shipping business that we will attract capital to the business of running ships.

The act provides for two methods of building these ships. If you cannot get them built under title V, under which the shipowner puts up 25 percent of the cost, then you build them under title VII and charter them.

MEMORANDUM FOR THE APPROPRIATIONS COMMITTEE

JUNE 17, 1937.

In connection with the settlement of the ocean-mail contracts, the question of new construction formed a very important feature. The amount of new construction desired by the private contractors was, and is, in many cases, dependent upon the final settlement of the ocean-mail contracts themselves.

Our survey in May indicated a construction program by private firms of approximately 28 cargo ships (C type) and 9 combination passenger and cargo ships (P type).

As we progressed toward settlement of the ocean-mail contracts, the new construction program by private firms developed, and a survey made in June indicates an urgent need for 31 cargo ships and 12 combination passenger and cargo ships to be constructed under title V.

Even as of this date (June 17) a number of ocean-mail contractors have not submitted their data or their proposals with regard to their new construction programs. As I outlined in my hearings, some of the reasons for this delay are obvious.

It is expected that the figures submitted herein will be augmented by the private firms when the ocean-mail contracts are settled and the question of operating subsidies is satisfactorily adjusted as required by the Merchant Marine Act of 1936.

In view of the foregoing, it will be apparent to the committee that the figures presented differentiating between title V and title VII must be elastic, although the over-all estimates are as accurate as can be submitted at this time.

JOSEPH P. KENNEDY, Chairman.

Mr. TRUITT. Under title V of the statute, the Maritime Commission becomes a party to the contract between the ship operator and the shipbuilder for the construction of the vessel. Legal title actually remains in the Maritime Commission, however, until the vessel is completed and a bill of sale is executed and a preferred ship mortgage is delivered by the ship operator to the Maritime Commission.

So far as construction is concerned, the same general procedure is followed, whether it is under title V or under title VII. That is a technical situation that confronts you with every vessel that is built. Mr. TABER. Will you give us a breakdown of these 43 vessels, showing the line for whom they are intended and the cost of each, and the amount of the differential or estimated differential?

Mr. KENNEDY. That is all in this morning's testimony, Mr. Congressman, with the exception of the lines.

Mr. TABER. And the tonnage?

Mr. KENNEDY. That will be shown on the chart which Commander Vickey will present.

Mr. TABER. How much money will probably accrue in the fiscal year 1938 on account of those 43 ships?

Admiral LAND. That is all in this morning's testimony, Mr. Taber. Mr. TABER. And broken down to show the differential cost and the amount that the ship operator will pay?

Mr. TRUITT. That is right.

Mr. TABER. As to these 52 ships that you propose to build and with reference to which you do not know today whether you would build them under this differential cost system or for the purpose of charter

ing, will you tell us which of the lines they are designed for and the tonnage of each ship and the proposed cost?

Mr. KENNEDY. That would be right on the chart that we showed you before we started this afternoon. That is how the allocation of these ships is to be made.

Mr. TABER. Except that that does not separate them as between owned and chartered ships.

Mr. KENNEDY. No; but they will show the lines to which there is an allocation or where we expect to get the money.

Mr. TABER. Can you tell us, insofar as these 52 ships are concerned, whether the operators have shown an inclination to enter into a contract in advance for their operation when they are completed?

Mr. KENNEDY. I would be frankly very disappointed and feel that I would have to come up and say to the committee or to the Congress that they must consider whether they want to be in the merchantmarine business for our protection as naval auxiliaries and built it at the entire expense to themselves, if we are not able to report by the time Congress convenes again just exactly what these companies are proposing to do for new capital and what they propose to do for new shipping. You will have to face the problem then as to whether you want to go out of business or not, depending whether they have raised enough capital to continue. They will be faced very definitely with the problem.

Mr. TABER. In other words, at this moment you do not know whether there are ship operators in a position and who are ready and willing to contract for the charter of these 52 ships?

Mr. KENNEDY. Oh, yes; we could charter these 95 ships and 95 more. But that will not be satisfactory, in my opinion.

Mr. TABER. I frankly did not think so.

Mr. KENNEDY. No. But they would be ready to charter. There is no question about that.

Mr. TABER. How many will be ready to contract and pay for the ships less the construction differential?

Mr. KENNEDY. That will depend entirely on how much capital will come in.

Mr. BOYLAN. Before we get away from the chartering business, could these vessels that you propose to charter be chartered at a rate that would amortize their cost and at the same time make it possible for them to compete with other vessels open for charter?

Mr. KENNEDY. My best answer to that would be that today the comparatively new ships, those built within the last 8 years, require a great deal less differential and some of them almost get by without any subsidy.

Mr. BOYLAN. Taking the charter period and the life of the vessel, do you think that the cost could be amortized during that period? Mr. KENNEDY. I would think so. But I would expect that the act would be modified to get a better deal for the Government. I do not think this is the best deal we can get or that we should get under title VII. I think I will have a definite recommendation by the next Congress, which would still be agreed to by the shipowners, and that would give the Government a much better break, before we do anything as far as chartering ships is concerned.

ARTICLE APPEARING IN NEW YORK TIMES ON OCEAN COMPETITION

I would like to read you an article that I have here that I think has a bearing on the question.

OCEAN COMPETITION AGITATES BRITONS-EMPIRE PARLEY SHIPPING GROUP SEES OUR "SUBSIDIZED SHIPS" DANGER TO PACIFIC TRADE-DOMINION AID IS FORECAST-CONFERENCE, IN FINAL SESSION TODAY, WILL REVIEW AND APPROVE WORK DONE

(Wireless to the New York Times)

LONDON, June 14.-Probable joint action by the British Dominions in subsidizing ocean commerce to meet the competition of the United States and other countries were foreshadowed tonight on the eve of the adjournment of the imperial conference in a report made public by the shipping subcommittee.

The committee announced that its conclusion had not been reached, but stressed the studies being made of the situation in the Pacific where the United Kingdom Canada, Australia, and New Zealand are concerned by the competition of "subsidized" American ships, plying between America and the western-most dominions. It is understood that the studies also involve Italian competition with British ships operating through the Red Sea to India.

"The committee reviewed the position regarding British shipping," it said in the report, "in relation to the needs of several parts of the British Commonwealth of Nations, and realized that the maintenance of adequate British shipping is a matter of common concern to the countries of the Commonwealth.

SHIPPING SEEN THREATENED

"The committee also noted that certain forms and methods of discrimination have latterly been adopted by governments outside the Commonwealth, by which British shipping in certain areas is seriously prejudiced if not threatened with entire elimination."

The Imperial Conference also published the reports by the air and polar subcommittees the substance of which already has been reported-but reserved until tomorrow the issuance of reports of studies on the subjects of imperial trade, defense, foreign affairs and colonies and mandated territories.

These four topics were not delegated to subcommittees, but were reserved for special study by the British Dominion Prime Ministers, who have held private sessions in the Foreign Office since the conference was convened on May 14. At the final plenary session tomorrow in St. James' Palace the Prime Minister and other delegates will review and approve a long summary of the work done and issue final reports.

It is not expected, however, that the reports will yield much that is tangible affecting foreign trade and politics, but rather will be confined to a statement of general agreements and the reaffirmation of the cooperative spirit of the dominions toward the mother country.

There has been evident a general agreement among the dominion spokesmen affirming the British practice as defined by Anthony Eden, Foreign Secretary, first under former Prime Minister Stanley Baldwin and now under Prime Minister Neville Chamberlain of developing a long-term foreign policy based primarily on the maintenance of peace and the development, where possible, of greater security.

On defense the dominions are represented general as agreeing to the system of voluntary coordination of a defense program keyed with the British rearmament plans. It is not expected that there will be any expression of concrete agreements on either topic-there having been noticeable differences between the dominions on methods to be used in the event of future contingencies-but there will be no disagreement on the fact that in basic foreign policy the British dominions stand as a unit.

THE TRADE TREATIES LEFT OPEN

The largest question to be left open for future study after adjournment of the Imperial Conference concerns the item of greatest interest to the United Statesforeign-trade treaties. In this problem the British Government faces probably a long task before finding a basis for substantial Anglo-American trade.

However, Anglo-American negotiations may be helped rather than hindered by the fact that the United Kingdom also must complete new compacts with

Australia, South Africa, and New Zealand before the Ottawa, 1932, agreement expires at the end of this year, making possible a move for bargaining with the dominions, which would not be possible if the imperial preferences had long terms

to run.

No more vexing problem than that of coordinating British desires for an AngloAmerican treaty-principally as an instrument of political prestige-with_demands for the continuance of Empire preference, has faced the Imperial Conference at which all government heads agree on the value of such a trade entente, but hesitate to make sacrifices for it, which would draw criticism alike from the dominion and agricultural groups and the British industrial bloc.

The atmosphere surrounding the trade treaty possibility was emphasized by a statement at Brighton before the Empire Advertising Convention by Walter Runciman, late president of the Board of Trade, expressing his belief that an Anglo-American treaty would "be consummated in the near future."

Mr. Runciman's statement came as a surprise as he no longer is a member of the Government, having resigned to accept a viscountcy and a seat in the House of Lords, and accordingly is not an official spokesman despite his visit to President Roosevelt to discuss trade last winter.

"There is a great desire in many foreign countries to enter into trade agreements with us," Mr. Runciman said. "One of the latest and one of the most important is the protected trade agreement between ourselves and the United States.

"I only wish I had been able to see that consummated before I left the Board of Trade, but I can assure you that the foundations upon which that is being built are being firmly laid, and I believe those projects will be consummated in the near future.'

Mr. KENNEDY. If I could come to you as a business man and say that I had the contracts for the building of 95 ships, signed, sealed, and delivered, I would be delighted; but I cannot give you that answer. If you are going to have a merchant marine, we will do the very best we can to work this situation out, and I think we are adopting methods here that will not cost the country any money except the subsidies that it has agreed to pay.

Mr. WOODRUM. Thank you, Mr. Kennedy.

AMOUNT THAT CAN BE USED FOR CONSTRUCTION

Getting back to figures again, for a moment, if we may, of this $229,000,000, which you will have available in 1938, including $150,000,000 for authorizations, $69,000,000 left over from other sources, and $10,000,000 which we appropriate, how much of that will be represented in subsidies? Can you give us any rough estimate of it? Mr. KENNEDY. Of that money, nothing will be represented in operating subsidies. We subtracted the operating subsidies before we arrived at the $69,000,000.

Mr. WOODRUM. That is all construction funds?

Mr. KENNEDY. That is right; which we can use for construction.

STUDIES AND INVESTIGATIONS OF COMMISSION UNDER SECTIONS 210, 212, 213, AND 301

Mr. WOODRUM. Now, I would like to have you furnish for the record, if you will, a statement showing just what steps have been taken toward making investigations under sections 210, 212, 213, and 301 of the act.

Mr. KENNEDY. We have that.

(The statement requested is as follows:)

The studies and investigations which the Commission is authorized and directed to make under sections 210, 212, 213, and 301 of the 1936 act are under way and substantial progress has been made toward meeting the directions of the Congress

as embodied in these sections. For example, such progress has been made in the determination of essential trade routes, of foreign operating costs, and of the requirements of our merchant fleet that the Commission has been enabled to negotiate temporary operating-differential contracts covering, for the coming 6 months, a number of the American lines serving our foreign commerce, and to submit to the Congress recommendations for the construction of vessels which will go far toward meeting our immediate replacement requirements.

Progress has also been made in other investigations involving the Commission's responsibilities under the above-mentioned sections and in due time appropriate reports and recommendations will be submitted, as required by the act, to the Congress.

ADMINISTRATIVE EXPENSES

Mr. WOODRUM. Have we got some statement on administrative expenses?

Mr. GIBBONS. Only the total, Mr. Chairman.

Mr. WOODRUM. Have you a break-down of your personnel?

Mr. GIBBONS. Yes, sir.

Mr. WOODRUM. Are all your positions graded under the Classification Act?

Mr. KENNEDY. That is right. They are being graded now, but they have not been accepted by the Civil Service as yet. Those that have been accepted are working under the Civil Service.

Mr. WOODRUM. They represent $2,500,000?

Mr. KENNEDY. About $2,250,000, Mr. Chairman.

Mr. WOODRUM. How does that compare with 1937?

Mr. GIBBONS. It will be substantially larger than 1937, with the Fleet Corporation and the Shipping Board, on account of this large amount of construction work being undertaken.

Mr. WOODRUM. Can you furnish for the record a break-down of that?

Mr. KENNEDY. Yes, sir; we will furnish that.

Mr. WIGGLESWORTH. Was there not a break-down submitted to the Budget?

Mr. GIBBONS. There was a total break-down submitted to the Budget last October. That was some time ago and the program has changed so in the meantime that it does not mean much. But we can work up a figure, I think, that will be reasonably accurate. (The statement requested is as follows:)

On May 31, 1937, the United States Maritime Commission had 973 employees with salaries and wages totaling $2,086,163 per annum. Of this total 516 employees with annual salaries totaling $1,395,421 were located in Washington, while 457 employees with salaries totaling $690,742 were located in the field offices at Boston, Mass., New York City, Philadelphia, Pa., Norfolk, Va., New Orleans, La., San Francisco, Calif., and London, England, and the laid-up fleets at Staten Island, N. Y., James River, Va., Mobile, Ala., New Orleans, La., and Lake Union, Seattle, Wash.

There follows an estimate of general administrative expenses of the United States Maritime Commission for the fiscal years 1937 and 1938.