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the lowly but essential Liberty-type vessel. There is little purpose in the construction of such tonnage unless there remain intact at least the nucleus of steamship organizations ready to take over at once; otherwise, their potential value will be negatived substantially.

CONCLUSION

The applicant has purchased but one vessel because of its financial limitations; it intends, however, to supplement this modest beginning by acquisition of additional tonnage at such time as its financial resources permit. It is apparent that economic factors prohibit the successful operation of but one vessel in the absence of other activities and consequent income. Nevertheless, the purchase was made, partially upon the continued availability of Commission vessels for charter, and upon the continuation of the applicant's present activities. The applicant has consistently and designedly, since its organization, avoided any relationship with foreign lines or owners in the nature of a joint venture. That is to say, it has avoided any arrangement whereby the agency compensation is fixed in relation to the vessel revenue with a direct interest in the financial result of the operation. In addition, it has not chartered for its own operation any foreign-flag tonnage despite the attractive results to be anticipated. Its only operational activities, other than as WSA agent, has been confined to the time charter of American-flag vessels which were put in the service above described; the bareboat charter of vessels from the Maritime Commission and ownership of the steamship William H. Kendrick.

We submit, therefore, that an exception should be granted to both the chartering ratio and general disqualifications set forth in the September 22 and September 24 telegrams and that applicant be permitted to retain the present bareboatchartered fleet. The misfortunes to which all ships are subject must, in successful operation, be spread over a sufficient number to minimize complete loss in the event of accident to one or possibly two contemporaneously. It was confidently expected that, upon purchases of the William H. Kendrick chartering operations of its then bareboat-chartered fleet would continue to the fullest time possible under the Commission's authority and thus give to the applicant the necessary spread of risk. Assistance at this time would be consistent with the expressed policies set forth in the Merchant Marine Act of 1936, the Merchant Ship Sales Act of 1946, and the present policies of the Commission itself. Accordingly, approval or early hearing is requested. Respectfully submitted.

DICHMANN, WRIGHT & PUGH, INC., By ALAN SMITH, President.

The CHAIRMAN. Next we have Mr. Garner, executive vice president of the Waterman Steamship Corp.

STATEMENT OF W. B. GARNER, EXECUTIVE VICE PRESIDENT, WATERMAN STEAMSHIP CORP. AND PAN-ATLANTIC STEAMSHIP CORP., MOBILE, ALA.

The CHAIRMAN. You may proceed, Mr. Garner.

Mr. GARNER. Thank you, Mr. Chairman.

My name is W. B. Garner. I am executive vice president of Waterman Steamship Corp. and its wholly owned subsidiary, PanAtlantic Steamship Corp., with headquarters in Mobile, Ala.

Waterman Steamship Corp. was organized in 1919 under the laws of the State of Alabama. I have been engaged in the shipping business for more than 35 years. We serve ports in nearly every State on the Atlantic coast, and in all States on the Gulf and Pacific coasts of the United States. We operate in both the domestic and foreign trades of the United States.

We have purchased from the Maritime Commission, under the Merchant Ship Sales Act of 1946, a total of 45 C-2-type and 10 Liberty-type dry-cargo war-built vessels, aggregating approximately

580,000 dead-weight tons, representing an investment of many millions of dollars. We have since sold several of the Liberty vessels to American citizens, but they will remain under United States flag.

I desire to submit to this committee our views with reference to House Joint Resolution 92, which proposes to continue the authority of the Maritime Commission to sell, charter, and operate vessels, and for other purposes.

After having given the matter most careful and mature consideration, we feel very strongly that the time has now been reached when Government-owned vessels should no longer remain available for charter to anyone under the Ship Sales Act of 1946. If this chartering authority had been permitted to expire at the end of 1947, as originally provided in the act, I am firmly convinced that at least 250 more of those war-built vessels would have been purchased by citizens than has actually proven to be the case.

The continuation of this chartering authority, in my opinion, has seriously deterred the sale of these war-built vessels to citizens; it has to a large degree nullified the basic intent of the Merchant Ship Sales Act of 1946, and imposed upon us and other large owners of American-flag vessels immeasurable injustices.

I assume that the members of this committee are aware of the fact that a great many of these vessels have been chartered by the Commission to numerous so-called operators who have nothing, or substantially nothing, invested in the American merchant marine.

The mandates stipulated in both the Merchant Marine Act of 1936 and the Merchant Ship Sales Act of 1946 clearly provide that the United States shall have an adequate and efficient merchant marine owned and operated under the United States flag by citizens of the United States. These Government-owned chartered vessels have been permitted to compete with privately owned American-flag vessels with much fury and intensity.

The basic purpose of the Merchant Ship Sales Act of 1946 was to enable the orderly restoration of a privately owned and privately operated merchant marine under the United States flag. Its purposes could hardly be better stated than by this committee in its report on that legislation when the committee said:

It is to assist in the establishment of such a postwar American merchant marine, and its maintenance in a healthy and vigorous condition, by means of an orderly disposition of the Government-owned merchant fleet, that the bill herewith reported deals. It is a bill which has been formulated in the light of the experience of the past and on which in large measure depends the existence of our merchant marine in the future.

Those of you who were members of the committee at the time consideration was being given to the enactment of the Merchant Ship Sales Act of 1946 will recall, and those members who have since been assigned to the committee will find from the legislative history of the act, that it was enacted for the basic purpose of permitting the sale of war-built vessels to citizens of the United States, and with the avowed purpose of reestablishing the privately owned and privately operated merchant marine which had been taken over by the Government as a matter of necessity during the war.

The committee and the Congress were reluctant even to authorize chartering of the vessels and, in fact, refused to authorize the chartering of tankers.

In reporting the Ship Sales Act, your committee pointed out that the policy of the bill was to place as many of the war-built vessels as possible in the hands of private operators; but that it recognized that there would be many cases where, because of uncertainty of success in reestablishing a trade, or because of opening up a new trade, sales might not be possible at the outset, whereas charters would be possible.

The report of your committee on the Merchant Ship Sales Act of 1946 contains the following language:

If the operator meets with success under a charter, he will in all likelihood desire to purchase the chartered vessel or another war-built vessel. Until that time, he will have had an opportunity, without a large capital outlay on his part, of establishing or reestablishing a trade

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Mr. Chairman, I point out that your committee mentioned in its report that chartering involved little capital outlay.

Because of the difficulty of prescribing by law all of the circumstances under which charters may or may not be permitted, section 5 of the Merchant Ship Sales Act gives the Maritime Commission discretion either to approve or disapprove any applications to charter, and further provides that the Commission shall not approve any such application unless it determines that the chartering of the vessel to the applicant would be consistent with the policies of the act.

In other words, when enacting the Merchant Ship Sales Act, Congress relied upon the Maritime Commission to charter these war-built vessels to citizens only in circumstances where the Commission determined upon basis of the facts that such chartering would be responsive to the enunciated policy and purpose of developing an adequate and efficient merchant marine under the United States flag, owned and operated by citizens of the United States.

It is impossible to calculate the detriment suffered by private purchasers of war-built vessels as a result of the failure of the Maritime Commission to establish and maintain a chartering program in conformity with the purpose and policy of the act.

According to Maritime Commission records, more than 1,500 Governent-owned war-built vessels were chartered to citizens during the peak period of chartering since the act was enacted.

However, the number of such vessels now remaining under charter is slightly in excess of 300. This means that about 1,200 chartered war-built vessels have been redelivered to the Commission merely by reason of the fact that the operators could no longer operate them on a profitable basis. The amount of business offered, and the demand for shipping space, has drastically reduced within the last 18 months.

As previously stated, the Commission's chartering authority under the Ship Sales Act was originally intended to expire on December 31, 1947. The said authority has already been extended twice since the act was originally enacted on March 8, 1946. Now, we are back here again giving consideration to a further extension of the present authority which expires on February 28, 1949.

Almost 2 years ago, when this committee was considering an extension of the chartering authority, Admiral W. W. Smith, Chairman

of the Maritime Commission, in reply to a question as to how chartering had helped sales, stated:

Admiral SMITH. I don't know it has helped. We recapture so much of the profits at the time that the operator could make more money if he purchased. Mr. WEICHEL. Chartering has not helped sales. How will the chartering authority help sales?

Admiral SMITH. It will not, in my opinion.

Mr. WEI HEL. Do you think that will probably go for wet cargo as well as dry cargo? It will not help sales there.

Admiral SMITH. No.

Admiral Smith, in a different place in his testimony, gave the reason why the chartering policy of the Commission would not help sales. He stated:

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So long as they have a 15-day cancellation, they cannot lose.

The following colloquy then ensues:

Mr. WEICHEL. No; they cannot lose.

Admiral SMITH. That is right.

Mr. WEICHEL. But they will have taken the profits and when they get through— you say there is not enough cargo space-the Government will still have it. You wouldn't have sold any when you get through.

Admiral SMITH. That is right.

Mr. WEICHEL. Couldn't the Commission, in its wisdom, foresee that? That would seem very simple.

Admiral SMITH. Well, it is for that reason that we have for some time considered the long-range charter, to take the cream off. A man will either stay in the shipping business or not.

I also invite your attention to statements made by Commissioner Mellen of the Maritime Commission when testifying before your committee nearly 2 years ago, when he stated:

Mr. MELLEN. Also, Mr. Chairman, if I am permitted to express my opinion with respect to your question about whether or not these charters are conducive to sales, I am unqualifiedly of the opinion that they are a deterrent to sales if continued too long.

Mr. Mellen further stated that the policy of the Commission, in chartering vessels with the privilege of canceling on 15-day notice, "places the charterer in a position of using the ships as long as they are profitable to him and to forthwith return them to us when it suits his convenience, after perhaps having worked some detrimental phases against the American merchant marine, as I have defined them." Further, the following testimony was given by Mr. Mellen:

Mr. KEOGH. You have expressed your opinion that the continued charter of these ships tends to retard sales.

Mr. MELLEN. Yes, sir. I think there is no question about it. I think, as long as anyone can rent anything on very liberal terms with the privilege of releasing them without an annual lease, it would be foolish to invest money, particularly with respect to Liberty ships.

And again, in Admiral Smith's testimony, he stated:

We are of the opinion that a long-term charter will encourage the sale of ships, that the well-founded operator will prefer to purchase rather than charter. The fault with the present charter, which is cancelable in 15 days, is that the charterer is taking very little chance.

From the above-quoted testimony before this committee nearly 2 years ago, it will be noted that the Chairman and one of the Commissioners of the Maritime Commission admitted that the policy which it had been following was a deterrent to the sale of ships, a detriment

to the American merchant marine, and in fact, contrary to the policy of the act.

Based upon the previous testimony of those Commissioners which I have just quoted, this committee on June 27, 1947, reported a bill to continue the temporary authority of the Maritime Commission to charter vessels. The report was unanimous, and it stated:

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The committee has approved this extension reluctantly, as it is of the opinion that during the 16 months since the enactment of the Merchant Ship Sales Act in 1946, the Maritime Commission has taken insufficient steps to place the American merchant marine in the hands of private operators. Your committee is of the opinion that the continuance of the charter and generalagency program operated by the Maritime Commission has militated against the accomplishment of the objectives of the Ship Sales Act of selling war-built merchant ships and of building for the future a privately operated American merchant marine.

The CHAIRMAN. Who made that statement?

Mr. GARNER. That was taken from the report of your committee when it reported the bill which provided for a further extension of the Ship Sales Act authority.

The CHAIRMAN. That was the committee's own statement?

Mr. GARNER. Yes, sir.

The committe further stated:

In addition, this extension has been granted with the understanding that the basic rate for the charter of dry cargo vessels and recapture rates will be immediately increased, thus encouraging the purchase rather than charter of these ships.

The CHAIRMAN. Was it increased?

Mr. GARNER. Yes, sir. The Maritime Commission did not increase the rate but what the Commission did, however, was to work out a formula whereby the operator of the charter vessel, in addition to paying the basic rate for charter, 15 percent under the ship sales price, after retaining $100 per day of the profit, the remainder was split so that the Commission would get up to, I think, after $300 a day, the Commission would get 90 cents on the dollar.

That is keeping the Government in the shipping business and I want to tell you that very emphatically, gentlemen.

Again, almost a year later in February 1948, this committee, in reporting out a resolution granting a further extension of the authority contained in the act, stated that:

The continuation of this authority until March 1, 1949, has been recommended by your committee as a reasonable period for final extension.

I want to emphasize the word "final."

I do hope that this committee will adhere to its last report, and that the extension granted at that time will be the final extension. In an effort to support my contention that the chartering of drycargo war-built vessels has greatly deterred the sale of such vessels to citizens, I invite your attention to the following observations.

The Ship Sales Act did not authorize the Commission to charter dry-cargo vessels to foreigners. As a result of these limitations, let us examine what actually took place.

The report of the Maritime Commission of transactions under the Merchant Ship Sales Act through December 31, 1948, shows that it had sold to foreigners and for foreign flag transfer a total of 1,117

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