O STATES OF AMERICA CONTENTS Agency reports- Comptroller General, dated June 22, 1965 - Federal Maritime Commission, dated June 16, 1965.. Statements of- Austin, James, vice president, Irving Trust Co., One Wall Street, Davis, Carl C., General Counsel, Maritime Administration, Depart- ment of Commerce, Washington, D.C.; accompanied by John R. Tankard, Assistant General Counsel, Division of Mortgage and Marine Insurance__ Hope, Robert S., Kominers & Fort, Tower Building, Washington, Kominers, Odell, Kominers & Fort, Tower Building, Washington, D.C.; accompanied by Arthur Schulte, Lehman Bros., One William Street, New York, N.Y.; and George H. Schreiner, vice president, American President Lines, Ltd., 601 California Street, San Fran- cisco, Calif... Meyer, Thomas L., Washington representative, Seafarers Interna- Mulholland, William D., Jr., Morgan, Stanley & Co., Two Wall Stokes, Isaac N. P., Webster, Sheffield, Fleischmann, Hitchcock & Chrystie, One Rockefeller Plaza, New York, N.Y., on behalf of the trustees, Theodore W. Kheel and Raymond J. Scully, Seatrade Communications from State Department dated July 20, 1965, and August 31, 1965, re Aide Memoire, dated July 6, 1965, and Note Verbale, dated August 17, 1965 from the Embassy of the Federal Decision by U.S. Court of Appeals, Fourth Circuit, re Chemical Bank Letter from Bank of America, San Francisco, Calif., dated July 2, 1965. Letter from Dillon, Read & Co., 46 William Street, New York, N. Y., Letter from First National City Bank, 399 Park Avenue, New York, Letter from Life Insurance Association of America, 1701 K Street NW., Letter from Metropolitan Insurance Co., One Madison Avenue, New Letter from New York Life Insurance Co., 51 Madison Avenue, New Additional information received-Continued Letter from the Northwestern Mutual Life Insurance Co., 720 East Statement of Maritime Administration's experience under title XI, Table: Public bond issues outstanding-With trustees as of June 30, Раб 12 BY STATES OF SHIP MORTGAGE BONDS WEDNESDAY, JUNE 23, 1965 U.S. SENATE, COMMITTEE ON COMMERCE, SUBCOMMITTEE ON MERCHANT MARINE AND FISHERIES, Washington, D.C. e subcommittee met at 10:10 a.m. in room 1202, New Senate Office ling, Hon. E. L. Bartlett presiding. nator BARTLETT. The subcommittee will be in order. e purpose of the hearing this morning is to take testimony on 18, a bill intended to clarify sections 9 and 27 of the Shipping Act 16 and subsection O(d) of the Ship Mortgage Act of 1920, and for purposes. is legislation was introduced by request for the purpose of directattention and initiating hearings on a proposal directed toward ing any problem that arises out of the decision of the U.S. Court of eals for the Fourth Circuit, handed down April 5, 1965, in the case led "Chemical Bank New York Trust Company v. S.S. Westpton." nce this is an extremely complex matter, there will be no attempt ›mplete the hearings this morning, but I do hope that substantial ress can be made so that the record can be completed with further ings early next month. The bill follows:) [S. 2118, 89th Cong., 1st sess.] LL To clarify sections 9 and 37 of the Shipping Act, 1916, and subsection O(d) of the Ship Mortgage Act, 1920, and for other purposes · it enacted by the Senate and House of Representatives of the United es of America in Congress assembled, That section 9 of the Shipping Act, (46 U.S.C. 808), is amended by adding at the end of the third paragraph of the following: "Provided, however, That any bond, note, or other ence of indebtedness heretofore or hereafter made or issued under a trust nture in connection with a mortgage on a vessel shall not be deemed to be an interest in the vessel, the sale, mortgage, delivery, or transfer in any ner of which without the approval of the Secretary of Commerce is proed by this section, if the trustee designated in such trust indenture is a en of the United States within the meaning of section 2 of the Shipping Act, (46 U.S.C. 802)." c. 2. Section 37 of the Shipping Act, 1916 (46 U.S.C. 835) is amended by ng at the end of section (b) thereof the following: "Provided, however, That bond, note, or other evidence of indebtedness heretofore or hereafter made sued under a trust indenture in connection with a mortgage on a vessel shall be deemed to be such an interest in the vessel the sale, mortgage, delivery, or sfer in any manner of which without first obtaining the approval of the Secry of Commerce is prohibited by this section, if the trustee designated in aff counsel assigned to this hearing: William C. Foster. such trust indenture is a citizen of the United States within the meaning of section 2 of the Shipping Act, 1916 (46 U.S.C. 802).” SEC. 3. Subsection O(d) of the Ship Mortgage Act, 1920 (46 U.S.C. 961 (d)) is amended by adding at the end of the first sentence thereof the following: “Provided, however, Any bond, note, or other evidence of indebtedness heretofore or hereafter made or issued and secured by a mortgage on a vessel of the United States shall not be deemed to constitute a right under such mortgage within the meaning of this subsection if such mortgage is held by a trustee who is a citizen of the United States within the meaning of section 2 of the Shipping Act, 1916 (46 U.S.C. 802)." SEC. 4. If any provision or portion of this Act, or the application thereof in any particular circumstance, is held invalid, the remainder of the Act and the application of such provision or portion to other circumstances shall not be affected thereby. (The agency comments follow:) COMPTROLLER GENERAL OF THE UNITED STATES, Washington, D.C., June 22, 1965. B-97285. Hon. WARREN G. MAGNUSON, Chairman, Committee on Commerce, U.S. Senate. DEAR MR. CHAIRMAN: Your letter of June 11, 1965, invites our comments on S. 2118, a bill to clarify sections 9 and 37 of the Shipping Act, 1916, and subsection O(d) of the Ship Mortgage Act, 1920, and for other purposes. We have no special information or knowledge that would assist in the consideration of S. 2118, and therefore have no comments to offer. DEAR MR. CHAIRMAN: This is in reply to your request of June 11, 1965, for the views of the Federal Maritime Commission with respect to S. 2118, a bill to clarify sections 9 and 37 of the Shipping Act, 1916, and susbection O(d) of the Ship Mortgage Act, 1920, and for other purposes. Inasmuch as the bill does not affect the responsibilities or jurisdiction of the Commission, we express no views as to its enactment. The Bureau of the Budget has advised that there would be no objection to the submission of this letter from the standpoint of the administration's program. Sincerely yours, JOHN HARLLEE, Rear Admiral, U.S. Navy (Retired), Chairman. Hon. WARREN G. MAGNUSON, THE GENERAL COUNSEL OF THE TREASURY, Chairman, Committee on Commerce, U.S. Senate, Washington, D.C. DEAR MR. CHAIRMAN: Reference is made to your request for the views of this Department on S. 2118, to clarify sections 9 and 37 of the Shipping Act, 1915 and subsection O(d) of the Ship Mortgage Act, 1920, and for other purposes. The proposed legislation would amend the Shipping Act, 1916, and the Ship Mortgage Act, 1920, to make it clear that the approval of the Maritime Adminis tration of the Department of Commerce is not necessary for the issuance or transfer to persons not citizens of the United States of ship mortgage bonds on a vessel of the United States if the mortgage is held by a trustee who is a citizen. While the Bureau of Customs of this Department has certain responsibilities in administering the laws which would be amended by the bill, the policy considerations here involved are beyond the scope of the Department. The Secretary of Commerce is primarily charged with consideration of policy matters with respect to the transfer of interests in vessels owned in the United States and will no doubt comment on the advisability of the proposal from the standpoint. Should the proposed legislation be enacted, this Department anticipates no unusual administrative difficulties in carrying out its responsibilities thereunder. The Department has been advised by the Bureau of the Budget that there is no objection from the standpoint of the administration's program to the submission of this report to your committee. Sincerely yours, FRED B. SMITH, Acting General Counsel. Senator BARTLETT. The first witness is Carl C. Davis, General Counsel of the Maritime Administration. Mr. Davis, we are pleased to have you here. STATEMENT OF CARL C. DAVIS, GENERAL COUNSEL, MARITIME ADMINISTRATION, DEPARTMENT OF COMMERCE, WASHINGTON, D.C.; ACCOMPANIED BY JOHN R. TANKARD, ASSISTANT GENERAL COUNSEL, DIVISION OF MORTGAGE AND MARINE INSURANCE, MARITIME ADMINISTRATION, DEPARTMENT OF COMMERCE, WASHINGTON, D.C. Mr. DAVIS. Thank you. Mr. Chairman, I have with me Mr. John Tankard, Assistant General Counsel in charge of the Division of Mortgage and Marine Insurance. Senator BARTLETT. We are delighted to have you. Mr. DAVIS. Mr. Chairman, thank you for the opportunity of appearing before your committee to present the views of the Maritime Administration of the Department of Commerce, and of the Department, on S. 2118. The purpose of S. 2118 is to cure the difficulties with respect to ship financing which were created by the decision of the Court of Appeals, Fourth Circuit, in Chemical Bank New York Trust Company, Trustee, Mortgagee v. Steamship Westhampton, decided April 5, 1965. This case involved a mortgage on an American-flag ship which was held in trust by a U.S. citizen trustee to secure a bond held by an alien. Before stating the holding in this case, I will state the various statutes which govern the financing of American-flag ships with foreign funds and those which govern the transfer of American-flag ships to foreign ownership or registry. Section 4132 of the Revised Statutes (46 U.S.C. 11) provides that a ship, wherever built, may be documented under U.S. laws for operation in foreign trade if it is owned by citizens of the United States or by a corporation organized under the laws of the United States, or of any State thereof, whose chief executive officer and chairman of the board of directors are citizens of the United States and all but a minority of the number of directors necessary to constitute a quorum are citizens of the United States. This section has no prohibition on alien ownership of stock in the corporation. The Bureau of Customs, which administers the documentation laws, will document such a vessel even |