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the war we built a huge quantity of this tramp type of vessel because they were part of the defense picture. Secondly, it has continued because of the large volume of ECA cargo which has been available and which we hope will continue to be available. The important thing is that the Maritime Commission, the labor unions, the American shipping industry in general, are now working on a program dealing with tramp shipping. And it is hoped that the program will enable the American-flag tramp operators to continue over the long run.

I think this continued tramp fleet is important; as proof of its importance is the fact that during the war these vessels served so well in support of the armed forces.

During the past few months a study has been made by the Maritime Commission, in cooperation with industry and labor. That program will, sometime during the present session, be before the Congress. I think it would be unwise to burden the record with any details of this program or any suggestions concerning it now. But I feel that one thing should be pointed out; that is that the present bills are not ends in themselves but really means to keep the American merchant marine alive pending further study by this Congress. Perhaps it can better be described by saying that these bills are steps necessary to maintain the possibility of any future tramp program being worked out. Because, if these bills are not enacted, it is inevitable that the American-flag tramp fleet will go downward and downward, so that any program which is subsequently enacted will be academic because it will be necessary for the industry to start from scratch all over again.

It is our thought, therefore, that these bills should be handled in such a way as to protect the present status quo for the tramp shippers. During the past several months there have been several rumblings dealing with the chartering program.

Two types of restriction have been suggested, and they were brought out briefly yesterday. Restriction No. 1 would limit the number of ships which a man could charter in proportion to the number of vessels he owns. The second would eliminate as a charterer any person having any foreign affiliations.

Now it is our hope, and I mean the hope of Dichmann, Wright & Pugh, Inc., and I think that hope is the hope of a substantial number of operators of American tramp vessels, that these restrictions are not imposed. It is our thought that, if they are imposed, it would serve to curtail the number of ships now being operated by Americanflag tramp operators as to, in effect, do away with the possibility of a future program.

Let me, if I may, describe Dichmann, Wright & Pugh, Inc., and tell how these suggestions would affect them.

As I mentioned before, they purchased a Liberty-type vessel from the Maritime Commission, and they hope to purchase more, because it is economically not practical to operate one ship.

Until conditions crystallize, I do not think any prudent businessman would put more money into tramps, particularly the large sums of money that ships require; and remember that a Liberty ship alone requires over half a million dollars.

I think you have to wait for such things as the ECA program, to learn how it is decided. I think, more important, that no one can

invest large sums until they know what the over-all tramp program is going to be.

During this period of uncertainty, and until such a program is developed or until the possibility is thrown overboard, we feel that they should be allowed to continue to charter these vessels unrestrictedly as they have for the last two and a half and more years.

Our thought is that, by so permitting this company to continue unencumberedly to charter, we are keeping nine American flagships on the seas. We are employing nine times the number of American seamen and the number of shore personnel required. We are keeping this company's operating personnel going as an entity.

We think that this is a valuable thing; that it is a valuable thing to preserve in order that any future program can be built on this base. Now another restriction which has been suggested is that anybody having a foreign-flag affiliation should not be permitted to charter American-flag ships from the Commission. I think, in part, that may be true; but I should like to distinguish very clearly between various types of foreign affiliations. Dichmann, Wright & Pugh, Inc., for example, has never entered into joint ventures with any foreign company. It has never had any foreign participation in its own activities, and it has never chartered any foreign vessels. It has never acted as agent for any foreign-flag vessel whereby its compensation was related to the vessels revenue.

What it has done is to husband foreign ships in outports such as Norfolk and Baltimore. I say "outports" because the major lines do not maintain their own agent but rely on agents such as Dichmann, Wright & Pugh, Inc.

In other words, they are not there basically for the solicitation of trade, most of which is decidedly incidental to their work. Though for 25 years they have been agents for some foreign-ship companies, I do not feel they are agents in the sense that there is any conflict between their carrier tramp operations and their agency work for other companies.

The CHAIRMAN. The term "husband" is rather technical, I wonder if you could describe it.

Mr. COLES. It means someone to care for the ship when it arrives in port, to take care of any refueling problems, and any victualing problems that are necessary. Perhaps there may be some difficulty in the case of an ill crew member and things of that sort.

There is some solicitation of cargo, but that is minor.

The CHAIRMAN. I think it should also be pointed out that this company represents foreign lines which are members of conferences. In other words, lines that charge the same rates as American lines, and they do not represent cut-rate or cut-throat operators.

Lastly, I think it should be pointed out that there is not a conflict between the tramp operation which Dichmann, Wright & Pugh, Inc., will handle with chartered ships and the operation they will handle for foreign lines. Mr. Smith has assured me that, in the event there should be any possibility, however remote, of a conflict between his operations as a charterer and his operations as an agent, both his patriotism as well as his pocketbook will insist on giving preference to the American-flag ships.

At the present time Mr. Smith and his company feel that it would be unwise for them, as prudent businessmen, to give up these foreignagency affiliations. The reason for that is, getting back to what we mentioned a few minutes ago, that the entire tramp picture is too uncertain.

To give up a bird in the hand for one which may be in the bush in the future is not appealing. They feel that it is necessary to wait for the long-range clarification before going into any large-scale purchase program, and particularly before going into any disruption of their regular activities.

I would like to add, before summing up, that the charter is beneficial to these companies because, if it were not, they would not be here asking for an extension. At the same time, I feel that it should be pointed out that there are certain burdens; for example, they must pay 15 percent per annum of the ships' sales price as charter hire. Secondly, all profits over $100 a day per vessel are divided, with the Commission getting the major portion of the profits; so that they cannot become wealthy by operating these ships.

Thirdly, they do not get the benefit of a tax deduction which the Bureau of Internal Revenue has given to the owners of Liberty-type vessels of amortizing over 4 years.

Lastly, the Maritime Commission has the right to specify the minimum at which the ships may be offered for charter to people wanting their products carried, and that minimum in part protects the owned vessels by acting as a floor below which the competing chartered vessels cannot go.

In summation, Mr. Chairman, may I repeat the following thoughts which we hope will be set forth, at least in the committee's report, as a guide to future activity under the chartering power. First, that there be no limitation on the number of ships to be chartered in proportion to the number of vessels owned.

Second, that there be no restriction arbitrarily against anyone having any foreign affiliation.

I think there should be a distinction between the types of such affiliations.

Third, if there be any restrictions, that they be considered on an individual basis, with the particular company considered individually rather than as an over-all group.

Lastly, if there are any changes in chartering policy which would require additional restrictions or limitations, that they be made prospective only and go to new charterers but not against those people who for the last few years have continued to charter vessels from the Maritime Commission.

Mr. WEICHEL. Is the representative of the company here for questioning?

Mr. COLES. As I said at the beginning of my statement, Mr. Smith is present, and he can answer any questions that you may have. Mr. Weichel?

Mr. WEICHEL. When did you purchase this one ship?

Mr. SMITH. April 1947.

Mr. WEICHEL. Is it a requirement of the Maritime Commission that you purchase one ship at 25 percent before you can get chartered ships? Is that a requirement?

Mr. SMITH. I do not think it is a requirement.

Mr. WEICHEL. Then, previous to the purchase of this ship, your sole business was chartering foreign ships and husbanding ships? Mr. SMITH. We did not charter.

Mr. WEICHEL. You were agent?

Mr. SMITH. Yes.

Mr. WEICHEL. Your purpose is now that you want to get into the tramping business and you think a continuation of this chartering would put you into the shipping business and the ownership of ships? Mr. SMITH. Yes.

Mr. WEICHEL. Beginning back in 1941, when the war period came on, was your company then the recipient of general-agency fees and charter fees from then on to now for the Government?

Mr. SMITH. In 1942 we became general agents.

Mr. WEICHEL. You became general agents?

Mr. SMITH. Yes.

Mr. WEICHEL. How much money did your company earn as general agent from the Maritime Commission, or from the United States Government, from then on down to now? Approximately how many million dollars?

Mr. SMITH. We have not earned any million dollars.

Mr. WEICHEL. I mean, from 1941 down to now, how much money did your company receive for general-agency fees, in round numbers? Mr. SMITH. I do not have that in mind.

Mr. WEICHEL. In round numbers.

Mr. SMITH. I would say $500,000.

Mr. WEICHEL. $500,000, in all that time, your company received in general-agency fees?

Mr. SMITH. Yes.

Mr. WEICHEL. Now, in that same period of time, did you charter any ships from the Maritime Commission?

Mr. SMITH. No; it was after the war was over.

Mr. WEICHEL. I mean, after the war was over, did you charter? Mr. SMITH. I understood your question to mean

Mr. WEICHEL. That was only one question.

Mr. SMITH. We did not get any $500,000 for it.

Mr. WEICHEL. What I am getting at, in general-agency fees, from 1941 down to now, your company received from the Maritime Commission or the Federal Government about $500,000?

Mr. SMITH. Not in the way of general-agency fees.

Mr. WEICHEL. How much in the way of general-agency fees?
Mr. SMITH. Roundly, I would say about $200,000.

Mr. WEICHEL. For the same period, from 1941 down to the present date, how much money did your company earn or receive in charter fees? I mean out of ships that you chartered from the Maritime Commission, roundly, for the same period?

Mr. SMITH. I suppose you are asking me what the net profit for the voyages was?

Mr. WEICHEL. How much you received in charter fees?

Mr. SMITH. We do not receive any chartering fees. We pay the Commission.

Mr. WEICHEL. I thought in the charter of these ships, that is Government ships, that you get a percentage of earnings, so that the

money all really belongs to the Government. At least I thought so, until I read about the Sword Line and some of these not paying up to the tune of millions and millions of dollars which they were supposed to pay.

Mr. SMITH. I can tell you the way it works.

Mr. WEICHEL. I am not trying to get a whole lot of detail. In other words, on the chartering operations, did you receive about $200,000 ? Mr. SMITH. I would say that.

Mr. WEICHEL. That would be the total that your company received from the Federal Government by way of general-agency fees and by way of chartering fees, roundly, half a million dollars from the beginning down to now?

Mr. SMITH. Yes.

Mr. WEICHEL. Did your company have any ships that it sold to the Government during that period?

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Mr. WEICHEL. Were there any requisitions for hire?
Mr. SMITH. No.

Mr. WEICHEL. So that in your particular case you received about $500,000 and you purchased one ship with 25 percent down and invested about a quarter of it.

Mr. SMITH. We have to pay the shore staff, you know.

Mr. WEICHEL. But you invested, roundly, about a quarter of it? Mr. SMITH. When I say that amount of money it means that was probably the net for the voyages and that was not the net that was left after we were through.

Mr. WEICHEL. Roundly, that is what you got.

There was someone here yesterday testifying about purchasing 48 ships and the only records we can find is that they purchased about 8 dry cargo and a few tankers, all together 14, and I am getting the total amount that these particular companies received over the same period of time which amounts to tremendous sums and they have exhibited little or no faith in the American merchant marine with reference to the purchase of ships.

The reason I was questioning you is because in your case there seems to be more faith. At least you are investing about a fourth of it where these other ones were practically investing nothing.

Your position is that if you can earn some money by the chartering of ships you want to go on in the American tramp business?

Mr. SMITH. Yes.

Mr. WEICHEL. That is the reason I am questioning your position because it seems to be different from those we have been questioning on other occasions.

Thank you.

The CHAIRMAN. Any further questions?

If not, Mr. Smith and Mr. Coles may stand aside.

(The following letter was subsequently furnished for the record :) DICHMANN, WRIGHT & PUGH, INC., New York, N. Y.

Re chartering policy of the Maritime Commission; application for exception.
SECRETARY, UNITED STATES MARITIME COMMISSION,

Washington 25, D. C.

DEAR SIR: Reference is made to the Commission's telegrams dated September 22 and September 24, respectively. The undersigned, Dickmann, Wright & Pugh,

85414-49-5

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