the terms of your construction loans.

Mr. MCCARTHY. Yes.

Mr. WOLVERTON. You say that when your first ship was constructed you were allowed a 50-percent loan?

Mr. MCCARTHY. Yes.

Mr. WOLVERTON. Is that represented now by a lien held by the Shipping Board?

Mr. McCARTHY. Yes; first mortgage.

Mr. WOLVERTON. How long is the term of the mortgage?

Mr. MCCARTHY. Fifteen years.

Mr. WOLVERTON. What is the rate of interest?

Mr. MCCARTHY. 514 percent.

Mr. WOLVERTON. I understand when the later ships were constructed you procured a 75-percent loan. What was the rate of interest?

Mr. McCARTHY. 514 percent.

Mr. WOLVERTON. The same term as to years?

Mr. MCCARTHY. Yes. We do not get the benefit of the lower rate of interest that has been granted foreign trade. We have to pay the 514, which is plenty high. I do not think the Government is borrowing much money on which it has to pay 514 percent.

Mr. WOLVERTON. It is the ships engaged in the foreign trade which get the lower rate?

Mr. McCARTHY. It is the foreign-trade ships; yes.

Mr. WOLVERTON. That is all.

Mr. PETTENGILL. When you built your ships in 1926, 1927, or 1928 you built them to comply with the United States rules of measurement covering toll charges, and since that time you have made subsequent changes?

Mr. McCARTHY. We have made some alterations. Since the depression we have had to compete with other companies, if we were to get the benefit of any competition, we had to go along and see if there was anything that we could do and still come out without a loss, and save ourselves any operating costs that we could. We did make those changes, it is true.

Mr. PETTENGILL. I would like to ask Mr. Sill a question whether the ships which have been testified to, whether these changes have actually decreased their potential capacity.

Mr. SILL. In the case of the vessels that Mr. McCarthy speaks about the ships reduced the tonnage by the exemption of the passenger cabins. The amount of space below decks that was affected was very small so that it did not decrease the earning capacity of the vessel except in the effect that it had upon the plimsol mark, the draft marks assigned by the classification society, which allows you to load deeper when the deck is closed than when the deck is open. However in the case of these vessels the difference in the draft was not very much.

Mr. PETTENGILL. This classification society does not make that classification for the basis of a marine insurance rate?

Mr. SILL. I do not know about insurance rates. The society determines the draft to which the vessel may be loaded, and of course it is only recently that the United States has adopted the international load-line law. Prior to that time there was no restriction on United States vessels as to how deep they could load.

Mr. PETTENGILL. Now, have these changes been of value to shipowners only with respect to toll charges, or have they also lessened the marine-insurance premiums, or have they increased premiums? Mr. SILL. I am not familiar with that.

Mr. MCCARTHY. I can answer that, Mr. Pettengill. They do not affect the insurance.

Mr. PETTENGILL. They do not?

Mr. MCCARTHY. They do not affect the insurance cost, but they do the Canal tolls, as well as the port costs; they have lessened the port charges.

Mr. PETTENGILL. Yes.

Mr. LEA. Are those port charges based on United States registration rules?

Mr. MCCARTHY. Yes.

Mr. LEA. And it reduces your tonnage too, does it not?

Mr. MCCARTHY. Under these rules only; it did not reduce the Panama Canal tonnage; that was not affected.

Mr. LEA. Is that requirements as to loading depth a matter of law or a matter of regulation under the law that has the force and effect of law?

Mr. MCCARTHY. It has the force of law, the international loading regulations.

Mr. LEA. If you overload the vessel you would be violating the law?

Mr. McCARTHY. If you overloaded the vessel you would be violating, not only the law, but you would be likewise facing a serious penalty and very drastic action on the part of everybody; if the ship is overloaded-nobody would be willing to insure an overloaded

vessel.

Mr. PETTENGILL. If you should overload the ship in violation of these rules would your marine insurance be collectable?

Mr. McCARTHY. The marine insurance would be jeopardized. I cannot conceive of any shipowner loading a vessel beyond the point allowed. He would lay himself open for criminal action. Mr. PETTENGILL. I have no further questions.

Mr. LEA. We thank you, Mr. McCarthy.

Mr. MCCARTHY. Thank you.

STATEMENT OF LOGAN CRESAP, MARINE INSURANCE, ISTHMIAN SHIPS, NEW YORK CITY

Mr. LEA. Just give us your full name, your address, and for whom you appear.

Mr. CRESAP. Logan Cresap, marine superintendent, Isthmian Ships, 50 Trinity Place, New York.

We operate a fleet of 28 cargo vessels, take no passengers. During the calendar year 1933 we made 130 transits of the Panama Canal. One hundred and twenty-one of those transits were loaded transits; nine of them were ballast transits.

On the 121 transits, loaded, we paid the Panama Canal $545,000 on the United States registered net tonnage of those vessels.

On the nine ballast transits we paid the Panama Canal $34,978; that was on the Panama Canal tonnage under their rules.

The combined expense for those two in that year was $580,775.44. Now, under the proposed schedule for those transits we would have paid for the loaded transits $651,359, and for the ballast transits $29,146.20, or a total of $680,505.20, the difference between the two amounts being $99,729.76. That is to say, what the passage of this bill would mean in the way of increased cost to our operation of approximately $100,000.

Mr. PETTENGILL. On the loaded transits your cost would be $651,000?

Mr. CRESAP. Under the new system, yes; $651,000.

Mr. PETTENGILL. And under the ballast transit it would be $48,000?

Mr. CRESAP. $29,146.

Mr. PETTENGILL. So your ballast transits would be less?

Mr. CRESAP. Yes. These figures vary from year to year; on some trade it shows an increase and some a decrease, so that there is not much difference in the whole. I have studied the same thing covering three different periods in the last 10 years and the proportion always comes out very close to the same percentage.

The total increase would be about 17 percent.

The increase of $99,729.76 amounts to 17.2 percent over existing payments by us, and is obviously a very material and oppressive burden. I see no reason to elaborate to the committee its importance to us, as the conditions under which we are operating are too well known to you to require it. Certainly the imposition of such an added expense could be justified only on the gravest necessity.

It is well to note that approximately 33 percent of our transits occur in foreign trade, where we are in direct competition with strong and numerous foreign-owned lines. In such trade the present foreign-exchange situation places our competitors in a favorable position as compared to us, as Panama Canal tolls are payable in United States currency. Not only would the proposed change materially increase our expense with no compensating increase in revenue but it would place a relatively lighter burden on our foreign competitors.

Mr. PETTENGILL. On account of the exchange?

Mr. CRESAP. Yes.

Mr. PETTENGILL. The foreign exchange?

Mr. CRESAP. Yes. That is the only statement, only fixed statement that I have prepared in reference to this bill, but there is one question that has come up two or three times in respect to the question of decrease in tonnage. We operate one ship which has no tonnage exemption. All of the rest of the ships have tonnage exemption, and they were built with that preference.

Mr. LEA. And this one ship gets the benefit of the ballast one way?

Mr. CRESAP. That is one ship which we have that is so constructed that it does not get the exemption.

Mr. LEA. I see.

Mr. CRESAP. It was built that way originally.

Mr. LEA. It is not an oil ship?

Mr. CRESAP. No; it is a freighter. A freighter can be built that