Mr. WOLVERTON. You have stated that the purchase price was higher for the first ships. Were some of the ships you bought from the Shipping Board sold for a lower figure? Mr. LUCKENBACH. No; mine were sold for a high figure. I am still paying for ships that I bought at a high figure; I paid as high as $237 a ton, and I am still paying that, and I am in competition with ships that were bought for $25 a ton. Sold by the same banker, the same shipping institution. Mr. WOLVERTON. What portion of the purchase price did you have to pay in cash? Mr. LUCKENBACH. I think it was 25 percent. Mr. WOLVERTON. What did you mean by your statement that you received no subsidy; will you make known the contrast you evidently had in mind between your ships and those which get a subsidy? Mr. LUCKENBACH. I mean I am in competition with ships that are receiving a subsidy. Mr. WOLVERTON. For instance? Mr. LUCKENBACH. Grace Line. Mr. WOLVERTON. What does the subsidy consist of? Mr. LUCKENBACH. You mean how much money? Mr. WOLVERTON. Yes, in a general way; and what is the basis on which it is given to other shipowners? Mr. LUCKENBACH. Carrying the mail. How much they receive, of course, I do not know, but that is all a matter of record and you can get it. Mr. WOLVERTON. Do they have Shipping Board obligations to meet? Mr. LUCKENBACH. I have heard so; I do not know, but I have heard so. Mr. WOLVERTON. I thought perhaps you were referring to ships that had been built under what might be termed a "subsidy" in that they received loans from the Shipping Board to cover a part of the construction cost, or that they had mail subsidies. Mr. LUCKENBACH. That is the subsidy that I meant; mail subsidies. Mr. WOLVERTON. I think there is another subsidy in that some are getting a lower rate of interest than you are paying on the balance due the Shipping Board. Mr. LUCKENBACH. I do not know what their rate of interest is. Mr. WOLVERTON. I understood you to say that you gave a good price for the ships which you originally purchased from the Shipping Board, a price substantially higher than that paid by other purchasers? Mr. LUCKENBACH. Yes. Mr. WOLVERTON. I am surprised to hear you say that you paid such a high figure and that your rate of interest is so high. Mr. LUCKENBACH. Well, you see I am not in the foreign trade. Mr. WOLVERTON. So, I now understand. Mr. LUCKENBACH. I am in the intercoastal trade. I have read that a very low rate of interest has been charged people in the foreign trade. Mr. WOLVERTON. You have suggested, I think, that there should be no tolls paid whatever. Do you not feel that at least there should be tolls paid based upon the cost of operating and maintaining the Canal? Mr. LUCKENBACH. I do not think there should be any tolls charged unless the charge is for digging out the channel. They dig out the Mississippi River and the Hudson River, and for the work done on rivers and harbors they do not charge the ships for using those facilities. Mr. WOLVERTON. In other words because they get something without paying for it you feel the same privilege ought to be extended to users of the Panama Canal? Mr. LUCKENBACH. Yes. I think they ought to charge somebody, but I do not think the charge should be against the ships in intercoastal trade when they do not have to pay in the harbors and rivers. Mr. WOLVERTON. That is all. Mr. PETTENGILL. In regard to the question of free tolls, Mr. Luckenbach, that involves a legal question under treaty agreement, does it not? Mr. LUCKENBACH. I do not know. Mr. PETTENGILL. With Great Britain. Mr. LUCKENBACH. I do not know. Mr. PETTENGILL. I think it was during President Wilson's first administration, if I recall correctly, that the question arose under previous international treaty about American ships transiting the Canal free of tolls. Perhaps that is a legal question that is not a part of our discussion here but that is something we would have to deal with. Mr. WOLVERTON. Would you have that apply to ships of all nations? Mr. LUCKENBACH. No; to American marine shipping. It was not built for the United States marine service; it was built as a military project and the Government vessels now go through the Canal free of charge and we are paying those expenses. Mr. WOLVERTON. Do you know if the Suez Canal makes any exceptions of that kind? Mr. LUCKENBACH. I do not know anything about the operation of the Suez Canal. Mr. WOLVERTON. You are interested in granting free use of the canal to intercoastal shipping? Mr. LUCKENBACH. Yes, right. Mr. WOLVERTON. That is all. Mr. WOLFENDEN. You have been in the shipping business for sometime? Mr. LUCKENBACH. Yes. Mr. WOLFENDEN. And you took over several of the Shipping Board's ships? Mr. LUCKENBACH. I think about 20 of them, from the Shipping Board. Mr. WOLFENDEN. How long have you been in business? Mr. LUCKENBACH. Forty-nine years. Mr. WOLFENDEN. And you have made money up until 1929 ? Mr. LUCKENBACH. You mean every year? Mr. WOLFENDEN. Yes. Mr. LUCKENBACH. No. Mr. WOLFENDEN. I understood you to say that you had up until 1929. Mr. LUCKENBACH. I would not be here now on this question if I had. Mr. WOLFENDEN. Practically every year? Mr. LUCKENBACH. No. Mr. WOLFENDEN. I understood you to state that you had made money up until 1929. Mr. LUCKENBACH. Oh, no; we have made money in a good many years, but in some years we have lost a million dollars. Mr. WOLFENDEN. And you made money up until the time you changed your vessels? Mr. LUCKENBACK. Not every year. As I say, some years I have lost a million dollars. Mr. WOLFENDEN. You did pretty well up until 1929? Mr. LUCKENBACH. Yes. Mr. WOLFENDEN. That is all. Mr. LEA. A portion of your difficulty in recent years has been due to the shortage of cargo, has it not? Mr. LUCKENBACH. And the depression. Mr. LEA. Yes; business has not been so good. Mr. LUCKENBACH. No. Mr. LEA. Have you put on any more ships during the last 4 years? Mr. LUCHENBACH. No. Mr. LEA. What information can you furnish the committee concerning the reduction in cargo carried through the Canal by the intercoastal ships in recent years Mr. LUCKENBACH (interposing). I did not get your question. Mr. LEA. What information can you give the committee as to the extent of the reduction of cargo that is carried in the intercoastal trade in recent years that would indicate what the depression has done to you in the way of reducing cargo? Mr. LUCKENBACH. I do not have those figures with me. Mr. LEA. I do not mean for you to give me a detailed statement but information indicating the falling off in your trade. Maybe I can put the question in another way: What proportion of your capacity do you carry now as contrasted with 4 or 5 years ago? Mr. LUCKENBACH. Well, I should say that we are running about 40 percent. Mr. LEA. Your average load would be about 40 percent of capacity or of what it was 5 years ago? Mr. LUCKENBACH. Of our capacity; yes. Mr. LEA. As compared with 5 years ago, what was your percentage then? Mr. LUCKENBACH. Five years ago; that would be what year? Mr. LUCKENBACH. 1929; I would say that we were running then about 75 to 80 percent. Mr. LEA. So that you have had a reduction of around 35 percent in cargo; that is 35 percent, as compared with a 100-percent capacity. Mr. LUCKENBACH. Yes. Mr. LEA. If your ships were carrying 75-percent capacity all the time, you could pay tolls all right, could you not? 48814-34- -7 Mr. LUCKENBACH. Yes. Mr. LEA. So that if you had some basis of charges for tolls in proportion to the amount you carry on laden ships, that would relieve you, would it not? Mr. LUCKENBACH. How am I going to meet the losses I have paid out? I have paid out $155,000. How am I going to make up for that? Mr. LEA. Of course, it would be returned, would it not, if you had the cargo to carry; you could expect to meet those charges, could you not, if you had a reduction in tolls in proportion Mr. LUCKENBACH (interposing). Yes; but I do not think we ought to have any tolls. Mr. LEA. I suspect that that is beyond practical possibilities. But at the present time ships transiting the Canal in ballast get a 60percent rate? Mr. LUCKENBACH. Yes. Mr. LEA. And ships, if laden to any extent, must pay on a 100percent basis? Mr. LUCKENBACH. Yes. Mr. LEA. So there is no distinction between the 60-cent and the $1, so far as the laden ship is actually concerned? Mr. LUCKENBACH. That is right. Mr. LEA. So a reasonable decrease of charges in proportion to the amount you carry, a reduction in charges where you had a load decidedly less than capacity, might be a way of greatly helping you in your present condition? Mr. LUCKENBACH. No. Mr. LEA. It would not? Mr. LUCKENBACH. We would rather have it left the way it is, and then I can pay my debts. Mr. LEA. Do you not think that the law should be framed so that you could meet the advantage ships have that reduced their actual efficiency in order to get cheaper rates? Mr. LUCKENBACH. I am satisfied the way the law is now. Mr. WOLVERTON. I understood you to say that the N.R.A. had increased your cost by 50 cents a ton. Mr. LUCKENBACH. Yes. Mr. WOLVERTON. What percentage is that? Mr. LUCKENBACH. That is 50 cents a ton; I do not know. Mr. WOLVERTON. You just stated that it increased your cost 50 cents per ton. What was the price per ton before the N.R.A. and what is it now? Mr. LUCKENBACH. Well, my accounting department gave me that information just as I was coming out, but I did not bring those figures with me. Mr. WOLVERTON. Would you be able to give us information showing just how the 50 cents a ton increase was made up? Mr. LUCKENBACH. I can send it to you if you would like to have it. Mr. WOLVERTON. I am interested in knowing in what way the N.R.A. has affected your business. Mr. LUCKENBACH. It has increased the cost of stevedoring; we have had an increase in fuel oil cost. For instance, we were paying 70 cents a barrel for fuel oil that is now costing us $1.25 in New York. You see, the tankers and those shipowners can increase their price where we have to compete with the railroads and we cannot increase our price. Mr. WOLVERTON. So notwithstanding the increased cost under the Mr. WOLVERTON. And your rates have not been increased? Mr. WOLVERTON. Are there any other elements that enter into your increased cost of operation aside from the items you have mentioned of stevedoring and the price of oil? Mr. LUCKENBACH. Everything that enters into the operation of a ship; all of the allied industries. Everything in the way of supplies. Mr. WOLVERTON. Would that include wages paid the men on ships? Mr. LUCKENBACH. We have not increased wages on the ships; we have increased our port wages. Mr. WOLVERTON. That is all. Mr. LEA. What are you limiting factors in charges at the present time? You have competing ships, which I presume place a limitation upon the charges you can make, in some cases? Mr. LUCKENBACH. Yes. We are a member of the conference that regulates the rates. Mr. LEA. Are all your competitors members of that conference? Mr. LUCKENBACH. No; they are not. Mr. LEA. Do they reduce their rates below the conference rates? Mr. LUCKENBACH. Yes; we have to compete with the industrial carriers; the Bethlehem Steel Co., for instance, are not in the conference; they carry their own merchandise together with all other cargo they can pick up, which is taken from the independent ship owner (not an industrial carrier.) Mr. LEA. They are in the general cargo business, are they not? Mr. LUCKENBACH. Yes. The Sheppard Line is in the lumber business, and it carries lumber to the North Atlantic coast ports and then it picks up anything that it can get for the return trip at any rate that it can make to carry back to their lumber port; at least, Í think they carry to three ports, west bound, but east bound I do not know; but I think they do not carry for anyone but themselves. LUCKENBACH STEAMSHIP CO., INC., New York City, March 16, 1934. Hon. CLARENCE F. LEA, Chairman Committee on Interstate and Foreign Commerce, Washington, D.C. DEAR SIRS: I beg to submit the following for your consideration: The Luckenbach Steamship Co. purchased from the United States Shipping Board 15 steamers ranging in size from 11,000 to 14,000 tons at a cost of $17,195,567.08. The United States Shipping Board hold mortgages on our fleet, on which we pay 5-percent interest; the total amount of interest paid up to March 1, 1934, being $890,521.10. Total cost to date $18,086,088.18. We have paid Panama Canal tolls up to March 1, 1934, amounting to $12,471,610. We have altered up to date 15 of our vessels to comply with the Panama Canal rules at a cost of $197,097. I confirm what I testified to before your committee that if this measure is put through as is, it will increase our operating costs between $350,000 to |