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Senator BARTLETT. Thank you, Mr. Coles. Do you know what this program to date has cost the taxpayers?

Mr. COLES. It would seem to me that the taxpayer has profited. Starting off, the Government has received for laid-up ships $4 million, plus the older ships which it received in trade. The 2,000 jobs of course have resulted in substantial taxes to the Government. The amount of $100 million in repair work would not aid the yards, but likewise would probably result in substantial taxes to the Government. Most importantly, perhaps, I think this has furthered the overall policy of the Congress of having an adequate American merchant marine, because it has kept better grade ships on the high seas, without any out-of-pocket costs through subsidy.

Senator BARTLETT. Thank you.

Mr. Robert S. Hope.

STATEMENT OF ROBERT S. HOPE, KOMINERS & FORT, WASHINGTON, D.C., ON BEHALF OF T. J. STEVENSON & CO., INC.

Mr. HOPE. Mr. Chairman, I would like to submit my statement also and summarize it.

Senator BARTLETT. All right.

Mr. HOPE. I am representing the T. J. Stevenson & Co., Inc., which is an operator and has been an operator for about 30 years of nonsubsidized vessels.

The problem that we have encountered is the one alluded to by Mr. Shapiro. It was a development that came along in the implementation of the program. And that is, if a nonsubsidized line acquires a ship which itself has been operated by a subsidized line, it is precluded from trading the ship for 3 years. This, we feel, is not the intent of the original statute, and I have set that forth at some length in my statement.

And we also have proposed some slight clarifying language in the statement. I would like to add, however, that Stevenson is also an applicant for construction differential subsidy on a 25,000-deadweightton bulk carrier. We share the same concern that Mr. Shapiro mentioned, that the Maritime Administration amendment, contrary to your bill, which would permit these tankers to come out, might be used as some kind of substitute or stopgap measure to prevent the proper processing of these construction differential subsidy applications.

We would hope that you would consider this and make it quite clear that this is not the intent of Congress. We have no objection to the broader amendment, but I think your bill, which limits the operation of such tankers to the domestic trade, would solve the immediate problem for operators such as Bulk Foods. Thank you very much. (The prepared statement of Mr. Hope follows:)

STATEMENT OF ROBERT S. HOPE, REPRESENTING T. J. STEVENSON & Co., INC., IN SUPPORT OF S. 2069

My name is Robert S. Hope. I am a partner in the law firm of Kominers & Fort, Tower Building, Washington, D.C. I am appearing on behalf of T. J. Stevenson & Co., Inc., in support of S. 2069 which would extend the termination date of the Vessel Exchange Act, Public Law 86-575 from July 5, 1965, to July 5, 1970. T. J. Stevenson & Co., Inc., has its headquarters in New York and has owned and operated American-flag vessels for approximately 30 years. During World War II and the Korean emergency the company operated large fleets for

the Government and it is still qualified as a general agenct of the Maritime Administration. The Stevenson Co. and its affiliates have been and are still desirous of upgrading their vessels and to this end they have acquired under the provisions of the Vessel Exchange Act one C-2-type vessel and one Victorytype vessel. Stevenson purchased on the open market one extended Victorytype vessel of about 14,000 deadweight tons and one C-2-type vessel from a subsidized owner. Its affiliate, Ocean Freighting & Brokerage Corp. purchased on the open market one C-2-type vessel likewise from a subsidized owner. More recently T. J. Stevenson has filed an application for construction-differential subsidy under section 501 of the Merchant Marine Act, 1936, to aid in the building of a new 25,000-deadweight-ton dry bulk carrier. Therefore it is obvious that this company has faith in the American merchant marine and earnestly desires to improve its fleet.

In addition to supporting extension of the vessel exchange program, Stevenson seeks a short and minor clarification of the existing language of the law to rectify a problem which it and other companies similiarly situated have encountered in their upgrading programs. Subparagraph (1) of section 510(i) of the act reads as follows:

"The traded-in vessels shall have been owned and operated without subsidy under title VI of this act by a citizen or citizens of the United States, and documented under the laws of the United States, for at least 3 years immediately prior to the date of the exchange."

This language has been interpreted by the Maritime Administration to mean that any vessel which has been under an operating subsidy contract within the last 3 years is ineligible for the vessel exchange program even though the present owner is not and has never been subsidized. Specifically, Stevenson's situation is that it exchanged an obsolete tanker about 2 years ago for a C-2 vessel, the American Hunter, which had immediately prior to the exchange been operated with operating subsidy. This vessel is a small C-2 of only about 10,000 deadweight tons but was one of a few vessels available at that time. Now Stevenson is desirous of exchanging this vessel for a larger vessel, but it cannot do so under the Maritime Administration's interpretation since the vessel was operated under subsidy prior to Stevenson's acquisition of the vessel 2 years ago. The same ruling would apply to the other C-2 owned by Stevenson and the one owned by Ocean Freighting, as both vessels were acquired from subsidized lines within the last 3 years.

Another nonsubsidized owner whom we represented made application for the exchange of a C-2-type vessel it had purchased from a subsidized line on the open market, but was advised that operation under subsidy by a prior owner rendered the vessel ineligible and the application was withdrawn. That company has other vessels similarly ineligible because of subsidized operation by a prior owner. There are, I am sure, numerous other nonsubsidized owners in the same predicament.

The legislative history, testimony, and committee reports, are clear that the Vessel Exchange Act was designed to upgrade the nonsubsidized fleet and the only purpose of the existing language was to limit the exchange program to such owners. For instance the report of the Commerce Committee to the Senate (S. Rept. 1275, 86th Cong., 2d sess.) stated as follows:

"All segments of the country's shipping industry currently are having their troubles, but the owners most severely affected are those operating without subsidy-the coastal and intercoastal lines, and the bulk carriers in the foreign tramp trades. Replacement of the vessels engaged in these trades-most of them war built-is essential if they are to continue to be truly competitive in these vital areas. Construction costs are high, however, and shipping profits in recent years have barely sufficed to assure continued operation, much less to permit provision for building the more modern vessels required."

To clarify the existing statute to properly reflect the original intent of Congress we propose that subparagraph (1) of section 510 (i) be deleted and a new subparagraph (i) reading as follows be substituted:

"(1) The traded-in vessels shall have been owned by a citizen or citizens of the United States, documented under the laws of the United States, and shall not have been operated with operating-differential subsidy under title VI of this Act by the applicant or any affiliate of the applicant for at least three years immediately prior to the date of the exchange."

We respectfully request favorable consideration by this committee on the extension of the program and this clarifying amendment. Thank you very much for permitting me to appear at this hearing.

Senator BARTLETT. Thank you, Mr. Hope. I do not have any questions.

All right, Mr. Bourdon, please come forward.

STATEMENT OF REGINALD A. BOURDON, ASSISTANT LEGISLATIVE DIRECTOR, AMERICAN MARITIME ASSOCIATION

Mr. BOURDON. My name is Reginald A. Bourdon, assistant legislative director, American Maritime Association. With your permission, I would like to file my statement for the record and perhaps summarize what I have in the statement.

Senator BARTLETT. Permission granted.

Mr. BOURDON. Thank you, sir. The American Maritime Association represents approximately 150 shipping companies, most of whom are unsubsidized and operate in foreign and domestic trade of the United States.

Many of these companies have been beneficiaries of the vessel exchange program, and the association strongly supports the extension. of the program for an additional 5 years.

As you are already well aware, there are many benefits which have derived from the program to date, benefits that have accrued to the Federal Government, to industry, and to labor. The Government has benefited from the trade-out, trade-in program to the extent that vessel sales have produced an additional $4 million to the U.S. Treasury, costs of maintaining the reserve fleet have been reduced somewhat, the shipbuilding industry has benefited to the extent of approximately $100 million through the repair work that has resulted from the program, and also of some significance is the fact that labor has had preserved 1,900 or 2,000 jobs through the program.

As far as the amendments are concerned, which have been presented to the committee, the association would favor the extension of the program to Great Lakes operators, and also favors the use of tanker vessels, as long as they remain in a nontanker service.

I would, therefore, share the view of Mr. Shapiro, who testified earlier this morning, that the trade-out of tankers should not be considered a substitute for the extension of construction subsidy programs to the dry bulk carriers. We would hope that the committee would make this plain in any report that is issued on the bill.

While the administration has been rather tardy in its support of this measure, nonetheless the views of the administration on the bill are quite clear. In the last session of Congress, for example, the Under Secretary of Transportation Martin appeared before this committee on S. 1773, and at the time proposed the extension of this program and use of the program for the domestic trades. Once again this morning both here and the other day before the House the present Under Secretary of Commerce for transportation reiterated those

views.

The main question before this committee, Mr. Chairman, as we see it, is mainly should this program, which has proved highly beneficial to the Government, to labor, and to the maritime industry, be continued? This association believes that the only program that is now on the books to help the unsubsidized operator is this particular program. There is nothing else that is available and every day we have

the same reiteration of views before this chamber and in the public press. We constantly complain the American dry bulk carriers are only transporting 3 percent of all our bulk cargoes. We claim that they are only transporting about 3 percent of the oil that is imported into this country. Now we have before this committee a program which, while it is not a panacea to cure these particular problems, does provide a great amount of assistance and we urge that this committee support this program and extend this particular measure. Thank you, Mr. Chairman.

(The prepared statement of Mr. Bourdon follows:)

STATEMENT OF THE AMERICAN MARITIME ASSOCIATION ON S. 2069

My name is Reginald A. Bourdon, and I am assistant legislative director of the American Maritime Association. The American Maritime Association is made up of approximately 150 shipping companies which are engaged in both the foreign and domestic trades of the United States. Largely composed of a membership which does not receive either construction-differential or operating-differential subsidy, the American Maritime Association is vitally concerned with the present legislation before this committee.

Under the terms of S. 2069, authority would be granted for the continuation of the vessel exchange program, a program which has been highly beneficial to the tramp segment of the American merchant marine. During the past 5 years, 52 vessels have been involved in exchange agreements. In addition to reducing reserve fleet maintenance costs, the sale of these ships has benefited the U.S. Treasury to an amount over $4 million. More importantly, this program has improved our tramp fleet and provided repair work for American shipyards. Only last year 18 C-4's were made available to nonsubsidized operators in exchange for old vessels. While the American Maritime Association does not believe that the trade-out, trade-in program constitutes the most effective method of coping with the program of oblescence in our tramp fleet, it feels, nevertheless, that in the absence of a more dynamic construction program it is an absolute necessity.

This association believes the amendment to the vessel exchange program suggested in S. 2069 would be beneficial to domestic operators and would also provide assistance to some Great Lakes operators. This association, therefore, would recommend the adoption of a provision that subsection (i) (9) of section 510 of the Merchant Marine Act, 1936, as amended, be amended to permit the trading out of tanker vessels from the reserve fleet upon the conditions that such vessels are no longer required in the reserve fleet for national defense purposes, that the vessels will be operated only in the domestic trade, and that they will not be employed in the tanker vessel trade upon their acquisition.

In hearings before the Merchant Marine and Fisheries Subcommittee of the Senate last year, concerning the vessel construction program to aid domestic trades, the Under Secretary of Commerce for Transportation, Clarence Martin, Jr., advocated greater use of the vessel exchange program to assist the replacement needs of domestic operators. The new Under Secretary of Commerce for Transportation recently reiterated those same views before the House Merchant Marine Subcommittee considering H.R. 728.

There would appear to be no alternative to the passage of the proposed extension, for without it there is an absence of legislative authority designed to assist the replacement and updating of our tramp fleet. If the exchange program is to terminate, it would mean that the unsubsidized and tramp operators would be left with no method of improving their fleets. I need not recite to this committee the sad statistics relating to the unsubsidized segment of the American merchant marine. They are often echoed in this chamber and published in the press. Failure to act on the renewal of the vessel exchange program can only lead to the further deterioration of the domestic and tramp segments of our merchant fleet. As this legislation will soon expire unless renewed by the Congress, it is hoped that this committee will give its favorable consideration to this measure as soon as possible.

Senator BARTLETT. Thank you. You were here this morning when Secretary Boyd testified and urged an amendment which would per

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mit the tankers in bulk cargo service to be used in other than the domestic trade. I note in your statement on page 2 that you recommend that the vessels be operated only in the domestic trade. Would you be willing to acquiesce in the recommendation of the Department of Commerce?

Mr. BOURDON. Yes, sir; except to the extent that we would not support such a measure if it is extended to operation in the actual tanker service. If it is nontanker service, yes.

Senator BARTLETT. Thank you.

Our next witness is Admiral James A. Hirshfield.

STATEMENT OF VICE ADM. JAMES A. HIRSHFIELD, U.S. COAST GUARD (RETIRED), PRESIDENT, LAKE CARRIERS ASSOCIATION, CLEVELAND, OHIO; ACCOMPANIED BY SCOTT ELDER, ESQ., COUNSEL

Admiral HIRSHFIELD. Mr. Chairman, we have a prepared statement which we would like to submit for the record.

Senator BARTLETT. It will be accepted.

Admiral HIRSHFIELD. I would like to comment briefly on it. We have suggested an amendment

Senator BARTLETT. Pardon me. For the purpose of the record, will you name your associate?

Admiral HIRSHFIELD. I am sorry. This is Mr. Scott Elder, counsel of our association.

We would like to suggest an amendment to the bill, because we feel that this is the area where it possibly might help or might possibly be used by our members. This is in regard to tankers.

The restriction of these vessels to the tanker trade, we feel, would preclude their use on the lakes by tanker companies who might want to trade entirely in the Great Lakes. They are the only ones I know of who have expressed an interest in vessels in the reserve fleet. But should someone else decide that they wanted to convert one of these vessels to a bulk carrier, and engage in the trade between United States and Canada, this would preclude that, because this restriction calls for the use of them in the domestic trade.

That is all I have to say, sir.

(The prepared statement of Admiral Hirshfield follows:)

STATEMENT OF LAKE CARRIERS' ASSOCIATION, CLEVELAND, OHIO

I appreciate this opportunity to express, on behalf of Lake Carriers' Association, the view of the American-flag Great Lakes vessel industry concerning S. 2069, legislation which would, in effect, extend the current vessel exchange program provided by Public Law 86-575, due to expire on July 5, next, and broaden its application so as to permit the trade-in of obsolete Great Lakes vessels in exchange for war-built vessels now in the reserve fleet. The fact that this or similar legislation has been introduced, we understand, at the request of the Secretary of Commerce suggests that such a broadened exchange program will meet the perplexing problem of ship replacement on the Great Lakes. Unfortunately, such is not the case.

Last year the commerce of the Great Lakes exceeded 202 million net tons, of which about 90 percent consisted of bulk commodities such as iron ore, limestone, coal, and grain. Of this total trade only about 9 percent was domestic to Canada, while 32,300,000 net tons, or 16 percent, was international trade between the United States and Canada. From the standpoint of individual commodities, iron ore is by far the most important, inasmuch as it accounts for about 52

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