condition, and I think it would be very illuminating for you to obtain that from the Shipping Board and see just the condition that these companies are in today, and they are worrying today with the increased costs. The costs have gone up so materially in the last year that they simply are not living up to their obligations to the Government now.

Now, what is to become of us if your tolls are increased 50 percent or 40 percent, under the 90-cent rule?

I think it would be very helpful if those statistics were obtained from the Shipping Board and you would just enlighten yourselves on that subject.

I am not making rash statements on that point. It is all a matter of record in Washington.

Mr. MONAGHAN. That it will increase the tolls 50 percent?

Mr. MCCARTHY. In our case, yes.

Mr. MONAGHAN. That is all.

Mr. MCCARTHY. Thank you.

Mr. LEA. Thank you, Mr. McCarthy.

STATEMENT OF R. R. ADAMS, VICE PRESIDENT GRACE LINES, NEW YORK, N. Y.

Mr. ADAMS. I will promise to be very brief, Mr. Chairman. Mr. LEA. All right, then. We can probably hear you before we adjourn for lunch.

Will you state your full name, address, and the organization you represent?

Mr. ADAMS. R. R. Adams, vice president Grace Lines, New York, N. Y.

Mr. LEA. You may proceed in your own way, Mr. Adams.

Mr. ADAMS. Mr. Chairman, my company operates among other services two principal ones, passenger and cargo services to the north and west coast of South America and to the west coast of Central America and thence to California. These two services have been stated by other departments of the Government to be essential trade routes in the foreign trade of the United States. Operating as they do on fixed and frequent services, and with fast itineracies, they pay proportionately very heavy tolls to the Panama Canal.

At the present moment our schedules call for the operation of 9 ships on these 2 trade routes, but those 9 ships transit the Canal, cach of them, twice every 6 weeks, so that we have 156 transits yearly by these vessels, which pay, under the present system of admeasurement, something over $800,000 a year in tolls, representing between 3 and 4 percent of all of the tolls paid by all of the boats, by all of the nations of the world.

I cite that particularly to show that we have a very important interest in this proposed legislation and also because it leads to the inevitable conclusion that the increase of tolls which would result under this proposed legislation, if the dollar rate is decided upon, would increase our amount approximately 50 percent, or some $400,000 a year, and will inevitably lead to increased freight rates between all of the Latin American countries which we serve and the United States.

This would be, in our opinion, a very inopportune moment for this additional burden to be placed upon the trade of the United States with Latin American countries. It would come just at a time when these nations are beginning to get back on their feet after a very difficult time through the last 4 years of a very, very serious depression and it would hamper the efforts being made by all of the departments of the Government to stabilize that trade at the present time.

Now I subscribe entirely to all of the arguments that have been put into the record by Mr. Farley and Mr. Morrison and subsequent speakers.

I wish to call particular attention to their argument regarding the inequities which exist in the Panama Canal rules the system of admeasurement proposed under this legislation. They are, in our, judgment very serious inequities in particular relation to the type of ships we operate.

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I want also to emphasize the fault, if I may call it so, in the Panama Canal rules in omitting any consideration of the deadweight carrying capacity of the vessel in measuring its so-called earning capacity." We have mostly in our ships a limitation in the capacity through weight and not through volume, and we think that any system which purports to measure the earning capacity of the ship should take into consideration its capacity to carry weight, as well as the amount of space that is in the ship.

Mr. LEA. In that connection, would you explain what accounts for that in a little more detail?

Mr. ADAMS. Yes; it results from the difference of classes of cargo carried. One ship can carry, let us say, for the sake of example, 10,000 tons of coal which would measure, let us say, 40 cubic feet to the ton, whereas we could only carry 5,000 tons of general cargo of the character of the average 80 cubic feet to the ton weight.

Mr. LEA. Now, when you collect for that cargo, do you not in part charge on a weight basis?

Mr. ADAMS. We do on those commodities which are weighty or of a heavy character, but the point I am making is, you are limited. You connot consider either the weight of the cargo or the space that is in the vessel, and that the rules of measurement in existence refer only to the cubic capacity, that is, based only on the cubic capacity of the vessel and not on the weight capacity. I can illustrate that feature, if you will permit, by saying a good deal has been made of the steps that have been taken by the various owners to reduce their tonnages by exemption of space permited under the United States rules. I think that has not been emphasized enough, that those reductions were obtained only at the sacrifice of some of the weight-carrying capacity of the vessel, because you are required to load lighter when loading on deck with a shallower draft when carrying out these changes in the ship. The actual fact is that we are restricted in many cases in our capacity by virtue of that fact. Mr. LEA. Do you in part take care of yourselves on that from the standpoint of charges, by charging more per ton for that heavy freight?

Mr. ADAMS. That is not always possible, Mr. Chairman.
Mr. LEA. In part, I assume that is true, though.

Mr. ADAMS. To some extent, yes.

Mr. LEA. You may proceed in your own way.

Mr. ADAMS. I really have nothing more to say except that it seems to me that when we are proposing, as we are in this legislation, to shift from one set of rules which has been in effect for some 20 years, and in which there may be inequities, to another set of rules which, I contend strongly, have also a great many inequities in them, that we should not do that unless there are some very strong purposes to be served, and it is my contention that the proper procedure is to endeavor to formulate the fairest possible set of rules, either by one means or another, in advance of enacting this legislation changing the system of measurement, and then setting the rate on that basis. I think we are putting the cart before the horse, and that we should have these investigations and these rewritings of the rules and whatever the governing body may decide upon, and that the rules be known before the rates are set, so that we in the industry may have some definite idea about what the changes are going to be and not have the legislation enacted and the power in the hands of the administrative body to proceed with it before we know what the basis of measurement on which the toll is going to be charged is. Mr. LEA. All right; thank you.

Mr. ADAMS. Thank you.

STATEMENT OF R. H. HORTON, MANAGER PORT OF PHILADELPHIA OCEAN TRAFFIC BUREAU, PHILADELPHIA, PA.

Mr. LEA. Will you give your full name, address, and organization you represent, Mr. Horton?

Mr. HORTON. My name is R. H. Horton. I am manager of the Port of Philadelphia Ocean Traffic Bureau.

The Ocean Traffic Bureau is a civic organization which was founded and is supported, has members on its board of directors, of the Philadelphia Chamber of Commerce, Philadelphia_Board of Trade, the Marítime Exchange, the Bourse, the Commerce Exchange, and the Real Estate Board.

Our purpose is to stimulate the flow of traffic through the port of Philadelphia and to do all in our power to see that the proper services are supplied to the ships and to the shippers.

This matter of Canal tolls is of considerable interest to us, particularly in view of the fact that Philadelphia is the foremost port, or was for 1933, on the Atlantic coast in the production of tonnage to go to the Pacific coast.

We have sailings, usually upwards of 30 a month from Philadelphia through the Canal to the Pacific coast. It involves a large part of the port's traffic.

Now, I am not qualified to discuss ship measurements or what system ought to be used, or anything of that sort. My work is largely of a traffic nature and I think it is conceded that these revised measurements are putting an additional burden upon the generalcarlgo carriers, and that is what hurts us.

The general-cargo carrier probably is the carrier that is less able to carry any increase in rates. The increase in tolls must be reflected in rates, and with the general-cargo carrier carrying a multiplicity of commodities, the effect of the increase of rates cannot well be forecast.

In the case of a lumber carrier or an oil carrier or an ore carrier, one can very easily determine what effect that particular increased rate is going to be on that particular commodity and that particular industry, but the ramifications of increased rates upon a generalcargo carrier are so great that you cannot really forecast exactly what is going to happen.

The general-cargo carrier has to obtain its cargo under competition. The bulk carrier generally is carrying his own commodity for his own purpose.

The competition of these intercoastal carriers is not only rail competition. It is fully as much competition in economic conditions.

When Mr. Bartley was on the stand here, I do not know whether he mentioned this to you or not, that they use the Panama Canal in both directions, and I think it is a very good example as to how the increase might be reflected. They bring tomato pulp from the Pacific coast to Camden, convert it into soup and tomato juice, and then ship it back to the Pacific Coast again, to be consumed. Now, it is very questionable if an increase in rates, on that tomato pulp, for example, would be such as to put the Campbell Soup Co. out of business. I do not expect that. But, it might be sufficient for them to say, "We do not want any more Pacific Coast pulp because it costs too much. We will use Mexican tomatoes, we will use Cuban tomatoes"; because to them the effect of the Canal toll is just the same as an import duty. It reflects itself in the freight rate.

You will find-I looked this up in the statistical abstract this morning-that the tonnage, the cargo tonnage, moving through the Canal from the Pacific to the Atlantic is generally three times as great as that moving from the Atlantic to the Pacific.

Now, the toll on your general-cargo carrier is the same in both directions, but when he goes through only one-third loaded the effect· of the increase in the tolls as reflected in the freight rate must be triple that which it would be in the opposite direction, because generally eastbound she is fully loaded, or we hope she is.

Now, our view of the situation is this, that these lines have been developed under this system during the last 20 years, the bulk-cargo carrier and the general-cargo carrier, and we have a lot of bulkcargo carriers in our port, too; but I have not heard anything from them on this bill. I have never heard them say that their charges were inequitable, and believe me, with this subject up, if they felt that their charges were inequitable, they would be down at my office, hotfooting it. All I have heard has been from our generalcargo carriers and the shippers. They say, "We cannot stand it."

Now, they have developed; that is, constructed their vessels, and they have reconstructed their vessels. They have set up their enterprises on this set of rules, and they are the rules of the game that they are now playing under, and they are going ahead under them, and, gentlemen, these intercoastal carriers have done a swell job. They have not developed their business purely by taking it away from the rail carriers. They have developed new business. It has been a constructive matter. They are carrying traffic which formerly did not move, and which with increased rates probably will not move. Some of it may go back to the rails, but the bulk of it will not move. It is fraught with so many hazards that I

can conceivably see that the Panama Canal may receive less gross tolls through decreased service.

If I were a shipowner and had a frequent service eastbound through the Canal, and the rules were set up increasing my tolls, and I had the very heavy burden of carrying the tolls, with the light cargo operations westbound, I think I would be very much inclined to cut down my service westbound, cut down my sailings, load the remaining ships heavier and send the others through in ballast and get the 40 percent discount. That is not evasion; that is business. That is merely operating efficiently.

And, this matter of tonnage, openings, and so forth, alterations, that they have made in their ships; I do not see any reason why they should not do that. I do not see any reason why they should not do that any more than they should not buy a more economical apparatus for burning fuel oil on their ships.

We have a successful enterprise, reasonably so, and I point out to you that the two lines serving Philadelphia the best, that is, the most frequently, the Luckenbach and the American-Hawaiian, have been developed over a long period of years without 1 cent of Government subsidy by mail contracts or construction loans. They have built their own ships with their own money and they have developed a splendid enterprise in a splendid manner, and it seems extremely hazardous to attempt to redistribute, when those who are allegedly inequitably treated are not present to ask for it.

There is just one other point that I want to touch upon and that is the discretionary power in regard to measurements. You have two factors, one the rate per ton, and the other to determine the tonnage to which that multiplier is to be applied. We hope to see this business grow. We hope to see better ships developed. Therefore, it seems of the utmost importance that the measurement factors be one of great stability that cannot be easily changed. That is the rules of the game under which they are going to play.

Mr. LEA. You would rather have that 100 cubic feet defined as equivalent to a ton?

Mr. HORTON. I would like to see some positive definition of that so that the man can construct his ship and will know that that is not going to be shifted around this way or that way under varying administrative ideas. I think it is important if we are going to have a logical development, if we are going to have people improve their ships and buy new ones.

I thank you very much for giving me this time before lunch.
Mr. LEA. You may proceed, Mr. Petersen.

STATEMENT OF W. J. PETERSEN, REPRESENTING THE PACIFIC
AMERICAN STEAMSHIP ASSOCIATION AND SHIPOWNERS'
ASSOCIATION OF THE PACIFIC COAST

Mr. LEA. All right, Captain Petersen, we will hear you.
Will you give your name and adress to the reporter?

Mr. PETERSEN. My name is W. J. Petersen. I represent the Pacific American Steamship Association and the Shipowners' Association of the Pacific Coast.

Gentlemen, inasmuch as the testimony adduced at the previous hearing last year must be more or less familiar to you, I will not