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lars, if it was purchased here, or if purchased in some other country, by the payment in local currency.

Mr. THOMPSON. Then, where did the question of who would get the insurance, in the event of a loss, come up?

Mr. SYRAN. We raised the question ourselves in the early days as to the need of insurance, on the question the Congressman brought up as to what would happen in the event of a loss.

Mr. HARE. What decision was made? Are you going to pay it, too? Mr. SYRAN. The decision that was rendered was that we, as ECA, would not insure, since we were not the purchasers of any commodities directly from us; and that the risk of loss would be sustained by the supplier, who was making a sale to a foreign purchaser, and he would follow the normal commercial practice of X in the United States sold to B in France, and he would, in normal conditions, have insurance, depending on the contract arrangement.

Mr. NELSON. That is an incentive to the foreign country to insure with the American company because they would want to be paid in dollars. Is that right?

Mr. SYRAN. The question of incentive I cannot answer, but the issue as to where he would place the insurance would be a matter of his own selection.

Mr. NELSON. If they insured with the foreign country, they would be paid in the currency of that country; would they not?

Mr. SYRAN. Not necessarily. He may require his premium to be paid in dollars or other hard currency.

Mr. JONAS. I would like to inquire, following the question Mr. Bonner asked, whether the letter dated January 27, 1949, on the letterhead of Paul McNutt, and addressed to the chairman of this committee. has been made part of this record?

The CHAIRMAN. Has it been made a part?

Mr. DREWRY. Yes, sir.

Mr. MEADE. Mr. Chairman, I have been handed a release from ECA with respect to this insurance. It is rather short. I think it tends to answer some of the questions.

The CHAIRMAN. Read it.

Mr. MEADE. This is a release to the afternoon papers, Monday, September 13, 1948, from the Office of the Administrator, Economic Cooperation Administration, Washington:

WASHINGTON, September 13.-In a further move to emphasize private trade practices in the ECA operations as directed by Congress, Paul G. Hoffman, Economic Cooperation Administrator, announced today that no ECA funds will be allocated in the future to cover the cost of insurance premiums for ECAfinanced cargoes. In the future insurance for cargoes will be handled by the exporter and importer as they desire, similar to export-import procedures that have prevailed in private trade transactions.

New procurement authorizations will not carry allocation of ECA funds for insurance premiums, but use of such funds authorized in past procurement authorizations will be honored, Hoffman said.

The new ECA policy on insurance premiums is based on the belief that such ECA funds as might be required for insurance premiums could better be used for projects more closely related to the main ECA objective of recovery in the participating nations. This new policy is threefold:

1. ECA will not finance insurance payments directly or indirectly. Losses of shipments will be regarded as a program expense and will require counterpart deposits by the country in local currency.

2. Participating countries or their importers may insure as they desire, using any currency they choose for payment of premiums. ECA will not decide whether cargoes should nor should not be insured.

3. In the event of losses, no adjustment will be made in the local currency counterpart funds of the participating countries.

Hoffman said that administrative as well as legal and economic considerations pointed to the wisdom of avoiding ECA involvement in insurance financing.

The CHAIRMAN. Are there any further questions?
Mr. WEICHEL. I have one question.

Mr. Syran, with reference to that being charged to program expense, if you allocate $100,000,000 worth of heavy-goods material to France and they did not insure and it was lost on the way over, you just charge it off and give them another $100,000,000? Is that what that means?

Mr. SYRAN. No, sir. That is their fund, and if they have sustained a loss, as the previous question indicated, that is charged to their account as if they received the goods and they are required to place in their local currency fund a counterpart fund for the equivalent United States dollars that was used to purchase that.

Mr. WEICHEL. How much is the counterpart fund? What percent? Mr. SYRAN. I believe it is 100 percent of the total amount that they are getting. They have to place it up in counterpart funds in their local currency.

Mr. WEICHEL. Do you mean if they have $100,000,000 worth of goods shipped and there was a loss, they would pay ECA $100,000,000?

Mr. SYRAN. No. They would set up in their own bookkeeping system, which would be subject to the direction of ECA and the local country, a sum in their own currency equivalent to the dollar cost of the item.

Mr. WEICHEL. Does it cost them anything? That is what I am getting at.

Mr. SYRAN. They have to put up their own money.

Mr. WEICHEL. Even though they do not get the goods delivered? Mr. SYRAN. That is right. They would follow the same procedures if they did get it.

Mr. BARRETT. Mr. Chairman.

The CHAIRMAN. Mr. Barrett.

Mr. BARRETT. Mr. Bailey, what do you think the advantages and disadvantages would be by excluding the 60-day limitation?

Mr. BAILEY. We do not understand the purpose of the 60-day limitation. We have not found anything explanatory of it in the material which has been given to us. The 50-percent provision, Mr. Hoffman said, is being administered now, and we think it should continue. If there is any idea of a 60-day hiatus where we do not administer it, we think that is wrong. We just do not understand why a 60-day lapse in the program.

Commissioner MCKEOUGH. Mr. Chairman, I may be able to volunteer an answer to that. At the time the meetings were held in connection with the other agencies, it was pointed out that in the draft which was submitted, as the agreed draft between the Commission and the ECA and the other agencies, there was inserted in the draft section 3-I do not have a copy of that handy; I think that is the number-that provided for the counterpart treatment that Mr. Hoffman sought to secure by additional legislation in the current Congress.

He had it incorporated in the draft, which, in our judgment, did not belong in the draft that is before this committee in that it was a

proposed amendment to the existing law of the ECA. So the 30 days that was first considered as needed for this committee to treat with it, in discovering that it related to an existing statute that came from the Foreign Affairs and Foreign Relations Committees, it would obviously have to be introduced through those committees, we presume.

Therefore, the 60-day feature was added and changed from 30, in that the treatment required by the other committees of the Congress would probably need the 60 rather than the 30, in that the first thought was that this committee was to treat with their proposed amendment in the existing statute.

By reason of the fact that Mr. Hoffman indicated that in the interim he would continue to handle the ECA shipments, as he was then handling it, on the differential base between American bottoms and foreign bottoms, we were quite confident that, having made that commitment, which I think he repeated here when he testified, there was no harm to come in the accomodation that was sought in the 60 days in order to permit the amendment to be introduced in the other committee. The CHAIRMAN. Are there any other questions?

STATEMENT OF FRAZER A. BAILEY, PRESIDENT, NATIONAL FEDERATION OF AMERICAN SHIPPING, INC.-Resumed

The CHAIRMAN. Mr. Bailey, your testimony heretofore has been on H. R. 1340; has it not?

Mr. BAILEY. Yes, sir.

The CHAIRMAN. Do you want to be heard further on H. J. Res. 92? Mr. BAILEY. With your permission I would like to make a very short statement in connection with H. J. Res. 92.

The CHAIRMAN. We would like to have it as soon as possible. We are not hurrying you along.

We want to direct our efforts then to H. J. Res. 92, if that is the will of the committee on preparing a bill for a quorum. We have more time on the other bill than we have on H. J. Res. 92. We have to hurry along.

Mr. BAILEY. My statement will be very short.

The CHAIRMAN. I know it.

Mr. BAILEY. I would like the record to show that the concurrence of the CIO and AFL, relates to H. R. 1340. I know of no difference between us on H. J. Res. 92. But I want to make it perfectly clear that I am not exceeding what they authorized me to say with regard to

concurrence.

With your permission I desire to make just a few comments on H. J. Res. 92. The additional comments are made necessary by substantial changes in this resolution.

First as to privately owned ships-preference to privately owned ships: In our statement on January 25 we suggested an amendment to this resolution requiring that the Commission shall not utilize this charter authority if the required transportation service is obtainable by the use of privately owned ships within a reasonable time and upon reasonable terms.

The Martime Commission redraft states only that before acting upon an application to charter, the Maritime Commission

shall consider whether the required transportation services could not be provided within a reasonable time and upon reasonable terms

by privately owned vessels. As redrafted by the Commission there is no mandatory requirements that chartered vessels may be used only when privately owned vessels are not available.

It does not even state that there shall be a preference. It only states that the Commission shall "consider" whether the services could be provided by privately owned ships. Such a watering down of the amendment suggested by the federation makes it in our opinion almost meaningless. It would certainly provide a large area for argument and contention by those seeking to charter vessels when privately owned ships are available to handle the business.

As we have stated to your committee, we view the chartering provision of the Ship Sales Act as auxiliary and supplementary to the real American merchant marine, the privately owned and operated ships. We do not believe this committee or the Congress ever intended that the chartering privilege should be used to compete with those who invest their own funds in building up the permanent merchant fleet. We submit that the language proposed by the Maritime Commission is no safeguard against this condition.

We have already furnished to the committee an amendment concerning the preferences which should be granted to ship owners in the extension of this chartering authority as to present owners and as to owners at September 3, 1939, before the war, some owners of which have lost their vessels and some of which have not been replaced. We have no further comments to offer with respect to the suggestion we have previously made.

In our presentation on January 25 we proposed that the generalagency authority-the operation of Government ships for Government account should not be used where privately owned dry-cargo vessels are available to handle the offering cargo, or when such drycargo vessels chartered to and operated by citizens are likewise available.

In other words, we put Government operation in the third position, following, first, privately owned and operated ships and, secondly, Government-owned ships chartered to citizens. The redraft submitted by the Maritime Commission is silent on this point. There is no expressed policy or limitation of this character placed upon the Government operation.

The Maritime Commission redraft states that

except in the case of passenger and combination passenger-cargo vessels, no outgoing voyage shall be commenced under any charter after June 30, 1950 (the extended period), and all vessels under charter on such date shall be returned to the Commission at the earliest practicable date.

We understand the purpose of this exception to permit agreements to charter Government-owned passenger and combination vessels to operate beyond the period of authority contemplated in this extension, the basis therefor being that considerable funds might necessarily be expended by the Government or by the charterer in connection with the operation of such a passenger service. We have no objection to the inclusion of this provision provided a vessel covered thereby is defined as having accommodations for not less than 80 passengers. That is a

definition in the Ship Sales Act, gentleman. We have reason to believe that this suggestion is acceptable to the Maritime Commission. The redraft by the Maritime Commission is silent upon the point as to whether existing charters may continue to operate under the old conditions after the present authority expires on February 28, 1949. We suggest that language be adopted which will make it perfectly plain that any voyages under charter or general agency commencing after the effective date of House Joint Resolution 92 shall be subject to the terms and conditions therein stated. The purpose of this is to prevent the continuance of charter or general agency operation after such effective date upon charters or charter agreements entered into pior to that time, except as to voyages upon which such vessels were then engaged; new terms and conditions as to such ships or current voyages to become applicable upon the voyage termination.

That constitutes my statement on House Joint Resolution 92, sir. The CHAIRMAN. Are there any questions?

Mr. BONNER. Yes, sir.

The CHAIRMAN. Mr. Bonner.

Mr. BONNER. When you state on section 2, page 2, that you already furnished the committee an amendment concerning the preferences to be granted to shipowners, what was that? I do not remember.

Mr. BAILEY. I will read that. In my statement of the 25th, I stated that we recommended amendment by the addition of a new section to read as follows:

In determining the order of preference between citizens and applicants to charter dry-cargo vessels, the Commission shall give preference to citizens who, at the time of application to charter, or who, on September 3, 1939, were the owners of American-flag dry-cargo vessels, and the Commission shall consider, among other relevant factors, the amount of such American-flag tonnage owned at the time of application or on September 3, 1939, in relation to the amount of tonnage chartered or to be chartered to the applicant.

Mr. BONNER. You do not give any weight to having purchased? Mr. BAILEY. Yes, sir. We say to owners, at the time they make the application; those are the people who have charters, or who were owners on September 3, 1939. There are two factors to consider. The CHAIRMAN. I remember you spoke of the 1939 date.

Mr. BAILEY. Yes, sir.

Mr. BONNER. You mean owners who lost their ships and have not purchased?

Mr. BAILEY. That is right.

Mr. BONNER. We had an example of that here the other day. A man lost his ships, has money in the bank, went down to the Maritime Commission, and went right on chartering. He could operate ships and so forth. You have not given any weight to that at all. Mr. BAILEY. Ours is a suggestion

Mr. BONNER. I have deep sympathy for anybody that loses his ship. But do you not think we adequately paid for the ships that were lost? Mr. BAILEY. I think that we paid for the ships that were lost; yes, Mr. Bonner. Of course, under this amendment we have taken a broader view than the other suggestions.

We have said here that we have not attempted to fix any ratio. Mr. BONNER. You are in the middle; I understand that. So I will not press it any further.

Mr. BAILEY. We have left it to the Commission to determine.

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